Cultivate an entrepreneurial mindset

BOB SAFIAN: Hi listeners, it’s Bob. We’re between seasons right now at Masters of Scale, but we couldn’t resist sharing this special bonus episode. 

Today we’re talking about something we are very passionate about here at Masters of Scale: the entrepreneurial mindset. 

The featured guest for the episode… is Reid! With me serving as host, this episode will feel a bit different: it’s not an interview, and it’s not Reid proving a theory on how to scale your organization. Today you’re going to get a little peek behind the curtain of how we create episodes of Masters of Scale. 

We almost always start by asking for in-depth analysis from Reid – on the interview he’s done, the topics of conversation, and the theory of scaling that we’re exploring. Our producers will send Reid a list of questions and observations for him to respond to. 

It’s a little like a brainstorming session, and also helps Reid and all of us unpack key thoughts and ideas. In today’s episode you’ll hear Reid’s analysis on the entrepreneurial mindset, what it means to cultivate that mindset, and much more. 

Reid talks about why we focused on the concept of the entrepreneurial mindset in creating the Masters of Scale Courses App. And I encourage you to stay tuned all the way to the end, because we will be sharing with you a lesson from the Courses App, which includes a special appearance from Sir Richard Branson that really brings it all together, and a wrap-up lesson from Reid that you won’t want to miss. 

Now, onto this special episode of Masters of Scale. 

[Theme Song]

SAFIAN: I’m Bob Safian, former editor of Fast Company, founder of the Flux Group, and host for this special bonus episode of Masters of Scale. 

We believe the single greatest success factor for any scale leader isn’t knowledge, experience or network – it’s your mindset. 

Optimism. Resilience. Curiosity. And also things that are less obvious: Counter-intuitive mindsets like letting fires burn, and occasionally doing things that don’t scale. And no one – not even Reid – is born with all the entrepreneurial mindsets. You may be comfortable in chaos, but less confident making quick decisions in quieter moments. You may be more creative than you are disciplined, or the other way around. 

The good news is these mindsets can be cultivated. That’s why we produce Masters of Scale and Masters of Scale: Rapid Response, and it’s why we made the Masters of Scale Courses App. The courses app offers curated courses around themes all entrepreneurs need to know about leading through crisis, learning how to pivot, and more. But it all starts with how to build and cultivate your entrepreneurial mindset.

Today we’ll hear from Reid about what it means to be a lifelong learner, how he continues to develop his own entrepreneurial mindset, and the impact of democratizing entrepreneurship. 

So, here we go. 

The first question starts at the beginning: How do you think about cultivating an entrepreneurial mindset as an investor and as a startup founder? Is it something you should seek out? 

REID HOFFMAN: The entrepreneurial mindset is throughout everything that I do. It doesn’t mean that everybody I hire is an entrepreneur or interact with, but it’s how you create the new, how you shape the possible into the real. And I think that’s pretty fundamental. The entrepreneurial mindset is not just entrepreneurs, because it’s not just the blank slate of paper. It’s not just v0 to v1. 

One of the things that I look at that I learned from SocialNet is I actually think there’s three kinds of games: there’s v0 to v1, v1 to v1.1, and v1 to v2. All of these are forms of entrepreneurial mindset. Now, probably goes in, like, “Oh my God, jumping into the unknown.” It goes v0 to v1, v1 to v2, v1 to v1.1 in those iterations, because the v1 to v1.1 is the most natural thing. And that’s the thing that people tend to most do, because it has the most certainty of outcome and so forth. 

But the other ones are fundamentally important, because at some point you get to local maxima, or it just doesn’t work. The v1 to v1.1 doesn’t just really work. Now, what I would say is in terms of working-learning is you should always be learning. This is a little bit like the Glengarry Glen Ross, “Always be closing,” but it’s “Always be learning.” And you should be approaching every circumstance with: Is there something serious I can learn here?

SAFIAN: So what happens if you drop the ball and stop moving forward? Are there key moments or milestones when you think an entrepreneur should reset, should double down on going back to learning?

HOFFMAN: So one question is if you think, “Oh, I’m actually in fact way off here. I don’t really have the right map. I’m not learning at the right rate by being in action and by doing the thing,” those kinds of things, then you go, “Oh shit, I should go back to learning…” Now, entrepreneurs almost always tend to learn by doing, learn by getting into it. That bias to action is actually in fact a very good thing for entrepreneurs. One of the things that people tend to be overly bias on is learn, learn, learn, learn, learn, learn, learn, learn, learn, learn, learn, learn, learn, learn – before you do.

And actually it’s learn, do, learn, do, learn, do, learn, do, learn, do, learn, do is useful. Now, sometimes you say, “Hey, I’m going to learn through something deep.” Coding, modern coding like artificial intelligence, some aspects of business strategy, or something else, you say, “Well, I actually need to learn a stack before I can get into the learn, do moment.” And sometimes that’s something in the field. 

For example, I’d say one of the things that was a very good piece of advice that I was given was learn how to ship commercial software, even though the way that large companies ship commercial software is different than small companies. Learn the components of that first, before trying to go create a software company. Because then I’m not kind of figuring out, like, okay, what is a PRD? What is a minimum viable product? What does QA look like? What do the people doing these jobs together look like? What is the way they coordinate? I’ve got at least a baseline of that. I may be improving it a lot, I may be changing it a lot, but I understand both what’s baseline and also understand what everyone coming to the picture with some experience will also experience as a common language, a common method of play, a common theory of the game as a way of doing that.

SAFIAN: Now, as you think about learning, are there great examples of “learners” out there? Models of how people take in information? 

HOFFMAN: I think there are different kinds of learners. Not everyone learns the same way. Now, obviously the classic way that people say this is some people are kind of reading learners, some people are audio learners, some people are video learners and so forth, but it’s not just that. Some people are learners by first principles and what they’re doing. Some people are learners by talking to other people. Some people are learners by studying what other folks are doing. And so you should have that theory of you as an individual, but you should also, by the way, have that theory of you as a group, you as a company. Because just not thinking about individuals as learning, but as companies as learning, and as kind of increasing capabilities in fitness functions is very important.

By the way, that’s not necessarily a big surprise, because one of the things that happens as people get more systemized groups is post mortems and Wiki knowledge bases, and other kinds of things that are in there in order to facilitate that. A strong example of how Facebook operates is that Facebook says, “We built a huge testing framework so that everybody can…” Literally, individual engineers can run tests on features and things that they want to do in order to make stuff happen. Now, part of the process is you have to document that you’ve searched the knowledge base to see if anyone else has run the test before you do it. So you’re not just blindly running the same test again.

So you can position your test against what has happened before or say, “Oh, I see it’s already been done.” And that’s an example of how not just individual learning, but group learning kind of plays together.

SAFIAN: How do you work networks into learning? What are the key things you look for in learning environments? 

HOFFMAN: Working networks into learning is a function of kind of like… Okay, who are the smart people out there that I can talk about? What questions can I ask them? What things can I learn from in what they’re doing? What’s the context in which I can talk to them and which I’m getting the most useful things in this? And so, kind of, network … And by the way, not all learning … Everyone tends to learning as a how-to. How do I build an AI machine, or how do I hire a sales force?

And those are important, but also a lot of key learnings are what not to do, because they’re part of what defines someone who has learned stuff is they go, “Well actually in fact, these are the landmines. These are the things that looked like good ideas, but are bad ideas and ultimately don’t work out.” Or kind of the classic thing that amateurs or smart amateurs are caught in. These are the things that could look like an interesting, bold, risky idea, but it’s much harder than you think. A lot of learnings are: that seems like a good idea, but the ROI is very bad on it.

SAFIAN: That’s a great point. Learning is not only about learning what to do but what not to do. So how do you take this cautionary idea and translate it into scaling? Sometimes when people think about scaling, they think they have to do everything.

HOFFMAN: When I went into business, my theory was, “Look, I have this big brain. I can manage a whole bunch of complexity in my head, and so I’m going to have a competitive differentiation from all the other people around me, because I’m capable of having this very big, complicated picture in my head.” And actually in fact, that’s not how business and business strategy, nor by the way military, works. It’s the simplest plan that wins. It’s the simplest plan that creates a lot of value. And so a lot of what you’re trying to do is not to say, “Well, look, all five of those are great ideas. We should do them.” The answer is, “Well, could we get away with doing one of them very well?”

And this is part of why people talk about focus, is in doing that one thing very well and making that work, is that the thing that we should really do from here? And is that the way we should play out? Now, by the way, you get this classic once companies get big, is to say, for example… There are people who say, “Well, all that Microsoft should do is Windows and Office.” They could say, “Well, why are you doing Bing?” Because Bing is only a loss leader to put pressure on Google, and that’s not how you’re going to make that much money. Well, the answer is if Microsoft hadn’t done Bing, then they wouldn’t have had Azure. And Azure is the next computing platform in the cloud, which puts Microsoft in the running and the edge for that.

And so that’s part of the reason why you have, once you get big, a number of things, and why the whole thing of there’s only one thing, once you’re there, isn’t actually in fact the right strategy. Now, when you’re a small company and you say, “We have five ideas,” doing one is much better than doing five. And even though you might do one and experiment a little bit with one, the discipline is to play that one out and then correct if it’s not the right one.

SAFIAN: Final question for you: Why do you choose to host Masters of Scale? 

HOFFMAN: Entrepreneurship is how the future is created. It’s how the future is created for products and services that improve society and life. It’s how the future is created for jobs and for people to do things. And it doesn’t say that big companies are mincemeat, but there’s an increasing what John Seely Brown and John Hagel call the topple rate, which is the last decade of companies that were in the S&P 500 dropping out of the S&P 500, because yes, some large-scale companies really go the distance, but also, companies fail.

For example, would you have anticipated that Yahoo! went from the giant of the internet to who are they now? As a way of doing it. And that can happen with any of these tech companies. It helps with all of that. That’s part of creating that content that people across all industries, all geographies, startups, and existing businesspeople, even small business people, even a restaurant entrepreneur… Because you go, “Well that may not actually ultimately go to scale.” So the blitzscaling lessons, for example, don’t apply, but entrepreneurship does.

And then of course on the Courses App, the whole thing is that’s the reason why these set of mindsets are very important, because these sets of mindsets allow you to approach the challenges that you’re solving with a learning mindset, with a what’s the way that I can win this game? What’s the way I can get more upside, avoid downside, and what’s the way that I am better day by day, month by month, year by year in doing this? And sometimes that requires asking the right question, approaching it the right way in order to learn it. Obviously, the specific, like oh, this is how you do a restaurant, or this is how you do a massive-scale company. The specific rule may not be in the Courses App, because it’s the mindset, the way what you bring to it that allows you to learn.

SAFIAN: Thanks Reid. And thanks too to our listeners. Because we believe in learning, we’ve tacked something special onto this episode for you: a free listen of Day 1 in the Masters of Scale Courses App: on The Mindset of Scale. This one features Sir Richard Branson.

The centerpiece of each day in the course is a 10-minute daily practice, anchored by a key first-person story from an iconic leader, like Branson, and concluding with a prompt or practice from Reid that you can take into your day to drive a new behavior. 

Each day also includes optional content for you to dig deeper. There’s a 3-to-5 minute “Concept” that unpacks the day’s key idea, and a full-length interview with one of the terrific guests we’ve had on the podcast. This is the first time we’re releasing the catalog of the entire 60-90 minute interviews with Reid; they’re available only to Masters of Scale Members.

So here’s Day 1 of the Mindset of Scale. The theme of the day is to ask: What if? Why Not?  with Sir Richard Branson. Let’s listen. 

HOFFMAN: Welcome to Day One for The Mindset of Scale, our first course in the Masters of Scale app. I know how each minute matters for an entrepreneur – and I know you probably have a tendency to multi-task. But take a moment right now to turn off Slack, close your email, and arrive for these 10 minutes. It will be worth your time.

Whether you’re an entrepreneur – starting something from scratch, on your own – an intrapreneur – who builds something daring inside an established organization – or an executive leading at scale: Your single greatest success factor isn’t knowledge, expertise, or network. It’s your mindset. So you have to think in ways that are often the exact opposite of what you learned in school. 

No one is born with all of the entrepreneurial mindsets – you may be comfortable in chaos, but less confident in making quick decisions. You may have a natural instinct for escaping competition, but less certainty about building company culture. The good news is that all of these mindsets can be cultivated. And that’s what this course is about. 

Each day we’ll tackle a different essential mindset. And the most fundamental mindset you need is a bias for action. It’s not enough to have good ideas. You have to be ready to act on them. 

To show you what I mean, I want to share a story from Sir Richard Branson. Richard is known for his death-defying entrepreneurial leaps into new markets and industries – Virgin Records, Virgin Airlines, and Virgin Galactic are just a few. He embodies the entrepreneurial bias to action. We’ll start the story in the mid-1960s. Richard was in high school, and about to act on his very first venture.  

RICHARD BRANSON: The Vietnamese war was going on. Like a lot of young people, we thought it was a travesty of justice. A horrendous, horrendous, horrendous mistake. And so I decided actually to start a magazine to campaign against it.

HOFFMAN: Richard was only 14 when he launched what he called Student Magazine. Like most schoolboys, he lacked an office. And, because this was the late sixties, he didn’t have his own phone – which he needed to sell advertising and conduct interviews. He found his solution in a classic British icon – a red telephone booth (or as they say: “telephone box”). But the amount of time he spent in his three-by-three-foot “office” became a problem.

BRANSON: I started on the magazine from the school phone box, and at 15, the headmaster said to me that I either had to stay at school and do my schoolwork or leave school and do the magazine. And so I said goodbye to him. And the magazine became quite successful. And then we sold about 100,000 copies an issue. 

HOFFMAN: Not every 15-year-old would have the bravado to start a business, much less abandon school to do so. And I really wouldn’t recommend it! But what I want you to notice is the underlying mindset: the unstoppable bias to action. Have an idea. Act on idea. Never look back.

And he didn’t. The magazine was the launchpad for Sir Richard’s next – and more famous – first venture: Virgin Records. The spark came – as it so often does with Richard – from an offhand comment.

BRANSON: One day somebody said to me, “Look, music is horrendously expensive, and why don’t you consider starting a music company?” And so we started Virgin Records.

HOFFMAN: It should probably go without saying – but I’ll say it anyway – that this was in the days before digital music. The Walkman was almost a decade away. CDs were a futuristic gleam on the horizon. Vinyl was king. There was only one problem for Sir Richard’s fledgling record store. But it was a pretty big one.

BRANSON: We didn’t have any records, but once the orders came in, we then went and bought them from record shops and tried to get a discount.

And then handed leaflets outside concerts. And because we didn’t buy the records up front, we got the cash flow to fund it in that way. And Virgin Records was born.

HOFFMAN: That’s right, Richard took the orders and the money before he had the stock – or even knew if he’d be able to get it at the price he was offering his customers. There are a few things I love about this story. The audacity of starting a record store without any records is one of them. But I also love that their lack of cash flow led directly to their advantage. Richard and his team had no choice but to negotiate those steep discounts because they had already made the sales.

Richard’s fast-growing reputation as someone who did things differently – in a quick, cavalier manner – was attractive to lots of people. Not least of all musicians. 

BRANSON: A young artist came to me with a tape, and he was only 15-years-old himself. And I found the tape hauntingly beautiful. We didn’t have a record company. So we went to the eight record companies to try to get somebody to put it out, none of them would put it out. 

HOFFMAN: Here it comes, another moment when Richard decides to go all in on a daring notion.

BRANSON: So we decided to start a record company, and “Tubular Bells” was the name of the album, and Mike Oldfield was the artist. And it sold millions of copies.

HOFFMAN: Even if the name doesn’t ring any bells – tubular or otherwise – you would very likely recognize the music. The album’s opening track was used as the theme for the movie “The Exorcist.”

BRANSON: And on the back of that, we were able to build the largest independent record company in the world and ultimately to sign people like the Rolling Stones and Janet Jackson and Genesis and Peter Gabriel and the Sex Pistols and so on and so on. So it was a lot of fun.

HOFFMAN: By the mid-eighties, Sir Richard’s bias to action had seen him launch a film distribution company, a video game publisher and, most famously, an airline.

BRANSON: Thirty five years ago, when we started it, the big carriers were dreadful. You were lucky if you had a lump of chicken dumped in your lap, and there was no entertainment. And very, very surly crew generally. And on one of those flights coming to the Virgin Islands, I got bumped, which is a sort of typical thing that airlines did in those days.

And so I hired a plane and filled it up with all the people who had been bumped, and called it Virgin Airlines as a joke.

HOFFMAN: However, the joke very quickly had Richard asking himself seriously the question: “What if, why not?”

BRANSON: And we arrived in the BVI and during that flight, I just thought “Airlines do bump people, maybe I should ring up Boeing the next day.” Which I did, and asked if they had any secondhand 747s for sale.

HOFFMAN: Turns out … they did. And the real Virgin Airlines was born. Sir Richard uttered the 5 words he’d repeat for the rest of his career. Words that became the title of one of his three autobiographies. Words worth emulating, even if you don’t quite want to repeat them.

BRANSON: Screw it, let’s do it.

HOFFMAN: “Screw it, let’s do it.” It’s the mantra that let Richard shake up the staid airline industry. And it’s not the only industry Virgin set out to disrupt: soft drinks, trains, even space travel. Not every venture worked. But Richard went all-in on each. If he could succeed, he did. 

And you can’t help but marvel at his bias to action – his willingness to ask “What if?” and then follow those fanciful thoughts with bold and decisive steps forward. But you don’t have to be born with Sir Richard’s bravado to cultivate a bias to action. If you’re taking this course, you clearly already have the seeds. 

But there are a few common things that might be tripping you up. You might be so busy fighting fires that you become all reaction and no action. Or you might just find yourself stuck – kicking the can on an idea, because you don’t know how to move it forward. 

So what you need to do is cut through the loops of analysis, over-thinking, or overwhelm that get in your way. You have to find a way to act. And I have a specific tool you can use, starting today. Next time you have an idea that just might scale, act on it immediately, using the word “ACT” as an acronym: A-C-T.

A: Ask the question: “What if? Why not?” Do it any time you’re inspired, delighted, or frustrated in a way that sparks an idea. Do this right away – not later! It’s the starting point of all great products.

C: Call your network. Because taking action doesn’t mean acting alone. In fact, the very first thing you should do when contemplating a big move is go to your network; talk to the people you respect. 

And finally, T: Take A Step. Any concrete step to move it forward. Sir Richard called Boeing to see if they had an extra plane. And they did. What can you do? Right now, this minute?

So that’s your A-C-T tool for taking action. But this next part is the most important. Once you land on the step you can take, don’t delay. DON’T add it to your To-Do list. DON’T write a draft, and save it to edit. Take the step. Do it right now. Act.

SAFIAN: That was Sir Richard Branson in the Masters of Scale Courses App, with Reid’s terrific advice capping it off. If you want to learn more, use promo code MINDSET at join.mastersofscale.com/mindset for a 25% discount on annual membership.

I’m Bob Safian, thanks for listening.