What It Takes - Reid Hoffman

What It Takes - Reid Hoffman

00:00:02 ALICE WINKLER: If you go to LinkedIn and look up Reid Hoffman’s profile, this is how he describes himself: entrepreneur, product strategist, investor. It actually takes a little work to find the part where he says he’s the guy who came up with LinkedIn. He created it, and he helped start the revolution in social networking. These days, what he mostly does is help other entrepreneurs get off the ground.

00:00:28 REID HOFFMAN: One of the metaphors I use for entrepreneurship is: You jump off a cliff, and you assemble an airplane on the way down.

00:00:33 ALICE WINKLER: Reid Hoffman is talking a little fast here, so let me rephrase; his metaphor bears repeating, anyway. “Being an entrepreneur,” he said, “is like jumping off a cliff and assembling an airplane on the way down...”

00:00:55 REID HOFFMAN: To do this more intelligently, you’re choosing your cliff. You’re choosing when. You’re preparing yourself with the right materials, the right teammates to jump over the cliff with, these sorts of things. But, sometimes, you just have a love of this technology or this area, and you stumble your way into it. So it's not — you know, you can be more systematic. You can increase your probabilities. You can increase your scale of outcome, but also, sometimes, you know, people are just like — they happen to be doing something they love, and all of a sudden, the commercial models and venture and everything else goes into it, and all of a sudden, it’s off to the races.

00:01:33 ALICE WINKLER: This is What It Takes from the Academy of Achievement, a podcast about passion, vision, and perseverance. Today we’re adding philosophy and entrepreneurship to that list because we’re devoting this episode to the remarkable career of Silicon Valley soothsayer Reid Hoffman.

00:01:54 I’m Alice Winkler.

00:01:55 OPRAH WINFREY: "Hattie Mae, this child is gifted," and I heard that enough that I started to believe it.

00:02:01 ROGER BANNISTER: If you have the opportunity, not a perfect opportunity, and you don't take it, you may never have another chance.

00:02:08 LAURYN HILL: It all was so clear. It was just, like, the picture started to form itself.

00:02:12 DESMOND TUTU: There was no way in which a lie could prevail over the truth, darkness over light, death over life.

00:02:20 CAROL BURNETT (quoting CARRIE HAMILTON): “Every day I wake up and decide, today I'm going to love my life. Decide.”

00:02:27 JOHNNY CASH: My advice is, if they're going to break your leg once when you go in that place, stay out of there.

00:02:33 JAMES MICHENER: And then along come these differential experiences that you don't look for, you don't plan for, but boy, you’d better not miss them.

00:02:44 ALICE WINKLER: LinkedIn, the networking site for professionals, has 467 million members. That’s the number as I'm recording this episode, but by the time you’re listening to it, it’s probably outdated because LinkedIn adds two new members every second. It’s so ubiquitous that about seven months before President Barack Obama’s term ended, he joked about joining LinkedIn to look for a job. And here’s actor Stephen Fry, hosting the British Academy Awards, the year that the film Lincoln was nominated for Best Picture.

00:03:19 STEPHEN FRY: Last year, I actually got several emails inviting me to join this film. "At last, the call from Steven Spielberg has come!" I thought. Sadly, when I looked closer, I realized that I’d been invited to join LinkedIn.

00:03:32 A huge disappointment, one that everyone in this room shares.

00:03:35 ALICE WINKLER: Reid Hoffman’s official role with LinkedIn ended when Microsoft bought it in December of 2016 for, oh, 26 billion dollars. But when Hoffman sat down to talk to the Academy of Achievement in 2014, he still held the title of executive chair, and he will, of course, always hold the title of co-founder. He started off the conversation with the Academy explaining that his path to tech entrepreneurship was kind of twisty.

00:04:08 He never set out to work in the computer field or in business, and he certainly had no notions of becoming massively wealthy. He’s a multi-billionaire, for the record. No, what Reid Hoffman planned on becoming was a professor of philosophy. He’s still happy to expound upon the differences between analytic philosophers and continental philosophers. He knows his empiricism from his logical positivism, and as you’ll hear, computers found a way into his philosophy.

00:04:42 REID HOFFMAN: My central interest was how we, as people, as humans, think, speak, reason, communicate and understand each other. And so, at Stanford, that led me to the major that was called symbolic systems, which is this kind of medley of philosophy, linguistics, psychology, computer science, some mathematical logic. That’s pretty much the set of it.

00:05:14 And while I was doing that, I realized that we didn’t have very good models for what it was to think, what it was to speak, what it was to understand each other. And so I got more interested in philosophy as a possibility for understanding how we kind of form images of the world — how it is, possibly, we can communicate — and that’s where the specific kind of scholarly interest in philosophy came from.

00:05:41 Now, that all being said, when I left Stanford, my plan was to be a public intellectual, and what I mean by public intellectual is someone who — well, then what I meant was someone who writes essays and books about, kind of: Who are we as individuals in a society, and who should we be? What is the collective human experience? And my view of the path to that was by being an academic.

00:06:13 ALICE WINKLER: The first book he thought he’d write was about friendship.

00:06:17 REID HOFFMAN: Because I think there’s a bunch of interesting things about friendship. And in fact, you know, the way that we go through life together is essentially the thing that most occupies my attention. Whether it’s the way we go through life as friends, whether it’s as colleagues, whether it’s as, you know, citizens, whether it’s as workers — and to some degree, I think, all of the theories of meaning of life that I think have some substance are: How are we going through life together?

00:06:53 What are our obligations to each other? What are our obligations to ourselves? What are the things we can aspire to? How do we make ourselves — when we aspire to what is the best in humanity, how do we get there? And the way that we discover that is through conversation with each other, through hearing other people's points of view and evolving our own and evolving theirs. And so that network connectivity, that — how we shape each other is at the bedrock of what I pay attention to.

00:07:22 ALICE WINKLER: You can hear that the seeds of his career and social networking were already planted, but he didn’t know then that they’d sprout in the online world. After Stanford, Reid Hoffman was awarded a Marshall Scholarship, one of the most prestigious honors for postgraduate study.

00:07:41 REID HOFFMAN: And so I thought that that would give me a chance to test whether or not being an academic was a good thing — and that the specific kind of academic I might want to be would be a philosopher, in part because my interest is in thought and language. And so I went to Oxford and started becoming a student of philosophy, and then I fairly quickly realized that philosophical scholarship wasn’t interesting to me because it didn’t have a broad enough impact.

00:08:11 That I was principally kind of like — if I would say what was most driving me, it’s how to have an impact at scale, by which you would affect — help, hopefully, improve the lives of thousands to millions of people. And that would require writing more popular works, popular works being frowned upon by the scholarly academy. And so I was like, "Okay, I have to do something else."

00:08:39 It took me at least a year of serious thought to formulate a second plan, and if I hadn’t gone to Stanford, I never would have formulated the plan I have, which was software entrepreneurship. And so it was like, "Oh, wait, maybe this would work.”

00:08:54 ALICE WINKLER: Journalist Gail Eichenthal, who interviewed Reid Hoffman for the Academy of Achievement, wanted to know why. Why would this work?

00:09:02 REID HOFFMAN: When I was thinking about public intellectuals and the kind of classic — as an author of essays and books, I realized that that’s, in some sense, an old-school form of media. Right? Which is to say, there are other forms of media, and that media is the — to some degree — the form that public intellectuals can operate in. And I said, "Well, actually, software is transforming the world, and there are all kinds of different ways that software affects how we think of ourselves, how we form an image of how the world works, and how we connect with each other."

00:09:39 And so I was like, "Well, I haven’t ever really thought about being a business person." And, by the way, even being an entrepreneur at that time, it was like, "Oh, I guess." Right? Like, it was only years after I’d started LinkedIn, which was kind of the third startup, that I was like, "Oh, yes, entrepreneur is a word that describes me." Like, I understand that that’s a word that applies to me, but it wasn’t like my goal was to be an entrepreneur.

00:10:01 What I realized is that actually creating software products could actually have a similar kind of public intellectual impact, and if it didn’t have as much of an impact as I’d like, maybe I could make enough money that I could then not need to fund myself through — I could essentially not need a salary, and so, therefore, I could become a public intellectual writing myself. And so it was kind of a plan A and a plan B. And so I came back from Oxford, the first time since — maybe since I was in junior high that...

00:10:32 ...I didn’t have a structured strategic plan that I knew exactly what I was going to do. I was like, "I need to come figure out this software thing in Silicon Valley." And so I came back without any concrete plans, and at my second week of living at my dad’s house, he's like, "Okay, so you’re going to go get a job now, right?" And I’m like, "Well, I was going to research a lot." He’s like, "Why don’t you research while you get a job?" And I was like, "Oh, okay," and so I was fortunate —

00:10:58 This is one of the things where I had some of the theory pieces of the fact that we live and work in a networked age now. And maybe I had some good instincts about that, but I just started calling my friends and saying, "Okay, where’s a good place to work?" And one of my close friends — a gentleman named Stefan Heck — his roommate, Jesse Ellenbogen, was working at Apple at the time, and he said, "Oh, well, what do you think about Apple?" And I said, "Oh, Apple’s a great company."

00:11:25 And so, basically, when I went to Jesse, he said, “Well, you don’t have enough depth of engineering experience to be an engineer. And you don’t have enough — we’re the UI group, the user experience group; you don’t have any specific, like, art experience, which is usually a requirement here. But, however, we do have this kind of, like, set of problems that we have a headcount for that we don’t know how to solve. Like, it’s unclear who you’d hire to do that, and you seem smart, so why don’t you come on a contract and see what you can do?”

00:11:56 Right? I’m like, "Oh, that’s fine. That sounds interesting." Including the: "Okay, well, your output of your work has to be these design mockups, and so, you know, Photoshop is the tool we’re using.”
And I’m like, "Well, I’ve never used Photoshop." And like, “Okay, here’s a book. You should be ready to use it within a few days." And I’m like, "Okay, here we go." That was a — I love great learning curves, and that was a very interesting learning curve.

00:12:23 ALICE WINKLER: Hoffman was at Apple from 1994 to 1996. His team’s goal was to create eWorld, an early form of social networking that included email, news, and a bulletin board system. Users of eWorld were called ePeople. The project was a failure, in most respects, obviously, since I’m pretty sure most of you have never heard of it. But with failure comes learning, and Reid Hoffman was an eager student, ready to move on to phase two of his new career.

00:12:57 REID HOFFMAN: Now, it was just before the commercialization of the Internet, and so, when I came out, I originally was thinking I was going to design — this is an old-school term: “personal information managers.” I was going to work on those sorts of products as a way of doing this, and within about a month of being here, I had realized that America Online was growing; CompuServe was beginning to be paid attention to; Prodigy.

00:13:22 Most young people today would have no idea what I’m talking about with everything other than maybe America Online. And I realized the online revolution was the area where I would want to participate. Now the fortunate thing about early consumer Internet is that everyone was fairly novice in this because there were different business rules, there were different ways you did customer acquisition, and there were different technologies at play.

00:13:47 And so, anyway, I had realized that the way the capital markets work is they’re either kind of open for a specific sector, in which case, as a first-time entrepreneur, you can get financing; or they’re closed, in which case, it’s very difficult unless you have some very deep-seasoned experience. And so I worked through my job at Apple very quickly; I worked through my job at Fujitsu very quickly — because I realized that I didn’t know how long the capital markets would stay open, and I needed to go and try to start a company and get some new product ideas out.

00:14:19 And so I quit my job at Fujitsu in July of '97, and my first company, SocialNet, was financed in November of 1997. It was called SocialNet. Actually, it was called relationships.com at the time, and I later renamed it SocialNet when I realized I wanted something that was more broad than just a dating service, in terms of concept.

00:14:40 GAIL EICHENTHAL: How did it do?

00:14:42 REID HOFFMAN: Well, SocialNet was, in Silicon Valley parlance, a failure. We did return our capital to our investors, but we didn’t actually make an ongoing company. One of the great things about Silicon Valley is that failure is actually not penalized because it’s a question of: What did you learn and what can you do now? And so this enables people to be bold about startups. This enables people to take risks and to try things, and I knew that going into it.

00:15:09 And so I knew that there was — you know, that I had — you know, there's a long shot on your first company being successful. I knew I had a long shot, but I wanted to try, and I knew that I would — if I didn’t succeed, I would try again.

00:15:22 GAIL EICHENTHAL: Give us a brief idea of some of what you learned not to do because of the first company failing.

00:15:31 REID HOFFMAN: Oh. So, let’s see. So one thing is: you have to think about whether or not — where do you need flexibility and rigidity in terms of what the team you’re assembling is? In some things — like, for example, you’re going to build a new phone — you need to have exact rigidity. You need to know exactly what you’re doing. You need to have that skill set. In some things, you want flexibility, like in a new area, where you’re trying to figure out — software, especially; it tends to be flexible. So what I had done — because I had imagined this is the way you start a company — is I had drawn up an org chart and said, "We need people with, you know, five to ten years of experience doing this, this, and this, but you need some of that in engineering and whatnot.”

00:16:12 But what I learned to do was to hire generalists, to hire people who learned fast, to hire people who were flexible because you were highly likely to pivot in what you were doing. So that was one lesson.

00:16:22 ALICE WINKLER: He learned that one from his own failings but also from watching what went right at PayPal, where he went to work as COO in 2000. One of the other most important things he learned about starting a company was that your strategy for acquiring customers has to be baked in from the beginning. In other words, you can’t just say, "I’ll build a really good product and figure out later how to attract the customers." Reid Hoffman loves to tell the story of how LinkedIn grew out of those and other lessons.

00:16:55 REID HOFFMAN: So the PayPal story to LinkedIn is fun because, in August of 2000, PayPal burned twelve million dollars in one month and didn’t really have a dime of revenue, and the cost curve was exponentiating. So Peter, Max, and I did an offsite for Labor Day weekend, I think it was. It was one of the weekends in September, where we spent three days — the first day was, “What’s our strategy for how we change course for PayPal?" because we could chart the mushroom cloud from the plowing into the side of the mountain.

00:17:30 We could almost chart it by the hour when we would blow up, and we decided to be a master merchant, and fortunately for us and for the world, that turned out to be a good strategy. And it worked because we had one — we used a lot of Star Wars metaphors, you know. “The attack on the Death Star,” you know, “one shot in the trench” — because it was like we had one strategy we could play, and other than that, we didn’t have time.

00:17:50 GAIL EICHENTHAL: And maybe you could explain what that means: “master merchant.”

00:17:53 REID HOFFMAN: Oh, so what we would do — the business model for PayPal would be — is that we would charge people for taking credit card payments, and that we would essentially be their merchant of record, even though — so usually, as a merchant, you establish your own relationship with a bank. By being a master merchant, we would have merchants who were not large enough to establish a relationship with a bank but would actually have a direct relationship with PayPal, and PayPal would have the relationship with the bank.

00:18:17 The second day, because we — Max, Peter, and I — were, “Well, if this blows up, we’re going to have one of the spectacular Silicon Valley failures on our hands, so we might as well do our next business together. So let’s each of us say what is our best alternative idea" — and the early germinations of LinkedIn, right? Some early components were one of the things I was working on because I had concluded from SocialNet that actually, in fact, your professional identity was really important.

00:18:48 It had effect on what your economic opportunity was — that everyone should have a public professional identity. It would help transform their work life, whether or not they’re an employee or an entrepreneur or a lawyer, all these things that having an identity would be really important, and that this could be a driver for how you lived and worked your work life. And so that was the idea I presented.

00:19:13 And then PayPal worked out, and so, actually, I didn’t go back and think about that idea until after we sold PayPal to eBay. I was like, "Well, what do I want to do next?" Because I now had what I was calling my ransom, which was enough money — I didn't need a salary, so I could go back to being a public intellectual and writing books or something if I wanted to do that. And I realized that this — the pattern of a consumer Internet company was something that was actually just beginning.

00:19:41 It was like the Silicon Valley had gone kind of — the typical pattern for Silicon Valley is you all run to one technology trend, call it “networking equipment” or “enterprise software” or “clean tech software,” and you all do that, and then you run to the next one. And so they all thought consumer Internet was over, and I was like, "No, no. It’s just beginning, and there are decades of interesting companies and work here. And I would like to participate in those. I would like to invest in them. I would like to create them. I think one could have a massive change of the world through these companies."

00:20:14 And so I invested in such companies as Friendster and Facebook and Flickr and a number of others — Zynga — and then I started LinkedIn. And that was because this whole notion of how networks can be a platform for identity and for applications that help us navigate the world in a much better way, that was what I had started this whole thing — you know, my whole path into Silicon Valley — with. And that was — now was the — at least a time, if not the time, to really do that.

00:20:45 GAIL EICHENTHAL: That is kind of a lonely place to be. What if you were wrong? You knew you were right?

00:20:52 REID HOFFMAN: I knew there was a very high probability I was right because I was close enough to it to know. Now, would I have known you would have had these giant companies like, you know, LinkedIn, Twitter, Facebook, Airbnb, you know, Dropbox — I wouldn’t have necessarily known how big they were, but I knew the phenomena was real. And this is one of the areas where expertise really matters because I knew the cost — the developing of these services — was going way down. There was open source software. There was cloud hosting that — essentially much cheaper models for running these services.

00:21:32 I also knew that the business models for the media attention — just advertising alone — would get better and that the consumer demand for these products was there. So I couldn’t have told you that, you know, some of these companies would be massive, multi-billion-dollar businesses, but I could have told you that I knew the products would work. I knew the business models would work, and so it was a worthwhile thing to engage in, both as an entrepreneur and as an investor.

00:22:00 And then, personally, the way of transforming how you impact the world through software ecosystems that help people establish identities, connect with each other, communicate with each other, coordinate with each other, seek entertainment, build social relationships — all of those things were the precise reason I got into Silicon Valley software creation, software entrepreneurship, in the first place. So it was like, "Nope, this is the play."

00:22:29 I had originally thought I was going to take a year off, and I said, "No, I’ll take two weeks. I’ll go visit my friend Ned Hoyt in Australia, and then I’m back to work because this is the time." And I was right about that.

00:22:44 GAIL EICHENTHAL: The model of looking through the yellow pages, looking at the L.A. Times want ads — this is really a completely different model of trying to find work, isn’t it?

00:22:56 REID HOFFMAN: Completely different and, actually, even today, most people coming to LinkedIn don’t really realize how strong the tools are because most people, when they look for work, they go — we have job listings on LinkedIn — they go and look at the job listings. It’s a perfectly valid thing to do, but the really interesting thing is to say, "Well, who do you know who is” — in our language of LinkedIn — “two degrees away from you who can help give you guidance? Who can say, 'Well, this company's a good place to work’ or ‘There’s this opportunity here’”?

00:23:21 I mean it goes all the way back to — my business career started with a call to a Stanford friend whose roommate was working at Apple. How do you discover those opportunities? Well, that all comes from your network.

00:23:34 GAIL EICHENTHAL: When LinkedIn went public at a 4.3-billion-dollar valuation, and the share price more than doubled within a matter of hours, it was said that in some ways LinkedIn had been unfairly ignored as a powerful consumer network, that there were other showier ones that had been getting all the attention. Did you feel that? Did you feel that you were sort of underestimated?

00:24:02 REID HOFFMAN: Well, we got a lot of criticism for being boring, over the years, and there’s both some fairness and some unfairness to that criticism. The fairness is that I’m sure we could — year by year, we endeavor to make the service better, more interesting, easier to use. The unfairness is, actually, in fact, our goal isn’t entertainment. Our goal is helping put the tools of navigating the network world of work into people’s hands, and people don’t do that to watch, like, you know, cute cat pictures or, you know, funniest home pet videos or whatnot.

00:24:41 Entertainment is not our goal. Transforming people’s ability to lead their economic lives is our goal. And frequently, by the way, that requires some work and is not simply entertaining and whatnot. And so, I would say that I pay attention to that feedback as a way to help me improve making the service better, but I don’t lose track of the fact that my primary goal is: How do I enable people’s economic lives?

00:25:07 ALICE WINKLER: Reid Hoffman may no longer be connected to LinkedIn — remember, he sat down for this conversation in 2014, two years before LinkedIn was sold to Microsoft. But he still enables people’s economic lives in a very different way. For many years now, he’s been an angel investor, one of those people who uses his own personal wealth to help new companies get off the ground. And he’s also been a venture capitalist, one of those people who invests in new companies through a financial firm.

00:25:38 In both capacities, he’s had tremendous influence in Silicon Valley — outsized influence — and in the process, he’s made himself one of the richest men in the world. He’s also managed to fulfill his early dream of writing books. He’s the co-author of The Start-Up of You and one called The Alliance. And Reid Hoffman’s latest venture, it turns out, is speaking out against the presidency of Donald Trump.

00:26:07 Hoffman made national news for offering to give five million dollars to veterans’ groups if Trump would release his tax returns, and he’s created a card game called Trumped-Up Cards: The World’s Biggest Deck. It comes in a shiny gold box, and all the profits go to charity. Reid Hoffman is the co-founder of LinkedIn, of course, and a partner at Greylock, a leading Silicon Valley venture capital firm.

00:26:37 I’m Alice Winkler, and this is What It Takes from the Academy of Achievement. Thanks for listening.

00:26:45 What It Takes is made possible by the Catherine B. Reynolds Foundation.

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