Table of Contents:
To be first to the future, be stubbornly nimble
ANNA BOFA: How do you balance saving capital for the unknown future versus taking advantage of available talent?
GEORGE McARDLE: How do you think about risk from both your investor and founder role?
LAUREN FITZPATRICK SHANKS: How does the story we’re telling shift once the technology isn’t as much of a unique selling point?
BOB SAFIAN: Welcome to Masters of Scale Strategy Session, where entrepreneurs strategize in real time with iconic business leader Reid Hoffman to solve their most pressing challenges.
I’m your host, Bob Safian, former editor of Fast Company, founder of the Flux Group and the host of Masters of Scale Rapid Response.
For this Strategy Session, the theme is ‘to be first to the future, be stubbornly nimble’. When navigating through new markets or grappling with new technologies, you have to be prepared to pivot and adjust your roadmap at any second.
SAFIAN: Hi, Reid. You ready to play?
REID HOFFMAN: Always.
SAFIAN: Let’s jump to it.
Calculating the risk of emerging tech
SAFIAN: All right, the first question comes to us from George McArdle, managing partner at VC firm, Mount Pleasant, and founder of Kettral, an AI platform that scans and monitors US legislation.
McARDLE: Hey Reid, very excited to be here. Also, may I just add you are an inspiration to the Dungeons and Dragons community for how far one of us can go.
I know you’ve wrangled being both investor and founder. How do you think about risk from both your investor and founder role when approaching emerging tech like AI that is just evolving and changing so fast?
HOFFMAN: Well, it’s a great question. And by the way, thank you for the D&D call-out.
The way to think about the risk stuff is to say, okay, first presume that you’re not going to be able to make it a purely knowable game. It’s useful as an entrepreneur to know that the games are not like chess. They’re not fully determined, there’s a randomness element — Ukrainian war, markets, a bunch of other stuff. I have partial risk management, partial control over it, but there’s unknown and uncertain things.
So then you say, okay, so what are the most key things that I should make bets on? It’s almost like risk betting; it brings the investor and the entrepreneur together on it. For example, if it’s like AI, what do I think the market demands are going to be like? What do I think customer reaction’s going to be like? What do I think government regulation is going to be like? What things might impact me and what I might need to speak up on?
So you want to be thinking about which risks are the absolute ones to really invest in to minimize and keep that as thin as possible. Which are smart risks to take that if I take them, I can possibly win large? And how am I monitoring if my theory of the game and the theory of the risks I’m taking is working out so that I might need to pivot or adjust? You have to be responsive to the kind of circumstance you’re in.
So George, thank you for your question.
SAFIAN: There’s a key insight in Reid’s answer that I really want to shine a light on here:
Entrepreneurship is a game with ever-shifting and uncertain rules. So only take the risks that offer a big enough reward to justify the leap.
Playing offense vs defense during times of uncertainty
SAFIAN: Alright. The next question comes from Anna Bofa, the founder and CEO of Crate, a software product powered by AI, which allows users to curate content from across the Internet. Let’s invite Anna in to ask their question.
BOFA: Awesome. So, here’s my question. There’s a lot of conflicting advice in today’s climate surrounding start-up runway. Many people are saying that we should be hoarding capital, given the uncertainty of the future right now. However, with all the recent tech layoffs, there’s never been more incredible talent available in the market.
We’re also aware that there’s an opportunity to maximize on the current excitement surrounding AI in the public discourse. So Reid, how do you balance saving capital for the unknown future versus taking advantage of the massive opportunity of available talent and the interests of the space that we’re building in?
HOFFMAN: Great question, and thank you for asking in part because this is a question that obviously many, many startups are facing right now.
Obviously we’d all like to have a crystal ball into the future to know exactly when the markets will start changing. So you obviously have to kind of say, “Well, what’s the amount that I need as additional insurance during volatile times?”
And there are people who will say, “No, you should absolutely maintain a minimum of 24 months right now. When you think, “Oh, we should hit the accelerator,” It’s because well, I’m going to be taking a smart risk. I know that I’ll be taking a risk. Maybe Putin will do something additionally sinister and crazy in Ukraine. Maybe that will disrupt markets, maybe factors outside my control affect what’s happening, but it’s worth taking this risk. It’s worth hiring some of this AI talent. And so selectively taking advantage is a good idea.
Now I think what you want to do is not only playing defense, but playing offense on this. I think that you want to also cut it classically as the stock market goes down, and then when it starts coming back. You don’t want to actually want to buy at the absolute bottom. You want to buy it as it’s beginning to grow back up.
So what you want to do is say, “Well, okay, we think we’re going to be able to get to our new milestones, some interesting marketing, some interesting product stuff if we accelerate now here and hire some of the talent.” In the similar way of financial investors buying into that market, you want to be thinking the same way about the marketing, about the talent acquisition, about the product development, about the acceleration.
Because the thing that’s so frustrating as an entrepreneur is we don’t quite know when do these turbulent times stabilize and start heading the normal economic growth pattern, in part for we have a lot of factors that are totally out of our control. So Anna, I look forward to hearing the progress and the AI acceleration. Thank you for your question.
SAFIAN: Here’s a nugget of wisdom I’m going to be thinking about from Reid’s answer:
Now is a smart time to play defense and offense. Be sensible with your financial runway,
but don’t let it totally prevent you from capitalizing on rare and precious opportunities available right now. After the break, we’ll hear two more entrepreneurs pose their questions to Reid: one about the common challenge of storytelling with new tech, and the other about the difficulty of setting a price for your product. You won’t want to miss it! Stick around.
SAFIAN: We’re back with Masters of Scale Strategy Session, where emerging entrepreneurs strategize in real time with iconic business leader Reid Hoffman to solve their most pressing challenges. The theme for today: ‘To be first to the future, be stubbornly nimble’.
Let’s dive back in!
Honing the story we tell of our company
SAFIAN: All right, we go to Lauren Fitzpatrick Shanks, founder and CEO of KeepWOL. KeepWOL is an interactive platform that uses team games to enhance employee engagement, skill development, and talent retention.
SHANKS: Hey Reid, I’m excited to have the opportunity to ask you a question and super excited to hear that you love games. So my question is, with new and emerging tech at the forefront of KeepWOL, we’ve struggled to find a consistent story that can resonate with customers, talent, and investors alike. How do we hone the story of KeepWOL that does justice to the new tech, while also making it simple enough and relatable enough to a broader range of relationships?
As the first to offer this new learning technology in our sector, we know that other businesses will eventually attempt to utilize the new tech similarly. So Reid, how does the story we’re telling shift once the technology isn’t as much of a unique selling point?
HOFFMAN: So I think there’s a lot of interesting components to your question. Obviously it’s great if one story meets all constituencies, and so you try to do that. But sometimes, you need story architecture. So you go, “Look, this is our primary. We primarily need it for our customers.” That’s the one that’s out there. And then we have an add-on, almost like a Lego piece that you add on to it for talent or for investors. And then you say, “Well, it’s two pieces, it’s not that simple.” But it’s like you try to make the two pieces simple. So it’s, what is the simplest architecture to that?
Now, to the kind of broader question as you advance, and I do think that games is a really good way to build relationships and interact.
So I think, you say, “Okay, well to some degree the technology’s never really the selling point, it’s the human engagement.” It’s the… how is my world and life different or better by using this product and service? And sure, the technology may literally say, “I’m the only one who can do it because I only have this thing doing that.” But eventually, it’s through that ongoing engagement.
And that’s something for all entrepreneurs to keep in mind, which is, it’s the value. That’s the key thing, that technology is only the supporting character.
SAFIAN: This is something a lot of leaders need to hear in 2023, so I’m going to echo Reid for another spotlight: Your new technology, however unique, is often just the supporting character. Your true selling point is the way in which the product can make the customer’s life better.
How do you convey the benefits of emerging tech?
So as you can imagine, Reid, there are many strategic questions that we’re facing like, how do you manage the messaging when people think that we are trying to replace humans with robots, and how do you set that initial price for a brand new product when there’s so little to compare it?
HOFFMAN: Well, it’s a classic disruptive innovation that causes people to have this kind of like, “Are you replacing people?” A general theme when you’re an entrepreneur is, how do you convert challenges into opportunities?
As opposed to saying, allowing the criticism to brand frame you as, “Oh, you’re replacing humans with machines,” it’s like, “No, no. We’re making humans a lot better.” It’s “human plus machine,” and the “human plus machine” will have much better outcomes, will be able to iterate and learn better, will set new benchmarks.
Part of when you’re thinking about the initial price, it depends a little bit on what do you think the growth rate is going to be. Sometimes people set very disruptive pricing, like 20% or one third. I would think in your arena, it would be better closer to 80%, but could be 50%, where you say, “Well, what’s the cost that we’re saving? What’s the benefit that we’re adding, and pricing below that?”
I think when you look at all of this, it’s a question of, how do you set the frame for the story about how people will think about what your product is, what using it as a surgeon would be, what receiving it as a patient would be, and the amplification of human beings in each of these cases.
I do think that one part of it is, how do you communicate those mindsets? And I think one of the things that’s part of the last couple decades of the Internet is trying to get influencers or other people articulating the story, the framework, the point of view, is part of what gets that well.
I think it’s great that you’re doing this invention. I look forward to hearing the path of success, and thank you for the question, Alberto.
SAFIAN: Reid, I loved listening to your answers. And particularly, I was curious what you were going to say about pricing, because pricing is something that constantly challenges me. And I think sometimes that question between: Are you a premium product with a premium price, or are you trying to get in with a fighter brand price and … Very tricky, very tricky questions to deal with.
SAFIAN: Let’s take a moment to shine a light on one last key insight: Don’t allow others to frame your brand before you have. Once you’ve honed the story of your product or your business, then find influential voices to take the baton and run with it.
What new developments should leaders react to?
SAFIAN: All right, Reid, so one of the themes we’ve seen in our questions and something I hear CEOs grappling with all the time is trying to figure out what new developments we need to react to now and what we can be patient about. Jeff Bezos has famously used this phrase, day one at Amazon, to encourage the team to act unencumbered by the past, embrace a beginner’s mindset, no nostalgia to sort of fight the resistance.
But if we start over every day like it’s day one, we never build any momentum. We can be jumping from one thing to the next. So, how do you know if a new development is central and requires attention or if it’s just a distraction?
HOFFMAN: What I usually think about is: what is the theory of the game and has the game changed? So for example, Microsoft, when Bill Gates was CEO, he was building an online service called Blackbird, because they thought they needed to compete with CompuServe and AOL and so forth.
Then they saw the Internet coming, and literally, Bill had all of the engineers hard disk erased to start working on the new Internet services. So it’s like, “No, no, you have to do this.” That’s the hard shift to a new day one. But that’s because the theory of the game changed. He was like, “Oh, we’re not doing these online dial-up services anymore. Those will only live a certain amount of time. It’s all going to be Internet. We need to be going to where the future is going, not to the past.”
And then obviously, there’s degrees of that, so when you have a shift to mobile, some things go, “Oh my god, everything’s going to have to end up being mobile first. I need to go mobile right away.” And by the way, ultimately that’ll percolate to enterprise and everything else. But enterprise software companies didn’t have to immediately go, “Oh my god, we have to be everything on mobile,” because their customers said, “Oh, we care about it. Our employees are bringing stuff in. They want to be able to use this from wherever they are,” but it will be a gradual adoption. So it isn’t a day zero thing, it’s kind of a more iterative pattern.
And one of the things that I frequently do is I break to three buckets. It’s V0 to V1, V1 to V1-1, V1 to V2. Because even that kind of revolution of V1 to V2 is not day one, but it’s a major jump. And the way that you play each of these three games is actually in fact different.
What’s your theory of the game and what is this change, market change, technology change, et cetera, what does this mean to me, to our business? And how much of a sharp adjustment to our play of the game do we need to make?
SAFIAN: And so if you’ve concluded that this is really changing the game, you want to make a hard shift. But if you’re not sure, you want to test, sort of. You want to see how much it really does change the game and how much it doesn’t, so you know whether to make a hard shift.
HOFFMAN: And sometimes, testing is saying, “Let’s go talk to 10 people who are the smartest.” One of the ways I learned Michael Dell is, he saw these LinkedIn invitations coming in. He said, “This is interesting. I wonder how this changes things,” and he reached out and talked to me. Sometimes, it’s like to figure it out is to just go ask.
Why Reid is a proponent of games to build strategic thinking
SAFIAN: Ask the questions. Yeah, great. You’re a proponent of games, as way to build strategic thinking. Why is that? What role do games play for you, have they played for you?
HOFFMAN: Well, people kind of assume that it was going and kind of equivalent on MBA and stuff with learning strategies. No, the strategy stuff was all from games, because what you want to have in a game is you want to have a theory of how this game plays. You want to have a theory about, okay, what is the way that I’m going to win the game? What are the challenges that I need to overcome in order to do it?
And so to some degree, it has been advanced that we are Homo Ludens, which is game players, and that Wittgenstein-like language is actually a form of gameplaying. You want to take that game and say, “Okay, am I playing the right game? Do I have the right theory of the outcome? What are the games other people are playing and will this game work?” And then you have to adjust the game.
And classically, with disruptive innovation, part of what happens is, entrepreneurs figure out a way, a theory, how to change the game, because of a new technology or a new market, a change in how things are operating or a change in the way things could operate. And I think that’s the kind of central thing for thinking about games as how we think and strategize and evolve our products and companies.
SAFIAN: Well, I love that, Reid. I can’t wait to keep playing some games with you.
SAFIAN: All of our Strategy Sessions are recorded live in front of a virtual audience. These unique events are created in alliance with our premier brand partner, Capital One Business.
Please join us for the next live Strategy Session. All you have to do to register is visit: mastersofscale.com/strategysession.
And if you’ve got a question that you’d like to ask Reid in a future session, just email [email protected].
I’m Bob Safian. Thank you for listening.