Brian Chesky - AI Founder Mode - [Invest Like the Best, EP.471]

0:00Most software companies try to maximize your time on their app to juice engagement. Ramp does the exact opposite. Ramp understands that no one wants to spend hours chasing receipts, reviewing expense reports, and checking for policy violations. So they built their tools to give that time back, using AI to automate 85% of expense reviews with 99% accuracy. And since Ramp saves companies 5%, it's no wonder that Shopify runs on Ramp, Stripe runs on Ramp, and my business does too. To see what happens when you eliminate the busy work, check out Ramp.com slash invest.

0:30Felix by Rogo is a personal finance agent that turns a single prompt into finished, client-ready work using your firm's own templates, context, and standards. Send Felix an email like, take these comments and turn them for me, or update my tracker with the context of these emails, or run the ability to pay math on this buyer, and Felix sends back finished PowerPoint decks, Excel models, and sourced research. Felix works the way your team already does, delivering work quickly and accurately around the clock. Learn more at rogo.ai slash Felix. OpenAI, Cursor, Anthropic, Perplexity, and Vercel all have something in common.

1:04They all use WorkOS. And here's why. To achieve enterprise adoption at scale, you have to deliver on core capabilities like SSO, SCIM, RBAC, and audit logs. That's where WorkOS comes in. Instead of spending months building these mission-critical capabilities yourself, you can just use WorkOS APIs to gain all of them on day zero. That's why so many of the top AI teams you hear about already run on WorkOS. WorkOS is the fastest way to become enterprise-ready and stay focused on what matters most, your product. Visit workos.com to get started.

1:34Hello and welcome, everyone. I'm Patrick O'Shaughnessy, and this is Invest Like the Best. This show is an open-ended exploration of markets, ideas, stories, and strategies that will help you better invest both your time and your money. If you enjoy these conversations and want to go deeper, check out Colossus, our quarterly publication with in-depth profiles of the people shaping business and investing. You can find Colossus along with all of our podcasts at colossus.com. Patrick O'Shaughnessy is the CEO of Positive Sum. All opinions expressed by Patrick and podcast guests are solely their own opinions

2:07and do not reflect the opinion of Positive Sum. This podcast is for informational purposes only and should not be relied upon as a basis for investment decisions. Clients of Positive Sum may maintain positions in the securities discussed in this podcast. To learn more, visit PSUM.VC. My guest today is Brian Chesky, the co-founder and CEO of Airbnb. Our conversation traces the path from his early training as an industrial designer at RISD through the pandemic moment that forced him into founder mode.

2:38He explains what he calls AI founder mode and why it will demand even more attention to the details. He walks through his 11-star exercise, which I've used personally many times over the years, which is his way of imagining the most absurd version of a customer experience as a path to product market fit. We talk about why founders are rarely good early CEOs and what changed him when he stopped chasing adulation and started making things for the love of making them. Please enjoy this great conversation with Brian Chesky.

3:05Before we hit go here, we were talking about industrial design, which you studied at RISD. And I have this weird affinity for the history of this topic just because Raymond Lowy, one of the famous industrial designers, helped me a lot in my career indirectly. I'd love to hear you just riff on the influence that guys like him had in your early studies and why you studied that in the first place. Such an interesting background. I was an artist growing up, but I didn't know what to do with my life. And I went to the Rhode Island School of Design. And at RISD, when you're a freshman, you have to pick a major. I'm 17 years old. And I'm like, okay, in three months,

3:35I've decided what I'm going to do the rest of my life. And I remember the department head for industrial design came. I'd never even heard of the term industrial design. I didn't know what it was. And they said industrial design is designed for everything from a toothbrush to a spaceship and everything in between. I immediately said, that's what I want to do with my life. Because I was thinking of maybe being an architect or something like that. So I started learning about industrial design. And I learned about Charles Ray Eames, Raymond Lowy. Raymond Lowy, probably the most important industrial designer of the 20th century, designed so many incredible products. This first designer, Air Force One. He designed a lot of beautiful consumer products.

4:07He designed a lot of cars. And he had a profound impact, I think, on society. And as I was studying the history of industrial design, it was so incredible because industrial design field is a deeply technical field. The thing about architecture is fairly technical, but it's a more known boundary. Like there's buildings and there's commercial, there's residential, there's retail. There's only so much variation. It's a multi-thousand-year-old field. Industrial design, for the most part, really started with Josiah Wedgwood. It was like, it's really the mass industrial products. Industrial design is really new from the Industrial Revolution.

4:39And it used to be analog things. The first industrial design was chairs and tabletop dishes and bowls. But as technology grows, suddenly industrial design becomes cars and airplanes. And now you have microwaves and refrigerators. And you have all these things in the 20th century, radios. And then eventually it becomes like medical equipment, like ventilators. And then, you know, with computers, I mean, a lot of people, the most infamous industrial design probably in the world is the iPhone. And the vastness of industrial design is unbelievable. The intimate relationship you have with a product is incredible.

5:12I remember when I grew up in the 1980s, I loved video games. I played with a Game Boy, a Game Gear, Super Nintendo. Or remember Nike in the 80s and 90s, those sneakers. They were the Reebok pumps. Like these products captured kids' imaginations. And they had a very intimate relationship with you. They really had a sense of personality. And computers in particular were something I was really, really interested in. And then, of course, you get to the golden age of Apple, starting probably in 1998 with the iMac and to Johnny Ive, who was my hero. So I went to RISD.

5:43And when I was at RISD, Apple was the golden age of industrial design. They really educated the public about design. Once they were educated, they couldn't see great products. And that captured my imagination. What I loved about industrial design was, A, it was very technical. You work with mechanical engineers. You work with electrical engineers. B, here's the thing about industrial design. It's almost different than any other design. This is also true of fashion design. A design is only successful if it sells. So if we design an office building, architects can win awards in their office building, and

6:13it can never get leased. We could design a house, but no one looks at, well, what was the retail value of the house? So the awards are detached from the commercial success. If you design a product and no one buys it, it's considered a failure. And so because the commercial success matters, you have to think about marketing, manufacturing, distribution, solving problems. It's not just about winning awards. It's about being viable to a customer. The other thing is, it's very much a problem-solving field. It's got so many different boundaries. And it's very much about empathy, about user journeys.

6:45More than I think any other design field, I think industrial design, always seemed like it was the kind of field where you put yourself in the shoes of the user. You design these user journeys. And I think they really teach them to design through user journeys. There's a very specific type of field. And I think that really prepared me for designing. I'll just give you one example. One of the projects I designed when I graduated university was a child's ventilator. And so instead of just thinking about a child's breathing machine, instead of just thinking about the design of the ventilator, one of the projects I had to do was imagine being the child in a hospital.

7:18And so I imagine being a child, it's hard to do, but you're six years old. Imagine you're being six, and you're scared, and you're looking up at a breathing machine. And imagine the parents. The parents go in, and the parents are like, is my child going to be okay? If this breathing machine seems like ominous and like it's keeping you alive, the parents are going to freak out. Like, what's wrong with my child? The other thing is I learned that one of the interesting things that happened was the nurse technicians, the really technical nurses, it's a weird thing. They had no problem that these things were complicated.

7:49But the hospital wanted a breathing machine that was so simple that everyone can learn how to use it. Except the nurse technicians had pride that only they knew how to use it. So you had to, like, weigh the stakeholders. How do you design something for the vantage point of a child? Consider how would it imbues to the parents? How could it be universally useful for everyone without threatening people's jobs? You see, there's so many dimensions. That just, I think, really prepared me for this field. There's no product managers in industrial design. You are the PM. There's industrial designers, and there's engineers.

8:20And there's program managers. So the designer is the product manager. So a design product is one function. Do you think the world's going to go that way now? You're obviously famous for helping usher in this founder mode idea. That was kind of pre-Opus 4.6 or whatever. There's, like, another layer to that now. I'm curious what we would call it. But it seems like, for the first time again, someone, even like you, running a very large company with lots of people, can disintermediate lots of the steps between idea and outcome. And this design stuff may be even more applicable than ever.

8:52What is the new mode like? Because everyone's trying to figure out, how do I run a company in this era? So how would you describe the new capabilities and the mode through the lens of this? You know, founder mode was something that Paul Graham coined, but based on an experience I had. I think people are basically born good founders or, said differently, it's innate. You don't have to learn how to be a good founder. It's like you jump in the pool and you learn how to swim. No one is born a good CEO. And the job of CEO is completely counterintuitive. And almost all of your intuition about what to do is wrong.

9:22And so the problem is, we founders never were really prepared to be great CEOs. We founders were taught to learn by doing. And that's great for a founder. It's not good as a CEO. You do not want to learn on the job how to be a CEO. In other words, trial and error is bad for a CEO. You know why trial and error is really bad? Because you hire somebody, they build an empire, they leave, and now you've got to unwind their empire. And it takes like four years. So you've wasted years. So actually learning how to be a CEO is something you should learn. And so I learned the hard way.

9:53And I basically learned that what happened was founders were over-delegating their companies to these professional managers. I'm not disparaging them, but they were detaching themselves. And they were being managed rather than managing the company. And it was really about not apologizing about how you run the company, being in the details. That was founder mode. Was there a moment that clicked for you that you had to change the mode? Yes, the pandemic. Two things happened. Actually, speaking of Johnny Ivan, Apple, and another person named Hiroki here, I spent the 2010s riding a rocket ship.

10:25Airbnb, Uber, a few of us, we went on these crazy rocket ships that Open Anthropics are doing now. It was awesome. It was amazing. But by the end of the last decade, around 2019, I remember waking up one day and it was completely unrecognizable, the company I was running. I had like 7,000 employees. I didn't know what anyone was doing. I felt like I was in a car without a steering wheel and I just could not turn the company. I was like, turn left and the company would go right. And actually, not only did I feel like I was not in control, I don't think anyone felt like they were in control. It was just a free-for-all. Thousands of decisions being made for me.

10:58Me overly deferring, not listening to my intuition. And I got to this point where I remember having this dream. And I told my co-founders, I had a dream in late 2019 where I felt like I'd left the company for 10 years and I'd come back and I was like, somebody had been running the company for 10 years and they turned it into this giant political bureaucracy and I didn't even recognize the company. And then I realized, oh my God, it was me the whole time. And so it was my fault. I had actually enabled all this to happen. And then I started talking to people and they all had the same experience. And all these founders felt like we were all made to feel crazy because we had this instinct.

11:33So around the same time as the pandemic, I hired a guy named Hiroki Asai. He was from Apple. And he told me about how Steve Jobs ran Apple. And Steve Jobs, when he came back to Apple in 1997, in July of 1997, there were 90 days from bankruptcy. And he basically just like went into founder mode, what you call founder mode. He got into the details of every little detail. And I wanted to do that. But initially, the company braced against it. It was almost like it repelled against it. But then the pandemic happened. And we lost 80% of our business in eight weeks. We were in total crisis mode.

12:03At that moment, I went from peacetime to wartime. And then I just totally took control of the entire company. And I just never let go. Over time, basically what I did is I reviewed every single thing for two, three years. I worked like 100 hours a week, reviewed every little detail of the company. My vision wasn't to do this forever. My vision wasn't to micromanage forever. My vision was before I empower people, I need to know what's going on. This notion that great leadership is hiring great people and trust them to know what to do. Well, how do you know they're great if you're not auditing what they're doing? And you actually want to start hands-on under control and give ground grudgingly.

12:37Everyone does the opposite. They let go. They hire someone. They go in the wrong direction. And by the way, that's bad for the leader. You're not training them. So to bring it back to your question, that's founder mode. We need AI founder mode. AI founder mode is going to be even more intense than founder mode. What are the principles that you're thinking about as you go into it? I think AI founder mode, you're even in significantly more details because you have almost everything on demand. The mechanism of founder mode was I had a lot of meetings because that was the only way I gained information.

13:08So I would probably do 35 hours of meetings, which is very similar to the way Steve ran Apple. I wouldn't do one-on-ones. I'd only do group meetings. I'd do a recurring thing where I review every single thing in the company, either on a weekly basis, by a week, month, or year. Live in person. Live in person, group meeting, and I'd have the full chain of command. A lot of companies, you have to get your boss to approve it and your boss's boss to approve it and your boss's boss's boss to approve it. I'd have the full chain of command in the room, and anyone can give their opinion. I would make all the final decisions. I would not speak first. I'd usually speak last. And I'd usually agree with the team, but 10% of the time, I'd disagree, but I'd ratify

13:41every decision. It was a very clear chain of command. But this was a meeting-based culture. I think in AI, I think we're going to move away from meeting-based to asynchronous. And we're fairly remote, and so I think that will benefit us. I think you're going to have a lot fewer layers of management. You know, I think there was an old famous saying, the Catholic Church has been going on for 2,000 years, only have four layers of management. Why do every other company have like seven, eight, nine layers of management? I know there's this like general idea, like as a thought experiment, what if I could theoretically manage all 7,000 people flat? I don't think that's a good idea.

14:12I think that's an extreme. But I do think going to a few layers of management would make a lot of sense. I'm in the middle of trying to think about how to redesign the company. I think every single person in this company's job will change. I don't know how. I've not wanted to make any rash changes. What I'm basically doing now is trying to get people to adopt AI tools. And I want to see how everyone's job changes in the world of AI tooling. And then I want to basically embark on like a fundamental redesign. I don't think people managers will have any value in the future. What I mean by people managers, people that only manage people.

14:44I think everyone's going to have to be a hybrid people manager or manager IC. Meaning they have to have contact with reality in some sense. They have to be a thing a customer ends up seeing or touching. Yes. An engineer would call that to be technical. In other words, every engineer needs a code. Even the managers need a code. Whatever the version of that is for your field, you need a code. So if you're a lawyer, you're just not managing people. You have to actually read the case law and you have to get involved. And that makes sense, right? You can't just be these managers where you're kind of people's therapist and you're just doing meetings. You're doing one-on-ones. Like people who have lots of recurring one-on-ones are not going to survive.

15:17Because what they're doing is like that, oh, you come with me with whatever your problem is. I'm here to help you like a mentor or professor. That kind of leadership style is not going to work. You need to have context. And I think a lot of people will survive this age of AI. The two types of people that will not survive the age of AI are two types of people. Pure people managers who think it's all about just leadership. No, it's about content and leadership. I hear about design leaders that like the heads of design, they don't actually manage the design. Johnny Ive manages the design. He designs and he leads people.

15:49A design leader who only manages the people, that's crazy to me. The way Frank Lloyd managed his design team is through the work. I say you manage people through the work. You don't manage the people. You manage the work. Otherwise, what are you doing? I mean, yeah, like maybe a couple times a year, you should have like a check-in, have a heart-to-heart, ask about their family, build relationships. You should do that. You should have relationships. That's not a day-to-day thing. You're not their therapist. You're managing people through the work. So the two types of people will not make the shift to AI are pure people managers and people that are rigid and don't want to change and evolve.

16:21As long as you're like got a growth mindset, I think the tools are going to be very easy. There's an economic setup for the tools to be so easy, everyone can figure them out. So I don't think the AI tools are going to be complicated. Right now, there's a lot of command line. I think CloudBot and Cowork are not the most intuitive to an average person, but I think economic incentives will be for this to become incredibly intuitive. And I think AI is really an enterprise thing right now. If you take out ChatGPT and people screwing around image generation, it's pretty much just an enterprise phenomenon.

16:52I'm on the board of Y Commodore, 175 companies last batch, 159 were enterprise. There are no consumer companies. Because there's new consumer companies, the incentive to make the interfaces really simple is not there because it's their job to figure out the interface. The next wave of AI is going to be consumer AI. Consumer AI is going to be the big prize. Can you think of a consumer AI company? You know, maybe open AI, but most of their energy is now going to Codex. Google, yeah, with Gemini, but most of it's still going to search. They don't want to cannibalize your business.

17:24So I think that's where it's all going to go. And I'm trying to start thinking about AI as a consumer play. And how do we make tools so simple that everyone here can figure out how to use them? As your business scales up, everything gets more complex, especially your compliance and security needs. With so many tools offering band-aids and patches, it's unfortunately far too easy for something to slip through the cracks. Fortunately, Vanta is a powerful tool designed to simplify and automate your security work and deliver a single source of truth for compliance and risk. There's a reason that Ramp, Cursor, and Snowflake all use Vanta.

17:56It frees them to focus on building amazing differentiated products, knowing that compliance and security are under control. Invest like the best listeners get a special offer of $1,000 off Vanta when you go to vanta.com slash invest. I know firsthand how complex the tech stack is for asset management firms. And seemingly every new tool and data source makes the problem even worse, adding more complexity, more headcount, and more risk. Ridgeline offers a better way forward. One unified platform that automates away that complexity across portfolio accounting, reconciliation, reporting, trading, compliance, and more, all at scale.

18:28Ridgeline is revolutionizing investment management, helping ambitious firms scale faster, operate smarter, and stay ahead of the curve. See what Ridgeline can unlock for your firm. Schedule a demo at ridgeline.ai. It's surprising that so few have tackled consumer, some of the biggest companies in history are consumer companies. You built one of the great consumer companies of the last generation of companies. What advice would you give to people that do want to build consumer businesses using this technology? Like if the next batch of YC startups were to invert because of your advice, what would

18:58you tell them? How would you guide them? I'm so curious why you think there aren't more. Here are the three or four reasons I think it's happening. Number one, I think a lot of people, when Chachapiti came out, were afraid. They were afraid Chachapiti was going to kill their business. And I think a lot of investors didn't want to invest in something where they thought Chachapiti was going to kill it. Number two, the business model is tricky. There is no yet consumer business model for AI that I've seen. For example, Chachapiti, there's three ways it can monetize. Subscriptions, unfortunately, they're probably going to hit a local maximum percentage of

19:29users subscribing because Claude and Gemini are given away for free. Ads, again, they're hitting a local maximum because Claude, Gemini are not going to do ads. And then e-commerce, they shut down the third-party apps. And the inference costs are expensive enough that they're burning a lot of money. And so I think the first thing is you need to have a business model around consumer AI. You can't just be in the business of information because people are not trained to pay for information. The second problem is distribution is mature. Now, again, top three apps in App Store are AI. So it does prove you have something revolutionary.

20:00You'll find your way to the top. The third thing is while I think Silicon Valley, we like to describe ourselves as rebels, I think and maybe it's a little bit like the always-on nature of Twitter. I think it's very trend-based and vibe-based. I think there's a sense that everyone kind of does what everyone kind of does. Does that make sense? I think the trend is enterprise. The other thing is with Y Combinator, we tell entrepreneurs, get other YC startups to be your first users. It's a really great distribution strategy, right? Like the way we got our first users is you do things that don't scale.

20:30Now, what happened was that has taken the logical extension that everyone just keeps making enterprise companies. Maybe finally, the reason people aren't doing consumer companies is they're just harder. They're more hits-driven. The price is bigger, but the risk is higher. It's more all or nothing. You can pick a narrow vertical, build a good medium to large-sized business. It's pretty straightforward. You can get other YC companies to adopt it, and you can grow into a larger and larger enterprise. It is much more hits-driven business. You have to be good at a lot more things. You generally have to be better at design, marketing, culture, press. It's not purely technology and sales, which is what I'd say enterprise is.

21:04Like, you make a product. It can be a technology-based product. Oftentimes, in enterprise, the person using the product is not the person buying the product. And so sales becomes really important. But you can start sales really small with smart in companies. It's really hard to figure out how do you start small consumer? Who do you start with on the street? So I think these are the reasons why. But it might also just be that everyone's doing enterprise because everyone's doing enterprise. And it's a trend. My prediction is that we're living in the age of enterprise AI. And I think in the next 12 to 24 months, you're going to see the beginning of a consumer AI renaissance.

21:37Almost every app on my home screen has not changed fundamentally since AI, including Airbnb. I think that's going to change in two years. On your most recent earning call, you referenced this thing, Project Hawaii, I think it was called, which is like the on-the-ground direct application of the soon-to-be-defined founder AI mode or whatever. Maybe just describe what that is and how you as an incumbent consumer company are trying to make yourself into one of these AI companies. And sort of like what's possible with a project like this. This is such a great story. So I had this conundrum. We had like 7,000 people.

22:09We were down to 5,000. I wanted to like basically take the magic of the founding of the company, the early stages. We were in this little apartment working together. And I wanted to work with like a team of 10 people. And I wanted to like have that team work in one problem. And so we ended up focusing on one problem. We said, let's put a team together to focus on improving the guest experience, improving conversion rate. Conversion rate is basically search to book. The conversion rate of people typing in a location and dates and booking. And there's a funnel. And you can basically measure the funnel and you can do A-B test.

22:42But more than A-B testing, I wanted to do something where the North Star was let's make the experience better and increase conversion. But we're going to start with a better user experience. And so we put together a team, 10 or 12 people, designers, engineers, product people, data scientists. It was mostly just a pure software team. And we treated it like a little startup. And we said, we're going to just focus. And we're going to do a system of crawl, walk, run, then fly. Crawl. Fix the bugs. Fix the problems of conversion rate. Just the easy things. Once you build a little bit more confidence, walk.

23:14Start to develop features. Really start to reframe the journey. Then run. Rethink the entire flow. Big features. Fly. Like, completely be in by yourself. And everything is going to be measured. Everything is going to be operationalized. The team's results were phenomenal. They ended up delivering the equivalent of, I think, in year one, $200, $300 million in kind of revenue for the company. The following year was like $400, $500 million. Now, we're at a run rate of like over 600 basis points. 600 basis points of $13, $14 billion. You get the sense of how much of a lever that is.

23:46It was just one team. I mean, it grew into dozens and dozens of people. Maybe 50 or 60 people. But it was this really lean team. We took that team. We said, what if we apply it to the next problem? Pricing. Totally different team. Same model. Then another model. Then another model. And I really tried to work with a team. And initially, I would meet with them every week. And then it became every other week. And then every month. And my general philosophy is start really hands-on and let go over time. I'm not a golfer. But I took a couple golf lessons. Here's an analogy for management.

24:17If you learn golf, you want to learn with a golf instructor before you build any habits. Because if you learn on your own, you're going to have a weird swing. And then when you get a golf instructor, they've got to change your muscle memory. So the golf instructor's got to watch you swing like thousands of times. Eventually, they don't need to see you. You let go over time. What most founders do is the opposite. They bring these people in. They let them figure it out. And then they intervene later. But they already have the wrong muscle memory. So I decided I'm going to be totally hands-on. I'm going to do everything with a team. Teach them everything I know.

24:48And let go. Then do it with the next team. And then I had teams learn from other teams. Then, when we launched Services Experiences, we basically found this other way of innovating. So here's a riddle. Or it was a riddle to me. Airbnb, we had this core business that was really successful. It did nearly $100 billion a year in gross sales. For every $1,000 spent in the world, $1 was spent on Airbnb. Except we had the problem of we're like a one-hit wonder. And for 18 years, I couldn't get a second hit out.

25:19And I kept wondering, like, why is this not working? And the answer is, like, too obvious. It was staring us in the face. But we kept having the burden of trying to scale these businesses at a global scale from the beginning. When we started Airbnb, we started in one city, New York City. We had 100 users. I was in Y Commodore. Paul Graham goes, where are your users? I'm like, they're in New York. We have, like, not many, but they're in New York. He goes, you're in Mountain View. You're in New York. What are you doing here? We went door-to-door meeting users. The basic philosophy is make the problem as small as possible.

25:50Get to product market fit, then scale. So we launched Service Experiences last year. And it didn't work right away. And I'm like, oh, shit. And we launched Service Experiences in 100 cities. And I went back and I thought to myself, wait a second. Airbnb launched in New York. Uber launched in San Francisco. DoorDash launched in Palo Alto. Let's make the problem small and just perfect a city. And so we started doing this with new businesses. We basically go to any new business. We're going to do one to ten to many. We'll pilot in one market, any idea. If we get the market to work, we'll go to ten.

26:20If you get a ten that works, we'll industrialize. It took us 16 years to get to our second and third business. We started getting those two working. Now we have, like, ten to 20 pilots. Eventually, we'll have 50 to 70 new verticals. This is like the Hawaii system. It's basically taking this giant company, making it a really small elite team. It's like the Navy SEALs. I work with the teams really leanly, make the problem as small as possible. I think that's a key thing, make the problem as small as possible. Dominic Inish, Peter Thiel used to say this. He was one of our first investors.

26:50He said it's better to have a monopoly of a tiny market than a small share of a big market. This is counterintuitive. Every investor wants to go into big markets. I don't like big markets. Big markets have a lot of competition. Go into a small market and make it big. Is the reason for both of these things, the idea that it works in Toronto but not at a hundred-city scale, and the reason a 10-person team can outperform a hundred-person team, is the shared reason some sort of, like, better contact with reality? And, like, somehow reality starts getting distorted as you get bigger or something? This comes back to the most important piece of advice I ever got.

27:23The first day Y Combinator, Paul Graham, said, it's better to have a hundred people love you than a million people sort of like you. And that came from Paul Buchheit. Paul Buchheit was a partner Y Combinator. He created Gmail. The old famous story was he created Gmail, and it took him two years. And they said, you can't ship it until a hundred people inside of Google loved it. And it actually took two years to get a hundred people to actually like the product. But once a hundred people like something, a hundred million people like it. It's like the sample size is enough. The problem is you try to make something a million people like. You can't talk to a million people. And so you end up with this shallow swimming pool.

27:54It's like you're trying to heat up an ocean. And the ocean just, it takes too long to heat up, and you can't tell. Instead of heating up an ocean, heat up a bathtub. Make the problem as small as possible. And you're close to the customer. In fact, if you only are focused on one city or even a subset of city, you can talk to every person. You can put all of these resources on a tiny problem. And I guarantee you, take a ton of resources, you put on a tiny problem, the smaller the problem, the more you'll change the numbers, the trajectory. And that will teach you lessons. And there's you do things that don't scale, then you scale. And the scaling is industrialization.

28:27But product market fit is a distinct problem from industrialization. So you want to basically make the problem as small as possible, understand the user, put yourself in their shoes, blow their mind, do things you've never thought before, do them by hand, make them unscalable, don't worry how much it costs, just prove the model. It's like R&D. This is a lot like industrial design. This is what we call prototyping. Before you manufacture something, you prototype and you make prototype after prototype after prototype until you make something that you love for yourself or someone loves.

28:58So, yes, the smaller the problem, the more there's fewer abstraction layers. You're actually on the ground. You're talking to people. That's how you prove it. Hawaii to these pilots, it's all the same thing. By the way, same thing with AI. You're removing abstraction layers. You're making the problem as small as possible and you're going directly to the source. I think that's a principle that all these things have in common. It's like we're playing this game of telephone if we don't do it that way and you just lose information. And this is why founders don't like running large companies. They end up in a game of telephone.

29:28They say something and then it goes down like five layers and then it goes back up five layers and they're in these like meetings and the meetings become like system reviews. And literally like the lowest point for me when I was having meetings about meetings. You've gotten into this new mode. It's called founder mode. It's not called CEO mode. Do you think you're now a good CEO? I think I am. I think I was naturally a good founder. Although I would say I also got really lucky because I had two great co-founders and I damn did I luck out on that. I think I was a very good early stage CEO. And I think the moment I had to have like an executive team, I really struggled to make the shift from a founder to CEO.

30:02I really struggled. And I think in the 2010s, I do not think I was a great CEO. And I think we paid the price for my learning curve. And I think the pandemic was a rude awakening for me. I think I was conflict averse. By the way, somebody once said a pitcher never takes himself off the mound. As a manager, you got to go take them off the mound. I didn't want to hurt people's feelings. I wanted them to take them off the mound. And the longer you leave a pitcher on the mound, the more home runs they give up, like the more upsetting they're getting. And they're still going to be angry at you no matter when you take off the mound.

30:34So I don't think I was naturally a good CEO. And I remember up to the pandemic, at one point I wonder, I wonder if I'm just not meant to be a CEO. Maybe I'm not meant to do it. And then the pandemic happened. We had a near-death experience. And I said, well, screw all the rumination. Like, it's do or die. And I feel like I learned how to do the job. There's really a few phases of CEO. Have an idea. Get to product market fit. Product market fit to hyper growth. Hyper growth scale to become a real company. Real company as in profitable public. And I did all that. We have like 40% free cash flow margin.

31:05We're very profitable. We do $100 billion in sales. The last phase of a CEO is reinventing the company. Product extension. And the reason our stock has been flat is because we only do one thing. And we've started to saturate a little bit of the core idea. So we've had to reinvent ourselves. We had to do product extension. So I've still got to prove myself. And then there's another proof point. Can I navigate this transformation of AI? I think founder mode is going to be the only way to operate in the age of AI. If you're a giant professional CEO, I think you can operate in a founder mode.

31:37But if you're like risk averse, you want to be incremental, those types of people are not going to survive the age of AI. So I think there was an old Albert Einstein quote. He said, the best way to keep your balance on a bicycle is to keep moving. You're going to have to keep moving. Founders are going to be really well primed or set up for this age of AI. Because we kind of have to redesign our whole company from scratch again. Was there anything else that Hiroki taught you? Because Steve was perhaps the literal ultimate example of everything you just said. Focused on the details, in the weeds forever, reinvention of the company.

32:09And before I say, just to say who Hiroki is, everyone knows Johnny Ive. Hiroki is a bit of an unsung hero. I always heard about him. He's like this legendary mythical figure that like was elusive. There's like almost no photos of him online. There's like no videos of him. He was never out in front. But he was Steve Jobs' creative director. It was a function under marketing. He did the ads. He did the graphic design. He was really responsible for, you know, when he was like that black type with the gray font and like the product in front of white. That was really his aesthetic. He taught me two principles of Apple that I brought.

32:42One was simplicity. I think startups are like, when you start a company, because you have no money and you're so constrained, you are naturally simple. Lack of abundance creates natural constraints. And so simplicity is thrust upon you. And that is good for you. And then once you raise a bunch of money and hire a bunch of people, you go a lot of directions. Then you lose your sense of focus. How many startups can we think of today who have struggled from lack of focus? Probably name a few. So you start to lose your muscle for simplicity. Hiroki taught me simplicity. And he taught me simplicity is not removing things.

33:15Simplicity is distilling something so fundamentally that you understand its essence. I know Steve just say design is the fundamental soul of a man-made creation that reveals itself through subsequent layers. In other words, great design is about distilling something to its essence. It's kind of what Elon does with SpaceX where he talks about first principles. And first principles is kind of like a physics term, but it's also a design term. It's about understanding if I'm going to reinvent this product, I have to understand the properties of glass. I have to understand everything about it to distill it to its essence.

33:46So I got obsessed with simplicity. Simplicity of our products, simplicity of our organization, simplicity of everything. The other one was a sense of craft and details. How you do anything is how you do everything. And I said everything must be perfect. It comes from, there's a book that a lot of people in Silicon Valley recommend, The Score Takes Care of Itself. Bill Walsh, the coach of the San Francisco 49ers. John Wooden, winning his coach in college basketball history, UCLA. Same principle. First day UCLA. So John Wooden won 10 NCAA champions over 12 years.

34:18First day, first hour on his team. He spends an hour teaching you how to put your socks on. One hour. And he said, put your socks on this way. Mr. Miyagi. Yeah, one hour teaching you how to put your socks on. It's a metaphor. Everything was that rigorous. Bill Walsh said the way you tuck your jersey into your pants was one of 10,000 details that depend on whether you won or not. Basically, don't focus on winning. Focus on getting all the inputs perfect. And you get everything perfect, then you will win. And you don't focus on the scorecard. We do focus on growth, but we kind of stop focusing on growth.

34:51We started focusing on making everything perfect. And if everything is perfect and you don't grow, then you focus on the wrong input. But if you have the right inputs and you make them perfect, then you'll grow really fast. And so that's really what I learned from him. He really taught me, I think, founder mode because I never met Steve. So I only knew through Hiroki. And I said, well, I love this. I'm an artist. I'm a designer. I get to have more control of the product. I get to make everything perfect. The initial attempt at founder mode created giant revolts. Everyone hated it because everyone thought I was micromanaging.

35:23And I learned something fundamental. Initially, everyone hated it. And by the end, everyone loved it. The people hated it left. So maybe there's like selection bias. The people liked it stayed. But even the people that thought they wanted autonomy and independence and empowerment, what they didn't realize was control and power is not zero sum. It's not like if I have all the power, you don't. There's a scenario where we're all powerless. And there's all scenario where if I have power, I can therefore give you power. It's not zero sum. This is the problem people don't understand. If I have more power and control, I can give you more power control and I can hand it off

35:55to you. It's about the idea that the car has a steering wheel. You turn it left and it actually goes left. I do think it's all about the company rowing in one direction. That's it. The thing that you've said historically that had the largest impact on me was this notion of the 11-star experience, the exercise of going from not a five-star, but a six-star and actually forcing yourself to write it. And I have this idea in mind because of this idea of simplicity and distillation, and it's a beautiful thing, right? It's ultimately empathetic with the customer. But why is that idea in practice so powerful?

36:26What happens as you go up the star count to 11 stars? So let me do like a one minute on what it is. Basically, when you book an Airbnb, most people leave a five-star. And if you leave a four-star, it's a bad experience. Five-star, everything went as planned. So it's called review compression, similar to Uber. You always leave a five-star. And if you leave anything other than a five-star, something really went wrong. But what if the driver was really amazing? You can only leave a five-star. So I started imagining, what if we could give a six-star? And I did this exercise from six to like 10 or 11 stars. So a five-star, let's say take one moment, checking into Airbnb.

36:59Five-star check-in is you get there and the host greets you or there's a door code and it works. In other words, nothing went wrong and you give a five-star. Anything went wrong, you give a four-star or less. That's review compression. Like, what if you went above and beyond? So what would a six-star look like? A six-star would look like you basically get to the Airbnb and there's your favorite wine on the table and there's like fruit and there's snacks there and there's a handwritten card. Okay, that's better than just letting me in the house. So what's a seven-star experience? Some of their experience, there's like a limousine or something waiting for me at the airport. They know I like surfing.

37:29There's a surfboard waiting for me and they're like showing me around the city. There's all this stuff. So what's an eight-star experience? An eight-star experience, I get to the airport. There's an elephant, I go on the elephant, I go on a parade in my honor. I'm like, wow, I feel really special. What's a nine-star experience? I call it the Beatles check-in. I get off the plane and like 1964 Beatles, there's 5,000 teenage girls screaming my name with cards making me feel like I'm a pop star. I get to the front lawn of the Airbnb and there's a press conference in my name. So it's a 10-star experience.

37:5910-star experience, Elon Musk greets me and takes me to space. It's an exercise. It's an exercise in the absurd. You keep pushing to go so absurd to 10 stars that suddenly six or seven stars doesn't seem crazy at all. And the way to get to product market fit is to just create a six or seven star experience. But you can't create a six or seven star experience without going beyond. In other words, go beyond the edge of reality and work backwards. And so it's kind of a fun exercise. What would the craziest possible way to blow someone's mind?

38:30One person's mind, one customer. And maybe try that. And maybe you can't scale that because that's like an eight-star experience. But you can probably scale a six star. And that difference between the five and six stars probably difference between you and a competitor. And if you can find a way to industrialize it and scale it, you might have product market fit in something special. One of the things that I think about when you give the absurd examples at the high end of the range is this feeling that I've experienced with AI that my imagination had almost atrophied, that by using these tools, I realized how hard it was. Like, oh, I can make anything. And I sit down and I'm like, I have no fucking idea what to make.

39:02And that as I started making little things, like all of a sudden my imagination got rebooted. And it feels like this exercise is like an imagination exercise. It is. One of the sayings is great writing is great thinking. But I find that, I don't know about you, some people have ideas and they think of ideas and they write them down. Sometimes I figure out the ideas through the act of writing. The act of writing is the act of coming up with ideas. The act of designing is the act of coming up with ideas. It's really hard to just sit in a room and abstractly think of ideas.

39:33You need to like do something. And so I think what was happening was we didn't have enough tools to express ourselves. I think a lot of the tools were very passive tools. I think increasingly we were spending more and more time on a sit back experience like social media. What I like about AI is I think AI shifts our attention from consumption to creation. Social media, a lot of us spend our time on and the only type of creation is giving your opinion, but you're mostly consuming. What I love about AI is it's not about opinions.

40:03It's about testing the hypothesis we're making. I love what's happening right now. Suddenly all of us have a paintbrush and a canvas to make stuff. I think that AI is going to lead to a renaissance in creativity. And I was an artist growing up. I was a pretty good artist. So I had the ability to express ideas. Here's an analogy. You ever meet a person, you probably think of musicians, like Prince, the name of a musician that probably in words couldn't express themselves, but then through music, there's like this dimension you never knew.

40:34An artist, they seem really reserved, but their art is like really emotional. So many of us have this creativity inside of us, but we don't have the craftsmanship or tools to express it. And suddenly what AI is going to do is going to give us the ability to express it. We're going to realize there are a lot more creative people than we thought, because we typically think of creative people as people that know how to express their creativity. It turns out, what if everyone can express it? Pablo Picasso once said, all children are born artists, so problems remain artists as one grows up.

41:04Every child's creative. If every child's creative, that means every adult could be creative. I think that every human on this planet is creative. You ask the average person, you're creative. About one in two says they're not. That's my experience. That's not true. It's just that they haven't exercised the muscle. And I think that the magic of AI is what's in our head can manifest. But also, as you said, we can develop new ideas in our head because it's a relationship. We maybe have a small idea, we try something, it gives another idea, and you go on this journey. A lot of people call founders visionaries.

41:35We're more expeditionaries. We're on these expeditions. We only call it visions later. We're really just one foot in front of the other. Can you talk about the difference between the act of creation in pursuit of, you said people-pleasing earlier, achievement, notches on the belt, versus just for the raw, pure joy of it, which seems to be more the way, the mode you're in now? I think when I started Airbnb, I don't think we were totally trying to be successful. And I like to joke that if I was trying to make money, I would have come up with a better idea than air, bed, and breakfast.

42:06I truly did it for the love and the fun. And somewhere along the way, I got really successful. And that almost became a curse because the success became a scorecard. And then I wanted to get even more successful. It stopped being intrinsic. And it started being a version of status and people-pleasing. It took me a little while to realize what I was doing. What I really wanted was love. I think that I learned growing up as a child, the way to get love is to be special. And the way to be special is to do special things. And if I do special things, I get praise and I feel love.

42:36I think that translated into if I'm really successful, I will get adulation. And if I get adulation, I'll feel that feeling that I'm always seeking. And I didn't do this consciously. I'm not like saying this. It took me many years to realize this is what I was doing. By the way, adulation is kind of like seeking status. So many people seek status. Anyone who's on social media and posting all the time is probably someone seeking status. There's nothing wrong with it. But the problem is that's not where great products and great companies come from. See, adulation is like a cup with a hole at the bottom.

43:07And you keep filling it in, thinking it's love, except it just keeps coming out the bottom. And at some point, you have to confront, who am I doing this for? Am I doing it for other people? For them to briefly love me and commend me to then move on? And either way, that's a drug. And it's a drug that's like real drugs. You need a greater hit to get the high. And eventually, it stops working. And eventually, you reach a peak. And it gets really meaningless and empty. And that happened to me. And at some point around the pandemic, we go public.

43:38We have $100 billion valuation. It's like one of the best days of my life. And the next day I wake up, I put on sweatpants. I go on a Zoom meeting. It was like it never happened. And it became the saddest day of my life because I realized, okay, what now? I got all this adulation. And I don't feel any different. And that made me re-evaluate what I'm doing this for. I had to just come to terms with, I want to do things for pure intrinsic reasons. And so I had to basically detach myself from people's approval, from status, from worrying about how hot Airbnb is or how successful I am, which I never gave a shit about when

44:12we started. You start getting accolades and you want more of them. And you got to let go of that because this is a losing game. And I just really started focusing on being heads down. Do the work like you used to do. Like when you were a kid, there was light. Just make stuff. Make it for yourself. That great book, Rick Rubin, he says, an artist is an artist when they make it for themselves. And they don't try to make something successful. And I stopped trying to be successful. And I just went back to the basics. And I realized like a person who doesn't know you will never love you. That's okay.

44:42The people who love you are the people that know you. And the most important person to love you is yourself. And we should love is the thing you're doing. So this became like a whole thing. It became about doing it because you love it. Putting your heart and soul in it. It's like the score takes care of itself. It goes back to that. Don't try to be successful. Try to do something wonderful that you love for yourself. Maybe you'll be successful. Maybe you don't. But don't focus on who you want to be. Focus on what you want to do. That was advice President Obama once told me. He said, if I focus on who I want to be, I focus on being president of the United States.

45:13And I wasn't. My life would have been a failure. But I focus on what I want to do. I want to help people. I want to be a community organizer. Then I don't need to be president. And so I think so many entrepreneurs focus on what they want to be. I want to be a giant tech founder.