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Speaker 1: Reen Hoffman is one of the most successful entrepreneurs and

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Speaker 1: investors in Silicon Valley. As an entrepreneur, he helped to

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Speaker 1: build PayPal and he started linked In. As an investor,

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Speaker 1: he was an early investor in Facebook and an early

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Speaker 1: investor in Airbnb. On this episode Appear to Appear, I

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Speaker 1: sat down with Reid Hoffman to talk about those different

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Speaker 1: skills of being an entrepreneur and an investor. The venture

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Speaker 1: capital world today seems like it can never get any better.

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Speaker 1: Everybody seems to be making money. The values are high,

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Speaker 1: but returns are very high. Can he get any better

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Speaker 1: than this? And are you worried about this being a

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Speaker 1: bubble not unlike we had in the tech bubble burst

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Speaker 1: in two thousand. Well, you always worried about the market's

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Speaker 1: getting over inflated. Amount of stimulus. Everything else is part

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Speaker 1: of making this happen. And so I do think that

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Speaker 1: there is some risk within the general market of this.

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Speaker 1: Now that being said, technology is accelerating the transformation of

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Speaker 1: all industries. Uh, there's what artificial intelligence gonna do to

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Speaker 1: all industries. There's obviously, you know, that's a leading edge

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Speaker 1: of software. There's things happening with a R and VR,

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Speaker 1: there's things happening with crypto and fintech, and so all

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Speaker 1: of this area, I think is is very much accelerating

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Speaker 1: in the future, and so I think that's part of

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Speaker 1: the reason why the venture industry has been so good,

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Speaker 1: is because technology is important in redefining many key industries.

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Speaker 1: Right now, Silicon Valley is not the only place in

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Speaker 1: the United States where their technology investments, but it seems

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Speaker 1: like the Silicon Valley companies seem to be the most

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Speaker 1: valuable and that's where the most activity is occurring. Is

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Speaker 1: there something about Silicon Valley that makes it unique and

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Speaker 1: better than other areas of interested in technology United States?

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Speaker 1: Silicon Valley itself has a number of overlapping network effects.

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Speaker 1: It has a network effect of essentially being the hub

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Speaker 1: by which a lot of English speaking entrepreneurs from around

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Speaker 1: the world come to start their software businesses or key

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Speaker 1: technology businesses. There's the hub for capital and the knowledge

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Speaker 1: and investing that goes into it. There's a u of

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Speaker 1: talent for people growing these companies. As part of the

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Speaker 1: reason I wrote this book blitz Scaling for how how

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Speaker 1: do you how do you build technology companies at a

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Speaker 1: global scale? Lightning Fast and the tech, the talent, there's uh,

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Speaker 1: there's network effects of learning and of sharing of information,

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Speaker 1: and it's part of the reason why Silicon Valley, which

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Speaker 1: you know has the whole Bay Area has like three

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Speaker 1: and a half million people tops, that's not the tech industry.

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Speaker 1: And you know why half of the NASDAC emerges out

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Speaker 1: of Silicon Valley is for those kinds of reasons, and

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Speaker 1: those network effects are what makes Silicon Valley great. What

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Speaker 1: about around the world, is China likely to catch up

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Speaker 1: and pass Silicon Valley as a leader of technology? UM?

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Speaker 1: I think that one it's one of the greatest concerns

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Speaker 1: that Silicon Valley knowledgeable people have because China is amazing.

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Speaker 1: It has huge amounts of tech talent. Everyone's acting like

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Speaker 1: an immigrant, UM, you know, with with with hunger. Uh,

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Speaker 1: they're like large companies have this policy nine nine a m.

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Speaker 1: To nine pm, six days a week. You're discoverable at

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Speaker 1: your desk, and that's kind of like you know, you

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Speaker 1: know tens of thousands of techno people in technology companies

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Speaker 1: and um, they're doing a lot of innovation. Uh. There

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Speaker 1: is there's things that we learned from from China, and

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Speaker 1: so I think that that China is going to have

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Speaker 1: one um kind of very strong creation of the technological future.

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Speaker 1: It's one of the reasons why in blitz scaling we

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Speaker 1: call it the land of blitz Scaling. I think Silicon

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Speaker 1: Valley has some edges too, but I think it's very

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Speaker 1: much of a game on circumstance. Now, some people would

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Speaker 1: say that the technology world the United States is dominated

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Speaker 1: by just a limited number of companies Google, Facebook, Apple, Netflix, Microsoft. Um,

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Speaker 1: you're sure you're familiar with all this. Do you think that, uh,

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Speaker 1: the United States is dominated by too many, too few

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Speaker 1: technology companies and there's ship should be done, something should

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Speaker 1: be done to kind of weaken their power, or do

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Speaker 1: you think it's okay as it is? Well, what I

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Speaker 1: think that we're heading to is we're going from five

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Speaker 1: massive tech companies to ten. I think we're already naturally

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Speaker 1: heading in that direction. You can see it with things

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Speaker 1: like uh, Netflix and Salesforce, and you know, all of

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Speaker 1: these other companies which are continuing to also grow in

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Speaker 1: strength and create a breadth of additional global, very strong

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Speaker 1: technology companies. And as respective as an investor, when you

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Speaker 1: go around and you ask kind of what all the

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Speaker 1: you know, kind of the venture capitalists, They're like, no, no,

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Speaker 1: we're We're having more and more startups, more and more

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Speaker 1: ability to create amazing new tech companies. So like, if anything,

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Speaker 1: I think we're already naturally on that transit of that trajectory.

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Speaker 1: Do you think that large Chinese technology companies Ali Baba,

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Speaker 1: ten Cent, By, Do By Dance and stuff forth can

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Speaker 1: have their technology become very dominant or important in the

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Speaker 1: United States and around the world. And are we in

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Speaker 1: a world now we're competing with Chinese technology companies for

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Speaker 1: market share outside of the United States and China. So

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Speaker 1: I think we're already in that world. I think that

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Speaker 1: if you look a kind of things that Ali Baba

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Speaker 1: is doing in terms of um spreading the the Ali

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Speaker 1: pay and everything else into South America into Africa, you know,

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Speaker 1: I think that the notion of the technological platforms of

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Speaker 1: the future are in deep like the there's a fast

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Speaker 1: moving competition between companies and Silicon Valley and companies in China,

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Speaker 1: and I think that's part of like, you know, which

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Speaker 1: systems will be the systems that the world operates in

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Speaker 1: is I think in deep competition. And that being said,

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Speaker 1: I think we're already seeing uh, Chinese uh, platform companies

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Speaker 1: beginning to make strong head roads into the US. Byte

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Speaker 1: Dance and TikTok as an obvious one, but I you know,

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Speaker 1: I think you already see it in also like drone

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Speaker 1: manufacturing d G I. There's a whole bunch that are

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Speaker 1: already UM, that are already getting massive global relevance, and

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Speaker 1: you can see it already. Let's talk about the future.

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Speaker 1: Some things that people are interested in the right now.

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Speaker 1: One of them is cryptocurrents. Are you a cryptocurrency officianado

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Speaker 1: or not? I am I. Actually, if if you go

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Speaker 1: to YouTube and search for bitcoin wrap battle. This is

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Speaker 1: inspired by Alexander Hamilton's the musical ideated and then funded

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Speaker 1: and produced a rap battle between Alexander Hamilton's and Satoshi Nakamoto.

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Speaker 1: And that's because I think there is a real role

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Speaker 1: for cryptocurrencies in helping US evolve. So do you invest

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Speaker 1: in cryptocurrencies yourself? I do? Okay? What about transportation? Are

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Speaker 1: you're a big believer in autonomous vehicles? I am, um.

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Speaker 1: I've invested in Aurora and neuro um because actually, in fact,

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Speaker 1: it's literally a question of when, not if, and how soon?

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Speaker 1: For when we have autonomous vehicles, it will make all

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Speaker 1: of our societies better. It will save you know, tens

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Speaker 1: to hundreds of thousands of lives, It will enable huge

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Speaker 1: amounts of increase and productivity. And so I think it's

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Speaker 1: it's it's a great thing that we should be accelerating

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Speaker 1: to as societies. Have you been in one of these

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Speaker 1: cars where you were not the driver and you feel safe?

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Speaker 1: I do, and I do. Um. Look, I think part

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Speaker 1: of the thing that all of them, uh, not just aura,

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Speaker 1: not just neural, but all of them have safety. Safety.

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Speaker 1: Safety is the very first thing. So when I've been

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Speaker 1: in these cars where there is nobody in the in

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Speaker 1: the driver's seat, um, it's it's it's been good and

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Speaker 1: fine you wear a crash helmet when you're in those

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Speaker 1: cars or no, you know, okay, what about flying taxis

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Speaker 1: is that something in our future? It is? Uh? As

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Speaker 1: you know. I also helped bring a JOBEI Public buys back,

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Speaker 1: and it's move the transport grid from two D to

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Speaker 1: three D, redefine space in cities, make commutes much less onerous,

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Speaker 1: be reliable and getting to the airport on time, or

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Speaker 1: be able to live you know, kind of more distantly

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Speaker 1: remote and then be able to come into the cities,

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Speaker 1: and so I think The Jetsons is now no longer

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Speaker 1: science fiction but on route to science fact. What about space?

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Speaker 1: Do you invest in outer space related investments? Um? Not

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Speaker 1: as as as intensely as some of my friends like

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Speaker 1: Ellen um, who obviously are in it. I've I put

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Speaker 1: some money into SpaceX. That's more because you know Elon

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Speaker 1: and this amazing transformation of the world. Uh. But it's

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Speaker 1: it's um, It's it's obviously an important area. UM. I've

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Speaker 1: kind of ended up in it sometimes just by who

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Speaker 1: I know. So let's talk about how you became an

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Speaker 1: investor and an entrepreneur. But you were going to be

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Speaker 1: an academic and then I guess on a road to

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Speaker 1: Damascus kind of epiphany, you said, I'm not going to

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Speaker 1: be an academic. I'm gonna be something more important in academic.

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Speaker 1: I'm going to be an investor. Well, actually didn't start

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Speaker 1: with investor. It started with a product creator. I wasn't

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Speaker 1: even necessarily starting with entrepreneur. It was how do we

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Speaker 1: think and speak better? How do we make ourselves better

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Speaker 1: as individuals and as a group. Well, actually, this medium

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Speaker 1: of software, this medium of constructing new products. UM, it

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Speaker 1: was kind of like I was just beginning to get

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Speaker 1: that lens of what does the internet mean? And how

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Speaker 1: do we all work together and play together and live

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Speaker 1: together using the internet to redefine our space and redefine

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Speaker 1: our networks and already be better and and I should

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Speaker 1: go create that. Well, as you were starting this career,

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Speaker 1: you were invited to join a company that was called PayPal,

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Speaker 1: and PayPal turned out to be a gigantic success later

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Speaker 1: sold to eBay. What was your job at PayPal? Well,

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Speaker 1: so when Peter Tiel and Max lefton started PayPal, they

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Speaker 1: each invited their friend who most understood and had entrepreneural

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Speaker 1: experience to be on the board. So that was me

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Speaker 1: for Peter and then Um, after about a year of

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Speaker 1: being on the board, I was thinking about going and

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Speaker 1: starting another company, and Peter said, no, come join um

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Speaker 1: PayPal full time. Uh and help us because you know

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Speaker 1: you've been helping us so much on the board and

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Speaker 1: you understand this stuff and and we have so much

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Speaker 1: to do because PayPal was an early blitzcaler. It was

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Speaker 1: its theory was it was going to be a bank,

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Speaker 1: and that was that that was not a workable theory. Um,

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Speaker 1: so we had a great customer acquisition engine, But how

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Speaker 1: do you redefine the payments OS was something that was

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Speaker 1: all in front of it even as it was exponentiating

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Speaker 1: its burn rate. So so I joined PayPal full time,

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Speaker 1: stepping off the board. All right. So PayPal was ultimately sold,

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Speaker 1: as I mentioned the eBay for about a billion and

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Speaker 1: a half dollars or so. You got your share of

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Speaker 1: the profits. You then became an angel investor. For those

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Speaker 1: who don't know what an angel investor is as opposed

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Speaker 1: to a devil investor, what is an angel investor? Well, uh,

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Speaker 1: sometimes there may be investors that entrepreneurs think our devil investors,

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Speaker 1: although it's usually more opposed. Fact, angel investors are individuals,

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Speaker 1: usually with some expertise in this area or some knowledge

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Speaker 1: of the entrepreneur, that tend to invest the earliest stages

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Speaker 1: of a of a company. Frequently, well, it's an idea

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Speaker 1: on the back of a napkin or an entrepreneur just

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Speaker 1: thinking about doing something. Although that has all, like all

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Speaker 1: investment has professionally scaled and does so kind of individually. Um,

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Speaker 1: not with a firm, the resources and assets of a firm, uh,

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Speaker 1: the platform, the network that the firm brings and so

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Speaker 1: that was what I started doing, mostly just because I

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Speaker 1: was interested in other folks who were building these great

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Speaker 1: projects that I wanted to help out with and participate in.

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Speaker 1: Right when you started doing that, you did it relatively prolifically,

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Speaker 1: and you became known as maybe the most active and

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Speaker 1: maybe the most successful angel in the western in Silicon Valley.

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Speaker 1: One of the companies I think you invested in was

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Speaker 1: that Facebook. Yes, so what did you see in the

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Speaker 1: young Mark Zuckerberg? Did you say this is gonna be

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Speaker 1: one of the great companies in the world. Are you

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Speaker 1: just said I'll take a chance. So Facebook had already

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Speaker 1: successfully launched a product that when it opened up a campus,

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Speaker 1: because when when I did the investment, it was strictly

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Speaker 1: only a kind of a university campus, you know, network,

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Speaker 1: not even not not the whole world. And but when

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Speaker 1: it opened up a campus in six weeks, eight percent

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Speaker 1: of the campus was using it six days, six times

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Speaker 1: or more per day. And so you could just look

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Speaker 1: person who's created this is a really interesting And even

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Speaker 1: though back then Mark was very quiet, so I had

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Speaker 1: a tendency to to not talk very much. Um long

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Speaker 1: pauses minutes long pauses in the conversation where you're like,

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Speaker 1: is this conversation over um? You could see that he

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Speaker 1: trajectory that Facebook was on was really interesting. So let's

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Speaker 1: talk about this, your angel investor. You're doing pretty well.

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Speaker 1: People are coming to you all the time with deals,

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Speaker 1: and while you might miss one or two, basically you're

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Speaker 1: doing quite well. Why did you join a firm called Graylock?

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Speaker 1: An excellent venture capital firm? But why did you need

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Speaker 1: own venture capital if you have enough money to start

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Speaker 1: your own firm, why would you join Graylock? So um,

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Speaker 1: not again not surprising for the guy go down to LinkedIn.

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Speaker 1: I think in networks, and I think in networks as platforms.

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Speaker 1: And one of the things that I think those small

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Speaker 1: number of very elite venture capital firms within Silicon Valley

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Speaker 1: and other places do is create a network. And I

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Speaker 1: was originally thinking about building my own. And then David

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Speaker 1: z and Neil Bustrie, who are then both general partners

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Speaker 1: at Greylow, came in and said, hey, we're um, we're

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Speaker 1: a rebirth of the firm, which has this great set

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Speaker 1: of investors and pedigree and culture and learnings and all

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Speaker 1: these things that will be very helpful. But also this

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Speaker 1: idea of network uh amplifier for venture capital. Um, we

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Speaker 1: love it. We'd love to do it with you. And

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Speaker 1: I was like, why these are these are people. I

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Speaker 1: would be delighted to be partners with these folks. So

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Speaker 1: let's let's build the firm here now. When you were

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Speaker 1: starting at at Graylock, even though you have already had

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Speaker 1: a good career as a venture investor and angel investor,

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Speaker 1: I think one of the legends of Silicon Valley is

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Speaker 1: the deal you wanted to do was Airbnb and the

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Speaker 1: and your partner at your firm said, look, that's a

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Speaker 1: terrible deal. It's going nowhere. Um. So were you intimidated

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Speaker 1: by that because he had a lot of experience, and

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Speaker 1: how did you push that through? There's even more drama

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Speaker 1: than your question suggests because the partner, the senior partner

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Speaker 1: is David z who was uh who's an amazing general partner,

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Speaker 1: was my board member from Greylock at LinkedIn uh reason,

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Speaker 1: I'm Matt Greylock Um and so I bring in Airbnb.

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Speaker 1: It's my first deal that I'm bringing into the partnership.

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Speaker 1: And David, you know who I'm super close to I

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Speaker 1: have deepest respect for, has has returned billions of dollars

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Speaker 1: the fun looks at me and says, well, every VC

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Speaker 1: has a has a deal that they can learn from

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Speaker 1: and fail from. An Airbnb can be yours. And so

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Speaker 1: I was like, David's super smart, and so ultimately I

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Speaker 1: kind of said, well, look, I have to have the conviction.

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Speaker 1: This is a portfolio. I'm gonna He gave me the

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Speaker 1: hunting license, the permission to go do the deal. So

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Speaker 1: I went and did the deal. Now to David's it

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Speaker 1: six months later, the numbers hadn't changed it all. He

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Speaker 1: came back to me and said, I thought about it

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Speaker 1: a lot. I think you were right. I was wrong.

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Speaker 1: What did you see that I didn't see? And I said, well,

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Speaker 1: all of the risk factors that you saw were correct.

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Speaker 1: I just realized that if you if you navigated through

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Speaker 1: the risk factors which I could see as able to do,

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Speaker 1: then you would end up with a redefining company of

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Speaker 1: an industry. It would be you know, the like the

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Speaker 1: literally like you just it transforms the entire industry. And

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Speaker 1: that's the thing I saw. You had some time I

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Speaker 1: don't know where you got the time from to start

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Speaker 1: a little company called linked In. The goal was building

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Speaker 1: something that enabled every individual professional to most to transform

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Speaker 1: their career by collaborating within a network. So in addition

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Speaker 1: to venture investing, you had some time I don't know

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Speaker 1: where you got the time from to start a little

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Speaker 1: company called linked In. Um, how did you have time

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Speaker 1: to start a company called LinkedIn when you're a partner

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Speaker 1: in a venture firm? Well, actually I started it much earlier,

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Speaker 1: and then Graylock. Um, that's actually how I met Greylock

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Speaker 1: because David z lad my series b UM. So I

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Speaker 1: was doing angel investing while I was a while I

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Speaker 1: was the c the founding CEO, and and co founder

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Speaker 1: of LinkedIn. But I didn't start venture investing until after

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Speaker 1: I'd hired Jeff Weener to be the CEO of LinkedIn,

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Speaker 1: and LinkedIn ultimately was sold to Microsoft or roughly billion

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Speaker 1: dollars or something like that. Did you ever anticipate something

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Speaker 1: like that when you started the company or helped to

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Speaker 1: start the company. So, Um, one of the things to

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Speaker 1: think about when you're strategizing. And it's like my first book,

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Speaker 1: The Startup of You, has this framework called a b

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Speaker 1: Z planning, which is part of it is the thing

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Speaker 1: about the spread of outcomes, like what's the what's the

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Speaker 1: great possible outcome, what's the worst outcome, what are the

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Speaker 1: intermediate outcomes? What are the things that change the landscape

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Speaker 1: of it? So I always knew that LinkedIn could be

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Speaker 1: a network as a platform that would be transformative, and

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Speaker 1: I also knew that it was the kind of thing

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Speaker 1: that most aligned with Microsoft's mission. So did that mean

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Speaker 1: that I knew that Microsoft is gonna end up buying

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Speaker 1: it for a you know, for it's it's it's it's

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Speaker 1: you know, kind of the largest acquisition, uh in its

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Speaker 1: history or um in as answers, No, I thought it

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Speaker 1: was a possibility. Uh, it was. It was an outcome,

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Speaker 1: It wasn't the goal. The goal was building something that

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Speaker 1: enabled every individual professional to most to transform their career

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Speaker 1: by collaborating within a network. Right when you sold the

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Speaker 1: company to Microsoft, you went on the board of Microsoft,

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Speaker 1: And let me ask you about that. Microsoft was a

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Speaker 1: technology company that came out of nowhere, became a dominant

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Speaker 1: software company. Many people thought it would go south as

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Speaker 1: it was, you know, getting older and older and transformed itself.

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Speaker 1: When Sancho Odela became the CEO, were you shocked and

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Speaker 1: surprised at how the company has become one of the

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Speaker 1: most valuable companies in the world again, Uh No, Um,

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Speaker 1: for a number of reasons. One is Microsoft has always

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Speaker 1: had an enormous amount of talent throughout the whole company.

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Speaker 1: The technology depth Microsoft you know has actually created a

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Speaker 1: whole range of products within not just commercial sidebels on

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Speaker 1: Microsoft research, um. And so there's always this raw amount

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Speaker 1: of talent. And then obviously having some key franchises like

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Speaker 1: Office and Windows and other kinds of things, and being

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Speaker 1: willing to be bold and creation of Xbox and the

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Speaker 1: gaming franchise. Now that being said, you know that I'd

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Speaker 1: say that the thing that Satya brought back with vigor

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Speaker 1: to the company was a focus on earning the ability

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Speaker 1: to to to build the next generation of products, you know,

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Speaker 1: starting with his own background and Azure, but also kind

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Speaker 1: of transforming across the the company. A we are only

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Speaker 1: one company in this universe, and we are um uh

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Speaker 1: doing our absolute best to surprise and delight our customers.

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Speaker 1: So let's talk about the different skill sets it. To

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Speaker 1: be an investor, you need a certain skill set. What

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Speaker 1: is that skill set and what is the skill set

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Speaker 1: and how is it different to be an entrepreneur. So, well,

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Speaker 1: I'll start with an entrepren because I think it's a

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Speaker 1: little easier, which, well, the game is hard, but the

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Speaker 1: definition is easier, which is, you have a vision for

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Speaker 1: where the world is moving towards, where you can help

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Speaker 1: build it towards. Um frequently, in the case of a

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Speaker 1: new technology or a market shift or something that gives

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Speaker 1: you that kind of market opportunity, you can assemble through

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Speaker 1: your network the assets not just capital, but talent, uh,

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Speaker 1: the ability to build the new product or service. And

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Speaker 1: you're driven by kind of the cadence of a complete

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Speaker 1: focus on how do you and you know, how do

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Speaker 1: you navigate that path, which can include pivoting, includes risk management,

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Speaker 1: and a bunch of other things. But it's that build

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Speaker 1: of of building something from nothing and then in you know,

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Speaker 1: kind of blit scaling getting it really large very fast.

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Speaker 1: As an investor, what you're looking at is judging entrepreneurial

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Speaker 1: talent and that same kind of circumstance of can this

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Speaker 1: set of people, can she or he or you know,

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Speaker 1: sometimes better to have two or three founders do that

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Speaker 1: run this? Uh this kind of this this race. And

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Speaker 1: the key thing that's a difference between being the entrepreneur

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Speaker 1: where it's kind of the all in focus is the

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Speaker 1: only thing I'm doing and a an investor is that

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Speaker 1: you're making the judge. You're not running the race as

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Speaker 1: the investor. The founders, the entrepreneurs, they are running the race.

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Speaker 1: You're helping as much as you can, but you have

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Speaker 1: to judge can they do that? And then can you

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Speaker 1: help them as best you can get there? But it's

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Speaker 1: it's the key difference in skill. So to make people

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Speaker 1: feel good who aren't as successful as investors as you are,

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Speaker 1: do you have some failures you can tell us about

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Speaker 1: where you made a terrible mistake, you lost all your money?

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Speaker 1: Just to make unrest of us feel good? Uh, well,

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Speaker 1: it depends on you know, do we have days I

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Speaker 1: can go through the list um And actually, by the way,

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Speaker 1: the interesting question about the analysis of here is not

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Speaker 1: as much of the companies that you that you invested

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Speaker 1: and went to zero. There's a large list of those

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Speaker 1: companies that that did that. The real thing is the

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Speaker 1: companies that uh you missed, so like missing Twitter, missing Snapchat,

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Speaker 1: missing Pinterest, those are in Those are much worse outcomes

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Speaker 1: then you put in, you know, a hundred thousand dollars

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Speaker 1: or a million dollars or ten million dollars in this

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Speaker 1: other company that went to zero. So final question, if

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Speaker 1: somebody said I want to be the next Reid Hoffman

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Speaker 1: person who's starting companies, investing in companies, doing good things

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Speaker 1: for public policy, what would you say is the best

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Speaker 1: training ground to do that? And how should somebody prepare

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Speaker 1: to be the next Reid Hoffman. Well, I'm still young

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Speaker 1: enough that I'm still hoping to be the next red

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Speaker 1: Offfman myself. But that being said, there's a number of

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Speaker 1: people who are like this with in Silicon Valley who

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Speaker 1: bring an entrepreneur's mindset and entrepreneurial success together with an

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Speaker 1: investing mindset and play a central on the network. And

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Speaker 1: many of these folks, um are folks that I work with,

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Speaker 1: you know, Um, you know, I could literally spend another

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Speaker 1: hour listing names, um, you know, Ali Partovi at NEO,

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Speaker 1: other other areas by which um we collaborate with these

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Speaker 1: folks and so I think there's a lot of people

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Speaker 1: out there who are all going to be the next themselves,

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Speaker 1: you know, with this amazing kind of track record and

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Speaker 1: luck Thanks for listening to hear more of my interviews.

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Speaker 1: You can subscribe and download my podcast on Spotify, Apple,

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Speaker 1: or wherever you listen.