This Week in Startups - E1041: The Lean Startup’s Eric Ries gives tactical advice for founders during an economic downturn: obligations of leadership, extending runway, handling layoffs with grace, finding new revenue opportunities, capitalizing on silver-linings & more!

Episode Date: April 1, 2020

0:52 Jason intros Eric Ries and they discuss how things have been since shelter-in-place started 8:33 What good will come out of this? Will UBI proponents like Andrew Yang be proven right? 10:12 Eric's advice to today's founders after living through the 2008 recession & the dot-com bust 15:53 Eric describes the obligations of leaders during a crisis of this magnitude, what the test-and-trace method is and how it's effective 25:02 Do authoritarian countries have an advantage in handling outbreaks better than democratic countries? 28:45 Jason & Eric reminisce about 2011 in startup-land 30:38 Tactical advice for Founders in an economic downturn 39:52 Eric explains what he is doing to help at: https://schoolclosures.org/ 44:11 What is the Long-Term Stock Exchange? 48:57 Thoughts on private companies giving equity options to contractors 53:00 More tactical insights for founders: handling layoffs, figuring out new revenue opportunities, capitalizing on silver-linings, extending runway, etc. 1:01:01 Amazon & Lyft partnering to help each other, Bird's layoff approach, extending runway by trading cash for equity 1:12:21 Eric's thoughts on the future of capitalism

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Go to LinkedIn.com slash twist and get a $50 credit towards your first job post. and Zendesk, a service-first CRM company with support, sales, and customer engagement products designed to improve customer relationships. Qualifying startups can join the Zendesk for Startups program and get six free months of Zendesk products. Visit Zendesk.com slash twist today to get started. Hey, everybody, welcome to this weekend startups. I'm your host Jason Kalakhanis, and it is Monday the 30th of March. I have to really think that through because I am in day 20 of my quarantine and I'm literally losing my mind. But it's great to see what the local government here in the Bay Area

credit to London Breed and the other officials who close San Francisco down. I believe it's now two weeks and they're closing down for another month and we flatten the curve here and people are safe. I hope everybody listening to my voice is safe and sound where they are. Social distancing works. It's obvious it works. and we're going to get through this. And as part of this ongoing discussion, there is a human toll here, which is first and foremost,

obviously important beyond anything else. Even if it's just old people who are impacted, those old people are our moms and dads and grandparents. Their lives are equally as valid. And that doesn't require me to tell you that. You know that to be true. And so thank you to everybody in our government who's working hard on this.

and of course the healthcare workers on the front line. Just, I'm in awe of the bravery of those workers who are going to work with under massive stress and with non-ideal conditions. But we're going to get through this. I believe that. And as part of getting through it, this is this week in startups. Startups are being infacted, you know, intensely. Half of my life right now is founders calling me up trying to figure out how to shut down their companies, lay off half their employees, all of them. their employees, cut salaries, and do general belt tightening. The other half are in solid

shape, and they're wondering what they should do. In some cases, even, their companies are booming because people are staying at home and have free time. It's a mixed bag out there. But one of my long-term friends and just a great advocate for startups, Eric Reese, reached out and was like, hey, are you doing any shows talking about how to get through this? And he and I have both been through the financial crisis. And we've been, we got the scars. And so Eric agreed to join us today for a special This Week in startups where we talk about running startups in the time of the pandemic. Eric, are you there? I'm here. Thanks for, thanks for doing this. And thanks for starting with the context of who the real heroes of this crisis are, the people on the front lines.

And doing grocery delivery and work in the supply chain and at great personal risk. It's It's been very moving to see people step up to take care of others. And yes, please, please, anyone who is not 100% on board with social distancing, like please get the memo. Every day matters a lot here. Yeah, it's so clear. And let me just start with, how are you and your family doing, Eric? Is everybody safe and home? And how are you doing psychologically as the leader of a company? Everybody knows you're running the long-term stock exchange. You've been on the pod many times, LTSE.com. We'll talk a little bit about that in the third segment, how that's going. But just first and foremost, how are you holding up and how's your family?

You know, I feel like this is a time to be real. Like, it's actually been really hard. You know, it's, we're in a really privileged position. You know, my wife and I, we were accustomed to working from home and schooling from home before the crisis. So we're relatively well set up for that. We got young kids, so that's not easy, but it hasn't been such a disruption to them. And, you know, as to folks like for whom schools are closed or, you know, having a really hard time.

I can't imagine now. I have such respect for people who are single parents. Oh, my Lord, yeah. My wife had some symptoms. And so she was, she was quarantined for a time. And I was, I was the only adult caregiver available. You know, we couldn't have any help in our house.

It was just me and the kids. Wow. So you had your wife in one room or wing of the house, and then you were in the other. Yeah, yeah. It was like, it was just sorry, you got your, you're it. And there's actually, like, to do that and, like, be running a company and also be like involved in all these relief efforts.

And it just, there were a few moments where I actually thought I was going to lose my mind. But, you know, but we're getting through it, you know. And it's, I take a certain amount of comfort and like everyone's going through this. Everyone's struggling. And we're all in this together. Yeah. And it's, uh, it really is interesting on a psychological level, this mass experiment of social isolation, which we've really never gone through.

And we as humans, even if you're an introvert, we're an extrovert, but even if you're an introvert, but even introverts, like you need some amount of talking to people or else you start to go mad. I was just thinking about how cruel and inhumane solitary confinement is in prisons on my drive to work. And I just thought, wow, I'm losing my mind. And again, I'm in a privileged position as well. And I'm starting to go a little bit stir crazy. I can't imagine. And then they announced another month here in San Francisco.

And I'm like, wow, I'm 20 days into this. I don't know if I can do another 30 days. And you think about somebody doing 20 or 30 years. and what they must be going through. Yeah, it's a genuinely, genuinely, genuinely cruel thing. And like, you never know with these crises. Like, they're going to, there's going to be so many changes large and small that get caused by, by seeing things in new ways.

And, you know, I'm hopeful that some of those positives eventually will come out of this will, will be in that realm of people, like being a little more compassionate for the folks who make all of this possible in so many different ways. And, like, kind of taking the negatives of this experience and saying, hey, how do we, we, how do we extend what we've learned from this, what we realized we're hard, you know, to others who maybe aren't as fortunate as we are. Yeah, absolutely. And I'm just thinking about those frontline Amazon workers, Instacart workers, of which are striking today, I understand, or doing a walkout. And I just thought to myself, like, how on earth are we not giving those

people double pay? And I literally emailed Bezos today personally, and I tweeted it, why don't they just let us put a tip, a standard tip amount in Amazon, right? And I had this argument with Travis over at Uber or debate, and he wanted it to be like friction-free, just a water, we don't want to put any friction of like a tip in there. And then I guess after he left, they added the tip.

And he had talked about putting- Just make it automatic. It's okay. You can make it friction-free and still be very generous. Yeah, and then, you know, Instacard, I guess, or some of these folks were maybe dipping in, I don't know, or maybe a DoorDash that was, you know,

prior to this dipping into those tips or doing that weird thing. We're like- Well, I'll tell you the thing that got to me, reading about the demands of the striking work, oh, Instacart workers today? was why did we need this crisis to have like free hand sanitizer for people who are doing this work? It's insane. It's like a hundred things like this that the crisis reveals and almost, and I'm sure we'll get to this because it's such a common refrain in the advice that I want to be giving to startups.

I'm sure you do too. So many of the things that you need to do in a crisis are things you really should have been doing the whole time. And somehow, sometimes it just takes a crisis to get you to take it seriously in a way that you didn't before. And I really hope that those lessons get carried over, you know, back into the time of prosperity, you know, God willing, we get there. Because, yeah, it's like, why don't we take care of those people? They're doing an incredibly important job. And it's not an easy job. And it's very hard work.

And so many of us rely on it. And why shouldn't they have the protections that they need? I mean, why is it even a question that Amazon workers did or didn't have sick time and pay time? I'm just how did we ever tolerate that before? Yeah. And the prosperity that we've experienced as a culture, the fact that we can't just create some minimum floors, you know, is mind boggling. I mean, hand sanitizer. It's kind of a minimum thing, allowing people to just automatically receive tips or get the tips that people thought they were sending to them in the DoorDash example.

Or just pay the people a living wage and as a society have a universal basic income. And, you know, like, I mean, it's just like there's some very, I really am hopeful that there's some very basic things that. require a certain level of solidarity among the citizenry of a republic that we've kind of, you know, we had kind of lost in the time of prosperity. This prosperity boom was one of great anxiety, social disconnect polarization. And so maybe maybe this shared experience like it did for our grandparents. I mean, I hope this won't be as bad as what they went through. But, you know, they came out of that crisis with a resolution, a real resolve to make lasting

civic improvements that we are the beneficiaries of to this day. and I don't think we have not lived up to that example and I hope that in some way this crisis will inspire us to do it. Yeah, it seems very clear that a lot of the concepts that Bernie Sanders or Andrew Yang with UBI in a crisis like this, I think that Andrew Yang will be remembered for that, you know, him champion UBI.

If he hadn't done that during this election, I wonder if Trump and the current administration would be so quick to say, you know what, we're just going to give everybody, we're going to helicopter some money in and do this bottom up as opposed to what happened last time, which I think is something we should talk about because you and I lived through it last time with the Great Recession. That was top down when they gave the stimulus.

This time it's all bottom up or it seems like it's very... I wish it was all, but yeah. It seems like it's very significantly bottom up or yeah. Yeah, yeah. I mean, clearly, clearly a very important component. When you look at what happened in what we went through in 2008, 2009, 2007, 2008, 2009 in that time period, what what advice can you give startup founders today that you experienced and please go into detail of living through that period well you know the funniest thing you know how there's things that

you remember intellectually but then you kind of forget about them until you have that sense memory of being in the situation again yes and then you know that people talk about like if you're you know if you're intoxicated you remember things that you did when you were intoxicated better if you're really stressed you remember things that happened so i've been having this flood of sense memories from not just the last crisis, but from the dot-com crash, too, but especially the last crisis. I had completely forgotten that the early days of lean startup coincided with the 0809 collapse. Yes.

And people heard that I was the lean startup guy. And after Sequoia made RIP good times and there was that like intense urge from investors to save money, a bunch of people would call me and say, hey, I heard you the lean startup guy. Can you help me save money on my startup? And I said, sure, let me talk to you about the build, measure, learn feedback. loop. And they'd be like, no, man, can you help me get rid of this fancy furniture? Yeah. And you get me out of my, I signed a five-year office lease and I shouldn't have and how can you help me get out of it? Yeah. And I remember I had this just sudden deja vu because

I'm getting a lot of those calls now. Yeah. And I had this deja vu moment of remember, I remember telling people, look, the things you need to do now are not any different than what you should have been doing all along because in a startup, any expense that you are, that you have, that is not really optimally, completely getting you towards figuring out if you're you're on the right track or not, right? Not kicking you through that build, measure, learn feedback loop. It's a form of waste, even if it seems like a good idea,

and therefore you can cut it. And that's true in a boom. It's true when a crisis, why did you have to wait for a crisis to cut those costs? And people would be like, oh, yeah, yeah, that's a good point. I better do it. And I thought very naively, I think,

I know this is like now I'm, and this is the first time I've really gone through the complete bus to boom to bus cycle as the lean startup guy. So I thought, because everyone had learned lean startup and so popular and you know it's had this effect like I really thought people would be better prepared for this crisis and yet I still I keep talking to startups who have all this bloat and all this irrelevant spending and you know they have like a five person comms team and they got

no revenue and it's like you know what why don't we get to product market fit and then invest in that stuff and so anyway so the number one piece of advice like just like from that historical parallel like The most important thing is to look at every dollar that's being spent and really understanding, like, what experiment am I running with this dollar? What am I trying to learn? And is that, in fact, one of my leap of faith assumptions that critically I need to know about in order for this to become a business or not? And I just, I think for a lot of companies, a lot of the money is being spent on stuff that is pure,

nice to have. And so definitely in a crisis, don't have nice to have spending. But that should be true all the time. Because it's not only the wasted money, it's the distraction factor. It makes it harder to learn about the things that are important if you're busy managing the things that are not important. Seems like one of the number one mistakes startups make is before they have that product fit, product market fit, they get distracted by something shiny and new, and they start pursuing two or three things concurrently before they have strong product market fit. So when we get back from this quick break, I want to talk about how do you know if you have really strong product market fit with Eric Reese of the lean,

startup and the long-term stock exchange when we get back on the sweet startups. When we're evaluating startups that we want to invest in, we ask them, hey, tell us about your NPS scores. Do you record your NPS score? Do you know what that is? Net promoter score. It's a way to indicate if people really love your product and if you have tight product market fit.

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D-E-L-I-G-H-T-E-D dot com slash twist. Okay, let's get back to this amazing episode. All right. I hope everybody's safe on this day 20 of quarantine here in San Francisco. If you're looking at this 10, 20, 30 years from now, yeah, it's kind of scary. but starting to get the sense at this very moment that we're going to get through it because San Francisco

flatten the curve, the number of people being admitted to ICUs and into hospitals is flat if not going down and Washington seems to have gotten control of this and even other cities like New York that got on it very late and that are much more dense there's a sense that they are getting more prepared

my guest today is Eric Reese who is calling in from home, obviously. I believe you're at home, assuming, or in an empty office. Shelter, shelter in place. Shelter in place. And we're talking about the ramifications for startups. But, you know, while we're looking at this, let me ask before we get back into startups and rolling up our sleeves to help people save

their startups and get focused. What's your sense? What is your gut on a personal level of when, let's just start with where we live, the Bay Area, when the Bay Area gets back to work and we're back at work, back in a restaurant, just those two things. We're back in our offices, maybe we're on the bar, and maybe we're in a restaurant. When do you think that happens? You know, I think in a situation like this, anyone who's trying to predict the future is a little bit crazy. So, you know, when exactly, I think there's still a lot.

We don't completely even understand the characteristics of this virus. And, of course, there's been no long-term longitudinal studies about what, happens to folks who've been infected. So there's a lot, there's a lot more uncertainty about those things. To me, the way I look at this is this is a two-phase process. The first is the human costs in the immediate. You know, there's, Tomas Payo has that great article, the hammer and the dance. And flattening the curve is the hammer, right? So we're taking these very extreme measures to try and flatten the curve and thank God for, you know, enlightened leadership in places like San Francisco and other cities that got on this relatively early.

And to the everlasting shame of this country, those who squandered the time, who could have prevented this crisis from reaching this current magnitude. And so during that first phase, like our obligations as leaders, even in startups in every kind of organization, is to really put people first and figure out, like,

what can we be doing right now to mitigate the human harms and costs of this? crisis. And we can't even really think about the later stuff until later. We have to just be all hands on deck focusing on that. And I hope we'll get a chance to talk about kind of some of the steps that folks can take to support people, put people first. And then, then we can deal with the second order effect, which is like the magnitude of the economic devastation that will be left behind from the hammer. Yeah. Because we're conducting an unprecedented experiment in the modern world in industrial. Like we are shutting down.

And again, we're going to attempt to cold restart a modern economy. And it might actually work because, like, I don't think people have really processed the extent to which, like, we've moved to a services economy in this country and an information knowledge work economy in a lot of places like San Francisco. And a surprising percentage of that work can happen on Zoom. Yeah. Thank God for Zoom. So maybe it won't be as bad as people say and the devastation will be limited only to certain sectors like retail and restaurants. or maybe this is a second great depression and, you know, it's more devastating than we can even imagine. And I think that ultimately will drive the timeline because the science on this is pretty clear.

Like I have great faith in the scientists who are working on this problem. I just did an interview with Sam Altman and he was talking about the experience that he's had of watching the entire biotech sector. Every company he knows, everyone he's talking to, 100% pivot to working on this and nothing but this all at once. It's pretty amazing. It's a beautiful thing to watch. You know, in the face of an absence of national leadership to watch civic leaders of all different stripes just step up and say, I will lead us out of this crisis in my own small way. So one of those therapeutics will work. One of the vaccines will work. One of the antivirals or maybe an existing drug for an off-label use. I mean, we have strategies for this. And I think we will get through.

you know, I think it's a matter of months, not years, before we can solve the, the, the kind of the immediate danger of the virus and create ways. You know, we can do test and trace. That would be the next phase of this. We can follow the lead. I hope if we ever get competent leadership, we'll be able to follow the lead of folks, places like South Korea and Taiwan who have already been through it. What do you think?

What does that mean exactly for somebody who's heard that but never heard a definition? Yeah, yeah. There's going to be a lot of explainers written about this shortly. because we're almost to the level of testing, you know, that, I mean, we should start, first of all, the most important thing, we have to ramp up testing to the nth degree and the delays in the U.S. to get testing on,

is unconscionable, and we should never let a moment pass. Crazy. With having maximum opprobium for the people who interfered with having proper testing in place in this country. I mean, it's a, it's a, uh, that's going to be quite a postmortem when we figure out why this testing did not occur

when we had six, eight weeks of, we had, I mean, I know people in China who say, we sacrificed everything to buy you some time to be prepared and you squandered it because, you know, out of your xenophobia and unwillingness to, and it's just bonkers. We are guilty as charged and we should feel, we should really feel a lot of shame about that. This is that's going to cost hundreds of thousands of lives.

So we test everybody. Tests are free. You get to a certain point. You get completely ubiquitous testing. And then the key is testing by itself won't solve the problem because, you know, we're, we're going to have on the order of like hundreds of thousands of tests. a day, not, we need 300 million tests a day if you wanted to really test everybody every day. Yeah. So what you do, the countries that have done this well, is my understanding is you,

you test a significant fraction of the population, but then you also have an ability to react very quickly to positive tests. So when you find somebody who is positive, you immediately quarantine them, but you also have some technological way to track who did they come in contact with. This is why it's called test and trace. You trace all the people they are in contact with. And you have those people quarantine also. Yeah. And so you have a lot of false positives. You want up quarantining a ton of people who don't have the disease while you wait for their test results.

But that's a very minor inconvenience to the fact that now community spread is really not possible. Like if you really take this seriously, do it right. You can't have community spread. And it's community spread that has the exponential curve attached to it. This virus is not that deadly in the grand scheme of things if people, if you have enough hospital beds and medical capacity. to deal with the folks. It's the exponential that makes the epidemiology dangerous. So test and trace will require,

it's going to be a very interesting cooperation, unlike anything we've ever done in this country. We were going to need the science for the testing. We're going to need government coordination. And we're going to need technology, like software technology. I want every person who's like, oh, we want to jet packs and whatever, and technology hasn't done anything for us and social media is stupid. It's like, no, the very technology of smartphones and social media

are an absolutely essential prerequisite. to doing test and trace and thank God we are all addicted to our smartphones. That's going to finally, finally, finally pay up. And so the idea behind the trace part is, I find out I tested positive. They take my phone and they just look at all my locations. I went to the gym. This is like in a post, you know, going back to work situation. I went to the gym. I went to this coffee bar. They know who was in the coffee bar because they have their phones at that time. And then we say, okay, we anonymized all this data. And then you get an SMS. By the way, you were in cycling. there was somebody in psychlas at the same time,

you need to go get tested. Boom. Yeah. And there's a number of variations of it, like, because it depends on what kind of test you get first. Like there's some people who think maybe we'll get a test for the immunity antibodies first. So you won't be able to test who has the disease quickly, but you'll be able to verify that people are immune.

Right. And then like maybe those people wear kind of a bracelet or have some kind of indicator that says, hey, this person is known to be immune. There are severe penalties for faking the bracelet. Like, you know, please, for God's sake, don't do that. And it would be great to have that bracelet because those people are the blockers. It's like those people. Exactly.

Exactly. And those people can go to work. Those people can man, you know, can do anything. I wish I had one of those bracelets right now and I could go and play poker with my friends, you know. Yeah. Like, yeah, if you have five people who all have the bracelet, then you can get together. But again, you're going to need technology because the temptation. Can you imagine, like imagine the social isolation goes on for another six months or more.

Oh, yeah. Absolutely within the realm of possibility. I mean, in a bad case scenario, we could be doing this for 18 months. In that situation, the temptation to fake it will be, would just be intense. It's because some people really like, well, they want to go out. So we have to have technology to just make it that's impossible. It's like, look, if you screw around here, we're going to find out. And I think in some countries, instead of how like arresting people and beating them and having

negative punishments, they've had like social shaming kind of things. It's like if you're found to have broken the quarantine, like they just tell your friends that you broke the quarantine and they call you up and say, dude, what are you doing? Yeah. No, I saw the videos of people in India like getting beaten on the streets for leaving their house. I was like, well, that's one way to do it. I think that's why Singapore, like, where it's, you start to see the differences in authoritarian countries versus, you know, democracies.

Well, but it's also interesting. There's the, I'm going to have, I'm going to butcher pronouncing her name because I feel like so easy to make light of these things and it's, it's not, you know, it's, it's, it's easy to think that it's funny, but of course, the stakes here are immense, but Zaynep Terfetchi is, you know, one of the academics who studies, um, digital revolutions and and political power in the age of social media. And she had a great article about how people think authoritarian governments would do better at this. You would, yeah.

But, and this was true in the case of China, authoritarianism breeds a lot of dishonesty. Ah. So it actually, like, the places that have a strong, like, you know, they don't necessarily have to be American-style democracies, but places that have a strong civil service where, like, there's an ability for people to speak the truth. Right. That's so essential. And that, in fact, it seems like it delayed the Chinese. response, even before, like while the Chinese, of course, they were suppressing the data from

the rest of the world. They were so good at suppressing the data, they suppressed it from themselves. The leaders only found out about the scale of the problem a little bit late and when an epidemic days matter. So it's going to be a very interesting. See, it's a very nuanced. It's a very nuanced point. Yeah. It's very nuanced too because you would think like, oh, they have the ability to lock everything down and people can't leave their city or whatever. They're welding doors shut. They're delivering food to people. But also, yeah, people are scared to death to tell the truth and then in fact, you know, people, you know, maybe disappear in certain places if they did tell the truth. We get back from this quick break. Let's talk about more tactical stuff

for startups to do when we get back on the sweet startups. Hey, everybody. Instead of me reading you copy in an ad about LinkedIn Talent Solutions, I thought, you know what would be a great idea? Who made LinkedIn Talent Solutions? Who's the product manager? Get me the head of product. And let's talk about why this product is so awesome. We've had so many great hires with me today. Blake Barnes, the head of product for LinkedIn Talent Solutions. Welcome to the pod. Thanks for having me. All right.

Thanks for that. When you are a growing business, SMB, a quick startup, whatever it is, you really want to focus on growing your business, right? That's where your energy and your focus needs to be. And so you don't really have much time to think about your end-to-end recruiting needs, like to build an sense of strategy and these sorts of things. You need solutions that do that for you, that bring it to you. And we have a whole range of tools that do that.

You're mentioning one of them. but there are plenty of others. So let's talk about screening tools. We have a whole suite of screening tools that help you to understand more about the candidate as soon as they arrive in your inbox. There are specific questions you can ask your candidates. So every candidate gets that question. I love that part. It's really cool, right? And it's interesting. With screening questions, we find that 80% of jobs that have this one or more screening questions get a qualified applicant in just 24 hours. And so these screening questions are really effective and useful for our hires. It's been pretty amazing so far. Find the right person for your business today with LinkedIn jobs. You pay what you want and you get the first 50 for free. The 50-0, the $50 bill. Just visit LinkedIn.com. Sliphton.com. You got that in your URL already.

Just add slash twist. TWIST and you get that $50 for your first job post. It's $50 for terms and conditions. Of course, apply. Thanks, Blake, for coming on the pod. Thank you for having me. All right. Let's get back to this amazing episode.

Special thanks to Eric Rees for taking the time to do this. I know he's busy being a dad running companies. and doing a bunch of important nonprofit work. You can follow Eric on the Twitter. Eric Reese, R-I-E-S. You know him from The Amazing Book, The Lean Startup, which is a mandatory read if you're going to start a company. I would say it's the first book you should read

if you're going to start a company. He's been on the pod. I guess it's your fourth appearance. First time, episode 199, back in the Santa Monica Days, October 2011, episode 600, episode 646 in 2015 and 2016 and 2016. a long-term friend of the pod and just a great human being

as far as I know. Well. That Santa Monica event was really fun. That was so much fun. Back in my younger, more rampunctious days. For all of us, too. For all of us. We're all growing up together here in real time.

Hey, you know what was great about 2011? Tell me. No global pandemic. No global pandemic. And you know what? Back then, I think it was such a pure time because if you were in startup land and I had just started angel investing.

You really, you had to be in it for the right reasons, right? Like, you just had to be, I don't want to say pure of heart, but pure of heart. Like, you were in it because you just loved it, you know? And then you get to like this peak. Everybody wants to be a founder and you asked them why they want to do this. And it's just like, I want to make money or it seems exciting. And boy, does that change when a pandemic hits. Well, that's, I mean, it's just, it's so classic boom versus bust and, you know,

saw that. And at the end of the dot-com bubble, saw it at the end of the financial crisis. there is a truth to the fact that people get into this for the wrong reasons during the good years, and that distracts a lot from the actual work that needs to be done. I'm looking at my portfolio, and I'm seeing a lot of people who are like, yeah, you know, it's not worth it to keep going because we have to make salary cuts. We've got to lay people off. And I'm like, okay, well, that tells me a lot.

I probably shouldn't have made this investment. Tell me about it. Let's talk a little bit about what a founder should be doing tactically right now. If you have an angel investment in a company, let's start with a company that I'll just give you a scenario. they've got, call it six months of runway. They've got product market fit in the sort of modest area, but they know they're not going to get continued investment. Existing investors said, we're not bridging it.

So they got six months of runway. They got 10 people. What should they do? How did you know? I had that call this morning. And every day in quarantine, at least one. Me too. But I actually think it's very important.

Before we get to like, that's obviously an existential problem for that startup. But I think we got to back up first because there's an order of battle here. And I want to go back to a point I made earlier about people being first. Sure. Crises are a time that clarify what your values really are. So like if you claim that something's a core corporate value or personal value or a part of your code of ethics or whatever, but you only do it when it's easy, then I call BS. That's no value at all. That's just PR.

Yep. So, okay, first of all, every company ought to have a version of a corporate value that says human beings are our priority. Toyota production system, they used to call it respect for people, like one of the top level principles. And if you don't have that principle, like, hey, now's a good time to update it, to add it, because you should always have that. Because why do we have organizations? They exist to serve people. Our customers, our employees, our investors, our suppliers, our vendors, we're in this web of human relationships. And I thought the very first thing that I had to do, even this crisis for LTSC, like the first company meeting we had about the

pandemic. And it took me several meetings to really make sure people really understood to say, listen, people first, that's always been one of our corporate values, but now I want you to really understand what that means. That means that taking care of human beings comes ahead of any business priority consequences to be damned. That was actually always true, but especially true now. We can never be in a situation where in a crisis you can take advantage of people sometimes. You know, you can do stuff that's shady and get away with it. Yeah. There's a lot of stuff that you can do. You can kind of turn your back on people in need. And if you think they're not going to remember how you treated them when you could have done something,

something different. Like, it's obviously the right thing to do. It's the moral thing to do. It's very important from a business point of view. The actions you take now as a leader will define you for the rest of your life. And so people first. So when we say people first, everybody nods, they agree. How does that manifest itself? What's an example of putting people first? Or examples, if the founder said, well, what does that mean? How do I do that? What do I do today? Yeah. So the first thing is, if you're not on board, fully on board with social distancing in this particular crisis, then shame on you. So you need to be early to these trends

because that means that is what taking care of your people and your community really means. And I'll give you an example, like this is a really funny one. I mean, funny, but like little things matter. So we went, you know, we had a formal response plan for the pandemic at LTSC.

And I remember we went to, you know, we went to the stages of like work home home optional, work from home encouraged, work from home mandatory. Yeah, we too. Yeah. You know, everyone went through this, right?

And it all upgraded pretty fast. But, you know, we were trying to be really thoughtful and respectful. And I remember there was a moment when I realized that some people were working and the office because they didn't have something at home that they needed. You know, not like I have a great work from home setup because I'm privileged to have whatever I want. But like, I have people that work for me who don't have as good a setup as me. And they were going into the office because they didn't have the computer or the equipment or the whatever. So, you know, it wasn't enough to say work from home.

We had to take the next step to say, oh, right, the company will take care of whatever expenses or costs you have, setting up your work from home setup. Please don't come into the office. Right. We literally shipped producer Jackie her monitor today in an Uber because she's on a laptop. It's, you know, if we're going to be home for an extended period of time, you need that giant 38-inch monitor. And like we had a developer who like has a super premium headphones. Yeah. And they left them in the office.

Now they can't get them because no one can get in the office. So it's like, well, just buy yourself another pair of headphones. Yeah, it's going to be okay. And we made, we made an employee a stipend. So it's like a little cheap, easy thing to do. The total costs were insignificant. I mean, like compared to like the money we're saving from nobody traveling. like completely insignificant cost.

Fair point. But it allowed people to spend money on all kinds of stuff that surprised me. A lot of it was like wacky stuff that I would have been like, oh, I could never have anticipated to tell you to do that,

but that's what it took. Like a good chair. Yeah, you know, whatever you actually need, and again, the standard is like, whatever will actually keep you at home during this time, we have to provide that for you. So you do that for your employees.

But then as you get yourself, obviously, it's like Maslow's hierarchy. As you get yourself, you get your family taking care of, your team taking care of, you can start to extend that empathy out to others. And I know some people are like, but what are you going to talk about my runway and I'm going on a business? Like, we'll get to that. We'll get there. Yeah. But like, we'll get there. But honestly,

it's very important. Even if you're going to go out of, like, startups fail. It's kind of what we do. It's the default. So like, it's a default. So like there's no shame in it. It happens. Right. So how you behave on the way down matters. Yes. And like, of course, some of these things will help you save your company. We'll get to that. But first and foremost, like, take the time to actually treat people respect and extend your empathy out to not just your employers but your suppliers. So here's another simple thing. I've heard from many vendors that they're keeping their employees in the office because they think their clients won't tolerate bad service. What? So lawyers, I know. I think people are getting the memo now, but again, in the early days of the crisis, we had lawyers in law firms

forced to go in the office, bankers, traders. I heard from some nonprofits that they were afraid to work from home because their donors wouldn't tolerate it. So each of us is not only a company with customers, we are a customer of many, many vendors. Well, have you sent every one of your vendors a letter telling them that if they endanger their people's lives, not only, like to serve you, not only is that not okay with you, but you're going to pull your business. You insist that they get on board with social distancing. Yeah. You're going to use it, right? So again, a very easy thing to do cost you nothing. It takes two minutes. May as well do it. And listen, since in the later segment, I'm sure we're going to be talking about how to renegotiate all your contracts with all your supplier.

Like, how about first, before we get to renegotiation, first let's take care of all the human beings, then we'll get to that stuff. I had two good suggestions that I did on the fly. We, you know, we have our Wednesday meeting. Usually it's the CEO lunch I've done it my whole life, which is every Wednesday, all the companies I've ever run. I just host lunch with everybody. And it's not like an agenda. It's not like a stand-up, like, you know, try to get work done.

It's more just casual, have lunch and just shoot. the breeze. And I just said, hey, everybody buy your family lunch as well. And we're going to start off with everybody's kids being on the, on the Zoom, right? So bring your kids to the Zoom and avoid it that. Please, please do that. It just made everybody realize to your point, and this is such an important one, people first, and being compassionate because, yeah, you may have to make some decisions as a leader in terms of laying people off or cutting salaries or whatever that are much harder. and if you just do those small little things, I think, you know, it's a reminder to you as the leader

that there are humans at the other end of this, right? Totally. And of course, like we adopted a new norm that kids are welcome on Zoom meetings and it's not a big deal. Through the whole meeting. I love it. Yeah, yeah, exactly.

And listen, and I'm not an investor or anything, but I love out-school, great startup. What is out-school? Is it homeschooling? It's like a homeschooling, learn from home, distance learning for kids. Yeah, that's going to become a thing after this. Yeah, I mean, I can't imagine how big their business must be booming.

I talked to Amir, like, in day three of the crisis and it was already going nuts. And I called him because I was like, listen, I want a corporate account. Like, just bill me for my employees' use of this. Because, like, if the kids can learn on these classes, like, it's one of my, I mean, it's not only great for them. It's, like, very enriching. I mean, my son is learning to play chess. He's singing a ukulele class.

He's doing these art projects. I mean, the number of classes he's taking out of school is obviously exploded during this time. Such a good idea. But it's also, it's critical for child care. Yeah. Many of us, you know, I was a single parent for a little time while there. And like, I need things for the kids to do that are not just like watching TV.

And again, like the cost. So great. These costs are extremely cost efficient. But, and of course, I know I can afford them so big deal. But what about, can every one of your employees necessarily afford that in their budget? Everyone's stressed about money right now. Everyone's 401K just went down. You know what?

Just cover it. Cover calm. Mental health stuff. Yep. There's just a lot of little benefits now that will go a long way. That's really important. I also told anybody if they need a mental health day by all means, take it. Like, I'm working, I don't know about you right now, but I think I'm working 50%, maybe even, I think I might be working close to twice as many hours as I normally do.

Like, it's all one. All I'm doing is working, taking care of kids, working, taking care of kids. That's it. And it's not ending for me. Like, it's literally one day is flowing into the next. The schedule just keeps getting filled. My schedule is twice as dense right now, and it's Saturday and Sunday. It's every freaking day to try to talk to founders and save companies.

It's really a crazy experience. Like, everybody is, I'm hearing from people that they're having this extended vacation and looking for time. I'm like, really? I know. I know. I have had not a single waking minute. It's been insane. Well, and because, of course, I threw myself rate into relief efforts.

You tell us about that. What are you doing? Yeah. Yeah. I'm no hero. Okay. The nurses are the heroes. Like, I saw like Instacart, Instacart's freaking heroes.

Yeah. I'm just trying to do my part. So I tried to pick something. I started with something that I thought was really tractable. We built this site called schoolclosures.org. Because like there's 100 million kids now who are involuntarily homeschooling. And so like if you, if you haven't had experienced homeschooling, it's like very, very intense. And people, there's people who like know what to do.

And so there's like, we got all these education companies to partner and give away free services. Outschool. Tell us the domain name one more time. So we have it. Schoolclosures.org. Schoolclosures.org. Perfect. And listen, of course, like, for privileged families, like, it's fine. I'm sure it's very helpful.

But, like, for a lot of people, this is, like, a real existential problem. Like, what do I do with child care? People use schools for food security. So we actually have a hotline. You don't have to be, like, a super social media savvy, like, person. Just like anyone with the phone, call the hotline, we will get you connected to someone who will help you. And it's such a good idea.

Yeah, really, like, it's been amazing to watch people rally to that. I just realized. 190 volunteers working on it. I'm going to do a, I, I announced that I, because I was very concerned about like startups not being able to raise angel funding, you know, like the VCs have the dry powder, but on the angel side, angels are investing directly from their 401k's into startups, right? Yeah, it's like, whoops. Whoops. I'm not going to be doing that. So I basically started Angel University, which is our in person.

And I said, just make a donation of $100 or more to, like food relief and other coronavirus relief. We sold out the first one, 150 people, like $15,000, and donations. I'm doing a second one. And it's like, yeah, I mean, think about how that helps. We get the donations on one side and then maybe some of these people might invest in companies and take on angel investing as, you know, a vocation. And so when we come out of this, they might be able to support these companies. I was just thinking based on what you're saying in Riffing, I could teach a startup course, you know,

and just for kids who are in high school because they all want to be founders now. Oh, yeah. Oh, what a cool idea, yeah. We could, we could. Maybe not quite as much as they did before, though. I would think, yeah, it's really interesting if the belief in capitalism versus socialism through all of this. I wonder if you have a take on that. Given like coming out of the pandemic, we're going to see all these great, as you said, with Sam Altman doing the biotech stuff.

If all of that works out, then we're looking at capitalism and saying, wow, it's great that we have Amazon and Instacard and all these biotech companies. I wonder if we'll have more people wanting to embrace entrepreneurship. Very interesting to see. And answer that question after we get back from this final break. Times are tough for early stage startups these days. We all know it. Many of us have had our minds on other things. We've been distracted and rightfully so.

But now more than ever, it's important to build and maintain great customer relationships. When you have a crisis like this or you're just too busy and you stop paying attention to your customers, you know what? that can lead to a lot of problems. And Zendesk is here to help with the Zendesk for Startups Program. The Zendes for Startups Program offers qualified companies six months of free usage of their service-first CRM solutions. They also give you access to their exclusive startup community and resources to help you scale out your customer support.

So you're not reinventing the wheel. You can ask their community, hey, how do I do this? They also are rolling out new features all the time, like the support suite and the sales suite, right? Zendesk is helping you on support and on sales now, which is really a great product extension for them. So if you're an early stage startup and you have under 50 employees, you can get started today with six months free of Zendesk at Zendesk.com slash twist. That's right, six months free. You cannot do better than free.

And Zendesk is playing the long game. They want to get these startup companies that listen to this week in startups now when they have under 50 employees. So if you have 50 employees or less, I want you to go to Zendes.com slash twill. twist, every customer counts. You know this in your heart. And when you're a startup, you need to covet all of those early customers, especially now. So start building the best experiences at Zendesst.com slash twist. Thanks again to Zendesk for supporting independent media like this weekend startups. Let's get back to this amazing episode. All right, Eric Reese is with us. He's doing the long-term stock exchange. Just to get that out of the way, for people who don't know

with the long-term stock exchange, why did you start it? What is it? Well, imagine what would have happened if since the Great Recession, the companies that had gone through the boon times had taken all the money they had made and really invested in their own people, invested in R&D, built relationship with long-term investors, and had built a culture of agility, scientific discovery, rapid response. Like, think how much better those companies would be equipped to deal with this crisis instead of like spending all the money on buybacks and financial engineering and now needing huge bailouts. So LTSC is dedicated to being a new, we're a new stock exchange. So we're America's newest stock exchange in the same category as nice here, NASDAQ, but our rules encourage that kind of long-term thinking and multi-stakeholder approach on the part of companies. And I remember early on when you and I were talking about your vision for this, the idea

would be, if I remember correctly how you explained it to me, hey, I'm, I own, I'm an LP or I'm just an investor, I'll buy this share and I'll agree to hold a share in Uber or Airbnb, Airbnb is a great example since they're not yet public. I'll hold this Airbnb share for the next five years. And if I agree to that condition, I'll get a 20% discount or I'll get an extra share for every four I buy. But if I want to have the flexibility to sell it every year, maybe I get no discount or whatever I trade share.

That was how you were in one of the examples you gave me early on. Where are you at in terms of launching us? And is that, was that vision? is that, has that been embraced? And when do you think we'll see the, the first long-term stock exchange company? A couple of questions there are taking as you want. Yeah, sure. Well, so, so yes, the idea's gotten a little more sophisticated since then, but the general thrust of it is right, having companies really partner with and reward their long-term investors and really all their stakeholders, not just their investors, but their employees, their suppliers, our community, everybody. But, you know, the irony is

we actually, we would have launched the trading platform three days ago. Oh, wow. If not for this crisis because it's obviously not a time to launch a new regulated financial market. So we're obviously going to push it back a few weeks. And it's actually really interesting to tie it to the thing we're talking about people first. One of the things that we realize very early on is we were talking about people first. So people first, you hear that, they first interpret that as like, okay, take care of my family. Oh, no. Also take care of our employees. And I was like, well, what about our contractors? Did you call all of our outsourcers? Did you like, okay, we call those people? And then what about our customers? Of course, we're calling companies.

see how they're doing. And then somebody was like, but what about the member like banks? What about all these banks who are our members of our market? We better call them and see how they're doing. And it was awful. You know, a lot of these companies were not set up for work from home.

A lot of like trading shops. Not at all, yeah. They had to push code changes. They have to like get access to their physical data center and all kinds of stuff that was suddenly disrupted. And we were inadvertently putting a lot of stress and pressure on those people because we have a legally mandated deadline

that they had to meet to be ready, to be ready to trade in our platform. And so we said, you know what, let's, let's proactively push that date back. Yeah, punt. Or we have to just, you know what, it's okay. Like, we're the, like we have long term in the name of the company.

Yeah. Does it really matter if trading starts this week or in a few weeks? Like, let's have some extra testing days. Sure. Let's like try to deal with the volatility. Let's like get through it. And the response from those people, it was just one of those small things where like it's a business setback for us.

Like we would rather have revenue. We would rather have trading. We'd rather be doing it. But in the long term, that investment in our partners will pay back itself many, many times over. So we'll see. Anyone who thinks they know what the markets are going to look like a month from now is kidding themselves. But with any luck relatively soon, we will be open for business. And then whenever companies start going public again, because who knows when that's going to be,

then the first company will have a chance to list or dualist with us. I'm dualist. So I could say, hey, I'm going to put some of my shares on this market. and you'll, you know, 1% of our float or 5% of our float will be available to LTSC.com traders. Yeah, that's actually the technical way that you described dual listing is not correct, but it's kind of arcane and it's all right. The short version is yes, you can have a completely conventional NYSE or NASDAQ IPO and still be listed with them and just add us as a secondary listing option and you get all the

liquidity you would get from a conventional IPO, but you also get all the protections of our technology and governance systems. I heard you embed in there a little bit about the stakeholders. I know when eBay was going public, they wanted to have sellers be able to have a taste of the IPO. I know Uber tried to do that with drivers. I know Airbnb wants to do that with hosts. It turns out it's very hard to give people who are not accredited investors. Those are the top 5% of Americans who make 200,000 a year, two years in a row, or have a million dollars in net worth, independent of their primary residence. I believe that's the definition today.

Something like that, yeah. Something in that exact range. Right. Is there... For some reason, only those people are allowed to have gross. Some reason only those people can have upside, as opposed to the Uber drivers or the Instacart delivery people who deserve it. Can you imagine if Instacart said we're going to give every person who comes to work

during this crisis one share of, you know, it could be a $5 share, but we can have everybody another share every day you come to work. They have an obligation. I mean, forget, forget the crisis for a second. They had this obligation before. Just because these people are legally, technically not classified as employees, every piece of logic and evidence that says you should give equity to your employees also applies to the people who are, I've been using the analogy of these platforms as a nation state.

Yeah. Like some of these platforms are like as big as nations. Of course they are. Yeah. It's like a huge government. So like, like everyone's talking about UBI, social wealth funds. Here's my idea. because yeah, you can't give them stock directly.

It's illegal, what a shame. They're going to change that for sure. I hope. But in the meantime, we don't have to wait for that. Let's create the equivalent of a sovereign wealth fund for the citizens of the nation and pay them a universal basic income powered by, like, you think about the Alaska permanent fund that pays a dividend to every citizen of Alaska based on the natural resources. Well, like platforms have a natural resource, which is their currency of the platform is

the stock. Let's build a sovereign wealth fund. And then let's say that anyone who is a good corporate citizen of the platform benefits from the upside, share the wealth with them in ways that are material. That's mind-blowing. So let me see if I understand this. There's a million Uber drivers globally. Uber says we're taking 1% of Uber's value, which would be $500 million today.

We're putting that into this long-term stock exchange, sovereign wealth fund, which means everybody's got $500 in it. Uber goes 10x. Now everybody's got $5,000 in it. If it throws off, you know, whatever interest a year, that position, we just say, you know what? Every year we're going to take 1% of that and give it to the drivers who previous were here. And then when new drivers come in, they're going to get a taste. Is that the concept? Yeah, yeah.

And then now imagine you did that earlier, right? All these companies are catching up. My Uber's going to do it now. It's going to be hard. But what if you'd done that when Uber had a market capitalization of like $5 million or $50 million when it was back down to a $500 million? Like if you'd done it then, it would be $5,000. run up. Right. We'd be talking about $250,000.

Significant money for people who really could use it. And at what cost? At the cost of 1% extra dilution? Who cares? It's not even a significant expense. Well, and then you probably could get some benefit in terms of loyalty to the platform, to the nation state, or you could even probably

get that legally. So if you said, hey, if you're an Airbnb host, if you give us exclusivity, or you, you know, hit 100 nights a year or 200 nights a year, we're going to give you this increase or bump in your access to the sovereign wealth fund of Airbnb. Oh, my Lord, that gives you a moat that's an opt-in moat. Yeah, now I wouldn't do it exactly that way because you don't want to come across as mercenary

and make it about nights. But I think there's a lot of ways. That's a difference between you and I, Eric. I have a bit of mercenary at times. I look at that. That's a good blocker, man. We're going to beat lift. Listen, the fact that there happens to be business benefits to doing the right thing, like ain't that sweet yeah let's do it because it's the right thing it's one of the great things it's the right thing I totally agree

it's one of the great things about capitalism which is so maligned these days but you know it does move the human species forward even if it has weird things on the edges let's get back to the capitalistic bullet points which is really it took us a little while to get here but let's let's do that right now

let's do the scenario you had the call this morning I'm having the call after this oh yeah so let's get into the tactics let's do it let's get tactical for the final 15 minutes here. Yeah, it's super important. I mean, respect for people, one of the ways that we help people

is by offering them secure employment. And so it's actually not doing anyone a service to run your unsustainable company into the ground because you're afraid to make the hard choices. That's not helping anybody. So we got to think about right-sizing the business and making sure we get into a sustainable place. And first of all, that means,

like, if you can raise money, do it. I know some people raising money at a 60% discount to what they thought their valuation was. And so what? Who cares? Extra delusion. You know what? But at least you raised the money. Like, do not mess around now.

If you have the opportunity to do that, just do it. Second thing is before you go right to layoffs, because I know a lot of investors, this was true in the last crisis. And by phone has been ringing off the hook, people being like, listen, there's certain investors that are just like lay off your whole team, lay off, everybody, layoff, layoff, layoff, lay off. I'm under intense pressure getting these calls. And it's like, hey, everyone, calm down.

First of all, I said this to investors. I'm not laying people off today in the middle of a crisis. Come on. Like, and they were like, okay, but all you're doing Monday next week, two weeks? I was like, let's take a beat, okay? Let's all take a breath. We may, like, there may be companies that do need to change their workforce composition, but don't rush into it because first thing you got to do is figure out there there are new revenue opportunities. I think it's very important to make every effort to preserve people's employment. Yes. And to look for new ways to make money. Because the nice thing about a crisis. The silver lining is the seriousness of purpose that it imbues everybody with. And so to be

honest with your team to say, hey, here's a situation. First of all, do not hide the bad news. Don't think you can improve morale by by BSing people. First of all, they see right through that. They know you much better than you think they do. And secondly, it's cruel. So be honest about the situation. You might even have some people who say, you know what, screw this. I'm going to take a job at a traditional company. I can't handle the stress of being in a startup right now. Yeah. Wish those people well and say, God bless you. Don't. Don't, don't fight this. Yeah. Stay in touch. Good luck. Yeah, right. Right. Listen, we'll welcome you back

if the situation changes. It's okay. And listen, were they true believers? You know, maybe not. But then the next thing is to say, okay, we're going to give ourselves a certain amount of time to get to a sustainable place. And for companies that are in a really dire cash crunch, you might even have to say, like, we only going to give ourselves two weeks

a month. We can't afford more time than that. But give yourself at least some time. Heck, if you said we were going to give ourselves this weekend. Right. I would say, give yourself some opportunity to find something new. Think I'm productive people are at startup weekend or in the old leading startup machine. We used to have people start a company like in two days. And when the mind is focused, constraints are intense. Like sometimes real breakthroughs come from that. I mean,

don't forget why Combinator is only 12 weeks long for the whole program. So if you can afford it, you could even say, you know what, we're going to give ourselves 12 weeks. But give yourself a hard deadline to find new opportunities. Because yes, in a crisis, people are generally going to cut back on spending. If you are relying on optimistic revenue forecast for the rest of the year, please throw those forecasts out. Better to be surprised on the upside than surprise on the downside. So it would be conservative now. But then in a crisis, people want to save money.

So products that save people money are all of a sudden back in fashion in a big way. And certain sectors are booming right now. So you have a product that is related to video conferencing to grocery delivery, you know, to stuff that is that people can do in their home. Like then that's a huge opportunity. Video games, subscriptions, learning tools, all that stuff. Yeah, and it will be, I bet you there'll be a hundred categories that we can't totally predict. Like, I was just talking to somebody about who's in the cosmetics business.

And their first reaction was like, oh man, no one's going to buy cosmetics in a crisis. Yeah. And I said, yeah, but what if you offer Zoom makeup? Whoa, here we go. Right? Like, we don't know. So like, and I have no, like, what do I know about makeup? Nothing.

So please don't take my product ideas ever. Yeah. But there will be unexpected opportunities everywhere. And so you owe it to yourself to give it, to give it company a chance to pivot. And the way I would structure this is work backwards. be like, okay, you're going to need like roughly 18 months runway on average to survive a crisis like this. That's like average recession length of the situation. This could be a lot worse.

But I would say like rule of thumb, you know, you want to have 18 months runway. That was actually always the rule of thumb. Always the rule of them for guys like that. You should always have 18 months. Yeah, you can think. When you have 18 months, you can really think long term because you can spend a year, you can spend one year working on your product and still have six months buffer to raise more money or pivot. Yeah.

You got it. So get yourself, so if you're all in six months runway, it's not that bad. Not that bad. It's not that bad. You now need to get 18 months runway. So if you're a 10-person team, even if you did nothing and you became a three-person team, then you'd have 18-months runway. So like, be grateful that you have six-months runway because the people with four-months runway

are really wishing they had six-months runway. Sort of like altitude. It's like altitude on a plane. You're at 10,000 feet. You drop some fuel. You drop some weight. You might be able to glide a little bit longer. If you had 30,000 feet, yeah, you can glide to an airport land.

You really just try. Much easier. So the first thing is so work backwards. Figure out what is it going to take, like make your worst case scenario plan. Be like, okay, like let's say you are going to have to reduce personnel. And again, respect for people. Do this in a compassionate way. Be generous with severance and make sure you're taking care of people.

Even if that means you have to do, you have to actually lay more people off, like get to a place where you can offer secure employment to the people who remain. And you can treat the people who are going with compassionately. That's very important for your long term reputation as a. human being, never mind it's the right thing to do. So then say give yourself a month. You know, like if you can't figure out how long to give yourself, give yourself a month by default. And if you, I'll show you how to do the calculation. You might be have to extend it to six weeks. You might be able to cut it back two weeks. We'll talk about a second. But give yourself a certain amount of time to say, can I find new opportunities for this business, new sources of

revenue that will extend my runway without layoffs. And it's very important to do that first. Even if you fail, people will really respect you for having tried and remember the lesson of the truly great companies. You know, Toyota famous. used to pay their workers to come to work in the factory even when they had no orders and say, just make the factory more efficient, figure out ways to improve the factory, improve our work, so that when orders resume, because orders will resume, we want to be ready to capitalize that opportunity. And so they always came out of recessions stronger.

So if there's any version of that that you can do, you got to do it. Now, if you're a company that was formerly profitable and had a real balance sheet, if you're in that situation, please do that. And if you're a platform company, do that. Do that for your platform workers, right? So, like, Instacart workers are striking because they're too busy. Airbnb hosts have nothing to do right now. Depending on where you are on that spectrum, like, if you have a corporate balance sheet,

like take care of those people, give them jobs to do, find ways for them to make investments that will benefit you and them when prosperity resumes. If you can't do that, if you're an unsustainable money losing startup, hey, join the club, me too. Yeah. Then the version of that we have to do is looking for new sources of revenue. And I would be really hardcore about it. I say, listen, we have a month.

And like, here's what we have to do. to get from six months runway to 18 months runway, here's the level of revenue we need to generate. And don't do it as like a gross number, like, oh, we need $5 million revenue. Do it on a per customer basis. Here's what a sustainable unit economics thing would look like. And you'll be astonished now.

If you give yourself truly a month deadline, how much shorter and quicker your MVPs are. Because now we're fighting for our lives. We're fighting for our jobs. We're going to actually really, really, really take clean startup seriously. We should have taken it seriously in the boom years, in my humble opinion. But okay, but now you're really going to take it.

series. Someone's like, you know what, we have to make it more perfect and take an extra week to launch. You're like, we don't have an extra week, man. Do you see what we, like, let's go now. And some of the greatest pivots in history, you know, like so many famous examples of like YC companies that like for sure got 10, 10 of the 12 weeks into the program, realized their products sucked, decided to pivot, make something new in the last two weeks and then boom, it really took off. It's kind of like the McGiver thing, you know, like if the bomb is about to blow up in your lap, you're like, you know what, I'm going to come up with a creative way to get myself out of this situation. McGiver yourself out of it with some goddamn chewing.

them, right? And it's really interesting to watch what happened with Lyft and Amazon as well. Like, I think Lyft partnered with Amazon to do deliveries. And I think they even told Lyft drivers, like, hey, here's an easy way to get work over at Amazon. There's that cross company. And you don't know until you ask if another company needs help. Like, maybe these Cloud Kitchen companies need help right now. Maybe you can help them. Exactly. Exactly. And do, like, I'll give an example of, like, this is where you find out what company's true colors are. So, like, DoorDash has been much maligned about, you know, because they had that issue with the tips and people imagine them and, you know, most it.

But like, DoorDat, when we did school closures, DoorDash was like, how can we, can we help deliver lunches to kids who need them right away? And they, and they, it was super smart. Like, like, that's an important thing that needs doing, but also it's work for their, for the dashers. So, like, rather than lay them off, find other ways for them to work. Yeah. I also think companies should be doing work on behalf of the unemployed. Like, in case you wind up having to do layoffs, like, then you're set up to really help those people find new jobs. do that anyway in advance of having to do it.

If you're hiring, like help people deal with a crisis. Here's a tactical question. I noticed that Bird got barbecued for the scooter company got barbecued for doing a Zoom call when they laid people off. Another company did that. But people are sheltered at home. It's like a first time we've ever had to have this situation. The breast practice was always get all the people impacted, get them in one room, provide services, and have a group discussion about it. You can't do it anymore.

You can't do it anymore. So they do Zoom. And it blows up in their faces. People say, oh, my God, this is cat. which is what people say anytime anybody gets laid off no matter how you do it. If you do it one at a time. And you can't, now is not a time. Like it's funny, now is a time to build your reputation for the long term.

Yeah. But it's not a time to be paying attention to what people are yelling at you on social media and all kinds of nightmares. Like you can't, it's not a popularity contest. You got to act decisively. You've got to do what's right. And you've got to trust that you're going to be judged in the long run. Right.

For having done the right thing, even though it's going to be painful in the meantime, including, I mean, laying people off is a really, I mean, we should just be really honest about this. It sucks for everybody involved. It sucks for the people being laid off. Of course, first and foremost, it sucks for their families. But it sucks for the people doing the layoffs.

It sucks having to make those decisions. It sucks for the people who are left behind. It sucks for everybody. It's really awful. But first of all, hey, ain't nothing compared to what nurses are going through right now. So, you know what? Have some perspective. Keep it in perspective for sure.

And secondly, you got to do right by the business. This is a time, like I said, to provide secure employment for folks. And just because you're laying somebody off does not mean you have to treat them disrespectfully or callously. and I would, you know, if someone had to leave my team for any reason, I would want to work really hard to help them get placed in a new place. Like, I would actually like make that my mission and job. Yeah. And, you know, I'm here for you. You join my family. And so like we're bonded for life, whether you work for me or not. And it's a really easy thing to do. I think a lot of companies now, the best practices, if people want to opt into being in an Excel sheet, I'm sorry, a Google sheet that shared or an air table that shared. Yeah, yeah. At least do that at a minimum. You publicly share it. And you know what? It's so effective because there's some company that's booming. that has an HR team that's working from home, and they're going to onboard those people super fast. Let me ask you a tactical question about cutting salaries of people in order to do it.

So let's say you got a 10-person team. You can keep all 10 people together if everybody takes a 20% cut, or you can let go of two people, which is the better thing to do in your mind? And how would you navigate that if one of your founders or investments or advisership said, what should I do? Do I lay off two people? Do I cut every salary 20%?

In these situations, there's no universally right thing. I do think shared sacrifice is powerful. So like I don't take a salary at LTSC, but like if I did, I would, first thing I would do is want to cut it. So make sure you, like the cuts should be deepest, the higher and the hierarchy you are. So like founder, CEO, take the biggest cut. Executives take the next biggest cut. Then before you ask anybody else to take cuts, I think that's, I think that's really

important just symbolically. It's also most people are salaries are pegged to market comps. Right. And market comps are about to collapse. So everyone's actually about to be overpaid. And it's actually one of the reasons why, like, if you talk to, like, management consultants who talk about layoffs, they're actually like, well, one of the benefits of layoffs is even if you wind up hiring back every single one of those people, you'll hire them back at the

new normal salary, you'll save a ton of money. So, like, yeah, don't be callous. Yeah, well, when you think about like just market consultants, I mean, that is, that is the height of mercenary thing. Well, no kidding. Yeah. So, like, so what I would do, and I would actually give people, I would start by, like, talking about it as a team.

Yes. Not that you're not willing to make the decision. It's your decision. Don't delegate this. It's not a popularity contest. And also, don't forget startups have one magic thing that other people don't have, unless they structure their comp right, which they usually don't, which is equity. Why?

Be generous. This is a time to trade cash for equity just like before. And I know a lot of companies, I mean, I've been in this situation too, where your valuation starts to go up, you start to get, start to raise real money. You start to be more stingy with your equity because you can and because your investors want you to be and that's rational to do. And so you actually, you wound up having employees who are underweight equity for what you kind of really would want them to have because you had to be stingy with your

option pool. Like this is a great time to go to your investors and say, hey, you know what we should do? Yeah, I'm going to do that of the stuff you want me to do too, but let's raise the option pool while we're at it. Absolutely. And let's use it to take salaries down. And a lot of people, you know, that's a really good deal for them. And even if they're not super happy about it in the moment, you're making a long-term investment

in their future. And, you know, and especially your frame it as like, we're going to save some jobs here if we all are willing to do this. I think it's pretty cool. I had a board call this morning, and they asked us to vote on the board to extend the option period for the people who were being laid off. Oh, please do that. And it's such an obvious, easy thing to do. And for people who don't technically understand what that is, is you usually have 30 or 60 days for people to buy or execute their options to buy those shares when they leave. So you're basically saying, you have no job, you have no future income. Please give us some money to buy your shares, which is like,

to do. Listen, I've always thought that that exercise window should be extended and, yeah, it should be five years. Yeah, it should be five years or something. Whatever you think it's going to take to be able to be liquid. But that's like saying to somebody like, yeah, by the way,

you've been fired, it's going to cost you $10 to go down the elevator on the way out. Yeah, it's just a really. Don't do that. And like, yeah, just try to find ways to do right by people. And again, if you think about it in a mercenary terms, like, you can screw, you can definitely get away with screwing people over right now. Like, and a lot of startups,

I mean, let's be really blunt, you could lay people off who have the largest equity positions because they were early employees and hire exactly equivalent people, you know, into those jobs to replace them. At lower prices. At lower prices with lower equity and they can't afford to exercise their options. So you could reclaim, like you could boost your personal ownership of your company by a lot right now. And I wish I could tell you that no founder in the history has ever done something like that. No, we know some examples. We know some examples. But boy, do we remember those people. Yeah, I mean, the reason they're high profile examples is because when they did That's the last time.

We all remember that. Yeah, so just remember. Like, don't take this as like added pressure because like, oh, I don't want it to be paralyzing. But you will be remembered for how you treat people now. And so none of us are perfect. We're all going to make mistakes. Here's one thing. But try to do right by people.

It is ultimately going to pay off. Here's what I did. I told everybody, hey, do me a favor because this is a new world for us working from home at the investment company launch. I said, just tell me what you're going to do. I started the meeting on, you know, our, lunch meeting on Wednesday is with, what are you doing to move the mission of the company forward?

And then every day, just put what you're going to try to get done that day. And if there's not enough on that list, just ask other people if you can help. So if your job was dependent on being at the office and you feel like at home you can't be as effective or you're not interfacing with founders, let's just ask people sitting next to you left or right,

what we can do to be, how you can be of service, how you can help, right? So you don't feel this anxiety of, oh my God, am I contributing enough? and am I on the list of people who are going to get laid off? I think that's like an important thing for, what's your advice for employees of team members

of how to behave during this? So again, rule number one, people first, be of service. Yeah. And, you know, I know a lot of people who are in a situation right now where they're being paid and they can't do any work. I mean, think about like everyone doing any kind of child care type business. And you have like, there's people, and like those, I mean, it's stressful. It's not like, oh, yeah, I'm on the beach.

No, it's stressful. going to have a job, what's going on? You know, I've, we just speaking personally, like, guaranteed the salaries of all the people that work for me personally, even some of those people can't work right now. Yeah, I mean, if you have a nanny and the nanny can't come because of social isolation, or they have to take care of their own kids. Yeah, you just have to do the right. In the immediate short term here, you just got to do right by people and suck it up.

It sucks, but, like, suck it up. But then, like, what's the long-term plan? I think it's really important to find things for people to do. And I'll give you a little tip, actually. This was a small thing, but it's actually, I think, can be big. I was reading in one of the early days of the pandemic, I was reading a blog from an epidemiologist who was talking about pandemic preparedness and what's been proven effective in the past.

And it was early blog post for me teaching me about social isolation and the need for social distancing and really helped me realize like, oh, man, this is going to be a lot more serious than I think. And one of the throwaway lines in there was like, oh, by the way, make sure for their psychological well-being that every person that works for you, has a pandemic specific job. That's not their normal responsibilities, but something extra,

no matter how small. Wow. And it was like, he was talking about, like, this is like being framed. Like, you run a retail establishment.

Well, somebody's job is to make sure that like the hand sanitizer is refilled by the door every day. Yeah, that somebody wiped down the doors. Yeah, it's just like a little extra responsibility

or like someone, you're in charge of like making sure that we have shift coverage if someone gets sick and they can't come in. It was just, and I've really seen that matter to people. that they feel like they have something no matter how small that they can do. It's purpose.

Sitting at home and we're full of despair. Yeah. And, you know, some people take refuge in their normal work and want a sense of normalcy. Some people naturally will get sucked into relief efforts or want to volunteer or whatever. And we encourage everybody to do that, of course. Yeah. But some people are just like what help me think of something to do. And so like we have these little jobs in the company.

Like someone's job is to post some good news every day about the pandemic. someone's job is to like check in with all of our different suppliers. Like we said that letter to all our suppliers, but like different suppliers, there's someone whose job. Just call them up and see how they're doing, make sure they're okay, make sure they have everything they need.

We have people doing guided meditation and guided movements and social hours and all, like we're experimenting with all kinds of different stuff. Yeah. To just see like, how do we keep people from being lonely from being isolated? So like find ways to be of service. And here's the funny part.

Again, I hate to keep coming back to doing the right thing can prove profitable. But like, it just, you know, just to give you extra encouragement, I bet you, like, some percentage of those little things that you wind up having people do

just to help your company turn into a new product. For sure. You're going to be like, wait a minute, every company's going to need this now in this new era of work from home all the time. And, hey, we should really,

and like, go with that. You know, let new ideas come in by having people, like people who are otherwise be idle, like just have them do something. Give them something to do. You'll be surprised the good ideas that can come from that.

All right. As we wrap up your final question, I had teased the socialism trend in the United States. Young people may be not believing in capitalism as much, thinking it's a rigged game. Now we have this crisis. You're obviously in the capitalism game in a major way, but you have your own thoughts on it being more compassionate. What do you think the future of capitalism is in a, let's assume we beat this in the next six months, but, you know, we go through this and we hit 10, 20, 30 percent unemployment, have to dig our way out of a pretty time. What is the future of capitalism in your mind, Eric? We need a new political philosophy and a new economic theory for the 21st century.

I think a lot of these dogmas are outdated on both sides. We need a philosophy that is pro-science. I do think science is about to make a major comeback. The idea that science is the engine of human progress. I mean, that has to be a foundational belief of the new emerging political philosophy. but not just like, okay, put experts, scientific experts in charge and everything will be fine. We're also seeing the need for democratic participation, for strong social institutions. I think our institutional fabric, our civic fabric of our life has been degraded and collapsed in the last half century. And so, you know, capitalism, social, our economic systems depend on having like institutions that can mediate those rules. of the road and make sure that we have shared prosperity, broadly shared prosperity.

That was the watchword for our grandparents, and it's going to have to be our watchword again. So belief in science, broadly shared prosperity, right, the multi-stakeholder approach, making sure we take care of people. And then I think we need to have, like, can you imagine if we had a political party that was pro-science, pro-environment, pro-technology, but also pro-like the livelihoods of everyday normal people? Amazing. And therefore, pro-entrepreneurship?

Yeah. What if we said, you know what, our political program coming out of this crisis is every person, no matter their station in life, no matter their background, no matter their wealth, no matter their education, every person has a shot to become an entrepreneur, to become a social entrepreneur, a civic entrepreneur, a commercial entrepreneur, whatever they kind. And we're not, that's not going to be the province only of the privileged and wealthy. It's not going to be, okay, if you happen to have a social network or a human capital situation where like your family is wealthy enough that you can like take time off to work. No, no. That's ultimately the rationale for. a strong safety net for a UBI for all these programs. It's like, let's give people the chance to pursue their passions and freedom. Absolutely. Without worrying about those. And so some of the things I just said, like people who are listening who are very political, some of the things I just said will have really pissed them off, no matter what ideology

they have. He's like, wait a minute, that's part of socialism. Hey, wait, that's part of, you know, Friedmanite capitalism. And it's like, yeah, these ideas are not totally adapted to the 21st century that we're in and we're going to have to come up with something new. and not just a mishmosh compromise, but like let's really think from first principles. What would it take to build a truly 21st century liberal democracy?

What is that going to look like? And I think we have the like a very nascent sense of what that could be. And I think I hate to be positive in a crisis because God, things are dark and I do not in any way want to minimize the human toll. This is going to happen here. The consequences of our failed leadership and so many other bad things about the situation. I want to break something every day. I've had plenty of moments of wanting to throw up.

I've been working on personal protective equipment for hospitals. And if you know anything about the way that that has been handled, it will make you absolutely want to feel somebody. It's so, so infuriating. But I really think the seeds exist. There is really fertile soil here for something new to be born. And I think if we attend to that, if we make those investments, if we learn the lessons of this crisis,

like we have the chance to build a new and really more beautiful society. At that, I think we'll end. Let's never waste a crisis. Let's get through this together and let's come out of this and really give some conscious thought to the society we want to live in and how we treat people up and down the stack from privilege all the way down to people just starting in the field. I mean, UBI is such a trigger for people. And I worry about it too. When you think about universal basic income, does that make everybody lazy and they stay home?

Like if we give everybody unlimited unemployment, is there any motive to go back to work? Like, why would you go back to work if you get 18 months? Just watch Star Trek, man. Right. And it could work out fine. I think there's some execution issues here. And that's what's great. We can actually have this dialogue.

And it's such a nuanced, important dialogue. And I appreciate you coming on the pod and talking about it. Eric, stay safe. It's a pleasure. Yeah. Thank you. Listen, I hope you're in your family get through this all right. Yeah.

You know, it's just one more time just in case people, I'm really worried that we live in an age where there's no nuance. But like, just say again, like, what are, incredible gratitude is to the people on the front lines of this crisis, the scientists, the researchers, the nurses, the doctors, the people, I mean, I was thinking about the janitorial staff and the hospitals. Yeah, think about that. Like, that's so important. You cannot run a hospital without this, like, incredible antiseptic cleanliness. And so there's people right now risking their lives to make that work. And like, those are not normally lauded as heroes, but they really ought to be. Think about that. The janitor at that hospital cleaning every dirty mask from the garbage and putting it

into a dumpster is the highest risk person on the front lines. It's the equivalent of being on the front lines in the infantry. Can I tell a story? One quick story? Yeah, please. I think it's a JFK story where he was touring the NASA moon landing project and ran into a janitor in the hallways and either he or one of the reporters asked him, hey, sir, you know, what are you working on? And he said, what do you mean? I'm trying to put a man on the moon. Absolutely. And it's such a beautiful story. That's such a key idea that like every person, every link in the chain matters, and we don't get the outcome unless we celebrate all those people as the heroes they deserve. So I just hope that was a lesson we'll learn from this crisis.

Absolutely. Here's to the heroes. Thank you to everybody on the front lines. We are in awe of your sacrifice. Thanks again, Eric, for coming on the pod. We'll see you all next time. Bye-bye. Stay safe, everybody.