Hard truths about building in the AI era | Keith Rabois (Khosla Ventures)

**Keith Rabois** (00:00:00):
... idea of a PM makes no sense in the future. The skill is more like being a CEO now, which is what are we building and why?

**Lenny Rachitsky** (00:00:06):
There's a lot of anxiety in the job market.

**Keith Rabois** (00:00:09):
AI is going to radically reorient lots of people's careers and maybe including mine. What I've noticed in some of the best organizations is the number one consumer of tokens is the CMO. They don't need to rely upon deputies and deputies and deputies to get actual work product.

**Lenny Rachitsky** (00:00:25):
I want to hit on some contrarian takes that you have. Your advice you don't actually want to be talking to customers.

**Keith Rabois** (00:00:30):
I hate talking to customers. I refuse to allow colleagues of mine to talk to customers.

**Lenny Rachitsky** (00:00:33):
You have this idea of criticizing in public versus in private.

**Keith Rabois** (00:00:36):
High performance machines don't have psychological safety. They're about winning.

**Lenny Rachitsky** (00:00:40):
You're uniquely great at helping companies build world-class teams.

**Keith Rabois** (00:00:44):
If a founder shows the ability early in his or her career to assess talent ruthlessly and accurately, here's how you can go very far with no other abilities whatsoever.

**Lenny Rachitsky** (00:00:52):
It feels like it's never been harder to attract the best talent.

**Keith Rabois** (00:00:56):
Really talented people. When things are going well, they're not happy. The morale actually does go down when people are skating. The single role for the CEO is offsetting that complacency. The better you're doing, the more the CEO should push.

**Lenny Rachitsky** (00:01:12):
Today, my guest is Keith Rabois. Keith's resume, both as an operator and investor is absurd. He was an early investor in Stripe, Palantir, Airbnb, YouTube, DoorDash, Ramp, and dozens of other companies. He's part of the famous PayPal Mafia, where he was executive vice president of business development and policy. He's also been chief operating officer at Square, VP of corporate development at LinkedIn. He's also co-founded two companies, and he's currently managing director at Khosla Ventures.

**Keith Rabois** (00:02:07):
It's a pleasure to be with you.

**Lenny Rachitsky** (00:02:08):
Okay, so when we were starting this recording, you told me you're doing this from an iPad, which I've never had. And you've shared a crazy fact that you haven't used a computer in years. Talk about what's going on there.

**Keith Rabois** (00:02:20):
Yeah. So when I started working at Square, Jack Dorsey was running the company off an iPad. And so I immediately converted in September 2010 and haven't looked back. I haven't touched a computer since September 2010. Everything I do in my life is either done from my phone, my watch, or my iPad.

**Lenny Rachitsky** (00:02:37):
What's so interesting about this as you were talking is just there's this trend of engineers starting to code from their phone, at Boris Cherny on and Simon Willison, these two engineers that are 10X engineers, and they're just coding from their phone talking to AI. And I feel like you've been preparing for this for a long time.

**Keith Rabois** (00:02:52):
Yeah. I'm trying to be ahead of the curve. Jack's very good at being ahead of the curve. If you just watch what Jack's doing and follow, you're in pretty good shape in technology.

**Lenny Rachitsky** (00:03:00):
And just to understand the benefit, is it just avoid distractions?

**Keith Rabois** (00:03:03):
Yeah, partially distractions, partially just the flexibility. Taking an iPad with you anywhere is just super easy. Some laptops have improved since then, but the screen flexibility, angles, but just the weight. I carry my iPad with me everywhere. There's nothing you can't perform unless maybe if you're doing heavy duty engineering, which obviously has not been my forte in life, although I may have to start. There's no reason to use a more powerful, heavier weight, less flexible machine.

**Lenny Rachitsky** (00:03:34):
Wow. iPad Maxing, Keith Rabois.

**Keith Rabois** (00:03:36):
See if you got my Apple. As long as it's an Apple product, it works.

**Lenny Rachitsky** (00:03:39):
**Keith Rabois** (00:05:44):
Well, let's start with first principles. The most important lesson I learned when I was working at Square from my board was Vinod Khosla was on my board, and he said, "The team you build is the company you build." And that adage is the most important thing when you're creating a startup. People get distracted with the market, with customers, with a product, with technology. Ultimately, it's the team. If you have the right people, everything else will be easy and you have the wrong people, everything else is going to be difficult.

**Keith Rabois** (00:06:11):
So, Vinod distilled it, but I actually learned this back on my PayPal days. So in the early 2000s, why was PayPal so successful? Why were there subsequent generations of successful, interesting companies for 25 years now? It's because Peter Thiel and Max Levchin marshaled an incredible density of talent. So it allowed PayPal to succeed where possibly we wouldn't have. And these people went on with interesting ideas, ambition, and talent to build epic companies in all kinds of verticals.

**Keith Rabois** (00:06:45):
So from day one, day one of my technical career, technology career, I've always been focused on the importance of critical density talent, how do you identify, retain, and promote people with that talent? Back in the PayPal days, when I first started my career in technology, I actually truthfully was not very good at this. Fortunately, Peter and Max were. So Max basically hired all the technical talent in the organization. Peter pretty much hired everybody else. They used their network primarily. So it was very difficult to get a job at PayPal, unless you had a first degree or second degree connection to the engineering team or to Peter through Stanford.

**Keith Rabois** (00:07:24):
Which is a different type of recruiting model. It works really well if you have a strong network. I wouldn't recommend it for everybody, but if you have a network that has unique talent, there's no substitute. Interviews are not a great substitute regardless of how strong you are at interviewing. But when I started my career, I was mediocre at let's say hiring people, probably 50/50. Some good people, some mediocre people. That doesn't allow you to scale a team with an unfair advantage.

**Keith Rabois** (00:07:53):
But what I learned to do is steal people from other people's organizations within PayPal very successfully. So I got feedback from David Sachs, who was the COO at the time that I wasn't going to get promoted again until I could demonstrate leverage, leadership leverage, which he had an equation for of one plus one has to equal three or more. So for every incremental person you hire, you have to show that you produce disproportionate returns, non-linear returns.

**Keith Rabois** (00:08:18):
And because I wasn't hiring that well, I wasn't really succeeding at that leverage. So when I went around, took the feedback into account, I said, "Okay, I really want to get promoted. What do I do?" So I found people within the organization that I felt had talent that were not being leveraged to the highest potential inhibition, and I recruited them to my team. And that was very successful.

**Keith Rabois** (00:08:42):
And then I did get promoted actually fairly quickly because these people actually left to speed. They were able to run really fast and we produced a lot of really important results for the company. The lesson though that I took away was, well, that's great because what it showed to me is I actually could identify talent. I just couldn't identify strangers with talent. So people that were in the building that I have lunch with or dinner with or go for a runaround the PayPal campus with, I was accurate at diagnosing their abilities. I just couldn't do it in a 20-minute, 30-minute, 45-minute interview.

**Keith Rabois** (00:09:15):
So the first thing is just double down on people I know. That doesn't scale perfectly, but learn to be excellent at, if I had context, assessing people's abilities, superpowers and weaknesses. Then over the next X years, tried to identify a different technique for identifying, assessing random people. Because ultimately if you're going to build an organization, ultimately if you're going to be a VC, you can't just invest in people that you already know. So that took some years and required some training.

**Keith Rabois** (00:09:47):
Anyway, I think you can teach some of this to a founder, but one advantage a founder has that's going to thrive is if a founder shows the ability early in his or her career to assess talent ruthlessly and accurately, here's how you can go very far with no other abilities whatsoever. Hiring is like a muscle. You need to exercise it. You need to try, learn what worked, what didn't, what could you have known, what did you miss, why, and riff on that and try to get better at it.

**Keith Rabois** (00:10:20):
There are tactics you can learn. I think the tactics work pretty well within the middle of a bell curve distribution of moving yourself 10, 20 degrees within that bell curve. I don't think the tactics can really teach you how to identify, call it top 10 basis points, top 50 basis points of talent. There you have to deviate from the norm. And I think that's actually true of most lessons in life.

**Keith Rabois** (00:10:41):
If you're going to be extraordinary in any skill, you can't follow a playbook. Otherwise, by definition, lots of other people would be the top 10 basis points, but you can get a lot better by learning techniques. So for example, let's share a couple.

**Keith Rabois** (00:10:55):
One thing I think you can learn to do is be excellent at references. It doesn't work for hiring people right out of college or something because the reference context is going to be a little off, but I think without getting better at interviewing and assessing, if you just learn to extract the right information from ruthless referencing. So for example, ruthless referencing to me means Tony at DoorDash does 20 references on every single senior hire, 20.

**Lenny Rachitsky** (00:11:24):
Wow.

**Keith Rabois** (00:11:25):
I bet you he's pretty good and that he's been pretty accurate too. So I think you can learn that. That's a skill that's teachable, that being absolutely incredibly dedicated to your craft, you can just get better at. Back in the day, there's an investor at Greylock who's on my board at LinkedIn, David Sze, very successful investor, notable for both LinkedIn and Facebook investments. He used to teach at Greylock, you couldn't stop referencing a founder until you hit a negative reference. So you would know you had exhausted the reference when you finally hit a negative reference.

**Keith Rabois** (00:12:02):
And so I think there are tactics there in muscle building. How do you get the right information from the right people? How do you frame the questions, et cetera? That will lead you in the right direction. Now, you have to be careful, let's say, I'll give you an example where this can go wrong.

**Keith Rabois** (00:12:18):
I've been a longtime investor from the seed round of a company called Faire, founded by two of my colleagues at Square, Max Rhodes and Jeff Colvison worked for me at Square and then the two other co-founders also worked at Square. When people were reference checking Max, often most VCs asked the wrong question, which was, "Was Max a good employee?" The answer to that is very mixed.

**Keith Rabois** (00:12:43):
And so some venture capitalists, including some very good ones, were nervous about investing in Faire. If they frame the question slightly differently, which is, "Is Max capable of being a world-class entrepreneur?" the answer was yes. So again, it's a tactic you have to understand, what exactly am I trying to extract? Same person, wrong question, wrong result. And many people passed on Fire and they regret it. And these are actually quite talented investors. They just didn't frame the question correctly when they were calling someone like Jack Dorsey up for the reference.

**Lenny Rachitsky** (00:13:17):
Any other questions you find really helpful in extracting the right information?

**Keith Rabois** (00:13:20):
When I interview candidates for senior people in leadership positions, I always ask them, look at whatever company they're at and say, "If you were CEO, what would you have done differently?" And you get a feel for their strategic mindset of can they drive value creation? Because almost by definition, they've come from a company that's had some traction success, so can they edit? So in your case, I would've asked you, "If you were CEO of Airbnb, what would you have done differently?" And you learn a lot from that question.

**Keith Rabois** (00:13:49):
On references specifically, I think a general arc that's pretty good is asking the person, what would lead to this person being most successful? And if something were not to work out, what would be the primary root cause that you can identify if something going wrong? I think generally probing on those two arcs leads to a lot of insight.

**Lenny Rachitsky** (00:14:10):
And that first question is for the candidate or is that in the reference?

**Keith Rabois** (00:14:14):
Yeah, for the candidate. That's for the candidate specifically.

**Lenny Rachitsky** (00:14:16):
Got it.

**Keith Rabois** (00:14:16):
Because I don't want them to criticize Airbnb. I don't think that's that productive, but you can tell how much of the current business model have they absorbed, how much do they understand trade-offs. And then can they create an unfair advantage? Because they have insights into afterburners. And then I have a follow-up question, which is usually gold, which is, let's say I asked you this question about Airbnb and you give me this great answer. I'm like, "Well, why weren't you able to persuade Brian to do it?"

**Lenny Rachitsky** (00:14:43):
So you made this interesting point that there's tactics that can help you get better at finding and identifying talent. A lot of this is just the feedback loop of doing it a bunch, it sounds like. I find the feedback loop is so, it's hard to actually ... Most people interview, hire, and then don't really learn much from how it ends up going. There's this gut thing that happens, but they're not really thinking about it. Do you have any advice for just how to make the most out of the lesson of seeing how something went?

**Keith Rabois** (00:15:09):
So I've read some research on the topic. And if you ask yourself 30 days after any hire, "Would you make the same decision?" That 30-day loop is pretty useful and it basically it's as accurate as measuring in a year or two years out. So you get a pretty tight feedback loop and you can ask the entire hiring team. So I think that is just a technique that every company should use.

**Lenny Rachitsky** (00:15:32):
I want to talk about this framework that you have, barrels and ammunition, because this is really mind-expanding and helping people understand who to even hire.

**Keith Rabois** (00:15:42):
So look, most companies raise money, they have some traction, they do a seed round, they get launched, they get some traction. Then they raise a lot of money, whether it's a series A or a Series B. And then they hire a lot of people infallibly or at least historically.

**Keith Rabois** (00:15:55):
And then the CEO, almost without accession, gets frustrated because they've hired a lot of people. The burn rate has increased a lot and they don't feel like more is getting accomplished per unit of time, per day, per week, per month, per quarter, and they get frustrated. And so then they sit around at a dinner with other CEOs or people like me or one-on-one conversation with me and are incredibly unhappy and disappointed that I'm spending all this money on all these people, but we're getting less done or the same done. And why, why, why, why?

**Keith Rabois** (00:16:22):
After years of sitting through these conversations at dinner with other CEOs or COOs, I realized that the fundamental driver of this is that the number of people that can independently drive an initiative from beginning, from inception to success is very limited within any company. And if you hire more people without expanding the number of what I call burials that can drive from inception to success, all you're doing is stacking people behind the same initiatives. And so you're wasting time, energy, and increasing your collaboration tax, your coordination tax. And so that's what causes the drag coefficient.

**Keith Rabois** (00:17:04):
So for example, at PayPal, we had about 254 people in Mountain View when we were acquired. Of those people, depending on how strict you really want to be. And this is considered one of the best talent rich networks of all time in technology, there's between 12 to 17 barrels in the organization. That's an infinite number.

**Keith Rabois** (00:17:23):
I once asked Jack Altman on a podcast at Loudouns, which is a pretty damn big company, how many barrels of the company? The answer was two. That's a more common answer for a very good company. So you have between two and let's say 15 barrels at a company. That defines the unique number of things you can do in parallel versus sequentially. And just hiring more people is not going to change that. And if anything, it's just going to cause a collaboration, a coordination tax, and you're going to have a track revision, you're going to do less.

**Keith Rabois** (00:17:50):
So the key is to me is if you want to do more or need to do more, your market requires you to do more, your business model requires you to do more, VCs require you to do more, you need to have more barrels. Now, the question is how and when and all this. There's a lot of details there, but fundamentally, the ratio of barrels to ammunition is what dictates the number of important initiatives that can be pursued simultaneously.

**Lenny Rachitsky** (00:18:15):
And you're not saying you don't want ammunition. It's valuable. To make an impact, you need ammunition in addition to the barrel.

**Keith Rabois** (00:18:20):
Yeah, you definitely need ammunition. And it depends on what kind of project. There are types of projects where an individual barrel may be able to succeed with very limited or no ammunition. Sometimes you may need a designer, an engineering team, a PM, a data analysis, blah, blah, blah. Depends on what the project is, what the problem you're trying to solve is, what's the proper amount of ammunition? But once you think about the ratios of ammunition to the problem, you can be much more constructive and deliberate and intentional about the team construction.

**Lenny Rachitsky** (00:18:53):
Most people hearing this assume they are barrels. What helps you understand if someone's truly a barrel?

**Keith Rabois** (00:18:59):
Can they take an idea and make it happen? Basically, we're going up that, there's a hill over there, that's the hill. Get us over that hill. And one way or the other, they will motivate people if they need to, they will accumulate resources if they need to, they will measure what they need to, and they're going to get your company across that hill. That's a barrel. Anything less than that is not a barrel.

**Lenny Rachitsky** (00:19:27):
And so this is skills like internal org stuff, resource. It's the collection of all the things to get something done.

**Keith Rabois** (00:19:36):
A collection of all those things, so it's basically there's an outcome. CEO, founder wants an outcome and come hell or high water, this person is going to deliver that outcome. Then the outcome can be fairly narrow and not that difficult in the beginning. And then you expand the scope, the complexity, the difficulty that you basically entrust to your barrels.

**Keith Rabois** (00:19:59):
And sometimes they have no line of sight of how to solve it when you start. Sometimes you have a preliminary idea. So it ranges, but ultimately it's that skill of, I'm going to take this off your plate, you can fire and forget, and this is going to happen. And if it's not going to happen, I'm going to come back to you proactively with the issues I'm confronting, what I've already tried, the diagnosis of the root causes and ask for your help with sufficient time for you to intervene and try to brainstorm with me to get us to the right answer.

**Lenny Rachitsky** (00:20:29):
Agency is the word that comes to mind when you talk about this role.

**Keith Rabois** (00:20:32):
Yeah, I think agency is accurate. The problem I have with terms like agency is it's a little bit like strategy. It goes in one ear, a lot of people and out the other ear and they don't really process the meaning.

**Lenny Rachitsky** (00:20:42):
Yeah. Who are some examples of barrels that make this real so people can understand what you're talking about?

**Keith Rabois** (00:20:47):
I talked to my YC lecturer in 2014 about how to operate. They can be as simple as the now somewhat famous in technology smoothie test, which is, we used to have engineers work pretty hard at Square and pretty late. And I always wanted them to have food so they wouldn't be famished, they wouldn't be distracted. And I didn't really want them to eat junk food because I actually think junk food's bad for you, bad for your brain, et cetera. So settled on delivery and really wanted to provide a 9:00 PM cold smoothies.

And we had, at that time, a pretty substantial team at Square, office team, EAs, this was not a lean, mean organization. And so I tried through the office team EAs and nothing ... We never got healthy, delicious, and cold smoothies delivered at 9:00 PM. Just kept that one. I was getting frustrating because if the smoothies aren't cold, then no one's going to eat them. If they don't arrive at 9:00, then no one can really bank on their refreshments. Everything went wrong.

And then I had this intern named Taylor Francis, and I was explaining just my frustration. It was his second day at work. And he's like, "I'll solve it." And I was like, "Okay, kid, good luck with that." I was like, "Sure, keep trying." Anyway, day goes by, 9 o'clock arrives. And lo and behold, smoothies show up at 9:00 PM, delivered on the standing desk table where the engineers would congregate. I sample them, they're cold, they taste great. And I'm like, "Oh my God, I found a barrel." And I later gave him almost everything to do.

**Lenny Rachitsky** (00:22:37):
I want to go back to actually the first question. You shared some amazing advice for how to identify great talent, but I'm still curious, when you find that barrel, for example, when everyone's throwing money at them, there's all these amazing teams to join. What are some things that companies do to attract and convince them to join their team?

**Keith Rabois** (00:22:56):
The standard of stuff is still true. Mission, selling the vision to mission is indispensable. Most people who have proven talent anyway, at least in the current world, are going to attract offers from multiple opportunities. And so you've got to convince them that your opportunity is very special.

**Keith Rabois** (00:23:14):
I think one way to do that that's a little bit more nuanced is convince them that their particular skill overlaps with the critical blockers to the current company, meaning they're betting on themselves. So for example, if they are superb at, let's say marketing, if the biggest blocker of the company in the company's current success is not technology, not the product, but we believe it's marketing, it's really easy to go to a world-class marketing person and say, "Not only is this great company building something really cool and interesting that you'll be proud of, but your particular ability is very unique and differentiated and you can solve this."

**Keith Rabois** (00:23:55):
This is actually how I wound up at Square. Back in 2010, I was actually, I'd just been acquihired into Google and was planning on being a VC actually next after I was investing whenever Google is going to compensate us. And then the investors in Square called me up and they said, "Hey, we've been looking for almost a year now for someone who knows something about financial services yet is still an entrepreneurial." And they're like, "Hey, there's only three of these." At the time, 2010, it was like, "There's only really two or three of you in the world, so would you be interested?" And I said, "Well, maybe."

**Keith Rabois** (00:24:33):
But that was the argument to me that made me leave Google early after two weeks and infuriate everybody. And bypass Venture for another three years, which had been my plan, was because they made the argument that, hey, I was one of three people in the world that could actually do this job.

**Lenny Rachitsky** (00:24:51):
So look, there's a, I don't know if it's ego, but it's also just impact.

**Keith Rabois** (00:24:55):
Yep. Well, exactly. Impact, you have talent, you want to use them and you want to feel that you're challenged every day and that what you're doing really, really matters. So I think that can be extremely helpful.

**Keith Rabois** (00:25:06):
My more important arc in this is I think you have to build a company on undiscovered talent. I don't think you really want to compete for the people that everybody else wants. And I learned this at PayPal. Peter taught me this literally the first week of my job at PayPal, that the way to build a company, we were jogging around the Stanford campuses, you've got to find these undiscovered talent. That's the only way to scale an organization against these large encumbers with infinite money, et cetera.

**Keith Rabois** (00:25:34):
And I've been on that crusade for 25 years. For those who are interested, you can link to it. I gave a speech at Ramp, how to hire, the talks in detail. I also recommend Eric, CEO of Ramp's speech, which is fairly similar. Both videos are online.

**Lenny Rachitsky** (00:25:49):
That's such interesting advice and it makes so much sense. You're not going to be able to afford the people that have done the thing at top companies. And also they're just probably not the people to join at early start, right?

**Keith Rabois** (00:25:58):
Well, they're also not maybe the people you want, so there's adverse election, but it's like a salary cap. Most sports these days have salary caps. And when you're a startup, not only do you have a salary cap, you probably have one 10th the salary cap of the people you're competing with. So you've got to figure out how to leverage less assets to more success.

**Lenny Rachitsky** (00:26:19):
What's just one tip when you're looking for undiscovered talent that's a sign of, okay, this person is really special? I know you have a lot to talk about here, but just what's one tip?

**Keith Rabois** (00:26:27):
I think it's basically isolating why other people aren't going to process them correctly. Most recruiting at large organizations becomes a homogenous function. And so if you understand why this person is going to get thrown into this black box thing and not get processed accurately, it's pretty easy.

**Keith Rabois** (00:26:49):
So I always think about, let's say this person was interviewing at Meta or Google or Block these days or Coinbase, what are they going to miss and then why? And then that leads to, oh, perfect. So sometimes it's just lack of information. Sometimes it's controversial to say this, but one of the reasons why the net impact of my higher undiscovered talent is you wind up skewing younger. It's not because you need young people, it's that younger people have, by definition, less data.

**Keith Rabois** (00:27:21):
It's like we use credit scoring, FICA scores. It's the same thing for employment. By the time you're over 30-some odd things, there's so many data points about you that this black box machine is usually going to process you like many other people. If there's no data points, it's very hard for a black box machine that does homogenous evaluation to evaluate you. So there is alpha, so to speak, by definition for people who have no data points.

**Lenny Rachitsky** (00:27:47):
It's interesting how this is the same skill as being an investor, picking startups to invest in.

**Keith Rabois** (00:27:51):
Yeah, absolutely.

**Lenny Rachitsky** (00:27:53):
Okay. I want to talk about something else. I asked a few people that know you well that work with you at various companies what to talk to you about. And one person said that when I asked him what to talk about, he said, "My immediate reaction is that he is a bar raiser. No matter what kind of numbers we put up, he pushes us to do more. In fact, often it seems like the better we do, the harder he pushes." Does that resonate?

**Keith Rabois** (00:28:16):
Yeah, I think that's true. I mean, I think, look, ultimately, I'll channel someone else's feedback, but it's in the same vein. So a friend of mine who's a CEO once asked Mike Moore, it's like, "What's the most common denominator of the best CEOs ever?" And he said, "It's the relentless application of force." Quote.

**Keith Rabois** (00:28:36):
I think that's the job of the CEO. People eventually get comfortable, complacent. The more success you have, the more complacent the organization tends to get, and the single role for the CEO is offsetting that complacency.

**Keith Rabois** (00:28:49):
So to the point, the more success you have, the better you're doing, the more complacency naturally kicks in. And unless you've erected a network effect, you do not want to get complacent. And even then, debate whether you should. But fundamentally, most businesses are not network-effect businesses. They're not going to run on their own for a long time.

**Keith Rabois** (00:29:09):
So I think that's one insight is the better you're doing, the more the CEO should push. Secondly, it's a little bit like sports when you're growing up. People, when they're winning, take advantage of feedback better than when they're losing usually. So for example, now what I do is mostly a VC, mostly a board member, mostly a consigliere to a founder.

**Keith Rabois** (00:29:36):
Maybe what's less intuitive, and you may picked up on this in your research and interviews of people who know me, when a company's struggling, I'm actually usually very non-critical and more like a coach and supporter. Because the company, the founder knows they're struggling. Being critical doesn't really help them solve the problems. That's when being supportive can actually somewhat counterintuitively be more important. But when the company's thriving, it's really important to be critical and isolating things that will eventually be problems while everybody in the company's really happy and borderline complacent.

**Keith Rabois** (00:30:12):
So you want to be the opposite as a default. And that's like a really good sports coach. When you're winning is when to polish everything and really master the details. When you're losing, you definitely also have to be exciting people and embracing the future and selling the future.

**Lenny Rachitsky** (00:30:30):
So is, say someone's listening, a founder or a product leader, the advice here is just keep pushing harder, set the bar higher as things, even if you're doing great?

**Keith Rabois** (00:30:41):
Yeah, if you're doing great. Well, also you have to remember, I remember giving a speech once at Square. It's like you get to a certain threshold, crazy inflection. Momentum gets you to certain valuation and all these attributes. But it's like winning a Super Bowl. The last year was great. Last four quarters was wonderful. It's like winning the Superbowl. You got to come back next year and start your records zero, zero again. And you got to remember that.

**Keith Rabois** (00:31:08):
Actually, Ventures like that. I'm only as good as my last investment. I've had 13 years or whatever, of pretty damn good investments. But truthfully, I have to wake up every day and find some undiscovered founder that's going to change the world. And if I don't do that, it doesn't matter what I've done in the last 13 years. And a company's like that and the company can skate on autopilot for a while. Venture, you really can't ever skate.

**Lenny Rachitsky** (00:31:33):
I definitely saw this with Brian Chesky. He just felt like things were going great. And we just shipped amazing products and growth is up and he's just always pedal to the metal no matter what. Just like, "Come on, when are we going to take a little break?" And it's interesting because when we did have little breaks here and there, morales actually went down because people are like, "What am I working on? I don't know. It's not that exciting."

**Keith Rabois** (00:31:53):
Yeah. Brian and I are usually in sync a lot. There's a really good interview when I interviewed him also at the same conference of how to hire, when he talks mostly about founder mode. But I generally subscribe to virtually all of Brian's views. He even taught me some of these things himself.

**Keith Rabois** (00:32:08):
But the more important point I think you identified, which is very subtle, is really talented people are like superb athletes. And when things are going well and people are really coasting, they're not happy. They have an internal clock tempo. They just want to create things and create value and drive, drive. And the morale actually does go down for the best people in the world when people are skating.

**Lenny Rachitsky** (00:32:37):
Okay. So actually along those lines, there's a lot of anxiety in the market, in the job market about the future of careers. Am I going to have a job? Where are things going? And it just feels like people are working very, very hard. They're just putting in a lot of hours, especially the most AI people. It just feels like they're working harder than ever.

**Lenny Rachitsky** (00:32:56):
I don't know if you saw this thing Tyler Cohen put out of just work harder. Now is the time to work harder because AI is eating away at your value. You probably talked to a lot of people looking for career advice of just like, "This feels scary and I feel like I'm working too hard and what should I do?" I don't know. Do you have any just advice for folks from-

**Keith Rabois** (00:33:15):
Well, I do think AI is going to radically reorient lots of people's careers, maybe including mine. So I think that's actually true. And I think the way to thrive in a rapidly emerging technology world is to be intellectually curious. So for example, I'm a business person historically. I did actually code when I was really young, but basically professionally, just a business person. What I've noticed in some of the best organizations is the number one consumer of tokens is the CMO-

**Lenny Rachitsky** (00:33:15):
CMO.

**Keith Rabois** (00:33:49):
... because these people are intellectually curious. And so they're like, "Wow, there's all these cool things I can do now with my hands. Either I had to rely on other teams or never got access the way I wanted and blah, blah, blah or lag." And they just do it. This is actually true at Opendoor. It's true at another great company that I'm on the board of that's incredible.

**Keith Rabois** (00:34:09):
And so I think you can be intellectually curious and future-proof yourself more than just, yes, you can work harder and a big subscriber to no days off and working all the time and all that stuff. But fundamentally, the intellectual curiosity is, "I want to learn new things," and that is how you embrace the future.

**Lenny Rachitsky** (00:34:29):
And you said CMO is who's the most-

**Keith Rabois** (00:34:31):
CMO. In both of these two companies-

**Lenny Rachitsky** (00:34:31):
So interesting.

**Keith Rabois** (00:34:33):
... both massive, awesome companies with lots of engineers. And I think that's very encouraging. For the executive particularly, like, "This is definitely the best executive in the company."

**Lenny Rachitsky** (00:34:47):
And what are they building? Is it landing pages and paid tests?

**Keith Rabois** (00:34:51):
Well, sometimes it's more like what we would've thought of analytics. Sometimes it's actually campaigns, actual campaigns. It's just like they don't need to rely upon deputies and deputies and deputies to get actual work product. And so they're just shipping things or shipping drafts of things or giving the CEO insights into things themselves.

**Lenny Rachitsky** (00:35:15):
I want to get your take on the future of specifically the product triad. You work with a lot of product people, engineers, designers. Everyone's always wondering, what the hell is going to happen in my career? Thoughts on just the future of those three specific roles?

**Keith Rabois** (00:35:30):
Well, I saw this podcast or I listened to this podcast that Peter Fenn did. And he convinced me that the idea of a PM makes no sense basically in the future. If you think about decomposing the logic is what does PM usually do? They take these inputs from customers, they create this sequential roadmap that's well organized over the next year, blah, blah, blah, blah, blah.

**Keith Rabois** (00:35:52):
That world is ridiculous. Right now, the capabilities of foundation models or companies like Lovable and things like that are just so improving such a rapid rate that it makes no sense to have a year-long roadmap. And they're just incoherent. There are things that were impossible to do in November that are actually pretty easy to do right now in March. And so I think you need to build an organization that's incredibly adept at, people say nimble and all that stuff, but incredibly adept at changing the roadmap almost on the fly.

**Keith Rabois** (00:36:31):
And I think intermediaries like conventional PMs don't make a lot of sense versus being prepared intellectually, embracing and exploding, noticing. So someone needs to notice that, "Oh, wow, we can actually do this." But then exploiting it this week is the future of a high growth stellar startup. We'll notice that something's now possible this week and create new features and new value for customers next week.

**Lenny Rachitsky** (00:37:01):
That's such an interesting area of discussion. A lot of people listening to this RPM. So I want to try to defend that role just to see if I can convince you otherwise. And by the way, I will say Mark Andreessen had this really good visual of just what's happening here is all those three functions, it's like the standoff where they're all like, "I'm good taking... The future is my role. The future is design, that's engineering is the future."

**Lenny Rachitsky** (00:37:22):
So the way I see it is as AI makes it easier to build and eats the middle of the software development process, just anyone can build detailed AI, here's what I want. The hard part, the gap at least for now is figuring out what to build and then aligning everyone around what to build.

**Keith Rabois** (00:37:39):
I agree with that. I actually think whether you talk about someone who used to be a PM or someone who used to be a designer or called an engineer, the skill is more like being a CEO now, which is what are we building and why?

**Lenny Rachitsky** (00:37:50):
Exactly.

**Keith Rabois** (00:37:51):
And to be a successful engineer, that trait's critical, to be a successful designer. Because the tools and the ability to actually create the thing, an object, is going to be easier and easier. But the art is knowing what to build.

**Keith Rabois** (00:38:07):
Another competitor of mine, Alfred Lin at Sequoia likes to talk about being a chef. When you're a chef at a prime restaurant, you're not actually cooking the dish. You're sampling your colleagues and editing their work a little bit, but fundamentally, it's half a commercial role.

**Keith Rabois** (00:38:26):
Being a chef at a famous restaurant is what's our value proposition? How do we differentiate ourselves? How do we brand ourselves? What's our segment? What's our pricing, et cetera? What's our location even? That's what makes a famous chef. It's not they're literally cooking the dish all the time.

**Lenny Rachitsky** (00:38:41):
Okay. I 100% agree. Interestingly enough, PMs are called mini CEOs often. And I think the important thing is it's not like, what do you call this person? I think the question is what skill will be most ... Where are human brains still going to be necessary? And it's-

**Keith Rabois** (00:38:56):
Business acumen. It's basically business acumen.

**Lenny Rachitsky** (00:38:59):
Right. What will help this company grow and succeed-

**Keith Rabois** (00:39:01):
Exactly.

**Lenny Rachitsky** (00:39:01):
... and win?

**Keith Rabois** (00:39:02):
I understand the company's business equation, where we're trying to go and what the inputs and connection outputs are. And I can, on my own, create things that move the needle or potentially move the needle. It's very exciting because you can actually drive impact much more easily now as an individual.

**Lenny Rachitsky** (00:39:19):
My conclusion based on what you just shared is of the three roles, which role is best at that? And historically, it'd be PMs. Obviously, I think the important thing here is it's great PMs or great engineers, designers will do well. But I think interestingly, what you're describing to me is what it sounds like what a great PM would be really good at basically represents [inaudible 00:39:41]

**Keith Rabois** (00:39:41):
If they were exceptional, I think that's right. But I think a lot of the best engineers I've worked with have commercial instincts like Max Levchin has this on steroids. Jeremy Stoppelman, he's worked with me very closely at PayPal before he started Yelp and got promoted to be engineering director and vice president of PayPal, had commercial instincts back when he was an individual contributor. So I think there are great engineers who are technically proficient that have always understood the business building.

**Lenny Rachitsky** (00:40:08):
Yeah. I think that's the ultimate unicorn is an engineer that is also very business-minded.

**Keith Rabois** (00:40:13):
It's going to put a premium. I think this is what ... The age of AI will put an incredible premium on that because they're not going to need a large team. You're not going to be marshaling the forces.

**Keith Rabois** (00:40:25):
Another example is a good friend of mine is director of engineering at Ramp. He ships as much code personally. So he has a team of about 20 people. He personally ships as much code as he used to as an individual contributor while he's managing a team of 20 because the tools are so great and he's become a leading pioneer in the usage of AI.

**Keith Rabois** (00:40:47):
And he's basically using AI as a second team. He's basically like, "Okay, you're the team manager. You do this, you do this, you do this, this, this together, check this out, blah, blah, blah." And I think that is definitely the future.

**Lenny Rachitsky** (00:40:58):
I 100% agree. Engineers that are very good at that are just extra valuable. What's your take on design in the future of design, the value of design?

**Keith Rabois** (00:41:08):
Well, it's interesting. Design and code are merging. And it's not clear to me who triumphs of is it code becomes design? And design just translate automatically into code. I've made some investments that bet on both in some ways, but I think they're merging in a way where they're not separate fiefdoms anymore.

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**Lenny Rachitsky** (00:42:42):
What I'm seeing is something really interesting happening with design. On the one hand, I just did some analysis on the job market for design. And it's basically plateaued in terms of the number of open design roles over the past three years, just hasn't gone anywhere. It's flat.

**Lenny Rachitsky** (00:42:55):
We had the head of Claude design, Jenny Wen, on the podcast, and she had this insight that the design process ... There's no time for the traditional design process. There's like engineers are shipping 17 things a day. There's no time to sit there and help mock and prototype and all these things.

**Keith Rabois** (00:43:12):
Well, let me give you a couple of concrete examples. So at Shopify, the way they develop, they've been doing this for over two years now. So this may seem normal, but they have not let PMs provide PowerPoint or keynote presentations on product for two years. Every presentation on product has to be a workable demo, and they just expect the PMs to create the products. And the execs just refuse to look at static, "We're going to have this feature." No, I want everything working. This is for two years. So I think that, again, everything's just merging together.

**Lenny Rachitsky** (00:43:51):
That's so interesting. You would think though, because there are so many products launching every single day, there's just endless things to pay attention to, you would think design would be a differentiator more and more.

**Keith Rabois** (00:44:02):
I do agree with that. I do agree with that actually. I think the alpha is in design just like in marketing. It's not the tools, it's not the channels, not the metrics. It's the storytelling. It's how do you cut through the clutter in the snappiest, most compelling, possible way? It's an NP problem. There's so many different words you can use to express the same concept, but the person who can say, "This is the way to frame it," the proverbial 1,000 songs in your market, is worth all the tools in the world.

**Lenny Rachitsky** (00:44:31):
Yeah. So that's the other part of my insight recently is just as AI makes it easier to build, it's kind of expanding from the middle out. And what remains is figuring out what to build and making iterating on the idea. And then it's at the other end of the spectrum, which is distribution, getting anyone to pay any attention to what the heck you've done, because again, there's so much happening every single day.

**Keith Rabois** (00:44:48):
Yeah. Cutting through the clutter. I mean, that's always been critical. I mean, when people are pitching me as an investor, it's one of the things I'm dialing into immediately is how the hell is this going to cut through the clutter? It's one of the reasons why I don't like to take customer feedback into account because by definition, when you put something in front of a customer, that's not a proxy for the real world.

**Keith Rabois** (00:45:09):
In the real world, you have to cut through the clutter while they're going to their Barry's bootcamp, while they're doing their job, while they're raising their kids, et cetera, et cetera, while they're walking, while they're on the subway. An isolated fake experiment doesn't give you actionable insights and often is directionally wrong.

**Lenny Rachitsky** (00:45:26):
Interestingly on that line, there's a few companies that are launching, Simile is one, that is simulating humans. I don't know if you heard about this company. They basically are building AI models of the actual people so that you can simulate your marketing launch and your product experience with people before you launch.

**Keith Rabois** (00:45:44):
I don't know if I've seen that specific company. I have seen one or two pitches. My general question as a refrain on those type of companies is what are they training on? Because again, if they're not training on the right data, it's dangerous to say you're simulating humans.

**Lenny Rachitsky** (00:46:02):
Yeah. Yeah. That is the question. Oh, man. What a weird world. Along these lines, actually, you have this, I don't know if you call it a hot take that AI content is going to surpass human content and that's just the future.

**Keith Rabois** (00:46:13):
Oh, that's inevitable.

**Lenny Rachitsky** (00:46:15):
I was talking to someone and then she was saying in the Chinese TikTok app, it's just all AI videos now and it's very good. She actually enjoys watching these videos and these stories.

**Keith Rabois** (00:46:26):
I think there'd be a binary sort maybe. I could see products and content thriving that is clearly still human-generated and that there's some desire for authenticity. Just like, for example, this piece of art is a Warhol. Anybody could create this now, high fidelity, but there's still an appreciation for this was created by Andy Warhol.

**Keith Rabois** (00:46:51):
I think there's going to be a curated experience with a premium of provenance that you know is human-created. And then there's just going to be a rank filtering of what's the best content and whether it's AI-generated or not. It's a little bit like the Ben Thompson strategy thing of curation versus algorithm. There's going to be two polls and the curation may be for human created stuff. And then there's going to be the algorithm, which is just what's the best?

**Lenny Rachitsky** (00:47:18):
I 100% believe that. That makes so much sense. I was just thinking the other day, it's so interesting that AI is getting very good at video. Videos are actually fun to watch that are AI-generated. And then images are getting really good, but writing is still really bad that is AI-generated. And it's ironic that it's called a large language model. It's all context, text, text trained. And it's just like that's the thing it's least good at, which is really weird.

**Keith Rabois** (00:47:44):
Well, I think part of that's an economic decision of token rationing by the LLMs. They basically are, when you prompt, they're trying to make their economics work within a bell curve distribution. And so for example, if you prompt an LLM to write something that's very short, the quality is significantly better than if it's a page to chapter to book. I think it's tokening ratioing versus actual quality.

**Lenny Rachitsky** (00:48:17):
You would think though, I don't know if it was Hemmingway of just like, "If I had more time, I would've made it shorter." It's more work. Yeah.

**Keith Rabois** (00:48:23):
But then you have ... I think the writing, right now what works best is short, many short examples and then-

**Lenny Rachitsky** (00:48:32):
Tweets, basically.

**Keith Rabois** (00:48:33):
... picking, editing, reprompting. It's a little bit like when I used to be a litigator 25 plus years ago, the hardest part of writing a brief or all the art and all the magic was the first paragraph. If I could write that first paragraph really well, the chance I would win the case and convince the judge would go through the roof.

**Keith Rabois** (00:48:55):
So what I would actually do is I might have three weeks to write a brief. I might spend the first week or more walking around the office, thinking through, "How am I going to nail the first three sentences?" Once I figured out how I wanted to frame those first three sentences, I could write 30 pages in two days, but getting that right could take a week or two.

**Keith Rabois** (00:49:20):
Sometimes it would occur to me in the shower or literally the shower or in the middle of a run. It's like, "Oh my God, here's how I distill it." Then I could just sit down and power through the rest of the brief. And I think it's a little bit like that. The powering through the rest of the brief works well, you still need the first three sentences.

**Lenny Rachitsky** (00:49:36):
Is there a story from that time in your life that would be interesting to share? I didn't even know about that.

**Keith Rabois** (00:49:40):
So yeah, not everybody knows. I spent the first four and a half years of my professional career as a law clerk and then litigator, which occasionally comes in handy truthfully. Sometimes trading off business risk against legal risk is a valuable thing to do. Sometimes it's not accidental that many of my best investments are in financial services in heavily regulated areas because I think I can sort of do the legal risk assessment in my own brain. This was definitely true back in the day when I invested in YouTube. But I think most things that lawyers learn are very inconsistent with being entrepreneur.

**Keith Rabois** (00:50:19):
So when you're graded as a lawyer, you learn every exam in law school virtually is issue spotting. So you get credit for identify ... There's fact patterns and identify all the issues and then resolve them. So you learn to identify everything that can go wrong, moderately useful, but very not useful as an entrepreneur.

**Keith Rabois** (00:50:39):
I mean, sure, you can identify all the reasons a company could fail, not that difficult to do. The art is solving those. So not the best training. And then you also measure your productivity by hours worked. Literally, you bill per hour. It took me two years, maybe a year and a half after converting to technology to stop tracking all my time. I used to literally write down in my notebook, "Oh, half hour of this meeting, 20 minutes on this, blah, blah, blah." I just couldn't get that out of my brain.

**Lenny Rachitsky** (00:51:08):
That is so funny. And David Sachs was a lawyer too. It's interesting.

**Keith Rabois** (00:51:11):
That's true. Peter was a lawyer.

**Lenny Rachitsky** (00:51:12):
Peter too.

**Keith Rabois** (00:51:14):
Peter was smart enough to quit after five months and four days, I think. David never practiced so maybe even smarter than both of us.

**Lenny Rachitsky** (00:51:23):
Okay. I'm going to hit on some hot takes, contrarian takes that you have. You have a number of these. I heard you share on a podcast recently. They asked you, "Why don't you have as many contrarian takes these days?" And you're like, "Well, they've just all been proven right."

**Keith Rabois** (00:51:35):
And that's the problem is if you have good ideas, eventually you want them to be adopted. It's a little bit like when you're an investor, you want to be contrarian. So Airbnb, you start with a contrarian take, but eventually if the company's going to succeed, it has to become consensus. Everybody in the world has to use it and believe in it and trust it. So you want that inflection. You don't want to just have contrarian takes and then nobody believe it. So you do need a refresh rate. And then the question is, how do you find new ideas? But you want to actually exhaust them.

**Lenny Rachitsky** (00:52:06):
Okay. So one that I think people still just would disagree with is that your advice is for, unless you're building an enterprise company, you don't actually want to be talking to customers.

**Keith Rabois** (00:52:17):
Yeah, I hate talking to customers. I refuse to allow colleagues about and talk to customers. You can talk with the famous stuff and the Steve Jobs, the horses and the faster horses and all this stuff. But I think it's more important is it's often directionally wrong. Customers don't know what they want and they're very bad because it's a subconscious decision, especially for consumers. What I purchase, what I wear is not a conscious decision. And when you're consciously trying to answer a subconscious decision, you actually give misleading information even when you're trying.

**Keith Rabois** (00:52:53):
The proverbial example I like to use, but it's instructive is ask anybody who drives a super fancy car like a Porsche or a Lamborghini, why they bought the car. 99% of the time they will tell you every reason except the real reason. Once you realize that, you're like, "I'm never asking customers anything."

**Keith Rabois** (00:53:10):
Now, a hardcore enterprise, customer development does work because there is a decision maker. And the decision maker is mostly making utilitarian decision. And yes, there's political forces within the organization and you may or may not be able to tap into those, but fundamentally, extracting that information is valuable, but a consumer, SMB, micro-emergent product, unmitigated disaster.

**Lenny Rachitsky** (00:53:36):
And so the implication here is you need to rely on your instincts and gut and experience.

**Keith Rabois** (00:53:40):
Yeah. I mean, humans are humans. I have this other line I like, which is everything important you need to learn about humans was written by Shakespeare. Just read Shakespeare. That's better than all the customer research.

**Keith Rabois** (00:53:52):
Now you are producing a movie and ultimately, this movie doesn't just need to be critically acclaimed. You have to sell tickets. So if you're not selling tickets, you have to question, "Okay, is the trailer wrong? Is our distribution where we're trying to meet people to let them know about the movie, is that wrong?"

**Keith Rabois** (00:54:14):
Fortunately, unlike a movie, you can go back and say, "Have I casted this somewhat incorrectly? Is the script slightly off," et cetera? But the goal is selling tickets and that's what you want to optimize for. But if you don't sell tickets successfully, economically, efficiently, you definitely want to go back in a loop and try to reorient things so that you are selling tickets.

**Lenny Rachitsky** (00:54:38):
So this is like CAC LTB kind of stuff is what I'm hearing here. And so your insight here is just, it's not going to help you. You're saying moreso it's actually harmful.

**Keith Rabois** (00:54:49):
It's harmful. And then people will say, "Yeah, I've sat in so many meetings," and this would infuriate me, but where people will be like, "I talked to eight customers, blah, blah, blah, blah, blah, and I know that this isn't statistically represented," but then they pontificate for an hour. And then they're like, "Oh, I know this is not blah, blah, blah." But once you hear this stuff, it's like we can't take this out of your brain. And then every other subsequent meeting is like this stuff is just locked in the customer's brain.

**Keith Rabois** (00:55:16):
So yes, in the enterprise when you have ... I work with a company in AI that has 30 must win accounts. That's the goal for the company over the next few years, make sure all 30, and we're doing really well, get all 30 using our product. Great. We actually can talk to all 30 customers and we can actually meet the decision maker, all 30 customers. And we can influence the CEO at all 30 customers. That is a useful exercise. If you're targeting a billion people on the planet, you are not getting representative feedback.

**Lenny Rachitsky** (00:55:46):
Being a contrarian take, many people would not believe this as good advice. Do you have a story, maybe an example of just, wow, someone talking to a customer, saying, "We're going in the wrong direction for a while"? Really-

**Keith Rabois** (00:56:00):
All the time. They're called failed companies. There's a reason why ... I mean, there's a Darwinistic efficiency to this too, which is just like, "Hey, there are things you can vet. Is it feasible to do X, Y, or Z?" So for example, let's go to DoorDash. I don't think customers told us that, "We want a button on our phone to click to deliver food," but you could talk to restaurants and say, "Hey, would you put this placard here so that people walking into your store know in the future that they can get delivered?" Okay. Yeah, maybe.

**Keith Rabois** (00:56:33):
Then could you run an experiment of how many deliveries per hour would you have to do to breakeven? And is there enough density within this? There are ways to improve the odds that you can make the business work, but I don't think launching the company saying, "Hey, we found 10 people in Palo Alto. Do you want this button on your phone?"

**Keith Rabois** (00:56:57):
So when Tony and Evan walked into my office originally, the epiphany I had was, well, they had a stat, which is 93% of the restaurants in the United States don't deliver. I was like, okay, seems like it should be a higher percentage than seven. Convinced.

**Keith Rabois** (00:57:14):
And then when they were describing what they wanted to create, Andrew Mason of Groupon fame had famously said, "These phones, these devices should have two buttons. I'm bored and I'm hungry." And I was like, "Oh my God, you're the I'm hungry button." And then so it just clicked in my brain and then it was like, okay, now we need to make it economically possible to scalably do this. Good luck, guys.

**Lenny Rachitsky** (00:57:38):
And this advice is not just consumer. You're also talking like DoorDash has SMB-ish-

**Keith Rabois** (00:57:43):
Yeah, like Square and things like that.

**Lenny Rachitsky** (00:57:45):
Square, yeah.

**Keith Rabois** (00:57:46):
Square is a good example. Anything sub mid-market, I think it's directionally dangerous.

**Lenny Rachitsky** (00:57:52):
And the advice here is basically trust your insights. You need to have the insight yourself. You can't find it [inaudible 00:57:57].

**Keith Rabois** (00:57:57):
I think typically the best companies-

**Lenny Rachitsky** (00:57:59):
Yeah, interesting.

**Keith Rabois** (00:58:00):
There's foundational insight. And people don't necessarily want to hear that, but there's logic, you can asset test and pressure test the logic. To some extent, when Brian first pitched me on Airbnb, there was some interesting evidence he already had that this was going to be successful.

**Keith Rabois** (00:58:21):
The number one, the one that stuck with me at the time was he gave me the exact number of Craigslist listings that said, "I want to rent someone's bedroom." And it was actually a reasonable number. It was 30 in the Bay Area. But given that you had to literally type it in and have the epiphany yourself, I was like, "That's a lot actually. That's probably a real market there."

**Keith Rabois** (00:58:49):
And as soon as he said that, I was already leaning in. And by the time he finished his three-minute monologue, I was like, "This is the coolest thing ever. I need to invest."

**Lenny Rachitsky** (00:58:57):
Yeah. And I think Airbnb was a good example where he was solving his own problem, saw an opportunity. Wasn't talking to people, "Hey, would you do this sort of thing?"

**Keith Rabois** (00:59:04):
And people would've said if he'd sampled the wrong people, definitely would've got feedback that was like, "No, very high risk." That's a good example where you had sampled 10 random people, good chance that nine plus percent would say, "No, I would never do that."

**Lenny Rachitsky** (00:59:19):
You know what's really interesting? I was just watching Taylor Swift's acceptance speech at this award show, iHeartMedia something or other. And she gave this really powerful speech that when she was starting out, she was just kind of at home working on songs, learning piano, just in a room on her own and had thousands of hours to just iterate and learn and get better. Versus today, if you were to do this, you'd be posting it, sharing it, people giving you feedback constantly. And her advice is just find ways to just not expose yourself to people for a long time.

**Keith Rabois** (00:59:53):
So I have a couple of friends who are artists in the music industry, and I think what she's saying is one of the reasons why it's sometimes difficult for artists who had success to recreate the success. Because the first success was not data-driven, was not customer feedback driven. It was like, "I'm creating this and it's resonating."

**Keith Rabois** (01:00:14):
Then because they have an audience, someone, either they or their manager or whoever, the label, blah, blah, blah, blah, blah, wants them to get feedback. And it creates derivative works, not strictly legally, but derivative works, they're less inspired.

**Keith Rabois** (01:00:32):
There's a podcast that Jack Altman did with my friend, Alex, from The Chainsmokers. He actually talks about this at some length that they created this song that actually didn't resonate with their normal audience, but actually resonated with a different audience, which is interesting. So I think you can get trapped with success. It's a good illustration actually.

**Lenny Rachitsky** (01:00:57):
There's also this concept of the ugly baby in Creativity, Inc., I don't know if you read that book, Ed Catmull, about every idea at Pixar, every great idea starts as this ugly baby that no one wants to help and pay attention to and just, "Get those out of here."

**Keith Rabois** (01:01:11):
It's like a startup. I mean, that is actually the startup. I use this prism as an investor, which is when I make a seed investment or series A investment, let's say, I want half of my friends who are VCs to laugh at me. Literally laugh because I know most of the people I compete with pretty well. And so I'm running this algorithm through my brain. Are these people going to laugh? If so, this is potentially a great investment because it's an ugly baby. And ugly babies are the ones where there's real alpha.

**Lenny Rachitsky** (01:01:37):
That's so interesting you say that. I did some research recently on what are signs. We interviewed, this is me and Terrence Rohan. I don't know if you know him, VC. We interviewed early employee, people that have joined early generational companies many times. They joined OpenAI early before anyone knew about it. Palantir, really early, Stripe. And so we asked them, "What did you look for?" And there's three patterns. And one of them was exactly that. The idea, people laughed at them. They thought it was crazy. This is never going to work. Palantir, for example, OpenAI, for example.

**Keith Rabois** (01:02:08):
Yeah. My parents used to laugh at almost all my jobs in tech. It used to be very funny. They thought I was going to be homeless because most of them did not make sense to them.

**Lenny Rachitsky** (01:02:17):
That's classic parents. No idea what the hell people do in tech. Yeah.

**Keith Rabois** (01:02:22):
They did appreciate Stripe though. My mom always appreciated Stripe.

**Lenny Rachitsky** (01:02:23):
That makes sense.

**Keith Rabois** (01:02:26):
And always tried to lobby me to invest, and I finally listened.

**Lenny Rachitsky** (01:02:30):
Nice. Good job, Mom. She earned her keep. Okay. We just shifted perspective because Keith's iPad was dying. Classic, that's maybe the downside of the iPad [inaudible 01:02:41]

**Keith Rabois** (01:02:41):
The downside of the iPad is I use it too much.

**Lenny Rachitsky** (01:02:44):
That's product market fit. Okay. I want to actually follow up on this discussion we're having about just finding great companies. A lot of people are starting AI companies now. There's so many launching. As an investor, I'm just curious, what's a sign that this is a worthwhile idea considering the endless number of startups launching? And maybe what are some just flags that are like, "Okay, maybe don't work on that idea"?

**Keith Rabois** (01:03:09):
Well, the existential question that everybody talks about these days is are the foundation labs just going to be so proficient that there's no oxygen? Because if you're building a successful startup, you need to build for eight to 20 years into the future. Whether you just discount a cap flow analysis or some other prism, it doesn't matter. Ultimately, you have to build for something that's durable for decades.

**Keith Rabois** (01:03:30):
And the rate of progress by the foundational labs, not just one, multiple of them, really does start creating questions about the sustainability of even companies that look like they're thriving in the short term. So that's one question. The second question I'd ask is very typical. I've always asked this question for 25 years, which are, what are the accumulating advantages of this startup?

**Keith Rabois** (01:03:56):
You do want to believe that over time you create an unfair advantage. And there are different species of accumulating advantages. The one that people immediately gravitate to, but it's only one illustration of a set of options is network effects. But you want something that, over time, makes the business better and better and better, arguably easier and easier at some point.

**Lenny Rachitsky** (01:04:18):
Do you see those sorts of things at the beginning when you're seeing a seed stage startup?

**Keith Rabois** (01:04:22):
Yeah, it's a great question because I think people can conflate two things. There's a difference between seeing it and understanding the potential. So what I'm looking for when I need a founder is can they articulate where the accumulating advantages can be in theory conceptually. They don't have to have demonstrated it.

**Keith Rabois** (01:04:43):
Yes, there's an occasional example. Once every five years you might find one where early you can actually point your finger on it empirically, but that's way too strict as a bar for an early stage investor. But I personally want the founder to articulate to me where they can build accumulating advantages and maybe even sequentially identify when they would start either taking advantage of them, leveraging them or measuring them.

**Lenny Rachitsky** (01:05:14):
So when you're evaluating startups these days, I know this is a very hard question to answer, but just is there anything in particular you're looking for that you get really excited about?

**Keith Rabois** (01:05:24):
I'm a founder-driven investor. So the only thing I really care about is, does this founder have a non-zero chance of changing an industry or the world? And if they do for a seed or series A investment, I'm in, period. Don't ask any other questions. That's all I need to identify.

**Keith Rabois** (01:05:43):
Not every investor who's been successful has the same algorithm they're running. There are technology-driven investors. I would say Mark Andreessen's probably someone like that. Vinod's a mix. He's both founder-driven and a technology-driven investor. There are investors who are products/market-driven investors.

**Keith Rabois** (01:06:00):
My colleague, David Wyden, I'd say is that. I think Alfred Lin at Sequoia is mostly that. So you can have different approaches, mental models, paradigms. But for me, it's, is this founder extraordinary? Do I have reason to believe that this founder is the next Brian Chesky?

**Lenny Rachitsky** (01:06:19):
You mentioned that you're an investor in all these companies you listed are doing incredibly well. And you're on the boards of a lot of really successful, incredibly good teams and companies. Is there just something they are doing the way they operate that is different from companies that are not as successful?

**Keith Rabois** (01:06:36):
I think the subtle signal, let's say very early, is speed. And it's one of those things that's easy to say, but let me try to be more concrete. There's a tempo, an operating tempo that a successful company develops that develops very early in a company's trajectory and is incredibly impressive. I remember when Roelof Botha was on my board at Square. He led the series B. So he joined our board.

**Keith Rabois** (01:07:09):
And six months in, so two board meetings in, he said to me, he's like, "I haven't seen this kind of tempo since our PayPal days." And he'd been a VC at that point for nine years. And I was curious, I said, "What are you noticing?" And he's like, "At board meeting X, you guys identify an opportunity or problem. And by the next board meeting, you've shipped solutions, addressed it, featured just constantly, consistently." And I think that's right.

**Keith Rabois** (01:07:40):
So the time between the seed and series A at Faire was pretty tight. And I remember at the time my chief of staff was Delian Asparouhov. And Delian said to me after the second fare board meeting that he shadowed me at, he said, "If there's one company in Silicon Valley that would cause me to leave being the VC, it'd be Faire." And I was like, "Interesting. Why?" And it's like, "The pace of execution."

**Keith Rabois** (01:08:07):
And his answer was exactly the same as Roelof's. He's like, "There is something slightly off. And by the next morning meeting, not only have they identified the root causes, but they've shipped and reacted and measured the impact of the solution. And that compounds, that speed really does come out." So that's just one trait, but you see it.

**Keith Rabois** (01:08:27):
It did lead me to, for example, preempt the series A of Ramp. So I led this seed in May-ish of 2019 and gave a term sheet to preempt the A in September. So pretty quick. One of the two signals was how fast Ramp was able to be on the precipice of shipping the cards.

**Keith Rabois** (01:08:50):
I'd been working in financial services for a long time at that point, 19 years or so. And there's just a lot of moving pieces to ship a card. You need these program managers, you need the sponsoring bank, and you need this and this and this. It usually takes nine to 12 months. Best case, nine. Ramp was on the precipice in three months. And I was like, "Oh my God, I've just never seen that velocity." That was one of two, maybe three inputs. And I was like, yes, makes sense to double down already, even if we hadn't shipped anything yet.

**Keith Rabois** (01:09:18):
So I think that's one. Critical density of talent, you see companies just creating an unfair advantage. The team was X when you invested in them. So, "Wow, this team is getting better, deeper, better," et cetera. So that's another signal.

**Keith Rabois** (01:09:34):
The third thing that I've noticed though is I think they have a different hiring philosophy ultimately, and maybe there's exceptions to this, but most of the companies I work with that are thriving have basically skipped hiring senior people, senior experienced people, mostly internally group talent. And I think that model has worked really well. It's definitely true of Ramp, definitely true of Trade Republic. It seems to be a mostly common ingredient, but there's probably exceptions.

**Lenny Rachitsky** (01:10:12):
Wow, that is an incredible answer instead of traits. Just to be clear, what you're saying on that third piece, so it's not hire fan CVPs from other successful companies and instead develop people internally as a trait of-

**Keith Rabois** (01:10:25):
Internally and almost turned it into a competitive advantage, meaning your strategy. We're just not even going to interview people. We're not going to try. We're just going to promote from within.

**Keith Rabois** (01:10:35):
And I think in some roles, it's not like you're hiring a GC typically right out of law school. But although we have done that once and it worked out pretty well, believe it or not, but I wouldn't recommend that. I have this blog post. Well, Delian wrote this blog post of lessons he learned from Keith. And one talks about hiring senior people. And the rough prism is, are you hiring for value creation or value preservation? If you're hiring for value preservation, typically some experience is useful. On the value creation side, it's probably not.

**Lenny Rachitsky** (01:11:07):
It's interesting how much of this comes back to just your initial point about hiring and the team being everything. So number two was talent density. And three is helping people develop and be into the role versus finding someone. And then obviously, speed all trickles down from just who you're hiring.

**Keith Rabois** (01:11:24):
Yeah. I mean, I've watched people use even chief of staff roles to groom talent. The one company board meeting I was at this week that is phenomenal on any metric. And the last two, his CMO, who's fantastic, is performing miraculously, was his last chief of staff and his new head of product probably is his current chief of staff. And just created this institution of factory where he can absorb ambitious, talented people and over one or two years in osmosis, train them to be senior successful leaders.

**Lenny Rachitsky** (01:12:02):
When you talk about speed, I think about Ramp for sure. When Jeff was on the podcast, their CPO, he just, our title was velocity, velocity, velocity. And I know they have days. If you go to days.ramp.com, it's the number of days since they launched and they're just always looking at that number, how long is it?

**Keith Rabois** (01:12:20):
Oh, yeah. Every board meeting starts with that. The first slide, day 1,184.

**Lenny Rachitsky** (01:12:26):
And they're like, what are they worth? 100 billion, not quite, but they're insane.

**Keith Rabois** (01:12:30):
Probably not quite that much-

**Lenny Rachitsky** (01:12:30):
Not quite but it's insane.

**Keith Rabois** (01:12:33):
... but a reasonable fraction of that.

**Lenny Rachitsky** (01:12:35):
Okay. That was incredibly valuable. Okay. One last hot take that I know you have that I want to make sure we share is this idea of criticizing in public versus in private. Talk about that.

**Keith Rabois** (01:12:44):
Yeah. So this is a lesson I actually absorbed from one of the great founders I work with and like many great founders, they have their own management philosophy. And one of the most important tenents is criticize people in public. And when you decompose the logic of it's so obviously true, but almost no one does this and very few people talk about it even if they do it.

**Keith Rabois** (01:13:09):
So if you think about it, when you give people feedback negative individually, you're optimizing for the atomic unit, not the system. The reason why to do it in public is it's more important for all the colleagues to understand that there's an issue, it's being addressed versus they usually have suspicions, let's say, or concerns. And if you've channeled the negative feedback to the individual, they don't know that you're addressing this, that you're on top of it, you're aware you're addressing it. Now it's a collaborative.

**Keith Rabois** (01:13:40):
And then also it lets other people kind of raise their hand and say, "You know what? I can help with that," or et cetera. And so, it becomes like a team building exercise in some way versus like, "Oh, you have this deficiency, go fix it yourself." And then the rest of the company is nervous about why this problem is persisting.

**Lenny Rachitsky** (01:14:02):
When people hear this, it may feel like, "Oh, wait," it feels aggressive to be criticized everyone public comment. Any advice for just how do you not make it this, I don't know, scary environment or is that part of it?

**Keith Rabois** (01:14:14):
Well, I think you want to win. And there's probably in art to this, I would say some of the best coaches in sports probably do a bit of both. There's things they will say in front of the team. And then there's things that probably channel to the individual player. So there's probably a mix. It could be very effective too.

**Lenny Rachitsky** (01:14:33):
It feels like you're not focused on psychological safety as a core tenent.

**Keith Rabois** (01:14:38):
No, no, I don't believe in that at all. High performance machines don't have psychological safety. They're about winning.

**Lenny Rachitsky** (01:14:46):
Bam.

**Keith Rabois** (01:14:47):
For those who want to ... A good book that's off central casting for you is read Jordan Rules or watch The Last Dance, if you like, but fundamentally, read Jordan Rules. If you want to be Michael Jordan, you got to act like Michael Jordan.

**Lenny Rachitsky** (01:14:59):
Do you feel like that's negatively correlated to this idea of psychological safety with success? There's just-

**Keith Rabois** (01:15:03):
For the most part.

**Lenny Rachitsky** (01:15:04):
Yeah. Interesting. I'm going to take us to failure corner. Okay. So failure corner, so that you talk about all these things you've done that are incredibly well. All these companies you invested in, all these businesses you've built, PayPal, all these things. People don't realize there's also a lot of failures along the way. Is there a story of a time you failed in your career or investing that might illuminate the doubt when things don't go great?

**Keith Rabois** (01:15:28):
Well, I mentioned one, I alluded to one by accident. I talked about being acquihired or whatever into Google and being stuck there. So clearly not successful. That was a slide. So we did sell for 187 million, but nowhere near the ambition, didn't really achieve any of our goals product-wise or company-wise.

**Keith Rabois** (01:15:49):
Investing teaches you mostly about failures. If you're a world-class investor in the early stages, 30 to 40% hit rate is great and golden. By definition, that's 50 to 60%, 70% failing. It's a little bit like those old Nike commercials where there's the Michael Jordan one where it's like, "I've missed 109 game-winning shots in my career." Or there's the tennis one. I think it's Federer that's like something like, "I win 60% of my points. Actually, I'm not the best tennis player ever, but I lose 40%."

**Keith Rabois** (01:16:27):
So there's a lot of that in venture. You definitely have failures all day long. I think one of the arts is not getting too caught up in failure, actually. I think over ... and I actually gave this feedback in the board meeting recently, which is someone well-meaning one or two board members were like, "Well, let's do retros on our failures."

**Keith Rabois** (01:16:48):
And the company's doing really well. So I was like, "You know what? Honestly, I'm not sure I would do this." I was like, "I don't want to deter people from taking ambitious shots on goal." And if you overemphasize failures and people think they're going to get criticized, this is where psychological safety maybe has some validity, which is be ambitious, be bold. Don't worry about the failing part unless there's things you miss that could have been factored in, but you want people to take risk and you want people to be excited about raising their hands for very difficult problems and challenges because that's how you create value. And so I was like, "No, let's really not do these retros. Let's just focus on winning."

**Lenny Rachitsky** (01:17:28):
Contrarian takes all around. Keith, is there anything else you wanted to share, anything else you want to leave listeners with before we get to our very exciting lightning round?

**Keith Rabois** (01:17:36):
I'm excited for your lightning round. This is usually one of the best parts of your podcast.

**Lenny Rachitsky** (01:17:39):
Okay. First question, what are two or three books that you find yourself recommending most to other people?

**Keith Rabois** (01:17:43):
So the number one one is called The Upside of Stress by Kelly McGonigal, Professor at Stanford. And basically it argues in an incredibly compelling way that if you want to be happy, healthy, or wealthy, you need more stress in your life, not less. So it's magic. The evidence she marshals is effectively uncritiquable at the outcome level, at the biochemical level. It is transformative to people to read this book, so I highly recommend it.

**Lenny Rachitsky** (01:18:10):
Favorite recent movie or TV show you've enjoyed?

**Keith Rabois** (01:18:14):
TV actually just watched Nuremberg Trial. Highly recommend Nuremberg. There's a lot of lessons there that are applicable to the modern world, so I won't spoil it all, but even I'm kind of a student of history and politics and watching the movie, I've probably learned five or 10 things that I never knew before. Highly, it's extreme ... And I mean, obviously it's not an exciting, thrilling movie, but it's an extremely well-produced movie and incredibly useful to understand some of the travesties of history and how to prevent them in the future.

**Lenny Rachitsky** (01:18:55):
Where do you find this? Is that one of the streaming services?

**Keith Rabois** (01:18:58):
It's either on Netflix or iTunes or both.

**Lenny Rachitsky** (01:19:00):
Sweet. Okay. Is there a product that you've recently discovered that you really love?

**Keith Rabois** (01:19:06):
Rarely. I do find products that I'm addicted to. I'm on this crusade about Eight Sleep, which is another one of my conventions is you must sleep eight hours a day, you must prioritize sleep even when you're very busy. I am an investor and so I'm somewhat biased in Eight Sleep, but it transforms people's lives. So I'm still addicted to that one. I don't know if there's a new product that I've been fanatically addicted to recently.

**Lenny Rachitsky** (01:19:34):
Eight Sleep counts. Do you have a life motto that you find yourself coming back to in work or in life?

**Keith Rabois** (01:19:40):
No days off, #NoDaysOff. I don't believe in taking days off for workout. I don't believe taking days off from work, period. Derivation for those who are interested is when Bill Belichick won the Super Bowl for whatever billionth time with the Patriots. As back to back Super Bowl wins, I think he started the championship celebration parade with this chant of, "No days off." So that's kind of my mantra. And

**Lenny Rachitsky** (01:20:06):
When you say, "No days off," are you saying, "Work every day, work the weekend," sort of thing, or what do you ...

**Keith Rabois** (01:20:12):
That too. So let's talk about the workout side. I believe I've missed seven days and seven years of working out. And it still kills me. Half of those I still am annoyed that I missed. If I really, really had reoriented my schedule, I should have been able to hit at least four of those. And I measure it and I post it at the end of every year. Last year I missed none, so I was very happy, but I don't believe in excuses basically. No days off is a proxy for I don't believe in excuses.

**Lenny Rachitsky** (01:20:38):
And do you work out every day? Is that the role?

**Keith Rabois** (01:20:41):
I mean, literally there's only seven days in the last seven years I haven't worked out.

**Lenny Rachitsky** (01:20:45):
Okay. I see.

**Keith Rabois** (01:20:45):
That includes all kinds of illness, sickness, travel, international, time zone, travel-

**Lenny Rachitsky** (01:20:50):
So it's actual okay.

**Keith Rabois** (01:20:50):
... weddings. There's no excuses.

**Lenny Rachitsky** (01:20:53):
Actually every day. All right. And then-

**Keith Rabois** (01:20:56):
Typically more than once a day.

**Lenny Rachitsky** (01:20:57):
And you've told me before we start recording, you had a Barry's class this morning. You have another one later today.

**Keith Rabois** (01:21:02):
I do. And a lift.

**Lenny Rachitsky** (01:21:04):
Okay. Final question. So you were famously part of the PayPal Mafia. I'm curious if there was someone there that's over-performed, someone that you worked with that you never thought would be that good.

**Keith Rabois** (01:21:16):
Honestly, no. I lot up investing in most of the derivative companies and stuff. And so I think I had a good spidey sense of which people had at least founder level ambition and could potentially build something. Sorry, I wish I could give you a better answer.

**Lenny Rachitsky** (01:21:38):
They would've been mad at you anyway, so this is the safer answer.

**Keith Rabois** (01:21:40):
Well, it depends. If they've been super successful, they might not care.

**Lenny Rachitsky** (01:21:43):
That's true.

**Keith Rabois** (01:21:45):
Peter Thiel on that. Just kidding.

**Lenny Rachitsky** (01:21:46):
Yeah, yeah, yeah. Elon Musk. Keith, thank you so much for doing this. I learned so much. This is going to help a lot of founders, a lot of people building stuff. Two final questions, where can folks find you online if they want to reach out and how can listeners be useful to you?

**Keith Rabois** (01:21:59):
Yeah, so X.com. I tweet prolifically. You mentioned my pinned tweet, so that's probably the easiest way.

**Lenny Rachitsky** (01:22:07):
Sweet. Keith, thank you so much for being here.

**Keith Rabois** (01:22:10):
Pleasure to be with you. Thanks for the invitation.

**Lenny Rachitsky** (01:22:13):
Thanks for accepting it. Bye, everyone. Thank you so much for listening. If you found this valuable, you can subscribe to the show on Apple Podcasts, Spotify, or your favorite podcast app. Also, please consider giving us a rating or leaving a review as that really helps other listeners find the podcast. You can find all past episodes or learn more about the show at lennyspodcast.com. See you in the next episode.