Y Combinator Startup Podcast - #69 - Anne Wojcicki of 23andMe and Sam Altman

Episode Date: April 13, 2018

Anne Wojcicki is the cofounder and CEO of 23andMe, which provides direct-to-consumer genetic testing.Sam Altman is the president of YC Group. He interviewed Anne for a series called How To Build The Future, which you can check out on our YouTube channel.

Hey, how's it going? This is Craig Cannon, and you're listening to Y Combinators podcast. Today's episode is with Ann Wigiske and Sam Altman. Anne's the co-founder and CEO of 23 and me, and they provide direct-to-consumer genetic testing. And Sam's the president of YC group. He interviewed Anne for a series called How to Build the Future, and you can check it out on our YouTube channel. All right, here we go. Today we're here with Anne Logiske, co-founder and CEO of 23 and me. Thank you very much. Thank you. We always like to start with how you came up with the idea and sort of the founding story of the company. So I was working on Wall Street.

That doesn't sound very fun. It was actually. It was fun? I loved it. So I grew up, I grew up in academia. I always thought I'd end up being an academic. I got very, my parents, I went to a job fair right out of college. My parents made me go.

And I got this job offer to go on Wall Street. And it's one thing I always tell young people, like you never really know what's going to come your way. Just take every opportunity. So I very randomly got some. this job on Wall Street. I had no idea what it was, but I kind of figured, like, I actually only took the interview because they gave me free frequent flyer miles. I wanted the flight. I won the frequent flyer miles. Oh, you had to fly there, but you got to keep the frequent flyer miles. Yeah, yeah, no, I was just excited. I was like, it's a free trip. Like, it will be 5,000 miles.

Like, that's pretty awesome. So I was on Wall Street for 10 years, and I loved it. Like, for me, it was, because it wasn't just about, like, trading and making money and doing these things, but it was like, I got to learn about companies. And the one thing that is amazing on Wall Street is that you get to go, like you get to go deep on certain companies when you're really interested in them and then really broad knowing a whole sector. So I got to know small cat biotechs and pharma companies and hospital systems and insurance companies.

And I got to have like a really broad landscape of health care. And, you know, in the beginning I had this eternal optimism. Like health care is going to, you know, totally change. There's antibodies. there's all this like new, you know, there's like technology. Like there's all these new discoveries coming. It's going to be so different. And then when the bubble burst in 2000, a lot of innovation dried up.

And I started to see more what health care really is. And at the end of the day, health care is an amazing business that really effectively monetizes illness. And I used to always say, you know, if I successfully get you to never be diabetic, no one makes money. But if you do become diabetic, there's all. kinds of ways I can make money. And at the end of the day, when I think about what I care about, what's in the best interest of me, like, I'd rather just never be diabetic. I'd rather never be sick. And there's no one in the system today that really thinks about how to keep me healthy. So after 10 years of investing, I felt like I really understood the system. And I also understood that

you had this, all these people with the right intentions who really care, but the ship's just pointing in the wrong direction. And that no one's actually focused on keeping people healthy, and that I wanted to have a company that was frankly somewhat rebellious and was going to inspire people to try to really be healthier. And, you know, and I felt like it was, you know, again, it had sort of that, you know, a little bit of a Robin Hood kind of mentality in the beginning of, you know, we have to, you can't change the system from within. So we've got to do something more radical from outside.

One of my favorite Charlie Munger quotes is incentives are superpower. And I always believe this. And I think this is the clear problem you just identified. So how do you think about how you design a system or a company that incentivizes, that is incented to keep people healthy? Well, I realize the main thing in healthcare is that you don't actually ever have a voice. Like you don't actually, because you're not the payer in healthcare, like you, the individual, you don't actually make decisions.

It's, you know, your insurance company, your doctor, the pharmacy benefit manager. There's all kinds of people in the back who actually make decisions. And I think there's all this data now about, you know, you go in for surgery, and there's doctors coming into the surgery that you've never even met. So for me, what was transformative, like what we did to change the incentives is to put you in the power seat.

Because I feel like, like, you make retail decisions that are your best interest because, like, you're actually the one paying the bill. So for us, like, what we decided to do that was, frankly, like, seen as disruptive as we are direct-to-consumer. I remember when you launched doctors or healthcare professionals in general

were saying patients, this is, irresponsible, you know, you need a medical professional to do this. Like we can't, I remember one quote that really stuck with me, something like, we can't have people making their own health care decisions. They don't know how to interpret the data. There was all kinds of interesting. There's like a whole, there's all kinds of interesting things because people would publish stuff on Facebook and then doctors say, like, do you have the right? And we'd remind people like, yeah, it's their own information. So there's always been, I'd say, attention a little bit with the medical system and the medical system, historically, there's tests like the pregnancy test, the pregnancy test,

when it came out was seen as radical. Like, how could women ever possibly learn at home that they're pregnant? And if you look at the literature of, you know, that era, like, we look at that today and we'd say it's crazy. So one of my favorite papers is there's this JAMA paper, the Journal of American Medical Association from 1969, I think, where they ask doctors, would you tell your patients that they have cancer if they had a cancer diagnosis. And over 90% of them said no. So I always put that in context of like it helps people understand like physicians were trained in such a way. And so I don't

blame the system or the individuals. It's just like that like that was the culture that was thought of like what was actually in your best interest. And I think what we do is like as we empower consumers, we are showing that people actually can be like people want to be in charge of their health. They want the information. And they actually. And they actually. And they actually want to be in control. I always like the sort of model of thinking about the world 50 or 100 years from now and looking back what we think was just totally ridiculous. Yeah. And this sure seems like. I think healthcare is that type, because health care is like really, as much as it's science and it's data driven, it's also not. Like part of what people don't necessarily always

understand is that the practice of medicine is an art. Like you can go, the reason why you can go to five different physicians and get five different ways of, you know, treating cancer is because there's the practice of medicine. You can get different opinions. And one of the things that we're specifically trying to change is exactly that, is exactly to say that we're trying to get data so that it's no longer a question of like, hey, Sam, like, what's the best in your best interest, that there's actually data to say exactly what you should be doing. How do you think the medical system, the healthcare system overall, will eventually get to a place

where we don't have this misalignment of incentives you talked about, and we have data and we have people in control of their own healthcare. If you could wave a magic wand and say, I'm going to fix the healthcare system, what needs to happen? I think the reality is what needs to happen is never going to happen, which is

like you have a universal payment system. So single coverage. The reality is, like, who cares about keeping you healthy today? Because you could be overweight, and you can eat poorly and you can never exercise, and you won't see the consequences of that for the next, let's say, 20 years. So the reality is, like, who's going to benefit from that?

And the reality is, like, it's society. And it's you personally. And it's, like, you know, somebody who's willing to invest in you in the long run. And I think for a single-payer health care system or, like, a country, they care about actually trying to keep you healthy for as long as possible. I think second, people, like we don't want, we saw that communism doesn't support the system that we all want. People have to be willing to spend money and they have to step up. And I think the same way you see people stepping up with yoga and vitamins and weight loss studies and, you know, all kinds of different alternative cares.

People at the end, people at some point have to step and say, like, your health is also your responsibility. And I think the more that we can give people personalized information about themselves, the more that they are going to be willing to execute on taking care of themselves. Speaking of that, you could have started so many different companies in the healthcare space. How did you decide this was not an obvious choice at the time? For me, it was totally obvious. So for me, there's a couple things that were happening. One, I always love genetics.

It was my first investment in 1996. In some ways, it was my first and it was my last. So the genetic revolution was happening. Like right in, when I started investing, there was the race of, like, you know, getting the cost of the genome down. It was super exciting. And I started looking at those investments again and realizing that you're going to be able to buy essentially a scan of your entire genome pretty inexpensively. And so that was the first nugget of like, okay, wow, you can actually start to get huge amounts of genetic information. And second was seeing this world of, you know, social networking.

That social networking was happening. and you don't actually need the old guard to get things to happen, I could crowdsource. So it gave me this idea that, wow, if I just empowered everyone with their genetic information, and I crowdsourced all this information, like if I have the world's health information, what could I do? And people are like, well, you could, you know, cure, you could save it. You know a lot. So the idea really was, well, we should do that.

We should, like, instead of relying on Stanford or Harvard or Pfizer to go and solve a disease or like how to be healthy, we, the people, we can do it. So in some ways, like having grown up in this Google environment and knowing, you know, the social networking world that was coming up, it was piecing those things together that was like combine the technology in science with the platform that is really emerging. I've noticed that many of the most transformative companies come because the founder sees some, like an intersection of two pretty different

but really important trends a few years before everybody else does. And this is clearly one of those. It's like the fact that crowdsourcing works is still amazing to me. Totally. What's also, I think, when a founder really wants something personally. Did you really want this person? Oh, yeah. To me, it was like the whole beauty for me of genes, of genetics is like you've gene by environment.

And I always love people debating, but is it your genes or is in your environment. I'm like, no, the whole beauty of it is that it's both. So like you might be genetically high risk for diabetes, but like there's your environment. So what can I do? So very few genetic ailments are 100% deterministic, meaning 100% likelihood that you're going to get it. So that means there's an environmental component where you can potentially do something.

So let's go figure out what you can do and then tell people. What was the reaction when you first announced that you were going to do this? What was it? I mean, I read the news, what was it like inside the building? I think there was, you know, it's always like startups are so fun. because you get a bunch of people who are really passionate and I think people were excited and people knew that there would be controversy

and in some ways I think we attract people who have all experienced the healthcare system in their own way and realize it has its limitations and so there's people who are excited about 23 me because of the mission and they're looking to contribute in some way to helping change the system. So there was enthusiasm and we had like, videos. We were, you know, we were also, we were super excited, like, to launch and we thought

there was going to be, like, this big coming, like, everyone, and we had tons, like, we had spit parties. We were the cover of the style. I went to one. I know. We had the cover of the style section. We had the spit party in the building. But I have to say, like, we sold a lot the first day, and then it was slow. That happens. And we were probably selling 20 to, you know, 15 to 25 kids a day, which is not a lot. How do you, well, I guess two questions. One, how did you eventually fix that? And how did you, how do you as a leader keep momentum in the building when, you know,

you have this great launch, everyone, the first day is always awesome. And then you have a week called the trough of sorrow. Yeah. People get pretty demotivated. So that's actually a good. There's always a trough of sorrow. And I think it's important to not let people be totally, you know, to not, like, not be hoping for immediate success and then to be overly distracted by the trough of sorrow.

And I think that that actually happens not just in launches, but every time you come up with a product, you have no idea how well it's going to go. Like I remember when my sister first launched AdSense. And she's like, I don't know, you know, we'll see how it goes. Like it's kind of, you know, it's an experiment. We've no idea. And then clearly it went on. But part is it because you work hard at it.

And I feel like for us and that trough of sorrow, like we recognize, like more we focus on the long term. Like, what do we need to do to get to this point? And I think as a leader for me, one of the most important things is not to wallow on today, but to wallow on like, okay, in two years, this is what it's going to look like, and these are the steps I need to do to get there. People love a vision and people love a plan. You just need to outline. Like, this is where we're going. So when we saw that sales were slow, we're like, people don't understand genetics. Some basic market research could have told us that. But, like, people don't know why they want their genetics. And then it was like, great. Now we actually need to like educate the population about why like why would you want your

genetic information. And how did you do that? So I started changing my talks like I would speak a ton in the early days like I like you gave me a conference invite and I took it. I remember that for myself yeah exactly well like any any talk because part of it is like it's constant feedback so again for the people who want to be entrepreneurs like you just like you're constantly learning constantly getting the feedback. So I would change my talks. I never gave the same talk twice. Like when I look at my inventory of all my talks, it's like, there's like a 500 of them because each one was slightly different. So I remember specifically getting the feedback. People question what is there a value proposition in what you're doing? And I was like, great, I can answer that question. Over 50% of

my customers get a medically meaningful result. And then I started like, I started shifting the conversation. So part of it was like getting like real time feedback. And part of it was like, part of was helping us define what is it that we have to do to show the value. And it was clear people need to understand genetics. They didn't understand the basics. They need to know what is the medical utility of this. And then also people need to know that they're not the only one. Like that's not weird.

Like, oh, this is like weird I did it. We need to drive social like acceptance. And, you know, and part of also was medical acceptance. So we did a ton. It's one thing I always advise science companies is you can't speak. I can't just tell you, like, oh, we're great. We have great science. Like, no one believes that.

So what you need to do is you need to publish. Like, I never even argue with scientists. I just hand over my publications. Like, here you go. Because that's the reality. It's like, you speak with your data. So, like, I can make all kinds of claims, but, like, here's my data to actually support it. Can you talk about the best decisions you made in the early days?

People always ask about the worst, which we can talk about if you want. But I'm curious if you look back things like that where you learn, like, I need to interact to the scientific community in this way. Are there a few decisions you made that looking back have been critical to success? I think the first two hires, the two founding scientists, were just like Brian and Serge, were amazing.

And so in some ways, like hiring the right, for me, like, it was such a critical part of the company. It was a scientific integrity of what we were going to do, and it set a bar of the talent that we are going to hire going forward. So I think in some ways, like having the right people. We've noticed that it is,

is almost impossible to search. You can make a lot of mistakes as a company, but if you screw up the first five, seven hires, it's almost impossible to get through that. Like, when I look at the first 15 people, there's a good, there's like a number of them are still here. And the others who have left were still very close to. How did you find those first two scientists?

We found them through a friend of a friend of a friend, and they had a similar idea. And so it worked as a partnership. But it's hard. I would say hiring is one of the hardest things. And I think one of the things that we've tried really hard here in the company is we, there's a lot of smart people who have humility, and there's a lot of smart people who, like, want to tell you how smart, smart they are.

And we have opted for the humility. And I think it's really important to have people who are constantly open to feedback and constantly open to, you know, constructive criticism and learning about other areas. And I think that's actually one of the things that did make us successful or, you know, allow us to grow and attract other people because it's a group of people who are really eager to learn from others and to keep learning. I've noticed in my own, looking back in my own career, the big hiring mistakes that I've made are people who are really smart but just awful to work with because they want to tell you

how smart they are. And the framework that I finally figured out is you have to look at the net output that a person has on the organization as a whole. Correct. And even if they do a lot themselves, if they make everybody else miserable. I think it's one of the things hiring is always really hard. And I think especially in leadership roles, if you have the wrong person, like I just recently watched one of the old documentaries about Steve Jobs and Bill Gates and jobs talking about, you know, how disastrous it was when Scully came. Like, I'd kind of forgotten about some of these stories, and I realized I was like, yeah, if you hire the wrong senior leadership, it can sink you. And you don't fix it very quickly. It can sink you.

What's it like being in a regulated industry? I think one thing that a lot of people say when they think about, they want to do this really ambitious startup, like genetic testing, but they are afraid because it's regulated. So I think regulation, in some ways there's like, so there's pros and cons. In some ways, like when you're right. related means that there's rules. Like there's like there's like guidelines and you can figure out exactly what that means. So in some ways like there's more of a path about actually how you have to execute. It definitely also means that it's more expensive. Like there are, there's rules and you don't always agree with all those rules. And when we went from an unregulated company to a regulated company, there was definitely a pretty major transition for us because we were used to, you know, you hire smart people. What are smart people?

to do, they like to question and they like to argue. And so we would question all the time, like, why would you need, like, why do you need that test? Or why do you need the study? Why'd you need that number of samples? And so we would question all the time. And one of the things, I think, in a regulated environment, again, like, it's like the DMV. There's rules, like you just, and you follow, like there's a level of obedience. So I'd like to encourage people. It's not, it's not so overwhelming to be regulated. That said, it requires a lot of communication. And in some ways it requires a communication style, that's not prevalent in Silicon Valley. Right.

Yes, that is hard. I think that there's a lot. People, there is an impedance mismatch there. There is. And I think, you know, we always said, like, we, we thought we were, like, I look at some of my old communication, and I'm like, oh, wow, that's embarrassing now. My, the way we thought we were, you know, communicating appropriately and how it really wasn't. So there's a style.

Like, there's a style and there's a form and there's a form and there's a, and there's a, like ways, you know, there's actually like there's a path and there's a rule. It's not terribly clear. You know, I think the regulatory world can do a better job of helping outline. And one thing I do appreciate from now having been regulated for a number of years is that there is a bigger picture that they see. So people who work at the FDA or people who work in government, like it's a public servant job. Like they care. They care about public safety. Like at the FDA, like they care about public safety. There are so many companies, like we can all see them. There are so many companies trying to dupe the consumer. And their job, like, they are there to keep us safe. So I have a lot

of respect for what they do. And the onus is on us as like this startup and the new company. All these people wanting to do things in a new way. The onus is on us a little bit to explain how we're doing it, how that works. And the way they speak, just like I mentioned about scientists, is they speak in data. Like you can't just say, like, Like, oh, no, no, no. Like, trust me. Like, I'm the good guy. Right.

You have to show with data, and you have to show with data in lots of ways. So in that capacity, I don't really mind because it's like they do know. They know a bigger picture story. You know, some of the people we worked with their, you know, have been there for, you know, 20 years. And we're amazing. And they have a depth, a breadth of knowledge that I'm never going to have. And so learning, there's input to genuinely. take. As you look back, you know, from the day you signed, your vision on the day you signed

the incorporation paperwork to now, how much has this all played out like you thought it would? Oh, it was remarkable. I like, so I actually, because I have this picture of the day we signed and I always look at it and I'm like, one, like I really dressed in a very different way than I do today. But two, our Series A documents and our OKRs from 2007. are remarkably similar to what they are today. That's always... So I think we're unusual. So like one of our investors, he has said, he's like, what's amazing, he's like,

I look back on everything. He's like, you're a broken record. In some ways, that's why it's also so easy to do speaking engagements, like, because I've said the same thing now for a decade. We, like, we have a mission. We have a drive. Like, I know where we're going. And it's been, we've been, we've been continuously executing on it.

The best companies are remarkably. steadfast in that. I think it's hard to do because entrepreneurs sort of by definition like to start doing new things. Right. So I think one the hardest things for entrepreneurs, like, and again, we're going back to sort of that, like, the era of, I forgot what you called it, the era of sorrow. The trough of sorrow. I think it's

important to stick with it. Like one of the things I think, like, one of the most important things I think I've learned at this, like, doing this now is the importance of persistence. Like, you have to stick with it. And when you stick with it, you really see a benefit. And there's things that I see. Now,

they've done it for over a decade. And I try, like, one of our missions is to tell people, anyone can be a scientist. Anyone, any age level, like, it's part of the whole reason we're directing students. I believe anyone. You can be eighth grade level, like, and you have the ability. I love it now when kids come to me and they're like, oh, I saw you speak. And because of you, like, I really, I was like, yeah, like, even though I, like, I, you know, my parents didn't know anything and I didn't really have that degree. Like, I'm now in a PhD program, MIT. Like, I get amazing stories. And you never, in some ways,

it takes a long time to see the consequences of your actions. So it's one of the things I emphasize to people. Like, if you really care about something, like if you're really passionate, it takes a decade to really see the impact. Yeah, I mean, it's like compound growth. It's always misunderstood. It always takes longer.

And then the magnitude and the out years is always bigger than you think. And I think what happens is that people, they hear the WhatsApp story, they hear other stories. And I say, like, the real story is, like, the companies that continue to persist, even if there's challenges. And everyone usually, like, the WhatsApps are the rare. But, like, you can be super consistent. And that's one thing.

Like, when I see the press about us now, it's overwhelming. Like, we just persisted. Yeah. That's it. We don't go away. That is the secret to overnight success is 10 years of persistence. Yes. The overnight success is that 10 years of persistence.

So you've done all these remarkable things as a company. And the one that I think is most remarkable or sort of most important to the future of the world is that I think in the last 11 years, genetic testing because of you has gone from something that people are afraid of to something that is now accepted as a really important part of putting people in charge of their lives and their health. But I'd love to hear what the next 11 years look like. And, you know, if we had this conversation in 2029 while we would be talking about and then your proudest accomplishments then. So I said, like, my original mission, like, if you think back to my Wall Street days, was like, I think the system is broken. Like, how am I going to be healthy? So success for me is like, I would like to be healthy at 100. So I now know I have my genetic information.

I can learn about things. And I have set up this research machine where I can collect data from all my customers. We can make discoveries. We give those discoveries back to our customers. I have this amazing machine for discovery. now I want to execute on the vision of like I would like to be healthy at 100. So like success for me is how do I now, I just empowered you. I have 5 million people empowered to learn about themselves and they could keep coming back.

We collectively as a 5 million person community and growing. Is that the biggest genetic data set in the world? By far, yeah. That's awesome. With health information. Yeah, yeah, yeah. But like to me, that's where like there's a power in what we can do now. to make discoveries about prevention.

So we have the drug discovery arm. To me, I look at it as like, we have two aspects. Like you're healthy today. You want to keep staying healthy. You have a condition that, like, you just have this. So we want to have drug discovery for that. Now we like to keep you healthy. And I think about who, like, what are the partnerships I can do?

What's like, what's the community I can form to actually help you make behavior changes? So one thing I see all the time when I meet people, like, again, all economic levels, all socioeconomic groups, people want to be healthier. They don't necessarily know how. And I see this, like, you know, people don't necessarily know, like, oh, where the Doritos really bad, soda really bad. Like, it's remarkable how much, like, there's a disconnect between, like, you hear things, but you don't really know, what are the ways that we're going to be able to help

have people healthier? Have you discovered anything that is, I mean, obviously, the whole point of this is it's personalized, but any generally accept, any general trends that you've discovered that apply to a lot of people they might not already be aware of. Like, I think most people know they probably shouldn't drink so much soda. No, but there's probably people, like some people who could absorb more sugar than others. I think those are the types of things. Like, we're all pretty different. Like, the beauty of humanity is that you're meant to survive. Like, you just look at, you can look at it from the perception of viruses. Like, you have the 1918

flu, lots of people died. Some people survived. Some people are immune. The same thing with, you know, foods. Like, some people just can eat a lot of sugar. Some people can't. And that's why, like, we are still around on the planet today. So I think the main thing that I would say take away is that there's a lot of variability. 100%. Like, you shouldn't smoke. You should exercise more. You should eat better. But the reality is, like, there's some people who wouldn't smoke and never get cancer. There's some people who eat a lot and they never get overweight. Like, some people don't exercise doesn't really matter.

How far away are we from someone being able to spit in a tube and you tell them, like, here's what you need to do to have a good shot of living into 100? So that's one of the things that's most exciting is, like, what we can do. do by having a community of people who are all engaged, we're starting to do what we call these intervention studies. So we did our first one on weight loss. So we had 70,000 people doing a six-arm weight loss study. So that's the first time we're doing it in that kind of scale, specifically to see, based on your DNA, are there differences in weight loss? I'm also, I'm personally, obviously, motivated in the Parkinson's space of people who are genetically high risk, are there behaviors that can lower your risk? And how much then can you lower your risk?

So we're starting to do those types of studies specifically because, like, that's what our customers want. Like, our customers specifically want to know exactly what you just asked. Tell me what to do. So like my, like when you say, again, success for me is like at the end of this decade, I will tell you what to do. At the end of like, like by 2020? Well, I look at it as like, I look at it as like, well, no, I look at it. Yeah. And the next 10 years of the company. So I'm already 10. I'm 12 years in. So give me another 8 years.

That's pretty exciting. I'm on it. I'm on it, Sam. I will follow the instructions for the letter. Thank you very much for taking the time. Oh, you're welcome. Anytime. It's really fun.

Super fun. All right. Thanks for listening. So as always, you can find the transcript and the video at blog. combinator.com. And if you have a second, it would be awesome to give us a rating and review wherever you find your podcast. See you next time.