North Star Podcast – Keith Rabois on Accumulating Advantages

Check out The North Star Podcast Episode Page & Show Notes

Key Takeaways

  • “Rather than focus on the score, focus on the process in everything you do, day in and day out”
    • If you do everything perfectly, eventually you’re going to win
  • Some excellent hiring advice from Peter Thiel As a startup, focusing on finding and hiring undiscovered talent
  • With starting and growing a company, it’s sometimes better to be naive:
    • “The most important companies are usually founded by people who don’t know much about what they’re getting themselves into”
    • “The best companies typically don’t have expertise”
  • Accumulating Advantages
    • This is the idea that over time, as a company gets stronger, eventually a bunch of people who are clearly only B-B+ players can run the company with continued success
    • Because the company is so strong, it doesn’t need the heroic efforts of incredibly talented people
  • There are so many lessons you can gather from the way companies have done things in the past
  • If you don’t have a reading habit, start one now
    • “Almost everybody I know who’s successful is a voracious reader”
  • Be very careful how you allocate your time

Books Mentioned

  • Keith recommends The Score Takes Care of Itself if you’re an entrepreneur
  • Keith got an important idea (Become the Only Person in the World That Does What You Do) from The Winner Within 
  • High Output Management was mentioned – “The most important lesson is to be consciously aware of what time you’re consuming, and how to get the most possible leverage/benefit/output out of that time”

Intro

The Score Takes Care of Itself

  • Keith recommends this book to most entrepreneurs
  • The main philosophy of the book – “If you do everything perfectly, then eventually you’re going to win”
    • “Rather than focus on the score, you focus on the process in everything you do, day in and day out”
  • The book was written by Bill Walsh, who took over the San Francisco 49ers in the late 1970s, when they were one of the worst teams in the NFL – they hadn’t won more than 3 games in a season, 5 years running
    • They were essentially the laughing stock of the NFL
    • In his third year as head coach, Bill managed to lead the team to a Super Bowl victory (in 1981), and then to 4 more Super Bowls in the next 7 years
    • The first thing Bill did as head coach, was to write an instruction manual for everyone in their roles 
      • This instruction manual even went down as far as the secretaries, instructing them how to answer the phone properly
  • Companies like Apple take this philosophy seriously – they design even their circuit boards with A LOT of aesthetic care

Hiring Advice from Peter Thiel

  • In his first week at Paypal, Keith went for a jog with Peter Thiel around the Stanford campus – Peter gave Keith some good advice related to hiring:
    • You need to find undiscovered talent
    • “As a startup, you’ll never be able to compete with the powers that be in regards to cash compensation, safety, and various other comfort factors and perks. The only way to build a company from scratch, that’s going to be sustainable, is to find people that the large companies didn’t know how to process or didn’t want to process.”
    • When you’ve been in the workforce/business world for 5-8 years, all companies can assess you equally based on your resume/LinkedIn
      • So Peter advised looking at younger candidates – ones without as many data points
      • “The spectacular successes come from finding people before they’re well known”
    • Peter taught Keith – “The only way to have a competitive advantage in life, when you’re building things from the ground up, is to get really adept and proficient at evaluating people, and evaluating them very early with very limited data and signals.”

An Interesting Thought

  • “I think most people who succeed at changing the world, have extreme talent in at least one or two dimensions, then have a screw loose in at least one or two dimensions”
    • The ones that thrive are self-aware enough to know where their screws are loose, and they actively seek a complement, to offset some of their weaknesses (so they’ll partner with people who can do things they’re not proficient at)

The Importance of Owning the Whole Stack

  • “I generally think one would be better off emulating Apple, or Amazon, or Tesla than trying to replicate Google or Facebook, and I think most founders veer on the wrong side of that”
    • Keith is a fan of “vertically integrated companies that are pretty horizontal”
      • Google and Facebook are horizontal, and less vertically integrated than Apple, and even Netflix
      • Vertical integration is harder to get started (more expensive, requires more broad talent) – but when it works, it really works and is defensible for decades
      • Keith tends to like companies that “own/control the whole stack and are not open platforms”
  • What companies are likely to do better?
    • Many people innovate following what Keith calls the easy path:
      • They “bite off one layer of a stack”
      • The problem is that – “Customers don’t care whose fault it is when something doesn’t work perfectly. Customers care about the overall experience.”
        • “Unless you can control and dictate the overall experience, you can’t optimize it”
        • “The only way to create a fully awesome product, is to dictate all the component specs and component pieces. Then over time, if you become the dominant player, people may build to your specs, but you can’t start that way – so you’re always making compromises if you don’t fully integrate.”
    • “The companies that have more control, and take more risk, will ultimately prevail over those companies that try to be a superficial layer on top. But a lot of founders are terrified of trying to do hardware, software, and underwriting, all at the same time, but those are the companies that tend to do the best.”
      • An example – At Square, everything was built from the ground up, from the hardware, to the software, to the decision making, to the risk engine….all the way up to who got approved to take credit cards with their platform
        • They “owned the whole stack”

It’s Sometimes Better to Be Naive

  • “People who are naive about markets, do better than those who know about them”
    • Examples:
      • At Paypal, only 3 people knew anything about financial services
      • The Collison brothers started Stripe, and they knew very little about payments
      • Elon Musk knew nothing about cars before starting Tesla
      • Keith knew nothing about real estate when he started Opendoor
  • “If you have a lot of industry experience, you tend to take things for granted, and you don’t ask a lot of, ‘Why?’ questions”
    • To add to this – it’s harder to disassociate yourself from the rules that you’ve learned
  • “The best companies typically don’t have expertise”
  • “The most important companies are usually founded by people who don’t know much about what they’re getting themselves into”
  • A good thought on starting a company:
    • “Starting a company is really a heroic exercise. It’s borderline completely irrational. The idea that you’re going to start a company with 1-2 of my friends, and it’s going to change the world, and revolutionize the industry….is a pretty irrational decision. The more rational one is, the more constraints one finds.”

How can one accelerate the pace of their learning?

  • Read
    • Especially books related to your field
    • In general, focus on books, and try to avoid content online
      • “I think online content is incredibly superficial. It’s almost like eating junk food – it feels good, but it really isn’t building muscle in your brain.”
  • Find experts and ask them questions
    • Focus on the “why” questions
    • “The right experts can reverse engineer for you the first principles. That allows you to clarify your own thinking, and discover where your blind spots are.”

A Good Thought on Writing

  • As long as you have a unique voice and insight, there’s an audience for you…no matter what you’re writing about
  • “You can separate yourself from the rest of the world, if you can communicate ideas that are better and different”
  • If you have insight, and can clearly communicate it, there’s really not much downside to writing about your ideas 
    • It’s a great way to showcase yourself, as well as gain attention (over time)
  • Keith has hired people solely based on their tweets or their Quora answers

Accumulating Advantages

  • This is the idea that every day the company/business gets better/stronger, so that eventually “idiots can run the company, because it’s so strong that you don’t need the heroic efforts of incredibly talented people”
    • In the beginning – you may need the top 10 people in the world to make something work
    • “You want to aim to build a business that’s so strong that over time, a bunch of people who are clearly only B-B+ can run the company with continued success”
      • “The advantages that the company creates are so strong and powerful, that it takes a lot to dislodge that”
  • An example – If everyone who works on Google as a search engine stopped showing up to work, it would probably take YEARS for their monopoly on internet search to erode

Random Yet Useful

  • The median home value in the U.S. is $234,000
    • In the bay area, it’s over $1,000,000
    • 81% of homes in San Francisco are valued over $1,000,000

The Importance of Silicon Valley History

  • “From a historical perspective, there are a lot of themes. Most startups encounter similar problems, and understanding the lessons of history allows you to avoid making the same mistakes.”
    • This is why Keith tends to look for founders who really appreciate Silicon Valley history, who have studied the companies that have come before them
  • There are SOOOO many lessons you can gather from the way companies have done things in the past:
    • How did they get their first 100 customers?
    • How did they organize the company?
    • What kind of founders succeeded/failed?
    • How were employees compensated?
  • “Understanding Silicon Valley history allows you to avoid detours and mistakes that are unnecessary, and therefore optimize your time and energy on things that are high value”
    • In a sense, this understanding allows you to avoid the trap doors/dead ends that have befuddled other people

The Importance of Reading and Consuming Content That Has Stood the Test of Time

  • Most content people consume was produced in the last 24 hours 
    • What if you instead aimed to consume more content that’s stood the test of time?
  • In addition…
    • “Grappling with longer form written content tends to force your brain to build new neurons in a way that short doses of content don’t”
  • “Almost everybody I know who’s successful is a voracious reader”
    • In addition – “Almost every great writer, is a voracious, voracious reader”

How can we create more ambition?

  • “Part of it, is a sense of possibility”
  • Second is giving people access to components (the raw materials of success) – money, mentors, or advice 
    • In general – access to people, capital, and information can serve as empowering fuel
  • Surround yourself with ambitious people
    • You pick up the traits of people you spend the most time with

Become the Only Person in the World That Does What You Do

  • Keith got this idea from The Winner Within by Pat Riley
  • Note from Podcast Notes – They don’t really get too in depth here, but the idea speaks for itself

Don’t Undervalue Your Time

  • “The most important thing is the allocation of time”
    • Most people undervalue their time – Keith learned this from Peter Thiel
    • You can always replenish other resources (like money), but time is finite
    • Keith says one of the greatest predictors of success, is how a person allocates their time
  • Keith mentions the book High Output Management
    • “It’s really a combination of high output management, and the allocation of time”
    • “The most important lesson is to be consciously aware of what time you’re consuming, and how to get the most possible leverage/benefit/output out of that time”
      • Sometimes the best thing to do with an incremental of time may be to sleep! Other times the best allocation might be to double down on something you’re already doing.
      • “The people who have a good feel for that, tend to thrive”

These notes were edited by RoRoPa Editing Services

Bookmark
Facebooktwitterredditmail

Don't Miss Out!

The top Takeaways, Lessons, Learnings and Quotes from the BEST podcasts each week in your inbox every Monday

Before You Go, Don't Miss Out!

The top Takeaways, Lessons, Learnings and Quotes from the BEST podcasts each week in your inbox every Monday