Andrew: Hey there, Freedom Fighters. My name is Andrew Warner. I’m the founder of Mixergy.com. It is, of course, home of the ambitious upstart.
My guest for this interview is Sam Altman. He is the president of YC Group, which oversees Y Combinator, the seed investment firm that has funded 1,500 startups with a combined value of $80 billion. By the way, you can still apply for entry. You can still apply for funding from Y Combinator. Just go to YCombinator.com. Before he became the president of the YC Group, Sam founded Loopt, a location-based software company.
My goal for this interview is to hear the story of how he created Loopt, which he reportedly sold for $43 million. I want to understand what it was like when he was a founder himself. I want to understand what he does to help companies grow as the head of YC Group and I want to hear about how he works. I’ve talked to people who have actually worked for him who say that this guy is just so incredibly productive. They just admire the way he works. So I’ve got a few questions to learn about that.
This interview is sponsored by Toptal and Pipedrive. I’ll tell you more about both of those later. By the way, Sam, I’m talking faster because I’ve noticed that’s the way you talk.
Sam: I do talk fast.
Andrew: You talk fast, right to the point, no wasting any time. So let me not waste time and go right to the first question. When you got funded by Y Combinator, there was actually no Y Combinator before that. So I’m wondering what drew you to Paul Graham, the founder, and Jessica Livingston and the whole group of people who helped you there?
Sam: Well, for me the first thing was really Paul Graham’s essays. Paul has written for a while about startups and things related to startups and he had written one particular essay called “How to Start a Startup” that really spoke to me. I didn’t have any idea how to start a startup. In fact, many people have found that essay by Googling “how to start a startup.” So it’s this question that a lot of people have and don’t know the answer to. I talked to Paul and I thought he was really smart and the way that he talked about starting startups really appealed to me.
Andrew: You were a student at Stanford, I think, at the time.
Andrew: So did you just reach out to him because he wrote a great essay? What was the point of that?
Sam: He had put out basically an application form for YC.
Andrew: I see. So at that point there was one.
Sam: So I filled that out.
Andrew: Okay. And what was your original idea for it?
Sam: GPS, sort of see where you friends were on your cell phone.
Andrew: So Alexis Ohanian was on here and he told me that before he had the idea for Reddit, he had an idea for this food phone-based service that allowed you to order food from your phone and he was dissuaded by Paul Graham because phones just weren’t mature enough for that yet. So I’m wondering, you were coming with another phone-based business. It required GPS, this whole thing that we’ll talk about how you helped create. Why didn’t they dissuade you? What was it about your idea?
Sam: Well, I think briefly he did try to dissuade me from it. I think that’s a normal thing. I wouldn’t read too much into the sort of Paul trying to dissuade Reddit thing. In the course of YC interviews, we talk about many ideas that a company could do. So I wouldn’t put too much weight into that either way.
Andrew: Still, the idea was I feel, in many ways, ahead of its time. I was watching an old version of, I guess it was a Boost commercial for Loopt. It was a bunch of people saying, “Where you at? Where you at? Where you at?” kind of cool and then at the end it showed Loopt on a flip phone with a map on it showing where people, where their friends were.
Sam: It was probably 2006, 2007, something like that.
Andrew: Yeah. So why weren’t you ahead, too far ahead?
Sam: Well, in practice I think we were somewhat too far ahead or maybe forever too far ahead.
Andrew: So should they have dissuaded you? Should they have said, “Look, you’re really smart, you can do something that’s more today?”
Sam: You know what? No one can be sure how the course of technology is going to develop. So it is easy to look back. But ex-ante, I think you can only make the best probability-weighted decision that you can. It wasn’t obviously not going to work. It wasn’t obviously going to work. But all of these things are just probability distributions.
Andrew: Okay. Why did that idea draw you?
Sam: It was just something I wanted for myself. It was something I thought was cool.
Sam: Yeah, I was just interested in it.
Andrew: Okay. I talked to one of your former employees in preparation for this interview and he said, “Look, at the time, there was no GPS on an iPhone.”
Sam: There was no iPhone.
Sam: There was no iPhone at the time.
Andrew: There was no iPhone. He said Sam had to actually go to the phone carriers and say, “We need GPS information and they said, “We don’t have it,” and then he worked with them and it turns out there was some kind of 911 service. Talk about that.
Sam: Yeah. Look, often when you are trying to kind of lead the wave by a little bit in technology, you end up doing these things that are . . . you’re willing to put up with some hacks to get something to market a little bit faster. So we knew GPS was coming, but it wasn’t there yet. We wanted to be first. So we were willing to work around that.
Andrew: It’s a personal . . . it seems like it’s a personal attribute. That’s who you are. You’re going to find that other option, right?
Sam: Well, not always.
Sam: But sometimes I think the right . . . often I would say I think the right decision is to just say no or not yet. Like hacks are a huge amount of work, working around things is a huge amount of work. It is far more important to figure out what not to do and not to waste your time on.
Sam: So the art is to figure out the one or two things that are worth really spending a crazy amount of effort on. But you can’t do that on very many things.
Andrew: Do you have an example of something in the early days that you just gave up on that maybe someone else wouldn’t who didn’t have that kind of discipline and focus?
Sam: So many. Again, most of your job as CEO, as a founder is to say, “No, we’re not going to go do this pretty good idea to save firepower for the great idea.” So that’s like most . . . you say that most features you think about, most ideas of any sort, most partnerships, most marketing ideas and at YC, we really do that.
A huge part of my job, both internally is we’re figuring out how to run YC and figuring out what YC should do and externally, thinking about what companies to fund, is to say no to good ideas to save firepower for great ones. And that’s a tough thing to learn.
Andrew: When you said there’s got to be a way to do GPS, that’s what my business is based on, how did you figure out that there was this 911 service? It was more than that. Am I more impressed by this than you are? It feels like I’m amazed that you were able to do it and you’re very casual about it.
Sam: Yeah. I don’t think this something you should be particularly impressed by. This is a thing we’re thinking about all day, every day. You learn every possibility in the field.
Andrew: How did you learn all those possibilities in the field? It seems like it’s a pretty dense, hard to understand space.
Sam: I think people always overstate how hard things are to learn. I think if you really apply yourself and talk to a lot of smart people that are experts in the field and read a lot of books or papers or whatever, people always underestimate how much they can learn quickly.
Andrew: So I won’t spend too much time by this, but I’m fascinated by it. What I understand was they basically said, “Look, this thing was made for 911.” You said, “We can make it work.” They said, “Okay. Fine. But it’s only meant to be tapped into occasionally.” And you said, “We need to find a way to tap into it a lot because our whole app is location based.” And not only did you find a way to do it, but did you license it back to them?
Sam: We eventually did. Yeah. That ended up actually becoming a fairly significant like many millions a year business for us in terms of licensing them back for other uses.
Andrew: And am I spending too much time because I’m too amazed by this? This feels like a shockingly impressive thing to do. I can’t get my phone carrier to up my data plan.
Sam: I mean, look, I think this is what startups do. You end up being really focused on one thing and you figure out a way. If you look at any startup that has gone on to be reasonably successful, they can point to examples like this. That is where you end up creating value is you focus really hard on something that’s important and you find a way to do it.
Andrew: I’m wondering how you knew that that was the right thing for you to focus your business on considering that you had a consumer-based product. You were then building this business to business product. How did you know this was not too far field from what you were doing but it’s worth investing in?
Sam: Well, again, these are shades of gray, but it was something that was a good business for us. It generated a lot of revenue and it was something that our customers really wanted. And it made us in much more valuable strategic position with them because at that point we were running a pretty important part of their infrastructure.
Andrew: One of YC’s approaches is to just talk to your customers. Did you get to do a lot of that in the beginning before it was kind of codified in the YC way of doing things?
Sam: We did.
Andrew: What was your process in the beginning of Loopt for talking to your customers and then how did it evolve?
Sam: Well, we really had two sets of customers. We had the mobile operators and then we had our end users. We treated both of those as important constituents and we just would go see them and talk to them a lot. There was like one year where I flew like 180,000 miles domestically or something, something crazy.
Andrew: And when you were flying how much of that was to see the carriers and how much was to . . .
Sam: The flying was just to see the carriers.
Andrew: Just the carriers.
Sam: The customers we would talk to via email or text or phone.
Andrew: Do you have an example of an insight that you got from talking to your customers that you wouldn’t have had otherwise, something like Airbnb’s Barry Manilow drummer story?
Sam: What would be a good one? Well, I think one, and this turned out not to be true just for us, but many other social services, were how important photos were. Before we could see how important photos were in the metrics, when we would talk to customers, we would just hear that again and again and again and it led us to put out photos as part of our product much, much sooner.
Andrew: I noticed there are still old YouTube videos of you hanging out in jeans, sitting on a couch talking about your vision for the product. And I did see that, that there was you with an iPad saying in the future photos will be more important for reviews than the text because people want to see what it’s like and the iPad allows us to do it. You were ahead of your time that way.
I’m wondering, Sam, when we’re talking to customers, a lot of times you are ahead of where they’re going to be. They didn’t know that they would want to use a phone for anything other than phone calls. Text maybe would have blown most people’s minds. And you were saying, “Look, in the future, you’re going to want to know where your friends are. There’s an app. Don’t worry about what that means, but it’s called an app. It will actually let you know.”
You were so far ahead. How can you ask people questions that will lead you to understand the problems that they have that you can solve with these apps?
Sam: Well, being too far ahead is bad. You want to lead the market, but you only want to lead the market by a little bit.
Sam: So I think there is some art to trying to figure out like how to be 18 to 24 months ahead of where your customers are but no more, no less. I think you just pick up a feel for that over time.
Andrew: So when you’re 18 months ahead, you’re still so far ahead of them that they’re not saying, “I have a problem or, “I need to know where my friends are,” are they?
Sam: Well, there’s this famous quote that Henry Ford said, “If I asked my customers what they wanted, they would have said a faster horse.”
Sam: Or another example is if you look at most people that were building aircraft when the jet engine came along, they were trying to figure out how to get better performance out of the piston engine. So sometimes when there’s something fundamentally new, customers don’t have that frame of mind. There are times when it’s really important not to listen to your customers. But in any case, I think it’s always worth trying to get to the deeper desire.
When you think about Henry Ford’s customer saying they wanted a faster horse or people saying they wanted a piston engine with more horsepower or that worked better at high speeds or whatever, what they meant was, “I want to get where I’m going faster.” The framework they had in their minds was, “I need a faster horse.” But really what they wanted to do was get there faster or get their cheaper. Thus, the car had a lot of advantages.
Andrew: Okay. Do you have an example of something like that you noticed people were asking for but they didn’t know what they really needed?
Sam: Well, part of that is just like what . . . there was a time, and I don’t think this is true anymore because now text is used for everything, but there was a time when the most common text message was, “Where are you?” It was meant as this like last mile coordination thing. I think that indicated that what people wanted was not better texting, but a way to answer that question.
Andrew: I see. I love that New Yorker profile of you. How do you feel you came off?
Sam: No. It’s fine. It was good. It was painful.
Andrew: It’s so good. Even my wife who had no idea I was going to interview you who just likes reading The New Yorker read it and was like, “This is a fantastic story.” It’s one of the things I love about The New Yorker.
Sam: They are the only publication left that does that.
Andrew: Do you guys seek that? Are you at a point where you say, “We need a little bit more . . .?” No?
Sam: No. That was actually . . . I have said no to every profile request and finally got to the point where some people said they were going to write something with me with or without cooperation. So it was a defensive move. I figured now if this is written, no one else would write one for a long time. I thought The New Yorker at least for whatever beef I have with them, they at least fact check. I think they’re reasonably fair. I disagree with some of it, but I don’t feel like I was treated unfairly in the process. But it was meant as a defensive move.
Andrew: Yeah. The $80 billion number I had for the overall valuation was different from what you said in one of your videos in your interview, I think, with Jessica Livingston, where I think you said $70 billion is the value of all the companies YC invested in, but I said, “You know what? If The New Yorker said it’s $80 billion, they probably vetted it.”
Sam: Well, that video, Jessica and I actually taped that a while back before she went to England because she’s on sabbatical this year. So at the time it was right. Now we’ve had some big up runs.
Andrew: You know, I understand why you would do The New Yorker piece. I’m really appreciative that you did this, but I’m wondering why. You don’t just do things. Why do this interview with me?
Sam: Honestly because Jessica asked me to and I do whatever Jessica asks.
Andrew: That was it?
Sam: That was it.
Andrew: So there’s something that stood out in The New Yorker piece that I was wondering how to ask about without looking like a rude jerk.
Sam: Go ahead.
Sam: I will take it in the spirit it’s intended.
Andrew: Thanks. It said that in 2012, you and the founder sold the company for $43 million, a negative return for your VCs, but you got $5 million from that sale. I’m wondering how does that work, where the VCs . . .
Sam: That actually was one of the things that was wrong or inaccurate. It’s sort of like a long explanation. I think one investor did lose a little bit of money, but that was a slight mischaracterization.
Andrew: So it wasn’t a negative return for them. It was maybe less than they’d expected or less than they needed?
Sam: This is like probably . . . I’m not trying to dodge the question. It was sort of a somewhat complicated deal that we had done with one of our investors in a later round anyway. It would take me a while to explain the whole thing. But I wouldn’t over-index on that.
Andrew: Okay. So then one last question related to Loopt, which is that before you closed that deal, you asked the people who worked for you to sign a power of attorney so you can close the deal. Does that sound at all familiar, so you can sign some paperwork?
Sam: No, that doesn’t. That may have happened, but I don’t remember. Do you have any more details about it?
Andrew: They didn’t seem shocked by it, but it was something that I heard three years ago at a dinner and I wrote it down to bring up.
Sam: This is about employees?
Andrew: Yeah, if it’s not something that you remember then it’s not anything that . . .
Sam: There’s all of this like ordinary due course stuff where like when people, like in some cases, but I can’t remember what that . . . in terms of anything exceptional that would be like unusual . . .
Andrew: Yeah. They didn’t seem shocked by it, they just said it seems like that’s why things are done so it’s not like it’s a problem, but why do we do that?
Sam: Yeah. I’m sorry. It’s a while ago and I honestly don’t remember.
Andrew: All right. Let me do my first sponsorship message and then I’m going to get into the YC Group the next part of the conversation.
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All right. Running YC Group . . .
Andrew: One of the things that I saw that Paul Graham tweeted out about you was this quote that you said, “Most people do too many things. Do a few things relentlessly.” What are the few things that you do at the YC Group relentlessly?
Sam: Well, that was part of the reason for making the structural changes that I did recently and putting Michael in the role for the Core YC program. I don’t get to spend as much time as I would like anymore advising startups directly. And that’s where it comes to choosing a few things to do.
So the main thing I can do at this point is figure out with very broad strokes the things that I would like the entire YC organization to go do and then hire people to go run those independent organizations. The reason that we call the people that run each of the organizations inside of YC CEOs . . . well, one, they’re running very large businesses. These are hundreds of millions or billions of dollars’ worth of value.
But also because I want them to be totally empowered to go run their respective groups without me getting too involved except when they need help so that I can not have that stuff clog up my time and focus on what I want to focus on.
Andrew: So you guide them but they . . .
Sam: Very little.
Andrew: They essentially run autonomously.
Andrew: Okay. What’s the way that you guide them? How do you interact with them? Do you set goals for them? What’s the process?
Sam: We set overall goals for YC. We have an overall mission that guides everything we do. Then for each individual part, for sure we have metrics and goals and we kind of not just the people running as groups, that is an entire partnership, we decide what our goals over a two-year period are going to be. Do we want to grow? Do we not want to grow?
And there are a lot of metrics that are pretty clear, like total valuation of our companies or whatever. Do we want to expand into new areas? Do we want to go open an operation in a different country? Do we want to try to fund more biotech companies? But one of the things I believe in general is that if you can set a clear mission the team believes in, if you can hire really strong individuals and give them autonomy and tell them this is the target and then stay out of the way to get there, that would usually work.
Andrew: So what is the target for Y Combinator now?
Sam: Well, what our mission is is to increase the amount of innovation in the world. We have a long thing, probably too long for this podcast, about why we believe that’s important and a good mission. But mostly that means funding startups. So like for Michael and the YC program, he thinks about how do we get the very best startups? How do we build things to help them do better? How do we make YC very helpful to them? How do we expand?
For Ali, that’s like how do we put more wood behind some of these companies. For YC Research, that’s less about startups. That’s more about what are the things that startups can’t do that still fit our mission and how do we plug those holes? For Startup School, it’s how do we reach everyone that might want to start a company and give them information so that maybe later they do start a company which we get to fund.
I taught the first version of that in 2014 at Stanford. I’m going to do another one early next year. So it kind of depends on exactly what any part of the organization is doing. But the overall goal is more innovation in the world.
Andrew: I noticed that, that with your relentless focus, you still said in the announcement about this MOOC that was coming out to do the Startup School, you said, “I’m going to be teaching it.”
Andrew: Why you? Considering all the other things you could be doing, why is it important for you, the head, to teach it?
Sam: Well, it’s a tradeoff. It means that I will do other things less. It means I’ll advise less companies. It means I’ll be on the road recruiting for YC less. But I think it is a super important part of what we do. To some degree, you can argue that making the top of the funnel bigger and making all startups better is the single most valuable thing that YC does. So in that sense, it makes sense that I’ll do it the first time. I’m not planning to do it forever, but when we start something new, I like to do it initially to get a sense of what it’s like, like I ran the research group for a while.
Andrew: I see.
Sam: And I’ll teach this, but probably only the first time.
Andrew: I see. So it’s your way of understand what this is, how it’s going to work before you start passing it on to other people to run it.
Andrew: I got it. Okay. Mark Andreessen, again, in that New Yorker piece, said that under you, the level of YC’s ambition has gone up 10x. What is the big . . .
Sam: You know, I think these profiles always end up as like somewhat caricatures and people always rewrite history to make it sound different than it is in practice. I think PG is incredibly ambitious and had plans far before he and I ever talked about how YC was going to be this very large, long-term organization.
Andrew: But even taking away from the comparison to YC before you, the comparison to other accelerators, the comparison to the way other people are thinking, you’re still 10x more than them, at least. What is the big ambition and why is it important?
Sam: Well, I don’t want to answer the question about other accelerators because I just don’t . . . I think they play a different game than we do and I don’t know enough to comment on their business. So I don’t know how to compare us to other accelerators. I don’t really think of us as one.
I also think accelerators on the whole are just terrible and I never want to be put into that class. But again the ambition for us is just like we have a belief that technology and economic growth and innovation is super important to a good future and we want to be a force to drive that as much as we can.
Andrew: And what do you see the future being? If you do your job right at YC, what’s the big future that happens because of you?
Sam: I do have an answer to that, but it takes multiple hours and I think any sound bite version of that I try to do would ring hollow or be inaccurate or get taken out of context. So I will say I do have thoughts about that, but there’s no way I can convince them yet. Someday I’ll get a good sound bite to it.
Andrew: But there’s no single phrase like put a man on Mars.
Sam: No. Although, I think SpaceX will do that and I’m a huge supporter of it. I think that is really cool.
Andrew: You said in a Hacker News Ask Me Anything that you should be talking more about failure but most journalists don’t want to write about that. Most people don’t want to listen to it. I do. I’m curious about it. So let me ask you a couple questions about it. The first is why is talking about failure actually helpful?
Sam: Because most people fail. If all that people talk about is success, then you have no context for what it’s like to fail, that it’s normal to fail, that it’s okay, that most people that go on to be really successful fail once first and that . . . Drew Houston has a quote that I really love, which is that you only need to be right once.
Drew Houston himself, actually he got rejected from YC first with an idea that went on to fail. Most other people I know failed at something first or they just failed at their current company for a while before they were successful. And by propagating this myth that either you succeed your first time out of the gate instantly or not, I think it’s really bad.
There are a group of these very young, very smart people in Silicon Valley that I kind of roll my eyes at them because they always have some new thing that’s going to be huge, they work on it for three months and then they give up and they say, “It didn’t work.” I say, “It took three months. If you’re not willing to focus on something for a number of years, you probably shouldn’t be doing it at all.”
But there’s this trope in the media that like either you succeed instantly or you suck. That’s just not accurate. I think it’s important to talk about that. My first thing worked out okay, but certainly not like what I was hoping for. I was laughing earlier when you said YC under your ambition or whatever because like it was only two and a half years ago that I took over YC and when I did, all of the media was like, “Who is this joker? Why is he running YC? This is really dumb.”
And now those same people are quoting me and like, “Sam is great. This was pre-ordained. He had been groomed his whole life to be the YC president.” And there’s just like a takeaway in that media portrayals of success and failures of individuals are wildly inaccurate and I think most people fail on most projects. Some are wildly successful on one and that’s all you need.
Andrew: I read that one of the things that made football more enjoyable to watch and grew its popularity was the heroes and goats framework, that on each play you need a hero and a goat. I feel like the same thing happens in the press for everything, that if you’re going to write about you, you’re either a hero or a goat and that’s what makes this story interesting. But it also gives a false sense of reality.
Sam: Yeah. It does.
Andrew: You failed. Have you failed yet at YC? Is there a failure you can share with us that you’ve learned from?
Sam: Every day. YC has funded 1,500 companies. Probably 90% of the value, at least 80 is in the top 20. So in some sense, we failed on those other 1,480 companies.
Sam: It’s very humbling to be an investor because you go into each investment with a belief that it’s going to be very successful or at least willing to pay for the probability that it will be very successful. You are wrong, humiliatingly wrong all the time. At some point, you just stop caring and you realize you’ll be wrong most of the time and that is a price of admission for being really right occasionally. And internet commenters love to jump on you for being wrong and there’s this schadenfreude saying, “YC backed this company. It was so stupid,” or this one startup or this person or this thing is so dumb.
There’s this pile on effect on the internet of people who love to do that and you just have to ignore it. You can safely say with high probability that any given investment is going to be a dumb idea and you will usually be right. There are a lot of people that choose to just sit around and say that all day, but they will never be really right when it matters in the other direction.
Andrew: Was there a major life decision or business decision you were wrong about beyond investment?
Sam: I hired people that haven’t worked out all the time. We have thought about going to new areas. Yeah. I mean, I want to just like . . . I am wrong most of the time on most decisions. I get them wrong. And my whole job is to be really right occasionally about a company or a strategic direction for YC. And the framework that most people have is the opposite of that, which is try to be minorly right most of the time. That does work for some businesses.
I think in general, there’s this framework of does the business need to get the big things right or the small things right. If you’re going to operate a train company, what you want to do is get the small things right and never screw up and you don’t ever have to get really big controversial decisions right ever. Or there’s a business where you can actually get all the small details wrong at the expense of occasionally getting the big things really right. I’ve noticed that most organizations tend to excel at one or the other.
Andrew: I asked people who knew you what they admire about you and one of the things was you used to actually . . . tell me if this is a wrong characterization or if you disagree with it, you used to believe you were right much more firmly, that even in discussions with people who work for you, who you trusted, you wouldn’t say it exactly like this, but you’d say, “This is a stupid idea.” And now it’s more like, “Here’s why I think this idea doesn’t work, but good luck if you want to go in a different direction.” Does that seem right, that you’ve changed and if you have, why?
Sam: Well, certainly I hope that like 30-year old Sam is more mature and better at delivering criticism than 20-year old Sam. That would be sad if that weren’t the case. I think a lot of 20-year old founders are a bit of a pain in the ass to work with.
Andrew: Was there something that changed in you? Was there a period where you said, “This thing I was wrong about and now I’ve got to learn to not do it?”
Sam: I think just like in my early 20s, like from 20 or 24 or whatever, I think I grew up a lot. I think a lot of people do in that period. As you gain more experience and as you develop better skills for interacting with people, I think a lot of that is just growing up.
Andrew: Okay. I want to ask you another question related to the AMA that you did, but first a quick message about Pipedrive. Pipedrive is a software that is used to help close sales. We use it at Mixergy to help us get people like you, Sam, to do an interview. What’s great about Pipedrive is it forces a sales department to say what are the steps involved in closing your sale and then it allows the whole team to collaborate on each step to get the deal done.
If you’re trying to close sales, if anyone out there is trying to close sales, I’m telling you, you’ve got to check out Pipedrive. It’s increased the number of people that I’ve had on Mixergy. It’s made our lives easier. It really works so well. And the best way to see it is to visualize it and to play with it. I think you guys if you’re listening to me should go check out Pipedrive.com/Mixergy. They’re going to give you two free months if you do, Pipedrive.com/Mixergy. I love that software.
It’s kind of weird for me to be doing ads with you here, partially because I feel like every second counts, let’s cut right through it.
Sam: Don’t worry about it.
Andrew: You said in the AMA that you did on Hacker News that founders should make an active effort to look for problems in the world. Why?
Sam: Well, I think that is how . . . I think having good ideas is really hard. I think that is still . . . I think I’ve gotten better at a lot of skills, like as I’ve mentioned, I hope I’ve gotten better at how to interact with people and how to deliver feedback about something I think is a bad idea. I also think I’ve just gotten more humble and realizing that sometimes you don’t know.
But one thing that has been hard for me consistently and that I don’t think I’ve gotten better at is identifying really good new markets. That is just an extremely difficult skill. I think the thing that has worked best for me in terms of how to do that is to notice things in the world that seem broken.
Now, that is only half the battle. Certainly I had actually thought before Uber started that taxis were terrible and really broken. But I had not come up with the idea of Uber and how to make them better. So sometimes you can notice the problem and not come up with the solution. But a lot of times, if you can really notice the problem, then it will at least set you down the path to find the solution.
Andrew: I see. So how do you become better at actively finding problems in the world, at noticing them? I think a lot of the problems that you guys solve at Y Combinator Paul wrote a post about, saying people just are blind to them.
Sam: Yeah. At least for me, that is the hard part, that I had to make an active effort to stop being blind to them. Everyone is thinking about their own things or going through their day. Humans get accustomed to good and bad really well as the new normal. For me it’s just an active mental effort to say like, “Okay, is this just like a normal thing or is this unusually bad and annoying and is this actually broken.” So for me it just took like a proactive mental process that I would run. I thought about it throughout the day.
Andrew: What’s that process?
Sam: I would just of like replay my day when I was walking or whatever and I would be like . . . or when I got annoyed by something, I would immediately think like, “Is this normal annoyance or is there something systemically broken here?”
Andrew: Is there something you noticed that was annoying recently? Is it one of my questions?
Sam: No. The questions have been great. I’ve had like a bunch of stuff break in my house recently. It’s just been like a bad month for that or whatever and just like having to deal with repair people. I am incredibly fortunate. My assistant helps me with the stuff. I have the best possible configuration for this, so I don’t need to claim I really suffer here. But it has been just the pain of dealing with home repair people relative to what it could be has struck me recently. That’s a small example but it was on my mind this morning.
Andrew: I see. So you pay attention to that and you say, “Okay, this is a problem. Maybe someone can solve it. This is a solution waiting to be created.”
Andrew: Yeah. I can’t find in my notes, but I saw somewhere that you guys hired a coach who happens to be a therapist. I went to her website. Anyone can hire her, but you guys at Y Combinator make her available to founders. I’m wondering why. Why is it important for founders to have a therapist/coach?
Sam: She actually does not coach . . . she’s the batch manager at YC. She’s one of our associates. She’s great. And she is essentially the first point of contact for founders in the batch and helps makes sure everything happens. We did not plan for her to also have a background in therapy. She was incredibly qualified and great for the role. But it’s been a real advantage.
I think Ben Horowitz was the first person I heard say the hardest part of being a CEO is managing your own psychology. I really believe that’s true. So having someone . . . again, there’s one of her and there are hundreds of founders per batch, but she can at least route people who are struggling to sources outside and sometimes she’s able to help them herself. This is hugely important. It’s an incredible psychological struggle to be a founder.
Andrew: Are you aware enough of your own psychology to know where you’ve had troubles or challenges managing your own psychology and staying focused on what you needed to?
Sam: I think. I should say I’m sure there are things I’m not aware of, but I’m aware of plenty of . . .
Andrew: What’s an example of a thing that you needed to deal with? What’s an example of one of your challenges that way?
Sam: Look, I think when things just really start to go wrong at a company, I think when you have a startup that’s not doing well, you are somewhat depressed and stressed and anxious all the time.
Andrew: Do you have a specific example? I’m looking for specifics just because I think that’s something we can visualize and that’s something that people remember.
Sam: Yeah. Look, it’s kind of hard because it was so long ago. I’m trying to remember things from ten years ago.
Andrew: How about recently?
Sam: Well, I just thought of one.
Andrew: Okay. Hit me.
Sam: When we had something with Apple go sideways, which I’m not even sure I can say about this, but it was sort of Steve Jobs saying he thought our product wasn’t very good. That is just a crushing blow that makes you question everything. It makes you feel like everything is about to fall apart. At the same time, you have key employees quitting and the metrics aren’t doing that well and like fundraising is not going that well and it’s usually these compounding problems or at least that’s what it was on that day.
All of those together just make it really hard to kind of like . . . you’re still a leader for the company, right? You can’t not do your job that day. You can’t take a mental health day. It’s just getting through that is really challenging.
Andrew: What did you do? What do you do to overcome situations like that?
Sam: I think everyone figures out their own coping mechanisms and I don’t like . . . the one that has worked best for me is having now had the experience that I’ve survived a lot of crises I didn’t think were survivable, that I thought were going to be company-killing. If I got through all of those, even though I didn’t know how I was going to get through them the moment they happen, I will trust myself to get through this one as well.
And I think that’s actually there’s a more generally applicable skill there that’s important, which is sometimes in the moment, you have a problem or an opportunity that you don’t know how you’re going to address, but it’s okay to just assume that you will figure it out later. So sometimes you say yes to a really great opportunity even though you don’t know today how you’re going to do it. It’s to trust yourself later. Or sometimes you have a really big crisis and you keep going because you trust yourself to think of the solution later.
Andrew: And partially that trust comes from knowing and remembering you’ve done that in the past.
Sam: Again, for me that’s what’s been most effective, but I think everyone figures out their own coping mechanism there.
Andrew: I noticed, speaking of how you work, I noticed that when I asked you to do an interview here, you responded within minutes to every email I sent you, you responded within minutes. I asked if this was typical of you and people said yes to the point where they sometimes said, “I feel bad that I sent him an email and he responded that fast, this wasn’t that critical,” but that’s one of the ways you work. How do you do that?
Sam: Well, I either respond quickly or never usually.
Sam: It’s like either it gets dealt with or it just falls down and I never get caught back up.
Andrew: So the idea is, do you have a process for acting quickly? Apparently you make decisions quickly. You can respond quickly. You just clear things out.
Sam: Well, I don’t make all decisions quickly. Sometimes if I think the decision will get better with more information or if I think about it longer, then I will do that. There are plenty of times where I will tell someone, “I need to sleep on this for a couple of days. I’m not sure yet.” I don’t even need particularly more data. I just need more time to think about it. Or if I need more data, I’ll tell someone I need this other thing.
But I think most decisions, if you have all the data you need, don’t get better with time. Most small decisions don’t get better the longer you take on them. So I try not to cloud up my brain with delaying small decisions. I think decision fatigue, for me at least, is really real. So I try to make big decisions early in the day and I try to make small decisions later. I try to make them quickly and I accept that I won’t get them all right. But I do think it is better generally on small decisions to decide quickly than think and prevaricate forever.
Andrew: This is a small thing. But I was looking at your Twitter profile in preparation for this interview and I noticed you’re holding your phone in that picture. I noticed you hold your phone in a lot of pictures. How much of your work is now done on a phone?
Sam: That’s more like a thing where photographers will be like, “Can you hold your phone? My editor wants to . . .”
Sam: I mean I do use my phone all the time.
Andrew: Do you mostly work on your phone, computer?
Sam: Computer. I’m still faster on my computer.
Andrew: Do you actually make a list of your goals every year?
Sam: I do.
Andrew: You do? What’s that like? What’s that process?
Sam: Well, usually I will go on vacation, like the last week or two of December. So usually it’s like with a group of friends. I’ll take like a half-day off and sit at the beach and try to write it down.
Andrew: And you just go through, is it a brainstorming session where you say, “How much can I write down here?”
Sam: Well, generally I’ve kind of been thinking about it as a background process the entire year. It’s more like a documentation session not a brainstorming session.
Andrew: I see. So it’s stuff you’ve already known. And then what do you do make sure you’re actually on top of these goals throughout the year?
Sam: I have some custom software I wrote a long time ago that periodically brings it up for me.
Andrew: It just pings you and says, “Hey, here’s one of your goals.”
Sam: No. It’s the whole thing. I look at the whole thing and check things off or not.
Andrew: Okay. Is there anything that I should be asking you that you wish someone who is interviewing you would ask but they don’t. Is there anything that you wish you’d get to talk more about?
Sam: No. This has been great. These have been interesting and different than normal questions.
Andrew: What are you going to do with your money when you die? Is that too personal?
Sam: I don’t know yet. I hope not to die for a very long time.
Andrew: But you don’t have a goal of donating it or anything like that.
Sam: I expect to donate it. I would expect that I will give my kids some small but like enough that they can not have to worry about like medical expenses or starting a company or whatever. Then I’d like to figure out the maximally impactful way to donate the rest. But I haven’t . . . I have a place holder in my estate documents for where it goes. But I expect to change that when I think about it more.
Andrew: Okay. I want to just close out with this. Basic income is something that you’re working on, giving people money to just live without having them earn it, right?
Andrew: Why is that so important for you?
Sam: Three main reasons. Number one is I remember what it was like to live paycheck to paycheck and be under financial stress and speaking of decision fatigue, which we talked about earlier, if you are stressed about having enough money to pay basic living expenses, that I think is really bad.
Two is I think the lack of financial freedom gets people stuck into these sub-optimal situations where they can’t learn a new skill, they can’t quit a job with a boss that mistreats them. So there’s a massive misallocation of human capital and potential because people are wage slaves. I’d like to see that end.
And three is that I think, and people, I think, some people will sit around and do nothing, but many will go on and create far more value as a society as a whole and we’ll all be much better off. The last thing is I think the coming wave of automation will lead to massive job displacement.
I’m optimistic that long-term we’ll find new jobs. I think human demand is pretty limitless. Even if it’s creating art or status goods of some sort, we’ll figure out something to do. But I think there will be significant disruption in the meantime. So I think we should have a safety net in place for that. I hate the current safety nets. I think they’re badly applied and there’s social stigma and something that is just really straightforward that everyone gets solves a lot of the problems of the current system.
Andrew: You said if this doesn’t work you have other ideas. What other ideas do you have for solving this problem?
Sam: I do have an answer for solving that as well. But that also, although not hours is many minutes. I think it comes down to other versions of income, wealth redistribution, and job availability and training. I don’t think I particularly have new ideas. There are smarter people than me that have been thinking about this for decades.
Andrew: All right. I’ll close out with this one question. I asked Paul Graham what should I be focusing on as I do these interviews and he gave me really good guidance. There was some stupid thing in the news about Google at the time. He said, “You can’t focus on that. You have to focus on the longer-term questions, like why did Google decide to make their own servers. That’s the kind of stuff you should be asking.”
Let me ask you this. As a guy who’s now been doing your own interviews, what do you advise? What should I be doing with my interviews or how do you think interviews can be more useful to entrepreneurs?
Sam: Well, I think the main thing is most interviews want to talk about big strategic advice, like, “How did you make this really big decision?” And to Paul’s point, the thing I think is most helpful to entrepreneurs is the boring tactical advice, like building your own servers. There’s not much of that out there. I think the thing that would be most helpful relative to everything else that exists out there is boring, practical advice on tactics of being a good entrepreneur.
Andrew: All right. Well, I do like focusing on that.
Sam: Yeah. I noticed today. That was interesting.
Andrew: I feel like interesting is like there’s something else you want to say you’re holding back. If you were the 20-year old you, what do you think candidly?
Sam: About what?
Andrew: When you say interesting, can you unpack that? What’s behind that? You can never hurt my feelings.
Sam: No, I literally just mean that I think founders hear that and it’s like, “Oh, I can actually implement this or that makes me think about doing my job different. That’s interesting. That’s helpful.” Like hearing me talk about my vision for how YC impacts the world over the next hundred years is not going to help an entrepreneur trying to make a company work today. But it’s fun to talk about. But I think like hearing, “Here’s how to run a one on one. Here are these specific interview questions I ask. Here is the red flags that I had noticed an employee that hasn’t worked out that seemed really good on paper,” like that actually is very helpful.
Andrew: That’s really good feedback. I’ll tell you why. I’ll be honest with you. The reason I was asking about your vision for YC was partially to flatter you because I figured if you were flattered then you’d be more open about other stuff and you’d feel like, “This is a place where they’re letting me speak.” The other thing is it adds gravitas to an interview if you talk about the big picture. But you’re right. It doesn’t add a lot of practical, useful information. I’m glad you said that. All right. That was really helpful for me.
Sam: Thanks for having me on.
Andrew: Cool. Thanks for being on here.
Sam: I enjoyed it.
Andrew: This interview was sponsored by Pipedrive and Toptal. And I appreciate you doing this. Thanks, Sam.
Sam: Thank you.