CS183C Session 18: Brian Chesky

Chris Yeh
Chris Yeh
Nov 20, 2015 · 18 min read

Today’s special guest was Airbnb co-founder and CEO Brian Chesky, who sat down for a fireside chat with Reid Hoffman. You can watch the recorded video here.

Reid: “I think Airbnb is the most interesting of the up and coming unicorns. I learn things from him all the time.”

Q: Start with the story of Airbnb.

A: Many people have called it “the worst idea that ever worked.” I actually went to art school — Rhode Island School of Design. Growing up in upstate New York, I don’t even think I heard the word entrepreneur. Both my parents were social workers. My mom was worried that I would never make any money. All she wanted was for me to get a job with health insurance.

Growing up, you don’t get rewarded for disrupting things. You end up in the Principal’s office. Where I was. A lot.

In design school, you’re taught that you can change the world. There, I met my co-founder, Joe Gebbia. After graduating, I was working for an industrial design firm in LA. Joe convinced me to quit my job to start a company. I drove up to San Francisco with $1,000. Joe told me the rent was $1,150, so I didn’t have enough money to pay rent. But there was a design conference in town, so we decided to create a B&B for designers. We didn’t have any beds, but we did have three airbeds from a camping trip, so we inflated them and rented them out. We hosted three people — a 35-year-old woman from Boston, a 45-year-old man from Utah, and a 30-year-old man from India.

When someone stays with you, it contracts the normal process of friendship into days. The three guests became friends; the guy from India invited me to his wedding.

We spent the four months after the conference building a roommate matching service, then we saw Roommates.com and realized we’d wasted months.

We had this core idea: What if you could book someone’s home the same way you book a hotel room?

I went home for Christmas, and because I didn’t want to say I was unemployed, I said I was an entrepreneur.

Reid: My first startup was SocialNet, and it included a roommate-matching service.

Airbnb wasn’t the big idea. We thought it would help pay the rent until we got the big idea. It turns out that the crazy little idea turned out to be the big idea.

Someone told me, “Don’t worry about someone stealing your idea. If it’s any good, everyone will dismiss it.”

Q: Talk about the early days.

A: We’re one of the companies that launched a bunch of times. If you launch and no one notices, you can keep launching until you get customers. We’d change the name and launch again!

The first launch was that weekend. The second launch was “Air Beds at Conferences.” We launched at SXSW, and I was one of the two customers. Eventually, we realized that you didn’t have to have a conference or an air bed. We actually forced people to inflate air beds and put them on top of real mattresses!

We decided to do direct payments (instead of sending people to PayPal).

We had a rule: “Three clicks from a paid booking.” We created a home page with a search bar, and that’s essentially the product we have today.

At this point, I get introduced to about 15 angel investors. We were raising $150,000 at a $1.5 million valuation. Of the 15, 7 or 8 didn’t even reply to the email intro. Of the people who replied, half said we didn’t fit their criteria. Of the people we met with, all of them rejected us. I went to pitch Mike Maples, and didn’t bring a deck. I figured I’d just show him the website. That day, we were covered in TechCrunch and the website didn’t work. I sat there for an hour, trying to explain what we were doing. Always have a deck.

You know those sleeves for baseball cards? We did that for credit cards. Joe and I were tens of thousands of dollars in credit card debt.

We decided to target the Democratic National Convention. We talked with anyone who would listen.

We got about 80 bookings to the DNC. The following week, we had no bookings. If only there were a political convention every week, we’d have a business!

This was rock bottom. We’re in debt, we don’t know what to do. It’s late at night, and we thought, “Air beds aren’t working — maybe we should get into the breakfast business!”

We made our own breakfast cereals — Obama-Ohs and Cap’n McCains. We found a RISD alum in Berkeley who agreed to print the cereal boxes for free, if we got a royalty. We folded 1,000 boxes of cereal. We ended up selling $30,000 of cereal, and that founded the company.

In November 2008, we were back to almost broke. We had a couple of customers per day. Everyone thought we were crazy. My mom told me, “If you need money, you don’t have to let strangers live in your home, I’ll send you some.” We met with Paul Graham at Y Combinator. He thought the idea was terrible. He asked, “People are actually doing this?” And when we said yes, he said, “What’s wrong with them?”

“It’s an investment nuclear winter. The only people who are going to survive are cockroaches, and you’re a cockroach.”

Q: What did you do to change the inflection?

A: YC created a structure for us to work on it full-time and live together. The enemy of a startup is everyone else’s life. PG says that startups don’t die, they just fade away. For three months, we’d get up at 8 AM, and work until midnight, 7 days a week. We were totally focused.

The second thing is that PG gave us a series of advice that changed our business forever. He drew this chart and said, “It’s better to have 100 customers that love you than 1,000,000 that just sort of like you.” 100 passionate people will tell 100 more.

We decided, do things that don’t scale. It turns out, getting 100 people to love you is hard. We’d fly to New York from Mountain View and go door to door to meet all of the hosts and stay with them. I noticed that the photos were terrible. So I borrowed a camera and went around taking photos. I also carried a bank register with us and handed people their checks for payment.

Once you have something 100 people love, you can figure out how to scale it. By April 2009, people started booking. Sequoia had put out “RIP Good Times” and I thought, “Good times? I’ve just had the worst year of my life!”

We were ramen-profitable, and Sequoia invested $600,000. That’s when we went from building a product to building a company.

Q: How did you start expanding to many cities?

A: The unexpectedly great thing about our business were the network effects. We launched in New York. The hosts are in New York, but the travelers were from all over the world. They’d go back to their city and spread the idea. They’d go from a guest to a host.

We also targeted events — political conventions, concerts, the Olympics.

Then we built this 1-click “Post to Craigslist” tool so that the listings would be re-listed on to Craigslist.

The main way we grew was word-of-mouth and PR. We tried to partner; partnerships don’t work because they take forever. PR worked because the crazier the idea, the more people would write about it.

To launch a city, we’d travel there and hold a meetup. Here in San Francisco, it’s not a big deal to meet a founder. In other places, that’s pretty novel. They would get so excited that they met us that they’d tell their friends. The markets started turning on, and we religiously focused on making sure customers loved us.

Q: Because you and Joe are designers, you have an incredible attention to design.

A: The general paradigm is that reviews have five stars. The problem is, the bar to do five stars is pretty low; if you have a four star Uber ride, your life was probably in danger.

We wanted to build a product that you’d love so much that you’d tell everyone about it. Travel has that kind of impact on people’s lives. What if you emailed the company and asked for a sixth star? Customers expect a five star experience. So what would it take to deliver a six star experience?

Five stars is that you knock on the door and they answer. Six stars is they pick you up from the airport. Seven stars is they send you a limo with your favorite foods. Eight stars is when they send an elephant and a parade in your honor. Nine stars is you get off the plane, and there are 5,000 people are holding signs and cheering for you. 10 stars is you get to the airport, and you see Elon Musk holding a card with your name, and he takes you into space.

If what you need is for 100 people to love you, you need to do more than people expect. We do this for almost every frame of the experience. We storyboard end-to-end the job interviewing experience.

The product is whatever the customer is buying. They’re not buying your website or app. For Airbnb, people are buying hospitality.

There was one wave of the Internet which took things offline and put them online. Then there was wave of connecting things online. Now we’re part of a wave of taking the Internet to the offline world.

Q: How do you design your office to embody your culture?

A: I consider myself a designer by trade. Steve Jobs would say, design isn’t about how something looks, it’s about how something works. Once you realize that everything can be designed, you realize everything can be reinvented.

We decided we should reinvent the space. First, we’re about renting cool spaces, so we needed a cool space. We also thought a great space would be a recruiting advantage. I thought, “It’s an afterthought for everyone else. Great, it can be an advantage for us!”

One night, I walked past a furniture store and saw the showroom. I thought, “What if we had a meeting in a showroom?” So we did, and it was fun. We eventually decided to make all our meeting rooms into exact recreations of rooms from the website. It’s a subtle reinvention, it doesn’t cost much money, it’s really creative, and we now have tens of thousands of people who come to our office to tour it.

It’s critical that there be no dissonance between what’s inside the building and what’s outside the building. I went to visit this travel magazine, and I expected this cool office. It was a grey cube farm. Your office is the center of your universe. It ought to be the most potent.

Q: What did you learn from spending a year in Airbnbs?

A: We started in a three-bedroom apartment. We were inspired by Craigslist, where they work out of a house. At one point, we had 17 people working in a 3-bedroom apartment. We were doing interviews in the bathroom. Apparently, that’s a violation. So I agreed to give up my bedroom to the company. At first, I thought about going to Roommates.com, but they I realized, I should stay at an Airbnb. I would stay for 3–5 nights. It was a huge message to the company — this is not a job or a career; it’s a passion and a calling.

Even if you’re a travel company, you can live and breathe your product. Every person in the company is a product person. You should use Airbnb when you travel. You should be an Airbnb host. Companies that are detached from their customers get disrupted.

Q: I see you put more energy into the design of the culture than nearly any other young entrepreneur.

A: I define culture as a shared way of doing things. There aren’t good cultures and bad cultures; people disagree on what’s good and bad. We wanted a strong culture, not a weak culture.

A strong culture is founder-led, and the founders impose a strong way of doing things and people buy in. The most important cultural event is hiring someone. The second most is removing someone. Culture becomes the people around you. I decided to interview every single person. I think I interviewed the first few hundred employees. Today, when you interview at Airbnb, you go through functional interviews, but you also go through two cultural interviews.

One of our core values is to be a host. It’s hard to not be a host in your DNA, and be successful at Airbnb.

We created a core values council; 12 people who are experts in the culture and values. If you’re not sure if something fits, you can book office hours with a council member.

Culture are beliefs that will never change, regardless of the technology.

You have to relentlessly do cultural things every week. The difference is, now I’m not doing it personally. I used to interview everyone. Then I trained the interviewers. Then I created an inner circle to train interviewers.

I used to conduct a welcome tour for every new employee. Then we did weekly tours. Now we’ve recorded videos.

Every Sunday night, I write an email to the company. You have to continue to repeat things. Culture is about repeating, over and over again, the things that really matter for your company.

Peter Thiel told me, “Don’t fuck up the culture.” The way you do that is to focus on it and design it. Some people argue that culture should be organic; I disagree. Pick just a few things; if you pick everything, you’re Big Brother.

Cultures work really well through peer accountability.

Q: What were the things that started changing when you started scaling?

A: Hiring, and then management of the people you’ve hired. Starting from mid-2008 to today, it’s been the most important thing. Before you achieved product-market fit, you and your co-founders could do everything. After product-market fit, you can’t do anything — you have to focus on people.

I’d never been managed or managed anybody in my life. I was a camp counselor at a hockey camp — I told 12-year-olds how to skate. That wasn’t management!

You learn partially through trial and error. For example, a classic mistake is to address complaints immediately. That incentivizes complaining, and the people who don’t complain don’t speak up, they just leave.

Pre-product/market fit, data isn’t important. It’s person-to-person learning. After, data, A/B testing, all it becomes important.

Reid: The thesis of blitzscaling is that what got you here won’t get you there. You have to go from short term to long term. From doing it yourself to hiring people and managing others.

There’s a perception that when you have a company, you just grow it. Stages 2, 3, 4, and 5 are more complicated that Stage 1. Stage 1 is pretty straightforward — solve a problem you know, do things that don’t scale, find 100 people who love it. After that, you’re kind of on your own. If I ask a CEO of a giant company how to manage

A CEO told me, “Every 6 months that you’re not fired, you’re getting a promotion.” I think it’s more like every six months is a completely different job. That’s why it’s hard to be the right person to start a company and then manage it when there are 1,000 employees. At scale, you have to be great at written and broadcast communications. You have to be adaptable.

Two things help you scale. One is general intelligence and talent. The other thing is people who are curious and adaptable. Picasso said, “It took me four years to paint like Raphael. It took me a lifetime to learn how to paint like a child.” I’m shameless about getting feedback.

Reid: The term I use are infinite learners, and you are one. The first time we did a press event together, the instant we got off stage, the very first question you asked was, “What could I have done better?”

Q: How did going international change your concerns?

A: The first stage is survival. Not dying means you get to work on it the next day. The second stage is firefighting. If you survive those, you now have the privilege of people copying you and trying to destroy you.

It was early 2011, so things had been working for 2 years. In 2010, Howard Hartenbaum told me, “Make sure the Samwer brothers don’t copy your website.” We started noticing suspicious activities, people spamming our users. In 2011, the hottest startup in the world was Groupon. They had to buy CityDeal, which was the Samwer brother clone. That was not somebody we wanted to fight.

At this point, we’d raised $7 million (from you, Reid). They’d raised $90 million. We had 40 employees. In 30 days, they hired 400 people and opened 20 offices. We didn’t even know how to open a second office!

They basically said, “We’re going to do in Europe, what you’re doing in the US.” If you’re a travel site and you lose Europe, you’re dead. It was a bet the company fight. I called up Andrew Mason, and he told me, “Yeah, they’re probably going to kill you.” Oliver Samwer thought copying companies was so easy, that he hired programmers from North Korea just to have a challenge. Mark Zuckerberg said, “Don’t buy them; the best product will win.” PG told us, “They’re mercenaries, you’re missionaries. They’re like people raising a baby they don’t actually want.” So our ultimate revenge was to force him to keep running his company.

We ended up flying to Europe, hired a bunch of country managers, flew them to SF, and then told them, go open an office.

Reid: This was one of the key triggers for Airbnb to move to blitzscaling.

The gift Samwer gave us was making us scale fast.

Q: Airbnb is the world should be. But you’ve faced the challenge of regulation.

A: The problem with all these challenges is that it’s like getting punched in the face without expecting it.

In June 2010, we got word that NYC was going to pass a law to go after a particular landlord. We were told not to worry about it. A couple of years later, we got a letter from the New York Attorney General saying that they wanted a list of our customers so they could enforce the law. Attorney Generals are scary, especially in New York. They put people in jail.

First, we challenged them in court, because asking for all the data was a fishing expedition.

Second, we had to figure out how to deal with the regulation. I wanted to fight, so we staged a political rally. Then we realized, that’s not the right approach. We have a company where people live together; that’s not a brand that fits with fighting. So instead, we decided to kill them with kindness. I also thought that if someone hates me, I don’t want to talk with them. In fact, it’s better to talk with people so that you’ll understand us and maybe hate us less.

I decided to meet everyone that hated me. Tons of horrible meetings. But months later, there was less vitriol.

Because we’re a business that’s in the real world, the scope of the things I’ve had to learn is unbelievable. We had 1 million people staying in strangers’ homes. How do we keep them all safe?

Trying to assemble an airplane as you fall off the cliff never stops. There’s always a next thing.

Q: Paris.

A: Everyone’s aware of the horrible attacks in Paris. I was in Paris with much of the company while the attacks were happening. It was our 3rd annual Airbnb Open; the hosts come together and we update them. 645 employees flew to Paris, along with 5,000 hosts. My parents, sister, and girlfriends came with me. I had a celebratory dinner for the first 14 employees of the company — they’re all still there — we’re having a wonderful dinner and then the phone starts buzzing. Shooting at a restaurant. 30 minutes later. Massacre in a theater. 100 people taken hostage. My phone buzzes again. Suicide bombing outside a stadium. We had 645 employees and 5,000 hosts from 110 countries, scattered all over Paris. There were 7 attacks, concentrated in the areas where our people were. I started finding out that some of our employees were at a restaurant by the theater. We had a team at the stadium. This was not something I’d ever had to deal with.

Our head of security set up a command center. We were in the bathroom of a 2-bedroom apartment. The first step was to account for everyone. Call and email all the employees. Next, work with the government to provide housing. We got 300 of our hosts to open up their homes to anyone who needed a place to sleep. We had to cancel the conference, fly all the people back.

When I was going through that, I thought, “This reminds me of the first four years of Airbnb. Heart pounding, constantly worried, not knowing what to do.” It was at that moment that I was struck by the responsibility I had. Your responsibility is truly real, and that was a huge and humbling realization.

Student Q: Can you talk more about learning how to learn?

A: I’ll give you one tip. If I told you, I want you to become an expert in UI design in a week, you’d probably read a ton of books and talk with people. If I then told you, you had to learn how to incorporate a company, how to hire a team, then you’d realize you didn’t have time to learn everything.

If you find the right source, you don’t have to read everything. I’ve had to learn to seek out the experts. I wanted to learn about safety, so I went to George Tenet, the ex-head of the CIA. Even if you can’t meet the best, you can read about the best.

You have to be shameless. Most people will help you if you ask a question. I was shameless about asking you (Reid) question after question.

Student Q: How did you pick your co-founders?

A: I got really lucky. I went to RISD with Joe, and was friends with him for seven years before we started Airbnb. I didn’t know our other co-founder, Nate, so that was luck. I could tell by the things he built that he was extraordinary.

The mentality should be, your co-founder should be better than you. If you have co-founders you know aren’t as good as you, they become proxy early-employees, and they won’t scale. Find people who are better than you who will challenge you.

You also need people you deeply trust and like. If you’re kind of annoyed by them after 4 hours, you won’t be able to stand them after 7 months of working 24/7.

Complementary skills work better than overlapping skills. Joe and I look the same on paper, but we’re very different?

Student Q: How did you make the switch from designer to entrepreneur? Why did you keep going in tough times?

A: How do you switch from anything to an entrepreneur? In hindsight, I was an entrepreneur even though they weren’t businesses. I created clubs, for example. The best way to become an entrepreneur is to just start. The best preparation for creating a company is creating a company. The next best is creating something else. The things I created were outside of school, and fun. The thing that’s even more useful than being in class here at Stanford is to leave this room and start something immediately.

At RISD, they teach you how to start things. They give you an impossible challenge and tell you to get going.

You need resilience and conviction to keep going. Steve Jobs said you have to be passionate about what you do because there are days when it’s so hard that you’ll be tempted to stop believing in it.

That very first weekend, we hosted three people, and I saw how their lives changed. I believed that if people could experience what I experienced, it would spread around the globe.

We had discovered something. My discovery was non-intuitive, which is good, because people didn’t copy us for a couple of years.

Student Q: How did you go from Roommates back to Airbnb

A: Conviction happens over time, through talking about it and thinking about it and working with people.

I was always a generation ahead. I could see the next step, a year out. But Joe and I convinced ourselves out of Airbnb because I couldn’t see how millions of people would use it. I had the wrong mental model to decide what to pursue.

When I went home for Christmas, the more I talked about Airbnb, the more excited I got about it. I kept adding things. The conviction happens through repetition, exploration, building on it. The more you have real experiences, the more you build that reservoir of conviction.

A leader is somebody that people follow. One of the main reasons people follow you is conviction. Of course, you also have to not be wrong.

Reid: Companies like this *make* markets. How many people were staying with strangers before Airbnb? How many people were taking black cars before Uber?

We fell into the dumb VC trap: “There’s no market for this.” Almost all great companies create their markets. Invest in products and founders. Sequoia is famous for investing in markets; they struggled in sizing our market, but to their credit, they decided it was big. “We think there will be a market.”

Student Q: What’s difficult for you right now?

A: Fuck. Okay, I’ll tell you one thing. In your book, you talk about transitioning from Village to City. We’re at the phase now where the core business is working well. We’ve hired a full executive team. I could presumably go away for a month, and the product would be fine.

The first thing I’m focused on is scaling the culture for the new size. Our culture was designed for a 500-person company. We have 2,000 employees now.

The other thing is that most companies that are really really big have more than one product. Google might be a notable exception. That’s the challenge for me. Part of me thinks, “I know how to start a product.” It turns out that starting a new business inside an existing successful business is so different from starting a business.

That’s something I’m thinking about a lot now. All enduring companies need to do that.

Blitzscaling: Class Notes and Essays

The official collection for Stanford’s CS183C: Technology-enabled Blitzscaling.

Chris Yeh

Written by

Chris Yeh

Entrepreneur, Investor, Writer, Dad.

Blitzscaling: Class Notes and Essays

The official collection for Stanford’s CS183C: Technology-enabled Blitzscaling.

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