Garry's Channel: 3 steps for billion dollar startups (How Airbnb & DoorDash succeeded)
What society imposes on us is the wrong kind of thinking: one that is based on analogy and credentialism instead of first principles thinking. But how do we break free? Here are 3 ways to do it.
Transcript
You get up, you brush your teeth, you eat cereal, you go to school, do as you're told. Sit up straight, show up on time, don't talk back, be a good person, fit in, don't make waves, stay in your lane, the nail that sticks out is hammered down. But isn't that the problem? A whole system, a whole society, a whole civilization dedicated to telling you how to live and what to do and how to think? Ugh.
But there is a way to break out. And it's a way that repeats over and over again in the founders that I've worked with who have gone on to create massive businesses. What do you need to break out of it? Let's get started. What do you need to break out of it? First principle's thinking. Can you start from what you are absolutely sure is true?
Can you have direct experience with a thing or get more experience such that you can make a more well informed decision or guess as to how something works or the state of a particular thing? Remember where we started? The classroom, the workplace. These places where we sometimes spend years and years of our lives are designed to teach you to stay in the box that you live in. You learn the history.
You learn how it's been done, and then you're programmed to believe that that is how they will be forever. And this is where first principles thinking can help you because in contrast, you will end up challenging the preconceived notions and the thinking by analogy that the rest of the world has imposed on us.
There are ways you can make something new and different, and it starts with three things I think you need. Number one is curiosity. Number two is empathy. And three, strangely, is actually serenity. Those are the three key things that will allow you to start on your path towards first principles thinking. First is curiosity. Asking questions and digging further to understand how those systems work.
One of the key ways to do this is actually the five whys analysis. It's something that the Toyota production system came up with years ago in Japan. Here's one of my favorite examples from a blog post by Eric Reiss, the creator of The Lean Startup. So imagine your website's down. First why, why was the website down? Well, the CPU utilization on our front end servers went to a %.
Second why, why did the CPU usage spike? Well, some code contained an infinite loop. Third why, well, why did that code get written? A programmer made a mistake. Why did that mistake get checked in? He didn't write a unit test for the feature. Well, why didn't he write a unit test? He's a new employee, and he wasn't properly trained to do test driven development.
So if you ask why, it will allow you to fully explore why something happened. Eric says, because the most common problems keep recurring, your prevention efforts are automatically focused on the 20% of your product that needs the most help. That's also the same 20% that causes you to waste the most time.
So five y's actually pays for itself awfully fast and it makes life noticeably better almost right away. The five y's is why the Toyota production system made Toyota so successful. Today, we think Japanese cars are incredibly reliable, but they had to come up with a process to get there. And curiosity is a key part of understanding why things are and then how to fix it. Second is empathy.
Getting an intuitive sense for the lived experience and feelings of other people, particularly customers. Listening to users and getting their direct experience is something that a lot of people know how to do. When you do it well, sometimes it can help you create a billion dollar startup. Airbnb just had an incredible IPO, but when it first came out, a lot of people said Airbnb wasn't gonna work.
It was literally just air beds and breakfast. Brian and Joe at Airbnb worked on something that was kind of a fringe idea. They needed money for rent and a design conference was in town. They thought they could make rent by making a website and letting people crash on the floor of their San Francisco SoMa loft on Rausch Street.
Here's Brian describing what it was like to host people for the first time. We end up posting three people from around the world, a 35 year old woman from Boston, a 45 year old father of five from Utah, and a 30 year old from India.
And now, I gotta tell you, the reason we started doing this is because we thought it was funny, cool, and we make money. Because we had to make rent. There's something that happens though. When somebody lives with you, it's kind of like the arc of a friendship gets contracted from a year to a day.
In other words, if you were to meet somebody, maybe here at Stanford or in the real world, you get to know them, how much time does it take to like invite them over to your house and have dinner with them? It might take like months, even a year. Like you don't just get to know people. And what it did, we realized is it can it it contracted this year long friendship into a couple days.
And so these people came as strangers. They literally left as friends. We ended up keeping in touch with them. In fact, one of the guests ended up inviting me to his wedding. The other guest, this woman, moves to from Boston to San Francisco and I think we're realizing there's a bigger idea here. This is a really interesting experience in empathy because it was so direct.
You can't get closer to someone than literally sleeping under the same roof with your users.
And what they heard in that first experience was what they used to pursue that idea. They had direct experience which gave them direct belief and conviction that this was something that was going to work. Airbnb is now worth more than a hundred billion dollars and counting on the public markets. Third and most counter intuitively, you need serenity.
The ability to accept things that you cannot change. This of course is from the serenity prayer by theologian Reinhold Niebuhr. God grant me the serenity to accept the things I cannot change, courage to change the things I can, and the wisdom to know the difference. One of the best recent examples is actually DoorDash. I worked with the startup at Y Combinator.
They reached 50% market share in The United States through a brilliant mix of strategy, but also extreme customer focus. Now picture this, your DoorDash, your competitors like Uber have incredible access to capital, and they're fighting it out in the cities in a pitched battle for market share. Early DoorDash employee Michael Block recounted this in a recent tweet storm.
Seamless had a seventeen year head start. Uber had 50 x their marketing budget. They retreated. They retrenched to Long Island, New Jersey, Westchester, and Connecticut. They found product market fit there and were profitable in a matter of months. DoorDash had the serenity to accept things they could not change. They went to the suburbs where their competitors were not. And here's the key thing.
They took the profits in the suburbs and won the cities. In a capital war, there are two ways to win. One is just to raise more money. But what can you do if you can't raise more money? You gotta do what DoorDash did. Be more profitable. Outflank and outsmart. Don't fight a losing battle.
Fight the battle you can win. DoorDash is now worth over $55,000,000,000 on the public market. If you have first principles thinking, you'll have the curiosity, the empathy, and the serenity to find a better path. You'll break out of the standard script. You'll go direct. You'll learn more about the customer, and you're gonna fight the right battles. You can win this.
Thanks for watching all the way to the end. I know if you've watched this far, you're one of the special people in the world who believes in lifelong learning. And I wanted to tell you about a startup we funded called Knowable. They're the best way to learn life changing skills with audio courses from experts like my friend Alexis Ohanian on starting a startup or Mark Bittman on how to eat well.
Check it out at knowable. fyi and use my coupon code Gary with two r's, which gets you 25% off your subscription. Separately, I wanted to thank you for watching this year. It's been a crazy year and I wanna let you know that the proceeds of my YouTube channel this year are being donated to Code twenty forty, a nonprofit dedicated to bringing racial equality in tech. Learn more at Code2040. org.
If you like this, please give it a like, click subscribe, and hit the bell icon to get notifications for when I post. So that's it this week. Be well. I'll see you again next week. Take care, everyone.
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