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Friends, 

What makes an exceptional founder? Longtime readers will know just how obsessed I am with this question. What made Steve Jobs the visionary he was? What allele explains Bill Gates? If you believe that special people are essential to human progress, deciphering them can begin to feel like an infinitely important and endlessly frustrating pursuit.

In our second edition of “Letters to a Young Investor,” I asked Reid Hoffman for his thoughts. There are many reasons why I think Reid is particularly well-suited to explore this topic. 

As an operator at PayPal, Reid worked alongside some of our era’s most formidable entrepreneurs and technological thinkers. His colleagues at PayPal, for example, included Elon Musk, Peter Thiel, Keith Rabois, Max Levchin, David Sachs, Roelof Botha, Chad Hurley, and other members of the “Mafia.” It is almost unfathomable to imagine what one might learn from being in the talent density of such a group. 

As an entrepreneur, Reid tasted both failure and stratospheric success. Most famously, Reid founded LinkedIn, which remains a core part of the internet today and earns over $13 billion in revenue under Microsoft’s umbrella.

And finally, as an investor, Reid has backed (and missed) a remarkable collection of highly productive founders, including Mark Zuckerberg, Brian Chesky, and the Collisons. (Check out our last edition for more on Chesky and the Collisons.)  

All of this is to say that Reid has lived the founder’s journey and observed it from multiple angles. In today’s correspondence, we delve into Reid’s recollections, discussing Satya Nadella, Jeff Weiner, and a formidable AI entrepreneur.

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Mario’s letter

Subject: The psychology of founders
From: Mario Gabriele
To: Reid Hoffman
Date: Monday, October 30 2023 at 9:34 AM ET

Hi Reid, 

Thank you so much for your fascinating, generous correspondence. It brought to light the pleasure and trickiness of this form – namely, that I would like to respond to all of the fascinating things you shared with long disquisitions peppered with exclamation marks. The Collisons! That David Sze anecdote! Massimo Bottura! Innovation in academia! Out of respect to both you and eventual readers, I will try my best to limit myself to only a handful of divagations.

As a proud Washington resident, you will be glad to know that I have traded one gray, rainy city for another with today’s missive coming to you from London. (In a nice bit of serendipity, we are staying in an Airbnb, which is home to not one but two Settlers of Catan boxes.) The visit has allowed me to reacquaint myself with the city via long walks, visits with old friends, and amazing meals. If you ever find yourself in town and enjoy Indian food, I particularly liked The Tamil Prince in Islington.

That brings me to Massimo Bottura. It is a thrill to hear about your evening there – and slightly dizzying to imagine two very different role models of mine interacting. Before I entered the world of tech, I attended culinary school, studying Italian cuisine. (I also briefly staged at a Michelin-starred French restaurant in New York, where I learned to reliably slice eggplants.) If you had asked me then for a list of culinary idols, Bottura would have topped the list by some distance. Though I haven’t had the pleasure of eating his food yet, his zeal, creativity, and sense of visual drama have served as inspiration. 

I was very glad to hear your reading recommendations and picked up both Mustafa Suleyman’s and Dr. Fei-Fei Li’s books. I enjoyed some of the other AI books I’ve read this year (notably the Schmidt, Kissinger, Huttenlocher folio) but am very much still getting up to speed. Hopefully, that pairing will make me a more educated interlocutor for our future correspondences.

Speaking of, I am so excited to continue our discussion of investing. I absolutely loved your anecdotes about Stripe, Airbnb, and Nanosolar. At a high level, I found your discussion about having a “good theory of the game” sneakily profound. In the investing world, I imagine many find it tempting to play the game without a good theory – to imitate without really understanding, to make compromises without being certain of the risks you’re taking. It can be appealing and reassuring to borrow others’ perspectives and investment positions, but by doing so, you are playing the game without a strategy – rolling the dice and moving across the board blindly. What I found particularly striking about your Airbnb investment is that you were not blind to the risks – you saw and understood them – but invested all the same. A meta-point in that story also struck me: the importance of good friends and mentors. David’s willingness for the fund to make what he considered a clear mistake – and the humility to admit he was wrong – felt like an insight into his character. I was also interested in understanding what David saw in the six months after Greylock’s initial investment that changed his opinion, especially since it pre-dated breakout revenue. If you recall, what were the early signs of something special happening?

One of your remarks is an apt introduction to a subject I’d love to delve into more deeply. In your last email, discussing how tech and venture investing have evolved, you wrote: “What hasn’t changed, though, is the primacy of people.” It’s incontrovertible that when building a generational business, people matter a great deal. But exactly how much do they matter in your view? I often think of Marc Andreessen’s 2007 post, “The only thing that matters.” While Marc doesn’t deny the value of a great team, he suggests that a great market is even more important. 

Conversely, one of the most remarkable venture firms I’ve studied (that I plan to write about soon) takes more or less the exact opposite position, weighing the founder over everything else. Where do you sit on this spectrum?

Perhaps more important is the difficulty of assessing what a “great” founder really looks like. Some VCs describe encountering an exceptional founder as an almost physiological experience, a “you-know-it-when-you-feel-it” moment. In your last note, you spoke of meeting two of the most impressive startup CEOs of the last decade in Patrick Collison and Brian Chesky – before they had earned that reputation. Did you feel that kind of magnetism? What struck you about them in those early encounters? Are there other founders that have left you feeling particularly stunned or inspired?

Beyond sheer gut intuition, I’d be fascinated to hear how you would articulate your founder filter. You mentioned some admirable qualities in your previous message: tenacity, creativity, character, and care for the problem at hand. How do you test for these things? Are there other traits you’ve found predictive? What do you look for in early meetings? Do the best founders you’ve met take advice – or, as some have suggested – ignore it? What weaknesses do you think exist in your current founder filter, which is to say, what types of “false positives” do you find yourself most prone to incurring?

Finally, although the primacy of people may not have changed, I wonder if the types of people have. When tech was a more capital-intensive greenfield, were startup founders noticeably different? Did it require a different kind of stubbornness? Or has the increased competition of the current environment led to a hardier, steelier entrepreneurial class?

I realize that I began this message with a flurry of exclamation marks and have ended it with even more question marks. I hope you will not feel obliged to answer them all. 

With much gratitude, as ever,
Mario

Reid’s response

Re: The psychology of founders
From: Reid Hoffman
To: Mario Gabriele
Date: Saturday, December 2 2023 at 6:23 AM PT

Hi Mario,

I’ve also enjoyed our exchange; thank you for initiating :)

Catan, crispy dosas, and the company of good friends sounds like life well lived. I appreciate the south indian food rec and have noted it for a future visit. It’s been nice to see that the food in London has improved considerably from back in my Oxford days!

Segueing back into investing, I actually think all the investors who evaluated Airbnb at that very early stage were, if anything, “overly aware” of the risks. I think it’s human nature for risk, at times, to shine a little brighter than potential.

But of course, risk is intrinsic to what we do as venture investors. The crucial task is to effectively understand the risks while dispassionately weighing them against the resources available to overcome them. Can the risk be balanced well enough to allow sufficient room for the opportunity to bloom and realize its potential? With Airbnb, yes, the risks were very real…but so was the scale of opportunity and strength of the founders.

I especially appreciated your meta-point on the importance of good friends + mentors in relation to my interaction with David Sze. It’s probably underappreciated how much these candid conversations, within our trusted circles, are essential to our development and for gaining insight into both ourselves and others. When I joined Greylock in 2010, it was the character of the people that drove the decision. I looked forward to learning and working with them and that decision has been validated countless times over the past decade+.

In the absence of market data, I think what David saw was the emerging power of the ecosystem and brand. Many of Airbnb’s original avid audience was in the tech community. Between the depths of the community’s evangelism for the brand alongside Brian, Nate, and Joe’s talent & devotion to the mission – he spotted that something special was gathering momentum. 

Looking back, I think it was the dichotomous nature of how Airbnb delivered value. On one hand, it was straightforward: the “sharing economy” unlocked underutilized assets (here: unused space inside homes) to make the economy more efficient. It used technology to increase the utilization rate. Important, but sterile if it were the only value offered. 

But, there was also, way on the other side of the spectrum, this ethereal je ne sais quoi that you felt from the experience. There was an authenticity of staying in a local’s home, a serendipity that was possible in communing with a host. In an increasingly mass-produced world, it was a small window of an almost artisanal connection to a place. There was fundamental value being created and it felt special. That’s a precious alignment and it’s what I believe David came around to seeing. 

The founder vs market question is very interesting. I’d posit that it’s rarely such a stark choice. It’s much more often about the right founder for the right market or for the right moment in time. Satya Nadella (a “re-founder,” as I christened in my podcast Masters of Scale) is a generational CEO at Microsoft, could he have this same transformative impact at, say, McDonalds? Or a small 5-person start-up in the fashion business? Maybe. Maybe not. Fit matters. Similarly, when you look at founders, there are distinct stages from 0 to 1, and then 1 to scale. The founder who can get you from 0 to 1 might not be the right one to scale an organization. As you know, I was the CEO at LinkedIn from 0 to 1, but ultimately, Jeff Weiner was the “re-founder CEO” that led our team to truly global scale. In those early days of 0 to 1, there often seemed to be a fifteen-minute gap between believing that “we were going to rule the world” and then feeling as if “we’re so gonna die.” That’s just one of the different challenges and experiences from building to a global scale!

Given this – the many different types of markets, stages, and dynamics at work – I think a singular archetype of a “great founder” is likely illusory. Certainly all great leaders are voracious learners, but there are many different styles to this – some learn by doing whereas others by talking and listening. At this point, though, relentless self-improvers and learners are probably table stakes. Founding leaders require an almost irrational self-belief (some may say self-delusion) that their vision for the future is possible. It might sound like a contradiction, but it’s necessary to hold that belief while also being conscious of the inherent risks...