🎂 Keith Rabois — A Conversation

Great. Hi, everyone. Thanks so much for joining me. I have the pleasure of having Keith Rabois on with me today.

Hi, Keith. Hello. Pleasure to be with you. Yeah, so great to see you.

We kind of know each other, so it's great to reconnect. And thanks so much for agreeing to do this and to being part of this 10th anniversary birthday week fireside chat.

So I'm really excited because you always have a lot to say and you never hold back.

So I hope that's the case for today. I'll try not to be too boring.

OK, OK, good. That's good. Excellent. Well, look, you know, this week is all about reflecting the last 10 years.

Cloudflare's 10 years old. So on a 10 year birthday, you kind of want to look back in the last 10 years as well as predict the next 10 years.

So let's start with the past. So 10 years ago, you were an operator.

I mean, really, if I think about it, you're a legend in technology. I mean, you really have had an incredible career operating and now as an investor.

And as your Twitter handle says, also contrarian, which we'll get to.

And so if you think back as when you were an operator, both at PayPal, LinkedIn and Square, like really three iconic companies that have really shaped the last decade.

What are some of the lessons that you think that you would definitely do again if you went back to an operating role?

And what are some things now as you've kind of had some time to reflect, maybe things you would do differently next time?

Well, the most important lesson of my 20 years both as an executive and as an investor, angel and professional now, is that the people are what matter the most.

Like you can get caught up in products and markets and spreadsheets and modeling things and technology and architecture.

At the end of the day, the team you build is the company you build.

And the reason why PayPal was successful was we had an unusual density of talent that mostly due to Peter and Max's recruiting, Peter Thiel and Max Levchin's recruiting, we assembled an unusually dense pool of talent and we were able to solve problems that probably should have killed the company.

Same thing at Square, we wound up inculcating a very amazing cohort of people that really had entrepreneurial ambitions of their own.

Some of that energy was channeled internally and you see like the second generation of Square from Cash App and Square Capital doing phenomenally well because of that entrepreneurial energy.

A lot of people have also left Square, started their own companies.

There's probably three to $5 billion companies at least that have been created by Square colleagues.

So I think that's the number one lesson is it's always about the people.

And if you have the right people, all challenges are solvable and the wrong people, even things that should work, basically fail.

Well, you know, it's so interesting you say that because I always say the best part of my job are the people I get to work with, because I feel like we have a great group of people at Copper who love to solve really hard problems that maybe others can't.

So that really resonates with me.

Is there anything that as you look back that maybe you've changed your tune on?

I thought that was really important, but in retrospect now, maybe it was less important than I thought.

Yeah, I mean, I started more on the empirical side of measuring businesses quantitatively.

That's sort of the DNA I was taught and kind of grew up with originally at PayPal.

We were very empirically driven culture. People literally could do calculus on the fly.

Statistics was considered way too easy and superficial.

And then I moved over the maybe first decade of my career here into a more design driven approach, more measuring inputs and not outputs.

So it's a pretty radical shift.

I think there's a blend actually that is probably superior to either poll, but fundamentally I start more in a design driven model now and then use the metrics and use the data to validate the design, the quality of the design, the direction of the design versus bottom up building from data.

That's interesting.

Actually, I've been doing some of these conversations this week and this idea of like the people who can blend kind of bring these two skill sets together often create something new that's almost a better way often.

So that really resonates the design and then the data driven model and marrying the two, you probably get better outputs.

It's not about over-relying on one or the other. That resonates too.

You've worked with, again, PayPal mafia, like you kind of described the now up and coming square mafia, LinkedIn, another smashing success.

Do you keep in touch with the people you worked with?

Oh, absolutely. Both professionally and personally.

So one of the ways I sort of figured out how to be an investor versus angel later as a VC was I didn't really know much about investing.

I just knew people.

And insofar as, you know, my colleagues and friends from PayPal were starting new companies, I figured out I'd be pretty smart to back them.

So when Jeremy Stoplin and Russ were starting Yelp, I got involved in Yelp as an investor and board member.

When one of our co-investors in PayPal, Kevin Hartz, a friend of mine from college, was starting his own company that became Zoom, which is a publicly traded remains company that PayPal acquired.

I funded and joined the board of that.

When my colleagues from PayPal were starting YouTube, I funded them.

So basically, LinkedIn, same thing. I was an angel investor later and executive at LinkedIn.

It was mostly because I knew the people. So, of course, you know, from a professional standpoint and then secondarily, of course, you know, bonding, one of the virtues of real world companies is you get to bond with people.

And it may be a little bit different in a remote world that we're all sort of confronting right now, but it's not accidental that, you know, 13 years later, actually 20 years later, 17, 18, 19 years later, I went back and worked for Founders Fund with Peter.

And one of the reasons why the fund, which has a quirky hiring process, was excited to recruit me was I literally knew every single person who worked at the fund.

Maybe a third of the people were invited to my wedding. I worked professionally and tried to recruit basically every single person but one who was on the investment team.

So, you know, these relationships are extremely valuable.

But to this day, I still spend significant time socially with friends from PayPal, friends from Square.

I've funded several companies from Square now. Fortunately, most of them are doing very well.

Open Door, I brought in, you know, our first, recruited really our first machine learning data scientist to be a co -founder of mine at Open Door because that was obviously a personal set core DNA to our success.

I recruited, I funded from scratch a company called Thera which is doing phenomenally well where all four of the co-founders are from Square actually.

Two of the four who worked, you know, reported to me directly.

DoorDash was founded by, you know, an intern at Square.

One of our principals at Founders Fund was an intern at Square.

So, I think, you know, using managing relationships over time is really an important dimension.

Probably half of my wedding party, well, certainly everybody in my wedding party I've actually worked with professionally.

All three of my groomsmen have actually worked for me, which is scary.

So, I'm not sure about like whether I recommend that strategy or not, but it's an interesting strategy.

But in any event, yes, absolutely keep in touch with people from 20 years ago because basically you form bonds with people under stress and building a company is incredibly difficult, challenging, as you know, and you go through ups and downs, trials and tribulations, and that forges, you know, pretty indelible bonds that stay with you forever.

Yeah, no, I love that. I agree that it's when you're faced with these tough problems, you really get to know folks and you develop a bond and a trust that is hard to replicate in other situations.

And so, those are all the positive sides and, you know, and I love that.

It's like the long-lasting relationships and I even think about Cloudflare.

We're 10 years old. The people, like the first time I met you, you were a judge judging us when we were launching our company, which we'll get to, but and how these things come back and these relationships matter.

The downside of that is all the new people that want to come into this industry to say, but I don't know any of these people.

How do I get involved? So, how do you balance, you know, obviously you have these amazing, this amazing network, but how do you also make sure that you're meeting the next generation who want to come into the industry and making sure that, you know, it's open to others?

And this is actually one of the hardest challenges of the job, especially as you get older, because you get more distant socially and in other dimensions from new up-and-coming people.

And if you're going to be a seed or early -stage investor, you have a professional interest in finding the people that have original ideas, that are going to be the next generation of successful founders, and it gets incredibly difficult.

So, what I do is, first of all, what I do is I look recursively, which is who do other smart, talented, younger people hang out with, find interesting?

Who do they follow? Who do they find influential?

And you try to spend and allocate sometimes meeting new people, sometimes random, like basically allocate a fair amount of randomness to my schedule.

You can't meet, obviously you can't meet everybody. From a perspective of giving advice on if I were an up-and -coming person and I didn't have a pre -existing network, what would I do?

I think one of the easiest things to do in the last 10 years that wasn't really available before previously is to write interesting things with interesting perspectives, whether you do it on Twitter or Medium or Substack.

If you have a voice that's unique, people will find you. I've actually found people that have written the most interesting, fascinating things on China and actually reached out to them and learned that they were some high school student in New York.

Like I didn't even know when I was reading and found sort of a work product to be so impressive and differentiated that they were 16 years old or 18 years old.

And so it's possible to come through the clutter if you have a unique perspective.

And so I'm constantly looking for new and interesting people. In fact, when I met Ian, our first data scientist at Square and co-founder of Opendoor, CTO right now, I actually ran into him at a professional event, but I already knew all about him and it was kind of amusing.

He came up to me and asked for professional advice.

And I'd already read all of his answers on Quora. And I just put the name and face together with all these answers I've read and I immediately offered him a job.

As soon as he came up to me, I actually offered him a job. And he's like, sort of shocked.

What do you mean? I was like, well, I know all about you.

I've already read all your answers. And I definitely need somebody who understands statistics and engineering and computer science.

So basically he had degrees basically in all three from Stanford and I'd read his answers and they were quite interesting.

And I was like, if I can't figure out what to do with someone like that, that's more of my problem than yours.

So he's like, well, don't you want me to interview?

I'm like, not really, but I'm happy to introduce you to other people if you want.

I love that story. That's really funny. Just to add on to what you're saying, what I've always thought, and as someone who started a company, as you have, is this idea that you can have a personality online.

It's much easier when you're early non-public to be able to have a point of view, right?

Share these thoughts. You don't have to run it by your legal team where you can really share a lot.

And I think it can differentiate your company earlier, help you find a community, customers, but it sounds like it also can help you build your network and help find a job.

So there we go. I'm going to add that to the list of reasons why to do that.

Yeah. I'm starting a sub stack this week for the first time.

I'm going to write a blog for content that hopefully is helpful, but I've found already some really original sub stacks that I find incredibly interesting and arresting.

So I think there's way, and these are people, none of the sub stacks I'm reading or people I've ever had.

That's neat. What are some of the topics that you've been compelled by, by these sub stacks that you've been reading this week?

Surprisingly more on the investing side, not necessarily about venture, but about public equities.

I've actually found more rigorous, more intellectually interesting analysis of public stocks than what I've ever read through investment banks or other coverage.

And so I think there's a whole genre of these emerging.

That's just one example. I do read some stuff that's in a more directly professional, like if someone's going to write some interesting analysis of venture, and occasionally someone does, if someone's going to write about, you know, recruiting a startup, I'll certainly read it.

But fundamentally, I think that's this long tail of content where anybody can become a publisher that the first generation of social applications, whether for Twitter or really enabled the second generation, I think is going to be even more powerful.

And so that's where my reading time is substituting to, I prefer long form over short form.

I like to read books. I still want to read books, but insofar as I can find long tail, long form content that forces my mind to think and engage, I'm really excited to do that.

And it's for new novel voices even better. That's awesome.

I love that. I love that. I think that's a good prediction. Okay. So you've mentioned that you went from operator to investor.

You told us a little bit of a story of how you fell into that.

Again, back to people, people you knew, they are starting great things.

You're like, I want to be a part of this. I want to bet on you, which is pretty cool.

As you think back and you've already named amazing investments that a lot of the audience have probably heard of, but as you think back about the investments you've made so far, what are some that you're really proud of and the impacts they're having in the world?

Yeah. So, I mean, I can give you the ones that are most famous and stuff like that, but I don't know if that's that constructive.

The ones I'm most proud of are actually the ones where bought for me committing to the company, they may never have raised money.

Because there's some investments you invest in, whether it's a VC or as an angel, where the company is going to be able to raise money, period, for a variety of reasons.

And there's other companies where you actually made a difference in their ability to raise money, and then they have shot to prove that they were on the right track and that they could build this company.

And so the ones that are more psychologically rewarding are the ones where you had more impact.

And that usually correlates with being very, very early being first.

So for example, actually today's a good day to talk about it because they just went public after 17 years.

Joe Lonsdale occasionally gives me credit for being the first person who actually liked Palantir.

So there's founders who obviously believed in it or they wouldn't have committed their time, effort, energy, money to it.

But he actually has told this story a few times where I was the first external person who actually said, oh, this is a good idea.

Same thing with Airbnb. Brian Chesky was nice enough to introduce me to the company at one point and explained that I was the only person on the planet who actually liked what they were doing.

There's lots of other people, not lots, but there's several other people who liked them as entrepreneurs, as people, and back to them, like including YC programs, talked about this publicly, how he hated the idea but loved the founders.

I actually thought the idea was really damn good and it would work.

And in fact, I interrupted Brian's initial monologue two minutes after meeting them and said, this is the coolest thing ever.

It's the best thing most likely to succeed since I've seen YouTube. And so I knew it instantly, but it was that immediate commitment to the idea that is powerful.

There's a company like NowFair where now everybody appreciates it.

They've done phenomenally well. They're basically providing tools and services to long-tail merchants who really need that ability to compete with software data with the Amazons in the world.

And at first, everyone thought it was a terrible idea, death of long-tail businesses.

Nobody's going to go to long-tail businesses.

It's Amazon, Amazon, Amazon. And so it's so counterintuitive, but being excited about them as founders and about the idea is really rewarding versus the companies that everybody believed in that you can certainly make money and be successful with.

But it's really proving people wrong and giving people energy and oxygen before the world recognizes what they're up to.

That's great. You just need someone to take a bet on you sometimes.

It just takes one yes. And if it's from Keith Raboi, that's even better.

And so let's say there is an entrepreneur listening right now who's like, oh my gosh, I am that person.

I'm the one that no one's taking a bet on me.

And I want Keith to take a bet on me. What's the best way to get their idea in front of you?

What's their best shot? So I've seen a variety of things work.

I've actually funded at least one entrepreneur who just tweeted at me. I had no idea who he was.

And we just had a Twitter dialogue. And then he eventually emailed me with more details.

And I set up a meeting around funding him. Some people just email me.

Other people ask for introductions. So there's a variety of different paths.

I mean, the simplest to describe and hardest to execute is actually build something.

But of course, if you build something interesting, people notice that.

If it's differentiated or users or businesses adopt it, that obviously speaks for itself.

That's by far more powerful. But publishing unique ideas or sending conceptual frameworks that are differentiated definitely sparks our attention.

I love that. That's good. Good. Well, thank you. That's democratizing access.

So that's great. So there you go, entrepreneurs. Now you all know the secret.

So one of the things I've always said about, I've never been an investor, but one of the things I've always thought as a venture capitalist is that you get to see the future before everyone else.

Because you're investing in things that become big 5, 10 years later, the overnight success story, which takes 10 years.

Do you have any stories about how you kind of saw the future before it happened?

Is that true? I think it's one of the options of being a venture capitalist, usually.

So when I first converted from being an entrepreneur or executive into venture, a lot of my entrepreneur friends thought I was crazy.

They're like, what are you doing? Why are you doing this?

That seems stupid. Why don't you keep doing building stuff? And one of the best benefits is if you're intellectually curious, you get to see the panoply in that you've escaped the parochial vision of building something, which is really being tenacious and executing and narrowing your field of scope and widening your peripheral vision.

I felt like I could, like when I was a young kid, another story from our wedding was, unfortunately, that I used to read like World Book Encyclopedia page by page, volume by volume when I was young.

So I feel like being a VC is a little bit like that.

Yeah. And it had this frozen kind of thing, I guess.

But in any event, the virtue of being a VC is it's a bit like that.

Like today, we take A volume off the shelf and learn about this. And then next week, I'm going to learn about this.

So like B volume would be batteries and S volume would be solar.

And then A volume is AI. And you just go back and forth. And it's really interesting.

And so you can absolutely see common denominators are things that are under the radar that will eventually be true.

So, for example, several years ago, I found a very interesting autonomous driving startup that was very differentiated from a team perspective, differentiated from an intellectual perspective.

That's what everybody else is doing. Everybody else is funding.

And I just immediately said, we absolutely have to fund this. And everybody internally, externally thought it was crazy.

But we're going to have real autonomous driving sooner rather than later.

And so you get to see the future coming together.

It's really rewarding. That's amazing. That's amazing. Okay. So one more thing about the past, then we're going to go to the future, which you're already bringing us to with autonomous driving.

What's been maybe the biggest surprise to you when you think about the Internet and technology over the last 10 years?

Anything surprise you? That is a great question. So I'll caveat this first by saying I don't stylize myself as like a macro thinker.

I've worked with and worked with colleagues who are.

Peter Teal is a prolific and very astute macro thinker. Vinod Khosla in many ways is a macro thinker.

Jack Dorsey is a very successful macro thinker.

Reid Hoffman is also quite adept at macro thinking. I'm more a Bob Milk investor, which is a founder walks in and convinces me that the world's going a certain direction.

And it just has an incredibly compelling narrative about how they're going to get there.

So I don't have these big projections of like, there's this wave and this wave should have happened or didn't happen or whatever.

So I don't really think that way too often. I do think it's been surprising that healthcare world hasn't transformed as much as I would have hoped.

Software has, I mean, looking back, you know, Adresin, Mark Adresin is clearly right that software is eating the world.

And you're seeing that play out more and more every day now.

So he was ahead of the curve in terms of at least framing the narrative in a very descriptive way.

That's true. It hasn't really eaten healthcare yet. And given the size of the US economy, given the importance, universality to everybody and giving actually the limits of current healthcare performance.

I'm very disappointed in some ways that it hasn't had more impact yet.

I mean, American lifespans are actually decreased over the last few years.

We're starting to show a little bit of sign of uptick again, but that's shocking given the ability of data and software to improve things.

Same thing true on the nutrition front. Like we still don't know what you should really eat.

Why? Who should eat what? And that's like shocking.

Like the government's advice in the 1970s was catastrophic for the American people.

People got basically obese and, you know, developed diabetes and unprecedented rates, partially because the government just fed them literally bad information.

And so we still don't really know though, who should eat what when, and that seems somewhat surprising as well and somewhat disappointing personally.

I wonder whether, um, you know, this idea of healthcare, not embracing technology as much as maybe some other parts of business.

Um, I wonder whether this pandemic will change that, whether it will help maybe accelerate some of those trends.

What do you think? Or am I too, I'm an optimist by, by nature. Am I too much of an optimist?

You're like, no, structurally still really hard. I think structurally it is difficult, but that, you know, that's true of most industries.

They're more complex than people realize from afar.

I think there's more willingness of entrepreneurs to try.

I mean, the first thing is investors are reactive.

Like ultimately we fund basically 99% of what we find is reactive to what entrepreneurs start.

So we can only fund things that entrepreneurs want to do.

And I think there's more intellectual interest among entrepreneurs in creating innovation around health.

And so I think that's a good thing and that we can give them the oxygen to propel them.

Uh, but if entrepreneurs aren't interested in a topic, it's really difficult.

We can incubate a company once in a while. Like I did an open door, like you did a founder's fund with Andrew, but we can only do one every X years.

So 99% of what we do is reactive to the interest of entrepreneurs. And I think the interest at home at the health level is off the charts compared to even two years ago.

That's great. That's great. Well, that's encouraging. And I hope as a citizen, this all comes out because, you know, we got, I think health, healthy lives are really important.

So I hope people solve those problems and make it better for all of us.

So speaking about the future, I mean, the pandemic, the Bay area, the future of the Bay area is our companies here to stay tech on the rise or decline here.

Are you longer short on the Bay area and why? Well, I've always been very long.

So historically I've been a major champion and kind of extremely concentrated portfolio of investments and entrepreneurial activities here, significantly concentrated network here.

And over the last called six to 12 months, I've started to change my mind.

So I'd say I'm neutral, you know, which investment banking products means you're actually short.

So the stock's mutual, that means you're basically short of it.

But basically I'm neutral, meaning I think it's an open question now of whether there's advantages to being in the Bay area, how strong are the advantages versus the downsides.

I mean, it is governed like a third world country.

Like arguably third world countries probably have a better government in terms of pros and cons.

We have rolling blackouts, we're closing down nuclear power.

Those are insane decisions. We have, you know, incredible property crime, which makes no sense.

We have all kind, you know, we have unaffordable housing, which is improving because people are leaving, but it's basically could have been improved just by building supply.

Like it's one of these sort of self-owned problems.

There are a lot of problems in the world that are not easy to solve. Like truthfully solving climate issues is not that easy.

Yeah, it's hard. Solving housing affordability is super brain dead simple.

You just build more units. Like there's no rocket science involved in this.

You just need to build more units and the price will go down, period.

End of story. There's no contrary data anywhere in the history of the world.

So, you know, to some extent we sort of have inflicted this pain on ourselves, on some of the dimensions.

The schooling here is terrible.

Public school system is atrocious. So there's just so many disadvantages of being here.

Obviously the climate is great, relatively speaking. You know, but there's still attractions.

There's still research that goes on. That's interesting, but there's research that entrepreneurs can take advantage all over the place.

We recently found some research in Colorado that we'll probably invest in at the lab.

So you can find labs in research in various places. So the best sleep innovation, autonomous driving innovation is actually in Australia.

So there's probably a place that you can look that are sort of undiscovered research labs and help turn that innovation or originality into a company.

And so we'll probably be looking to do more of that.

So I'd say now I'm neutral on, you know, with the companies based in Germany, I'm really excited to invest in them.

If a company is based, you know, in Texas, I'd be excited to invest in them.

Those are recent term sheets that, you know, have extended, whereas I've been so focused on working with entrepreneurs, you know, within walking distance basically for most of my life.

Okay. Wow. Yeah. That's it. That, that is a change. You know, one of the things you were saying about self -inflicted, I have a saying where there are some things that are hard and they're just naturally hard.

So it's fun to go solve those with smart people.

But the things that I have no tolerance for are things that should be easy that we make hard.

Like you should have no tolerance for that.

You got to just stamp that, stamp that out. It just becomes friction to all the other great things that you could be spending your time on.

I think that's a wonderful philosophy.

I may borrow that. Yeah. Yeah. There's something I've been saying that a lot more than I want to recently, but it really resonates, really resonates.

So, you know, as you look ahead, so one of the things, Keith, is you're a contrarian, you've kind of, you, you obviously you speak your mind.

Not everyone always agrees with you.

Sometimes you get yours, you kind of rub people the wrong way sometimes, sorry to break the news, but that's sometimes the case.

Like, how do you deal with that? Why are you a contrarian? Why do you call yourself that?

And then how do you deal with the blowback that comes with that? Yeah.

So, I mean, the funny thing is I started, I think my label contrarian on my Twitter profile probably dates back to like 2008 before it's cool or trendy to be a contrarian.

Vintage. Yeah. Unfortunately, you know, like the word's been gastronomized or abused or whatever.

So I probably shouldn't supervise it, but it does date back, you know, for at least a decade, probably.

So, but in any event, I think what that means to me is being first principles thinker, really, like not, not deferring to the views and pseudo expertise of others, but thinking things from first principles backwards and having that allows you to have original thoughts and to break through problems and solve things that other people don't think are addressable.

On the Twitter thing, actually, I kind of created this maybe stupid idea a long time ago back when I was at Square, I would read every single tweet about Square every single day.

And, you know, partially to get product feedback and just to get a fuel barometer for how well we were doing and would learn interesting things.

And occasionally, not surprisingly, especially as Square grew up and became larger, people would tweet incorrect things about Square.

And rather than just sit there and let people write defamatory, false things, I decided to correct them.

But there's always some limits on what you can say when you're running a company.

So some of the responses have to be terse, but I didn't want the record to be uncorrected where people just assume because someone published it as if it was true.

So I kind of got in this habit of correcting things on the Internet.

The problem with being a VC is I started correcting, trying to correct everything on the Internet, which is the worst fools errand ever.

Like the idea of trying to correct everything wrong or everything dumb that's published on the Internet is an insane idea, but somehow or another I got addicted to it.

So I'm going to stop trying to correct everything on the Internet, which you obviously don't have enough time and energy to do.

So that'll probably limit some of this. But, you know, I don't mind the blowback.

I think part of being involved and having a platform and proselytizing is not everybody's going to agree by definition.

And so the way you move the world forward is by persuading people.

And even if you persuade 50%, that's better than nobody having this idea.

Or even if you persuade 10% and nobody would have believed this, that's great.

So you don't, if you measure your success by influence in moving the needle, going from zero to 1% is great.

Going from 1% to 10% is amazing.

10% to 40%. And things that used to be, you know, very weird and odd are now conventional wisdom.

And so, you know, having an audience is what I think I can do constructively is move the needle on some topics.

But I think I'm going to get out of the business of trying to correct every mistake made by anybody across sports, politics, startups, finance.

Like this, this is a really bad idea.

So I'm finally convinced that I should do better things with my time.

Well, Keith, this has been amazing. You are the red pen of the Internet.

So there you go. That might be the new Twitter. Thank you so much for joining everyone.

Keith Raboy, thanks so much for joining us today.