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Hard Truths About Building in the AI Era | Keith Rabois

Career | Growth

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  • Why Keith Rabois Abandoned Computers For iPad
    • Keith Rabois has worked entirely from an iPad, phone, and watch since joining Square in 2010 after seeing Jack Dorsey do the same.
    • He says the setup reduces distractions and adds portability, while laptops offer little extra unless you do heavy engineering. Transcript: Keith Rabois Yeah, so when I started working at Square, Jack Dorsey was running the company off an iPad. And so I immediately converted in September 2010. And have a look back. I haven’t touched a computer since September 2010. Everything I do in my life is either done for my phone, my watch or my iPad. Lenny Rachitsky What’s so interesting about this as you were talking is just there’s this trend of engineers starting to code from their phone, like at Boris Cherneon and Simon Willison, these two Engineers that are like 10X engineers, and they’re just like coding from their phone, talking to AI. Keith Rabois And I feel like you’ve been preparing for this for a long time. Yeah, trying to be ahead of the curve. Jack’s very good at being ahead of the curve. If you just watch what Jack’s doing and follow, pretty good shape and technology. Lenny Rachitsky And just understand the benefit, is it just avoid distractions? Keith Rabois Yeah, partially distractions, partially just the flexibility, like taking an iPad with you anywhere is just super easy. You know, some laptops have improved since then, but like the screen flexibility, angles, but like just the weight. Like I carry my iPad with me everywhere. So there’s no reason. There’s nothing you can’t perform. Maybe if you’re doing heavy duty engineering, which obviously has not been my forte in life, although I may have to start. There’s no reason to use a more powerful, heavier weight, less flexible machine. (Time 0:02:20)
  • Talent Density Shapes The Entire Company
    • The team you build determines the company you build more than market, product, or technology.
    • Keith Rabois traces PayPal’s success and its long tail of iconic founders to Peter Thiel and Max Levchin creating extraordinary talent density early. Transcript: Keith Rabois Let’s start with first principles. The most important lesson I learned when I was working at Square from my board was Vinod Khosla was on my board. And he said, the team you build is the company you build. And that adage is the most important thing when you’re creating a startup. People get distracted with the market, with customers, with the product, with technology. Ultimately, it’s a team. If you have the right people, everything else will be easy. And if you have the wrong people, everything else is going to be difficult. So I actually learned this. Vinod distilled it, but I actually learned this back in my PayPal days. So in the early 2000s, why was PayPal so successful? Why were there such subsequent generations of successful, interesting companies for 25 years now? It’s because Peter Thiel and Max Levchin marshaled an incredible density of talent. So it allowed PayPal to succeed where possibly we wouldn’t have. And these people went on with interesting ideas, ambition, and talent to build epic companies, you know, and all kinds of verticals. So from day one my technology career, I’ve always been focused on the importance of critical density talent. How do you identify, retain, and promote people with that talent? Back in the PayPal days, when I first started my career in technology, I actually, truthfully, was not very good at this. Fortunately, Peter and Max were. So Max basically hired all the technical talent in the organization. Peter pretty much hired everybody else. They used their network primarily. So it was very difficult to get a job at PayPal unless you had a first degree or second degree connection to the engineering team or to Peter through Stanford, which is a different type Of recruiting model. It works really well. If you have a strong network, I wouldn’t recommend it for everybody. But if you have a network that has, you know, unique talent, there’s no substitute. Interviews are not a great substitute in regards of how strong you are at interviewing. (Time 0:05:44)
  • Use Ruthless Referencing To Improve Hiring
    • Build hiring skill through ruthless references, not just interviews, and keep refining your judgment with repetition.
    • Keith Rabois cites Tony Xu doing 20 references per senior hire and Greylock’s rule to keep referencing until you hit a negative. Transcript: Keith Rabois But when I started my career, I was mediocre at, let’s say, hiring people, probably 50-50, you know, some good people, some mediocre people, that doesn’t allow you to scale a team with An unfair advantage. But what I learned to do is steal people from other people’s organizations within PayPal very successfully. So I got feedback from David Sachs, who was the COO at the time, that I wasn’t going to get promoted again until I could demonstrate leverage, like leadership leverage, which hit an equation For one plus one has to equal three or more. So for every incremental person you hire, you have to show that you produce disproportionate returns, nonlinear returns. And because I wasn’t hiring that well, I wasn’t really succeeding at that leverage. So when I went around, took the feedback into account, I said, hmm, okay, I really want to get promoted. What do I do? So I found people within the organization that I felt had talent, that were not being leveraged to their highest potential and ambition. And I recruited them to my team. And that was very successful. And then I did get promoted actually fairly quickly because the people actually were up to speed. They were able to run really fast. And we produced a lot of really important results for the company. The lesson though that I took away was, well, that’s great because what it showed to me is I actually could identify talent. I just couldn’t identify strangers with talent. So people that were in the building that I have lunch with or dinner with or go for a run around the PayPal campus with, I was accurate at diagnosing their abilities. I just couldn’t do it, you know, in a 20 minute, 30 minute, 45 minute interview. So the first thing is just double down on people I know. That doesn’t scale perfectly, but learn to be excellent at, if I had context, assessing people’s abilities, superpowers, and weaknesses. Then over the next X years, tried to identify a different technique for identifying, assessing random people. Because ultimately, if you’re going to build an organization, ultimately, if you’re going to be a VC, you can’t just invest in people you already know. So that took some years and requires some training. Anyway, I think you can teach some of this to a founder, but one advantage a founder has that’s going to thrive is if a founder shows the ability early in his or her career to assess talent Ruthlessly and accurately, here she can go very far with no other abilities whatsoever. Hiring is like a muscle. You need to exercise it. You need to try, learn what worked, what didn’t, what could you have known, what did you miss, why, and riff on that and try to get better at it. There are tactics you can learn. I think the tactics work pretty well within the middle of a bell curve distribution of moving yourself 10, 20 degrees within bell curve. I don’t think the tactics can really teach you how to identify, call it like top 10 basis points, top 50 basis points, I’m telling it. There you have to deviate from the norm. And I think that’s actually true of most lessons in life. If you’re going to be extraordinary in any skill, you can’t follow a playbook. Otherwise, by definition, lots of other people would be, you know, the top 10 basis points, but you can get a lot better by learning techniques. So for example, let’s share a couple. One thing I think you can learn to do is be excellent at references. It doesn’t work for hiring people right out of college or something because the reference context is going to be a little off. But I think without getting better at interviewing and assessing, if you just learn to extract the right information from ruthless referencing. So for example, ruthless referencing to me means Tony at DoorDash does 20 references on every single senior hire. 20. Wow. I bet you he’s pretty good. I bet he’s been pretty accurate too. So I think you can learn that. That’s like a skill that’s teachable, that being absolutely incredibly dedicated to your craft, you can just get better at. Back in the day, there was an investor at Greylock who was on my board at LinkedIn, David Zee, very successful investor, notable for both LinkedIn and Facebook investments. He used to teach at Greylock, you couldn’t stop referencing a founder until you hit a negative reference. So you would know you had exhausted the reference when you finally hit a negative reference. And so I think there are tactics there in muscle building. How do you get the right information from the right people, how do you frame the questions, et cetera, that will lead you in the right direction. Now, you have to be careful. Let’s say, I’ll give you an example where this can go wrong. I’ve been a longtime investor from the seed round of a company called FAIR, founded by two of my colleagues at Square, Max Rhodes and Jeff Kaldeson worked for me at Square, and then the Two other co-founders also worked at Square. When people were reference checking Max, often most VCs asked the wrong question, which was, was Max a good employee? The answer to that is very mixed. And so some venture capitalists, including some very good ones, were nervous about investing in FAIR. If they framed the question slightly differently, which is, is Max capable of being a world-class entrepreneur? The answer was yes. So again, it’s like a tactic. You have to understand, like, what exactly am I trying to extract? Same person, wrong question, wrong result. And many people passed on FAIR, they regret it. And these are actually quite talented investors. (Time 0:07:40)
  • Ask Candidates What They Would Change As CEO
    • Ask senior candidates what they would have done differently as CEO at their current company to reveal strategic judgment.
    • Keith Rabois follows with why they failed to persuade the CEO, then checks 30 days after a hire whether the team would make the same choice. Transcript: Keith Rabois I always ask them, you know, look at whatever company they’re at and say, if you were CEO, what would you have done differently? And you get a feel for the strategic mindset of, you know, can they drive value creation? Because almost by definition, they’ve come from a company that’s had some traction success. So can they edit? So for your case, I would have asked you, you know, if you were CEO of Airbnb, what would you have done differently? And you learn a lot from that question. On references specifically, I think a general arc that’s pretty good is asking the person, what would lead to this person being most successful? And if something were not to work out, what would be the primary root cause that you can identify if something’s going wrong? I think generally probing on those two arcs leads to a lot of insight. Lenny Rachitsky And that first question is for the candidate or is that in the record? Keith Rabois Yeah, for the candidate. That’s for the candidate specifically. Got it. Because it’s not, I don’t want them to criticize Airbnb. I don’t think that’s that productive, but you can tell how much of the current business model have they absorbed, How much do they understand trade-offs? And then can they create an unfair advantage? They have insights into afterburners. And then I have a follow-up question, which is usually gold, which is, let’s say I asked you this question about Airbnb and you give me this great answer. I’m like, well, why weren’t you able to persuade Brian to do it? Lenny Rachitsky So you made this interesting point that there’s tactics that can help you get better at finding and identifying talent. A lot of this is just the feedback loop of doing it a bunch. Sounds like I find the feedback loop is so like, it’s hard to actually like, like most people interview higher and then don’t really learn much from how it ends up going. Like there’s this gut thing that happens, but they’re not like really thinking about it. Do you have any advice for just how to make the most out of the lesson of seeing how something went? So I’ve read some research on the topic. Keith Rabois And if you ask yourself 30 days after any hire, would you make the same decision? That 30 day loop is pretty, pretty useful. And it, it basically it’s as accurate as measuring in a year or two years out. So you’ve got a pretty tight feedback loop and you can ask the entire hiring team. (Time 0:13:23)
  • Why Barrels Matter More Than Headcount
    • Companies slow down when they add ammunition without adding barrels, the people who can drive an initiative from idea to outcome.
    • Keith Rabois says even excellent companies may have only two true barrels, so extra hires mostly increase coordination tax. Transcript: Lenny Rachitsky I want to talk about this framework that you have, barrels and ammunition, because this is really mind expanding and helping people understand who to even hire. Keith Rabois So look, most companies raise money. They have some traction. They raise, you know, just see Brown, they get launched, get some traction. Then they raise a lot of money, whether it’s a Series A or a Series B. And then they hire a lot of people infallibly, or at least historically. And then the CEO, almost without exception, gets frustrated because they’ve hired a lot of people. The burn rate has increased a lot, and they don’t feel like that’s more getting accomplished per unit of time, per day, per week, per month, per quarter. And they get frustrated. So then they sit around at a dinner with other CEOs or people like me, or one-on conversation with me, and are incredibly unhappy and disappointed that I’m spending all this money on All these people, but we’re getting less done or the same done. Why, why, why, why? After years of sitting through these conversations at dinner with other CEOs or COOs, I realized that the fundamental driver of this is that the number of people that can independently Drive an initiative from beginning, from inception to success is very limited within any company. And if you hire more people without expanding the number of what I call barrels that can drive from inception to success, all you’re doing is stacking people behind the same initiatives. And so you’re wasting time, energy and increasing your collaboration tax, your coordination tax. And so that’s what causes the drag coefficient. So, for example, at PayPal, we had about 254 people in Mountain View when we were acquired. Of those people, depending on how strict you really want to be, it is considered one of the best talent-rich networks of all time in technology. There is between 12 to 17 barrels in the organization. That’s like an infinite number. I once asked Jack Altman on a podcast at Lattice, which is a pretty damn good company. How many barrels of a company? The answer was two. That’s a more common answer for a very good company. So you have between two and let’s say 15 barrels at a company. That defines the unique number of things you can do in parallel versus sequentially. And just hiring more people is not going to change that. And if anything, it’s just going to cause a collaboration or coordination tax, and you’re going to have a track provision, you’re going to do less. So the key is to me is if you want to do more or need to do more, your market requires you to do more, your business model requires you to do more, VCs require you to do more, you need to have More barrels. Now, the question is how and when, and there’s a lot of details there, but fundamentally, the ratio of barrels to ammunition is what dictates the number of important initiatives that Can be pursued simultaneously. Lenny Rachitsky And you’re not saying you don’t want ammunition. Like, it’s valuable to make an impact. You need ammunition in addition to the barrel. Keith Rabois Yeah, you definitely need ammunition. And it depends on what kind of project. There are types of projects where an individual barrel may be able to succeed with very limited or no ammunition. Sometimes it may be a designer, an engineering team, a PM, a data analysis, blah, blah, blah. It depends on what the project is, what the problem you’re trying to solve is, what’s the proper amount of ammunition. But once you think about the ratios of ammunition to the problem, can be much more constructive and deliberate and intentional about the team construction. Lenny Rachitsky Most people hearing this assume they are barrels. What helps you understand if someone is truly a barrel? Keith Rabois Can they take an idea and make it happen? Basically, we’re going up that. There’s a hill over there. That’s the hill. Get us over that hill. And one way or the other, they will motivate people if they need to. They will accumulate resources if they need to. They will measure what they need to. And they’re going to get your company across that hill. That’s a barrel. Anything less than that is not a barrel. Lenny Rachitsky And so this skills like internal org stuff, resource, like strategy, like what, yeah, it’s kind of the collection of all the things to get. Collection of all those things. Keith Rabois So basically there’s an outcome. CEO wants, CEO founder wants an outcome and come hell or high water, this person is going to deliver that outcome. Then the outcome can be, you know narrow and not that difficult in the beginning. And then you expand the scope, the complexity, the difficulty that you basically entrust to your barrels. And sometimes they have no line of sight of how to solve it when you start. Sometimes you have a preliminary idea. So it ranges. But ultimately, it’s that skill of, I’m going to take this off your plate. You can fire and forget, and this is going to happen. And if it’s not going to happen, I’m going to come back to you proactively with the issues I’m confronting, what I’ve already tried, the diagnosis of the root causes and ask for your help With sufficient time for you to intervene and try to brainstorm with me to get us to the right answer. Lenny Rachitsky Agency is the word that comes to mind when you talk about this role. Keith Rabois Yeah, I think agency is accurate. (Time 0:15:32)
  • The Smoothie Test Revealed A Future Leader
    • Keith Rabois spotted a future barrel when Square failed repeatedly to deliver cold smoothies at 9 p.m. for engineers.
    • An intern, Taylor Francis, volunteered on day two, fixed it immediately, and Keith Rabois later trusted him with far bigger responsibilities. Transcript: Lenny Rachitsky Yeah. Who are some examples of barrels that make this real so people can understand what you’re talking about? You know, I talked to my YC lecture in 2014 about how to operate. Keith Rabois They can be as simple as the now somewhat famous in technology smoothie test, which is, you know, we used to have engineers work pretty hard at the square and pretty late. And I always wanted them to have like food so they wouldn’t be famished, they wouldn’t be distracted. And I didn’t really want them to eat like junk food because I actually think junk food is bad for you, bad for your brain, et cetera. So settled on delivering and really wanted to provide like a 9 p.m. Like cold smoothies. And we had at that time a pretty substantial team at Square, office team, EAs. You know, this was not a lean, mean organization. And so I tried through the office team, EAs, and nothing, we never got healthy, delicious, and cold smoothies delivered at 9 p.m. Just kept that one. It’s getting frustrating because if the smoothies aren’t cold, then no one’s going to eat them. They don’t arrive at nine and no one can really bake on. They’re a refreshment. Everything went wrong. And then I had this intern named Taylor Francis. And I was explaining just my frustration. It was like a second day at work. And he’s like, I’ll solve it. And I was like, okay, kid. Good luck with that. I was like, sure. Keep trying. Anyway, day goes by. Now my clock arrives. And lo and behold, smoothies show up at 9 p.m. Deliver it on the standing desk table where the engineers would congregate. I sample them. They’re’re cold. They taste great. Lenny Rachitsky And I’m like, oh my God, I found a barrel. And I later gave him almost everything to do. I want to go back to actually the first question we did. You shared some amazing advice for how to identify great talent, but I’m still curious when you find that barrel, for example when like everyone’s throwing money at them there’s all These amazing teams to join what are some things that companies do to attract and convince them to join their team the standard stuff is still true uh mission selling the vision of mission Keith Rabois Is indispensable most people have proven talent anyway at least in the current world are gonna attract offers from multiple opportunities. And so you’ve got to convince them that your opportunity is very special. I think one way to do that that’s a little bit more nuanced is convince them that their particular skill overlaps with the critical blockers to the current company, meaning they’re Betting on themselves. So for example, if they are superb at, let’s say marketing, if the biggest blocker of the company in the company’s current success is not technology, not the product, but we believe It’s marketing, it’s really easy to go to a world-class marketing person and say, not only is this great company building something really cool and interesting that you’ll be proud Of, but your particular ability is very unique and differentiated and you can solve this. This is actually how I wound up at Square. Back in 2010, I was actually, I’d just been aqua hired into Google and was planning on being a VC actually next after I was kind of like vesting whenever Google is going to compensate us. And then the investors in Square called me up and they said, hey, we’ve been looking for almost a year now for someone who knows something about financial services yet is still entrepreneurial. And they’re like, hey, there’s only three of these at the time. I was like, there’s only really two or three of you in the world. You know, so would you be interested? I said, well, maybe. But that was the argument to me that made me leave Google early, like after two weeks and infuriate everybody. And bypass, you know, venture for another three years, which had been my plan, was because they made the argument that, hey, I was one of three people in the world that could actually Lenny Rachitsky Do this job. So there’s like a, I don’t know if it’s ego, but it’s also just like impact. (Time 0:20:41)
  • Build On Undiscovered Talent Instead Of Stars
    • Build companies around undiscovered talent instead of bidding for the same proven stars every other startup wants.
    • Keith Rabois looks for why big-company recruiting systems will misread someone, often because younger candidates have too little data to fit standard filters. Transcript: Keith Rabois Yep. Well, exactly. In fact, you have talents, you want to use them, and you want to feel that you’re challenged every day, and that what you’re doing really, really matters. So I think that can be extremely helpful. My more important arc in this is I think you have to build a company on undiscovered talent. Like I don’t think you really want to compete for the people that everybody else wants. And, you know, I learned this at PayPal. Peter taught me this literally the first day, the first week of my job at PayPal, that the way to build a company, we were jogging around the Stanford campus is you’ve got to find these Undiscovered talent. That’s the only way to scale an organization against these large incumbents with infinite money, et cetera. And, you know, I’ve been on that crusade for 25 years. For those who are interested, you can link to it. I gave a speech at Ramp, you know, how to hire, but talks in detail. I also recommend Eric, CEO of Ramp’s speech, which is fairly similar. Both videos are online. Lenny Rachitsky That’s such interesting advice and makes so much sense. You’re not going to be able to afford the people that have done the thing at top companies. And also, they’re just probably not the people to join early. Keith Rabois Well, they’re also not maybe the people you want. So there’s adverse selection. But, you know, it’s like a salary cap. Most sports these days have salary caps. And when you’re a startup, not only do you have a salary cap, you probably have one-tenth the salary cap of the people you’re competing with. So you’ve got to figure out how to leverage less assets to more success. Lenny Rachitsky What’s just one tip when you’re looking for and discover talent that’s a sign of, okay, this person is really special. I know you have a lot to talk about here, but just like what’s one tip? Keith Rabois I think it’s basically isolating why other people aren’t going to process them correctly. Like most recruiting at large organizations becomes sort of a homogenous function. And so if you understand why this person is going to get thrown into this block box kind of thing and not get processed accurately, it’s pretty easy. So I always think about, you know, let’s say this person was interviewing at Meta or Google or Block these days or Coinbase. What are they going to miss? And then why? And then that leads to, oh, perfect. So sometimes it’s just lack of information. Like one of the reasons why, you know, sometimes it’s controversial to say this, but one of the reasons why the net impact of my higher undiscovered talent is you wind up skewing younger. It’s not because you need young people. It’s that younger people have, by definition, less data. It’s like, you know, we use credit scoring, FICA scores. It’s the same thing for employment. By the time you’re over 30-some odd things, there’s so many data points about you that this black box machine is usually going to process you like many other people. If there’s no data points, it’s very hard for a black box machine that does homogenous evaluation to evaluate you. So there is alpha, so to speak, by definition for people who have no data points. (Time 0:24:55)
  • Success Requires More Pressure Not Less
    • Great CEOs push harder when things are going well because success breeds complacency faster than struggle does.
    • Keith Rabois says elite people dislike coasting, and morale can actually drop when a company starts skating instead of stretching. Transcript: Lenny Rachitsky Okay. I want to talk about something else. I asked a few people that know you well, that work with you at various companies, what to talk to you about. And one person said that, when I asked him what to talk about, he said, my immediate reaction is that he is a bar raiser. No matter what kind of numbers we put up, he pushes us to do more. In fact, often it seems like the better we do, the harder he pushes. Does that resonate? Keith Rabois Yeah, I think that’s true. I mean, I think, look, ultimately, I’ll channel someone else’s feedback, but it’s the same thing. So a friend of mine who’s a CEO once asked Mike Moritz, like, what’s the most common denominator of the best CEOs ever? And he said it’s the relentless application of force. Quote, I think that’s the job of the CEO. People eventually get comfortable, complacent. The more success you have, the more complacent the organization tends to get. And the single role for the CEO is offsetting that complacency. So to the point, the more success you have, the better you’re doing, the more complacency naturally kicks in. And unless you’ve erected a network effect, you do not want to get complacent. And even then debate whether you should, but like fundamentally, most businesses are not network-affect businesses. They are not going to run on their own for a long time. So I think that’s one insight is the better you’re doing, the more the CEO should push. Secondly, it’s a little bit like sports when you’re growing up. People, when they’re winning, take advantage of feedback better than when they’re losing, usually. Like, so, for example, now what I mostly, mostly VC, mostly a board member, mostly I could consider the RHF founder. And when the company’s struggling, maybe what’s less intuitive, and you may have picked up on this in your research and, you know, interviews of people who know me, when a company’s Struggling, I’m actually usually very non-critical and more like a coach and supporter because the company, the founder knows they’re struggling. Being critical doesn’t really help them solve the problems. That’s when being supportive can actually somewhat counterintuitively be more important. But when the company’s thriving, it’s really important to be critical and isolating things that will eventually be problems while everybody in the company is really happy and borderline Complacent. So you kind of want to be the opposite as a default. And that’s like a really good sports coach. When you’re winning is when to polish everything and really master the details. When you’re losing, you definitely also have to be exciting people and embracing the future and selling the future. Lenny Rachitsky So is the advice, say someone’s listening, a founder or product leader, the advice here is just keep pushing harder, set the bar higher as things, even if you’re doing great. Keith Rabois Yeah, if you’re doing great. Well, also, you have to remember, like, I remember giving a speech once at Square is like, you get to a certain threshold, it creates inflection. Momentum gets you a certain, you know, valuation and all these like attributes. But it’s kind of like winning a Super Bowl. You get, the last year was great. Last four quarters were wonderful. It’s like winning the Super Bowl. You got to come back next year and start your record zero, zero again. And you got to remember that. Actually, adventure like that you know i i’m only as good as my last investment i’ve had like 13 years or whatever pretty damn good investments but like truth i have to wake up every day And find some undiscovered founder that’s going to change the world and if i don’t do that it doesn’t matter what i’ve done the last 13 years and a company’s kind of like that the company Can skate on autopilot for a while. Venture, you really can’t ever skate. Lenny Rachitsky I definitely saw this with Brian Chesky. He just felt like things were going great. And we just shipped amazing products and growth is up. And he’s just always like pedal to the metal, no matter what. Just like, come on, when are we going to take a little break? And it’s interesting because when we did have little breaks here and there, morale actually went down because people were like, what am I working on? I don’t know. It’s not that exciting. Keith Rabois Brian and I are usually in sync a lot. There’s a really good interview where I interviewed him also at the same conference of How to Hire when he talks mostly about founder mode. But I generally subscribe to virtually all of Brian’s views. He even taught me some of these things himself. But the more important point I think you identified, which is very subtle, is really talented people are like superb athletes. And when things are going well and people are really kind of coasting, they’re not happy. They have an internal clock tempo. They just want to create things and create value and drive drive and like you know like the morale actually does go down for the best people in the world when people are skating okay (Time 0:27:53)
  • Use AI With Curiosity To Stay Relevant
    • Future-proof your career in AI by staying intellectually curious, not just by working harder.
    • Keith Rabois says the top token consumer in some great companies is the CMO, using AI directly for analytics, campaigns, and drafts without layers of deputies. Transcript: Lenny Rachitsky So actually along those lines there’s a lot of anxiety in the market in the job market about the future of careers are i gonna have a job am i gonna like where are things going and it just Feels like people are working very very hard there’s just putting a lot of hours especially the most ai pelt people it just feels like they’re working harder than ever i don’t know if You saw this thing tyler cohen put out of just like work harder now is the time to work harder because ai is eating away at your value you know you probably talk to a lot of people looking For career advice of just like this feels scary and i feel like i’m working too hard. What should I do? I don’t know. Do you have any just like advice for folks? Keith Rabois Well, I think AI is going to radically reorient, you know, lots of people’s careers, maybe including mine. So I think that’s actually true. And I think the way to thrive in a rapidly emerging technology world is to be intellectually curious. So, for example, you know, I’m a business person historically. You know, I did actually code when I was really young, but like basically professionally just a business person. What I’ve noticed in some of the best organizations is the number one consumer of tokens is the CMO. Because these people are intellectually curious. And so they’re like, wow, there’s all these cool things I can do now with my hands. Either I had to rely on other teams or never got access the way I wanted and blah, blah, blah, or blah. And they just do it. This is actually true at Opendoor. It’s true at another great company that I’m on the board of. That’s incredible. And so I think you can be intellectually curious and future-proof yourself more than just, yes, you can work harder and I’m a big subscriber to like no days off and working all the time And all that stuff. But fundamentally, the intellectual curiosity is able to learn new things. And that is how you embrace the future. So, and you said cmo is who’s tmo both these two companies so interesting both massive you know awesome companies with lots of engineers and i think that’s that’s very encouraging um You know for for the executive particularly but this is definitely like the best executive in the company and what are they building is it like landing pages and paid tests sometimes It’s like more like what we would have thought of analytics sometimes it’s actually campaigns like actual campaigns it’s just like they don’t need to rely upon deputies and deputies And deputies to get actual work product um and so they’re just like shipping things and like, or shipping, you know, drafts of things or giving the CEO insights into things themselves. (Time 0:32:37)
  • AI Is Turning Product Work Into CEO Work
    • The classic PM role is shrinking because AI compresses building time and makes yearlong roadmaps obsolete.
    • Keith Rabois argues the enduring skill across product, design, and engineering is CEO-like judgment about what to build and why. Transcript: Lenny Rachitsky Want to get your take on the future of specifically the product triad. You work with a lot of product people, engineers, designers. Everyone’s always wondering what the hell is going to happen in my career. Thoughts on just the future of those three specific roles. Keith Rabois Well, I saw this podcast or listened to this podcast that Peter Fenton did, and he convinced me that the idea of a PM makes no sense, basically, in the future. If you think about decomposing the logic is what does a PM usually do? They take these inputs from customers. They create this sequential roadmap that’s well organized over the next year blah blah blah that world is like ridiculous like right now the capabilities of foundation models or companies Like lovable and you know things like that are just so improving such a rapid rate that it makes no to have a year-long roadmap. And they’re just like incoherent. There are things that were impossible to do in November that are actually pretty easy to do right now in March. And so I think you need to build an organization that’s incredibly adept at, you know, people say nimble and all that stuff, but incredibly adept at changing the roadmap almost on the Fly. And I think intermediaries like conventional PMs don’t make a lot of sense versus being prepared intellectually, embracing and exploiting, noticing. So someone needs to notice that, oh, wow, we can actually do this, but then exploiting it this week is the future of a very high growth, stellar startup. We’ll notice that something is now possible this week and create new features and new value for customers next week. Lenny Rachitsky That’s such an interesting area of discussion. A lot of people are saying this is RPM. So I want to try to defend that role just to see if I can convince you otherwise. And by the way, I will say Marc Andreessen had this really good visual of just what’s happening here. All those three functions, it’s like the standoff where they’re all like, I’m going to take you. The future is my role. The future is design. Engineering is the future. Because as AI makes it easier to build and kind of eats the middle of the software development process, just anyone can build, you tell AI, here’s what I want. The hard part, the gap, at least for now, is figuring out what to build and then aligning everyone around what to build. I agree with that. Keith Rabois I actually think like whether you talk about someone who used to be a PM or someone who used to be a designer or called an engineer, the skill is more like being a CEO now, which is what are We building and why? Exactly. And to be a successful engineer, that trait’s critical, to be a successful designer, because the tools and the ability to actually create the thing, an object, is going to be easier And easier. But the art is knowing what to build. You know, another competitor of mine, Alfred Lynn at Skoya, likes to talk about being a chef. When you’re a chef at a prime restaurant, you’re not actually cooking the dish. You’re sampling your colleagues and editing their work a little bit. But fundamentally, it’s half a commercial role. Being a chef in a famous restaurant is what’s our value proposition? How do we differentiate ourselves? How do we brand ourselves? What’s our segment? What’s our pricing, you know, et cetera. What’s our location even? That’s what makes, you know, a famous chef. It’s not, they’re literally cooking the dish all the time. Okay. Lenny Rachitsky I 100% agree. Interestingly enough, PMs are called mini COs often. And I think the important thing is, it’s not like, what do you call this person? I think the question is, what skill will be most, like where are human brains still going to be necessary? Business acumen. It’s basically a business acumen. Right. Like what will help this company grow and succeed? Keith Rabois Exactly. I understand the company’s business equation, where we’re trying to go and what the inputs and connection outputs are. And I can, on my own, create things that move the needle or potentially move the needle. It’s very exciting because, you know, you can actually drive impact like much more easily now as an individual. Lenny Rachitsky My conclusion based on what you just shared is of the three roles, which role is best at that? And historically, it’d be PMs. Obviously, I think the important thing here is it’s like the best, you know, it’s like great PMs or great engineers, designers will do well. But I think interestingly, what you’re describing to me is what it sounds like, what a great PM would be really good at basically. Keith Rabois If they were exceptional, I think that’s right. But I think the best, a lot of the best engineers I’ve worked with have commercial instincts, like Max Levton has this on steroids. Jeremy Stoppelman, he’s worked with me very closely at PayPal before he started Yelp and got promoted to be engineering director and vice president of PayPal, has commercial instincts, You know, back when he was an individual contributor. So I think there are great engineers who are technically proficient that have always understood the business building. Yeah. Lenny Rachitsky I think that’s like the ultimate unicorn is an engineer that is also very business minded. Keith Rabois It’s going to put a premium. I think this at the age of AI will put an incredible premium on that because they’re not going to need a large team. You’re not going to be marshalling the forces. Like, you know, another example is a good friend of mine is director of engineering at RANF. He ships as much code personally. So he has a team of about 20 people. He personally ships as much code as he used to as an individual contributor while he’s managing a team of 20. Because the tools are so great. And he’s become a leading pioneer in the usage of AI. And he’s basically using AI as a second team. He’s basically like, okay, you’re the team manager. You do this, you do this, you do this, this together, check this out, blah, blah, blah. And I think that is definitely in the future. Lenny Rachitsky I 100% agree. Engineers that are very good at that are just extra valuable. What’s your take on design and the future of design, the value of design? Keith Rabois Well, it’s interesting. Design and code are merging. And it’s not clear to me who triumphs of like, is it code becomes design or design just translate automatically into code. I’ve made some investments that bet on both in some ways, But I think they’re merging in a way where they’re not separate fiefdoms anymore. (Time 0:35:15)
  • Cheap Building Raises The Value Of Design
    • As AI makes building cheap, design and storytelling become stronger sources of edge because distribution gets noisier.
    • Keith Rabois points to Shopify requiring working product demos instead of slides, and says the real alpha is framing that cuts through clutter. Transcript: Lenny Rachitsky What I’m seeing is something really interesting happening with design. On the one hand, I just did some analysis on the job market for design, and it’s basically plateaued in terms of the number of open design roles over the past three years. It just hasn’t gone anywhere. It’s flat. We had the head of Claw Design, Jenny Nguyen, on the podcast, and she had this kind of insight that the design process, there’s no time for the design, the traditional design process. Engineers are shipping 17 things a day. Keith Rabois There’s no time to sit there and help mock and prototype and all these things. Well, let me give you a couple of concrete examples. So at Shopify, the way they developed, they’ve developed, they’ve been doing this for over two years now. So this may seem normal, but they have not let PMs provide like PowerPoint or keynote presentations on product for like two years. Every presentation on product has to be a workable demo. And they just expect the PMs to create the products. And the execs just refuse to look at static, you know, we’re going to have this feature. No, I want everything working. This is for two years. So I think that, everything’s just merging together. Lenny Rachitsky That’s so interesting. You would think though, because there are so many products launching every single day, there’s just endless things to pay attention to. Keith Rabois You would think design would be a differentiator more and more. I do agree with that. I do agree with that, actually. I think the alpha is in design, just in marketing. It’s not the tools. It’s not the channels, not the metrics. It’s the storytelling. It’s how do you cut through the clutter in the snappiest, most compelling possible way? It’s kind of an NP problem. There’s so many different words you can use to express the same concept. But the person who can say this is the way to frame it, you know, the proverbial thousand songs in your market is worth like all the tools in the world. Lenny Rachitsky Yeah. So that’s the other part of my insight recently is just as AI makes it easier to build, it’s kind of expanding from the middle out. And what remains is figuring out what to build and making it iterating on the idea. And then it’s at the other end of the spectrum, which is distribution, getting anyone to pay any attention to what the heck you’ve done. Because again, there’s so much happening every single day. Keith Rabois Cutting through the clutter. I mean, that’s always been critical. I mean, one of the times when people are pitching me as an investor, it’s one of the things I’m dialing into, you know, immediately is how the hell is this going to cut through the clutter? It’s one of the reasons why I don’t like to take like customer feedback into account, because by definition, when you put something in front of a customer, that’s not a proxy for the real World. In the real world, you have to cut through the clutter while they’re going to their Barry’s boot camp, while they’re doing their job, while they’re raising their kids, et cetera, et Cetera. And while they’re walking, while they’re on the subway, like that, like, you know, an isolated fake experiment doesn’t give you actionable insights and often is directly wrong. Lenny Rachitsky Interestingly on that line, there’s a few companies that are launching Simile is one that is simulating humans. I don’t know if you heard about this company. They basically are building AI models of actual people so that you can simulate your marketing launch and your product experience with people before you launch. Keith Rabois I don’t know that I’ve seen that specific company. I have seen one or two sort of pitches. My general question as a refrain on those type of companies is, what are they training on? (Time 0:42:42)
  • Why Customer Feedback Misleads Consumer Teams
    • Customer conversations are often actively harmful for consumer and SMB products because people rationalize subconscious choices with fake reasons.
    • Keith Rabois makes an exception for enterprise sales with clear decision-makers, like an AI company he advises with 30 must-win accounts. Transcript: Lenny Rachitsky I’m gonna hit on some uh hot takes contrarian takes that you have you have a number of these i heard you sharing a podcast recently they asked you um why don’t you have as many contrarian Takes these days? And you’re like, well, they’ve just all been proven right. Keith Rabois And that’s the problem is, you know, if you have good ideas, eventually you want them to be adopted. It’s a little bit like, you know, when you’re an investor, you want to be contrarian. So Airbnb, you start with a contrarian take. But eventually, if the company is going to succeed it has to become consensus like everybody in the world has to use it and believe in it and trust it so you want that inflection like you Don’t want to just have contrarian takes and then nobody believe it so you do need a refresh rate um and then the question is how do you have a you know how do you find new ideas but you want Lenny Rachitsky To actually exhaust them okay so one that i think people still would disagree with is that your advice is for, um, for unless you’re building an enterprise company, you don’t actually Want to be talking to customers. Yeah. Keith Rabois I hate talking to customers. I refuse to allow colleagues of mine and talk to customers. You know, there’s the, the famous, you know, even top of the famous stuff and the Steve Jobs, you know, the horses and the oil faster horses and all this stuff. But I think it’s more important is it’s often directionally wrong. Customers don’t know what they want and they’re very bad because it’s a subconscious decision, especially for consumers. Like what I purchase, what I wear is not a conscious decision. And when you’re consciously trying to answer a subconscious decision, you actually give misleading information, even when you’re trying, you know, the proverbial example I like To use, but it’s instructive is ask anybody who drives a super fancy car, like a Porsche or a Lamborghini, like why they bought the car. 99% of the time, they will tell you every reason, except the real reason that once you realize that you’re like, I’m never asking customers anything. Now, it’s hardcore enterprise. Customer development does work because there is a decision maker. And the decision maker is mostly making utilitarian decisions. And yes, there’s political forces within the organization, and you may or may not be able to tap into those. But fundamentally, extracting that information is valuable. But a consumer S&B micro merchant fund, it’s an unmitigated disaster. Lenny Rachitsky And so the implication here is you need to rely on your instincts and gut and experience. Keith Rabois Yeah. I mean, humans are humans. I have this other line I like, which is everything important you need to learn about humans was written by Shakespeare. Just read Shakespeare. Like, that’s better than all the customer research. Um, now you are producing a movie and ultimately this movie doesn’t just need to be critically acclaimed. You have to sell tickets. So if you’re not selling tickets, you have to question, okay, is the trailer wrong? Is our distribution, you know, where we’re trying to meet people to let them know about the movie, is that wrong? Fortunately, unlike a movie, you can go back and say, have I casted this somewhat incorrectly? Is the script slightly off, you know, et cetera? But the goal is selling tickets and that’s what you want to optimize for. But if you don’t sell tickets successfully, economically, efficiently, you definitely want to go back in a loop and try to reorient things so that you are selling tickets. Lenny Rachitsky So it’s like Cat Cal TV kind of stuff is what I’m hearing here. And so your insight here is just like, it’s not only like, it’s like, it’s not going to help you. You’re saying more so it’s actually harmful. It’s harmful. Keith Rabois And then people will say, yeah, like I’ve signed so many meetings and this would infuriate me, but where people will be like, I talked to eight customers, blah, blah, blah, blah. And I know that this isn’t statistically represented, but then they pontificate for an hour. And then, then they’re like, oh, I know this is not, you know, blah, blah, blah. And, but once you hear this stuff, it’s’s like you can’t take this out of your brain. And then every other subsequent meeting is like this stuff that’s just locked in the customer’s brain. So, yes, in the enterprise where you have like, I work with a company in AI that has 30 must-win accounts. That’s like the goal for the company over the next two years, make sure all 30, and we’re doing really well, get all 30 using our product. Great. We actually can talk to all 30 customers. And we can actually meet the decision maker, all 30 customers. And we can influence the CEO at all 30 customers. That is a useful exercise. If you’re targeting a billion people on the planet, you are not getting a representative. (Time 0:51:23)
  • DoorDash And Airbnb Started From Insight Not Surveys
    • Keith Rabois did not back DoorDash or Airbnb because customers requested them; he backed a sharp underlying insight.
    • DoorDash clicked when he heard 93% of restaurants did not deliver, and Airbnb clicked when Brian Chesky cited Craigslist demand for renting bedrooms. Transcript: Keith Rabois Time they’re called failed companies you know there’s a there’s a reason why i mean there’s a darwinistic efficiency to this too which is just like hey there are things you can that like, Is it feasible to do X, Y, or Z? So let’s get like DoorDash. I don’t think customers told us that we want a button on our phone to click to deliver food. But you could talk to restaurants and say, hey, would you put this placard here so that people walking into your store know in the future that they can get delivered? Okay. Yeah, maybe. Then could you run an experiment of how many deliveries per hour would you have to do to break even? And is there enough density? There are ways to improve the odds that you can make the business work. But I don’t think launching the company saying, hey, we found 10 people in Palo Alto. You know, do you want this button on your phone? So, you know, when Tony and Evan walked into my office originally, the epiphany I had was, well, they had a stat, which is 93% of the restaurants in the United States don’t deliver. I was like, okay, seems like it should be a higher percentage than seven convinced um and then when they were describing what they wanted to create andrew mason of groupon fame had famously Said these phones these devices should have two buttons i’m bored and i’m hungry and uh i was like oh my god you’re the i’m hungry button and then so it just clicked in my brain and then it Was like okay now we need to make it economically possible to scalably do this good luck guys and this advice is not just consumer you’re also talking like door dash has like smb-ish yeah Like square and things like that square yeah square is a good example like anything sub mid- I think, is directionally dangerous. Lenny Rachitsky And the advice here is basically trust your insights. Like you need to have the insight yourself. You can’t find it. Keith Rabois I think typically the best companies, there’s foundational insight. And, you know, people don’t necessarily want to hear that, but like there’s logic. You can acid test and pressure test the logic. Like, you know, to some extent, like when Brian first pitched me on Airbnb, there was some interesting evidence he already had that this was going to be successful. At the time, was he gave me the exact number of Craigslist listings that said, I want to rent someone’s bedroom. And it was actually a reasonable number. It was like 30 in the Bay Area. But given that you had to literally type it in and sort of have the epiphany yourself, I was like, that’s a lot, actually. That’s probably a real market there. And I was already, as soon as he said that, was already leaning in and by the time he finished his three-minute monologue though it was like this is the coolest thing ever i need to invest Yeah and i think airbnb was a good example where he was solving his own problem saw an opportunity wasn’t like talking to people hey would you do this sort of thing and people would have Said you know if he’d sampled it on people definitely would have got feedback that was like no like very, very high risk. Like, that’s a good example where you had sampled 10 random people. (Time 0:56:00)
  • Great Ideas Need Isolation Before Feedback
    • Early creative work improves in isolation because constant audience feedback makes it safer and more derivative.
    • Keith Rabois connects Taylor Swift’s advice to startup investing, saying the best seed ideas are ugly babies that half your peers would laugh at. Transcript: Lenny Rachitsky You know, it’s really interesting. I was just watching Taylor Swift’s acceptance speech at this award show, I Heart Media, something or other. And she gave this really powerful speech that when she was starting out, she was just kind of at home working on songs, learning piano, just in a room on her own and had thousands of hours To just iterate and learn and get better versus today. If you were to do this, you’d be posting it, sharing it, people giving you feedback constantly. And her advice is just like find ways to just not expose yourself to people for a long time so i have a couple of friends who are like in artists in the music industry and i think what she’s Keith Rabois Saying is one of the reasons why it’s sometimes difficult for artists who had success to recreate the success because the first success was not data driven was not customer feedback Driven it was like i’m creating this and it’s resonating then because they have an audience someone either they or their manager or whoever the label wants them to get feedback and it Creates derivative you know sort of works not strictly, but like derivative works that are less inspired. There’s a podcast that Jack Altman did with my friend Alex from the Chainsmokers. He actually talks about this at some length that they created this song that actually didn’t resonate with their core, their normal audience, but actually resonated with a different Audience um which is interesting um so i think you can get trapped with success if you it’s a good illustration actually there’s also this concept of the ugly baby in creativity inc i Lenny Rachitsky Don’t know if you read that book at catmull about every idea at pixar like every great idea starts as this ugly baby that no one wants to like help and pay attention to and just like get this Keith Rabois Out of here. It’s like a startup. I mean, that is actually the startup. Like I use this prism as an investor, which is when I make a seed investment or share’s A investment, let’s say, I want half of my friends who are VCs to laugh at me. Like literally laugh because I know most of the people I compete with pretty well. And so I’m running this algorithm through my brain. Are these people going to laugh? If so, like this is a great of us, potentially a great investment because it’s an ugly baby. (Time 0:59:19)
  • Judge AI Startups By Durability And Founder Quality
    • Evaluate AI startups by asking whether they can build durable accumulating advantages before foundation models absorb the opportunity.
    • Keith Rabois mainly backs founders who might change an industry and wants them to explain where compounding edge could emerge over time. Transcript: Lenny Rachitsky A lot of people are starting AI companies now, there’s so many launching. As an investor, I’m just curious, what’s a sign that this is a worthwhile idea, considering the endless number of startups launching? And maybe what are some just like flags that like, okay, maybe don’t work on that idea? Keith Rabois Well, the existential question that everybody talks about these days is, you know, are the foundation labs just going to be so proficient that there’s no oxygen? Because if you’re building a successful startup, you need to build for like eight to 20 years into the future. Like whether you just discount a capital analysis or some other prism, it doesn’t matter. Ultimately, you have to build for something that’s durable for decades. And the rate of progress by the foundational labs, and not just one, multiple of them, really does start creating questions about the sustainability of even companies that look like They’re thriving in the short term. So that’s one question. The second question I’d ask is very typical. I’ve always asked this question for like 25 years, which are, what are the accumulating advantages of this startup? You do want to believe that over time you create an unfair advantage and there are different species of accumulating advantages. You know, the one that people immediately gravitate to, but it’s only one illustration of a set of options, is network effects. But you want something that, over time, makes the business better and better and better, arguably easier and easier at some point. Lenny Rachitsky Do you see those sorts of things at the beginning, like when you’re seeing a seed stage startup? Keith Rabois Yeah, it’s a great question because I think people can conflate two things. There’s a difference between seeing it and understanding the potential. So what I’m looking for when I need a founder is, can they articulate where the accumulating advantages can be in theory, conceptually? They don’t have to have demonstrated it. Yes, there’s an occasional example, once every five years, you might find one, where early you can actually point your finger on it empirically. But that’s way too strict as a bar for an early stage investor. But you really, I personally want the founder to articulate to me where they can build accumulating advantages and maybe even sequentially identify when they would start either taking Lenny Rachitsky Advantage of them, leveraging them or measuring them. So when you’re looking at when you’re evaluating startups these days, I know this is like a very hard question to answer, but just what do you is there anything in particular you’re looking For that you get really excited about? Keith Rabois I’m a founder driven investor. So the only thing I really care about is, does this founder have a non-zero chance of changing an industry or the world? And if they do, for a seed or series A investment, I’m in, period. Don’t ask any other questions. That’s all I need to identify. Not every investor who’s been successful has the same algorithm they’re running. There are technology-driven investors. I would say Marc Andreessen is probably something like that. But no, it’s a mix. He’s both founder-driven and a technology-driven investor. There are investors who are sort of product-slash investors. My colleague David Wyden, I would say, is that. I think Alfred, Lynn, and Sequoia is mostly that. So you can have different sort of approaches, mental models, paradigms. But for me, it’s, is this founder extraordinary? Do I have reason to believe that this founder is the next Brian Chesky? (Time 1:02:50)
  • Three Early Signals Of Exceptional Companies
    • The best companies reveal themselves early through execution tempo, talent density, and promoting strong people from within.
    • Keith Rabois cites Square, Faire, and Ramp, where problems identified by one board meeting were often solved and measured by the next. Transcript: Lenny Rachitsky Mentioned that you’re an investor in all these companies you listed are doing incredibly well. And you work with a lot of, you’re on the boards of a lot of really successful, incredibly good teams and companies. Is there just something they are doing the way they operate that is different from companies that are not as successful? Keith Rabois I think the subtle signal, let’s say very early, is speed. And, you know, it’s one of those things that’s easy to say, but let me try to be more concrete. There’s a tempo, an operating tempo that a successful company develops, that is very, that develops very early in a company’s trajectory and is incredibly impressive. I remember when Wolof Bote was on my board at Square, he, he led the series B. He joined our board. And six months in, so two board meetings in, he said to me, he’s like, I haven’t seen this kind of tempo since our PayPal days. And he’d been a VC at that point for nine years. And I was curious. I said, like, you know, what are you noticing? And he’s like, board meeting X, you guys identify an opportunity or problem. And by the next board meeting, you’ve shipped solutions, addressed it, featured just constantly, consistently. And I think that’s right. Like, so the time between the seed and series A affair was pretty tight. And I remember at the time my chief of staff was delian asperoff and delian said to me after the second fair board meeting that he shadowed me at he said if there’s all if there’s one company In silicon valley that would cause me to leave being the vc it’d be fair and i was like interesting why it’s like the pace of execution and his answer was exactly the same as rawlloff’s He’s like there is something slightly off and by the next morning meeting not only have they identified the root causes but they’ve shipped and reacted and measured the impact of the Solution and that compounds that speed really does come out so that’s just one a trait and but you see it it in lead me to, for example, preempt the series A of ramps. I led the seed in May-ish of 2019 and gave a term sheet to preempt the A in September, so pretty quick. One of the two signals was how fast ramp was able to be on the precipice of shipping the cards. I’d been working in financial services for a long time at that point, you know, 19 years or so. And there’s just a lot of moving pieces to ship a card. You need these program managers, you need the sponsoring bank, and you need this and this and this. It usually takes nine to 12 months, best case nine. Ramp was on the precipice in like three months. And I was like, oh my God, like I’ve just never seen that velocity. That was one of two, maybe three inputs. And I was like, yes, makes sense to double down already, even if we hadn’t shipped anything yet. So I think that’s one. Critical density of talent. You see companies just creating an unfair advantage. The team was X when you invested. It’s now, wow, this team is getting better, you know, deeper, better, et cetera. So that’s another signal. The third thing that I’ve noticed though, you know, is I think they have a different hiring philosophy ultimately. And maybe there’s exceptions to this, but most of the companies I work with that are thriving have basically skipped hiring senior people, senior experienced people, mostly internally Good talent. And I think that model has worked really well. It’s definitely true of Ramp, definitely true of Trade Republic. It seems to be a mostly common ingredient, but there’s probably exceptions. Lenny Rachitsky Wow. That is an incredible answer instead of traits. Just to be clear what you’re saying in that third piece. So it’s not hire like fancy VPs from other successful companies and instead develop people internally as a trade. Internally and almost turned it into a competitive advantage, meaning a strategy. Like we’re just not even going to interview people. Keith Rabois We’re not going to try. We’re just going to promote from within. (Time 1:06:19)
  • Use Public Critique To Improve The System
    • Criticize in public when the goal is improving the system, not just coaching one person in isolation.
    • Keith Rabois argues public feedback shows the team that a problem is seen and invites others to help fix it, unlike private conversations. Transcript: Lenny Rachitsky Of that okay that was incredibly valuable okay one last hot take that uh i know you have that i want to make sure we share is this idea of criticizing in public versus in private talk about Keith Rabois That yeah so this is um a lesson i actually absorbed from one of the great founders I work with. And, you know, like many great founders, they have their own management philosophy. And one of the most important tenets is criticize people in public. And when you decompose the logic of it, it’s so obviously true, but almost no one does this and very few people talk about it, even if they do it. So if you think about it, when you give people feedback negative individually, you’re optimizing for the atomic unit, not the system. The reason why to do it in public is it’s more important for all the colleagues to understand that there’s an issue, it’s being addressed versus like they usually have suspicions, let’s Say, or concerns. And if you’ve channeled the negative feedback to the individual, they don’t know that you’re addressing this, that you’re on top of, you’re aware you’re addressing it. Now it’s a collaborative. And then also it lets other people kind of raise their hand and say, you know what, I can kind of help with that or, you know, et cetera. And so it becomes like a team building exercise in some way versus like, oh, you have this deficiency, go fix it yourself. And then the rest of the company, you know, is nervous about why this problem is persisting. Lenny Rachitsky When people hear this, they may, it may feel like, oh, wait, I’m just, it’s like, it feels aggressive to be criticized, everyone public comment. Any advice for just like, how do you not make it this like, I don’t know, scary environment? Or is that part of it? Well, I think you want to win, you know, and there’s probably an in art to this. Keith Rabois Like I would say, you know, some of the best coaches in sports probably do a bit of both. Like there’s things they will say in front of the team. And then there’s things that probably, you know, channel to the individual player so probably a mix you know it could be very effective too it feels like you’re not a uh focus on psychological Safety as a core no no i don’t believe in that at all like high performance machines don’t have psychological safety they’re about winning like for those who want to you know a good book That’s off central casting for you is uh read jordan rules or watch the last dance if you like but like fundamentally read jordan rules if you want to be michael jordan you got to act like Michael jordan do (Time 1:12:33)
  • Too Much Failure Analysis Can Kill Ambition
    • Obsessing over failures can make ambitious teams less willing to take bold shots.
    • Keith Rabois told a thriving board to skip retros on failed bets because overanalyzing misses can dampen risk-taking more than it teaches. Transcript: Lenny Rachitsky You feel like that’s negatively correlated this idea of psychological safety with success and there’s just for the most part yeah interesting i’m going to take us to failure corner Okay so failure that, you know, you talk about all these things you’ve done that are incredibly well, these companies you invested in, all these businesses you built, PayPal, all these Things. People don’t realize there’s also a lot of failures along the way. Is there a story of a time you failed in your career or investing that might illuminate the doubt, you know, when things don’t go great? Keith Rabois I mentioned one, I alluded to one by accident. I talked about being acquihired or whatever into Google and being stuck there. I’m so clearly not successful. That was a slide. So, you know, we did sell for like $187 million, but nowhere near the ambition, you know, didn’t really achieve any of our goals product-wise or company-wise. Investing teaches you mostly about failures. If you’re a world-class investor in the early stages, 30% to 40% hit rate is great and golden. By definition, that’s like 50% to 60%, 70% failing. It’s a little bit like those old Nike commercials where there’s the Michael Jordan one where it’s like you know I missed 109 game-winning shots in my career or there’s the tennis one I think it’s Federer that’s like you know I something like I win 60% of my points actually I’m like the best tennis player ever but I lose 40% so there’s a lot of that in venture. You definitely have failures all day long. I think one of the arts is not getting too caught up in failure, actually. I actually gave this feedback in a board meeting recently, which is someone well-meaning, one or two board members are like, well, let’s do retros on our failures. And the company’s doing really well. So I was like, you know what? Honestly, I’m not sure I would do this. I was like, I don’t want to deter people from taking ambitious shots on goal. And if you overemphasize failures and, you know, really people think they’re going to get criticized, this is where the psychological safety maybe has some validity, which is be ambitious, Be bold. Don’t worry about the failing part unless there’s things you miss that could have been factored in. But you want people to take risk and you want people to be excited about raising their hands for very difficult problems and challenges because that’s how you create value. And so I was like, no, let’s really not do these retros. Let’s just focus on winning. (Time 1:14:59)