BOB SAFIAN: Hey everyone, it’s Bob Safian, coming to you with a new installment of our Need to Know series. In these episodes, Reid Hoffman and I have unfiltered conversations about the most important business topics impacting entrepreneurs right now. We dig into some big themes today, including Bob Iger’s return as Disney CEO, continuing chaos at Twitter, how to keep true to your social responsibility pledges in the face of economic downturns, as well as the long-term outlook for crypto and AI.

Let’s get into it.

[THEME MUSIC]

Bob & Reid on the inaugural Masters of Scale Summit

REID HOFFMAN: Hi Bob.

SAFIAN: It’s been awhile since we’ve been able to do one of these Need to Know episodes, and so much has happened, is happening. But I have to start by saying it was great to see you in person at the inaugural Masters of Scale Summit in October, at the beautiful Presidio Campus, face-to-face engagement with all the speakers and attendees. It was amazing. Do you have any particularly memorable moments or insights from your time at the summit?

HOFFMAN: Well, a whole range. It was everything from your amazing panel moderation, which I actually wrote about because I amended my “Why panels suck,” to “When panels can be very interesting.”

And then we obviously had the usual great kind of group of people there, both on the stage and in the audience. And there was a bunch of stuff that I wouldn’t have expected that worked, that worked really well.

I approach these things, like the Masters of Scale Summit, the way I approach a company that I’m on the board of. Which is, you have you guys, the team going, “We got this great idea,” and I’m like, “Well, I don’t think that’ll work, but if you’re so convinced, why don’t you give it a try?” And one of the things that I got universal acclaim from all of the various folks attending was: start with a humanizing moment, then go to talk to each other in the audience. Turn left, turn right, say the WaitWhat thing of, “You would know me better if,” and literally it was impossible to get people to kind of, “Okay, calm down. We’ve got this amazing thing about to be on the stage,” because people were so much engaged with meeting the other people. And literally, I had portfolio companies, I had friends in the audience. And all of them said that that was one of the unexpected treasures of coming to the Summit.

SAFIAN: Yeah, I mean, the feedback that I’ve gotten really was about how human the dialogue was. For something that people thought, “Is this going to be a tech conference?” And it didn’t really feel that way, this emphasis on the mental game and on resilience and vulnerability. One moment that struck me was hearing Uber CEO Dara Khosrowshahi talk about coming in as a new leader and the advice he got from everyone about how you’re supposed to walk the halls to introduce yourself, and how it made him super uncomfortable, right?

And it made me think about, of course we can all feel uncomfortable in new situations, but Dara also responded by saying he realized he had to do things his own way, that he couldn’t play by someone else’s playbook. If walking the halls didn’t work for him, to trust that, and that lesson about the need to be yourself and be authentic. Those kinds of personal and more human lessons I feel like really brought the summit alive.

HOFFMAN: Yeah, exactly that. How do you build cultures and companies that endure, how do you think about the world, which we’re about to talk about, as you find it with kind of wars and markets and trailing pandemics. How do you blend all this with being a present human being?

And that was part of the reason why, for example, the other things of our sister podcast, not just Meditative Story, but also Spark & Fire, kind of bring in creativity to the way that you work. And it’s so far exceeded, I think, everyone’s expectations, which were high. It was amazing.

SAFIAN: Well, I should also acknowledge too, Reid, the incredible range of people that you talked to on the stage, from the CEO of TikTok, to Dylan Field, the founder and CEO of Figma, to director Ron Howard, who was just delightful. And then Bill Gates, you were carrying a lot of water there. It must have been kind of dizzying to move between all those different people and topics.

HOFFMAN: Dizzying but fun. When you have amazing people to talk to, sometimes that dizziness is part of the vertigo of elevation.

SAFIAN: One of the folks I got to sit down with at the Summit was Airbnb CEO Brian Chesky, who’s been on Masters of Scale several times. Brian and I talked about his background as a designer, and it reminded me of a recent conversation that I had with PepsiCo’s Chief Design Officer Mauro Porcini for Rapid Response. Here’s Mauro, who as you’ll hear has a delightful Italian accent, talking about why design is such an essential competitive tool for perpetual disruption at scale.

MAURO PORCINI: You need to build in-house the culture of innovation. You need people in love with people, as I like to define them. People that are obsessed with extreme quality, with excellence, with creating meaningful solutions for the people out there. Designers are trained in this, but this is not just the design and designers kind of issue and opportunity. The entire company needs to have that kind of culture. A designer can help eventually ignite the culture. But the culture needs to be spread across every single function of the company.

The right and wrong ways to announce layoffs

SAFIAN: Let’s dig into the current moment. There’s a lot to unpack, and just the last few weeks, we’ve seen interest rates rise, concerns persist about inflation and growth. We’ve seen a wave of layoffs announced particularly by tech firms, Intel, Meta, Amazon, Stripe, media firms. Announcing layoffs, one of the hardest things a leader faces. Is there a right way, a wrong way to announce layoffs? Is it going to be uncomfortable no matter what you do?

HOFFMAN: Well, there’s definitely wrong ways, and I’ve said multiple times that Elon is one of the most celebrated entrepreneurs of our generation, and he’s done things that are amazing that I don’t know anyone else who could have done them other than Elon. But of course, the way he’s done the Twitter layoffs is just bad on lots of fronts. Doing it inhumanly before the holidays, kind of a little bit like swerving down the road like, “Oops, we didn’t mean to lay you off,” etc. Just all kinds of things that have publicly played out, so we don’t need to comment a lot more. But those are the poster child of how not to do them.

And yet, I think other folks like Patrick Collison, I think did it masterfully. 

SAFIAN: Patrick Collison, the CEO of Stripe.

HOFFMAN: Communicating a lot: “why it is we’re doing it,” “we’re trying to help the folks who we’re laying off not only with a kind of a human and generous severance package,” but also finding other work, and kind of posting for it and being rational to the audience in the broad world saying, “Look, we didn’t lay off people. We’re very conscious about how we hire, and we’re very conscious about performance management. So the people we lay off, we regret. We think they’re really good.” 

Obviously he learned a lot from our very first Masters of Scale guest, Brian Chesky, who kind of did that during the pandemic, which of course I was appreciative of, as my second book, The Alliance, which is your relationship with your employees should be a lifetime relationship even though it may not be lifetime at this company. And that’s part of being human about how you do the layoffs the right way.

Now, the last opening remark on layoffs that I think is kind of interesting is that doing somewhere around 12 to 13 percent. I think when you get to the kind of 10-plus years of bull markets in this, and people go, “Okay, we need to refactor, do fewer things better, defer some kind of longer term investments because we’re kind of rationalizing with the capital now that the markets are tighter,” that ends up being a more focused on efficiency and kind of disciplined fewer things better approach.

SAFIAN: So when cycles turn, you want to be more lean, but you don’t want to cut into bone. And so you end up in this 12 to 13 percent. We just, sort of, our eyes were a little bigger than our stomachs.

HOFFMAN: Yes.

SAFIAN: In the good times.

HOFFMAN: Yeah, in the good times. It’s actually not making a mistake when you say, “Well, there’s a lot of capital flowing.” It’s only a mistake if you knew that the market was going to correct. The fact that you move from a higher growth to a more moderate growth and focus perspective is not necessarily that the earlier judgment was a mistake.

SAFIAN: And not to butcher your blitzscaling philosophy, but take the advantage that’s there when it’s there, and deal with the repercussions when you have to.

HOFFMAN: Yes, exactly. And the key thing is to adjust quickly, right? Again, with blitzscaling, it’s the, “Ah, capital market’s changed. They’ve changed for an uncertain number of months, could be a long number of months. How do we readjust? How do we readjust now? What are the things we do in order to do that?”

Elon Musk’s first month on the job at Twitter

SAFIAN: So you mentioned Elon Musk and Twitter, and I have to double click on that and go a little deeper. The last time we talked, Musk was threatening to pull out of even buying Twitter, right? Litigation, that’s ancient history now. He’s in charge, he owns the platform, he’s remaking things at what might be a blitzscale pace, right? But it’s not clear if he’s moving too fast, too recklessly, certainly, as you referred to the edict that only hardcore employees should stay around was bracing for folks. What do you make of all of this, of how he’s doing this, what the implications are?

HOFFMAN: Well, as I have kind of said a few times, Elon is an amazing entrepreneur. We wouldn’t have gotten a revolution of the space industry and now of satellites without his going through tens of feet of concrete wall head first. We wouldn’t have gotten the electric vehicle revolution without him also doing that and putting it all in line and taking risks. So that’s the kind of entrepreneur he is. And so the way he’s approaching Twitter is also putting it all on the line right now. It’s a five alarm fire right now in order to change it. And that’s the way he has done amazing entrepreneurial work.

Now that being said, I would’ve done Twitter a lot differently. I think that playing roulette with the fundamental advertising revenue structure with uncertainties about what’s happening with content moderation. And so just chaosville in all this stuff. I think in social products, in community products, in network products, you need to approach it differently. With an eye towards humanity. What are the aspirations of compassion, wisdom, all these other things which are very good, the opposite of inhumane? Think about the parallels of how towns grow into cities.

As populations get larger, you never go, “Oh, now we only need a smaller police force.” Because the nature of humanity is, as you get to these dense human things, you get all kinds of crazy behavior from some humans. That’s why we create a society with laws and collective forms of governance to have a clean, well lit place. The village square, it’s a treasure exactly as Elon says. But you need the principles to run in healthy ways. And that’s what you have to approach, is: what is the human nature of these problems? And Elon is a super fast learning machine. I suspect he will get there through his fast iterations. But that’s, I think, the different nature of this problem.

SAFIAN: Yeah. I mean, going to space or creating a new vehicle, super complicated. But the media and social platforms are complicated in different ways. And it’s not yet clear that he’s fully got his arms around the nuances and the sophistication that’s required when the implications of what that platform can be and can do are so broad societally.

HOFFMAN: Yeah. And I think it’s clear that he hasn’t yet, but having decades of personal experience, I know he’s one of the people that we refer to as infinite learners. I have hope that the learning curve would be fast here on these vectors.

SAFIAN: Entrepreneurs may be asking how they should respond to what’s happening on Twitter. Do they keep using the platform to grow their business? Do they change how they’re using it? Is there a way that business leaders should think of Twitter and how to use it differently right now? I mean a lot of advertisers are pausing.

HOFFMAN: Well, I think it’s rational for the advertisers to pause because part of the advertising side is to say, “what we care about is a certain brand association,” and very few advertisers want to be associated with chaos or human conflict or other kinds of things. For entrepreneurial leaders, et cetera. I would say there isn’t a moral principle of packing up ship and leaving. I think it’s the question of participating and continuing to be the, how you would want to see humanity and other kinds of things expressed here? I do think that Twitter is a world and U.S. public good for a public square, and I think it’s important for us to participate in it.

So I myself am continuing to do it. We at Masters of Scale are continuing to do it. We are not participating in any trash talk or that part of the dumpster fire. We’re trying to be our normal selves. And for example, even being truth tellers like here saying, “Look, it’s important to be human first,” just like the episodes. And so be human on Twitter, be compassionate for the Twitter employees whose lives have been unsettled. And articulate the truth that it was not done the right way. And to do that, and to participate that way, is, I think, far more important than anything else. And that’s how you exemplify leadership in the modern networked world.

SAFIAN: There are very different leadership styles in the marketplace, Musk a particular version.

The skills and strategies that are most important to leaders right now

I spoke with CNBC’s Julia Boorstin for Rapid Response about the skills and strategies that she sees as most important right now for leaders. Her conclusions are drawn from research for her new book, When Women Lead.

JULIA BOORSTIN: In order to succeed in this incredibly uncertain environment, the skills and strategies that women have always deployed are more valuable than ever for everyone. We’re going to start to see more men adopt these traditionally more female leadership styles, and I think everyone will be better for it.

Women tend to rank much, much higher on empathy tests. You want to retain your employee base, you want to motivate your team, you can’t not be empathetic. Nevermind being empathetic to your customers, your investors, you name it. In uncertain times like these, empathy is essential. Another key one, vulnerability, women are a lot more comfortable demonstrating vulnerability to their teams. And vulnerability is a key way to invite collaboration.

There’s a lot of research showing that women enjoy practicing gratitude, whereas men, it makes them a little bit more uncomfortable.

But gratitude also correlates with longer term thinking, longer term planning, being less focused on the near term win, the near term fix, and more focused on the long term gain. These are all things that, though women are more likely to do, men should be doing.

[AD BREAK]

SAFIAN: Before the break, Reid and I talked about dealing with layoffs, differing leadership styles, and what Reid calls the “chaosville” of Elon Musk’s early days at Twitter. 

Now we dig into the implications of Bob Iger’s return as Disney’s CEO, the cryptocurrency crisis and FTX’s bankruptcy, and where Reid sees larger challenges and opportunities in today’s business downturn.

Reid Hoffman on Bob Iger’s return to Disney

SAFIAN: So another media company in the news lately, Disney, Bob Iger coming back as CEO, taking over from Bob Chapek. We both know several folks in the Disney Board. Did it surprise you that he is back?

HOFFMAN: Well, it didn’t surprise me from the viewpoint of among the reasons why we’ve had Bob on Masters of Scale, he is one of the amazing CEOs of the last few decades. Frankly, if you’re the board, you’d want as much Bob as you can get. So that part of it didn’t surprise me. But the part that did surprise me was it seemed to be a very abrupt change. Now I think it’s a smart thing to do given that, I think, part of what Bob Iger understood well and talked some about with us, is a lot of Disney is about the talent within the media side, is about making the appropriate long range investments in streaming and other sorts of things. And I think that it wasn’t clear that Chapek was doing that, and as well. And I think I have no inside knowledge of this, but that might have informed some of these changes. But I think that what is overlooked in the overall discussion is, look, I think if I was on the Disney board of directors, as many years of Bob Iger as the CEO, I’ll take him.

SAFIAN: Yeah, I mean I was looking back at comments that Bob Iger made a year ago when he officially stepped down from even being chairman, away from the board. And he talked about how he realized he was being too dismissive of other people’s opinions. And in hindsight that sort of looks like, “Oh, maybe he didn’t necessarily agree with where the current CEO is taking the company. And so it was time for him to step aside, and maybe now it’s an opportunity for him to reassert what those opinions are.” Because it always seems strange to me because he was not a leader who didn’t listen.

HOFFMAN: And actually one of the things that I think is an important subtle thing here is there was a report in the press, who knows if it were true or not, that Chapek was feeling constrained by having Iger around. One of the subtle things that I think about having infinite learners as CEOs is I would want Iger talking about things like, “Okay, look, how did you solve this? How would you think about it?” Great. That’s an input to how I’m making my decision. And yes, I’m going to make my own decision, but I would want the input. And if whatever was reported in the press was correct, of “I want you out of the room,” or “I feel overshadowed by you,” that would be a subtle but important negative tell.

SAFIAN: Yeah, it’s always a challenge if ego gets in the way of learning, and learning is what the goal is for all of us, right? Even if there’s conflict involved in that learning.

HOFFMAN: Exactly.

Reid Hoffman on what the bankruptcy of FTX means to the future of crypto

SAFIAN: So we talked in a previous need to know session about the crypto winter that descended earlier this year. Reset in valuations and slowed momentum for web three promises. But we’ve had a new development with the bankruptcy of FTX, which had been seen as sort of a stalwart and a trusted player. What does this mean for where we are right now in crypto? What does this mean for what the future of crypto is? Is it just isolated?

HOFFMAN: Well, it’s definitely not isolated. There’s a couple things. First, there’s baseline stuff. I wasn’t really aware that a whole bunch of people had done growth investments in FTX when it didn’t really have a board. Not every investor has to go on the board, but part of when you’re doing scale investments or loaning your brand to an entity that is scaling, you want to have a good theory of governance. It might fail, but you’re doing it. And people say, “Well, crypto needs to be regulated.” Well, we do have this kind of regulation for companies. It’s called a board of directors with a couple of independents. Let’s start there. That would be a good idea. I frankly don’t know what the scale investors were doing with investing without having a board of directors there because not only is it a responsible use of capital, but also investing in the institutions which affect our societies, scale companies, but also financial systems and everything else. So I think there’s a lot of ways to improve beyond a well constituted board of directors, but that’s really table stakes when you get to these things. And there’s a bunch of stuff that’s been in the press about self-dealing and accounting, chicanery, and uses of customer deposits against what was explicitly stated, all of that stuff is super important things, but you start with a board of directors.

Now, I do think that in various ways, figuring out how to get a good regulatory framework for crypto is important. Well, we at Greylock have made a number of different investments in this arena. People say, “Well, why do you want crypto?” And the answer is, if you say there’s 200 countries in the world-ish, around, and then you start counting from the worst to the best in a combination of governance and financial systems and financial system governance, it’s well over 100 or 150 to which you begin getting into countries where you go, “Well, maybe they don’t need crypto. Maybe the crypto thing is optional for them.” So actually, in fact, having an internet based system of identity, system of value, system of contract, system of exchange, could be very good for elevating the rest of the world. So therefore, that’s a future world that we should move towards.

Obviously things like FTX or token speculation or the use of crypto for criminal activity, ransomware, other things, are all serious problems that need to be dealt with, but I think overall crypto, good. Now, this being said, this will have all kinds of contagion because people will go, “Well, you were just telling me two months ago how FTX was genius in the future and everything else and was the leading exemplar of why crypto was good, and this is much worse than the emperor has no clothes. This is the emperor has no clothes and was running around doing a bunch of very questionable things that people are investigating to see what its degree of legality was.”

SAFIAN: Yeah, the emperor had no clothes and was running around stealing yours.

I mean, you have been an enthusiast about crypto from early days. Is it frustrating that a scandal like this emerges? Which as you talk about almost seems, like, simple that it should have been cut short earlier and yet it tarnishes something else that you believe in very strongly.

HOFFMAN: Well, it’s definitely frustrating. It’s obviously going to be really difficult for a whole bunch of the crypto entrepreneurs who do have boards of directors and are trying to build systems for decades and long term, and aren’t doing financial trades on empty tokens and so forth. They’re now going to have to work through all of that as part of how they’re operating.

Generally speaking, there’ll be a lot more people going, “See, all this crypto stuff, this is just all crud.” And you have to work through that too. But on the other hand, this is part of why entrepreneurship is hard. By default, entrepreneurs and building new things is part of how we get all kinds of benefits in society: jobs, wealth, prosperity, new products and services that we love, new products and services that support health, education, and other kinds of things. So that’s part of the reason why at Master Scale we like the humanity and the celebration of the scale entrepreneurship journey.

Rashad Robinson and Reid Hoffman on social responsibility commitments from companies

SAFIAN: With economic and financial pressures on businesses rising, there’s an increased risk of  backsliding on corporate sustainability and social-responsibility pledges. It’s what made the latest Rapid Response appearance by Rashad Robinson so timely. 

Rashad is the president of Color of Change, a civil rights advocacy group and the largest online racial justice organization in the U.S. 

I asked him his assessment of how business has lived up to social responsibility, diversity and anti-racism commitments. 

Here’s what he told me.

RASHAD ROBINSON: Of course, we’re seeing a backslide of commitments. We’re seeing companies try to wiggle out of things that they said and things that they committed to, but that’s all part of any work towards progress.

A lot of people want to believe that racial inequity is unfortunate, almost like a car accident. It just happens. “If we do a couple of things differently, we can avoid the car accident,” but racial injustice, racial inequality is not unfortunate like a car accident. It is manufactured. It is manufactured through a set of choices.

When we’re actually trying to deal with harm that exists in the world, we have to recognize that we’re not looking for charitable solutions to problems that are structural. We’re asking for structural change.

Our work is to build a stronger, broader, multiracial coalition of people who actually will demand better from these companies and demand these companies actually meet the standards they’ve committed to.

SAFIAN: This question about how we build the future in more challenging economic times, sometimes we don’t step on the gas quite the same way towards doing it, and sometimes there’s a risk of even backsliding on things like sustainability, on social responsibility pledges, diversity. How important is it to sustain those pledges in difficult times? And how hard is it when you feel like you’re being squeezed in terms of your resources?

HOFFMAN: Well, it’s definitely hard, and it’s hard also because to some degree, companies are the most efficient adaptation mechanism that we’ve yet discovered to a set of stakeholders, where the stakeholders includes customers, employees, shareholders. And to some degree, if those three groups say, “Hey, no sustainability goals,” then it’s very hard for a company to stay on it. So what’s important is that all three groups, and of course other stakeholders like society say, “Hey, look, this continues to be important to us,” and then what you do as a company is you say, “Okay, we’re trying to be the efficient allocator of capital across these goals.”

So my hope for a number of leaders is that you don’t go, “Oh, difficult times,” you just park that. You go, “Okay, well just like everything else, we have to be more focused about how we’re investing in it,” but we continue to invest in it. It isn’t that it goes off the list. It’s that it goes, “Okay, so maybe we thought we had a thousand dollars to invest in this, and maybe we only have 400 now,” or 300. Okay, how do we allocate those $300 really efficiently, and what do we do in order to do it?”

SAFIAN: Well, and sometimes when you’re in these tighter moments, you do prioritize and say, “Actually, that deserves a bigger proportion of my investment,” even if the dollars may not be the same. You may say that, “Listen, in the future, we need to be sustainable, we need to be more diverse.” It presents an opportunity for you to make those a larger priority in the business that you’re, again, building for the future.

HOFFMAN: Yes, exactly. I think that’s the way of thinking about the future’s still there, the future’s still coming, you still have to invest in it just like you have to do in every other business.

Now, the one kind of asterisk, just to make sure it’s said, is part of when you get to these in business, the very first thing you do is you think about how do you continue to survive in order to thrive? So you first do all the double check on the baseline game, and that might put some real pressure on your sustainability goals. The thing it can’t put pressure on is the fact that you’re still committed to it, that it’s still in mind, that you’re still planning it for the future. Even if you go, “Well, no, we’re really battering down the hatches to make sure that we get through the next couple years, so that when capital flows, and we can continue to invest that we are here in order to do that.” You could still have it clearly in your mind as you’re doing that.

Opportunities available in economic downturns

SAFIAN: So in a business downturn, some businesses discover great opportunities. The leaders of the next cycle are often born amid the carnage. Do you have any sense yet about where those opportunities might be most ripe in this cycle? Are there places that you are looking?

HOFFMAN: Indeed, as you say, it is actually in fact best to start a company during an economic downturn, because the most highly variable is fewer start-up competitors for the opportunities that you see. And so, it’s harder to raise capital, harder to assemble the talent, et cetera, because the talent tends to want to go to places that’s stable.

And by the way, I think there’s still a lot of investment in the tech industry, so I think one of the things that I think is that, as people leave various companies or get laid off, I think there’s a lot of different tech investments that are being made. What do we do in order to build that future, I think, is in fact, I think, still there, and so I think you play for that.

I don’t mean to undercut how difficult some of the times are going to be. So I think, as per your question, it’s good to start businesses. Now, the way that I do it is I generally am not like, “Oh my God, right now…” For example, the start of the pandemic, “Oh, I’ll go invest in businesses that are going to deal with the pandemic right now.” I tend to invest in businesses that have decades-long impact and transformation of industries.

So what I’ve been doing for years has been artificial intelligence, large language models, generative models, et cetera. I co-founded a company earlier this year with Mustafa Suleyman called Inflection. Greylock has been doing this investment in Adept, and Cresta, and Snorkel.

We continue to make investments in the crypto space because, well, what’s going to be true 10 years from now?

And my thesis on this has been, everyone likes to talk about this as a little bit like tech lash, like AI replacing human work. I tend to think of it as actually much more broadly, amplifying, it’s kind of the essay that I did on Dall-E earlier, whether or not you’re no graphic skill, low graphic skill, medium graphic skill, high graphic skill, it will be amplifying to you across it. It’ll now be a new essential tool.

You say, “Hey, we’ve got amplifiers for doctors.” Great. We’d love to have a lot more personalized medicine. Human beings do like to talk to human beings for how to interpret and how to work on it. And now, as opposed to the way that industrialized medicine works, which is you get 10 minutes with your doctor and then you got to be out the door, it’s like, well actually, in fact, we have amplifiers. Maybe that moves to 30. And that would be a good thing for society.

Plus obviously, you can provide medical stuff in a whole bunch of countries where the people need injury or illness detectors off cell phone cameras. Then all of a sudden, in the 8 billion people around the world, most of them can’t afford doctors. Well, we can provide something, which is useful. And I think that we just have to keep building to that future with the right kind of focus, and thoughtfulness, and speed, to just mention blitzscaling, in order to realize the benefits.

And so, I think that’s the lens by which you can see AI generating positive results across, I think, all professions, and therefore, all industries.

SAFIAN: Well, Reid, as always, it is an education talking to you, and fun too. So thanks for doing this, and look forward to doing it again soon.

HOFFMAN: Bob, likewise. Let’s do this again soon. And happy holidays.