We Study Billionaires - The Investor’s Podcast Network - TIP 125 : Billionaire Reid Hoffman & The Start-Up of You (Business Podcast)

Starting point is 00:00:00 We study billionaires, and this is episode 125 of The Investors Podcast. Broadcasting from Bel Air, Maryland. This is the Investors Podcast. They'll read the books and summarize the lessons. They'll test the waters and tell you when it's cold. They'll give you actionable investing strategies. Your host, Preston Pish, and Sting Broderson. Hey, how's everybody doing?

Starting point is 00:00:31 out there. This is Preston Pish, I'm your host for The Investors Podcast. And as usual, I'm accompanied by my co-host, Stig Broderson, out in Seoul, South Korea. And today we have a book for you. And this book was by the billionaire Reed Hoffman out of Silicon Valley. So for anybody who's not familiar with Reed Hoffman, he is the LinkedIn guy. That's probably the best way I can describe him for everybody to know exactly who I'm talking about. He's the founder of LinkedIn. And if you don't know much about Reed, he really comes with a pretty impressive background because it's not like he just did LinkedIn. He did a bunch of other things that have all been insanely successful. So let me give you a quick background on him.

Starting point is 00:01:15 So his current net worth is $3 billion. He was an undergrad student at Stanford and then he went on to study at Oxford. Really interesting. He at a very young age, is quoted as saying that he wanted to have a huge impact. on the world. And so he initially wanted to go into academia and write books. And then he kind of had this transition and this morphing early on where he didn't feel like he could have as big of an impact by being in academia. So instead he wanted to go out and he wanted to work for a big name company in Silicon Valley. So he started off working at Apple Computers in 1994. Now what I find really interesting

Starting point is 00:01:54 about his background is he started at Apple and within three years, they put him in this division called E-World, which was eventually sold to AOL within two years after he started working there. And only three years after he started working for Apple, he went on, on his own, and started a company called socialnet.com in 1997. And if you're wondering what socialnet.com was in 1997, it was Facebook. That's basically what it was. Now, this, didn't obviously become Facebook, but what socialnet.com was, and this was like literally seven or eight years before Mark Zuckerberg created Facebook or MySpace or any of that stuff, Reid Hoffman was way ahead of the game on this stuff. And so socialnet.com, what it did is it was

Starting point is 00:02:42 like online dating and it was matching people up with similar interests. So like if you played golf, it would link people up who were also in the neighborhood that wanted to play golf. So it just shows you how brilliant this guy. I was early on. He saw all of this stuff happen and way before it even happened. So he goes off, so socialnet.com. He holds on to that. And at the same time, he became a member of the board of directors for a little company called PayPal. His work at PayPal was very profound. He was the chief operations officer at PayPal. And what was amazing for him was he was going through this and this growth within PayPal. Reed Hoffman went on to work all the big deals with B.C.

Starting point is 00:03:24 Mastercard, Wells Fargo. He did all the business development with eBay and Tuit, which is a really big software for accounting. And then he also handled all the government regulation and judicial type stuff, the legal stuff. And this is where he was working for Peter Thiel, which we read Peter Thiel's book zero to one, a long time ago, probably two years ago. But he was in the heart of this growth with PayPal. And he was the guy really making things happen. He was the action officer. He was the guy putting out all the fires and making things happen.

Starting point is 00:03:55 So this all happened in January 2000 is whenever he basically left this social net thing and he went full time onto PayPal. And so only two years later, he was at PayPal for another very short burst of time. And his age, Stig, he's what, 48 or something like that? He's not that old for all the things that he's accomplished. It's pretty mind-blowing all the things he's accomplished for all the older he is. But anyway, so after he was done at PayPal, which was 2002, he then started LinkedIn. So it was just like number one hit after number one hit in Silicon Valley from the time he

Starting point is 00:04:33 basically stopped working at Apple. And he just started making moves, like serious moves. And as you plow through his bio even more, you can see that he was an initial investor, first round investor in Facebook. I mean, you'd think, you know, Stigigig, if he's investing a business, Facebook, considering he already wrote the code for it like seven years ago, I guess he would have seen that one as being a winner. Yeah, that's true.

Starting point is 00:04:59 He's really impressive. And Preston, I'm really happy that you talked about the PayPal Mafia. I think we covered it a few times. But it's really impressive, like these guys, Elon Musk being one of them, Peter Thiel and another. And also the two guys from YouTube, Yelp as well. I don't know how they're actually doing it. Well, he actually touched briefly upon that in the book in terms of making alliances and all

Starting point is 00:05:20 that, but it's quite astonishing that you'll see all the key people from the PayPal days that they all have been so successful since. I think it's quite remarkable. Yeah. I mean, this guy's brilliant. He's absolutely brilliant. You can see that from just where he went for his undergrad and his masters. I mean, he was just a super smart guy. So some of the other companies, just real fast before we dive into the book here. So not just Facebook, not just PayPal. He's the founder of LinkedIn. And he also had investments in Airbnb. He had investments in coupons.com. He had an investment in care.com, which is the babysitter website. And I mean, this is the tip of the iceberg. I could keep reading all these companies that he was an investor in early on, like round one investor. It's

Starting point is 00:06:06 totally crazy. So anyway, let's dive into the book. So that's who we're talking about. These are his thoughts that he wrote this book. And there's a co-author on this. His name is Ben Casanocha and two of them wrote this book together. So, We'll just go chapter by chapter because there's really not a lot of chapters. And this was a pretty easy read. Won't you agree? Stick? What were your overall thoughts before we go chapter by chapter? Well, I definitely think that this is the book I should have read 10 years ago. I think it has a lot of great insights about building relationships and especially, I would say, if you're a college student, that's definitely a book you should pick up. Clearly, when you're sending up your own business,

Starting point is 00:06:45 you learn to build relationships with business associates one way or the other. But I think, that starting out with a book like this, it will save you a lot of hardship in terms of approaching people the right way. I thoroughly enjoyed the book. And as you said, Preston, it's a really easy read. A lot of anecdotes, a lot of great stories, very conversational. Yeah. Yeah. And I think you can, I know I listen to the Audible version of this, and I really liked it. And just a note, if you're listening to this and you want a free book for the first one you download, go to our website. We have links in the website that you can download your first audiobook on Audibles for free. And this could be the book if you want to

Starting point is 00:07:21 listen to this one. So the first chapter is titled, All Humans or Entrepreneurs. He starts off this chapter with a really kind of simple premise where, and I really like the way he lays this out because he says that, you know, 30 years ago, 40 years ago, the way that America worked in particular, you could go work for a company and work your way up the ladder and really kind to have enormous success for yourself and really kind of live in that house that you wanted and all that kind of stuff. Like basically the American dream, you could go work for one company and rise up through it and that was, it worked. And he's saying today, it's not like that anymore. He said, you can have a great education. You can go work for a great company and really kind of

Starting point is 00:08:09 struggle to really produce this American dream. And I think he really attributes it to is just the fact that the world is insanely competitive at this point. And I mean, you could get into this whole big long argument as to what's causing that. Stig and I would probably argue that it has to do with long-term interest rate cycle, but we aren't going to go down that path. He's laughing because he agrees with me. We're not going to get down that path as to why that's happening. But he lays out that case and Reed doesn't lay out why that's happening either. All he's saying is the world is becoming a lot more competitive. And if you're relying on that model, that 1960s to 80s kind of model as to how you're going to rise to the top, it's probably not going to work

Starting point is 00:08:50 out nearly as well for you. I think his argument here is that you have to get better at creating a competitive advantage for yourself. So I want to throw it over to Stig and hear his thoughts on this. Whenever I heard the title of the first chapter, all humans, entrepreneurs, I was thinking, I guess like most people, so does that mean that we all need to start up our own company? I mean, clearly it has been really, if not easy for Reid Hoffman. He's been very successful. So I was kind of like, hmm, that's a weird start. But actually, he's very accurate on what he means about being entrepreneur because it's not

Starting point is 00:09:26 about necessarily starting your own company. It's just as much about your approach to your own work life. It might be starting up your own company, but for most people, it's being an employee. And he's having this notion that today, 20 years of experience is 20 times one year of experience. That's the premise he's looking everything from. And I really, really like that. He's saying, you're not 20 times as good. And as Preston said before, this is not about you working 20 years in the same company or even longer getting your gold watch and then retire. The world is definitely changing. And he's saying that the good thing about the entrepreneurial mindset is that

Starting point is 00:10:04 they're really good at working with uncertainties and they need to constantly adapt. And that's something as an employee today, you also need to do. And he's talking about this term he calls permanent beta. And basically what this means is that everything is always a working process. You're never done with anything. You can't look at your job is just done. And he says that it's the same thing with your job. It's the same thing for your career. And you must simply accept being out there in the world that you are flawed and you're always going to approve. And that's the entrepreneurial mindset that he encourages everyone to have. Yeah, I like that point because at the heart of it, he's talking about self-improvement.

Starting point is 00:10:50 And he's saying that the entrepreneurial mindset is one that's always trying to self-improve. It's always basically saying what I have right now is not good enough and that I need to get better at whatever it is that I'm doing. And he's basically saying that if you have that mindset and you are treating whether you're working for a big name company, you're working for a small business, you own your own business, it doesn't matter. But if you take this entrepreneurial mindset of constantly trying to self-improve, that's going to be a huge building block for you as you try to achieve whatever it is that you're trying to go after. And he had this very nice way for stock investors

Starting point is 00:11:31 to look at how the world is changing because he said that in 1920s, the company stayed in the S&P 500 for 65 years. That was something. that even back then sounds like a long time. That was really surprising. But what he's saying now is that today it's 10 years. For me, as a stock investor, how can I use that information? I was like, does that mean that one should be thinking more into HGF investing because it's simply too difficult to predict the performance of companies these days? All right. So going on to the second chapter, this one was called Develop a Competitive Advantage. So, as you might think, what he's saying here is that there's so many opportunities.

Starting point is 00:12:12 There's millions of people that are equally skilled for what it is that you're doing. So how in the world are you going to set yourself apart from the other person? And so the way he lays this out, he says, first off, you need to determine your assets. Whether they're soft skills like your network, your knowledge that you have, or maybe it's hard assets like your cash or your investments, you need to determine what those assets. are. And I think for most people, they're going to be a soft skill asset. It's going to be what you know, what you learned in college, your practical knowledge and the jobs that you've had. That's where most people have their assets. The next thing that you need to do, after you understand

Starting point is 00:12:49 what that is, you need to figure out how you can grow that asset base into the future. And then thirdly, it's essential to face the reality and identify what your customers are willing to pay for. And your customers, for a lot of people, that's your boss. That's who you're working for. That's your customer. You're providing a service to them. And if you can't figure out a way to expand that, your ability to basically rise up and maybe achieve whatever it is that you're wanting to achieve is not going to happen. So I guess it's a really simple way to look at things from a business entrepreneur mindset, but then you're applying it to your ordinary job, if that's what it is, or maybe you're applying it to the business that you own. It's however you want to

Starting point is 00:13:33 look at it, but it's really kind of viewed through the same lens. And I really like the way that he was putting it up in three simple steps. And after he did that, he used the example of a basketball player. So he said that for a basketball player, well, his assets, soft assets in this case, that was his capabilities of playing basketball. Now, so the second part, the aspiration of values, well, his value needs to be aligned before it's sustainable for him. And so in his situation and the niche that he needs to,

Starting point is 00:14:03 put himself in is where he has a competitive advantage. So that might not be the NBA. There might be a small league because he needs to be someone who is remarkable. And then the third one is the market relatives. So who is actually willing to hire you? Which kind of league can you play in? Which kind of club can you play in? And he said that that was the way to look at those three steps. And we must all do that because we can always be the best at what was in a cellar wants to be best at. But still, it needs to be aligned with what we believe in. So we need to find that needs first. That's really the key word and go from there.

Starting point is 00:14:40 And I think that was a really interesting way of looking at your own capabilities, especially if you just graduated and you're thinking, well, I'm probably not really the best at anything because I haven't really acquired any skills. But he debunks that and saying you do have them. You just need to develop them and then find the niche where you can be the best. And he said that you can usually do that within six to 12 months. Let's take a quick break. from today's sponsors. All right. I want you guys to imagine spending three days in Oslo at the height of

Starting point is 00:15:08 the summer. You've got long days of daylight, incredible food, floating saunas on the Oslo Fjord, and every conversation you have is with people who are actually shaping the future. That's what the Oslo Freedom Forum is. From June 1st through the 3rd, 2026, the Oslo Freedom Forum is entering its 18th year bringing together activists, technologists, journalists, investors, and builders from all over the world, many of them operating on the front lines of history. This is where you hear firsthand stories from people using Bitcoin to survive currency collapse, using AI to expose human rights abuses, and building technology under censorship and authoritarian pressures. These aren't abstract ideas. These are tools real people are using right now. You'll be in the

Starting point is 00:15:53 room with about 2,000 extraordinary individuals, dissidents, founders, philanthropists, policymakers, the kind of people you don't just listen to but end up having dinner with. Over three days, you'll experience powerful mainstage talks, hands-on workshops on freedom tech, and financial sovereignty, immersive art installations, and conversations that continue long after the sessions end. And it's all happening in Oslo in June. If this sounds like your kind of room, well, you're in luck because you can attend in person. Standard and patron passes are available at Osloof Freedom Forum.com with patron pass. is offering deep access, private events, and small group time with the speakers. The Oslo Freedom Forum isn't just a conference. It's a place where ideas meet reality

Starting point is 00:16:39 and where the future is being built by people living it. If you run a business, you've probably had the same thought lately. How do we make AI useful in the real world? Because the upside is huge, but guessing your way into it is a risky move. With NetSuite by Oracle, you can put AI to work today. NetSuite is the number one AI Cloud ERP, trusted by over 43,000 businesses. It pulls your financials, inventory, commerce, HR, and CRM into one unified system. And that connected data is what makes your AI smarter. It can automate routine work, surface actionable insights, and help you cut costs while making fast AI-powered decisions with confidence. And now with the NetSuite AI connector,

Starting point is 00:17:23 you can use the AI of your choice to connect directly to your real business data. This isn't on add-on, it's AI built into the system that runs your business. And whether your company does millions or even hundreds of millions, NetSuite helps you stay ahead. If your revenues are at least in the seven figures, get their free business guide, demystifying AI at netsuite.com slash study. The guide is free to you at netsuite.com slash study. NetSuite.com slash study. When I started my own side business, it suddenly felt like I had to become 10 different people. overnight wearing many different hats. Starting something from scratch can feel exciting, but also incredibly overwhelming and lonely. That's why having the right tools matters. For millions of

Starting point is 00:18:10 businesses, that tool is Shopify. Shopify is the commerce platform behind millions of businesses around the world and 10% of all e-commerce in the U.S. from brands just getting started to household names. It gives you everything you need in one place, from inventory to payments to analytics. So you're not juggling a bunch of different platforms. You can build a beautiful online store with hundreds of ready-to-use templates, and Shopify is packed with helpful AI tools that write product descriptions and even enhance your product photography. Plus, if you ever get stuck, they've got award-winning 24-7 customer support. Start your business today with the industry's best business partner, Shopify, and start hearing... Sign up for your $1 per month trial today at Shopify.com.

Starting point is 00:18:58 slash WSB. Go to Shopify.com slash WSB. That's Shopify. dot com slash WSB. All right. Back to the show. All right.

Starting point is 00:19:12 So going into the third chapter, it is titled Plan to Adapt. And I like this chapter because it kind of goes against the grain on a lot of other books that we've read that really talk to this idea of coming up with this one goal and this one thing that you are dead set on. achieving. And he doesn't say that you shouldn't do that, but I think what he's saying is you should be more adaptable and open to other courses as you're going towards whatever that goal is. So let me just give an example. So let's say you have this huge goal of becoming the number

Starting point is 00:19:48 one chess player in the world, whatever, it might be. And as you're going down this path and you're working towards it, you might be presented with opportunities that might actually be more appetizing to you in the long run. So like, let's say, for example, you're trying to be the best chess player in the world. But then for whatever reason, the conditions, the environment around you offers you this new opportunity that maybe you could start your own chess academy and teach other people how to be world class chess players. And for some people, that might sound like an absolute terrible thing, you know, or maybe

Starting point is 00:20:26 somebody who's trying to achieve at a very high level. That sounds horrible because it'd take them off their course. But for another person, if they'd be presented with this opportunity, that might actually be something that they actually might want more. And I think that's what reads getting at in the book. He's saying, you should have these huge goals and these huge aspirations. Absolutely. But don't get so rigid in your thinking that when these other opportunities come up in your life, you're so focused on that one thing that you don't even wait a second to consider the opportunities and the other things that could come up. into your life and maybe even be more beneficial or make you happier.

Starting point is 00:21:05 And I really like that because I think that it is some great advice. And I think that it offers up this idea of, yes, have a course of action, but have an array of other things that you're open to and that you can consider it. And you know what? If something comes up, it's so easy just to say no. But if you're open to those things, I think your opportunity for success in the long run and your happiness in the long run is that much greater. It was definitely a chapter that was with a lot of great advice, especially if you were just about to graduate.

Starting point is 00:21:35 It was quite clear to me, I guess, that it was almost like he was talking to himself whenever he was younger and all the mistakes that he felt that he did in terms of going to the business world, even though he's been quite successful. That was still how I read it. And he talked about this paradox of very often companies will ask you if you have experience. Otherwise, you can't get the job and you'll be like, well, I don't. don't have any experience, but you need to give me experience before I have experience. Well, I guess that everyone who's been applying for a job, they probably know this paradox. So he addresses that, and he said that the way to fix this, if you can afford it, of course, is to look at internships.

Starting point is 00:22:14 And I think everyone has probably heard about that, but he had a very interesting thing to this about internships, because he said that a lot of people, when they look at internships, they look at internships in terms of they're almost doing, because, company a favor one way or the other because, hey, they are working for free. And that was not how he said that one should look at it because the cost of paying someone a salary, that's only one type of cost for the company. That's not really how it is. So he was saying that whenever you are applying for a job or even if it's an internship, think about how are you making the lives of the employees in the business better? And not so much about is it cost, how much is it? That's

Starting point is 00:22:59 not really what's relevant because very often these people and the way that they're making decisions are, can they solve this problem for me? That's actually the main thing. And I think that was a really interesting discussion because, as he said, it's never a company that's hiring people. It's always people hiring other people. So I think that was one of my key takeaways from this chapter. So whenever I look at the way Reed behaved through his life with respect to this plan to adapt, I look at this first company that he started, this socialnet.com. And like we said at the beginning of the episode, this was seven to eight years before Facebook even happened. And so he clearly knew this was something that was going to be big.

Starting point is 00:23:46 But you know what? He hung it up after three years, was it? Two or three years, he hung that up. and he went to PayPal. And you can see he had this goal. He knew that this thing was going to be big. He saw it. But even though he was getting resistance and he was getting friction whenever he was

Starting point is 00:24:03 trying to start this, and this is all relative to where he went next, because it was obviously probably something that was pretty successful in its own rate. But he got offered another opportunity to go work at PayPal and have this huge role in something that was absolutely revolutionary on a global scale. and he seized it. He adapted to his environment that he was being offered. Then again, you know, PayPal's huge. They're selling it to eBay and everything else.

Starting point is 00:24:31 And, I mean, it's massive. And then he has another opportunity with LinkedIn. And you look at how the correlation between LinkedIn and this social net basically paved the way for him to basically stand up this LinkedIn website. And I see that he exercised that in his own life. and I think it's such a great demonstration for people that he's just not saying it. He's demonstrating it for people to see how he implemented this into his own life. He had this big, big, huge goal of creating these platforms.

Starting point is 00:25:02 But he did it in a kind of jump from one ship to the next and he kept going where the growth was. Take advantage of those opportunities and be very open mind because it looks like that's what he did in his own life and it paid off immensely for him. Okay, so the fourth chapter is called It Takes a Network, and I wasn't surprised to hear this chapter in the book, considering it's the... From the LinkedIn founder, no. So, as you might expect, he's a big proponent of using your network and networking in general. And I kind of liked how he talked about this in his book because he gets into the discussion of how he's still, communicates with Peter Thiel. He still talks to Elon Musk.

Starting point is 00:25:50 And he values these guys and he bounces ideas off of them and he keeps them close to him. And they might be working in completely different directions. But at the end of the day, he uses these guys as a sounding board and he's there for them. And the relationship is reciprocal. So when they have ideas, say Elon Musk has an idea, he'll come to read and he'll bounce these ideas off of read. And so it's not a profit-motivated. mindset where, hey, do you want to sell me some of that equity? It's not anything like that. It's more

Starting point is 00:26:21 and I'm sure some of that takes place, but I think it's more of an intellectual mind share and a mastermind that he's talking about. And it was really neat to hear this billionaire talk about his mastermind and how much he values it. I really enjoyed hearing some of that. And I like the way that he talks about this. He used this great metaphor that relationship building is like flossing. You were told that you have to, but it's really no fun. I like that. And I definitely like that because I'm an introvert. I think for a lot of extrovert people, it's a lot easier for them

Starting point is 00:26:55 and a lot more natural for them to build networks. But if you're not, it's really hard because whenever you're hearing, oh, you need to build a network, you're thinking about, oh, my God, I need to hand out 50 business cards and give everyone my elevator pitch. But that's not how he talks about it at all. And the weird thing is that I don't know too much about Reed Hoffman himself, but I kind of feel like he might be an introvert himself, which is also why he's building all those relationships online and perhaps not in person.

Starting point is 00:27:23 But to move on with some of the key points from this chapter is that he's talking about the difference between a strong tie and a weak tie. And he's talking about that most people go to their strong ties first. So that would be someone like your spouse or your best friend. He's using the number eight to ten people. It really in your inner circle. But then he brings up this very interesting statistic. Whenever it comes to finding a spouse or actually finding a job,

Starting point is 00:27:55 70% of them is through weak ties. And you might be thinking, wow, that doesn't make any sense. Like, why don't I get this from my strong ties instead? And he's saying, well, it's actually because the people closest to you, They have this problem looking at you because they are almost putting you in the box. That's how they know you. So they keep talking about you and to you like you are that predefined person. So they're not thinking about your development and not thinking about what else you can do

Starting point is 00:28:25 because they have this really predefined notion about who you are. Another thing is that the people very close to you, they're very often exposed to the same thing as you are. And using weak ties, perhaps they have another mindset, but they're simply exposed to other thing and other opportunities compared to your strong ties. So I kind of felt that was a really interesting discussion and really interesting in terms of where is my next business opportunity, perhaps. All right. So moving on to chapter five, we're going to talk about pursue breakout opportunities.

Starting point is 00:28:56 And this is kind of a neat chapter because I think it's easy to talk about this, but harder to put into application. So he says that opportunities come suddenly, and while some of us are clueless about it, others seize them and make the most of it. This wasn't in the book, but I want to talk about a personal experience in my own life. So I know whenever I've had setbacks in my life, the approach that I've usually taken is I just feel bad for myself and I often focus on the setback. And that's it. Like, it's just like that's all I think about is how terrible this situation is.

Starting point is 00:29:30 And I'd like to say that I'm introspective and I look inside as to why that might have happened and never blame anything on my exterior. circumstances. But that's obviously not true because a lot of the times I get into this blame mode and I think that it's because of my outside circumstances that cause whatever. And only recently, I can honestly say that within the last year or two, anytime I've had a setback, I'm starting to take, and I'm still not, I haven't mastered this by any shape of the imagination. But what I'm trying to start to do is anytime I have that setback, I immediately say, okay, So what is it that I'm supposed to take advantage of right now at this moment? Because I'm having this setback for a reason.

Starting point is 00:30:17 I just have to figure out what the enormous opportunity is that's being served, that's tethered to this setback. And I know that's so easy to say that, but really, really difficult to implement because it might not feel like there's any hope or any type of opportunity tied to the setback. back. And that's obviously not always the case, but I feel that it actually might be the case more often than people realize. So what I'm trying to do is writing it down. So what I'll do is I'll grab a piece of paper and I'll write setback and write it out. And then I try to force myself to write three

Starting point is 00:31:01 opportunities that now present themselves because of the setback. And sometimes I don't write anything down. But I try. I try and I think that that's the point that I want people to take away from this. So I'm going to throw it over to stick because he's going to take it from here. I think Reid Hoffman had two very interesting observations in this chapter. The first one that was about human resources. Now his take was that human resources don't have any positive power, if you want to call it like that. The reason he's saying that is that they have the power to say no, not always to say yes. So if you're using the traditional channels in terms of applying for a job, you'll meet a lot of people that would just say no, because that is where they have authority.

Starting point is 00:31:45 So that's why if you really want a job and a job with great opportunities, you need to connect with someone that can say yes. And they're typically not in the human resource department. The other thing he talks about was both as an employee and as a business owner, is important to make a decision. He's saying that today the way business works is that we have so many options. We have so many options and it's really hard for us as human beings to say no and really to go down one path. So he's talking about in terms of weighing risk, it might be perceived in the human mind as being risky not to be open to a lot of different things, but it's actually really important

Starting point is 00:32:27 for you again as an employee or as a business owner to commit to that opportunity you have. And you need to do that and you need to follow through before you pivot into another thing. Those two observations I thought was really profound from Hoffman. So I like this part where he basically says, so I'm telling you to pursue breakout opportunities, but you ask, how do I do that? And what he says is you have to start off by developing habits that increase your chances of finding more opportunities. So a person might say, well, what does that mean?

Starting point is 00:33:05 And I think what it really comes down to, at least for me, is are you a person that does it yourself, or are you the type of person that needs to be spoon-fed information and how to do things? And I think that's the critical habit that you need to develop. If you don't have that, go get it done yourself kind of attitude. I think that's what it really comes down to. The people that teach themselves anything in this world are the ones who create these habits of opportunities that fall onto their lap. And so I would challenge people to think about that really long and hard if you're trying to find things to have opportunities come into your life.

Starting point is 00:33:49 Let's take a quick break and hear from today's sponsors. No, it's not your imagination. Risk and regulation are ramping up. and customers now expect proof of security just to do business. That's why VANTA is a game changer. VANTA automates your compliance process and brings compliance, risk, and customer trust together on one AI-powered platform. So whether you're prepping for a SOC 2 or running an enterprise GRC program, VANTA keeps you

Starting point is 00:34:17 secure and keeps your deals moving. Instead of chasing spreadsheets and screenshots, VANTA gives you continuous automation across more than 35 security and privacy framework. Companies like Ramp and Ryder spend 82% less time on audits with Vanta. That's not just faster compliance, it's more time for growth. If I were running a startup or scaling a team today, this is exactly the type of platform I'd want in place. Get started at Vanta.com slash billionaires.

Starting point is 00:34:47 That's Vanta.com slash billionaires. Ever wanted to explore the world of online trading but haven't dared try? The futures market is more active now than ever before, and plus 500 futures is the perfect place to start. Plus 500 gives you access to a wide range of instruments, the S&P 500, NASDAQ, Bitcoin, gas, and much more. Explore equity indices, energy, metals, 4X, crypto, and beyond. With a simple and intuitive platform, you can trade from anywhere, right from your phone. Deposit with a minimum of $100 and experience the fast, accessible, and you can trade from your phone.

Starting point is 00:35:26 futures trading you've been waiting for. See a trading opportunity. You'll be able to trade it in just two clicks once your account is open. Not sure if you're ready, not a problem. Plus 500 gives you an unlimited, risk-free demo account with charts and analytic tools for you to practice on. With over 20 years of experience, Plus 500 is your gateway to the markets. Visit plus500.com to learn more. Trading in futures involves risk of loss and is not suitable for every. Not all applicants will qualify. Plus 500, it's trading with a plus. Billion dollar investors don't typically park their cash in high yield savings accounts.

Starting point is 00:36:07 Instead, they often use one of the premier passive income strategies for institutional investors, private credit. Now the same passive income strategy is available to investors of all sizes thanks to the Fundrise income fund, which has more than $600 million invested in a $7.97,000,000,000 percent distribution rate. With traditional savings yields falling, it's no wonder private credit has grown to be a trillion dollar asset class in the last few years. Visit fundrise.com slash WSB to invest in the Fundrise income fund in just minutes. The fund's total return in 2025 was 8%, and the average annual total return since inception is 7.8%. Past performance does not guarantee future results, current

Starting point is 00:36:53 distribution rate as of 1231, 2025. Carefully consider the investment material before investing, including objectives, risks, charges, and expenses. This and other information can be found in the income funds prospectus at fundrise.com slash income. This is a paid advertisement. All right. Back to the show.

Starting point is 00:37:13 So let's go on to the next chapter. Chapter six, take intelligent risks. So, read Hoffman's of the opinion that people have a tendency. to overestimate risks and that they over account for them. And that a lot of the times, and this is another important one, is that just because you don't know what the risk is, doesn't mean that it's actually a risk. You need to dig into it more and maybe understand why or why not.

Starting point is 00:37:44 It's a risk. And I really liked all this. I think that this is good stuff. I think that when it comes to stock market investing, Sometimes people fall into that latter category where they don't even know something's a risk and they don't take the time to account for it. And that's where they can potentially get themselves in a lot of trouble. But I think that when you're talking about things that are more job-centric and, hey, I want to start my own business and or I want to go off and do this other thing, people are scared of things that they just don't know. And so they don't go any deeper than that.

Starting point is 00:38:19 And I think what Reed Hoffman's saying here in his book is he's saying, go deeper than that. He's saying, if you don't know what it is and you're scared, do the research, work hard to understand things. So you now do know what the risk is. And you might find out that the risk is nothing and that you should go for it. And that's what he's really getting at in this chapter. And I really like that because I think it helps to chase the fear out of whatever it is that you want to go do and whatever you want to go accomplish.

Starting point is 00:38:53 Yeah, I really love your point about that we are overestimating risk. And when it comes to risk, it makes a lot of sense. And the way that Hoffman explains this is that traditionally, if we made a wrong decision, and he was talking like thousands of years ago, you would just die. If you made a mistake back then, you might be eaten by an animal. That's actually the metaphor he's using. And he's saying it makes a lot of sense to consider risk all the time. But he's saying that anywhere in life, there is a risk to any of your decision. He's taking an airline example whenever you're flying. Well, there's a risk and there's a reward.

Starting point is 00:39:28 He's saying if you do crunch the numbers, if you do have that knowledge by digging deeper, as Preston said before, you usually see that the worst thing that can happen is usually not that bad. And for instance, when it comes to the job market, well, if you get the wrong job, you know what? You can quit. And a lot of people are saying, well, it doesn't look good for him resume. Hoffman doesn't agree with that at all. I mean, clearly it's not good if you have 10 different jobs in five years, but everything is definitely better than staying in a job that you don't like.

Starting point is 00:39:58 He's also talking about, again, the title of the chapter is Take Intelligent Risk, and he's actually using Warren Buffett as an example here, because he's saying that he is taking intelligent risk whenever he is investing where everyone is running from the health in the stock market. That's an intelligent risk. That doesn't mean that he can't be wrong, but it's an intelligent risk because he's weighing the risk and the reward. And that's basically the jest of this chapter.

Starting point is 00:40:24 We need to rethink what risk is. And if we do crunch the numbers, think so you shouldn't end up that risky. Okay. So the last chapter, chapter seven, and the title of this chapter is, who you know is what you know. One of the things that he starts off on this one is he says, Bill Gates once said that the best way to stand out in a crowd is to equip yourself with information. The way we use the information can be the decisive. factor between success and failure.

Starting point is 00:40:51 And I really like that quote because we're taught in schools to memorize things and take tests. And we see this all the time. People that come out of college, they have straight A's because they memorized everything that they needed to know for the test. But when it gets into the real application, they might be 100% clueless how to take that information and apply it to a dynamic and changing world around you. And this is something that Hoffman lays out in his book. And I think that it comes down to this simple analogy. You can read as many books as you want. You can read every Michael Phelps book that's ever written about

Starting point is 00:41:34 swimming. But until you actually get in the water and try to do it yourself, you're going to have no clue how to swim until you actually start to learn and try to apply the things that you read or that you learned about in theory. I think that when you combine those two things, that jumping in the pool and actually attempting the stuff that you're studying, and you combine it with the theory, that's when you get the amazing results. The other thing that he's talking about in this chapter really gets at what the title of it is, which is who you know is what you know. And what he's really getting at is you are surrounded by people.

Starting point is 00:42:15 So most people have a LinkedIn account. If you go into your LinkedIn account, I want people just to imagine this. If you look at all those connections and you could imagine the amount of information and more importantly, the experience of all those people, if you could just harness all that into a super brain, into your own mind, just think of what you would be capable of doing. And I think what he's getting at in this chapter is you need to think as if that exists for you. The only thing that's the difficult part is knowing who knows what and how to access them so that they can help you achieve what you want. And you can also have a win-win relationship where you can help them in return in order to keep that connection alive and operating.

Starting point is 00:43:02 That's what he's really getting at here. And so you need to think about how profound that is and how you can utilize that to accomplish what it is that you're really after in life. One of the great ways he's explaining the power of network, especially now in the age of Google, where you were told you can Google everything and get answers to everything. Well, he's saying that, well, Google will come off short compared to a friend that can tell you about a job opportunity that is not open. And that is how he kicks off this chapter. And he's saying, so how do you utilize your network in terms of gaining that knowledge? And he's talking about how you need to learn how to converse. It's actually skill in itself to obtain information from other people, not in the sense that

Starting point is 00:43:48 you're exploiting people, definitely not in the sense that you're interrogating people, but actually having a pleasant conversation with another human being where you can learn from each other. And he's talking about the importance of priming the respondent. So one of the things that he's saying is that you need to tell him which kind of answer you might be looking for. If I would be calling up Preston and he would know it was me and I would say, how should I invest? That would be a pretty open question and a really hard question for Preston to respond. but the more concise I am without clearly giving president yes or no question because that would probably be an even worse way of having a discussion, the better it is. So he's basically saying

Starting point is 00:44:33 you need to think about what you're asking and how you can use why. Again, the importance of why that we talked about most of the times on the podcast, how can you utilize why questions and how can you prime net respondent in terms of the kind of answer you would like. And he's also saying that it's natural for people to be afraid to ask too much into something. So for instance, you might be talking about a job at Microsoft. That was one of examples. And then the other person might say, yeah, but working at Microsoft right now, it's quite risky. Now, here's a problem, because if you're thinking, so this is Sticks definition of risk. So that means XYC. He's saying, naturally, you would say, hmm, so what do you mean about risky working at Microsoft?

Starting point is 00:45:18 So again, it's the whole thing about digging deeper and being sure what the other person is saying. All right, guys. So that completes our review of the book, The Startup of You by Reid Hoffman. We really liked this. We thought it was very good. I would recommend that a person that is an introvert should read this book. It would be a good area for them to expand and to think about. If you're an extrovert already and you're pretty good at networking and all that stuff, probably a pass.

Starting point is 00:45:46 but for me, I think that this would be a great book for an introvert to read. All right, guys, so if you want to get our free executive summary of this book, we type up an executive summary for every single book that we read. It's about five pages long. Go to our website, and if you go under the subscribe link, there'll be a spot where you can sign up for our email list. We don't send out any spam. This email list is just for you,

Starting point is 00:46:08 and we want to help add value for you that you can read through these books at a much faster pace to determine whether you want to actually buy the book or not. So go onto our website and sign up for that email list so you can get all of our executive summaries for free. At this point in the show, we're going to go ahead and play a question from our audience. Our question this week comes from Soham, and here it goes. Hey, Preston State. This is Sohan from the San Francisco Bay Area, big fan of the show. Hopefully you guys come out here soon.

Starting point is 00:46:34 What are some of the most significant biases that beginning investors have? And what are some ways to address those biases to make sure that they don't affect returns besides obviously listening to your excellent show? Thank you. Okay, so I absolutely love this question because I think this one is really, really important for people to understand where they might be making a mistake. For new investors, I think one of the biggest bias that you can really shape or have is having a strong win up front and not really knowing why it actually materialized. So it's really common for a person to just lack basic stock investing knowledge. And I talk to people all the time about this stuff. And you'd be blown away at how many people whenever I say,

Starting point is 00:47:22 okay, so you know what the EPS, the earnings per share is on the company. And they just look at me like I just started talking a different language. Or I might say, well, what's the dividend yield or any one of these really, really basic? What's the PE ratio? You know, and they just have no idea what you're talking about. But that same person who I'm having this conversation with will say, yeah, I made like 20% on this thing in the last six months. And that's a person who's about to have a major, major upset in their investing approach. And so I really think that that's important for people to think about.

Starting point is 00:48:01 If you are just starting out and you have had some good picks, first of all, compare them to what the S&P 500 is done. So I see this one a lot. A person will say, oh, yeah, I did. I picked company XYZ and it went up 20% in the last six months, but they never even think about how the S&P 500 performed during that same six months. And if the S&P 500 went up 20%, or maybe even the S&P 500 went up 25%. That person just lost.

Starting point is 00:48:32 And they need to understand why they lost and they need to think in relative terms. to the broader context of the market or other opportunities that were out there. And I think when you're doing that and you're really assessing your performance across a basket of other opportunities, that's when you can really say that you're making good, sound decisions that are outperforming the market as a whole. So I have two biases I would like to address. The first one is actually overconfidence too. So I'll just do that very briefly.

Starting point is 00:49:05 I'd say definitely not knowing what you don't know. That's a big problem. And that's usually just how it goes whenever you start investing or basically anything else that you haven't done before. It might be because as president suggests, that you might be very successful with the first pick, so you become more confident. But in general, if you don't know anything about it, it's so easy to forget the risk that associated with it because you haven't had experience with risk and you don't know how to value at risk in investing. So definitely overconfidence, that's one thing. And the last point really leads me to the next big bias. And I think that's a lack of diversification. You might have your eyes on a specific pick, say Coca-Cola. And because you believe in this stock, regardless of the valuation, perhaps, perhaps that was why you decided to enter the stock market in the first place. All the information that you look for in terms of why you should invest in Coca-Cola,

Starting point is 00:50:03 if you do that, that even makes you more confident or actually what we call confirmation bias. So basically, like all the information out there, you're kind of searching unconsciously after something that would say, yes, Coca-Cola is a great company. Coca-Cola is a great company, and there's a lot of information out there that would back that up. Now, there is not that information that would probably tell you that it's a good company giving the current valuation, but that might also be something that you won't consider to begin with. So, you might go out and invest, say, 30% of your portfolio in the stock. And for someone who's not familiar with sizing their portfolio, it might seem like,

Starting point is 00:50:42 why can I invest 30% in the stock? The interesting thing is that when you're new in investing, you usually don't have that many stocks on your radar because it takes a lot of time to acquire the necessary knowledge to invest a lot of stocks. And again, say Coca-Cola might be the reason why you go into stocks in the first place. So you would go ahead and say, I really believe in this company, remember, for all the confirmation bias too, so I might go ahead and invest 30% of my portfolio in that stock. Now, 30% might not have a lot of sense if you're Warren Buffett, but it definitely doesn't

Starting point is 00:51:14 make any sense for other investors, especially if they're new investors. So if I need to come up with two things, definitely overconfidence and the lack of diversification if you were a new investor. So HOM, really, really great question. We really appreciate that. And we also really like to reward you for your questions. So we're giving you two courses from TIP Academy. It's the chapter by chapter video summary of the intelligence investor and also a new course, how to invest in ETFs. But guys, this was all that Preston and I had for this week's episode of The Investors podcast. We'll see each other again next week. Thanks for listening to The Investors Podcast.

Starting point is 00:51:56 To listen to more shows or access to the tools discussed on the show, be sure to visit www. www.theinvestorspodcast.com. Submit your questions or request a guest appearance to The Investors Podcast by going to www.com. If your question is answered during the show, you will receive a free autographed copy of the Warren Buffett Accounting Book. This podcast is for entertainment purposes only.

Starting point is 00:52:20 This material is copyrighted by the TIP Network, and must have written approval before commercial application.

We Study Billionaires - The Investor’s Podcast Network - TIP 125 : Billionaire Reid Hoffman & The Start-Up of You (Business Podcast)

There aren't comments yet for this episode. Click on any sentence in the transcript to leave a comment.