How great leaders respond in a crisis

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BRIAN CHESKY: I thought the hardest thing I would ever do in my life was start Airbnb, and I was certain of that. I came back from the holidays — it was January 2020. I thought my life was going down a certain road, and I could predict it. We were a 30 billion company waiting to go public. And then all of a sudden within eight weeks, we lost 80% of our business. You can learn a lot about people in a crisis, and I think the person you learn the most about is yourself.

REID HOFFMAN: The voice you just heard belongs to Airbnb CEO Brian Chesky, one of my favorite scale leaders. I’m Reid Hoffman, partner at Greylock, co-founder of LinkedIn, and host of Masters of Scale. 

Recently, Brian sat down with my colleague Bob Safian on stage at the Masters of Scale Summit in San Francisco to talk about how great leaders respond during a crisis. In their conversation, they analyze clips of Brian’s previous appearances on Masters of Scale, and talk about the first principles that carried Airbnb through its near death in the pandemic. And how Brian has led Airbnb to its success today as a public company.

It’s a conversation that continues to be relevant to leaders of any kind. Even CEOs. 

Stay tuned for Bob Safian’s conversation with Brian Chesky.

JODINE DORCE: Please welcome to this stage, the CEO of Airbnb, Brian Chesky.

[THEME MUSIC]

BOB SAFIAN: Brian has been listened to more times than anyone on Masters of Scale through his different episodes. So what we’re going to do is we’re going to play a handful of clips. And then we’ll chat about it.

CHESKY: All right.

SAFIAN: So you ready?

CHESKY: Yes. Do it.

SAFIAN: Let’s play the first clip.

Copy LinkThink like a designer

CHESKY: I went to a school called the Rhode Island School of Design. And when I was at RISD, I never aspired to be a CEO. Do you know why? Because no one at RISD seemed to become a CEO. It seemed like not an available option. I was doing medical design once. I designed a children’s ventilator.

I had to sit in the shoes of the child. And so I had to imagine being a child getting on the operating table. And you had to put yourself in the shoes of the patient or the person using your product. And if you’re only doing A/B tests, you’re never designing with empathy.

CHESKY: Wow. It’s weird to listen to yourself in front of hundreds of people.

SAFIAN: So being a designer as a CEO, it’s still pretty distinctive. So what does it mean to think like a designer when you’re a leader?

CHESKY: Well, I think it probably starts by defining what is design. I think we should start there because I think at the surface, design is how something looks. So designers design how things look. But I think at a deeper level, design is really how something fundamentally works. I think of design as just a way to assemble something to solve a problem. And so, to think like a designer, I think the first thing you need is probably curiosity, because you’re trying to design for people. And so to design for people, you have to understand them, you have to care about them. And also, you don’t just design for people. You have to understand the industry and the history and why things are the way they are. And so you have to think about first principles. And so once you’re curious, then the next thing I think a designer has to do is be holistic in their thinking.

So we tend to, as designers, like to be really holistic and see the entire system. And so part of being a designer, I think, is to take a thousand things in your head and to try to organize them and then make all these trade offs. Because the final thing you have to do is distill them to its essence, to whatever is most important — what we would often call the simplicity. 

And so ideally when you get to the end of that process, you were curious, maybe you discovered something, you could have never imagined. You weighed all these different outcomes and you designed something that was really inevitable. And I think you can design not just objects, you can design not just clothing. You can design a company, you can design how people connect together. You can design communities. Almost anything can be designed. And to solve many of the hardest challenges today in society, I think we’re going to need more designers at the table. Because you ever have a situation where there’s like no good option? Sometimes a third option’s the right option, which is something you haven’t thought of yet. And that’s where I think creativity and imagination come in.

Copy LinkHow to get 10 people to love you

SAFIAN: Second clip — it references you and your co-founder ‎Joe Gebbia in the early days.

CHESKY: We literally would knock on the doors of all of our hosts, and we had their addresses, and we’d say, “Knock, knock. Hello. Hey, this is Brian, Joe, we’re founders, so we just want to meet you.”

HOFFMAN: It’s a little creepy just to knock on the door unannounced.

CHESKY: We needed an excuse to get in their home.

HOFFMAN: So they came up with an offer that the host couldn’t refuse.

CHESKY: We’d send a professional photographer to your home and photograph your home. Of course, we didn’t have any money, and we couldn’t employ photographers. So Joe and I, we’d show up at their door, and they’re like, “Wow, this company’s pretty small.”

HOFFMAN: These home visits became Airbnb’s secret weapon. It’s how they learned what people loved.

CHESKY: It’s really hard to get even 10 people to love anything, but it’s not hard if you spend a ton of time with them. So if I want to make something amazing, I just spend time with you. And I’m like, well what if I did this? What if I did this? What if I did this?

SAFIAN: I love this story, this handcrafted experience, which is by the way, one of the most compelling insights we’ve had on Master of Scale. We all want the leverage of scale, but you sometimes have to start with things that don’t scale. That’s something that you’ve said. I’m curious how much of that perspective was learned versus instinctive and how do you keep handcrafted when the company gets much bigger?

CHESKY: Totally. I think it’s instinctive in all of us, don’t you think? I think it’s instinctive in all of us that we want to think about another person. And I think it’s really hard to think abstractly about millions of people. But when I came to Silicon Valley, it was all about hyper growth and scale and we had this instinct about trying to design for another person, but then people would say, “But how would that scale?” And so what ended up happening is you would end up editing your imagination. You’d be afraid to imagine something if you couldn’t ever imagine scaling it. And so if you edit your imagination, it’s like you take the stone, which is your idea, and you start carving it down and pretty soon all you’re left with is this tiny idea, this tiny stone.

And we entered Y Combinator and Paul Graham is the founder of Y Combinator. And the first day at Y Combinator, Paul Graham said something to us. He said, “It’s better to have a hundred people love you than to have a million people that just sort of like you. Because a hundred people that love you will tell their friends about you. And then they’ll tell their friends, they’ll tell their friends and they become your marketing.” And the reason that’s great is because it’s a lot easier to design for a hundred people than a million people. How do you know what a million people want? It’s pretty hard. But you could study one person. And so what we did was this exercise: take a single traveler and design the perfect experience. And so if you go to the Airbnb app, we ask you one through five stars, how was your check-in experience? But we did this exercise. We said, “What if we made the check-in so great, you added a sixth star, what would that check-in be?” And you wouldn’t just go in and the host wouldn’t just open the door, but there’d be maybe a bottle of wine on the table and there’d be like some cheese and they’d learn about you a little bit and that’s a six star experience. And then you ask, “Well what would a seven star experience be?” Well a seven star experience, they would basically send a limousine to the airport, you’d get in the car, there’d be champagne, you’d go to the house. They know you love surfing so you have a surfboard in the kitchen and well, I don’t know why it’s in the kitchen, but you get the idea.

And so then I asked, “Well what would an eight star experience be?” An eight star experience, you show up to the airport, there’s a giant elephant, you get on the elephant, it’s a parade in your honor and you basically have this huge ceremony for you. So what’s a nine star experience? A nine star experience is the Beatles check in. You get to the airport and 5,000 young women are cheering your name, and they’re hyperventilating and then you have a press conference on the front yard of your Airbnb. So what’s a 10 star experience? Very simply, Elon Musk shows up and he just takes you to space.

The idea is that we’re not going to design an eight star, nine star, 10 star experience, but if you can go through the mental exercise of taking a person, designing the journey for them, exaggerating, maybe eight or nine stars are not possible, maybe six or seven stars is. So now you’ve designed the perfect experience. Now you need to scale it. The process of scaling is now taking that experience, breaking it down to its component parts and then that’s just like system design. I don’t want to say it’s easy, but the point is to separate those two processes. And if you do that, hopefully you will eventually create something that people love.

Copy LinkAirbnb’s 11-star experience

SAFIAN: Now Brian makes it sound like this is all hypothetical, but we have an audio clip of you actually talking about a particular experience that you handcrafted for someone.

CHESKY: We put up these flyers anonymously saying, “Seeking a traveler. We’ll photograph your trip to San Francisco if you let us follow you.” This guy named Ricardo replied. What we learned was his trip was awful. We call him back. We say, “Ricardo, we want to create the perfect trip to San Francisco for you.” We fly him back and we had the team storyboard the perfect experience for Airbnb. We had a driver pick him up at the airport and we took him to the perfect Airbnb. There were all these services. He went on these dinner parties, we got him the best seats at restaurants. We took him on this midnight mystery bike tour, like 60 riders go on it and nobody but the leader knows where it’ll end up. And it’s just like there was this crazy magical world. I see him at the end of the trip, I say “How was your trip?” He says, “It was amazing.” And then I walk away. He yells at me, “Brian, one more thing” and he starts crying and he breaks down and says, “Thank you, this is the best trip I’ve ever had.”

SAFIAN: This concept that you talk about of 11 star experience, you tried it out, you’re trying to do it. You’re not just talking about it.

CHESKY: Yeah. And to be clear, we don’t always get it right because you do face the realities of scale. There’s like this old Pablo Picasso quote, I think he once said, “The older you get, the stronger the wind gets, and it’s always in your face.” And it might as well be a comment about companies. The bigger you get, the stronger the wind gets and it’s always in your face. And I think the challenge with large companies is when you build a product, the first time you built it, you built it for someone else. Actually, when you start a company, you’re usually building it for yourself. So it’s a deeply personal thing. And now there’s no employees or no other stakeholders, you’re making it for another person. And then one day you wake up, if you are so successful and you have a huge organization, and then you have employees to think about and a board and shareholders.

And then one day you’re in a company and you have meetings about meetings and you’re not really talking about the product. And I think it’s really important, no matter how big a company gets that you always go back to that small scale, that we’re never maintaining something at the company, we’re always going to the next version of it. And the next version always goes back to subscale. How do we keep this perfect experience? Okay, that’s the experience. Now we’re going to scale that. And that’s essentially what we try to do. It doesn’t always work, but I think that’s a way to continue to keep your soul, keep your humanity, and do something that people really love.

[AD BREAK]

HOFFMAN: Before the break, we heard Airbnb CEO Brian Chesky talk with my colleague Bob Safian about how designing a business for delight instead of scale can actually fuel scale growth. Now, Brian talks about the hardest thing he’s ever done, and how a near-death business experience changed him and Airbnb for the better.

SAFIAN: So you take this ridiculous idea that people are going to sleep on each other’s couches.

CHESKY: Yes.

SAFIAN: And you turn it into, not just a business, but a company that’s growing, that’s thriving. It’s all over the world. People know what Airbnb is. You’re steaming towards an IPO.

CHESKY: Yeah.

SAFIAN: And it just happens to be March, April of 2020.

CHESKY: Amazing timing.

SAFIAN: Perfect, perfect timing. And you were gracious enough to get on and talk with me at that time. And we have a clip of that also that we can play here.

Copy LinkAirbnb’s near-death experience

CHESKY: We were preparing to go public, we had a plan and I felt great about the plan and all of a sudden it felt like I was a captain of the ship and a torpedo hit the side of the ship. The world changed irreversibly. It just felt like everything was breaking at once. And so we had this really, really difficult choice. Never thought I would have to make a choice like this before. My principles were do more than people expect, be remembered for how we conduct ourselves, be nimble, pivot to where we think the world is going. It feels like you’re in a house and it’s on fire and you’ve got to put out the fire while you’re having to rebuild the house.

SAFIAN: So we talk a lot here about having to pivot. But this was the situation where the pivot, you don’t even know where you’re supposed to pivot to when you’re in the middle of uncertainty. Was there something that you reached to, to steady yourself, to steady your team? How do you stay nimble in the face of a crisis that’s like that? I mean you’ve emerged stronger out of it.

CHESKY: Yeah. I thought-

SAFIAN: I’m bringing you back to the pain.

CHESKY: I know.

SAFIAN: I can see I’m bringing you back to the pain.

CHESKY: I thought the hardest thing I would ever do in my life was start Airbnb and I was certain of that. And I came back from the holidays, it was January 2020 and I think like most of you, I thought my life was going down a certain road and I could predict it. And we were about to go public. We had mostly finished our S1 about a business that I was feeling pretty confident about and we were kind of a success story at that point. We were a 30 billion dollar company waiting to go public. And if you told me 14 years earlier when I was 25, unemployed, my parents are social workers, that would happen I would’ve told you were crazy. I thought we’d made it. And then all of a sudden, within eight weeks we lost 80% of our business. And when you’re our size and you lose 80% of your business in eight weeks, it’s like an 18 wheeler going 80 miles an hour and then having to slam on the brakes. Nothing good happens.

And it was a really, actually, terrifying time in some ways. I mean there were major journalists saying, “Is this the end of Airbnb?” “Will Airbnb exist in the future?” This is eight weeks after the preparation for what was supposed to be a huge IPO.

So I’ll bring you back to what was happening for me. It’s actually pretty intense. You can learn a lot about people in a crisis and I think the person you learn the most about in a crisis is yourself. And things get really clear to you in a crisis. I’ve never thankfully had a near death experience. Although, what it’s been described as, your life flashes before your eyes and then suddenly everything becomes really clear to you. And I felt like we had a near death business experience. And then suddenly everything became more clear to me and not everything mattered. It was like our company was a burning house. If I could go in the house and only take half the things, which things do I want to take with me? You suddenly have to do that.

And the other thing I’ve learned about a crisis, a lot of people now ask me, “What’s the hardest thing to manage in a crisis?” You know what the hardest thing to manage in a crisis is? And this surprised me…it’s your own psychology. The hardest thing to manage in your crisis is your own psychology if you’re a leader. Because the psychology of the leader, I found, becomes the psychology of the organization. And if you think you’re screwed, people see it in your face and they say, “Well you have the most information so we must be screwed.” But if you are optimistic, and not optimism that’s blind optimism because then you’ll lose faith, but optimism rooted in some basis of facts that people still want us to exist, we’re not going to be as big as we used to be, but this is why we’re going to exist.

Then that becomes the optimistic mentality that permeates the organization and you need to be optimistic to have creativity and you sure as hell need creativity in a crisis because often there seems like no good solutions. And then the next thing you need to do in a crisis I found is communicate about four times as frequently as a non-crisis. I talked to every executive every day, every board member every week, I did all hands meetings every single week and I would totally be open in Q and A’s. And that was counterintuitive because in a crisis you don’t want to have to face every employee because they’re going to ask, “Are we going to do layoffs?” And you really don’t want to have to answer that question. But I would try to just go through that process.

And the final thing, at a crisis you have to be decisive and fast. But the problem with decisiveness is that a lot of people, especially a lot of data-oriented people, they get a little bit paralyzed because in a crisis everything’s changing and how can you make a decision without the core data? And that’s when you need courage. But courage needs to lean on something. What do you lean on with courage? And so courage must lean on principles. In other words, in a crisis, I don’t think you make business decisions as much as you make principle decisions. And principle decisions become things like, if I can’t predict the outcome, how do I want to be remembered? And if you always just imagine a crisis, this is my defining moment, this is how I want to be remembered, it sometimes helps you separate from the craziness and the chaos of that moment. And then suddenly you can point a way forward and you can become better than you ever were.

So to end the story, people then thought we were going out of business, a thousand of us went in a foxhole, rebuilt the company from the ground up, miraculously, eventually went public at a valuation five times our nadir and now a design led company did more than $3 billion in free cash flow in the last 12 months, by not even really trying to make money. There’s a number of lessons here, but I think the most important lesson that I learned is: the thing you learn most about in a crisis is yourself. And you’ve got to be true to who you are. Don’t apologize for how you want to run the company because when you are in your darkest moments, the principles in who you are is what you have to lean on.

SAFIAN: Well Brian, this has been great and we’re just about out of time, but there is one last question I want to ask you.

CHESKY: Yeah.

Copy LinkHow has Brian Chesky changed as a leader?

SAFIAN: And that is, how are you different as a leader today? Maybe if it’s not crisis times the same way, from having gone through this, what’s different about the way you think about it?

CHESKY: I think of a funny analogy. Any of you ever have a friend that was super immature, never grew up and they were stunted and all of a sudden they had children and then they grew up and they became more responsible? I think that one of the things that makes you grow up is responsibility. And it wasn’t that I didn’t have a lot of responsibility before the crisis, but I didn’t feel it as much. But when you’re in a crisis and people think you’re going to lose everything, you hear from everyone. Employees are worried about losing their jobs, shareholders were worried about losing their investment, hosts were worried about losing their income. Guests were worried about getting refunds and communities are wondering can you help them? Suddenly in that moment, you just feel your responsibility from everyone at once. And that’s a real growing up experience.

Every decision you’ve ever made kind of comes and gets compressed. And you reckon with all at once. I was trying to become something, I was trying to become a great CEO by studying other great CEOs. And I studied Jeff Bezos and he does these six page papers. So I did six page papers and he divisionalized the company. So I divisionalized the company. And one day I woke up before the pandemic and I didn’t even recognize the company I’d started.

Then suddenly in the crisis, there was no one to turn to. I mean I had a lot of support, but everyone asked me, “What are you going to do?” And in that moment, I think the number one thing I did was I stopped being shy and I stopped apologizing for how I wanted to run the company. I didn’t have a lot of role models, there weren’t a lot of creative people that were like me. But I saw that no longer as a weakness but as a strength. What we need in this world is more diversity. And I think diversity is not just getting every different type of person in the boardroom or the executive team to conform. That’s like diversity gone wrong. Good diversity is people being themselves because that’s the whole point is people come from different backgrounds and they don’t homogenize, they actually come together and they put out new ideas. And I think that was probably the biggest thing I learned, which was just to be myself, it’s going to be okay.

SAFIAN: All right, great. Thank you Brian.

CHESKY: Thank you.

HOFFMAN: I never get tired of hearing Brian speak. What I take away from his commentary here is the courage that it takes to make difficult decisions. When you have a clear philosophy about how to run your business, tough decisions become if not simple, then simpler. For all of us to manage a crisis, we need to anchor on core principles, and make our decisions through that lens. That enables greater creativity and better opportunity, in tough times and in blue-sky moments.

You can hear more of Brian Chesky’s story on our show feed — he was the subject of the very first episode of Masters of Scale, and has returned two times on Masters of Scale: Rapid Response. There are rich lessons throughout. 

I’m Reid Hoffman. Thanks for listening.