If this was a VHS tape, it would be labeled Shan Hardcore Part Two. People would not be getting what they thought they were getting. Here's the Indian guy at his desk screaming about management hacks. CEO.
What I want to talk about is basically if you're a CEO of a company, if you're running a company right now, which I think a lot of people listening to this are, there's a good chance you're not being hardcore enough. And what I want to talk about is like six or seven real anecdotes, stories of what CEOs do, moves that CEOs do that sound wrong, sound almost illegal, but they actually work. The idea being when you're a CEO, there's no CEO school. There's no CEO training. There's nobody there to manage you. You're the one managing everybody else and most people don't even give you like real feedback because you're kind of their boss. You're in charge.
Is this like famous examples or your friends?
I have a mix of examples you'll know. Examples I think you won't know but they're of famous companies and then one or two from my friends. Okay. So I have one, two, three, four, five. I have like seven.
And whenever you come up with ideas like this, which you do all the time, they interest me. But what also interests me is why do you care? Why do you care right now?
Well, two things. One is in general like I want to be better at what I do. And so if I ever hear of somebody else doing something that I think could be either I haven't tried or I think like, wow, that sounds kind of crazy, but I guess I see how that might work. It's like I kind of found a new move in a video game and I like to know that. But the other is we talk a lot about almost to the point of it being obnoxious this phrase frame breaking, which is you see the world a certain way and it seems like there's a border, everything about the world fits inside that frame and then you'll hear this story that will just be outside of the frame. It breaks the frame. The frame has to expand now to incorporate this new information.
And I don't know why I love it. I love it like dudes love Pokemon cards. I just want to collect as many of those frame breaking ideas and stories. And the reason why is if you've ever heard that story of like the elephant who as a young age like they tether him to the stake in the ground and then he grows and now he's so powerful he could easily rip out the stake but he doesn't. There are many examples in my life where it feels like there's the illusion of control that like I'm limited by something that in actuality I'm not limited by at all. The stories I'm going to tell you are sort of like elephant in the stake things where you're like, 'Oh, I couldn't possibly do that. Why not? Why can't you do that?' Before I go into like kind of the famous stories of people, you know, doing this, I'll tell you the guy who I was having breakfast with that told me a story like this that got me thinking, got me paying attention to these. So, I was getting breakfast recently with this guy, Martin, who will come on the podcast, Martin Basseri. Now, Martin was like the one that got away for me. The very first angel investment I ever wanted to do. 10 plus years ago, I started making like a little bit of money. I think I was making like I don't know 160 grand a year. Not even that much money. Not enough money to be, I would say, an angel investor, but I wanted to be. I was sitting in San Francisco and I thought that would be the thing to do. I should start angel investing. And I had this kid who was like this 13-year-old kid who was using one of our products and he always used to hang out in the tech rooms and hang out around tech things. He emailed me and he said, 'Hey, I'll be your scout.' So here I was this guy who had never made it at angel investment and now I got a scout and he said I'm going to send you three companies a week and you know you don't have to invest in any of them but it'll just be great practice for me if you just give me feedback on those I'd love to learn.
What age are you at this time?
I'm probably 24, 25 maybe. Yeah.
He sends me this email with the first company and he goes this guy Martin Vizier, he's in Canada where I live and already I'm like I'm not trying to invest in a Canadian company. I want to invest in Silicon Valley companies. He's like, what he's doing is really cool. He's got this company called Applyboard. And what Applyboard was doing is very simple. They were letting international students who, you know, if you've ever lived internationally, the dream of most international students is to come to school in the United States. To go to university here. But imagine just being like a kid in Malaysia with Malaysian parents. And it's like, great, why don't you apply to whatever UC Davis? And they're like, what is UC Davis? Where is that school? How do I apply? How do I fill out this form? Like it's a very like there's a huge gap between where you are and where you're trying to go and you need a bridge and Applyboard became that bridge. They basically made it very easy for foreign students to apply to US universities and what they did they realized it was very smart was that US universities absolutely rip off foreign international students. There's a reason they love international students is because they charge them three times the price to go to school and this to the same school get the same education. So if you're a state school, you'll obviously charge less for in-state tuition, out-of-state tuition. And then there's a third tier called international tuition. It's three times higher. And so he went to the schools and he got the schools to say, 'Yeah, I'll pay you five grand or 10 grand per student that we admit like as an affiliate fee, as a bounty.' So this is like an incredible and the international is dying to go there. So it's not the hardest sell in the world. They just needed a bridge. So I hear this, I'm like, 'Dude, this 13-year-old might have actually sent me a good company.' And I'm like, 'Okay.'
And so I'm like, 'Dude, I think I'm going to do this deal.' And so he comes out. I meet him in San Francisco and I agree on the spot. I'm going to invest 25 grand into this company. And I said it very confidently to him, which is a huge amount of money, by the way.
Your annual savings in San Francisco on $170,000 was $20,000.
Yeah, exactly. I was basically putting all of my like post-tax disposable income into this one random Canadian startup. Well, guess what? A day later, your boy got cold feet. I'm like, 'Oh man, that was a lot. I shouldn't have said that.' I felt stupid coming down. I was like, do I go back to him and say 5 grand, 10 grand? That felt stupid. And you know what I did? I didn't back out, but I just didn't say anything. And like I didn't follow up and he didn't really follow up. And some time went by and then I got unavailable. And then anyways, I missed out on this deal. Applyboard today I think it does over like a billion dollars a year in revenue or something crazy. It's like a multi-billion dollar company. It's insane. I don't know the exact numbers but I know it's a multi-billion dollar company. So huge miss for me on that. That's for the very first possible angel investment.
What was his valuation back then?
Oh dude it must have been like I don't know $10 million or something. Yeah. Five, six. I would have been the first investor in like first Silicon Valley investor in it.
Yeah. It would have been amazing.
So last week I'm having breakfast with him and I've now invested in his new company, Passage, which is doing some amazing things. But I'm saying like, 'Dude, how's it?' I was like, 'How is it like how do you operate?' I was like, 'Tell me like we're having breakfast right now. You're going to go to the office. What do you do?' And he was like, 'I work pretty hard.' And I was like, 'Okay, what does that mean?' And so he's telling me his work schedule. The guy basically like, 'I drop off my kids, you know, 8 a.m. I'm in the office at 8:30 and I'm there from 8:30 to, you know, midnight every night.' And I'm like, 'Midnight? Jesus Christ.' I was like, 'Are you the only one there?' He goes, 'I used to be, but not anymore.' I was like, 'Well, what do you mean? Like, how'd you get people to start staying so late to work like extra like that? Like, what'd you do to inspire them, motivate them?' He goes, 'Option drop.' I said, 'What?' And he's like, 'Option drop.' I said, 'What's an option drop?' He goes, 'At any time in my company, if anybody does something awesome, I just say option drop. 50,000 options.' I just give them share options at the company on the spot. Like if somebody has a great idea, they go above and beyond for a customer. They solve a problem in the meeting right there. Option drop.
It's like Dana White giving out a bonus.
What I'll do, he says it's a bonus, but stocking the company on the fly. And then at night he goes if I'm there 10 p.m. and if there's like let's say 12 people there I'll just say everybody here option drop 20,000 options all of you. He's like I don't do it every night but I'll do it once every you know 50 days. And guess what? It got people to start doing the things that I cared about. They know if I solve a big problem, if I unlock some new growth, if I solve a customer's problem, if I'm working really hard, that's how I get more options. Option drop. And so I'm sitting there and I'm like laughing. So, I'm laughing at him first because I'm like, that's just hilarious. Just the phrase and the way he said it, I just was cracking me up. And I was like, well, of course, of course that would work. Of course, that would reinforce behaviors rather than saying, well, I put our company values on the wall once 6 years ago. I sure hope they're doing it. You know what I mean? Like obviously an in-the-moment incentive, positive reinforcement for a behavior. The more specific, the more concrete, and the more immediate a reward, the more of that behavior you're going to get. That's kind of basic behavioral science. So, I was like, 'Okay, I guess that does work.' And I was like, 'Is that legal? Could you?' I was like, 'I don't know. I just can't feel like you can't just throw around options like that.' He's like, 'Why not?'
He's like, 'I just send a message to my assistant, option drop these people, this amount, and then it gets papered. That's it.'
Well, and it's an option, meaning they still have to buy it, right? So, it's not like it's free money.
Um, yeah. Like this has a strike price. Yeah. So you can exercise the option if you so choose.
But there's that exercise window. You don't have to buy it right away. You can wait if you want.
So okay, option drop was the first one of I was like, oh obviously a way to incentivize the types of behaviors that you want right there on the spot using your company's share options. Can I give you the next one?
Keep going. This is exciting.
Any you want to rate these? Maybe give me a you know give me a you have a very simple let's do gladiator thumbs down, lukewarm thumbs up or double thumbs up. That's your options.
Um not a double thumbs up. So just one thumb up.
Okay. Yeah, that's very effective. Good. Not that like extreme.
I don't do options but because Yeah. Like I just give money.
Okay. Do you do that on the spot?
Okay. But I'm also not the CEO and I'm also not extreme. Like, you know what I mean? Like, I'm not playing that game.
What? The game of trying to win? What do you mean? Of course you are.
Not at the price of being there at midnight. No, I'm more of a...
It doesn't have to be midnight, right? Like that's one. You just decide of the things I care about. Do I on the fly reward the behaviors I want?
We do it via having a gong in the office. And when someone does something awesome, we smack a gong. So, auditory. Well, it's just like because everyone stares at it and you're like, we're going to like celebrate what is happening right now. But no, I don't give up money.
Okay, here's the next one.
Hey everyone, really quick. If you're enjoying this episode on CEO stuff, so delegating, having hard conversations with your team, hiring, then I've got something for you. So, the team at HubSpot, they actually went and put together a bunch of best practices that Shaan and I use in our own companies, and they put it together in something that's really easy to read and understand. And so if you want to just save yourself 10 years of headache and heartache, then you should check it out. I wish we had this a long time ago. It would have helped me a lot. But there should be a QR code on your screen that you can scan or a link in the description. So check it out. It's totally free and totally awesome.
OpenAI, the makers of ChatGPT, they are trying to fight friction. So in every company, there's just a whole bunch of Especially as you grow, and when you're like them, you grow very fast. There's always just things that are just drag in bureaucratic drag in the company. Policies, procedures, you know, potholes, things that just start to trip you up as you're working in the company. Just try to do good work. So, they created what they call the friction removal service. It's sort of like a DOGE idea inside the company, but it's actually very simple, which is there's an email inbox called
[email protected] and you could just email friction with anything that's causing you to not get your job done. So, like, is there something slowing you down? Is there something that's missing? Is there something that's a problem? Anything that's there? And there's a person assigned to the company whose job is to triage everything that comes in there. And if there's something that seems like, oh, that's actually a pretty legitimate source of friction, we should eliminate that. That's going to help our people move faster and then they go and they remove that friction. And it creates a culture of saying like, look, we are going to actively fight the bloat that comes in companies that grow really big and grow really fast by having a janitorial crew for bureaucracy. I was like, 'Oh, I kind of love that idea.' So, yeah, that's brilliant. Give me a score.
Two. Just two. Am I allowed to do two?
Yeah. Yeah. Double thumbs up. All right.
What a Caesar would never do that, but that's okay.
It's sort of giving like Chuck E. Cheese instead of Gladiator.
Uh, no. Two, because that is like less heroic and more systematic. Yeah, I'm totally on board with that.
All right. Next one is one-bit communication. So, do you remember this app, Yo, from back in the day?
