Lenny's Podcast: Product | Career | Growth
00:11:25 · Keith Rabois
[00:11:25] S0: I bet you he's pretty good and that he's been pretty accurate too. So I think you can learn that. That's a skill that's teachable, that being absolutely incredibly dedicated to your craft, you can just get better at. Back in the day, there's an investor at Greylock who's on my board at LinkedIn, David Sze, very successful investor, notable for both LinkedIn and Facebook investments. He used to teach at Greylock, you couldn't stop referencing a founder until you hit a negative reference. So you would know you had exhausted the reference when you finally hit a negative reference. And so I think there are tactics there in muscle building. How do you get the right information from the right people? How do you frame the questions, et cetera? That will lead you in the right direction. Now, you have to be careful, let's say, I'll give you an example where this can go wrong. I've been a longtime investor from the seed round of a company called Faire, founded by two of my colleagues at Square, Max Rhodes and Jeff Kolovson worked for me at Square and then the two other co-founders also worked at Square. When people were reference checking Max, often most VCs asked the wrong question, which was, "Was Max a good employee?" The answer to that is very mixed. And so some venture capitalists, including some very good ones, were nervous about investing in Faire. If they frame the question slightly differently, which is, "Is Max capable of being a world-class entrepreneur?" the answer was yes. So again, it's a tactic you have to understand, what exactly am I trying to extract? Same person, wrong question, wrong result. And many people passed on Faire and they regret it. And these are actually quite talented investors. They just didn't frame the question correctly when they were calling someone like Jack Dorsey up for the reference.
00:13:17 · Lenny Rachitsky, Keith Rabois
[00:13:17] S1: Any other questions you find really helpful in extracting the right information? [00:13:20] S0: When I interview candidates for senior people in leadership positions, I always ask them, look at whatever company they're at and say, "If you were CEO, what would you have done differently?" And you get a feel for their strategic mindset of can they drive value creation? Because almost by definition, they've come from a company that's had some traction success, so can they edit? So in your case, I would've asked you, "If you were CEO of Airbnb, what would you have done differently?" And you learn a lot from that question. On references specifically, I think a general arc that's pretty good is asking the person, what would lead to this person being most successful? And if something were not to work out, what would be the primary root cause that you can identify if something going wrong? I think generally probing on those two arcs leads to a lot of insight. [00:14:10] S1: And that first question is for the candidate or is that in the reference? [00:14:14] S0: Yeah, for the candidate. That's for the candidate specifically. [00:14:16] S1: Got it.
00:14:16 · Lenny Rachitsky, Keith Rabois
[00:14:16] S1: Got it. [00:14:16] S0: Because I don't want them to criticize Airbnb. I don't think that's that productive, but you can tell how much of the current business model have they absorbed, how much do they understand trade-offs. And then can they create an unfair advantage? Because they have insights into afterburners. And then I have a follow-up question, which is usually gold, which is, let's say I asked you this question about Airbnb and you give me this great answer. I'm like, "Well, why weren't you able to persuade Brian to do it?" [00:14:43] S1: So you made this interesting point that there's tactics that can help you get better at finding and identifying talent. A lot of this is just the feedback loop of doing it a bunch, it sounds like. I find the feedback loop is so, it's hard to actually ... Most people interview, hire, and then don't really learn much from how it ends up going. There's this gut thing that happens, but they're not really thinking about it. Do you have any advice for just how to make the most out of the lesson of seeing how something went? [00:15:09] S0: So I've read some research on the topic. And if you ask yourself 30 days after any hire, "Would you make the same decision?" That 30-day loop is pretty useful and it basically it's as accurate as measuring in a year or two years out. So you get a pretty tight feedback loop and you can ask the entire hiring team. So I think that is just a technique that every company should use.
00:15:09 · Keith Rabois, Lenny Rachitsky
[00:15:09] S0: So I've read some research on the topic. And if you ask yourself 30 days after any hire, "Would you make the same decision?" That 30-day loop is pretty useful and it basically it's as accurate as measuring in a year or two years out. So you get a pretty tight feedback loop and you can ask the entire hiring team. So I think that is just a technique that every company should use. [00:15:32] S1: I want to talk about this framework that you have, barrels and ammunition, because this is really mind-expanding and helping people understand who to even hire.
00:15:42 · Keith Rabois
[00:15:42] S0: So look, most companies raise money, they have some traction, they do a seed round, they get launched, they get some traction. Then they raise a lot of money, whether it's a series A or a Series B. And then they hire a lot of people infallibly or at least historically. And then the CEO, almost without accession, gets frustrated because they've hired a lot of people. The burn rate has increased a lot and they don't feel like more is getting accomplished per unit of time, per day, per week, per month, per quarter, and they get frustrated. And so then they sit around at a dinner with other CEOs or people like me or one-on-one conversation with me and are incredibly unhappy and disappointed that I'm spending all this money on all these people, but we're getting less done or the same done. And why, why, why, why? After years of sitting through these conversations at dinner with other CEOs or COOs, I realized that the fundamental driver of this is that the number of people that can independently drive an initiative from beginning, from inception to success is very limited within any company. And if you hire more people without expanding the number of what I call burials that can drive from inception to success, all you're doing is stacking people behind the same initiatives. And so you're wasting time, energy, and increasing your collaboration tax, your coordination tax. And so that's what causes the drag coefficient. So for example, at PayPal, we had about 254 people in Mountain View when we were acquired. Of those people, depending on how strict you really want to be. And this is considered one of the best talent rich networks of all time in technology, there's between 12 to 17 barrels in the organization. That's an infinite number. I once asked Jack Altman on a podcast at Loudouns, which is a pretty damn big company, how many barrels of the company? The answer was two. That's a more common answer for a very good company. So you have between two and let's say 15 barrels at a company. That defines the unique number of things you can do in parallel versus sequentially. And just hiring more people is not going to change that. And if anything, it's just going to cause a collaboration, a coordination tax, and you're going to have a track revision, you're going to do less.
00:17:50 · Keith Rabois, Lenny Rachitsky
So the key is to me is if you want to do more or need to do more, your market requires you to do more, your business model requires you to do more, VCs require you to do more, you need to have more barrels. Now, the question is how and when and all this. There's a lot of details there, but fundamentally, the ratio of barrels to ammunition is what dictates the number of important initiatives that can be pursued simultaneously. [00:18:15] S1: And you're not saying you don't want ammunition. It's valuable. To make an impact, you need ammunition in addition to the barrel. [00:18:20] S0: Yeah, you definitely need ammunition. And it depends on what kind of project. There are types of projects where an individual barrel may be able to succeed with very limited or no ammunition. Sometimes you may need a designer, an engineering team, a PM, a data analysis, blah, blah, blah. Depends on what the project is, what the problem you're trying to solve is, what's the proper amount of ammunition? But once you think about the ratios of ammunition to the problem, you can be much more constructive and deliberate and intentional about the team construction. [00:18:53] S1: Most people hearing this assume they are barrels. What helps you understand if someone's truly a barrel?