tv Studio 1.0 Bloomberg August 9, 2015 6:00am-6:31am EDT
♪ emily: he's been called the start-up whisperer of silicon valley. reid hoffman is the co-founder and executive chairman of linkedin, and an investor in some of the most successful companies of all time, including facebook. yet, the man with one of the most impressive resumes in silicon valley wasn't always on track to be an entrepreneur. a student of philosophy, hoffman at one point pursued a career in academia. but he took his first job out of school at apple, then later joined the now legendary paypal mafia. now a partner at greylock, hoffman sits on seven boards. he is the author of "the start-up of you," and now a new book, "the alliance." our guest today on "studio 1.0"
is reid hoffman. reid: great to be here. emily: thank you so much for joining us. reid: my pleasure. emily: so you have no shortage of jobs to do. why did you write this book? reid: the key thing is, in many circumstances, companies -- employers and employees are lying to each other. because the notion is the modern career is actually in fact changing where there's options -- for shifting companies, for how do you evolve -- even career tracks are changing. so the question is how do you get that investment in the future and that entrepreneurial relationship between the company -- the employer and the employee. and the short answer is alliance. and it's an alliance that's based on tours of duty, where you set up for a project that's like three or five years long, and that transforms your career, makes you employable, and transforms the company. emily: you say people should be honest from the start. how honest should they be? reid: well, to give you an example of something i learned from one of our executives at linkedin, kevin scott, who's the head of operations and engineering -- when he's interviewing people, before they start at the company, he asks them what job they want after linkedin. that's actually a part of his
interview. emily: so what do you want to do next after you do this? reid: yes. and that's a level of transparency and -- we are committed to your career. we want your stint here to be transformative to what your career is. emily: what if you hear something you don't like? reid: well, then, you ask why? by the way, that's a very good thing to learn. so if you learn something, you're like, "oh, wait a minute, actually, that may mean that our alliance over this tour of duty, over this three to five years, may not work." emily: this comparison to the military, the term "tour of duty" -- do people really feel that way about their companies? that patriotic, as a soldier is to his country? reid: we so much wanted to get people to understand is -- look, it's not daily employment. and it is an investment in something real, and it should be transformative, that a kind of a bold term should be the right way for people to think about it. emily: what other companies out there are doing this well? you have your hand in so many of them. reid: google, for example. when i talk to eric schmidt. it's like, no, no, actually we normally think about these as three to five year -- they weren't using the word tour of duty -- but like three to five
year stints, where the person actually learns a job, achieves something significant, proves himself at the end of the job, and then goes on to do something else. ebay focuses a lot on how do we bring the relationships of all the folks who have graduated from ebay and paypal together. and they have the external network tied in. but even, for example, places like ge, all right, in terms of what they used to do -- and they still do -- for executive rotation. but also, how do you then groom all kinds of stars to be an executive at this, you know, huge industrial conglomerate? emily: what does silicon valley get that other industries don't yet? reid: silicon valley understands that r&d is not just -- like, we hole up in our lab and we invent something, and then -- then, 'tada! there it is.' that actually being present and active in what is going around in the entire network around silicon valley is central to innovation. so people frequently, for example, hold up steve jobs as well he was the 'i sit in the back room and invent something' -- they don't realize he was
talking to people constantly. he was like, 'what can be done here, what's here, i'm interested in learning about this,' you know, 'i want to know about what these google folks are doing, let me talk to them --' and so, silicon valley is a combination of intense competition and intense cooperation. emily: linkedin sits at an interesting paradox. because on the one hand, it makes it easier for people to find good opportunities -- it also makes it easier for companies to lose good people. reid: when you have a more open and transparent ecosystem, that means the quality opportunities, the quality companies, the high culture companies will benefit. because essentially, the talent will flow to them. but overall, it creates massive benefits both for the individuals and for the companies that are, that have interesting opportunities. and that is a good thing. emily: you have a statement of alliance at the end of the book that people can use as a guide. in the end, though, isn't it just a promise? and a promise can be broken. reid: promises can be broken, just like any relationships. and so, sometimes, you -- like a friendship ends and that kind of thing, it happens.
but if you lived your whole life like, 'oh, friendships may end, so i'm not going to have any friends,' that would be terrible. [laughter] emily: so many companies have a founding myth that is sort of boiled down into legend. what is the myth of reid hoffman, and what is the reality? reid: myth, reality, who can tell the difference? the myth is kind of a manifest destiny march towards entrepreneurship and technology. and the reality is kind of an instinct for how do we come together as people, and what are the ways to help that? and -- oh, look, software! oh, look, entrepreneurship! -- right? as ways of discovering that path. that is kind of the myth and reality. emily: let's take a break. we'll be right back. ♪
emily: let's talk about how you got there. you grew up in berkeley. reid: yup. emily: what did your parents do? reid: both parents are lawyers. and that led to -- because the legal profession is the one that people most often leave, when you actually look at the, the actuary charts on people transitioning -- so when people asked me in 12 what i wanted to be when i grew up, the answer was not a lawyer. [laughter] emily: what was the answer? reid: i actually didn't know. what happened is -- i, i kind of got the independence bug a little early. i was going to a school that was on the berkeley-oakland border called the college preparatory school. a friend of mine said, 'oh, i'm going to a school called the putney school in vermont.' and i was like, wait, i could go and be independent. and be exploring my own life. so i applied for and got in to the putney school without either of my parents knowing. emily: you applied to a boarding school without your parents knowing? reid: yes. yes. because it was kind of the independent streak, which i encountered a little early. emily: what kid were you in high school? did you fit into one of the boxes anywhere? reid: no, actually, i was a pretty strange individualist.
[laughter] reid: so like, for example, i usually would have one or two friends in most of the different cliques. like i had a friend or two out of the jocks, a friend or two in the artists, or a friend or two -- it was all very individual. i did have, much younger -- i was part of a fantasy role-playing group. right? so -- emily: what is that? reid: so, dungeons & dragons. emily: ok. reid: so, when i was -- and actually, the way i got into dungeons & dragons was my dad, when i was nine, hired a babysitter for me who introduced me to dungeons & dragons. and i was like, 'ooh, creating new worlds, and thinking about how stories come together' -- and kind of like an interactive novel. emily: so you went to stanford. reid: yes. emily: you majored in symbolic systems. marissa mayer also majored in symbolic systems. what is that? reid: so, symbolic systems -- it's a unique major to stanford. and, it's -- the simple explanation is cognitive science and artificial intelligence -- although most people will think, 'that isn't simple.' but really, it's actually a step deeper, which is -- part of what is transforming the world are these notions of
systems of symbols. whether they're computer programs, whether it's mathematics and logic, whether it's models of how we think and psychology -- i think i was the eighth or ninth person to declare the major. emily: so while you are at stanford, you met peter thiel. reid: yes. emily: tell me how you met. reid: peter and i had both been told about each other by people we knew. i was told he was this really right wing person, he was told i was this really left-wing person. we both went, 'wait a minute, i've heard about you.' and so we grabbed coffee, and i think we argued for eight hours. right, because we were like, 'oh, you can't believe that.' and then we were like, 'that was fun, let's do that again.' emily: you went on to oxford, you studied philosophy. reid: yes. emily: why? reid: i said, 'well, i think i'll be an academic. because if i'm an academic, i can write about both of these interesting questions. i'm always fascinated about people -- how we think, how we reason. how we communicate. and in fact, actually, what i realized was that the course of
becoming an academic professor was to be a very, very narrow scholar. and so you essentially wanted to be an expert on this thing that, say, for example, only 10 to 20 people in the world probably knew about. and actually, what i really want to do was how do you help millions of people? basically, within about six months at oxford, i knew that, actually, in fact, i wasn't going to be an academic. i was going to come back here and -- emily: so that's when you decided to be an entrepreneur, essentially. reid: well, that is when i started to work on software. actually, in fact, thinking of myself as an entrepreneur, that kind of came later. emily: so you took your first job at apple? reid: yes. emily: 1994, sort of in the middle of the near death spiral. reid: yes. emily: did you meet steve jobs at that time? reid: no. steve jobs wasn't there at the time. i was literally at apple at the 'we don't know what we're doing, we have no really good plan to adapt to what's going on in the future' -- i went there because i loved apple products. i love the macintosh. i bought one of the earliest ones. i learned to program on the apple iie. emily: then you went on to start your own company. you started a social network
sort of before social networks, right? it was called social net? reid: it was called social net. emily: 1997? reid: yes. social net had some of the right ideas. it had the idea of having a profile, it had the idea of discoverability. it had the idea of having some kind of social controls on how you would meet strangers. but it didn't have the fundamental network idea. it didn't have the fundamental real identity idea. emily: you then went on to the paypal mafia. reid: yes. emily: who called who, how did that end up -- how did that happen? reid: i called peter, and peter said, 'oh, well, we're going to actually, probably going to sell paypal, because we don't have a business model' -- at the time -- but it would be really useful for us, because you know all this stuff. could you help us come organize the company and help sell it and everything else? and i said, 'well actually, i know all you guys, and if i would be helpful, i would be happy to step in and do that.' and of course, we didn't end up selling it, we ended up taking it public -- selling it to ebay after we took it public. and so what was supposed to be a six-month tour of duty turned into a three-year tour of duty. and, well, the paypal story is long and fun.
emily: and legend. when did it start being called "the mafia?" reid: you know, i don't really know. it might have been with the "fortune" article. i am always a little hesitant about the term, because "mafia" implies dark rooms. extortionate practices. these kinds of things. it's clever, it gets repeated. it implies a very dense, tight network where people are very tight with each other. for example, if i were to call it -- it's probably much less evocative -- "the paypal network" would be the way i would call it. i think it probably started six to 12 months after the ebay acquisition. emily: linkedin, tesla, youtube, yelp, yammer, and spacex. all founded by members of the paypal "mafia." reid: yeah. emily: what was special about all of you? what did you have in common? reid: paypal collected a whole bunch of people who were young, and intense, and were entrepreneurial themselves. then, all of a sudden, it was bought by ebay. so a bunch of these folks were like, ok, well then, what do i
do next? and so -- you know, chad and steve go in to youtube, elon goes and does tesla and spacex, jeremy and russ do yelp, and i do linkedin. and yet, because we've had this intense experience together, we all have still really tight network. so we are calling each other going, 'hey, i'm thinking about doing this, what do you think?' emily: who do you call for what? reid: so for example, macroeconomic, financial, bold models, i will call peter. the intersection of kind of interesting business models or business technology -- things like big data -- max levchin. for a willingness to just think super big, with risk as not a variable, elon. right? emily: what do they call you for? reid: laughs. no. [laughter] emily: i've heard you are quite funny. reid: occasionally. i don't know. other people are funnier. a view of the valley.
like, ok, i'm thinking about x, who are the right people to talk to about x? emily: you were instrumental in the sale to ebay for $1.5 billion, 2002. looking back, was it the right decision? i mean, ebay and paypal have had an interesting year. some other members of the paypal mafia think they are better apart. reid: it was absolutely the right decision at the time. and we made it collaboratively. and part of the reason was because to really get to the right kind of level of mass of the payments transaction system, it required a much closer connection with ebay. now that it has gotten to a certain level, you can say, look, is it better inside or outside? and one can make good arguments both ways. the argument with is, for example, actually, in fact, there is still a lot of density of value between ebay and paypal. on the other hand, the argument against it is to say well, actually, in fact, maybe paypal should become a bank. ebay is not a bank holding company. the natural evolution is to head there in some direction. and that's also possible with the right management team. emily: it's time for another quick break. we will be right back. ♪
♪ emily: after you sold paypal, you could've retired a few times over, probably. some other members of the paypal mafia bought ferraris. you bought an acura -- which is still a very nice car. but you didn't say, 'look, i'm -- i'm just going to lean back.' reid: first, a little funny story on the car. i was thinking about buying an audi s8. because i was like, well, it's a really nice car. and so forth. and then what happened is, i got pitched by a friend of mine on investing in a start-up. i was like would i rather buy the s8, or would i rather invest in the start-up? so it was like, 'ok, what's the cheapest nice car that i could buy?', because i would actually rather spend my money in investing in these companies that are transforming the world. and so that's how i ended up buying the acura. emily: and then you decided to start something new. reid: i was thinking about taking a year off. i was thinking about traveling around the world for a year. and what i realized was in 2002, silicon valley basically concluded the internet was over.
i was like, 'no, no, it's just beginning.' and the current companies are great. google, yahoo, ebay, amazon. but they are only going to be some of the great companies that are going to be created. as opposed to a year, i took two weeks in australia, came back, said ok, what is my best idea, oh, look, linkedin is actually still a very valid idea. the market opportunity is right for it. i should start that. i started investing in companies like facebook and flickr and a number of others. i was like let's just go all in on this next generation of internet. emily: i know the early years were hard. tell me about that. reid: so i don't know how many of our viewers will remember this, but friendster was all the rage back then. emily: i remember friendster. reid: and so what happened is, i would come and say, this is what linkedin is. and they would say, well, you're like friendster but for business. and i was like, well, that's not the way i would describe it, but -- i can't tell you the number of times i've had conversations with people who are smart and very close to say, 'that isn't going to work.' and i'm like, 'i think it will'' emily: when did you come closest to giving up? reid: oh, never. emily: ever? never? reid: no.
emily: it took five years to turn a profit, and you made some really hard decisions along the way, including stepping down as c.e.o. and becoming executive chairman. reid: the question really wasn't like, 'oh, is it a difficult thing for ego, for stepping down as c.e.o.' as much as -- what gives us the best possible chance to realize something? and part of what i'd come to realize was that i'm passionate about scale impact in the world, i'm passionate about solving product, business problems, i'm passionate about entrepreneurship and innovation. but i'm not passionate about running an organization. like, i don't wake up going 'how do i run my exec staff better?' and how do i -- 'when we're onboarding the next 100 people, how do we do that in a really good way?' and i know it's important, but it's not the problem that i wake up thinking about. as i came together with jeff, and jeff said i can help you with your kind of -- person as interim, kind of running the exec stuff, the stuff that you kind of feel challenged about. and then we were like jeff is enough of a product guy, he can actually do this job.
emily: tell me a little bit about your partnership with jeff. reid: jeff and i get along very well. for example, jeff knows that when it comes down to things like building organizational cultures, or thinking about how do you really make an executive staff work really well together, and how do you identify a plus talent through the whole organization. so we partner on these things together. we solve these problems together. emily: so you split your time now between linkedin and greylock. how do you split your time? i mean, is it like 50/50? can you break it down? reid: or 70/70. [laughter] emily: or more like that. reid: so, i, generally speaking, work seven days a week. i have an office right next to jeff's. the short answer is all. and -- emily: seven days a week? reid: yes. emily: you have had so many wins already. why do you do all of this? reid: the way i think about it is how do you have a life that was -- that you are proud about having lived it? that you think that what you did in the world was worth it? emily: you think about steve jobs at apple, mark zuckerberg at facebook, larry and sergey at google.
is there a magic that a founder brings that would be lost if you weren't here? reid: i think so. every founder is useful. because of that vision, that commitment, the, the willingness to take bold risks. emily: you joined greylock as a partner in 2009. and you have a really unique investing philosophy in that the best companies to invest in are actually the companies you don't agree on. reid: most people think that the way that a venture partnership works is everyone votes to do a deal, and then when everyone says yes, this is a good deal, then that is the deal that happens. however, the best deals are not all where everyone's voting, 'yes, i would do the deal, too.' the really bold deals that transform industries are the ones that initially seem a little crazy. a little out there. not quite right. like linkedin in its early days. and yet end up growing to something that is big. emily: didn't you guys disagree on facebook and airbnb? reid: yes, there was disagreements in the partnership. as a matter of fact, a partner -- not to be named -- said 'this is going to be the death of greylock.' and with airbnb, a variety of the partners, including david, david sze, said -- you know, are
people really going to rent out the rooms? isn't that going to be a little weird? he and i had an argument. he said, fine, i wouldn't do the deal, but you can. and obviously airbnb has done great. emily: you have been called the start-up whisperer of silicon valley. what does whispering to start-ups involve? [laughter] reid: well, i'm not quite sure. i guess what people who use that term -- i don't identify myself that way -- by being an entrepreneur myself, by being a participant in a lot of the early stage companies -- and it's not that i know everything. but i know some things that are useful. emily: we live in an age of four increasingly powerful platforms. apple, google, facebook, and amazon. do you worry at all that any one of them could become too powerful? reid: yes. although not necessarily specifically each one of them. but more as a general system. but naturally, when you have aggregation of platforms, you have to worry about leaving room for entrepreneurs, leaving room for innovation. and so i worry about that on a general basis. not on those specific four
companies basis. because i talked to all of the, you know, ceos of those companies. they are all like, 'look, we're just trying to build really great products and do great things.' emily: richard branson has a private island. steve ballmer is buying a sports team. marc benioff gives a lot away. what do you do? with all the money you have made? reid: so, most of it is still in linkedin stock. because i am building the world through linkedin. i serve on a number of different nonprofit boards, like kiva and endeavor and do something. i try to finance projects that i think are interesting. emily: are we ever going to see you start something else? another company? reid: probably not. you know, with series a and seed founders, i work pretty closely with them, but there is a long way to go with linkedin still. so i would say that it's unlikely. although, you will see me partnering with a bunch of great young entrepreneurs, and trying to help figure out how to build something big.
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