No one is born a good CEO. I think people are basically born good founders, or said differently, it's innate. You don't have to learn how to be a good founder. The job of CEO is completely counterintuitive and almost all of your intuition about what to do is wrong. We founders were taught to learn by doing, and that's great for a founder. It's not good as a CEO. You do not want to learn on the job how to be a CEO. And so I learned the hard way, and it was really about not apologizing about how you want to run a company, being in the details.
Before we hit go here, we were talking about industrial design, which you studied at RISD. And I have this weird affinity for the history of this topic just because Raymond Loewy, one of the famous industrial designers, helped me a lot in my career indirectly. I'd love to hear you just riff on the influence that guys like him had in your early studies and why you studied that in the first place. Such an interesting background.
I went to, I was an artist growing up, but I didn't know what to do with my life. And I went to the Rhode Island School of Design and at RISD when you're a freshman, you have to pick a major. I'm 17 years old and I'm like, 'Okay, in three months I have to decide what I'm going to do the rest of my life.' And there were 18 majors. And I remember the department head for industrial design came. I never even heard of the term industrial design. I don't know what it was. And they said industrial design, design of everything from a toothbrush to a spaceship and everything in between. I immediately said that's what I want to do with my life because I was thinking of maybe being an architect or something like that. And so I started learning about industrial design and I learned about Charles and Ray Eames, Raymond Loewy. Raymond Loewy, probably the most important industrial designer of the 20th century. Designed so many incredible products. His first design, Air Force One. He designed like, you know, a lot of like consumer products, very beautiful consumer products. He had a profound impact, I think, on society. And as I was studying the history of industrial design, it was so incredible because industrial design field is a deeply technical field. The thing about architecture is fairly technical, but it's a more known boundary. Like there's buildings and there's commercial, there's residential, there's retail, there's only so much variation. It's a multi-thousand-year-old like field. Industrial design for the most part really started with Josiah Wedgwood. It was like it's really the mass industrial products. So, industrial design is really new from the industrial revolution. And it used to be analog things. The first industrial design was chairs and tabletop dishes and bowls. But as technology grows, suddenly industrial design becomes cars and airplanes. And now you have microwaves and refrigerators. And then eventually it becomes like medical equipment. And then you know with computers the most famous industrial design probably in the world is the iPhone. And the vastness of industrial design is unbelievable. The intimate relationship you have with a product is incredible. I remember in, I grew up in the 1980s. I love video games. I like, I played with a Game Boy, a Game Gear, Super Nintendo. These devices or remember Nike in the 80s and 90s. Those sneakers that were the Reebok pumps. These products captured kids' imaginations and they had a very intimate relationship with you. They really had a sense of personality and computers in particular were something I was really really interested in. And then of course you get to the golden age of Apple starting probably in 1998 with the iMac and Jony Ive who was like my hero. So I went to RISD and when I was at RISD Apple was the golden age of industrial design. They really educated the public about design. Once they're educated, they couldn't unsee great products. And that really like captured my imagination. And what I loved about industrial design was a, it was very technical. You work with mechanical engineers, you work with electrical engineers. B, here's the thing about industrial design. It's almost different than any other design. This is also true of fashion design. A design is only successful if it sells. So if we design an office building, like architects can win awards in their office building and it can never get leased. You can design a house but no one looks at well what was the retail value of the house. So the awards are detached from the commercial success. If you design a product and no one buys it, it's considered a failure. And so because the commercial success matters, you have to think about marketing, manufacturing, distribution, solving problems. It's not just about winning awards. It's about being viable to a customer. The other thing is it's very much a problem solving field. It's got so many different boundaries and it's very much about empathy, about user journeys. You know, more than I think any other design field, I think industrial design always seemed like it was the kind of field where you put yourself in the shoes of the user and you design these user journeys. And I think they really teach industrial design through user journeys. I don't think they teach graphic design that way. At least they didn't at the time. It's a very specific type of field. And I think that really prepared me for designing. I just to give you one example. One of the projects I designed when I graduated RISD was a child's ventilator. And so instead of just thinking about like a child's breathing machine, instead of just thinking about the design of the ventilator, one of the projects I had to do was imagine being the child in a hospital. And so I had to imagine being a child. It's hard to do, but you're 6 years old. Imagine you're being six and you're scared. You're looking up at a breathing machine. And imagine the parents, the parents go in and the parents are like, 'Is my child going to be okay?' If this breathing machine seems like ominous and like it's keeping you alive, the parents are going to freak out like what's wrong with my child. The other thing is I learned that one of the interesting things that happened was the nurse technicians, they had no problem that these things were complicated. But the hospital wanted a breathing machine that was so simple that everyone can learn how to use it. Except the nurse technicians had pride that only they knew how to use it. So you had to like weigh the stakeholders. How do you design something from the vantage point of a child? Consider how would it imbue to the parents? How can it be universally useful for everyone without threatening people's jobs? You see, there's so many dimensions and that just I think really prepared me for this field and I think it's there's a reason why I became a CEO because there's no product managers in industrial design like you are the PM. There's industrial designers and there's engineers and there's program managers. So, industrial designer is the product manager. So a design product is one function.
Do you think the world's going to go that way now? You were obviously famous for helping usher in this founder mode idea. It seems like there's now, that was kind of pre-OpenAI 4.6 or whatever. There's like another layer to that now. I'm curious what we would call it. But it seems like for the first time again someone even like you running a very large company with lots of people can disintermediate lots of the steps between idea and outcome and this design stuff maybe even more applicable than ever. What is the new mode like? Like how would you describe, because everyone's trying to figure out how do I run a company in this era? So how would you describe the new capabilities and the mode through the lens of this?
I mean basically yeah like founder mode was something that Paul Graham coined but based on experience I had and the experience I basically had was like I felt like I was a, just to back up I think people are basically born good founders or said differently it's innate you don't have to learn how to be a good founder no one is born a good CEO and the job of CEO is completely counterintuitive and almost all of your intuition about what to do is wrong like you listen to somebody and you're like they tell you something you want to agree with them and then you got to be careful know if you agree with them without getting the other side. You know, like there's a lot of things that are counterintuitive about being a CEO. And so the problem is we founders never were really prepared to be great CEOs. And I think we founders were taught to learn by doing. And that's great for a founder. It's not good as a CEO. You do not want to learn on the job how to be a CEO. In other words, trial and error is bad for CEO. You know why trial and error is really bad? Because you hire somebody, they build an empire, they leave, and now you got to unwind their empire. And it takes like four years. So, you've wasted years. So, actually learning how to be CEO is something you should learn. And so, I learned the hard way. And I basically learned that what happened was founders were overdelegating their companies to these professional managers. I'm not disparaging them, but they were detaching themselves and they were being managed rather than managing the company. And it was really about not apologizing about how you want to run a company, being in the details. That was founder mode.
Was there a moment that that like clicked for you that you had to change the mode?
Yes. The pandemic. Two things happened. Actually, speaking of Jony Ive, Apple, and another person named Hiroki here. So, I spent the 2010s riding a rocket ship. Airbnb, Uber, a few of us. We went on these crazy rocket ships that like, you know, OpenAI, Anthropic are doing now. It was awesome. It was amazing. But by the end of the last decade around 2019, I remember waking up one day and it was like completely unrecognizable the company I was running. I mean, I had like 7,000 employees. I didn't know what anyone was doing. I felt like I was in a car without a steering wheel. And I just could not turn the company. I was like, 'Turn left.' And the company would go right. And actually, not only did I feel like I was not in control, I don't think anyone felt like they were in control. It was just a free-for-all. And it was just thousands of thousands of decisions being made for me. Me overly deferring, not listening to my intuition. And I got to this point where I remember having this dream where I, and I told my co-founders, I had a dream in late 2019 where I felt like I'd left the company for 10 years and I'd come back and I was like somebody had been running the company for 10 years and they like kind of turned it into this like giant political bureaucracy and I didn't even recognize the company and then I realized, oh my god, it was me the whole time. And so it was my fault. Like I had actually enabled all this to happen and then I started talking to people and they all had the same experience and all these founders felt like we were all made to feel crazy because you know we had this instinct. The pandemic was what it was. So around the same time as the pandemic I hired a guy named Hiroki Asai he was from Apple and he told me about how Steve Jobs ran Apple and Steve Jobs when he came back to Apple in 1997 in July of 1997 there were nine days from bankruptcy and he basically just like went into founder mode. What you call founder mode. He got into the details of every little detail and I wanted to do that but initially the company braced against it. It was almost like this, it repelled against it and then the pandemic happened and we lost 80% of our business in 8 weeks. We were in total crisis mode at that moment. I went from peace time to wartime and then I just totally took control of the entire company and I just never let go. Basically what I did is I reviewed every single thing for two, three years. I worked like 100 hours a week, reviewed every little detail of the company. My vision wasn't do this forever. My vision wasn't to micromanage forever. My vision was before I empower people, I need to know what's going on. This notion that great leadership is hiring great people and trust them to know what to do. Well, how do you know they're great if you're not auditing what they're doing? And you actually want to start hands-on under control and give ground grudgingly. Everyone does the opposite. They let go. They hire someone. They go in the wrong direction. And by the way, that's bad for the leader. You're not training them. So to bring it back to your question, that's founder mode. We need AI founder mode. AI founder mode is going to be even more intense than founder mode. I'm not yet ready to tell you what that is. I'm in the middle of it.
What are the principles that you're thinking about as you go into it? Like even if you don't have it ironed out yet,
I think AI founder mode, you're even in significantly more details because you have almost everything on demand, right? Like the mechanism of founder mode was I had a lot of meetings because that was the only way I get information. So I probably did 35 hours of meetings which is very similar to the way Steve ran Apple. You know so I wouldn't do one-on-ones. I'd only do group meetings. I'd do a recurring thing where I review every single thing in the company either on a weekly basis, bi-monthly or quarterly live in person group meeting and I'd have a full chain of command. So I used to tell people like you know a lot of companies you have to like get your boss to approve it and your boss's boss to approve it and your boss's boss's boss to approve it. I'd have the full chain of command in the room and anyone can give their opinion. I would make all the final decisions. I would not speak first. I'd usually speak last and I'd usually agree with the team, but 10% of the time I'd disagree, but I'd ratify every decision. It was a very clear chain of command. But this is a meeting based culture. I think in AI, I think we're going to move away from meeting based to asynchronous and we're fairly remote and so I think that will benefit us. I think you're going to have a lot fewer layers of management. You know, I think there was an old famous saying, the Catholic Church has been going on for 2,000 years, only have four layers of management. Why do every other company have like seven, eight, nine layers of management? I know there's this like general idea like as a thought experiment, what if I could theoretically manage all 7,000 people flat? I don't think that's a good idea. I think that's an extreme, but I do think going to a few layers of management would make a lot of sense. We're in the, I'm in the middle of trying to think about how to redesign the company. I think every single person in this company's job will change. What I'm amazingly doing now is trying to get people to adopt AI tools and I want to see how everyone's job changes in the world of AI tooling and then I want to basically embark on like a fundamental redesign. I don't think people managers will have any value in the future. When I mean people managers, people that only manage people. I think everyone's going to have to be a hybrid people manager or manager IC.
Meaning they have to have contact with reality in some sense like a thing a customer end up seeing or
Yes, an engineer, they have to be technical. In other words, they have to be, every engineer needs to code. Even the managers need to code and whatever the version of that is for your field, you need to code. So, if you're a lawyer, you're just not managing people. You have to actually read the case law and you have to get involved. And that makes sense, right? Like you can't just be like these managers where you're kind of people's therapists and you're just doing meetings, you're doing one-on-ones. Like I do not think people who have lots of recurring one-on-ones are not going to survive because what they're doing is like that. Oh, you come with me with whatever your problem is. I'm here to help you. Like a mentor or professor. That kind of leadership style is not going to work. You need to have context. And I think a lot of people will survive this age of AI. The two types of people that will not survive the age of AI are two types of people. Pure people managers who like think it's all about just leadership. No, it's about content and leadership. And by the way, like I hear about design leaders that like the heads of design, they don't actually manage the design. Jony Ive manages design. He designs and he leads people. A design leader who only manages the people. That's crazy to me. The way Frank Lloyd Wright managed his design team is through the work. I say you manage people through the work. You don't manage the people, you manage the work. Otherwise, what are you doing? I mean, yeah, like maybe a couple times a year you should have like a check-in and go out to dinner with a direct report, have a heart-to-heart, ask them about their family, like build relationships. You should do that. You should have relationships. That's not a day-to-day thing. You're not their therapist. You're managing people through the work. So the two types of people will not make the shift to AI are pure people managers and people that are rigid and don't want to change and evolve. As long as you're like got a growth mindset, I think the tools are going to be very easy. There's an economic incentive for the tools to be so easy everyone can figure them out. So I don't think the AI tools are going to be complicated. Right now there's a lot of command line. I think Claude and Copilot are not the most intuitive to an average person, but I think economic incentives will be for this to become incredibly intuitive. And I think maybe one last thought is AI is really an enterprise thing right now. If you take out ChatGPT and like people screwing around like image generation, it's pretty much just an enterprise phenomenon. I'm on the board of Y Combinator. 175 companies last batch. 159 were enterprise. There are no consumer companies. Because there's no consumer companies, the incentive to make the interfaces really simple is not there because it's their job to figure out the interface. The next wave of AI is going to be consumer AI. Consumer AI is going to be the big prize. Can you think of a consumer AI company? You know, maybe OpenAI, but most their energy is now going to Codex. Google, yeah, with Gemini, but most of it's still going to search. They don't want to cannibalize their business. So, I think that's where it's all going to go. And I'm trying to start thinking about AI as a consumer play and how do we make tools so simple that everyone here can figure out how to use them.
Most software companies try to maximize your time on their app to juice engagement. RAMP does the exact opposite. RAMP understands that no one wants to spend hours chasing receipts, reviewing expense reports, and checking for policy violations. So they built their tools to give that time back using AI to automate 85% of expense reviews with 99% accuracy. And since RAMP saves companies 5%, it's no wonder that Shopify runs on RAMP, Stripe runs on RAMP, and my business does, too. To see what happens when you eliminate the busy work, check out ramp.com/invest. Felix by Rogo is a personal finance agent that turns a single prompt into finished client-ready work using your firm's own templates, context, and standards. Send Felix an email like, 'Take these comments and turn them for me.' Or, 'Update my tracker with the context of these emails.' or run the ability to pay math on this buyer and Felix sends back finished PowerPoint decks, Excel models, and sourced research. Felix works the way your team already does, delivering work quickly and accurately around the clock. Learn more at rogo.ai/felix. OpenAI, Cursor, Anthropic, Perplexity, and Vercel all have something in common. They all use WorkOS. And here's why. To achieve enterprise adoption at scale, you have to deliver on core capabilities like SSO, SCIM, RBAC, and audit logs. That's where WorkOS comes in. Instead of spending months building these mission-critical capabilities yourself, you can just use WorkOS APIs to gain all of them on day zero. That's why so many of the top AI teams you hear about already run on WorkOS. WorkOS is the fastest way to become enterprise ready and stay focused on what matters most, your product. Visit workos.com to get started.
It's surprising that so few have tackled consumer. So many of the biggest companies in history are consumer companies. You built one of the great consumer companies of the last generation of companies. What advice would you give to people that do want to build consumer businesses using this technology? Like if the next batch of YC startups were to invert because of your advice what would you tell them? How would you guide them?
Yeah, this is really interesting. Here are the three or four reasons I think it's happening. Number one, I think a lot of people when ChatGPT came out were afraid. They're afraid ChatGPT was going to kill their business. And I think a lot of investors didn't want to invest in something where they thought ChatGPT was going to kill it. Number two, the business model is tricky. ChatGPT, there is no yet consumer business model for AI that I've seen. For example, ChatGPT, there's three ways it can monetize. Subscriptions. Unfortunately, they're probably going to hit a local maximum percentage of users subscribing because Claude and Gemini are giving away for free. Ads, again, they're hitting a local maximum because Claude, Gemini are not going to do ads. And then e-commerce, they shut down the third party apps. And the inference costs are expensive enough that, you know, it's just they're burning a lot of money. And so, I think the first thing is you need to have a business model around consumer AI. You can't just be in a business of information because people are not trained to pay for information. They're not trained to do that. So that's the first problem. The second problem is distribution is mature. Now again, top three apps in app store are AI. So it does prove you have something revolutionary. You'll find your way to the top. The third thing is while I think Silicon Valley we like to describe ourselves as rebels. I think and maybe it's a little bit like the always on nature of Twitter. I think it's very trend based and vibe based. I think there's a sense that like everyone, there's a little bit of like everyone kind of does what everyone kind of does. That makes sense. I think the trend is enterprise. The other thing is with Y Combinator and this is, I'm on the board of Y Combinator so I have a good, like we tell entrepreneurs get other YC startups to be your first users. It's a really great distribution strategy right like the way we got our first users is you do things that don't scale. Now what happened was that has taken the logical extension that everyone just keeps making enterprise companies. Maybe finally the reason people aren't doing consumer companies they're just harder. They're more hits driven. The prize is bigger but the risk is higher. It's more all or nothing. You can pick a narrow vertical build a good medium to large size business. It's pretty straightforward. You can get other YC companies to adopt it and you can grow into larger and larger enterprise. You can pick a sliver vertically integrate with AI. It's very straightforward. It is much more hits-driven business. You have to be good at a lot more things. You generally have to be better at design, marketing, culture, press. Like it's not purely, you know, technology and sales, which is what I'd say enterprise is like you make a product, it can be a technology based product. Often times in enterprise, the person using the product is not the person buying the product. And so sales becomes really important, but you can start sales really small with smart companies. It's really hard to figure out how do you start small consumer like who do you start with on the street? So I think these are the reasons why my prediction is that we're living in the age of enterprise AI and I think in the next 12 to 24 months you're going to see the beginning of a consumer AI renaissance.
I mean almost every app on my home screen has not changed fundamentally since AI including Airbnb and
I think that's going to change in two years.
Yeah. On your most recent earning call, you referenced this thing, Project Hawaii, I think it was called, which is like the on the ground direct application of the soon to be defined founder AI mode or whatever. Maybe just describe what that is and how you as an incumbent consumer company are trying to make yourself into one of these AI companies and sort of like what's possible with a project like this.
This is such a great story. So, you know, I had this conundrum. We had like 7,000 people or we were down to 5,000 and I needed to, I wanted to like basically take the magic of the founding of the company, the early stages. We were in this little apartment working together and I wanted to work with like this team of 10 people and I wanted to like have that team work on one problem. We said let's put a team together to focus on improving the guest experience, improving conversion rate. Conversion rate is basically search to book. The conversion rate of people typing in a location and dates and booking and there's a funnel and you can basically measure the funnel and you can do AB tests. But more than AB testing, I wanted to do something where the north star was let's make the experience better and increase conversion. We're going to start with a better user experience. And so we put together a team of like I think it was like 10 or 12 people, designers, engineers, a couple product people, data scientists. This is mostly just a pure software team and we treated it like a little startup and we said we're going to just focus and we're going to do a system of crawl, walk, run, then fly. Crawl, fix the bugs, fix the problems of conversion. Once you build a little bit more confidence, walk, start to develop features like really start to reframe the journey, then run, rethink the entire flow, big features, fly, like completely reinvent yourself and everything is going to be measured. The team's results were phenomenal. They ended up delivering the equivalent of I think in year one $200 million in internal revenue for the company. The following year was like $400 or $500 million. Now, you know, we're at a run rate of like over 600 basis points. 600 basis points of 134 billion dollars. You get the sense of how much of a lever that is. It was just one team. I mean, it maybe it grew into dozens and dozens of people, maybe 50 or 60 people. But it was this really lean team. We took that team. We said, what if we apply to the next problem? Pricing. Same people, another team, totally different team, same model, then another model, then another model. So it was really and I really tried to work with a team and initially I would meet with them every week and then it became every other week and then every month and you know my general philosophy is start really hands-on and let go over time. It's like I'm not a golfer but like I took a couple golf lessons like a golf instructor. Here's an analogy for management. If you learn golf, you want to learn with a golf instructor before you build any habits because if you learn on your own, you're going to like have a weird swing and then when you get a golf instructor, they got to change your muscle memory. So the golf instructor's got to watch you swing like thousands of times. Eventually, they don't need to see it. You let go over time. What most founders do is the opposite. They develop, they bring these people in, they let them figure it out, and then they intervene later, but they already have the wrong muscle memory. So, I decided I'm going to be totally hands-on. I'm going to do everything with a team, teach them everything I know and let go. Then do it the next team. And then I had teams learn from other teams. Then when we launched services, experiences, we basically found this other way of innovating. So here's a riddle or it was a riddle to me. Airbnb, we had this core business that was really successful. It did nearly a hundred billion dollars a year in gross sales. For every thousand dollars spent in the world, $1 was spent on an Airbnb. Except we had the problem of we're like a one-hit wonder. And for 18 years, I couldn't get a second hit out. And I kept wondering like why is this not working? And the answer is like too obvious. It was staring us in the face. But we kept having the burden of trying to scale these businesses at a global scale from the beginning. When we started Airbnb, we started in one city, New York City. We had 100 users. I was in Y Combinator. Paul Graham goes, 'Where are your users?' I'm like, 'They're in New York.' We have like not many, but they're in New York. He goes, 'You're in Mountain View. Users in New York. What are you doing here? Go to New York.' We went door to door meeting the users. The basic philosophy is make the problem as small as possible. Get to product market fit, then scale. So, we launched services experiences last year and it didn't work right away. And I'm like, 'Oh shit.' We launched services experiences a hundred cities. And I went back and I thought to myself, 'Wait a second. Airbnb launched in New York, Uber launched in San Francisco, DoorDash launched like Palo Alto. Let's make the problem small and just perfect a city.' And so we started doing this with new businesses. We basically go to any new business, we're going to do one to ten to many. We'll pilot in one market. Any idea if we get the market to work, we'll go to ten. You get to ten, it works, we'll industrialize. We took us 16 years to get to our second and third business. We started getting those two working. Now we have like 10 to 20 pilots. Eventually we'll have 50 to 70 new verticals. So these are the, this is like the Hawaii system. It's basically taking this giant company making it a really small elite team. So the Navy, it's like the Navy Seals. I work with the teams really really leanly. Make the problem as small as possible. I think that's a key thing. Make the problem as small as possible. Dominate a niche. Peter Thiel used to say this. He was one of our first investors. He said, 'It's better to have a monopoly of a tiny market than a small share of a big market.' This is counterintuitive. Every investor wants to go into big markets. I don't like big markets. Big markets have a lot of competition. Go into a small market and make it big.
Is the reason for both of these things, the idea that it works in Toronto, but not at 100 city scale, and the reason a 10 person team can outperform a 100 person team, is this the shared reason some sort of like better contact with reality? And like somehow reality starts getting distorted as you get bigger or something.
The general principle, this comes back to the most important piece of advice I ever got. The first day Y Combinator, Paul Graham said, 'It's better to have 100 people love you than a million people sort of like you.' And that came from Paul Buchheit. Paul Buchheit was a partner Y Combinator. He created Gmail. And I think that this old famous story was he created Gmail and it took him two years and they said, 'You can't ship until 100 people inside of Google loved it.' And actually took like two years to get 100 people to actually like the product. But once 100 people like something, 100 million people like it. It's like the sample size is enough. And so the problem is you try to make something a million people like, you can't talk to a million people. And so you end up like with this shallow swimming pool, it's like you're trying to heat up an ocean. And the ocean just it takes too long to heat up and you can't tell. Instead of heating up an ocean, heat up a bathtub and like just make the problem as small as possible and you're close to the customer. In fact, if you only are focused on one city or even a subset of city, you can talk to every person. You can put all these resources on a tiny problem. And I guarantee you take a ton of resources you put on a tiny problem. The smaller the problem, the more you'll change the numbers, the trajectory and that will teach you lessons. And there's you do things that don't scale, then you scale. And the scaling is industrialization. But product market fit is a distinct problem from industrialization. So you want to basically make the promise as small as possible. Understand the user. Put yourself in their shoes. Blow their mind. Do things you've never thought before. Do them by hand. Make them unscalable. Don't worry how much it costs. Just prove the model. In other words, it's like R&D. This is a lot like industrial design. This is what we call prototyping. Before you manufacture something, you prototype and you make prototype after prototype after prototype and until you make something that you love for yourself or someone loves. So yes, the smaller the problem, the more there's fewer abstraction layers. You're actually on the ground. You're talking to people and that's how you prove it. Hawaii to these pilots. It's all the same thing. By the way, same thing with AI. You're removing abstraction layers and you're making the problem as small as possible. You're going directly to the source. I think that's a principle that all these things have in common.
It's like we're playing this game of telephone.
Yes. Yes. And you just lose information each time communication. And this is why founders don't like running large companies because they end up in a game of telephone. They say something and then it goes down like five layers and then it goes back up five layers and then these like meetings and the meetings become like system reviews and literally like the lowest point for me when I was having meetings about meetings. It was like very meta.
You've gotten into this new mode. It's called founder mode. It's now called CEO mode. Do you think you're now a good CEO?
I think I am. I think I was naturally a good founder although I would say I also got really lucky because I had two great co-founders and damn did I luck out on that. I think I was a very good early stage CEO and I think the moment I had to have like an executive team I really struggled to make the shift from a founder to CEO. I really struggled and I think in the 2010s I do not think I was a great CEO and I think that we paid the price for my learning curve and I think the pandemic was a rude awakening for me. I think I was conflict averse. By the way, somebody once said a pitcher never takes himself off the mound. As a manager, you got to go take them off the mound. I was always helping people, I didn't want to hurt people's feelings. I wanted them to take them off the mound. And the longer you leave a pitcher on the mound, the more home runs they give up, like the more upsetting they're going to get. And they're still going to be angry at you no matter when you take them off the mound. So, I don't think I was naturally a good CEO. And I remember during the pandemic, at one point, I wonder, I wonder if I'm just not meant to be a CEO. Maybe I'm not meant to do it. And then the pandemic happened. We had a near-death experience and I said, well, there's no, I don't like, I'm screw the rumination. Like, it's do or die. And I feel like I learned how to do the job. And there's really a few phases of CEO. Have an idea, get to product market fit. Product market fit to hyper-growth. Hyper-growth scale to become a real company. Real company as in profitable, public, like, and then the last stage and I did all that, you know, we have like 40% free cash flow margin. We're very profitable. We do a hundred billion dollars in sales, customer sales. The last phase of a CEO is reinvent the company, product extension and the reason our stock has been flat is because we only do one thing and we've started to saturate a little bit of the core idea so we've had to reinvent ourselves we had to do product extension so I still got to prove myself and then there's another proof point can I navigate this transformation of AI. By the way I think founder mode is going to be the only way to operate in the age of AI. If you're a giant professional CEO, I think you can operate in a founder mode, but if you're like, you know, risk averse, you want to be incremental, those types of people are not going to survive the age of AI. So, I think there was an old Albert Einstein quote. He said, 'The best way to keep your balance on a bicycle is to keep moving.' You're going to have to keep moving. So, I think that like founders are going to be really well primed or like really well set up for this age of AI because we kind of have to redesign our whole company from scratch again.
Was there anything else that Hiroki, is that Hiroki, that taught you? Because Steve was perhaps the literal ultimate example of everything you just said focused on the details in the weeds forever reinvention of the company.
Yeah. Hiroki. So just, I would love to say and before I say just to say who Hiroki is, everyone knows Jony Ive. Hiroki is a bit of an unsung hero. I always heard about him. He was like this legendary mythical figure that like was elusive. There's like almost no photos of him online. There's like no videos of him. He was never out in front, but he was Steve Jobs' creative director. It was a function under marketing. He did the ads. He did like the graphic design. He was really responsible for, you know, when he was like that black type with the gray font and like the product in front of white. Like that was really his aesthetic. He taught me two principles of Apple that I brought. One was simplicity. When you start a company, because you have no money and you're so constrained, you're naturally simple. Lack of abundance creates natural constraints and so simplicity is thrust upon you and that is good for you and then once you raise a bunch of money and hire a bunch of people you go to a lot of directions then you lose your sense of focus. How many startups can we think of today who have struggled from lack of focus probably name a few. So you start to lose your muscle for simplicity. Hiroki taught me simplicity and he taught me that simplicity is not removing things. Simplicity is distilling something so fundamentally that you understand its essence. I know Steve used to say design is the fundamental soul of a man-made creation that reveals itself through subsequent layers. In other words, isn't that a beautiful saying? In other words, great design is about distilling something to its essence. It's kind of what Elon does with SpaceX where he talks about first principles and first principles is kind of like a physics term but is also a design term. It's about understanding if I'm going to reinvent this product, I have to understand the properties of glass. I have to understand like, you know, I have to understand everything about it to distill it to its essence. So I got obsessed with simplicity. Simplicity of our products, simplicity of our organization, simplicity of everything. The other one was a sense of craft and details. How you do anything is how you do everything. And I said everything must be perfect. It comes from there's a book that a lot of people in Silicon Valley recommend. The Score Takes Care of Itself. Bill Walsh, the coach of the San Francisco 49ers, John Wooden, winningest coach in college basketball history, UCLA, same principle. First day UCLA. So John Wooden won 10 NCAA championships over 12 years. First day, first hour in his team, he spends an hour teaching you how to put your socks on. One hour and he said, 'Put your socks on this way.' Mr. Miyagi. Yeah. One hour teaching you how to put your socks on. It's a metaphor. Everything was that rigorous. Bill Walsh said the way you tuck your jersey into your pants was one of 10,000 details that depend on whether you won or not. Basically, don't focus on winning. Focus on getting all the inputs perfect. And you get everything perfect then you will win and you don't focus on the scorecard. And so we kind of, we do focus on growth, but we kind of stopped focusing on growth. We started focusing on making everything perfect. And if everything is perfect and you don't grow, then you focus on the wrong inputs. But if you have the right inputs and you make them perfect, then you'll grow really fast. And so that's really what I learned from him. And I just, he really taught me I think founder mode because I never met Steve. So I only knew through Hiroki. And I said, 'Well, I love this. I'm an artist. I'm a designer. I get to have more control of the product. I get to make everything perfect.' The initial attempt at founder mode created giant revolts. Everyone hated it because everyone thought I was micromanaging them, taking their... and I learned something fundamental. Initially, everyone hated it and by the end everyone loved it. Now, the people that hated it left. So, maybe there's like selection bias. The people that liked it stayed. But even the people that thought they wanted autonomy and independence and empowerment. What they didn't realize was control and power is not zero sum. It's not like if I have all the power, you don't. There's a scenario where we're all powerless. And there's also a scenario where if I have power, I can therefore give you power. It's not zero sum. This is the problem people don't understand. If I have more power and control, I can give you more power and control and I can hand it off to you. It's about the idea that the car has a steering wheel. You turn it left and it actually goes left. That's the basic idea. I do think it's all about the company rowing in one direction. That's it.
The thing that you've said historically that had the largest impact on me was this notion of the 11-star experience, the exercise of going from not a five-star but a six-star and actually forcing yourself to write it. And I have this idea in mind because of this idea of simplicity and distillation and it's a beautiful thing, right? It's I guess it's ultimately empathetic with the customer. But why is that idea in practice so powerful? Like what happens as you go down or up the star count to 11 stars? Like why is that such a valuable exercise?
Let me do like a one minute on what it is. So basically when you book an Airbnb most people leave a five-star and if you leave a four star it's a bad experience. Five star everything went as planned. So it's called review compression. Similar to Uber you always leave a five-star. And if you leave anything other than a five star something really went wrong. So but what if the driver was really amazing you can only leave a five-star. So I started imagining what if we could give a six star and I did this exercise from six to like 10 or 11 stars. So, a five-star, let's say take one moment checking into Airbnb. Five-star check-in is you get there and the host greets you or there's a door code and it works. In other words, nothing went wrong. You give a five star. Anything went wrong, you give a four star less. But that's review compression. Like what if you went above and beyond? So, what would a six-star look like? A six-star would look like you basically get to the Airbnb and there's like your favorite wine on the table and there's like fruit and there's snacks there and there's a handwritten card. Okay, that's better than just letting me in the house. So, what's a seven-star experience? Seven-star experience, there's like a limousine or something waiting for me at the airport. They know I like surfing. There's a surfboard waiting for me and they're like showing me around the city. There's all this stuff. So, what's an eight-star experience? An eight-star experience, I get to the airport, there's an elephant. I go on the elephant. I go on a parade in my honor. I'm like, 'Wow, I feel really special.' What's a nine-star experience? I call it the Beatles check-in. I get off the plane and like 1964 Beatles. There's 5,000 teenage girls screaming my name with cards making me feel like I'm a pop star. I get to the front lawn of the Airbnb and there's a press conference in my name. So, it's a 10-star experience. 10-star experience. Elon Musk greets me and takes me to space. Right. And the reason you do this and it's an exercise. It's an exercise in the absurd. There is you keep pushing to go so absurd to 10 stars that suddenly six or seven stars doesn't seem crazy at all. And the way to get to product market fit is to just create a six or seven star experience. But you can't create a six or seven star experience without going beyond. In other words, go beyond the edge of reality and work backwards. And so it's kind of a fun exercise. You, what would the craziest possible way to blow someone's mind, one person's mind, one customer, and maybe try that and maybe you can't scale that because that's like an eight-star experience, but you can probably scale a six-star. And that difference between the five and six star is probably the difference between you and a competitor. And if you can find a way to industrialize it and scale it, you might have product market fit and something special.
One of the things that I think about when you give some of the absurd examples at the high end of the range is this feeling that I've experienced with AI that my imagination had almost atrophied. That by using these tools, I realized how hard it was. Like, oh, I can make anything. And I sit down, I'm like, I have no idea what to make. And that as I started making little things like all of a sudden my imagination got rebooted and it feels like this exercise is like an imagination exercise.
