10 Ways to Be Successful in Life and Work from Legendary Silicon Valley Investor Andy Rachleff

00:00:00.000 | A lot of the most successful people are learn-it-alls.

00:00:04.120 | They're not know-it-alls.

00:00:05.400 | And the only way they can likely do that

00:00:07.600 | is if they have intellectual curiosity.

00:00:09.560 | - There's sometimes a stigma in companies

00:00:11.960 | where the people that ask the questions

00:00:13.640 | don't know anything.

00:00:14.680 | - I think the opposite.

00:00:16.120 | As a matter of fact, the CEO of Wealthfront

00:00:18.720 | became the CEO because he asked such tough questions.

00:00:23.080 | The best judge of how good someone is

00:00:26.960 | probably be how quickly have they ascended in their career.

00:00:30.880 | - In this day and age, I constantly see people

00:00:33.040 | just want more benefits, more work-life balance,

00:00:35.880 | all this stuff.

00:00:36.880 | - I think work-life balance is really hard

00:00:40.000 | if you wanna be really successful.

00:00:42.600 | Again, really successful.

00:00:44.600 | Every book on entrepreneurship would lead you to believe

00:00:48.040 | that successful companies start by looking for a problem

00:00:52.280 | and developing a solution.

00:00:53.600 | In practice, that's not how the great technology companies

00:00:56.640 | were founded.

00:00:57.480 | It's the exact opposite.

00:00:58.560 | I'm a big believer that you learn far more from success

00:01:02.160 | than you do from failure professionally.

00:01:05.840 | I think you learn more from failure personally.

00:01:09.280 | In my experience, the person who rises the fastest is...

00:01:14.280 | - Andy, thanks for being here.

00:01:17.760 | - My pleasure.

00:01:18.960 | - Last time we talked a lot about investing

00:01:20.760 | and we'll have a few investing questions.

00:01:22.560 | But when I think of all the advice I've gotten from you,

00:01:26.040 | everything I've learned from you over the years,

00:01:28.000 | there's all these little pieces of things that I'm like,

00:01:30.760 | ooh, I wanna draw on that.

00:01:31.960 | It's almost like even as an employee

00:01:34.480 | without a one-on-one relationship,

00:01:35.840 | I've heard multiple people be like,

00:01:37.000 | gosh, Andy's mentored me so much

00:01:38.600 | in the wise knowledge he has.

00:01:41.280 | I wanna start with one bit of things you've said.

00:01:45.040 | You've said that intellectual curiosity

00:01:47.120 | is above all the thing you value.

00:01:48.920 | Why have you leveled that up to be the most important thing?

00:01:51.520 | - I am a big fan of learn-it-alls versus know-it-alls.

00:01:55.200 | Learn-it-alls get better, know-it-alls don't.

00:01:58.840 | And so when you hire someone or work with someone,

00:02:03.600 | you want someone who has a big ceiling

00:02:07.200 | or a very tall ceiling that they can grow into.

00:02:10.760 | And the only way for them to grow

00:02:13.360 | is for them to better themselves.

00:02:15.080 | And the only way they can likely do that

00:02:17.200 | is if they have intellectual curiosity.

00:02:19.600 | - And can someone kind of change their habits

00:02:22.560 | to be more intellectually curious,

00:02:24.160 | or is it kind of ingrained in who we are?

00:02:26.800 | - But I would imagine if it's important enough,

00:02:30.040 | you can prioritize it.

00:02:31.720 | When raising our children,

00:02:33.720 | it was really important to my wife and me

00:02:37.480 | to ingrain that in our kids.

00:02:40.080 | - And how did you do that?

00:02:41.160 | - By constantly encouraging questions.

00:02:44.760 | - Of any type? - Of any type.

00:02:46.160 | Some people discourage questions.

00:02:48.480 | They think that it's annoying.

00:02:50.440 | And I think it's great.

00:02:53.240 | I love when people ask me questions.

00:02:56.760 | And my kids are pretty inquisitive.

00:03:00.200 | For example, I remember my son's,

00:03:02.560 | a number of the coaches of my son's teams

00:03:06.200 | would start a season out by saying,

00:03:08.160 | "You don't ask me questions.

00:03:10.280 | I ask you questions."

00:03:12.800 | That's really dumb. (laughs)

00:03:15.240 | How's the kid gonna get better?

00:03:17.200 | - I think there's sometimes a stigma in companies

00:03:19.880 | where the people that ask the questions

00:03:21.760 | don't know anything.

00:03:23.160 | I think the opposite.

00:03:25.120 | As a matter of fact, the CEO of Wealthfront

00:03:27.960 | became the CEO because he asked such tough questions.

00:03:35.200 | So he joined us when he was 24 years old

00:03:38.200 | as a junior engineer.

00:03:39.880 | Every tech company typically has a weekly all-hands.

00:03:43.680 | And there's always one or two engineers

00:03:45.880 | who ask really annoying questions.

00:03:47.840 | And they're annoying because they hit the raw nerve.

00:03:51.360 | There's usually an issue with every decision

00:03:54.120 | that a management team makes.

00:03:56.360 | And there's always one or two people

00:03:59.320 | who know how to find it.

00:04:01.640 | And David Fortunato was the guy

00:04:04.000 | who always found the raw nerve.

00:04:06.720 | And after a year of taking these questions,

00:04:09.280 | I made him the CTO. (laughs)

00:04:12.120 | At 25, and he's now our CEO,

00:04:14.920 | and he's a much better CEO than I ever was.

00:04:17.480 | - And when it comes to asking questions,

00:04:19.920 | is that an important skill to develop?

00:04:22.280 | - I think so, absolutely.

00:04:24.040 | - Is it about listening more?

00:04:25.360 | Is it about thinking more, preparing in advance?

00:04:28.640 | - I think all of the above.

00:04:30.000 | - When you would go into board meetings,

00:04:33.360 | since I know you've sat on a lot,

00:04:35.480 | to ask questions, did you plan for those meetings?

00:04:38.560 | How much preparation do you put into your work

00:04:41.840 | in advance versus kind of just paying attention

00:04:44.560 | in the moment?

00:04:46.920 | - I tried pre-internet to read as much

00:04:51.200 | as I possibly could about my companies

00:04:53.800 | through analyst reports or back when journalists

00:04:58.640 | actually wrote objective articles.

00:05:03.040 | But I would try to be as well prepared as I could.

00:05:06.800 | And so that I could ask questions.

00:05:10.080 | And I used to take copious notes,

00:05:11.720 | and that was before we were told we couldn't

00:05:13.840 | because of lawsuits, which was really frustrating for me.

00:05:17.560 | But I always made sure to read the materials

00:05:19.680 | in advance and be prepared.

00:05:22.080 | Now, a board meeting isn't necessarily the place

00:05:25.560 | where you want to interrupt the flow

00:05:27.680 | with a lot of questions.

00:05:28.840 | So maybe the questions are better asked privately

00:05:32.080 | versus during the board meeting.

00:05:34.080 | - Okay, and you talked about taking notes,

00:05:36.200 | but one of the things I think I evolved my work style

00:05:40.560 | working with you is the importance of writing.

00:05:43.840 | And I was never really a big memo writer

00:05:46.720 | or writer about anything.

00:05:47.840 | And that evolved a lot.

00:05:50.520 | You had written a ton.

00:05:52.080 | - I never wrote before I founded WealthThreat.

00:05:54.920 | - Okay, so what changed?

00:05:57.680 | Because I--

00:05:58.520 | - Well, as an investor, I didn't have to do it.

00:06:02.000 | I would take notes.

00:06:03.200 | I would always keep notes on what were the five

00:06:06.440 | most important issues that each of my portfolio companies

00:06:10.440 | had to address.

00:06:11.560 | But I didn't have to write beyond that.

00:06:15.040 | But I always encouraged my CEOs to write their thought,

00:06:20.040 | their strategy down because the process

00:06:24.600 | of writing something down causes you

00:06:26.880 | to think through it much better.

00:06:28.640 | Business plans were fantastic because they really forced you

00:06:33.200 | to think everything through.

00:06:35.080 | When I was in business school, I remember Don Valentine,

00:06:37.760 | the founder of Sequoia Capital, came and spoke in our class.

00:06:41.280 | And the topic that he focused on was a recently introduced

00:06:46.280 | product called Lotus 1-2-3,

00:06:50.560 | which was an electronic spreadsheet.

00:06:53.120 | And he said electronic spreadsheets

00:06:55.440 | have ruined entrepreneurship.

00:06:57.920 | And the reason why was prior to electronic spreadsheets,

00:07:02.280 | you would do a financial plan on what was known

00:07:04.960 | as columnar paper.

00:07:06.360 | When I used to teach a class on venture capital

00:07:09.720 | at Stanford Graduate School of Business, I would bring it.

00:07:12.360 | And you would create a financial plan

00:07:15.200 | on this columnar paper, just like you would

00:07:17.360 | with a spreadsheet with rows and columns.

00:07:19.920 | But if you were going to write it down,

00:07:22.800 | you had better have thought everything through

00:07:26.360 | in a way that you don't with an electronic spreadsheet.

00:07:29.120 | You can get lazy because you can quickly change

00:07:32.240 | an assumption and it flows through the entire plan.

00:07:35.800 | But when you have to write it down with a pencil

00:07:38.960 | on columnar paper, you really had to have thought

00:07:44.880 | through your assumptions.

00:07:46.360 | So being purposeful about it led to a far better

00:07:50.400 | thought out financial plan than when you did it

00:07:54.400 | with an electronic spreadsheet.

00:07:55.560 | And this is what really annoyed Don.

00:07:58.520 | And I think just as it's really valuable

00:08:01.640 | for doing a financial plan, it's really valuable

00:08:04.520 | for doing the strategic plan.

00:08:07.160 | What's important?

00:08:08.400 | Why is it important?

00:08:09.480 | How does it impact other functions?

00:08:12.840 | And writing these things down, PowerPoint doesn't for,

00:08:16.440 | it's like the spreadsheet.

00:08:17.800 | You don't have to think it through when you write bullets.

00:08:21.520 | - And do you apply that at all in your personal life?

00:08:24.160 | Like what are our goals as a, you know, family

00:08:27.120 | or anything like that and use it there

00:08:29.440 | or do you just use it in work?

00:08:31.280 | - Just work.

00:08:33.520 | - Do you think it would have an impact

00:08:35.240 | in your personal life if you wrote down

00:08:37.320 | what do we want to accomplish this year?

00:08:39.000 | - Oh, I'd be a real grind if I did that.

00:08:41.960 | - Okay, okay.

00:08:42.880 | - I tend not to have long-term goals

00:08:46.080 | 'cause they change so much every year

00:08:48.640 | based on what's going on.

00:08:50.600 | - So I think that's probably a hot take,

00:08:53.720 | which is I talk to lots of people and they're like,

00:08:56.040 | here are my goals and here's what I'm gonna take steps

00:08:58.320 | to get to them and here's how I'm planning out life

00:09:00.480 | and everything, no long-term goals.

00:09:03.360 | How do you, especially earlier in your career,

00:09:06.080 | how do you think, where do I want to go?

00:09:07.560 | Are you just thinking about what's next?

00:09:09.120 | - Well, you know, it's really funny.

00:09:09.960 | When I was younger in the school year,

00:09:11.640 | I would sort of pick a topic,

00:09:13.600 | something that I wanted to get better at

00:09:15.600 | and I would focus on that for the year.

00:09:18.760 | And I started getting too busy to do that around 45.

00:09:23.080 | - I wonder, I mean, Zuckerberg did this for a while

00:09:26.320 | where he's like, this is the year I'm gonna hunt.

00:09:27.960 | This is the year I'm gonna do the, you know,

00:09:29.880 | learn a language.

00:09:30.880 | - Yes, I used to do that.

00:09:33.160 | - It seems like he fits your intellectual curiosity.

00:09:35.320 | - Oh, he's the biggest sponge I've ever heard about.

00:09:40.320 | I haven't met him, but the people I know who know him well

00:09:45.760 | describe that as his greatest attribute.

00:09:48.960 | - And would you say that's a common thread

00:09:50.840 | amongst people you've met

00:09:52.520 | that are either successful or fulfilled?

00:09:55.720 | - I think a lot of the most successful people

00:10:00.720 | are learn-it-alls.

00:10:02.840 | They're not know-it-alls.

00:10:04.680 | I think there's an enormous difference

00:10:06.440 | between someone who's a promoter,

00:10:08.760 | an outstanding promoter,

00:10:10.920 | versus someone who is really good at what they do.

00:10:15.600 | - One of the things I've heard you say in the past

00:10:18.440 | is that one of the only ways to make money

00:10:21.200 | is to be non-consensus.

00:10:22.360 | It seems like you have a lot of non-consensus takes.

00:10:25.320 | In general, today it seems like everything around us

00:10:28.320 | is trying to show us content that's similar

00:10:30.840 | to how we believe.

00:10:32.640 | How do you force yourself to do that?

00:10:34.280 | - I'm intellectually curious.

00:10:35.880 | It all comes back to the first point.

00:10:38.240 | So, I don't accept what I'll see.

00:10:41.400 | I mean, I don't use social media very much,

00:10:44.600 | barely at all anymore.

00:10:47.440 | So, I don't believe what someone pushes in front of me.

00:10:52.320 | I wanna do my independent homework,

00:10:54.480 | and I wanna do my homework by going to experts,

00:10:56.920 | not my friends.

00:10:58.480 | One of the biggest differences I notice

00:11:00.960 | in the millennial generation versus a baby boomer,

00:11:04.720 | and I'm a baby boomer,

00:11:06.360 | is that baby boomers go to experts for advice,

00:11:11.360 | whereas millennials, my kids are millennials,

00:11:15.560 | they go to their friends.

00:11:17.520 | Well, what do your friends know?

00:11:20.080 | It makes no sense to me.

00:11:21.640 | I would go to my friends to find the experts,

00:11:24.640 | but I wouldn't go to my friends for advice.

00:11:28.080 | - Interesting.

00:11:29.200 | I'm trying to think about how this plays out.

00:11:30.800 | It's like, is it because it became a popularity thing,

00:11:35.320 | where it's like, what I actually want

00:11:36.640 | is actually the thing my friends care about?

00:11:38.440 | - I don't know.

00:11:39.280 | I don't know if it's partially enabled

00:11:41.760 | by the prevalence of social media,

00:11:45.040 | that you're so used to asking your friends so many things,

00:11:48.560 | why not ask them for advice about, should I change jobs?

00:11:52.720 | What kind of job should I change to?

00:11:55.480 | How should I think about doing something?

00:11:57.840 | It's amazing to me how many people,

00:12:02.200 | how many of my students at Stanford

00:12:05.120 | rely on what their friends tell them,

00:12:07.560 | and their friends are not well-versed,

00:12:10.000 | or how many people I've attempted to recruit to Wealthfront,

00:12:14.320 | or people who've worked at Wealthfront

00:12:16.320 | have based decisions based on what their friends,

00:12:19.960 | who really don't have any expertise, have told them.

00:12:24.320 | So, for example, a lot of people in Silicon Valley

00:12:28.920 | believe in this narrative that you should have experience

00:12:33.880 | in small companies and large companies.

00:12:36.400 | That makes no sense to me.

00:12:38.080 | The way that I've observed is you're either

00:12:42.120 | a small company person or a big company person.

00:12:44.800 | The things that make you enjoy small companies

00:12:47.360 | would make you not like working in a big company,

00:12:49.680 | and vice versa.

00:12:51.160 | So the idea that you should have both experiences

00:12:54.160 | is crazy to me, but it's a very common narrative,

00:12:58.200 | and it's reinforced by friend networks

00:13:01.960 | of people who haven't necessarily had success.

00:13:06.000 | - And to push a little bit

00:13:07.600 | on the big versus small company thing,

00:13:09.640 | I think I found I didn't work well in a big company.

00:13:12.320 | Is it possible if someone thinks they don't do well in one,

00:13:19.120 | the answer is the other, or are there traits of someone

00:13:21.920 | who does well in big versus small?

00:13:24.680 | - I think the latter.

00:13:25.800 | - Okay.

00:13:26.640 | - And if you talk to somebody who understood the two

00:13:29.640 | and could help you think it through,

00:13:31.560 | they might actually help you understand that sooner.

00:13:34.480 | - Are there any traits you've seen of people

00:13:35.880 | that enjoy one or the other?

00:13:37.320 | - Yes, and there's no value judgment in this.

00:13:41.520 | If you enjoy being a hero,

00:13:44.840 | you're gonna enjoy being in a small company more.

00:13:48.120 | If you enjoy being associated with success

00:13:53.120 | and you wanna be part of an organization

00:13:56.760 | that can move the market, you'll like big companies.

00:14:01.440 | You can't have, you can't be part of an organization

00:14:06.440 | that moves the markets and be a hero.

00:14:09.720 | They're really in conflict with one another.

00:14:13.280 | - Unless maybe you're the person running the organization,

00:14:15.880 | but I imagine most people listening aren't in a position

00:14:19.240 | to immediately become a person running a company

00:14:21.800 | that moves markets.

00:14:22.640 | - Right.

00:14:23.480 | - You mentioned companies that are moving the markets,

00:14:26.680 | companies that are successful.

00:14:27.720 | - By the way, there's different strokes for different folks.

00:14:31.880 | So I'm not trying to comment on one is better than the other.

00:14:36.400 | I think you need to be intellectually honest about yourself

00:14:40.400 | to determine where you should be.

00:14:42.680 | - So you're talking about companies that are successful.

00:14:45.080 | How important for someone in their career

00:14:47.200 | do you think it is to experience working

00:14:49.880 | at a successful company versus seeing more failures

00:14:53.560 | at a company they're working at?

00:14:54.880 | - All right, I have strong opinions on this.

00:14:56.720 | I think I know what you're getting at.

00:14:58.720 | So I have another very non-consensus point of view

00:15:03.720 | on this topic.

00:15:04.640 | I'm a big believer that you learn far more from success

00:15:08.200 | than you do from failure professionally.

00:15:11.920 | I think you learn more from failure personally.

00:15:16.120 | I think that the general worldview

00:15:18.880 | is you learn more from failure.

00:15:21.200 | But if I'm interviewing you to come work for me,

00:15:25.600 | I don't want to hire someone who knows what not to do.

00:15:29.680 | I wanna hire someone who knows what to do.

00:15:32.040 | I want you to bring your expertise,

00:15:34.600 | your special skill that you learned from success

00:15:38.160 | and apply it to my company.

00:15:39.920 | There's far more leverage from lessons of success.

00:15:44.640 | And so I am way biased toward people

00:15:48.320 | who've worked at successful companies.

00:15:50.760 | And I think that most people don't understand

00:15:54.360 | that knowledgeable hiring managers have that bias.

00:15:59.360 | - And so if you're someone who's working at a company

00:16:03.640 | that was a failure and you wanna overcome that bias

00:16:08.240 | in your direction, are there things to highlight?

00:16:11.680 | - Yes, you might take a little bit later stage job

00:16:16.680 | at something that you think has a very high likelihood

00:16:20.280 | of being success.

00:16:21.480 | You have to be a little bit more patient

00:16:23.840 | because you might get less financial reward for doing that,

00:16:28.840 | but you have to re-cloak yourself in success.

00:16:32.920 | One of the things that I see some former students of mine do,

00:16:37.720 | which I think is an enormous mistake,

00:16:40.440 | is they join companies pre-product market fit.

00:16:43.720 | And I think this is an intelligence test

00:16:46.480 | because you only get a little bit less equity

00:16:51.000 | joining a company post-product market fit than pre.

00:16:55.360 | So why would you ever join pre?

00:16:59.300 | It doesn't make any sense.

00:17:02.080 | And the best people know that they can command a job

00:17:07.880 | a company that has lower risk

00:17:10.000 | by virtue of it having gotten product market fit.

00:17:13.760 | The vast majority of companies

00:17:16.040 | do not find product market fit and therefore fail.

00:17:19.000 | I think it's the biggest determinant of success.

00:17:22.640 | And then they see their peers from business school,

00:17:27.640 | their classmates, and their friends might've moved on

00:17:31.640 | to now commanding a title of director.

00:17:35.160 | And they think, you know, I'm three or four years

00:17:37.520 | post-graduation, I should be a director.

00:17:40.280 | Well, no good company that has a lot of momentum

00:17:43.800 | is gonna hire from a crappy company.

00:17:47.520 | So the only place they can command that title

00:17:50.180 | is another crappy company.

00:17:52.200 | So they sort of reinforce this thing

00:17:54.720 | and they never find success.

00:17:56.920 | And once you do it two times,

00:17:59.480 | it's almost impossible to dig yourself out of that hole.

00:18:03.160 | - And do you think titles even matter?

00:18:05.120 | Should that person even care whether-

00:18:06.760 | - I don't believe they should.

00:18:08.500 | Because if you work for a company

00:18:12.200 | that becomes really successful,

00:18:14.500 | A, you get more value from your equity than you expected.

00:18:20.440 | And B, you get heavily pursued by recruiters

00:18:24.040 | because they think those are the best people.

00:18:26.680 | And you can parlay that into a best next job.

00:18:30.200 | - Would you think that in today's day and age,

00:18:32.200 | I think there's been a lot of influence

00:18:33.960 | from just the way technology companies have managed.

00:18:37.560 | Also, I think so many companies are starting to act

00:18:40.040 | like technology companies that aren't.

00:18:41.640 | - They think they're acting like technology companies.

00:18:43.880 | - But if someone were working at, you know,

00:18:46.760 | on the corporate side of Walmart or Costco,

00:18:50.840 | the equity piece might not matter as much,

00:18:53.120 | but are a lot of these lessons still similar, you think?

00:18:56.980 | Guess.

00:19:00.280 | I've got to believe that lessons of success matter

00:19:04.000 | and that one should prioritize that in recruiting.

00:19:09.000 | - So someone might identify,

00:19:11.600 | I'm interested in bigger companies.

00:19:13.320 | I'm interested in smaller companies.

00:19:15.640 | I want to get some good experience.

00:19:17.560 | Should I go work at OpenAI,

00:19:20.200 | even though I have no interest in AI?

00:19:22.520 | And not speculating on that company in particular,

00:19:26.080 | but how important when someone's trying to figure out

00:19:28.080 | what to do and where to work is actually loving

00:19:31.840 | or believing in or being passionate about

00:19:34.360 | what that company does versus it's the right size,

00:19:38.000 | it's the right type of experience I can get.

00:19:40.840 | - Well, this is a topic near and dear to my heart

00:19:43.640 | because I get asked this all the time by my students.

00:19:46.180 | I've been teaching at Stanford Graduate School of Business

00:19:49.080 | for 19 years now.

00:19:51.040 | And I took that advice and I codified it

00:19:54.920 | into a series of blog posts for Wealthfront

00:19:58.240 | that we ultimately made into an e-book

00:20:02.000 | called the Silicon Valley Career Guide,

00:20:04.320 | which is about 20 or 25 pages.

00:20:06.160 | And it's a free download if you want to Google it.

00:20:09.720 | And basically what I tell people

00:20:12.440 | is you should prioritize the industry

00:20:15.320 | in which you want to work.

00:20:16.760 | And hopefully it's one that you can work in

00:20:19.220 | for 20 or 30 years,

00:20:21.360 | but something about which you're incredibly passionate

00:20:24.200 | because I'll always take the more passionate

00:20:28.360 | over the more talented person

00:20:30.560 | if the passionate person has enough talent.

00:20:33.280 | I want the person who's more passionate

00:20:35.800 | because they're more likely to invest the time

00:20:39.560 | and effort to get better.

00:20:41.680 | So three years hence, the passionate person

00:20:45.000 | who might be slightly behind the talented person

00:20:47.800 | and talent will be above.

00:20:49.480 | And I have a number of case studies for that.

00:20:52.440 | So pick an area where you're gonna wanna spend the time

00:20:55.920 | getting better.

00:20:57.540 | Then choose the best company in that space

00:21:02.000 | and title should be, the position should be the last point.

00:21:07.000 | No company has enough good people.

00:21:10.080 | And so if you're really passionate

00:21:12.500 | and you really improve yourself and you do a great job,

00:21:16.200 | you'll be able to transition

00:21:17.980 | into whatever job you ultimately want.

00:21:21.160 | This is really hard advice to take.

00:21:23.800 | And my students who've taken this advice

00:21:27.480 | have done exceptionally well.

00:21:30.320 | - Does that mean that if one day I wanna be

00:21:33.440 | a product manager and the only job I can get

00:21:36.240 | is working on the research team or something,

00:21:39.120 | but I can do it in a field I'm passionate about

00:21:41.500 | at a company that seems like it'll suit me well

00:21:44.080 | and is growing, that that might be a good path?

00:21:46.920 | - I would recommend that, yes.

00:21:49.000 | - And so what you do is less important?

00:21:52.520 | - I believe that, yes.

00:21:54.040 | - Is there a minimum amount of excitement

00:21:57.060 | for what someone, you know, I don't care about,

00:21:59.240 | you know, I'm making this up,

00:22:00.400 | like I'm not interested in marketing or PR,

00:22:03.240 | but that's the only job I can get.

00:22:04.600 | - You had better be really passionate about the field

00:22:08.520 | to overcome that.

00:22:09.720 | - Okay.

00:22:10.560 | But if it is a field--

00:22:11.380 | - But they wouldn't have hired you into that function

00:22:14.880 | had they not thought you had some relevant skill.

00:22:19.560 | - What about this concept of specializing

00:22:22.760 | versus going broad in your career,

00:22:25.400 | learning five or six different skill sets

00:22:28.520 | versus trying to hone your craft at one?

00:22:31.240 | - In my experience, the person who rises the fastest

00:22:36.240 | is the specialist, is the expert.

00:22:39.800 | So you wanna become really great at one thing

00:22:43.400 | and you hire for all the other stuff.

00:22:46.320 | - Okay.

00:22:47.240 | And is that who you would look for to be a leader

00:22:49.680 | in the company? - Absolutely, every time.

00:22:51.600 | - You mentioned asking questions with David,

00:22:53.920 | someone who's a deep specialist,

00:22:55.380 | which having worked with David, I can confirm,

00:22:57.760 | was definitely a specialist.

00:22:59.460 | Other things you look for in people

00:23:01.560 | that you wanna elevate at a company?

00:23:03.520 | - Well, I think those two things lead to upside.

00:23:07.560 | So I don't understand people who hire people

00:23:10.160 | who can fill the job today.

00:23:12.560 | I think that's a huge mistake, that don't have upside.

00:23:16.640 | - And meaning take the time to find the right person.

00:23:21.120 | - It's gonna be more work,

00:23:22.420 | but it will be well worth your while over time.

00:23:27.420 | And this is why one of the four values

00:23:29.800 | of Wealthfront is endurance. (laughs)

00:23:33.680 | - And if someone's on the other side of this,

00:23:35.400 | is like, "I really want this role,"

00:23:37.520 | from all the people that you've seen reach out to you,

00:23:40.240 | are there things that stand out as ways

00:23:43.420 | for people to get in front of a company?

00:23:45.480 | - Prove that you're passionate.

00:23:50.400 | I can't tell you how many people I've interviewed

00:23:52.680 | who haven't spent a minute learning about the company.

00:23:55.480 | And it's just clear that they're window shopping,

00:23:57.960 | or they're trying to collect offers.

00:24:01.240 | So as you learned, if we feel like we're one of five

00:24:09.040 | companies that someone's talking to,

00:24:11.840 | we no longer spend time with them,

00:24:14.680 | because we want people who are excited about what we do.

00:24:18.600 | And they make themselves known.

00:24:22.040 | And some people get upset with us,

00:24:25.160 | like, "It's my right to look at a lot of other companies."

00:24:28.760 | And we say, "It absolutely is your right to look at all,

00:24:31.320 | "but it's our right not to wanna spend

00:24:32.880 | "any more time with you too."

00:24:34.760 | - You know, what would you tell someone

00:24:36.400 | who they know the company they're excited about,

00:24:38.640 | but odds are not always in your favor?

00:24:40.760 | Can you be excited about a few different companies?

00:24:43.120 | Not necessarily because--

00:24:43.960 | - Within the same field, I believe,

00:24:46.320 | but if they're in disparate fields,

00:24:47.900 | like when I was a venture capitalist,

00:24:50.440 | I would meet someone who was interviewing

00:24:52.480 | at a big company and a small company.

00:24:54.880 | And the interview was immediately over in my mind,

00:24:57.960 | because if they didn't know what they wanted,

00:25:00.600 | why should I spend time and effort on them?

00:25:03.920 | They clearly weren't passionate about what we were doing.

00:25:07.320 | They were taking the meeting to sort of educate themselves.

00:25:10.960 | I'm not here to educate you.

00:25:12.720 | - It's a great way to save time as a manager.

00:25:14.760 | - Well, then you never have enough time.

00:25:17.240 | - Yeah.

00:25:18.360 | - Now, some people don't like this.

00:25:20.360 | I'm a really efficient user of time.

00:25:23.380 | And I don't wanna spend time on something

00:25:27.160 | that's not likely to yield.

00:25:29.420 | Now, there are type two errors.

00:25:31.520 | So I'm gonna miss some people

00:25:33.320 | that maybe we should have gotten.

00:25:35.380 | But from a probability standpoint,

00:25:37.320 | I'm gonna be better off and I'm happy playing the odds.

00:25:40.840 | - So you said you're an efficient user of time.

00:25:42.520 | That's an example.

00:25:43.560 | Are there other things that you do in your work, life, career?

00:25:47.680 | - I have really short emails.

00:25:49.580 | (laughs)

00:25:50.680 | - As someone who loves to read or write.

00:25:52.680 | - I didn't say I love to write.

00:25:55.240 | I think it's really valuable to.

00:25:57.600 | So everyone in my family makes fun of me

00:26:00.640 | about how short my text messages are and my emails.

00:26:05.640 | - And I think sometimes people who are writing emails,

00:26:07.760 | let's say they're writing an email to you

00:26:09.440 | and they're like, or five years ago,

00:26:11.280 | you're at Wealthfront, they wanna work at Wealthfront.

00:26:12.880 | They hear your email, they wanna send you an email.

00:26:15.160 | They think, gosh, I've gotta write this email

00:26:16.780 | where it's, hey, I'm so excited.

00:26:18.420 | I really love Wealthfront.

00:26:19.560 | They end up with four paragraphs and they send it to you.

00:26:22.140 | Is that really the most productive email they can send you?

00:26:24.400 | - It depends.

00:26:25.440 | How long does it take to express the critical point

00:26:29.640 | that they want to express?

00:26:31.600 | In my class on product market fit at Stanford,

00:26:35.300 | I have, the students have to do a lot of reading

00:26:38.580 | for each class and they have to turn in

00:26:41.260 | a one to two page paper on a written assignment

00:26:46.260 | that you can't do unless you've done the reading.

00:26:50.300 | Well, I didn't say it has to be two pages.

00:26:55.820 | Some of the best papers are one paragraph.

00:26:58.740 | If you can get the point across in one paragraph,

00:27:01.920 | that shows unbelievable command.

00:27:05.120 | So a lesson that I learned from one of my partners

00:27:08.560 | at Benchmark, Alex Balkansky, that I use often

00:27:13.560 | is he, it was a result of his childhood.

00:27:20.140 | So Alex grew up in Paris and he's the son

00:27:25.800 | of a fairly renowned physicist.

00:27:28.860 | And so whenever physicists in his dad's field

00:27:32.260 | would visit Paris, his dad would invite them over

00:27:35.260 | for dinner with his family.

00:27:37.460 | And one of the things that Alex noticed

00:27:40.260 | was that truly exceptional physicists

00:27:45.260 | explain complex issues in simple terms.

00:27:50.900 | Very good physicists explain complex issues

00:27:54.100 | in complex terms and good physicists couldn't explain

00:27:58.020 | what they were doing at all.

00:28:00.140 | So I actually took that to heart

00:28:03.040 | at the end of my venture capital career

00:28:05.100 | that the best entrepreneurs have such great command

00:28:08.400 | of their subject that they can explain complex issues

00:28:12.340 | in really, really simple terms.

00:28:14.420 | So I think that actually is a core part of seed investing

00:28:18.500 | where you're really investing in the person, not the idea.

00:28:23.340 | Maybe the insight, but being able to succinctly

00:28:28.340 | explain the power of the insight is something

00:28:34.460 | that only one with tremendous command can do.

00:28:38.500 | - Okay, if I wanna evaluate myself as an entrepreneur

00:28:41.260 | and I'm speaking for anyone listening,

00:28:43.420 | do I have high intellectual curiosity?

00:28:45.140 | That would be a plus one in the camp.

00:28:48.140 | Can I be succinct to explain things?

00:28:50.860 | - You can only be succinct if you have incredible command.

00:28:54.940 | - Okay.

00:28:55.780 | - And those things maybe put you in a better position

00:29:00.780 | to recognize an inflection point in technology

00:29:04.440 | that will enable an insight.

00:29:06.540 | So one of the most controversial points that I make

00:29:08.860 | in my product market fit class is that every book

00:29:12.760 | on entrepreneurship would lead you to believe

00:29:15.360 | that successful companies start by an entrepreneur

00:29:20.100 | observing a market, looking for a problem

00:29:22.820 | and developing a solution.

00:29:24.940 | In practice, that's not how the great technology companies

00:29:27.940 | were founded, it's the exact opposite.

00:29:30.980 | The founder typically recognized an inflection point

00:29:34.780 | in technology that enabled them to build a new kind

00:29:38.180 | of product and then they had to find somebody

00:29:40.860 | who cared about it.

00:29:41.700 | So in effect, it was a solution in search of a problem

00:29:44.860 | and you keep iterating on the markets till you find

00:29:47.540 | a group that's desperate for what you have.

00:29:50.500 | But you have to have a really powerful insight

00:29:53.640 | in order for that to work.

00:29:55.260 | - You've said product market fit a lot.

00:29:58.300 | I know the definition because we've worked together,

00:30:01.080 | but for anyone listening who kind of missed

00:30:03.340 | the implied definition, how would you think

00:30:06.540 | of defining that term?

00:30:08.100 | - You have found a market that's desperate for your product.

00:30:12.960 | - And what question would you ask during an interview

00:30:16.640 | to find out whether the company you're potentially

00:30:18.940 | gonna work for actually has it?

00:30:20.620 | Or would you not even ask the company?

00:30:22.260 | - I would absolutely ask the question.

00:30:24.780 | So over more than 25 years of maniacally studying

00:30:29.780 | this topic, I have come to two heuristics

00:30:35.880 | that I think are pretty good indicators

00:30:38.600 | of whether or not you found this.

00:30:40.660 | So in a consumer business, exponential organic growth

00:30:45.660 | and in an enterprise business,

00:30:47.580 | a company that sells to businesses,

00:30:49.700 | a sales yield greater than one.

00:30:52.260 | So let me give you a quick fleshing out of that.

00:30:56.900 | So the two most important things to prove

00:31:01.580 | that you have found an audience that's desperate

00:31:04.020 | for your product are word of mouth and retention.

00:31:07.980 | Well, how do you know if there's word of mouth?

00:31:12.460 | And word of mouth is five to 10 times

00:31:15.660 | more valuable than retention.

00:31:18.060 | So how do you measure that?

00:31:19.900 | Well, in a consumer business,

00:31:22.160 | the one metric that really captures it

00:31:26.020 | is exponential organic growth.

00:31:28.940 | Not total growth, 'cause you can game growth.

00:31:31.380 | You can pay for growth.

00:31:33.180 | You can acquire customers, but they might not stick around.

00:31:37.140 | And they might not tell other people to come,

00:31:41.860 | in which case, once you turn off the faucet,

00:31:44.860 | the paid marketing faucet or advertising,

00:31:48.420 | the business goes away.

00:31:49.780 | The only way that a company can grow exponentially

00:31:53.520 | organically is word of mouth,

00:31:57.140 | 'cause delight is the greatest form of virality,

00:32:00.620 | and retention.

00:32:02.260 | But you're not gonna tell your friends

00:32:03.860 | you gotta use this product

00:32:05.060 | if you're not gonna stay with the product also, right?

00:32:07.580 | So it does an amazing job of capturing it.

00:32:10.980 | On the enterprise side,

00:32:12.480 | one of my teaching partners, Mark Leslie,

00:32:15.180 | wrote an amazing article called

00:32:17.180 | "The Sales Learning Curve" in the Harvard Business Review.

00:32:21.060 | And in it, he found that

00:32:26.060 | when companies selling to businesses get started,

00:32:32.820 | it takes them a while 'til they figure out the recipe

00:32:36.380 | of how to sell the product or who the target audience is.

00:32:39.580 | Who's, in my words, who's desperate.

00:32:43.260 | Because better doesn't matter.

00:32:46.540 | If there's a good enough alternative,

00:32:48.420 | people are gonna buy the good enough alternative

00:32:50.940 | from the incumbent because they're trustworthy.

00:32:53.300 | Why should they buy from you for better?

00:32:55.360 | The only way they're gonna buy from you

00:32:56.680 | is if they're desperate.

00:32:58.040 | So it takes a while before you discover who's desperate.

00:33:02.020 | When you do, your sales yield goes to one.

00:33:05.580 | And sales yield is defined by the dollar contribution

00:33:10.460 | per average sales rep divided by the cost

00:33:14.620 | to field a sales team.

00:33:17.580 | So in a direct sales business in technology,

00:33:20.500 | you typically pay a sales rep between salary

00:33:25.500 | and commission on the order of $250,000.

00:33:29.500 | And then they typically have a sales engineer

00:33:31.820 | who does the technical part of the sale.

00:33:34.140 | And they typically earn on the order

00:33:35.740 | of $150,000 to $200,000 total cut.

00:33:39.580 | And then there's a fraction of an inside sales rep

00:33:42.780 | who does qualification.

00:33:44.620 | And then there's T&E and other expenses like that.

00:33:47.740 | And then finally, you have to amortize the cost

00:33:51.100 | of management across sales teams.

00:33:53.820 | So the all-in cost is around $600,000.

00:33:57.580 | And what Mark Leslie and Chuck Holloway,

00:33:59.620 | his co-author, found was that until the contribution margin

00:34:04.620 | is at least equal to the cost to field a team,

00:34:10.660 | so until you generate a contribution margin

00:34:13.140 | of at least $600,000, it doesn't take off.

00:34:17.340 | But once you get to a yield of one,

00:34:20.420 | for some reason there's an inflection point.

00:34:22.420 | And it's incredibly consistent.

00:34:24.900 | And then it goes up to two,

00:34:26.060 | and then there's an inflection point that slows down.

00:34:29.420 | And Mark and Chuck found that you should hire

00:34:31.860 | a different type of rep pre-achieving sales yield of one.

00:34:36.860 | It's sort of a hybrid marketer and salesperson.

00:34:41.220 | You don't want to hire a whole sales force

00:34:43.220 | until you get to the yield of one

00:34:45.940 | because then you waste a lot of money.

00:34:47.700 | So they call that the renaissance rep.

00:34:50.020 | Then you hire an enlightened rep, a classic rep,

00:34:52.740 | who can sell the merits of a product.

00:34:55.260 | And then once you get to a sales yield of two

00:34:58.220 | and things start to plateau,

00:35:00.340 | then you just hire order takers.

00:35:03.220 | And they call those coin-operated reps.

00:35:06.260 | So you really need to know where you are in this phase.

00:35:09.020 | But for some reason, there's an inflection point at one.

00:35:12.380 | Inflections matter more than almost anything in business.

00:35:15.580 | Wherever you see an inflection,

00:35:17.220 | drop everything and focus on that.

00:35:19.500 | So that tells me that you're out of the discovery phase

00:35:22.260 | and you've found product-market fit.

00:35:24.380 | - So do you think companies can just answer these?

00:35:27.820 | Oh, what is the sales yield?

00:35:29.340 | - Good companies can.

00:35:30.940 | Companies that don't want to answer those questions

00:35:35.300 | generally don't want to

00:35:36.620 | because they can't answer them well.

00:35:39.700 | - So is that a red flag or a yellow flag?

00:35:43.340 | - I think red.

00:35:44.700 | - Okay.

00:35:45.540 | - Now, many companies would say,

00:35:46.620 | if you hear, "Oh, that's confidential,"

00:35:49.220 | that's bullshit. (laughs)

00:35:52.900 | - Yeah, I mean, sometimes maybe the hiring person

00:35:56.340 | you're talking to doesn't know the answer

00:35:58.020 | and they can go get it.

00:35:58.860 | - Well, then do you want to work for somebody who lies?

00:36:01.900 | Instead of saying, "I don't know.

00:36:03.940 | "Let me find out and I'll get back to you,"

00:36:07.780 | that's a high-quality person,

00:36:09.340 | the person who says it's confidential

00:36:11.660 | because they're insecure.

00:36:13.420 | Do you want to work for a company

00:36:14.660 | that employs people like that?

00:36:16.380 | I don't.

00:36:17.700 | - Well, you probably don't want to work anywhere anymore.

00:36:20.140 | - Yeah, but even when I was working,

00:36:21.980 | I wouldn't want to work with people like that.

00:36:24.740 | - As you're talking about some of these lessons

00:36:28.700 | for tech companies,

00:36:29.820 | I think about a few friends of mine work outside of tech,

00:36:33.060 | and one of them works in oil and gas,

00:36:35.700 | but they're running it like a tech company now,

00:36:37.260 | and in many ways-

00:36:38.860 | - What does that mean?

00:36:39.860 | - So a little bit that the way they think about management,

00:36:43.900 | the way they think about leveling,

00:36:45.660 | it just is all the same language

00:36:47.620 | that I've heard in this industry that we've worked in.

00:36:51.940 | I also think that these days, some of these companies,

00:36:55.260 | it's hard to tell what a tech company is

00:36:57.620 | because if it's actually selling oil and gas technology to,

00:37:00.420 | it is a tech company,

00:37:01.260 | it just happens to be in this other industry,

00:37:03.100 | and I think it's interesting

00:37:04.300 | that I don't want people to be too turned off

00:37:08.900 | by us talking about tech companies and think,

00:37:10.940 | "Well, this is just small tech startups

00:37:12.860 | that you can work at,"

00:37:13.820 | 'cause you might not necessarily have the experience

00:37:17.100 | outside of Silicon Valley

00:37:18.300 | to know that these lessons transition,

00:37:20.300 | but my instinct is that a lot of what we're talking about

00:37:23.940 | would be relevant in many other industries.

00:37:26.060 | - I'll let you make that assertion.

00:37:28.220 | I try to stick to what I know,

00:37:30.260 | and I'm not a fan of people who are know-it-alls.

00:37:33.260 | I said that earlier.

00:37:34.820 | So I haven't learned about those fields.

00:37:37.740 | I'm not gonna make any assertions.

00:37:39.340 | - You mentioned a little earlier some of these heuristics

00:37:42.700 | of people that, or companies that are successful.

00:37:46.460 | What about other heuristics of either companies

00:37:49.900 | or managers that people should look at

00:37:52.140 | of what makes people successful in their roles?

00:37:55.500 | - I think the best judge of how good someone is

00:38:00.500 | is if you only had one metric to look at,

00:38:05.180 | would probably be how quickly

00:38:07.620 | have they ascended in their career.

00:38:09.860 | - Which is a very easy thing to get data on.

00:38:12.100 | - Very easy, but very few people ask about it.

00:38:15.900 | So one of the things that I used to ask executives

00:38:19.540 | who I interviewed for portfolio companies

00:38:23.180 | when I was a venture capitalist also was,

00:38:26.140 | tell me about the best person who ever worked for you.

00:38:29.980 | What do they do now?

00:38:31.500 | And if they were still below them,

00:38:37.620 | that didn't speak well of the executive

00:38:42.100 | because they didn't develop people.

00:38:44.380 | If they could tell me a story about someone

00:38:46.500 | who might even be at a higher level than they today,

00:38:50.140 | that was really powerful.

00:38:51.940 | So that was true of, that's true of more senior people.

00:38:55.580 | But in general, I would say the rate

00:38:57.540 | at which one ascends in their career.

00:39:00.540 | - We talked a lot about management, managers, hiring.

00:39:03.780 | What role in work is there for people

00:39:07.020 | who don't want to manage,

00:39:08.340 | but want to excel in their career and their craft?

00:39:12.060 | - Boy, I'm having a hard time with that one.

00:39:14.460 | This is something that is particularly timely to me

00:39:18.900 | because I don't understand how someone becomes

00:39:23.460 | a VP of engineering today in a software company

00:39:27.740 | because most good engineers, and I'm saying most, not all,

00:39:32.540 | have no respect for managers (laughs)

00:39:36.660 | and often think of managers as an HR position.

00:39:41.660 | It's an administrative position.

00:39:44.720 | And therefore, they aspire to be tech leads and not managers.

00:39:49.720 | They aspire to lead a project,

00:39:54.760 | but technically lead it, not manage it.

00:39:57.800 | Well, I don't know what career path that leads

00:40:03.920 | to being a chief technical officer

00:40:06.880 | because you can't become a VP of engineering.

00:40:10.880 | You want to be a tech lead who also can manage people.

00:40:15.880 | So perhaps we need hybrid tech lead managers,

00:40:21.840 | but the trend today in most software companies

00:40:28.960 | is towards separating managers from tech leads.

00:40:32.400 | So I'm thoroughly confused about how one ascends

00:40:36.960 | in their career in engineering.

00:40:40.320 | - And even outside of engineering,

00:40:42.760 | do you think management is a required stop

00:40:46.000 | on the seniority level system?

00:40:48.760 | - Yes, but again, I think you want to focus on the skill

00:40:52.260 | at which you're a killer and hire the rest.

00:40:56.780 | So if you're a marketer and you happen to be

00:41:01.780 | a superb product marketer, then you don't necessarily

00:41:06.000 | have to be the best at paid marketing

00:41:08.360 | or marketing to the existing customers,

00:41:13.360 | programs of that sort.

00:41:16.660 | You can, I think, do really well by aspiring

00:41:22.840 | to hire in to manage people who do those things.

00:41:29.720 | But if you're great at one thing,

00:41:32.240 | you're much more likely to be promoted quickly,

00:41:35.480 | which leads back to the metric I talked about.

00:41:37.560 | - Yeah, I just wonder if sometimes people end up

00:41:39.880 | in a place where, wow, you're so good at this thing.

00:41:42.200 | We're going to elevate you.

00:41:43.040 | Now you run the team.

00:41:44.600 | And that's just a totally different skillset.

00:41:46.480 | - Well, this gets back to tech lead.

00:41:48.720 | So let's draw the analogy that that's why I think

00:41:52.240 | the ideal manager is both a technical expert and a manager.

00:41:57.240 | If they're just a manager

00:41:59.480 | and they're not an expert in their function,

00:42:02.840 | I don't think that usually leads to good outcomes.

00:42:06.160 | - Okay, so if you're taking on too many employees under you

00:42:10.780 | that you don't have any time to actually do the work.

00:42:13.680 | - Or think about it.

00:42:15.120 | - Okay.

00:42:16.240 | - Where you can help someone below you at what they do.

00:42:21.160 | So imagine you manage product managers.

00:42:24.960 | Well, you better have some really good instincts

00:42:27.200 | about products to be able to help them,

00:42:30.720 | the people who report to you.

00:42:32.280 | - Yeah.

00:42:33.120 | - If you're just managing them,

00:42:35.640 | then your reports aren't going to get

00:42:40.360 | a lot of value from you.

00:42:42.320 | And I don't think you're that valuable.

00:42:46.640 | - Rates of leaders that you've worked with

00:42:49.200 | or seen are valuable.

00:42:51.280 | - Perhaps the two most important characteristics

00:42:54.680 | of a good leader are their ability to set expectations well,

00:42:59.640 | because do you want to follow someone

00:43:01.320 | who doesn't set good expectations

00:43:04.080 | and someone who communicates really well?

00:43:07.480 | - And if you are an employee somewhere listening to this.

00:43:10.640 | - And then I guess the third point would be

00:43:13.080 | they put others ahead of themselves.

00:43:15.480 | So I'm going to make that three points.

00:43:17.840 | - And can you influence those

00:43:19.560 | as someone who reports to that person,

00:43:21.200 | if they're not setting expectations,

00:43:22.880 | is it find a new manager or is it?

00:43:25.360 | - Well, you can ask to transfer.

00:43:27.720 | - But kind of influencing and changing your manager's style.

00:43:32.480 | - Just like I don't believe in pips.

00:43:34.920 | - Okay, say more.

00:43:37.240 | - I've seldom if ever seen

00:43:40.440 | a performance improvement program ever work.

00:43:45.080 | That once you start questioning whether someone

00:43:48.080 | who works for you is up to the task,

00:43:50.680 | you've made up your mind.

00:43:52.040 | You know the answer actually.

00:43:53.960 | - And is the right move there as a manager

00:43:56.120 | to just let them know that and let them go?

00:43:58.080 | - Yes, and help them find something where they can excel.

00:44:02.160 | It's not usually a bad person.

00:44:04.720 | It just might not be a great fit.

00:44:06.760 | - So I think very rarely does someone have a manager

00:44:09.720 | who's like, ah, you're not cut out for this job.

00:44:13.040 | - They should.

00:44:13.880 | - Let me help you.

00:44:14.800 | No, no, no.

00:44:15.640 | The first part I think you might hear frequently,

00:44:18.520 | but the let me help you.

00:44:20.320 | I think you've talked about the golden rule a lot.

00:44:22.280 | Is that where that belief comes from?

00:44:24.520 | - I just think it's the right thing to do.

00:44:26.680 | - Yeah, I mean, I just feel like in--

00:44:30.480 | - Treat, I guess you're right.

00:44:32.520 | So as you said, I'm an enormous believer

00:44:35.640 | in the golden rule of treating others

00:44:37.200 | the way you'd like to be treated.

00:44:38.880 | And if I had a boss,

00:44:40.360 | that's what I would want them to do for me.

00:44:43.080 | So yeah, absolutely.

00:44:44.600 | - And do you, I know you've said intellectual--

00:44:47.880 | - Thank you for leading me through this, Chris.

00:44:49.800 | (laughing)

00:44:51.240 | - I did a lot of homework.

00:44:53.280 | - I just know that you talk about that

00:44:55.480 | in a lot of the ways you make decisions.

00:44:57.520 | You just think about it from other people's perspective.

00:45:00.320 | - Exactly.

00:45:01.640 | And don't you wish the world operated that way?

00:45:03.960 | Wouldn't we have avoided a lot of the problems

00:45:06.480 | that we have in this country?

00:45:08.680 | If everyone treated others

00:45:10.560 | the way they would like to be treated,

00:45:12.280 | God, we're going in the opposite direction.

00:45:15.760 | - And what can we do about that?

00:45:17.480 | - I don't know.

00:45:18.320 | We need leaders.

00:45:19.480 | (laughing)

00:45:20.960 | We need really good leaders to set examples,

00:45:23.880 | but our leaders are doing the opposite.

00:45:26.480 | - And is there a thing, are there short-term fixes?

00:45:30.200 | I mean, a long-term fix is,

00:45:31.280 | oh, if you think you could do the opposite,

00:45:32.680 | become a leader,

00:45:33.520 | but does the system kind of corrupt

00:45:35.800 | your leadership along the way?

00:45:37.280 | - Perhaps, at least politically,

00:45:39.160 | I think that's really challenging today.

00:45:41.560 | - And do you see any path forward?

00:45:44.080 | - I know very little about politics,

00:45:46.000 | so I'm not going to comment on that.

00:45:47.840 | - Okay, okay.

00:45:48.960 | (laughing)

00:45:50.960 | Well, I actually had a point

00:45:52.160 | that maybe politics will bring up,

00:45:55.040 | which without talking about it is,

00:45:57.200 | I haven't heard you talk much about optimism and pessimism

00:46:00.520 | and how important one side or the other is in business.

00:46:05.200 | - I'm an optimist.

00:46:06.520 | David Fortunato, Wealthfront's CEO,

00:46:12.640 | comes across as a pessimist.

00:46:14.920 | I don't think he really is.

00:46:16.480 | (laughing)

00:46:17.680 | - Is that his questioning nature?

00:46:19.640 | - Perhaps.

00:46:20.600 | He's skeptical and somewhat cynical.

00:46:23.760 | - Yeah, I've heard people-

00:46:27.400 | - It's hard to have a growth mindset if you're a pessimist.

00:46:30.920 | - When I think about intellectual curiosity,

00:46:32.400 | it's like, I want to know if there's a better answer.

00:46:34.160 | I want to know how to do this.

00:46:35.040 | - David Fortunato, who I talked about earlier, our CEO,

00:46:38.720 | I'm in awe of him.

00:46:39.880 | I mean, he's unbelievably well-read, learned and all,

00:46:44.080 | and just has a voracious appetite to add to his knowledge.

00:46:49.080 | And he is loathe to comment on things

00:46:52.840 | about which he is not educated,

00:46:55.320 | and tries to surround himself with people who are.

00:47:00.080 | - We asked about whether asking questions

00:47:02.000 | makes you look bad.

00:47:03.160 | I think I know the answer to this question, but-

00:47:05.960 | - By the way, one of the things that is terrible,

00:47:07.840 | you have two little girls, I have a daughter,

00:47:10.720 | and when my daughter was in middle school,

00:47:14.520 | her friends would say, "Stop raising your hand.

00:47:17.280 | You shouldn't be doing that.

00:47:20.440 | It's like, it's inappropriate."

00:47:22.920 | There's a bunch of social mores

00:47:26.360 | that make it really hard for women to stand out

00:47:31.080 | and do some of the things that I think are needed for them

00:47:34.440 | to achieve everything they're capable of achieving.

00:47:37.840 | - So is your advice to your daughter,

00:47:39.200 | just don't listen to that, raise your hand,

00:47:41.400 | ask the question. - Absolutely.

00:47:42.240 | But to a middle schooler, that's really, really hard.

00:47:45.320 | - Yeah, I haven't had to give advice

00:47:46.480 | to a middle school daughter.

00:47:48.240 | - Oh, let me tell you, middle school is awful.

00:47:51.640 | - But we talked earlier about how some people

00:47:56.960 | feel like asking questions looks bad.

00:47:58.960 | I think another one is not knowing the answer.

00:48:02.360 | But here, multiple times your answer has been,

00:48:05.680 | "Well, I don't know enough about that to answer."

00:48:07.320 | And I think so many people-

00:48:08.160 | - Do you respect people more

00:48:09.480 | who admit what they don't know?

00:48:11.760 | - I do, but I think people are always afraid

00:48:14.080 | to not know the answer

00:48:15.240 | and they feel like they're gonna look bad.

00:48:17.400 | - Again, makes no sense to me.

00:48:19.580 | - I wonder if it comes-

00:48:22.040 | - Again, applying the golden rule,

00:48:24.520 | how would you like to be treated?

00:48:25.960 | You want someone to bullshit you?

00:48:27.920 | - No, no, so many things that you've said are so obvious,

00:48:31.480 | but I think oftentimes we worry,

00:48:33.640 | "Oh, how will people look at me?"

00:48:35.400 | And maybe this goes back to me being the millennial

00:48:37.760 | looking for my friend's advice,

00:48:39.040 | caring more about what they think than what matters.

00:48:41.840 | But I wouldn't say I embody that,

00:48:43.520 | but if I don't know the answer,

00:48:46.040 | I guess my curiosity leads me to,

00:48:47.760 | "Well, I don't know, but let's go find out."

00:48:49.120 | - Let's go find out, right.

00:48:50.280 | - And I think one fortunate thing is if you don't know,

00:48:53.060 | it's a lot easier to find the answer.

00:48:54.440 | I wonder if 20 years ago,

00:48:57.040 | you could get away with making up an answer a lot easier

00:48:59.440 | 'cause it wasn't as easy to fact check.

00:49:01.900 | I don't know.

00:49:03.600 | - Yeah, but people also didn't make up answers

00:49:06.280 | the way they do today. (laughs)

00:49:08.480 | Because if you write well,

00:49:10.160 | you can publish something on the internet

00:49:12.720 | that people will believe.

00:49:14.200 | - Yes.

00:49:15.040 | - You don't have to be an expert.

00:49:18.080 | - No, I think finding experts

00:49:20.720 | is probably a lot harder now than it has been.

00:49:24.840 | I think you've mentioned, I wrote down a bunch of names,

00:49:27.080 | people you've worked with, people you looked up to

00:49:28.780 | that have all kind of been experts or mentors or partners.

00:49:32.560 | How did you create those relationships and foster them?

00:49:36.440 | Because I think all of us, myself included,

00:49:40.400 | hope that one day when I'm having conversations like this

00:49:43.920 | on your side, that I have all those people to lean on

00:49:46.760 | and say, "Oh, this person who taught me all of this,

00:49:48.920 | this person who taught me all of this."

00:49:50.280 | - Someone didn't necessarily teach me,

00:49:52.520 | I might have observed.

00:49:54.120 | And using some of the lessons that I shared to filter,

00:50:01.480 | you might find some people in your life

00:50:03.840 | who are really, really good.

00:50:05.400 | Boy, you ought to pay a lot of attention to them.

00:50:07.480 | I'm 65 years old, and I've been on the board of directors

00:50:12.080 | of the University of Pennsylvania for 19 years now.

00:50:14.800 | So I joined when I was 46.

00:50:16.600 | I absolutely adore one of our former chairman,

00:50:22.680 | who was the vice chair of T. Rowe Price.

00:50:25.960 | And I'm like a puppy dog in his case.

00:50:28.320 | And I'm like a puppy dog in his company.

00:50:31.800 | So even when I was 60 years old or 62 years old,

00:50:36.320 | if I had an opportunity to sit next to him at a bar

00:50:40.160 | and just soak up his lessons,

00:50:42.680 | to this day I keep learning from him.

00:50:44.920 | So when you find someone who's really good,

00:50:48.800 | boy, pay attention to them.

00:50:51.120 | - And have the people who've done that to you stood out

00:50:53.840 | by just asking good questions?

00:50:55.720 | - Yeah, absolutely, all it really takes.

00:50:58.640 | And I have infinite time for people who do that.

00:51:02.080 | - Be careful what you wish for.

00:51:04.640 | We've got lots of people listening.

00:51:05.480 | - I understand, but there have to be people I know.

00:51:07.800 | So I often get asked to engage with people on LinkedIn

00:51:12.800 | or things like that.

00:51:14.600 | And I tell them, I'm sorry,

00:51:16.040 | but I only do this with people I know.

00:51:18.720 | And I'm amazed by the number of people who don't understand

00:51:22.840 | you should always be introduced.

00:51:25.800 | Never cold call anyone.

00:51:28.080 | Like venture, one of the first lessons I learned

00:51:30.280 | as a venture capitalist is never engage

00:51:32.480 | with anyone who cold calls you.

00:51:34.040 | Because imagine what they'll do

00:51:37.160 | when they're an entrepreneur.

00:51:38.800 | If they cold call customers,

00:51:40.280 | they're never gonna get them to engage.

00:51:42.760 | So it's sort of a test.

00:51:45.120 | If you can't find someone who knows me,

00:51:48.320 | then you might not be creative enough

00:51:52.360 | or the appropriate person to start a company.

00:51:55.000 | - But does that lesson apply to someone

00:51:59.560 | who doesn't necessarily want to start a company,

00:52:01.080 | but you think the same rule applies

00:52:03.560 | is always find the introduction?

00:52:05.000 | - Absolutely.

00:52:05.960 | If you're gonna make an introduction for someone,

00:52:08.840 | first ask the person to whom you're making the introduction

00:52:12.200 | if they're open to it.

00:52:13.800 | - Yes.

00:52:14.640 | - 'Cause otherwise you're gonna annoy them.

00:52:16.440 | And I'm amazed by the number of people who,

00:52:19.680 | when someone says, will you introduce me to Chris?

00:52:23.480 | And I'll say, well, I'll just let me check.

00:52:25.360 | But many people will just send a forward the email

00:52:29.080 | as an introduction.

00:52:29.920 | Well, that's a pain in the ass for you.

00:52:32.320 | If I were to, it's not treating you

00:52:33.920 | the way I would want to be treated.

00:52:35.880 | So be conscious of these things.

00:52:38.560 | But ask for an introduction.

00:52:42.360 | Why should someone spend time with someone

00:52:45.440 | that they don't know?

00:52:46.600 | I don't understand.

00:52:48.400 | - I think the one place I'll push back is

00:52:51.200 | if you are able to offer a ton of value to someone,

00:52:55.880 | I think you can overcome the cold call problem.

00:52:59.800 | - Well, then you have to be well-known.

00:53:02.040 | - Or someone at a company I worked at

00:53:06.480 | really loved the company,

00:53:07.720 | wanted to be involved in the company and said,

00:53:11.320 | they sent an email to a few people and said,

00:53:13.000 | I just spent six hours going through your product.

00:53:17.360 | And I have all of this feedback for you.

00:53:19.840 | And you don't know me.

00:53:20.960 | - But they spent a lot of time, okay, I respect that.

00:53:23.280 | I agree with you on that.

00:53:24.440 | - So I think if you're young and you have time on your hand,

00:53:27.320 | but you don't have your network yet,

00:53:29.080 | I think putting in the time and energy

00:53:30.760 | to add value to that person.

00:53:32.240 | - Okay, completely agree.

00:53:33.800 | We actually had an employee at our company

00:53:36.960 | who did that on Twitter.

00:53:39.680 | That he kept defending the company against trolls

00:53:43.040 | over and over and over again.

00:53:44.440 | His name is Tyler Hogue.

00:53:46.160 | And I reached out to Tyler

00:53:48.160 | because I really appreciated what he did.

00:53:51.080 | And he said, I'd love to come to work for Wealthfront.

00:53:54.080 | And it was clear that he had spent the time and effort.

00:53:56.760 | He didn't ask, based on what he did, I went to him.

00:53:59.720 | I had a sales background

00:54:01.000 | and we don't have a sales function.

00:54:03.240 | So I said, if you're willing to start in product support,

00:54:08.240 | which is what we call customer service,

00:54:11.800 | I'll make sure that you have a shot

00:54:14.400 | to move into another function, as we described earlier.

00:54:17.840 | And he said, absolutely, which most people wouldn't say.

00:54:21.520 | So he joined us and then within a year and a half,

00:54:24.640 | he moved into product.

00:54:25.760 | He's from Utah and he was recruited by a startup in Utah

00:54:29.720 | that was willing to make him the VP of product.

00:54:32.640 | That company I think was sold for over a billion dollars.

00:54:35.800 | He did exceptionally well.

00:54:37.560 | And now he's a Utah-based venture capitalist.

00:54:41.160 | But he put the time and effort in.

00:54:44.600 | - And was willing to take a role

00:54:46.480 | that some people might think was too small.

00:54:49.520 | - But was beneath them.

00:54:50.560 | - Yeah.

00:54:51.880 | - And every step of the way, he put in the extra effort

00:54:56.080 | because he was so passionate.

00:54:59.400 | - Do you think that the key to leveling up

00:55:03.120 | is just putting in the effort?

00:55:05.320 | We talk a lot about work-life balance.

00:55:06.160 | - You have to have enough talent.

00:55:08.040 | - Enough talent, but I think in this day and age,

00:55:10.800 | I constantly see people talking,

00:55:12.680 | oh, today people just want more benefits,

00:55:16.440 | more work-life balance, all this stuff.

00:55:19.240 | - I think work-life balance is really hard

00:55:22.320 | if you want to be really successful.

00:55:24.920 | Again, really successful.

00:55:30.240 | That doesn't mean that it's bad

00:55:33.400 | to not be really successful.

00:55:35.080 | I'm not saying that.

00:55:36.440 | But it's really hard to have a work-life balance

00:55:38.920 | if you want to be really successful.

00:55:40.640 | You can get the leisure time after you're successful.

00:55:45.560 | - You know, we talk about ways to be successful.

00:55:48.480 | How much of it-

00:55:49.320 | - And by the way, success isn't money.

00:55:51.560 | It's being absolutely, by excelling in whatever you do.

00:55:56.560 | - How much of that is not just work, but luck?

00:56:03.200 | - I think there's an article that I love sharing

00:56:08.200 | with my students in my product market fit class

00:56:11.600 | that's written by my investment idol,

00:56:13.240 | a guy named Howard Marks,

00:56:15.400 | who is a famous distressed debt investor

00:56:19.640 | from Oak Tree Capital.

00:56:20.880 | And he's equally as well-known for his quarterly letters

00:56:24.880 | to his investors.

00:56:28.680 | And they're always very thought-provoking.

00:56:32.080 | And he wrote this one letter called "You Bet"

00:56:36.280 | that talked about success in investing

00:56:41.040 | is very similar to certain types of gambling

00:56:46.040 | in that people confuse outcomes with good decisions.

00:56:53.560 | That outcomes are a function of the quality

00:56:57.800 | of the decision process,

00:57:00.000 | the extent to which you take maximum advantage

00:57:02.800 | of the data available to you,

00:57:04.320 | because there's hidden information, and luck.

00:57:07.240 | Now, roulette is a pure game of luck,

00:57:11.040 | but poker is a function of the three.

00:57:13.600 | Investing is a function of the three.

00:57:17.440 | I think entrepreneurship is a function of the three.

00:57:20.280 | You can have a, if you really focus on your product process,

00:57:25.280 | just like you really focus on your investment process,

00:57:30.400 | you won't always be successful,

00:57:32.720 | but you really improve your probability of success.

00:57:36.680 | And that's why at Wealthfront,

00:57:37.720 | we spend a lot of time, as you know,

00:57:39.720 | focused on our product process.

00:57:41.760 | - Yeah, I think--

00:57:42.960 | - So this is true in one's career as well.

00:57:46.440 | I think if you really focus on the process

00:57:50.000 | of becoming a learn-it-all,

00:57:53.960 | you take maximum advantage of the information

00:57:57.400 | that's available to you.

00:57:59.840 | If there's a surprise, you savor it.

00:58:02.200 | Odds are you're going to do well,

00:58:05.960 | but you can run into bad luck.

00:58:08.360 | - Yeah.

00:58:09.680 | So you talked about judging your decisions

00:58:11.920 | and ways to look at things in hindsight.

00:58:14.080 | How do you make decisions?

00:58:16.320 | - What do you mean?

00:58:18.720 | - Do you have a process for making big decisions

00:58:21.920 | in life or work?

00:58:23.440 | - Well, there are decisions made under uncertainty

00:58:25.960 | and decisions made under certainty.

00:58:28.920 | So under certainty means you have a lot of data.

00:58:32.120 | Those are the easiest decisions,

00:58:34.960 | and they actually are the least impactful

00:58:37.520 | 'cause anybody can make those decisions.

00:58:39.520 | The hardest decisions and the most impactful ones

00:58:42.920 | are the ones made under uncertainty.

00:58:45.000 | So that comes down to judgment.

00:58:49.960 | - Okay, so let's talk about judgment

00:58:52.240 | 'cause I know when I first joined Wealthfront,

00:58:54.720 | it was something that you mentioned

00:58:55.880 | was like a very important characteristic,

00:58:58.840 | someone's judgment.

00:58:59.680 | - To success.

00:59:00.720 | - Yes.

00:59:01.720 | And what does judgment mean?

00:59:05.000 | How do you think about?

00:59:06.480 | - Well, judgment to me is decision-making under uncertainty,

00:59:09.880 | which means there's a bunch of luck involved,

00:59:13.040 | but some people show evidence

00:59:17.880 | of having better judgment than others.

00:59:21.240 | - And is it just a feeling?

00:59:22.440 | Is it looking at how someone makes a decision sometime

00:59:24.880 | and there's no process, but it's a gut feeling?

00:59:26.880 | - This was another thing I spent a lot of time on

00:59:29.040 | in interviews.

00:59:30.960 | Tell me about some decisions you made under uncertainty,

00:59:35.200 | the ones that worked and the ones that didn't.

00:59:37.800 | And I wanted to know how they came to the conclusion.

00:59:40.760 | And what was the quality of their thinking,

00:59:45.120 | thinking through the logic of the challenge?

00:59:49.000 | To me, job choice was the best proxy for judgment.

00:59:53.680 | - And just seeing what people have done

00:59:55.360 | in their career in the past, or?

00:59:58.120 | - What companies they chose

00:59:59.840 | and the success of those companies.

01:00:01.920 | - And with enough data points,

01:00:03.600 | you can kind of get rid of the luck.

01:00:05.240 | If they've had one job and one role and it was unsuccessful,

01:00:08.440 | you wouldn't fault them for that.

01:00:09.640 | - I wouldn't fault them for that.

01:00:11.280 | But if they had three straight really successful companies,

01:00:15.920 | they have taste.

01:00:17.120 | Taste is another way of saying judgment.

01:00:19.640 | - Okay.

01:00:20.480 | - And they would tell me what characteristics

01:00:24.440 | they would look for.

01:00:26.120 | - And seeing how they think through things.

01:00:27.640 | So really it's in the same way

01:00:29.320 | that you would judge a decision

01:00:30.720 | based on the process you followed,

01:00:32.280 | the information you used.

01:00:33.400 | It's really judgment is just, how do you make decisions?

01:00:36.640 | - Well, some people think it's pattern matching.

01:00:39.000 | There are a number of people who don't like pattern matching

01:00:41.880 | but it's a really, really important way to make a decision.

01:00:46.720 | You just have to make sure

01:00:48.760 | that there aren't biases involved.

01:00:50.600 | And you have to be very, very conscious

01:00:52.880 | of not allowing biases into that process.

01:00:57.880 | - And how would you do that?

01:00:59.680 | - Just by being conscious of it.

01:01:01.400 | - Just calling them out in advance

01:01:03.640 | of whatever that process is.

01:01:05.040 | - Yeah.

01:01:05.880 | - Do you have an example?

01:01:06.760 | I'm trying to think through what that would look like.

01:01:08.840 | - Well, there's confirmation bias.

01:01:10.840 | We see what we're looking for.

01:01:16.480 | There's desirability bias.

01:01:19.640 | The bias toward the outcome that we want.

01:01:24.400 | So just being conscious about these things

01:01:27.840 | keeps you honest and helps you make better decisions.

01:01:31.760 | - Okay.

01:01:33.040 | I feel like I wrote a lot of things down.

01:01:35.080 | We got through almost all of them.

01:01:36.560 | There's a couple random ones.

01:01:38.840 | You talked about, David,

01:01:41.200 | at Wealthfront being a voracious reader.

01:01:43.960 | Do you think reading is a skill

01:01:46.800 | or a trait of someone who's successful?

01:01:48.720 | Do you read a lot?

01:01:49.960 | How do you think about where reading--

01:01:51.240 | - My wife would kid me

01:01:52.240 | that I never read anything without staples in it.

01:01:54.640 | So until I effectively retired,

01:01:59.360 | which is the stage I'm at,

01:02:01.160 | I haven't had a ton of time to read fiction and nonfiction.

01:02:06.160 | Most of my time was spent reading about business stuff,

01:02:09.560 | work-life balance that we talked about before.

01:02:11.920 | I watch a lot of TV and movies,

01:02:13.760 | so it's not like I'm a total dullard

01:02:17.240 | who only is focused on business.

01:02:19.720 | But I think if you wanna get better at what you do,

01:02:24.720 | there's a lot of value in meeting the principles

01:02:30.720 | because everyone revises history in public forums.

01:02:35.240 | You have to be careful that I'm not revising history here

01:02:39.200 | as I'm speaking to you.

01:02:41.080 | But every successful company has revised history

01:02:44.320 | on how they actually got to success

01:02:47.080 | because consumers or buyers prefer buying from companies

01:02:52.080 | who always intended to serve them.

01:02:54.960 | So if they started with an inflection point in technology,

01:02:57.680 | develop a product,

01:02:58.880 | and then they iterated through a bunch of markets

01:03:00.800 | till they found one that was desperate for what they had.

01:03:03.840 | When they tell the story on a podcast,

01:03:05.720 | it's always, you know, I saw this problem

01:03:08.920 | and I developed this solution

01:03:11.080 | because that's what people prefer to hear.

01:03:14.520 | So it's challenging to reach conclusions

01:03:19.520 | based on what you hear on podcasts

01:03:23.280 | or what you read in blog posts,

01:03:25.280 | which is why I encourage my students

01:03:28.240 | to, wherever possible, meet the principles

01:03:31.960 | because people tend to be much more truthful

01:03:35.280 | when you talk to them in person

01:03:38.120 | than when they talk in a one-to-many environment.

01:03:43.840 | - Do you think, you know,

01:03:44.680 | if you go back more historically--

01:03:46.080 | - I benefited unbelievably in my career

01:03:48.680 | by meeting a lot of really, really interesting people

01:03:52.040 | and getting an introduction

01:03:54.440 | to the people I wanted to talk to.

01:03:56.320 | And with introductions,

01:03:59.200 | people are generally open to meeting.

01:04:02.160 | I think you wanted to meet me

01:04:03.640 | and you went through Nick Shalek.

01:04:05.440 | - Yes, yeah.

01:04:06.280 | - So that's how we met.

01:04:08.600 | - Yes, and I think people who've had experience

01:04:12.880 | love sharing that experience.

01:04:14.240 | So when you approach someone,

01:04:15.440 | and I've often used the line of like,

01:04:18.040 | I just love to hear some of the wisdom

01:04:19.560 | you've picked up in your industry.

01:04:20.840 | People are like, I would love,

01:04:22.880 | I'd love to share some of my wisdom.

01:04:25.720 | It's like a compliment, but offering them a chance to teach.

01:04:28.240 | - And it's usually unfiltered.

01:04:29.720 | - Yes.

01:04:30.560 | One thing we didn't talk about,

01:04:31.960 | you teach at Stanford in the Graduate School of Business.

01:04:35.640 | How do you think about graduate school

01:04:37.160 | as a stop in someone's career?

01:04:38.960 | - The job for which you hire a premier business school

01:04:43.960 | is number one, pivoting your career,

01:04:46.640 | number two, developing a network,

01:04:49.400 | and unfortunately a distant number three is education.

01:04:53.520 | And I'm guilty of it too,

01:04:55.080 | when I went to Stanford GSB for my MBA.

01:04:58.800 | I think, because let's say you were an accountant

01:05:02.520 | and you wanna work for a software startup in marketing.

01:05:06.840 | No one's gonna interview you.

01:05:09.280 | Based on that resume,

01:05:10.880 | one month into going to a great business school.

01:05:13.840 | - You can change their perspective.

01:05:16.760 | - You can get the meeting.

01:05:18.880 | You're the same person, but it matters.

01:05:22.760 | So I think the biggest reason

01:05:25.320 | to go to a premier business school

01:05:28.000 | and why it's worth the money

01:05:29.880 | is if you wanna pivot your career.

01:05:32.720 | - And so what would you say

01:05:33.640 | about a non-premier business school?

01:05:35.720 | - It's hard to justify the cost

01:05:38.960 | because is it really gonna allow you to pivot your career?

01:05:42.920 | Then I think you're primarily going for the education.

01:05:46.840 | And I'm not sure you're gonna be that much further ahead

01:05:50.880 | on a net present value basis relative to the cost.

01:05:54.200 | And I know that's a controversial thing to say.

01:05:56.680 | - No, I just wonder, there are a lot of graduate schools

01:06:00.280 | that publish all of their content online.

01:06:03.720 | In today's day and age,

01:06:05.400 | I wonder if you're paying for the discipline

01:06:09.600 | around the education more than the actual content itself.

01:06:12.920 | - We could speak for hours on this one.

01:06:16.480 | One of my teaching partners, Bill Barnett,

01:06:18.960 | who's a professor at Stanford GSB,

01:06:22.080 | likes to say there's no use,

01:06:24.880 | there's no benefit teaching dead knowledge.

01:06:30.600 | There's a lot of benefit in teaching live knowledge.

01:06:34.040 | And he defines dead knowledge

01:06:36.600 | as something that's already well-known and understood.

01:06:40.120 | He said, you can read that.

01:06:41.480 | Live knowledge is something that you're,

01:06:44.840 | it's still in the process of being discovered,

01:06:48.960 | which means you can have

01:06:51.760 | really interesting conversations about that.

01:06:55.200 | And so his point of view is that schools

01:06:59.520 | should focus class time on live knowledge.

01:07:04.240 | And I think that's a really fascinating point of view.

01:07:07.240 | - And you teach a class on product-market fit.

01:07:09.840 | Is that class more about the fundamentals?

01:07:12.800 | Or, 'cause I imagine if someone went and listened

01:07:15.480 | to every episode you've done

01:07:16.920 | of every podcast about product-market fit

01:07:18.960 | and heard all the references to the case studies,

01:07:21.320 | they could get some of the knowledge.

01:07:23.360 | - Yes, but I view myself

01:07:25.720 | as not having come up with any novel ideas.

01:07:28.960 | So I credit Don Valentine with the concept.

01:07:32.840 | I put the name to it.

01:07:34.600 | So I coined the term product-market fit.

01:07:37.360 | But I learned the concept from Don Valentine at Sequoia

01:07:40.720 | because as a venture capitalist,

01:07:42.720 | I wanted to understand another great venture firm

01:07:46.440 | that did things very differently

01:07:47.960 | than we did it at Benchmark.

01:07:50.040 | So as someone who likes to learn about these things,

01:07:52.720 | I tried to learn as much as I could.

01:07:55.000 | And I actually learned a lot more about it,

01:07:57.400 | teaching it to try to make things very simple,

01:08:00.840 | to be able to express the terms very simply.

01:08:03.280 | And so I see myself as a system integrator

01:08:05.880 | among a variety of books,

01:08:08.600 | each of which address a component of the challenges.

01:08:13.000 | And one of the things I've found for my students

01:08:16.400 | is they might read a chapter of the book

01:08:19.760 | and not understand it at all

01:08:21.440 | because the understanding of that topic

01:08:27.040 | might have evolved since the book was published.

01:08:30.200 | And the fact that I know the authors

01:08:32.640 | and have talked to the authors about the topics,

01:08:35.640 | I actually know the latest thinking on it.

01:08:38.720 | So I'll help them interpret it

01:08:41.640 | in a way that they weren't able to do themselves.

01:08:45.280 | - Okay.

01:08:46.760 | - That's my value added as a teacher.

01:08:49.280 | And that's why I think it's live knowledge.

01:08:51.800 | - But again, the number one and the number two,

01:08:55.200 | we're not the education and the knowledge

01:08:57.640 | as much as the network and the pivot.

01:08:59.720 | - This is, for someone who's interested in education

01:09:03.200 | on this particular topic, it's valuable.

01:09:05.560 | Yeah. - Yeah.

01:09:06.760 | - But I think that for most people

01:09:10.000 | who attend good business schools,

01:09:12.800 | they're there for the pivot and the network,

01:09:17.800 | both of which are incredibly valuable.

01:09:20.360 | - Yeah, I'll share something

01:09:21.920 | that will directly go into the last question I have,

01:09:24.520 | which is around parenting.

01:09:25.640 | But there's this product that recently launched,

01:09:29.080 | and it's an app on the iPad for teaching kids to read.

01:09:33.720 | And it's this company called Mentava.

01:09:35.480 | I think I got it right.

01:09:37.160 | We've been using it for four days.

01:09:39.000 | And they got launched into much earlier than they wanted to

01:09:42.920 | because someone got so upset that they were creating an app

01:09:46.520 | to help kids learn to read earlier.

01:09:48.640 | And they thought, oh, Silicon Valley's trying

01:09:50.640 | to create these tools to go work at these companies

01:09:54.080 | and build robotic humans that are gonna be tech workers

01:09:57.040 | at age eight.

01:09:58.560 | And they were like--

01:09:59.400 | - Wasn't there research that shows the age

01:10:00.760 | at which you start reading doesn't matter?

01:10:03.400 | - I think there is.

01:10:04.360 | - I thought there was scholarly research to that.

01:10:06.920 | - So I was like, oh, let's try this app out.

01:10:08.920 | You get seven days for free.

01:10:10.800 | - By the way, I care a lot about peer-reviewed research,

01:10:14.080 | which unfortunately the world doesn't seem to care

01:10:16.480 | as much about anymore.

01:10:17.960 | - No, actually, I got an introduction to someone

01:10:21.520 | who their expertise is how to review peer-reviewed research.

01:10:25.720 | And so I was thinking about doing an episode

01:10:27.000 | just to help everyone understand

01:10:28.640 | how do you actually look at research.

01:10:31.360 | So as a consumer in any field, how could you review that?

01:10:34.240 | But the interesting thing about this app was

01:10:36.400 | we use it for four days now.

01:10:40.960 | And I was like, the progress that our daughter has made

01:10:43.840 | in four days is mind-blowing.

01:10:46.040 | Like taking four-letter words

01:10:48.720 | and saying them after seeing them in days.

01:10:52.320 | And the company has been critiqued heavily online

01:10:56.080 | for charging a lot for an app.

01:10:58.840 | So they have an app that helps your kid learn how to read.

01:11:00.400 | They charge $500 a month, which is, they say-

01:11:04.160 | - It's value-based pricing.

01:11:06.240 | - And the most interesting thing was I both totally agree.

01:11:10.320 | And someone's like, $500 is crazy.

01:11:12.640 | He's like, you don't have to pay it.

01:11:14.360 | - Right.

01:11:15.200 | - If you don't wanna pay it,

01:11:16.120 | here's a book on Amazon that's $17.

01:11:18.560 | That will teach basically the same lessons.

01:11:21.720 | But you have to do the curriculum.

01:11:24.520 | You have to curate it.

01:11:25.480 | You have to come up with the exercises and do it all.

01:11:28.640 | And it was just wild.

01:11:31.480 | I don't know why I'm bringing it up,

01:11:32.440 | but it made me think of both education

01:11:34.200 | and paying for education.

01:11:35.040 | - Well, this reminds me of information wants to be free.

01:11:38.320 | You only pay for convenience.

01:11:40.400 | It's a great example, isn't it?

01:11:42.120 | - Yeah.

01:11:42.960 | - You could find the research

01:11:44.440 | that explains how to do all this.

01:11:46.800 | But if you provide the convenience of delivering it,

01:11:51.320 | if you make it convenient to do this,

01:11:54.960 | that's really providing a lot of value.

01:11:57.480 | - Yes.

01:11:58.320 | We have three days left

01:11:59.240 | before we actually have to make a decision

01:12:00.840 | on whether we keep using this app.

01:12:02.320 | And the data I've seen shows

01:12:03.960 | that it doesn't really matter what age you learn this.

01:12:06.000 | So why do we need to push it?

01:12:08.000 | - It makes you feel better as a parent.

01:12:09.600 | - I know, I know.

01:12:10.480 | And that was the last thing I wanted to ask you, right?

01:12:12.560 | We talked about a couple points about parenting,

01:12:16.320 | but I haven't met your children,

01:12:18.880 | but from what I've heard from you, they turned out great.

01:12:21.800 | - Well, I really am crazy about them.

01:12:23.240 | - Yes, and we all are.

01:12:24.600 | - And I'm fortunate to have an amazing wife

01:12:26.920 | who is the better parent of the two.

01:12:28.920 | - But aside from encouraging

01:12:31.680 | and provoking intellectual curiosity,

01:12:34.200 | what other pieces of advice do you have for parents

01:12:38.560 | listening about taking some of your lessons

01:12:42.320 | going through that experience?

01:12:43.880 | - I think that would be arrogant of me

01:12:46.040 | to say that the way that I did this was the right way.

01:12:49.240 | I recently, a year and a half ago, became a grandparent

01:12:52.760 | and every one of my friends

01:12:55.320 | who has recently become a grandparent

01:12:58.280 | has experienced the same thing,

01:13:00.600 | which is all of our kids tell us

01:13:02.440 | that the way that we brought our kids up was all wrong.

01:13:05.200 | So I'm not sure I can answer that question well.

01:13:09.600 | - Okay.

01:13:11.240 | It's funny 'cause I have had that conversation

01:13:13.920 | with my parents.

01:13:14.760 | Oh, come on, we gotta do these things these different ways.

01:13:17.360 | What were you doing?

01:13:18.360 | - You seem to have turned out pretty well.

01:13:21.240 | - I know, so maybe it doesn't matter.

01:13:23.840 | - I don't know, but clearly the research has changed

01:13:28.360 | since my kids were born.

01:13:30.680 | It's very funny to my wife and me

01:13:34.280 | and to our friends as we hear this from our kids.

01:13:38.800 | - I do think that some of what the research shows

01:13:41.640 | is just being around, like caring,

01:13:45.320 | being a parent that is interested

01:13:48.200 | in what your kids are doing.

01:13:49.200 | It's not what book, what time did you start reading lessons?

01:13:53.400 | What layout was there room in?

01:13:57.440 | How did you paint the house?

01:13:58.480 | It's not these little things

01:13:59.520 | as much as it is just being there.

01:14:01.680 | So I haven't gone deep on parenting.

01:14:04.360 | I have an interview with someone

01:14:05.880 | who I think has thought about this far more

01:14:08.240 | than both of us, a woman named Emily Oster,

01:14:11.280 | who's written a bunch of books.

01:14:12.120 | She's a professor at, I think, Brown.

01:14:14.800 | And she wrote this pregnancy book

01:14:17.480 | followed by the early childhood book,

01:14:20.800 | followed by a book that we're now reading

01:14:23.000 | called "The Family Firm,"

01:14:24.040 | which is how to run a family in a productive way.

01:14:28.160 | And the thing I love about her work

01:14:30.840 | is she's like, I'm gonna go read

01:14:32.360 | all the peer-reviewed research

01:14:33.880 | and then just break down what my interpretation of it is.

01:14:36.720 | You do what you want.

01:14:37.560 | - Well, I'm in awe of my wife

01:14:39.600 | because she practices unconditional love

01:14:43.480 | in a way that I can't get to.

01:14:46.840 | And I think that's what made her an amazing mom.

01:14:50.600 | And I think that that really resulted in two great kids.

01:14:55.600 | - That's amazing.

01:14:57.080 | Well, I'm working on that.

01:14:59.200 | There, I'm sure, will be days between now

01:15:01.640 | and teenage girl years, as you mentioned,

01:15:04.000 | where it's trying, but so far it's great.

01:15:09.200 | The only other thing I'll ask

01:15:10.400 | is you try to be a very efficient user of time.

01:15:13.400 | Are there things that that has led you to do differently

01:15:16.640 | that you think maybe most people aren't doing

01:15:18.800 | who are poor users of time?

01:15:20.920 | - I think one's greatest strength

01:15:23.120 | is usually one's greatest weakness.

01:15:25.840 | And in order to be the most efficient of time,

01:15:30.840 | you might be perceived as being rude

01:15:35.320 | because you cut someone off or you stopped a meeting

01:15:38.200 | or you didn't give them as much time

01:15:40.000 | as they might have felt that they deserved.

01:15:42.920 | - And so does that mean you still do that, or?

01:15:46.240 | - Yeah, if I wanna be jealous of my time,

01:15:49.320 | I'm not gonna just keep going for the sake of continue,

01:15:54.320 | to make someone feel as good as they can possibly feel.

01:15:58.880 | Like I wanna treat someone the way I'd like to be treated.

01:16:01.200 | There's the golden rule and there's the platinum rule.

01:16:03.880 | Treat someone the way they would like to be treated.

01:16:07.440 | That's really hard to do, I think.

01:16:11.440 | - Yeah, but I do think the time--

01:16:13.840 | - Therein lies the trade-off.

01:16:15.480 | I think there's a time trade-off

01:16:17.640 | between the golden rule and the platinum rule.

01:16:20.240 | - And how do you strike the balance?

01:16:22.640 | - I don't know if there is a right balance.

01:16:25.000 | I think that's where one needs to use judgment.

01:16:27.680 | - I do think when it comes to people's time,

01:16:30.840 | sometimes you think people will be offended

01:16:34.360 | in circumstances that they aren't.

01:16:36.040 | And I think we've probably brought up a few examples

01:16:38.000 | already about that, but if you're pitching a company

01:16:42.000 | and someone, investors, has decided after two minutes

01:16:44.800 | they're never gonna invest to let them pitch for an hour,

01:16:47.720 | is that as productive or not?

01:16:50.680 | - Well, I'm not gonna cut the meeting off.

01:16:53.000 | There are a lot of really rude venture capitalists

01:16:55.760 | who have their assistants come in after 15 minutes

01:16:59.640 | with a fake phone call.

01:17:02.440 | And they'll decide, based on the quality

01:17:05.000 | of the first 15 minutes,

01:17:06.320 | whether or not they wanna continue.

01:17:08.080 | I would never do that.

01:17:09.920 | But I might try to bring the meeting to an end

01:17:13.160 | after 30 minutes if it's not going anywhere,

01:17:17.440 | 'cause I don't wanna waste their time

01:17:18.600 | and I don't wanna waste mine.

01:17:19.840 | - I think a lot of people are afraid to do that.

01:17:21.440 | - So how do you do that nicely?

01:17:23.040 | Now, you can make an enormous effort to be nice about it,

01:17:28.520 | and some people will feel badly

01:17:31.480 | because they didn't get an hour,

01:17:34.120 | no matter how nicely you delivered the message.

01:17:39.120 | So it depends.

01:17:43.360 | - My hack there is that you just schedule the meeting

01:17:45.720 | for a very short and then block extra time,

01:17:47.880 | so they don't have the expectation that they had an hour.

01:17:50.200 | - Yeah, but how would you feel if somebody said

01:17:52.640 | you only have half an hour?

01:17:54.640 | You feel a little rushed.

01:17:56.760 | - I guess in the fundraising example, maybe that is true.

01:18:00.600 | In just generally a life phone call, a meeting,

01:18:03.880 | I don't know if everything has to be an hour.

01:18:06.520 | - I would agree with you.

01:18:08.240 | And that's why I don't use invite apps.

01:18:11.760 | I don't want to set an expectation

01:18:14.160 | around how long the meeting is going to be.

01:18:17.080 | But for my students, I mean, I always set aside an hour

01:18:22.080 | because that's for them.

01:18:23.520 | That's not for me.

01:18:26.280 | - Okay.

01:18:27.120 | - And after 30 minutes, they'll say,

01:18:28.440 | do we have any more time?

01:18:29.760 | And I'll say, I have all the time you want.

01:18:32.080 | - So I intentionally didn't bring up negotiating

01:18:33.800 | in the conversation because we talked about it last time

01:18:36.640 | when we talked about investing.

01:18:38.600 | So if anyone wants to hear your stance there,

01:18:40.720 | I'll say, go back and listen to that episode.

01:18:42.520 | I'll link it in the show notes.

01:18:44.280 | But one thing I realized in that investing conversation

01:18:46.960 | that we didn't really cover,

01:18:48.640 | that I'll ask you about as a departure,

01:18:50.960 | which we started the conversation with,

01:18:53.360 | is about being non-consensus

01:18:55.320 | and how important that is in investing.

01:18:57.320 | Can you talk a little bit about why

01:19:00.880 | that is one of the ways the most successful investors invest?

01:19:04.840 | - Sure.

01:19:05.680 | Well, I credit Howard Marks, who I referenced earlier.

01:19:09.840 | Almost all of his letters are premised on his belief

01:19:14.840 | that investing can be described with a two-by-two matrix.

01:19:20.040 | And I believe that this matrix is equally applicable

01:19:22.680 | to entrepreneurship as it is investing.

01:19:25.960 | On one dimension, you can be right or wrong.

01:19:27.880 | And on the other dimension,

01:19:28.880 | you can be consensus or non-consensus.

01:19:31.720 | Now, obviously, if you're wrong, you don't make money.

01:19:34.320 | But what most people don't realize

01:19:35.800 | is if you're right in consensus,

01:19:38.040 | you don't earn outsized returns

01:19:40.040 | because they get arbitraged away.

01:19:41.920 | It's too obvious.

01:19:43.600 | The only way that you earn above market returns

01:19:46.560 | or outsized returns are by being right and non-consensus.

01:19:52.040 | The challenge is you know you're non-consensus,

01:19:54.040 | you don't know if you're right.

01:19:55.440 | - Yes.

01:19:56.280 | - So you have to have, I think,

01:19:57.360 | tremendous command of your subject

01:19:59.280 | to be able to take the leap of faith

01:20:02.280 | to make that kind of bet.

01:20:04.400 | But in this world, you don't earn outsized,

01:20:08.400 | and the reason you earn outsized returns in that quadrant

01:20:12.880 | is because risk is correlated with return.

01:20:16.920 | So you're taking more risk.

01:20:19.440 | Therefore, you should generally be compensated

01:20:23.040 | with more return.

01:20:24.000 | Should be, not always the case.

01:20:25.720 | There's always outliers to everything

01:20:27.880 | that I've said on this entire podcast.

01:20:29.880 | So I think about this a lot in venture capital.

01:20:38.720 | I think some firms outperform others consistently.

01:20:43.260 | There's about 20 firms whose returns,

01:20:45.400 | whose realized returns, not unrealized returns.

01:20:48.520 | That's a big difference, are consistently in the top 20.

01:20:53.240 | And that's because they know which leaps of faith to take

01:20:57.400 | on which to be non-consensus.

01:21:00.120 | And I think that's the intellectual property

01:21:03.080 | that the premier firms have.

01:21:05.680 | So Bill Gurley turned me on to this framework

01:21:09.240 | soon after he joined Benchmark.

01:21:12.880 | So this might have been in around 2000, 2001.

01:21:16.880 | And then I had the unbelievably good fortune

01:21:19.740 | to serve on the Penn Board of Trustees with Howard Marks.

01:21:22.880 | So one day, my first trustee meeting,

01:21:25.420 | the university secretary came over to me

01:21:27.580 | to introduce me to this fellow named Howard Marks.

01:21:30.160 | And I said, "The investor?"

01:21:32.200 | And he said, "Yes."

01:21:33.880 | So as you might imagine, I spent a lot of time

01:21:36.920 | asking Howard Marks questions about this.

01:21:41.240 | - For anyone listening,

01:21:42.600 | all of these memos are available to anyone.

01:21:45.520 | So I'll link to them in the show notes, but-

01:21:47.400 | - They're unbelievable.

01:21:48.520 | - Yes, I've read many of them.

01:21:50.320 | And to the point about Bill Gurley,

01:21:51.880 | Bill Gurley now has his own podcast.

01:21:53.960 | And so anyone that wants to go listen to his wisdom,

01:21:57.160 | he does that every two weeks.

01:21:58.720 | So I think one great thing is that a lot of the knowledge

01:22:01.680 | that you've talked about,

01:22:03.240 | people are now sharing even more than they were before.

01:22:05.480 | Howard Marks has been writing for a while,

01:22:06.980 | but I think Bill Gurley is just a few months

01:22:09.280 | into a podcast.

01:22:11.400 | I don't know when your show's coming,

01:22:13.200 | but this will have to do for now.

01:22:14.920 | - Okay, good.

01:22:16.120 | - Andy, is there anything I didn't cover?

01:22:19.040 | My goal was to-

01:22:19.880 | - I'm not sure, maybe we'll have another episode.

01:22:23.160 | - I love it.

01:22:24.000 | Andy, thanks for joining me.

01:22:25.440 | - Always a pleasure.

10 Ways to Be Successful in Life and Work from Legendary Silicon Valley Investor Andy Rachleff

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