Hard truths about building in the AI era | Keith Rabois (Khosla Ventures)

[00:00] Idea of a PM makes no sense in the future. The skill is more like being a CEO now, which is what are we building and why? There's a lot of anxiety in the job market. AI is going to radically reorient lots of people's careers, maybe including mine. What I've noticed in some of the best organizations is the number one consumer of tokens is the CMO. They don't need to rely upon deputies and deputies and deputies to get actual work product. I want to hit on some contrarian takes that you have.

Your advice, you don't actually want to be talking to customers. [00:30] I hate talking to customers. I refuse to allow colleagues about and talk to customers. You have this idea of criticizing in public versus in private. High performance machines don't have psychological safety. They're about winning. You're uniquely great at helping companies build world class teams. If a founder shows the ability early in his or her career to assess talent ruthlessly and accurately, he or she can go very far with no other abilities whatsoever. It feels like it's never been harder to attract the best talent.

[01:00] The morale actually does go down when people are skating. The single role for the CEO is offsetting that complacency. The better you're doing, the more the CEO should push. [01:12] Today, my guest is Keith Raboy. [01:14] Keith's resume both as an operator and investor is absurd. [01:18] He was an early investor in Stripe, Palantir, Airbnb, YouTube, DoorDash, Ramp, and dozens of other companies. He's part of the famous PayPal mafia, where he was executive vice president of business development and policy. [01:31] He's also been chief operating officer at Square, VP of corporate development at LinkedIn.

He's also co-founded two companies and he's currently managing director at Kostla Ventures. It's safe to say that Keith is in the 99.9th percentile at Identifying Talent, [01:46] building teams and operating world-class companies. [01:49] Before we get into it, don't forget to check out Lenny's Product com for an incredible set of deals available exclusively to Lenny's newsletter subscribers. With that, I bring you Keith Raboy. [02:00] Keith, thank you so much for being here and welcome to the podcast. [02:06] It's a pleasure to be with you. [02:08] Okay, so when we were starting this recording, you told me you're doing this from an iPad.

[02:12] which I've never had. And you shared a crazy fact that you haven't used a computer in like years. Talk about what's going on there. 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 from my phone, my watch or my iPad. What's so interesting about this as you were talking is just [02:39] 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.

And I feel like you've been preparing for this for a long time. [02:52] 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 in technology. [02:59] And just understand the benefit, is it just avoid distractions? Yeah, partially distractions, partially just the flexibility, like taking an iPad with you anywhere. It's 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 unless maybe if you're doing heavy duty engineering, which obviously has not been my forte in life, although I may have to start. [03:29] to use a more powerful, heavier weight, less flexible machine. Wow. iPad maxing. Keith Raboy. See if you got my Apple. As long as it's an Apple product, it works. It looks so appropriate. [03:42] This episode is brought to you by our season's presenting sponsor, WorkOS. What do OpenAI, Anthropic, Cursor, Vercel, Replit, Sierra, Clay, and hundreds of other winning companies all have in common?

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It's essentially Stripe for enterprise features. Visit com to get started or just hit up their [04:42] WorkOS allows you to build faster with delightful APIs, comprehensive docs, and a smooth developer experience. Go to com to make your app enterprise-ready today. [04:52] As I was preparing for this, Chad, there's just like so many directions we could have gone with this. You are so smart. So many things. [04:59] I want to focus on something that I think you're uniquely great at, which is helping companies build world class teams. [05:07] and i want to start in particular with attracting the best talent [05:11] And what's really interesting these days, from what I can tell, is there's just a lot of people that are struggling to find a job.

It's taking a lot longer to find a job. It's just there's all these layoffs. [05:20] On the other hand, it feels like it's never been harder to attract the best [05:24] Talent. [05:25] there are so many amazing companies doing amazing things so much money flying around these hundred million dollar offers and things [05:32] And so [05:33] from the companies that you are closest to that [05:35] you see our best at attracting the best talent. [05:39] What have they figured out? What are they doing differently? What are some creative things they do?

[05:43] Well, 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. [05:54] 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? [06:24] Thank you. [06:25] uh for you know 25 years now it's because peter teal and max love chin [06:30] Marshalled 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, in all kinds of verticals.

So from day one, I've always been day one of my technical career, technology career, I've always been focused on how the importance of critical density talent. [06:55] How do you identify, retain, and promote people without talent? [07:01] Back in the PayPal days, when I first started my career in technology, I actually truthfully was not very good at this. [07:06] 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 technology. [07:34] Tell it. [07:36] There's no substitute. Interviews are not. [07:38] a great substitute regardless of how strong you are at interviewing but when i started back for a [07:43] I was... [07:44] mediocre, 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. [07:53] 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 he had 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... [08:21] succeeding at that leverage. [08:23] So when I went around, took the feedback into account, I said, OK, 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 the highest potential and ambition. And I recruited them to my team. [08:39] And that was very successful. [08:42] And then I did get promoted actually fairly quickly because the people actually went 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. [09:07] I was accurate at diagnosing their abilities. I just couldn't do it in a 20 minute, 30 minute, 45 minute interview. So the first thing is just double down on people I know. [09:17] That doesn't scale perfectly, [09:20] but learned to be excellent at, if I had context, assessing people's abilities, superpowers, and weaknesses, then over the next X years, tried to identify [09:32] 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... [09:44] some years and requires some training. [09:48] I think you can teach some of this. [09:50] to a founder. [09:51] But one advantage a founder house is going to thrive is [09:55] If a founder shows the ability early in his or her career to assess talent ruthlessly and accurately, [10:01] He or she can go very far with no other abilities whatsoever. Hiring is like a muscle. [10:07] You need to exercise it. You need to try, learn, [10:11] What worked? What didn't? What could you have known? What did you miss?

Why? And, you know, [10:16] 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 that 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 of talent. 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, [10:46] would be 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. [10:59] It doesn't work for hiring people right out of college or something because [11:03] the reference context is going to be a little off. [11:06] 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. [11:24] Wow. [11:25] I bet you he's pretty good.

I bet she's been pretty accurate, too. So I think you can learn that. That's like a skill that's teachable that. [11:34] being absolutely incredibly dedicated to your craft, you can just get better at. Back in the day, there was an investor at Greylock who's on my board at LinkedIn, David Z. [11:44] 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. [11:59] 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? [12:11] 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. [12:22] founded by [12:25] 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. [12:48] Thank you. [12:49] If they frame 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? [13:02] Same person. [13:03] wrong question wrong result and many people passed unfair and they regret it and these are actually [13:10] quite talented investors, they just didn't frame the question correctly when they were calling someone like Jack Dorsey up for the reference.

Any other questions you find really helpful in extracting the right information? When I interview candidates for senior people in leadership positions, 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? [13:29] 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?

[13:46] 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. [14:00] If something were not to work out, what would be the primary root cause that you can identify if something going wrong? I think. [14:07] Generally, probing on those two arcs leads to a lot of insight. And that first question is for the candidate. Or is that in the reference? Yeah, for the candidate. That's for the candidate specifically.

Got it. Because I don't want them to criticize Airbnb. I don't think that's that productive. Right. [14:21] you can tell how much of the current business model have they absorbed. [14:26] Thank you. [14:27] 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 ask 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?

[14:43] So you made this interesting point that there's like tactics that can help you get better at [14:47] finding and identifying talent. [14:49] A lot of this is just the feedback loop of doing it a bunch, it sounds like. [14:53] I find the feedback loop is so, like... It's hard to actually, like... [14:57] Like most people interview, hire, [14:59] 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

[15:06] make the most out of the lesson of seeing how something went. So I've read some research on the topic and if you ask yourself, [15:13] 30 days after any hire, would you make the same decision? [15:16] that 30-day loop is pretty useful. And basically, it's as accurate as measuring it a year or two years out. [15:25] So you've got a pretty tight feedback loop and you can ask the entire hiring team. So I think that is just a technique that every company should use. I want to talk about this framework that you have, barrels and ammunition, because this...

[15:37] is really... [15:39] mind expanding and helping people understand who to even hire? So look, most companies raise money. They have some traction. They raise, you know, DC Brown, they get launched, get some traction, then they raise a lot of money. [15:49] 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, [15:57] 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 more than accomplished per unit of time, per day, per week, per month, per quarter.

And they get frustrated. And so then they sit around at a dinner with other CEOs or people like me or one-on-one 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? [16:27] I realize that the fundamental driver of this is that, [16:32] the number of people that can [16:35] 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.

[16:55] And so you're wasting time, energy and increasing your collaboration tax, your coordination tax. [17:01] 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. [17:10] of those people depend on how strict you really want to be it is considered one of the best talent rich networks of all time and technology [17:17] There is between 12 to 17 barrels in the organization. That's like an infinite number. I once asked Jack Altman on a podcast, [17:26] A lot of us, which is pretty damn good company.

How many barrels of a company? The answer was two. [17:30] That's a more common answer. [17:32] For a very good company. [17:33] 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 and you're going to do less. [18:03] lot of details there but fundamentally the ratio of barrels to ammunition is what [18:09] dictates the number of important initiatives that can be pursued simultaneously.

[18:14] and you're not saying you don't want ammunition like it's valuable to make an impact you need ammunition in addition to yeah you definitely need ammunition and 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 you know ammunition sometimes maybe a designer an engineering team a pm a data analysis blah blah depends on what the project is what the problem you're trying to solve is what's the proper amount [18:44] of ammunition to the problem, you can be much more constructive and deliberate and intentional about the team construction.

[18:52] Most people hearing this, [18:55] Assume they are barrels. [18:57] What helps you understand if someone is truly a barrel? Can they take an idea? [19:01] And make it happen. Basically, we're going up that. There's a hill over there. [19:05] Thank you. [19:05] That's the hill. [19:07] Get us over that hill. [19:09] in one way or the other, [19:11] they will motivate people [19:14] people if they need to, they will accumulate resources if they need to. [19:20] They will measure what they need to, and they're going to get your company across that hill.

[19:24] That's a barrel. Anything less than that is not a barrel. And so this is skills like internal polyorg stuff. [19:31] resource like strategy like what yeah it's kind of the collection of all the things to get a collection of all those things is there's basically there's an outcome [19:37] CEO founder wants an outcome [19:40] and come hell or high water, this person is gonna deliver that outcome. Now the outcome can be, you know, fairly narrow. [19:48] and not that difficult in the beginning, and then you expand the scope [19:52] you know, the complexity, the difficulty that you basically entrust to your barrels.

[19:58] 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. [20:05] But ultimately, it's that skill of I'm going to take this off your plate. [20:10] You can fire him for that. And this is going to happen. [20:13] And if it's not going to happen, I'm going to come back to you proactively with the issues I'm confronting. [20:19] what I've already tried, the diagnosis of the root causes and ask for your help, was sufficient time for you to intervene and try to brainstorm with me to get us to the right answer.

Agency is the word that comes to mind when you talk about this role. Yeah, I think agency is accurate. The problem I have with terms like agency is, [20:36] is it's a little bit like strategy because in one year a lot of people went out the other year and they don't really process the meaning. [20:41] Yeah. [20:42] 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. They can be as simple as...

[20:54] the now somewhat famous in technology smoothie test, which is [20:59] We used to have engineers work [21:02] pretty hard and they square them pretty late. [21:04] And I always wanted them to have like food so they wouldn't be famous. 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, etc. So settled on delivering and really wanted to provide like a 9 m. cold smoothies. [21:22] And we had at that time a pretty substantial team at Square, Office Team, EAs, you know, this was not a lean, lean organization.

[21:31] And so I tried through the office team. [21:34] Yes. [21:35] And nothing. We never got [21:37] healthy, delicious, and cold smoothies delivered at 9 m. [21:42] Just kept that one. It's getting frustrated 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 the refreshments. [21:55] Everything went wrong. And then I had this intern named Taylor Francis. [22:00] And I was explaining just my frustration. It was like a second day at work. [22:06] And he's like, I'll solve it.

[22:09] And I was like, [22:10] Okay, kid, good luck with that. Like I was like, sure. [22:14] Keep trying. Try. Anyway, day goes by. [22:18] Nami Klopp arrives. [22:20] And lo and behold, [22:21] Smoothies show up at 9 m. [22:23] deliver it on the standing desk table where the engineers would congregate. I sample them, they're cold, they taste great. And I'm like, "Oh my God, I found a barrel." [22:33] Thank you. [22:33] 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. [22:44] 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. [22:52] What are some things that companies do to attract and convince them to join their team? The standard stuff is still true. Mission, selling the vision of mission, [23:00] is indispensable most people have proven tell it anyway [23:05] at least in the current world, are going to 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 [23:21] Thank you. [23:21] 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, [23:35] of the company in the company's current success is not technology, not the product, but technology. [23:40] 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, [23:49] But your particular ability...

[23:52] 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. [24:22] and there are [24:24] They're like, hey, there's only three of these at the time.

There's only really two or three of you. [24:28] in the world, you know, so would you be interested? I said, well, maybe, but that was the argument to me that made me [24:36] 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 do this job. [24:51] So there's like a I don't know if it's ego, but it's also just like impact.

Yep. Well, exactly. In fact, you have you have talent. 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 that I think that can be extremely helpful. You know, my. [25:06] 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. [25:36] 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. That's such interesting advice and it 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.

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. [26:06] 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. [26:19] What's just one tip when you're looking for a discovered 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?

[26:27] I think it's basically isolating why [26:31] other people aren't going to process them correctly. Most recruiting at large organizations becomes a homogenous function. [26:39] 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? [26:58] And then why? And then that leads to [27:01] 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. [27:24] it's the same thing for employment by the time you're over 30 some amount of 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 like no data points

[27:47] It's interesting how this is the same skill as being an investor, picking startups to invest in. Yeah, absolutely. [27:53] 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. [28:07] 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.

[28:14] Does that resonate? Yeah, I think that's true. I mean, I think, look, ultimately... [28:19] I'll channel someone else's feedback, but it's the same thing. [28:25] A friend of mine is 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. [28:36] 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... [28:50] To the point, the more success you have, [28:53] 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 you debate whether you should. But like fundamentally, most businesses are not network-affected 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. [29:19] People [29:21] when they're winning, take advantage of feedback better than when they're losing, usually.

Like, so for example, now what I do is mostly VC, mostly a board member, mostly a consigliere, a founder. And when the company's struggling, [29:36] Maybe what's less intuitive, and you may have picked up on this in your research and 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... [29:57] somewhat counterintuitively more important but when the company's thriving it's really important to be critical and isolating things that will eventually [30:07] 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 [30:30] So is the advice, say someone's listening, a founder or a product leader?

[30:34] The advice here is just keep pushing harder, set the bar higher as things, even if you're doing great. 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. [30:50] Momentum gets you a certain... [30:52] you know, valuation and all these attributes. But it's kind of like winning a Super Bowl. [30:58] 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, adventures like that, you know, [31:10] I'm only as good as my last investment. I've had like 13 years or whatever of pretty damn good investments. But like truth, I have to wake up every day. [31:18] 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 in the last 13 years. And a company is kind of like that. The company can skate on autopilot for a while. Venture, you really can't ever skate.

[31:32] I definitely saw this with Brian Chesky. [31:35] 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, [31:48] Morales actually went down because people are like, what am I working on? I don't know. It's not that exciting. Brian and I are usually in sync a lot. There's a really good interview where I interviewed him also at the same conference.

I've had a hire when he talks mostly about founder mode, but it generally subscribe to [32:03] 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, [32:12] is really challenging people [32:14] Or like superb athletes. [32:17] And when things are going well and people are really kind of coasting, they're not happy. [32:24] They have an internal clock tempo. They just want to create things and create value and drive, drive. And like, you know, the morale actually does go down for the best people in the world when people are skating.

[32:37] Okay, so actually along those lines... [32:39] There's a lot of anxiety in the market, in the job market about [32:43] The future of careers. Am I going to have a job? Am I going to. [32:47] Like where are things going? And it just feels like people are working hard. [32:51] 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 [32:59] 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... [33:10] I feel like I'm working too hard. What should I do? [33:13] I don't know. Do you have any just like advice for folks? Well, I think AI is going to radically reorient, you know, lots of people's careers, maybe including mine. [33:22] 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 could when I was really young, but like, [33:36] basically professionally just a business person. [33:40] What I've noticed in some of the best organizations is the number one consumer of tokens. [33:47] This is the CMO. [33:49] Because these people are intellectually curious. And so they're like, wow, wow. [33:54] There's all these cool things I can do now with my hands. [33:57] either I had to rely on other teams or never got access the way I wanted and blah blah blah or lag and they just do it this is actually true at Opendoor [34:04] It's true.

Another great company that I'll have the board of. That's incredible. [34:09] And so I think you can be intellectually curious and future proof yourself more than just, yes, you can work harder and a big subscriber to like no days off and working all the time and all that stuff. But fundamentally, the intellectual curiosity is I want to learn new things. And that is how you embrace the future. So and you said CMO is who's. CMO, both these two companies. So interesting. Both massive, you know, awesome companies with lots of engineers.

[34:38] And I think that's [34:40] That's very encouraging, you know, for the executive particularly. I'm like, [34:44] This is definitely the most executive in the company. And what are they building? Is it landing pages and paid tests? Sometimes it's more like what we would have thought of analytics. [34:55] Sometimes it's actually campaigns, like actual campaigns. It's just like, they don't need to rely upon [35:01] 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 drops of things or giving the ceo insights into things themselves [35:15] I want to get your take on the future of specifically the product triad.

[35:19] You work with a lot of product people, engineers, designers, [35:23] Everyone's always wondering what the hell is going to happen in my career. [35:26] Thoughts on just the future of those three specific roles? [35:29] Well, I saw this podcast or listen to this podcast that Peter Fenton did, and he convinced me that the idea of a PM makes no sense. [35:37] basically in the future. If you think about decomposing the logic is what does DPM usually do? They take these [35:44] inputs from customers, they create this sequential roadmap that's well organized over the next year, blah, blah, blah, blah.

[35:52] That world... [35:53] It's like ridiculous. Like right now, the capabilities of foundation models or... [35:59] Companies like Lovable and things like that are just so improving such a rapid rate that it makes no sense to have a year-long roadmap. [36:09] and they 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 [36:29] almost on the fly.

And I think intermediaries like conventional PMs don't make a lot of sense versus [36:37] being prepared intellectually, embracing and exploiting, noticing. So someone needs to notice that, oh, wow, we can actually do this, but then exploiting it [36:46] This week. [36:48] is the future of a very high growth stellar startup. We'll notice that something is now possible this week. [36:57] and create new features and new value for customers next week. [37:01] That's such an interesting area of discussion. A lot of people are sitting at this RPM, so I want to try to defend that role just to see if I can convince you otherwise.

[37:09] And by the way, I will say Marc Andreessen had this really good visual of just what's happening here. It's like all those three functions, it's like the standoff where they're all like, I'm taking it. The future is my role. The future is design. That's... [37:20] Engineering is the future. [37:22] So the way I see it is... [37:24] as AI makes it easier to build and kind of eats the middle of the software development process. [37:29] just anyone can build detailed AI, here's what I want. The hard part, [37:33] The gap, at least for now, is figuring out what to build and then aligning everyone around what to build.

I agree with that. I actually think 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? [37:50] Exactly. And to be a successful engineer, [37:53] That trait's critical to be a successful designer, because the tools and the ability to actually create the thing, an object, [38:01] is going to be easier and easier. [38:04] But the art is knowing what to build. Another competitor of mine, Alfred Lin at SCOIA, likes to talk about being a chef.

[38:12] When you're a chef at like a prime restaurant, you're not actually cooking the dish. [38:18] You're sampling, you know, 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. [38:41] Okay, I 100% agree.

Interestingly enough, PMs are called mini-COs, often [38:46] And I think the important thing is, it's not like, what do you call this person? I think the question is, [38:50] What skill will be most like where human brain still going to be necessary? Business occupying. It's basically a business occupying. [38:58] Right. Like what will help this company grow and succeed? 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... [39:08] On my own. [39:09] create things that move the needle or potentially move the needle.

[39:13] It's very exciting because, you know, you can actually drive impact like much more easily now as an individual. [39:19] My conclusion based on what you just shared is of the three roles, [39:24] which role is best at that and in historically, [39:27] 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. [39:34] 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 if they were 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 some steroids jeremy stoppelman you know he's he's he's [39:52] Worked with me very closely at PayPal before he started Yelp and got promoted to be engineering director and vice president of PayPal.

Had 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. [40:08] Yeah, I think that's like the ultimate unicorn is an engineer that is also very business minded. 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 Randall.

[40:29] he ships as much code personally. So he has a team of about 20 people. He personally ships as much code as, [40:37] as he used to as an individual contributor, while he's managing a team of 20. [40:42] 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, stitch this together, check this out, blah, blah, blah. And I think that is definitely the future.

[40:58] I 100% agree. Engineers that are very good at that are just extra valuable. [41:03] What's your take on design and the future of design, the value of design? [41:08] well you know it's interesting i designed a code emerging and it's not it's not clear to me [41:13] Who triumphs of like, is it code becomes design at work? [41:18] design just translate automatically into code um i made some investments that [41:24] bet on both in some ways, but I think they're merging in a way where they're not separate [41:31] fiefdoms anymore.

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[42:49] plateaued in terms of the number of open design roles over the past three years. It just hasn't gone anywhere. It's a flat. [42:55] We had the head of Claw design Jenny Wen on the podcast and she had this [43:01] a kind of insight that the design process, there's no time for the traditional design process. [43:06] There's like, [43:07] Engineers are shipping 17 things a day. [43:09] There's no time to sit there and help mock and prototype and all these things. [43:12] Well, let me give you a couple of concrete examples.

So at Shopify, the way they 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. [43:33] Demo. [43:34] and they just expect the PMs to create the products. And the execs just refuse to look at static, you know, we're gonna have this feature, [43:43] "No, I want everything working." This is for two years. So I think that, again, everything is just merging together.

[43:51] That's so interesting. You would think, though, because there are so many products launching every single day, like there's just endless things to pay attention to. You would think design would be a differentiator more and more. [44:02] I do agree with that. I do agree with that. Actually, I think the alpha is in design, just like 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. There's kind of an NP problem.

There's so many different words you can use to express the same concept. But [44:22] 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. 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. [44:37] 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.

[44:43] getting anyone to pay any attention to what the heck you've done. Because again, there's so much happening every single day. Yeah, 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 [45:13] they're raising their kids, you know, 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. [45:26] Interestingly, on that line, there's a few companies that are launching Simile as one that is simulating [45:32] humans. I don't know if you heard about this company. They basically are building AI models of [45:36] actual people so that you can simulate your marketing launch and your product experience with [45:42] people before you launch?

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? [45:54] because like again, [45:56] If they're not turning on the right data, it's dangerous to say you're simulating humans. Yeah, yeah, that is the question. Oh, man, what a weird world. [46:05] Along these lines, actually, you have this, I don't know if you call it a hot take, that AI content is going to surpass human content, and that's just the future.

Oh, that's inevitable. Mm-hmm. [46:15] I was talking to someone and she was saying in the Chinese TikTok, [46:19] app. It's just like all AI videos now and it's like very good. She like actually enjoys watching these videos and these stories. [46:26] I think it'll be like a binary sort, maybe. [46:29] I could see products and content thriving that is clearly still human generated and that there's some desire for authenticity. [46:39] Just like, for example, you know, this piece of art is a war hall. [46:42] Anybody could create this now, high fidelity, but there's still an appreciation for this was created by Andy Warhol.

I think there's going to be a curated experience. [46:54] with a premium of provenance, you know, that you know is human created. And then there's just gonna be a sort of a rank filtering of what's the best content. [47:03] And whether it's AI generated or not, it's a little bit like the Ben Thompson's trajectory thing of curation, you know, versus algorithm. [47:11] There's going to be two polls in the curation, maybe for human created stuff. And then there's going to be the algorithm, which is just what's the best. [47:19] I 100% believe that.

That makes so much sense. [47:21] I was just thinking the other day, it's so interesting that AI is getting very good at video. Like videos are actually fun to watch that are AI generated. And then like images are getting really good. But... [47:33] Writing is still really bad that is AI generated. And it's ironic that it's called a large language model. It's all context, text, text trained. And it's just like, that's the thing it's least good at, which is really weird. [47:43] Well, I think part of it is the economic decision of token rationing by the LLMs.

Like they... [47:51] They basically are... [47:54] when you prompt, they're kind of trying to make their economics work within a bell curve distribution. And so, for example, I'd use a prompt in LLM to write something that's very short. [48:05] the quality is significantly better than if it's a page, paragraph, [48:09] I mean, page to chapter to book. I think it's token ratioing versus actual quality. You would think that, you know, like, I don't know if it was Hemingway of just like, if I had more time, I would have made it shorter.

Like, it takes more work. But then you have. [48:24] I think the rating... [48:26] Right now, what works best is short, many short [48:31] examples and then humans picking editing yeah reprompting [48:37] It's a little bit like when I used to be a litigator 25 years ago. The hardest part of writing a brief. [48:43] or all the art and all the magic was the first paragraph if i could write that first paragraph [48:49] really well. The chance I would win the case and convince the judge would go through the roof.

So what I would actually do is I might have three weeks to write a brief. I might spend the first [49:00] Weak. [49:02] Or more... [49:03] walking around the office. [49:06] thinking through how am I going to nail the first three sentences? Once I figured out how I wanted to frame those first three sentences, I could write 30 pages in like two days. [49:15] But getting that right, [49:18] Could take a week or two. [49:20] Sometimes it would occur to me in the shower or literally the shower or in the middle of a run.

It's like, oh, my God, here's how I distill it. Then I could just sit down and power through the rest of the brief. And I think it's a little bit like that. The power through the rest of the brief works well. You still need the first three sentences. Is there a story from that time in your life that would be interesting to share? I didn't even know about that. So, yeah, not everybody knows. I spent the first four and a half years of my professional career as a law clerk and then litigator, which occasionally comes in handy, truthfully.

[49:50] Yeah. [49:50] trading off business risk against legal risk is a valuable [49:54] thing to do. Sometimes it's not accidental that many of my best investments [49:59] or in financial services in heavily regulated areas, because I think I can sort of do the legal risk assessment in my own brain. This was definitely true back in the day when I invested in YouTube. But I think most things that lawyers learn are very, [50:17] inconsistent with being entrepreneur so when you're graded as a lawyer [50:21] you learn every exam in law school virtually is uh issue spotting so you get credit for identifying there's like a fact pattern [50:28] identify all the issues and then resolve them so you learn to identify everything that can go wrong [50:34] Thank you.

[50:35] Moderately useful, but very not useful as an entrepreneur. I mean, sure, you can identify all the reasons a company could fail. [50:41] not that difficult to do the art is you know solving those uh so you know not the best training and then you also measure your productivity by hours worked you know literally you build per hour it took me two years maybe a year and a half after converting to technology to stop tracking all my time i used to literally write down in my notebook a half hour of this meeting 20 minutes on this you know blah blah blah just couldn't get that out of my brain [51:08] That is so funny.

And David Sachs was a lawyer, too. It's like interesting. That's true. Peter. Peter is a lawyer. Peter was smart enough to quit after. [51:16] Five months and four days, I think. David never practiced. They're maybe even smarter than both of us. Okay. I want to hit on some hot takes, contrarian takes that you have. You have a number of these. I heard you share on a podcast recently. They asked you, why don't you have as many contrarian takes these days? And you're like, well, they've just all been proven right. And that's the problem is if you have good ideas, eventually you want them to be adopted.

It's a little bit like when you're an investor, you want to be contrarian. So Airbnb, you start with a