Speaker 1: Reen Hoffman is one of the most successful entrepreneurs and
Speaker 1: investors in Silicon Valley. As an entrepreneur, he helped to
Speaker 1: build PayPal and he started linked In. As an investor,
Speaker 1: he was an early investor in Facebook and an early
Speaker 1: investor in Airbnb. On this episode Appear to Appear, I
Speaker 1: sat down with Reid Hoffman to talk about those different
Speaker 1: skills of being an entrepreneur and an investor. The venture
Speaker 1: capital world today seems like it can never get any better.
Speaker 1: Everybody seems to be making money. The values are high,
Speaker 1: but returns are very high. Can he get any better
Speaker 1: than this? And are you worried about this being a
Speaker 1: bubble not unlike we had in the tech bubble burst
Speaker 1: in two thousand. Well, you always worried about the market's
Speaker 1: getting over inflated. Amount of stimulus. Everything else is part
Speaker 1: of making this happen. And so I do think that
Speaker 1: there is some risk within the general market of this.
Speaker 1: Now that being said, technology is accelerating the transformation of
Speaker 1: all industries. Uh, there's what artificial intelligence gonna do to
Speaker 1: all industries. There's obviously, you know, that's a leading edge
Speaker 1: of software. There's things happening with a R and VR,
Speaker 1: there's things happening with crypto and fintech, and so all
Speaker 1: of this area, I think is is very much accelerating
Speaker 1: in the future, and so I think that's part of
Speaker 1: the reason why the venture industry has been so good,
Speaker 1: is because technology is important in redefining many key industries.
Speaker 1: Right now, Silicon Valley is not the only place in
Speaker 1: the United States where their technology investments, but it seems
Speaker 1: like the Silicon Valley companies seem to be the most
Speaker 1: valuable and that's where the most activity is occurring. Is
Speaker 1: there something about Silicon Valley that makes it unique and
Speaker 1: better than other areas of interested in technology United States?
Speaker 1: Silicon Valley itself has a number of overlapping network effects.
Speaker 1: It has a network effect of essentially being the hub
Speaker 1: by which a lot of English speaking entrepreneurs from around
Speaker 1: the world come to start their software businesses or key
Speaker 1: technology businesses. There's the hub for capital and the knowledge
Speaker 1: and investing that goes into it. There's a u of
Speaker 1: talent for people growing these companies. As part of the
Speaker 1: reason I wrote this book blitz Scaling for how how
Speaker 1: do you how do you build technology companies at a
Speaker 1: global scale? Lightning Fast and the tech, the talent, there's uh,
Speaker 1: there's network effects of learning and of sharing of information,
Speaker 1: and it's part of the reason why Silicon Valley, which
Speaker 1: you know has the whole Bay Area has like three
Speaker 1: and a half million people tops, that's not the tech industry.
Speaker 1: And you know why half of the NASDAC emerges out
Speaker 1: of Silicon Valley is for those kinds of reasons, and
Speaker 1: those network effects are what makes Silicon Valley great. What
Speaker 1: about around the world, is China likely to catch up
Speaker 1: and pass Silicon Valley as a leader of technology? UM?
Speaker 1: I think that one it's one of the greatest concerns
Speaker 1: that Silicon Valley knowledgeable people have because China is amazing.
Speaker 1: It has huge amounts of tech talent. Everyone's acting like
Speaker 1: an immigrant, UM, you know, with with with hunger. Uh,
Speaker 1: they're like large companies have this policy nine nine a m.
Speaker 1: To nine pm, six days a week. You're discoverable at
Speaker 1: your desk, and that's kind of like you know, you
Speaker 1: know tens of thousands of techno people in technology companies
Speaker 1: and um, they're doing a lot of innovation. Uh. There
Speaker 1: is there's things that we learned from from China, and
Speaker 1: so I think that that China is going to have
Speaker 1: one um kind of very strong creation of the technological future.
Speaker 1: It's one of the reasons why in blitz scaling we
Speaker 1: call it the land of blitz Scaling. I think Silicon
Speaker 1: Valley has some edges too, but I think it's very
Speaker 1: much of a game on circumstance. Now, some people would
Speaker 1: say that the technology world the United States is dominated
Speaker 1: by just a limited number of companies Google, Facebook, Apple, Netflix, Microsoft. Um,
Speaker 1: you're sure you're familiar with all this. Do you think that, uh,
Speaker 1: the United States is dominated by too many, too few
Speaker 1: technology companies and there's ship should be done, something should
Speaker 1: be done to kind of weaken their power, or do
Speaker 1: you think it's okay as it is? Well, what I
Speaker 1: think that we're heading to is we're going from five
Speaker 1: massive tech companies to ten. I think we're already naturally
Speaker 1: heading in that direction. You can see it with things
Speaker 1: like uh, Netflix and Salesforce, and you know, all of
Speaker 1: these other companies which are continuing to also grow in
Speaker 1: strength and create a breadth of additional global, very strong
Speaker 1: technology companies. And as respective as an investor, when you
Speaker 1: go around and you ask kind of what all the
Speaker 1: you know, kind of the venture capitalists, They're like, no, no,
Speaker 1: we're We're having more and more startups, more and more
Speaker 1: ability to create amazing new tech companies. So like, if anything,
Speaker 1: I think we're already naturally on that transit of that trajectory.
Speaker 1: Do you think that large Chinese technology companies Ali Baba,
Speaker 1: ten Cent, By, Do By Dance and stuff forth can
Speaker 1: have their technology become very dominant or important in the
Speaker 1: United States and around the world. And are we in
Speaker 1: a world now we're competing with Chinese technology companies for
Speaker 1: market share outside of the United States and China. So
Speaker 1: I think we're already in that world. I think that
Speaker 1: if you look a kind of things that Ali Baba
Speaker 1: is doing in terms of um spreading the the Ali
Speaker 1: pay and everything else into South America into Africa, you know,
Speaker 1: I think that the notion of the technological platforms of
Speaker 1: the future are in deep like the there's a fast
Speaker 1: moving competition between companies and Silicon Valley and companies in China,
Speaker 1: and I think that's part of like, you know, which
Speaker 1: systems will be the systems that the world operates in
Speaker 1: is I think in deep competition. And that being said,
Speaker 1: I think we're already seeing uh, Chinese uh, platform companies
Speaker 1: beginning to make strong head roads into the US. Byte
Speaker 1: Dance and TikTok as an obvious one, but I you know,
Speaker 1: I think you already see it in also like drone
Speaker 1: manufacturing d G I. There's a whole bunch that are
Speaker 1: already UM, that are already getting massive global relevance, and
Speaker 1: you can see it already. Let's talk about the future.
Speaker 1: Some things that people are interested in the right now.
Speaker 1: One of them is cryptocurrents. Are you a cryptocurrency officianado
Speaker 1: or not? I am I. Actually, if if you go
Speaker 1: to YouTube and search for bitcoin wrap battle. This is
Speaker 1: inspired by Alexander Hamilton's the musical ideated and then funded
Speaker 1: and produced a rap battle between Alexander Hamilton's and Satoshi Nakamoto.
Speaker 1: And that's because I think there is a real role
Speaker 1: for cryptocurrencies in helping US evolve. So do you invest
Speaker 1: in cryptocurrencies yourself? I do? Okay? What about transportation? Are
Speaker 1: you're a big believer in autonomous vehicles? I am, um.
Speaker 1: I've invested in Aurora and neuro um because actually, in fact,
Speaker 1: it's literally a question of when, not if, and how soon?
Speaker 1: For when we have autonomous vehicles, it will make all
Speaker 1: of our societies better. It will save you know, tens
Speaker 1: to hundreds of thousands of lives, It will enable huge
Speaker 1: amounts of increase and productivity. And so I think it's
Speaker 1: it's it's a great thing that we should be accelerating
Speaker 1: to as societies. Have you been in one of these
Speaker 1: cars where you were not the driver and you feel safe?
Speaker 1: I do, and I do. Um. Look, I think part
Speaker 1: of the thing that all of them, uh, not just aura,
Speaker 1: not just neural, but all of them have safety. Safety.
Speaker 1: Safety is the very first thing. So when I've been
Speaker 1: in these cars where there is nobody in the in
Speaker 1: the driver's seat, um, it's it's it's been good and
Speaker 1: fine you wear a crash helmet when you're in those
Speaker 1: cars or no, you know, okay, what about flying taxis
Speaker 1: is that something in our future? It is? Uh? As
Speaker 1: you know. I also helped bring a JOBEI Public buys back,
Speaker 1: and it's move the transport grid from two D to
Speaker 1: three D, redefine space in cities, make commutes much less onerous,
Speaker 1: be reliable and getting to the airport on time, or
Speaker 1: be able to live you know, kind of more distantly
Speaker 1: remote and then be able to come into the cities,
Speaker 1: and so I think The Jetsons is now no longer
Speaker 1: science fiction but on route to science fact. What about space?
Speaker 1: Do you invest in outer space related investments? Um? Not
Speaker 1: as as as intensely as some of my friends like
Speaker 1: Ellen um, who obviously are in it. I've I put
Speaker 1: some money into SpaceX. That's more because you know Elon
Speaker 1: and this amazing transformation of the world. Uh. But it's
Speaker 1: it's um, It's it's obviously an important area. UM. I've
Speaker 1: kind of ended up in it sometimes just by who
Speaker 1: I know. So let's talk about how you became an
Speaker 1: investor and an entrepreneur. But you were going to be
Speaker 1: an academic and then I guess on a road to
Speaker 1: Damascus kind of epiphany, you said, I'm not going to
Speaker 1: be an academic. I'm gonna be something more important in academic.
Speaker 1: I'm going to be an investor. Well, actually didn't start
Speaker 1: with investor. It started with a product creator. I wasn't
Speaker 1: even necessarily starting with entrepreneur. It was how do we
Speaker 1: think and speak better? How do we make ourselves better
Speaker 1: as individuals and as a group. Well, actually, this medium
Speaker 1: of software, this medium of constructing new products. UM, it
Speaker 1: was kind of like I was just beginning to get
Speaker 1: that lens of what does the internet mean? And how
Speaker 1: do we all work together and play together and live
Speaker 1: together using the internet to redefine our space and redefine
Speaker 1: our networks and already be better and and I should
Speaker 1: go create that. Well, as you were starting this career,
Speaker 1: you were invited to join a company that was called PayPal,
Speaker 1: and PayPal turned out to be a gigantic success later
Speaker 1: sold to eBay. What was your job at PayPal? Well,
Speaker 1: so when Peter Tiel and Max lefton started PayPal, they
Speaker 1: each invited their friend who most understood and had entrepreneural
Speaker 1: experience to be on the board. So that was me
Speaker 1: for Peter and then Um, after about a year of
Speaker 1: being on the board, I was thinking about going and
Speaker 1: starting another company, and Peter said, no, come join um
Speaker 1: PayPal full time. Uh and help us because you know
Speaker 1: you've been helping us so much on the board and
Speaker 1: you understand this stuff and and we have so much
Speaker 1: to do because PayPal was an early blitzcaler. It was
Speaker 1: its theory was it was going to be a bank,
Speaker 1: and that was that that was not a workable theory. Um,
Speaker 1: so we had a great customer acquisition engine, But how
Speaker 1: do you redefine the payments OS was something that was
Speaker 1: all in front of it even as it was exponentiating
Speaker 1: its burn rate. So so I joined PayPal full time,
Speaker 1: stepping off the board. All right. So PayPal was ultimately sold,
Speaker 1: as I mentioned the eBay for about a billion and
Speaker 1: a half dollars or so. You got your share of
Speaker 1: the profits. You then became an angel investor. For those
Speaker 1: who don't know what an angel investor is as opposed
Speaker 1: to a devil investor, what is an angel investor? Well, uh,
Speaker 1: sometimes there may be investors that entrepreneurs think our devil investors,
Speaker 1: although it's usually more opposed. Fact, angel investors are individuals,
Speaker 1: usually with some expertise in this area or some knowledge
Speaker 1: of the entrepreneur, that tend to invest the earliest stages
Speaker 1: of a of a company. Frequently, well, it's an idea
Speaker 1: on the back of a napkin or an entrepreneur just
Speaker 1: thinking about doing something. Although that has all, like all
Speaker 1: investment has professionally scaled and does so kind of individually. Um,
Speaker 1: not with a firm, the resources and assets of a firm, uh,
Speaker 1: the platform, the network that the firm brings and so
Speaker 1: that was what I started doing, mostly just because I
Speaker 1: was interested in other folks who were building these great
Speaker 1: projects that I wanted to help out with and participate in.
Speaker 1: Right when you started doing that, you did it relatively prolifically,
Speaker 1: and you became known as maybe the most active and
Speaker 1: maybe the most successful angel in the western in Silicon Valley.
Speaker 1: One of the companies I think you invested in was
Speaker 1: that Facebook. Yes, so what did you see in the
Speaker 1: young Mark Zuckerberg? Did you say this is gonna be
Speaker 1: one of the great companies in the world. Are you
Speaker 1: just said I'll take a chance. So Facebook had already
Speaker 1: successfully launched a product that when it opened up a campus,
Speaker 1: because when when I did the investment, it was strictly
Speaker 1: only a kind of a university campus, you know, network,
Speaker 1: not even not not the whole world. And but when
Speaker 1: it opened up a campus in six weeks, eight percent
Speaker 1: of the campus was using it six days, six times
Speaker 1: or more per day. And so you could just look
Speaker 1: at the usage curve and go, this is interesting. The
Speaker 1: person who's created this is a really interesting And even
Speaker 1: though back then Mark was very quiet, so I had
Speaker 1: a tendency to to not talk very much. Um long
Speaker 1: pauses minutes long pauses in the conversation where you're like,
Speaker 1: is this conversation over um? You could see that he
Speaker 1: was very smart and you could see what was the
Speaker 1: trajectory that Facebook was on was really interesting. So let's
Speaker 1: talk about this, your angel investor. You're doing pretty well.
Speaker 1: People are coming to you all the time with deals,
Speaker 1: and while you might miss one or two, basically you're
Speaker 1: doing quite well. Why did you join a firm called Graylock?
Speaker 1: An excellent venture capital firm? But why did you need
Speaker 1: to be joining a venture capital firm. You're already your
Speaker 1: own venture capital if you have enough money to start
Speaker 1: your own firm, why would you join Graylock? So um,
Speaker 1: not again not surprising for the guy go down to LinkedIn.
Speaker 1: I think in networks, and I think in networks as platforms.
Speaker 1: And one of the things that I think those small
Speaker 1: number of very elite venture capital firms within Silicon Valley
Speaker 1: and other places do is create a network. And I
Speaker 1: was originally thinking about building my own. And then David
Speaker 1: z and Neil Bustrie, who are then both general partners
Speaker 1: at Greylow, came in and said, hey, we're um, we're
Speaker 1: in the process of moving the firm from Boston to
Speaker 1: Silicon Valley where where it's kind of a kind of
Speaker 1: a rebirth of the firm, which has this great set
Speaker 1: of investors and pedigree and culture and learnings and all
Speaker 1: these things that will be very helpful. But also this
Speaker 1: idea of network uh amplifier for venture capital. Um, we
Speaker 1: love it. We'd love to do it with you. And
Speaker 1: I was like, why these are these are people. I
Speaker 1: would be delighted to be partners with these folks. So
Speaker 1: let's let's build the firm here now. When you were
Speaker 1: starting at at Graylock, even though you have already had
Speaker 1: a good career as a venture investor and angel investor,
Speaker 1: I think one of the legends of Silicon Valley is
Speaker 1: the deal you wanted to do was Airbnb and the
Speaker 1: and your partner at your firm said, look, that's a
Speaker 1: terrible deal. It's going nowhere. Um. So were you intimidated
Speaker 1: by that because he had a lot of experience, and
Speaker 1: how did you push that through? There's even more drama
Speaker 1: than your question suggests because the partner, the senior partner
Speaker 1: is David z who was uh who's an amazing general partner,
Speaker 1: was my board member from Greylock at LinkedIn uh reason,
Speaker 1: I'm Matt Greylock Um and so I bring in Airbnb.
Speaker 1: It's my first deal that I'm bringing into the partnership.
Speaker 1: And David, you know who I'm super close to I
Speaker 1: have deepest respect for, has has returned billions of dollars
Speaker 1: the fun looks at me and says, well, every VC
Speaker 1: has a has a deal that they can learn from
Speaker 1: and fail from. An Airbnb can be yours. And so
Speaker 1: I was like, David's super smart, and so ultimately I
Speaker 1: kind of said, well, look, I have to have the conviction.
Speaker 1: This is a portfolio. I'm gonna He gave me the
Speaker 1: hunting license, the permission to go do the deal. So
Speaker 1: I went and did the deal. Now to David's it
Speaker 1: six months later, the numbers hadn't changed it all. He
Speaker 1: came back to me and said, I thought about it
Speaker 1: a lot. I think you were right. I was wrong.
Speaker 1: What did you see that I didn't see? And I said, well,
Speaker 1: all of the risk factors that you saw were correct.
Speaker 1: I just realized that if you if you navigated through
Speaker 1: the risk factors which I could see as able to do,
Speaker 1: then you would end up with a redefining company of
Speaker 1: an industry. It would be you know, the like the
Speaker 1: literally like you just it transforms the entire industry. And
Speaker 1: that's the thing I saw. You had some time I
Speaker 1: don't know where you got the time from to start
Speaker 1: a little company called linked In. The goal was building
Speaker 1: something that enabled every individual professional to most to transform
Speaker 1: their career by collaborating within a network. So in addition
Speaker 1: to venture investing, you had some time I don't know
Speaker 1: where you got the time from to start a little
Speaker 1: company called linked In. Um, how did you have time
Speaker 1: to start a company called LinkedIn when you're a partner
Speaker 1: in a venture firm? Well, actually I started it much earlier,
Speaker 1: and then Graylock. Um, that's actually how I met Greylock
Speaker 1: because David z lad my series b UM. So I
Speaker 1: was doing angel investing while I was a while I
Speaker 1: was the c the founding CEO, and and co founder
Speaker 1: of LinkedIn. But I didn't start venture investing until after
Speaker 1: I'd hired Jeff Weener to be the CEO of LinkedIn,
Speaker 1: and LinkedIn ultimately was sold to Microsoft or roughly billion
Speaker 1: dollars or something like that. Did you ever anticipate something
Speaker 1: like that when you started the company or helped to
Speaker 1: start the company. So, Um, one of the things to
Speaker 1: think about when you're strategizing. And it's like my first book,
Speaker 1: The Startup of You, has this framework called a b
Speaker 1: Z planning, which is part of it is the thing
Speaker 1: about the spread of outcomes, like what's the what's the
Speaker 1: great possible outcome, what's the worst outcome, what are the
Speaker 1: intermediate outcomes? What are the things that change the landscape
Speaker 1: of it? So I always knew that LinkedIn could be
Speaker 1: a network as a platform that would be transformative, and
Speaker 1: I also knew that it was the kind of thing
Speaker 1: that most aligned with Microsoft's mission. So did that mean
Speaker 1: that I knew that Microsoft is gonna end up buying
Speaker 1: it for a you know, for it's it's it's it's
Speaker 1: you know, kind of the largest acquisition, uh in its
Speaker 1: history or um in as answers, No, I thought it
Speaker 1: was a possibility. Uh, it was. It was an outcome,
Speaker 1: It wasn't the goal. The goal was building something that
Speaker 1: enabled every individual professional to most to transform their career
Speaker 1: by collaborating within a network. Right when you sold the
Speaker 1: company to Microsoft, you went on the board of Microsoft,
Speaker 1: And let me ask you about that. Microsoft was a
Speaker 1: technology company that came out of nowhere, became a dominant
Speaker 1: software company. Many people thought it would go south as
Speaker 1: it was, you know, getting older and older and transformed itself.
Speaker 1: When Sancho Odela became the CEO, were you shocked and
Speaker 1: surprised at how the company has become one of the
Speaker 1: most valuable companies in the world again, Uh No, Um,
Speaker 1: for a number of reasons. One is Microsoft has always
Speaker 1: had an enormous amount of talent throughout the whole company.
Speaker 1: The technology depth Microsoft you know has actually created a
Speaker 1: whole range of products within not just commercial sidebels on
Speaker 1: Microsoft research, um. And so there's always this raw amount
Speaker 1: of talent. And then obviously having some key franchises like
Speaker 1: Office and Windows and other kinds of things, and being
Speaker 1: willing to be bold and creation of Xbox and the
Speaker 1: gaming franchise. Now that being said, you know that I'd
Speaker 1: say that the thing that Satya brought back with vigor
Speaker 1: to the company was a focus on earning the ability
Speaker 1: to to to build the next generation of products, you know,
Speaker 1: starting with his own background and Azure, but also kind
Speaker 1: of transforming across the the company. A we are only
Speaker 1: one company in this universe, and we are um uh
Speaker 1: doing our absolute best to surprise and delight our customers.
Speaker 1: So let's talk about the different skill sets it. To
Speaker 1: be an investor, you need a certain skill set. What
Speaker 1: is that skill set and what is the skill set
Speaker 1: and how is it different to be an entrepreneur. So, well,
Speaker 1: I'll start with an entrepren because I think it's a
Speaker 1: little easier, which, well, the game is hard, but the
Speaker 1: definition is easier, which is, you have a vision for
Speaker 1: where the world is moving towards, where you can help
Speaker 1: build it towards. Um frequently, in the case of a
Speaker 1: new technology or a market shift or something that gives
Speaker 1: you that kind of market opportunity, you can assemble through
Speaker 1: your network the assets not just capital, but talent, uh,
Speaker 1: the ability to build the new product or service. And
Speaker 1: you're driven by kind of the cadence of a complete
Speaker 1: focus on how do you and you know, how do
Speaker 1: you navigate that path, which can include pivoting, includes risk management,
Speaker 1: and a bunch of other things. But it's that build
Speaker 1: of of building something from nothing and then in you know,
Speaker 1: kind of blit scaling getting it really large very fast.
Speaker 1: As an investor, what you're looking at is judging entrepreneurial
Speaker 1: talent and that same kind of circumstance of can this
Speaker 1: set of people, can she or he or you know,
Speaker 1: sometimes better to have two or three founders do that
Speaker 1: run this? Uh this kind of this this race. And
Speaker 1: the key thing that's a difference between being the entrepreneur
Speaker 1: where it's kind of the all in focus is the
Speaker 1: only thing I'm doing and a an investor is that
Speaker 1: you're making the judge. You're not running the race as
Speaker 1: the investor. The founders, the entrepreneurs, they are running the race.
Speaker 1: You're helping as much as you can, but you have
Speaker 1: to judge can they do that? And then can you
Speaker 1: help them as best you can get there? But it's
Speaker 1: it's the key difference in skill. So to make people
Speaker 1: feel good who aren't as successful as investors as you are,
Speaker 1: do you have some failures you can tell us about
Speaker 1: where you made a terrible mistake, you lost all your money?
Speaker 1: Just to make unrest of us feel good? Uh, well,
Speaker 1: it depends on you know, do we have days I
Speaker 1: can go through the list um And actually, by the way,
Speaker 1: the interesting question about the analysis of here is not
Speaker 1: as much of the companies that you that you invested
Speaker 1: and went to zero. There's a large list of those
Speaker 1: companies that that did that. The real thing is the
Speaker 1: companies that uh you missed, so like missing Twitter, missing Snapchat,
Speaker 1: missing Pinterest, those are in Those are much worse outcomes
Speaker 1: then you put in, you know, a hundred thousand dollars
Speaker 1: or a million dollars or ten million dollars in this
Speaker 1: other company that went to zero. So final question, if
Speaker 1: somebody said I want to be the next Reid Hoffman
Speaker 1: person who's starting companies, investing in companies, doing good things
Speaker 1: for public policy, what would you say is the best
Speaker 1: training ground to do that? And how should somebody prepare
Speaker 1: to be the next Reid Hoffman. Well, I'm still young
Speaker 1: enough that I'm still hoping to be the next red
Speaker 1: Offfman myself. But that being said, there's a number of
Speaker 1: people who are like this with in Silicon Valley who
Speaker 1: bring an entrepreneur's mindset and entrepreneurial success together with an
Speaker 1: investing mindset and play a central on the network. And
Speaker 1: many of these folks, um are folks that I work with,
Speaker 1: you know, Um, you know, I could literally spend another
Speaker 1: hour listing names, um, you know, Ali Partovi at NEO,
Speaker 1: other other areas by which um we collaborate with these
Speaker 1: folks and so I think there's a lot of people
Speaker 1: out there who are all going to be the next themselves,
Speaker 1: you know, with this amazing kind of track record and
Speaker 1: luck Thanks for listening to hear more of my interviews.
Speaker 1: You can subscribe and download my podcast on Spotify, Apple,
Speaker 1: or wherever you listen.