Lecture 10 - Culture (Brian Chesky, Alfred Lin)

1. ALAlfred Lin0:03

   Set the stage with a few slides and some comments, but the main stage is gonna be with Brian when he comes up and talks about, uh, how he built the Airbnb culture. So, uh, you're here. You, I've been following the presentations and so now you know how to get started. You've built a team. You started to sort of build your product. It's off the ground. It's growing. People love it. You figured out how to do that. You figured out how to create a s- very special one-of-a-kind company with, uh, monopoly powers that's bi- and the market that you're chasing after is slightly bigger than the paper airplane business, so you're good, right? So now what? So we're here to submit that actually culture is the thing that's gonna be very, very important for you to be able to scale, uh, the business as well as your team. And hopefully after this talk, you'll be able to know what, what is culture, uh, why does it matter, how to sort of create your core values and think about elements that sort of fit together for the core values and the culture that create a high performance team and get some best practices for the culture. So what is culture? Um, anybody have a, wanna take a guess at what, how one should define this?

2. SPSpeaker1:17

   A set of values in a team.

3. ALAlfred Lin1:19

   Yeah, that's good. You, did you look that up on the, uh, because you had a computer and internet connection? Did you just look it up? So these are some definitions, uh, that, uh, you'll find, uh, in, in Webster's Dictionary and, but that, that... We're at Stanford. This is kind of a trick question. It's a CS class. Pe- questions are never straightforward. The real question is, what is company culture gonna be? You know, culture that we can generally talk about society, uh, about groups, about places or things. Here we're talking about company culture. And so how do one define company culture? We can take the previous definition and modify it a little bit. And so every, this is a hint of how we w- may wanna define company culture. Every day, blank and blank of each member of the team in pursuit of our company blank. Uh, and some people have filled these in with different sort of things. A, the first blank could be assumptions, beliefs, values. My favorite is core values. The second blank for the B blank, people have said behaviors. My favorite sort of answer to that is real action. How do you act? Uh, and in pursuit of goals, that's kinda weak. Uh, in, in, in pursuit of big and hairy, audacious goals, that's a little stronger. But a better definition is in pursuit of the mission. So now that sort of we have that definition, what do we do with it? And why does it matter? Uh, this is a quote from Gandhi, "Your beliefs become your thoughts, your thoughts become your words, your words become your actions, and your wor- your actions become your habits, and your habits becomes your values, and your values become your destiny." If you don't have a good culture in the company, you can't pursue your destiny. Uh, why it matters is it, it becomes the first principles that you sort of go back to when you make decisions. Becomes a way to align people on values that matter to the company. It provides a certain level of stability to fall back on, and it provides a level of trust that people can sort of trust each other with. It'll also give you a list of things that you should be able to s- figure out what to do and what not to do. And what, the more important thing about that is what not to do. Uh, and then finally, the other thing that is important is it allows you to retain the right employees. There are people in this world that are not gonna be a fit for your company, but if you have good, strong culture and good, strong core values, you'll know who you wanna retain and who you do not wanna retain. And if you took the, take the first words, uh, first letter of those, it happens to help you move faster. Another reason. You're thinking that's like all mushy stuff. This is actually more scientific stuff. Uh, so here are, uh, indices for, from 1997 to 2003 of stock market index of companies in the S&P 500, in the Russell 3000, and then for the one, uh, Fortune 100 best companies to work for. They survey all these companies out there and they've picked out companies that they believe are the best companies to work for, and the returns, the stock market returns of those companies happens to be 11.8 perc- uh, 11.08%, which is almost twice that of the other two indices. And so there's real power in companies that treat their employees well, where there's a lot of trust and what, where there's a lot of cul- uh, strong culture. So how do you sort of create a, a set of values and, and sort of define the culture, et cetera? Get asked that a lot. You gotta start with the leader of the company, the founder, and, uh, w- sort of ask yourself, what are the personal values that are most important to you? What are those things that are most important to the business? Uh, who are the types of people you like working with, and what are their values? And through that, you sort of distill together what a set of values are. Then think about all the people that you've never liked working with. What values do they have? Think of that, the opposite of that, and maybe those should be considered values for, for, uh, your company. And finally, remember, this, the values have to support your mission, and if it doesn't support your mission, you're missing something. And, and then the last final checks are cre- they have to be credible and they have to be uniquely tied to your mission. So at Zappos, in terms of uniquely applied to the mission, we were focused on creating a culture that was gonna provide great customer service. So the first core value we had was to deliver wow through service. We were very specific that we wanted to deliver great customer service and it was gonna be a wow experience. And then below that, we want to sort of add a paragraph supporting that, talking about exactly what we mean by that. We want it to support them th, um, deliver wow through service and support people such as our employees, our customers, and our brand partners, and our investors. On terms of the opposite thing, we generally didn't like working with arrogant people. So one of our core values at Zappos was to be humble.Uh, so those are two examples where we sort of created core values in a way that sort of, sort of became, uh, credible and uniquely tied to our mission. So you go through this process, you come up with a few core values. These might be some of them, whether it's honesty, integrity, service, teamwork, and it might be a list of, you might start with three, you might end up with a list of 10, you might list, list of 30. It's a good start. Um, and when Zappos went through this process, we started with like, we asked all the employees at the time h- uh, what core values they wanna identify with. We came up with 37. We initial- we sort of whittled that down to about 10. Uh, and it took a year to do this. That's a long time, and you might wanna ask why. Well, if you just come up with the word honesty, I mean, give me a break. Everybody wants, uh, the culture to be honest. No, you w- nobody's gonna say, "I wanna be lied to every day." Uh, s- service, what do you mean by service? There's gotta be a lot more depth in this than that. And nobody, everybody talks about teamwork, but there's a difference in level of teamwork that you see in an intramural sports team as, versus a baseball team. And so how do you sort of dive deeper into teamwork? What are the things that don't work on, uh, for a team? A lot of it has to do with communications. A lot of it has to do with things that people have studied, and you might wanna go deeper into that. At Zappos, we thought about, well, there are a lot of smart people in this room. Um, when they're fighting with each other and trying to figure out who's right and who's not, it's probably not the best use of time, and we wanted everybody to sort of riff off each other and help each other make any idea better. The result is that the company gets a better idea, not that any individual person is right. So we wanted to m- instill this idea that it's company first, then your department, then your team, then yourself. And how do you do that? You could go an- up, an, a level deeper in that. There's another, there's a great sort of, um, sort of element of high-performing teams that I really like, which is this pyramid that was created by Patrick Lencioni, um, and he wrote this book, The Five Dysfunctions of a Team. And the reason this is interesting, he talks about the breakdowns of a teams. First of all, if you don't, a lot of teams break down because they don't have any trust. Then even if you had trust, why do you need trust? Well, then if you have trust, you can actually have debates and conflict and get to the right answer. If you don't have conflict and debate, people are just, it's the blind leading the blind. How do you know you actually got to the right answer before you sort of commit to something? So people are not actually willing to commit. They're afraid of committing. Uh, and so let's say you get to the next level and you are actually able to commit. Well, what, what goes wrong then? It's usually because people are not held accountable to things that they committed to. And if people are not held accountable to the things that they've committed to, then they can't get results. And I would submit to you, if you think about the company as a black box, and results, whether it's financial, whether you produce a great product or anything like that as the output, one of the major inputs is the culture of the company. So, uh, some other best practices we're gonna actually talk about w- during Q&A, because I think this is gonna blend into the conversation, is that you wanna incorporate your mission to values. We've talked about that. Performance, you gotta think harder, deeper, and longer about your values than you might initially think you need to do. Uh, one of the things that I think a lot of companies don't actually do is they interview for technical fit or skill fit, uh, or, or competency in that realm that, but they don't actually interview for the culture fit and whether someone will actually fo- believe and follow the mission. I think that's a big, big no-no. Like, I think you can have the smartest engineer in the world, but if they don't believe in your mission, they're not gonna put their, pour their heart and soul into it. Uh, and that's one of the things that where if you actually sort of start thinking about culture from the interview process, to performance reviews, to making sure that it's a daily habit, you'll get, uh, a lot further with produ- with, um, making a great culture. The l- final point on making a, c- uh, a daily habit, I think culture, just like customer service or fitness, is like motherhood and apple pie. Everybody wants to provide great customer service. Every company wants to have a great culture. What they fail to do is m- make it a daily habit. You just can't be fit if you're, if you don't do it as a daily habit. Eventually, you get out of shape, then you get fat, and then you're like, "Oh, I gotta go on a crash diet to sort of get back into shape." That doesn't quite work, uh, and the same is true with something like culture. So I think we've checked all of these off, so we can go into Q&A with Brian.

4. BCBrian Chesky11:21

   All right, cool. Can you move the chair? Right here?

5. ALAlfred Lin11:28

   Yeah, that's good.

6. BCBrian Chesky11:30

   All right. Hello, everybody. It's quiet in here.

7. SPSpeaker11:33

   [laughs]

8. BCBrian Chesky11:34

   I'll be honest. Now it's much better. Now I feel a little less on edge. Nothing worse than like a, a room full of people really, really quiet staring at you, but now I feel better.

9. ALAlfred Lin11:42

   Oh, I did it for five, 10 minutes.

10. BCBrian Chesky11:43

    Yeah, that [laughs]

11. ALAlfred Lin11:44

    You, you could bear it for a little longer.

12. BCBrian Chesky11:45

    Yes, exactly.

13. ALAlfred Lin11:46

    So Brian, could you talk about how, the process by which you came to understand that culture was important to Airbnb and in building the company?

14. BCBrian Chesky11:54

    Yeah. So, um, I think one of the things we realized is, so just to give you, uh, I won't tell the full story of Airbnb and some of you may know it, um, but the very short version of the story was that, um, Airbnb wasn't meant to be, like, the company we were trying to start. I had quit my job. I was complete, um, I was living in LA. One day, I drove to San Francisco, became roommates with my f- uh, friend from college. I went to Rhode Island School of Design, Joe Gebbia. And-I had $1,000 to bank and the rent was $1,150. So that weekend, um, this international design conference was coming to San Francisco. All the hotels were sold out. We had this idea, let's just turn our house into a bed and breakfast for the conference. I didn't have any beds. Joe had three air beds. We pulled them out of the closet. We called it the Air Bed & Breakfast. That's how the company started.

15. ALAlfred Lin12:43

    [laughs]

16. BCBrian Chesky12:43

    I probably told that story 10,000 times by the way, some version of that story. And I didn't think I'd ever tell that a second time. Um, when ... I, I remember growing up, um, I, I also went to college and, and, um, my parents were social workers, and they had kind of been nervous about me going to art school. They kind of worried that maybe I would, like, not get a job after college, which I'm sure a lot of parents are worried about. She said, "Make sure you promise me you'll get a job with health insurance." I ended up starting Airbedandbreakfast.com was the original name, and she remember her telling me, "I guess you never got that job with health insurance."

17. ALAlfred Lin13:14

    [laughs]

18. BCBrian Chesky13:15

    Uh, the reason I say this though is this. Airbnb was never meant to be the big idea. It was meant to be the thing to pay the rent so we could think of the big idea, and along the way, by solving our own problem, it became the big idea. Um, so alongside that, um, uh, and I'm not gonna talk about, like, kind of how we built the product. That's probably another conversation that some other people are talking about. You have to build a team and a great company. And in the early days, we had three co-founders, Joe, Nate, and myself. And I kind of think of one of the reasons we're successful was I was really lucky. And I don't think I was really lucky 'cause we came up with the idea of Airbnb, and I don't think we were really lucky that we became successful once we had the team. I think we could have come up with a lot of ideas and been somewhat successful. I think I was lucky 'cause I found two great people that I wanted to start a company with, people I admired that almost intimidated me how talented, how smart they were. And I think that's one of the first things, is you gotta build a team that is so talented that they kind of almost make you slightly uncomfortable 'cause they know by being with them, you're gonna have to raise your game to be with them. And then when we were working together in the early days, this is like 2008, um, the first thing is we, we were like a family. You think about founders. Founders are like parents, and the company's a child, and the child will manifest, in many ways, behaviors that parents have between their relationship. If the parents are dysfunctional, they're not working together, then the child's gonna be, frankly, pretty fucked up, and so you don't want that.

19. ALAlfred Lin14:34

    [laughs]

20. BCBrian Chesky14:34

    You want your culture to be awesome. And so Joe, Nate, and I were like total fa- a total family in the beginning. We, you, we worked 18 hours a day, seven days a week. I remember when we were at Y Combinator. We, like, worked together. We, like, ate food together. We, like, even went to the gym together. We may as well have gotten jumpsuits. We didn't go that far.

21. ALAlfred Lin14:51

    [laughs]

22. BCBrian Chesky14:51

    But we were like, it was like we were a mission. I felt like we were like a special forces or something. And we had this, like, amazing shared way of doing things with amazing accountability. And then, um, we reali- That was, like, the DNA of the company. And then we started thinking, at some point, you go from building the product to phase two, which is building the company that builds the product. And so a lot of the talk is about how do you build the product, how do you get product market fit. Once people start doing that, now you've gotta build a company. And it doesn't matter how great your original product or idea is. If you can't build a great company, then your product will not endure. And so we thought about this, and one of the things we realized is we want to build a company for the long term. The last thing I want is to build something ... I mean, think about it this way. If your, if, if your company's like your child, a parent wants his child to outlive him or her. It'll be a tragedy to outlive your child. It would also, I felt, like, be a tragedy for us to outlive our company and just watch it rise and fall. We didn't want that. We wanted a company that would endure. And so to do that, we started noticing companies have something in common. Companies that were around for a really long time had a clear mission, and they had a clear sense of values. They had a shared way of doing something that was unique to them and was really, really special. And so then Joe, Nate, and I, when we were three people, decided to look around companies. I noticed Apple, you know, Steve Jobs talked about his core value was that he believed people with passion could change the world, and he said, "Our products change, but our value never had." And we learned about Amazon. We learned about Nike. We learned about companies in the early days. You can even use this to talk about organizations. You know, even, like, a founding of a, like a nation has a strong values and a declaration, then the country might endure longer. And so we started realizing, like, we need to have intention. Culture needs to be designed. And that's kind of how we got connected, is because, um, you know, when we were funded by Sequoia, Alfred Lin had just joined from Zappos to Sequoia. And I was told Zappos had an amazing culture, and we went to Las Vegas and met up with Tony, and we learned about it.

23. ALAlfred Lin16:45

    And so what did you learn?

24. BCBrian Chesky16:47

    Well.

25. ALAlfred Lin16:47

    [laughs]

26. BCBrian Chesky16:49

    [laughs] You guys were crazy.

27. ALAlfred Lin16:51

    It's a nice-

28. BCBrian Chesky16:51

    Um, I, the fir- the thing we learned, and we were three people, was you need to ha- Like, c- if culture's a shared way of doing things, there's really two parts. One is behaviors, and those can kind of change, and maybe 50 years from now there will be rituals and behaviors that will change and be different. But there have to be some things that never change, some principles, some ideas that endure, that make you you. And I think of core values as integrity, honesty. Those aren't core values, 'cause they're values everyone should have. They're, like, integrity values. But there have to be, like, three, five, six things that are unique to you. And you could probably think about this in your life. What is different about you than every single other person? If you could only tell somebody three or four things, what do you want them to know about you? And we l- realized that when Zappos was 100 employees, they wrote down these nine core ... Is it nine?

29. ALAlfred Lin17:35

    10, 10.

30. BCBrian Chesky17:36

    10? 10 core values. And the only thing I learned from Tony is he said, "I wish I didn't wait till I was 100 employees-"

Episode duration: 50:25