How do you get the idea for a business and then lead it to success?
That’s the core question that the new book, Masters of Scale, by Reid Hoffman with June Cohen and Deron Triff, seeks to answer. Among its many takeaways are that the best business ideas initially seem the least plausible, that doing things that don’t scale can be a good starting point, and that what customers actually want can be different from what they tell you.
The book stems from a popular business podcast by the same name that’s hosted by Hoffman, the co-founder of LinkedIn, former PayPal executive, and Greylock Partners venture capitalist.
Like the podcast, the book is centered around the hero’s journeys of “the most iconic entrepreneurs behind the disruptive companies that have shaped our cultural landscape,” people including Airbnb’s Brian Chesky, Netflix’s Reed Hastings, Bumble’s Whitney Wolfe Herd, and Canva’s Melanie Perkins. Hoffman draws general lessons and strategies from their stories—which form the structure of the book and are helpfully summarized at the end of each chapter.
The book’s strengths and its weaknesses are linked to its overall celebration of the VC-funded entrepreneur—it recounts compelling anecdotes behind the growth of well-known companies, but is largely uncritical of anyone it discusses. Its stories of founders being turned away by dozens of VCs and slogging away for years before seeing any returns seem quite quaint given the gusher of money chasing startups these days and get-rich-instantly phenomena like NFTs.
Putting all that aside, for its compelling startup narratives and earnest aphorisms, Masters of Scale is an entertaining, thought-provoking read.
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Among the lessons that Hoffman delivers:
- Sometimes when an investor tells a startup founder “no,” it’s a positive sign for the business. When an idea is truly big and transformative, it can draw a polarized reaction, or a “squirmy no.” Hoffman decided to invest in Airbnb over the skepticism of a fellow VC partner, for example.
- The best businesses can emerge from moments of desperation. Photo-sharing site Flickr was a last-ditch attempt to save a startup whose main online role-playing game offering had stalled.
- Lavish attention on the few people who love your product in the beginning. It’s generally not scalable, but providing high-touch service allows you to better shape your offering and understand what customers value. To this end, Airbnb once designed an over-the-top custom vacation in San Francisco for a man named Ricardo from London as an experiment.
- Early hires are essential for crafting a company’s culture. Bad cultures are really hard to fix. Founders should identify the qualities employees should have for the kind of company they want to build and design questions to screen all recruits for them. Arianna Huffington asks job candidates about a tough conversation they had with a colleague or manager to understand whether they exhibit “compassionate directness.”
- Many founders make the mistake of becoming too attached to their initial ideas. It’s better to be constantly learning and testing assumptions with customers as quickly as possibly. Shopify CEO Tobi Lütke, for example, started out building a snowboard store but then discovered the ecommerce software he built was the bigger opportunity. Stewart Butterfield pivoted from the failure of a videogame called Glitch into the creation of Slack.
- Watch how customers are actually using your product. Bumble users effectively hacked the dating service to make friends and network professionally, so Bumble began explicitly offering those features.
- Rapid decision-making is essential. “When you’re moving fast, you may make mistakes. But the biggest mistake is not making decisions fast enough, because the only thing that matters is time,” Hoffman writes. (p. 127)
- You can never raise enough money. Things are always more expensive and take longer than you think they will. Hoffman believes even self-funded success stories like Mailchimp could have grown faster if they took venture capitalists’ money.
- The best leaders develop talent from within rather than just hiring expensive stars. A program Marissa Mayer started at Google, for example, has successfully developed more than 500 associate product managers. “If you hire people at senior positions, you are a failure as a leader,” IAC’s Barry Diller is quoted as saying.
To be sure:
- The “blitzscaling” approach to aggressively growing startups that Hoffman is the standard bearer of arguably has favored ruthless behavior by founders and the force-feeding of inefficient growth.
- The hero’s journey narrative favored by Masters of Scale can overstate the role of a single protagonist as opposed to a team and oversimplify the impact of individual turning points in a business.
Memorable facts and anecdotes:
- Kathryn Minshew, founder of The Muse job site, says investors told her ‘no’ 148 times before the first one agreed to invest.
- When Airbnb’s co-founders showed up at an early New York listing, the host produced a binder with dozens of pages of notes for changes he wanted to see in the service. “It was like he created a roadmap for us,” Chesky says.
- Chesky brainstorms products by asking people to describe what one-star through five-star versions of the experience are, and then to imagine what versions up to 11 stars might entail. An 11-star Airbnb check-in experience might be that Elon Musk meets you at the airport and offers to take you to space. “You have to almost design to the extreme to come backward,” says Chesky. (p. 35)
- Huffington’s wellness startup Thrive has a rule that nobody should interview a job candidate while they’re tired. “I can trace back all my hiring mistakes to being tired,” she says. (p. 94)
- In PayPal’s early days, it was so swamped by customer service calls that the employees turned off the ringers on their desk phones.
- Early on, Google users when surveyed said they wanted 30 search results on each results page. But user tests revealed they actually preferred 10, because the page loaded slightly faster with fewer results.
- Former Burberry CEO Angela Ahrendts initially hated working at Apple when she arrived to head its retail stores.
- Chinese parents’ dissatisfaction with their children working at Starbucks was hurting employee retention, so the company held an annual meeting of the parents of its employees in China and extended health insurance to them.
- “If you’re a good entrepreneur you can assume that your instincts are right 95% of the time and your ideas might be right 25% of the time.”—entrepreneur Mark Pincus
- “If you have a C culture you can revise it to a B+. But a C culture will never become an A culture. The only way you get an A company culture is by creating it at the beginning and preserving it.” (p. 81)
- “If you’re not embarrassed by your first product release, you’ve released too late.” (p. 102)
- “Fighting every fire can cause you to miss critical opportunities to build your business—you’ll be all reaction and no action.” (p. 117)
- “I learned really early that you are best when you know nothing.”—IAC’s Diller (p. 134)
- “I’ve noticed that times of crisis favor founder-led companies, because they’re headed by people who like improvising. They think about things through first principles and are okay adapting and changing their business.”—BuzzFeed founder Jonah Peretti (p. 194)
- “Whether your staff is 70,000 or only seven, a leader needs two things to create a strong unified team: an elevated mission and everyday human contact.” (p. 204)
The bottom line is that Masters of Scale offers distilled lessons and memorable stories from dozens of companies. Many of the subjects are anchored in the VC-funded Silicon Valley startup world, with their founders treated as heroes of the narratives. But the tactical advice is more broadly relevant for entrepreneurs and leaders.
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