The Exchanges

Q For the founders that end up running their businesses at scale, do you think it's somewhat random luck in the sense of the organization can actually handle those peculiarities? Or do you think they tend to go into different phases and maybe mature in some way?

A No, I don't think they mature. I think they, uh, discover an organizational trick. One of my best friends, John Rubinstein, was, uh, uh, Jobs's, uh, head of hardware for, you know, both at Next and then at, uh, the reinvention of Apple. And John, I think, was representative of Steve Jobs growing up. Jobs was still insane, but, but the second coming of Steve Jobs had an organizational level of world-class executors. Tim Cook, John Rubinstein, Avi, et cetera, were all people who could take that craziness and filter it down to an organization that provided a level of stability. They were an impedance match. You know, between crazy whatever to competent management, and that's what Jobs lacked in his first incarnation at Apple. There was no filter. There was no level of operational excellence between his mouth and then the direct people he was trying to manage.

AI assessment note: “No, I don't think they mature. I think they, uh, discover an organizational trick.”

Q What was the founding story of the forceps to the epiphany? What, what was going on that led to that crystallization and ultimately the book?

A So as I mentioned, I, I started practicing some of this in my last company called Epiphany, actually was the name of the company. The founding story of, uh, on the four steps of Epiphany was I had retired and thought that the world really needed my memoirs. And I had structured my memoirs to kind of, and I started writing them here and I started doing it chronologically. Here's company X, you know, and then I, at the end of each one of those vignettes, I wrote something called the lessons learned. Here are the bullets and the next company and, you know, whatever. And I remember I was up skiing with my wife and daughters, and they were out on the slopes, and I brought a computer, and I still have the document. I was up to page 80, and the hair stood up on the back of my neck. I realized that there was a pattern here I had never seen. The companies that I actually spent time with customers, I did really well at, or, you know, or somebody had spent time. And the companies where we just went and executed because we got funded the plan, and VCs said we were geniuses cause they wrote a check and therefore the kind of canonical model was here, you know, go to alpha test, beta test, first customer ship. And, and do we have enough room to store all the bags of money? But that wasn't true. And I realized I never saw that before. And then realized my, my investors weren't telling me to do…

AI assessment note: “The founding story of, uh, on the four steps of Epiphany was I had retired”

Q Going back to sort of what we were talking about a few minutes ago, do you have any ideas or interventions if, if in the U S we wanted to 10 X the number of successful companies that are started in a given year, what would need to happen? Maybe we could, you know, create more dysfunctional families, but I think we're probably at maximum capacity there.

A You know, after I was an entrepreneur for two decades, I just realized I've been an educator now. For even a longer amount of time, which is frightening on multiple levels. But, but here's what I, I think I discovered and I'm going to use an analogy for about 30 seconds to make the point. You know, in the middle ages, we discovered that to make great artists, you have them apprentice with other great artists and they would work in someone's studio and they would learn, you know, some techniques, et cetera. And so, but people had a self-select that they want to be artists. But in the 19th century and certainly in the 20th century, we realized we can actually find artists earlier and a lot more of them if we did something that never occurred to anybody before, and that is teach art appreciation all the way from kindergarten on up. And what I mean by that is we taught kids how to do painting. We taught them how to write stories. We taught them how to, you know, do little sculptures and put on plays, et cetera. And, or draw little cartoons. And most of us, including me, went, well, I have no skill in this at all. But what's really interesting is, you know, some fraction of kids said, really? You could make a career out of writing? Wow, I want to do that. Or, wait a minute, meaning people will actually buy my paintings? And by the time they graduate high school, we have a cadre of k…

AI assessment note: “how come we don't have the equivalent K-twelve in entrepreneurial appreciation?”

Q all sorts of topics around founder psychology, like what drives second and third time founders and why some folks run out of energy while others can seemingly go on forever. And we end on what he's changed his mind on since publishing his book nearly 20 years ago. I really hope you enjoy this episode, our last one of 2023. So why do you think there aren't more successful startups?

A We still kind of get it wrong because of the, the makeup of entrepreneurs and the nature of capitalism and business. I mean, world-class entrepreneurs want to create things. And, and even in my career, it was, you know, the tendency was to fire ready aim. You know, the whole lean methodology I built was to kind of constrain myself that says, well, even though you believe all you have is a series of untested hypotheses and that's really, really hard. To kind of integrate with the passion of the entrepreneur. And, and then there's probably a limited pool, but though I'm not sure we've tapped into it worldwide, a limited pool of people who truly can see over the horizon, who understand that integration of technology and art and the possible, and, and who know is just the beginning of a conversation. All the things we know about great entrepreneurs. Uh, they're relentless, they're irrational, they're passionate. They see things that other people don't, and that means that You know, all of them think they're visionaries, and we know the data says 98% of them are hallucinating. You know, so far the, the data says the, the world-class ones, at least the ones that make it in Silicon Valley and the ones that get funded are completely antisocial and probably come from usually dysfunctional families. I mean, it's not a requirement, but it seems to fit the everybody from Ellison to, to cer…

AI assessment note: “We still kind of get it wrong because of the, the makeup of entrepreneurs”

Q think that one of the things that's in very short supply isn't necessarily kind of a vision for the future, but it's Right. I think that X is going to happen in the future. There's an opportunity for Y. Very few people have the ability to then assemble the steps to ultimately get to something that's five, 10, or 20 years away. And so what comes to mind for you?

A Well, I, you know, this is when you have a world-class board or world-class advisory board that helps young founders or not so young founders actually think about, you know, great. We want to get here. How do, how do we actually think of the pieces of getting here and how do we make money for both the company and its investors simultaneously with, you know, one of the things we haven't done well in the. Entrepreneurship ecosystem is right enough actual, and I use the word because I hate them, case studies that actually describe reality, um, rather than, you know, Sally is sitting by the window thinking if you've ever read any HBR case studies, none of them really are about product market fit or MVPs or long-term strategy. They're all, you know, God knows what they are. Now I'm talking about the investing side. A good job as an industry in, um, in teaching. We do a world-class job in investing and we make enough money. So we don't think we have to teach, but I also now have value that it wouldn't take much to actually start building and writing about extended lessons. I think Y Combinator has done a good job on the front end. If you look at their startup school videos and some of the others, et cetera. But I think what you're talking about is how do I extend this thing into a company that lasts, you know, past my fund or, or whatever. That are actually lasting companies, and wha…

AI assessment note: “this is when you have a world-class board or world-class advisory board”

Q What do you make of Satya and his success? Probably the best example of a non-founder taking over a business. For the last 20 years.

A Taking over a company that no one would have remembered their name, you know, the whole pivot out of windows and into the cloud and was just genius. And he did it in a way that was, uh, you know, I'm sure was wrenching for some people inside, but from the outside almost looked like the resurrection of, you know, it's just an amazing job. And I think it's an example of somebody who wasn't beholden on that track. I mean, the problem is when you're in it, think about what Outsiders bring. It's just a, they're not beholden to any, um, Any dogma and, and any doctrine that the company might've had internally, and they're able to look around and say, well, Windows is great. I'm glad you guys spent 20 years building it, but it's irrelevant for, you know, these other new things we need to be in. And yes, it needs to be a core part of what we're doing, but it needs to be a part of rather than the driver. And, and I think it took an outsider to do that. I think when Sam Altman came into, you know, why comedy? Uh, same thing, you know, Paul Graham and his wife Jessica built something spectacular. Sam took the next level and then open AI did something that, you know, no one expected Sam or what I didn't to do, which was, you know, basically, you know, create anti-gravity. I don't have to tell you and your listeners, you know, generative AI and AI in general is kind of like inventing electri…

AI assessment note: “the whole pivot out of windows and into the cloud and was just genius”