Geoff Ralston:
It is now my great pleasure to introduce my longtime colleague at Y Combinator, Paul Buchheit. Paul is known for a lot of things, not the least of which is his wisdom in all things when it comes to startups. But he's also of course the creator of Gmail, the inventor, this is true, of "Don't be evil" And has had an incredible career. So I just thought I turn over to Paul for a couple of minutes, for him to describe his journey from somewhere into YC and what's happened then. Then we're going to have an interesting conversation, I hope, on what it means to build an epic company. Paul.
Paul Buchheit:
Wow, all right, thank you. How far back do you want me to go, exactly?
Geoff Ralston:
Where were you born?
Paul Buchheit:
Where was that? Upstate New York.
Geoff Ralston:
Me too.
Paul Buchheit:
Yeah, I grew up in the Midwest and went to college in Ohio, in the '90s, just different from now, probably.
Geoff Ralston:
Everything in the '90s was different from now.
Paul Buchheit:
Yeah, everything in the '90s was different. So, yeah, I was always interested in startups. And even as a kid this idea, I just didn't like the idea of working for someone else. And also I liked the idea that you could make a lot of money and create cool new inventions basically, right? You'd read about inventors like Tesla or someone like that, you're, "Wow, if only that guy were smarter in business." Right? He had all-
Geoff Ralston:
He invented so much.
Paul Buchheit:
He invented so much, and he died penniless. He wasn't smart-
Geoff Ralston:
Didn't he start that car company?
Paul Buchheit:
Yeah, I'm not sure if he actually got any equity of that, it's too bad.
Geoff Ralston:
I don't think he did.
Paul Buchheit:
So yeah, that was always [inaudible] back in my mind. But, as I'm coming up to graduate college, which was in 1998, so I was very interested in startups. But there was obviously no startup school, there was no Y Combinator, there was none of ... It was basically very little. The web was relatively tiny at the time, there was not a lot of resources. I didn't really have any connections. I didn't know anyone who worked at a start up, but I suspected they were in California. So just always doing the simplest thing first-
Geoff Ralston:
Kind of intrigued by that. What made you think of California?
Paul Buchheit:
I mean, eBay, Netscape, that first generation Yahoo, all of that first generation of internet companies, those companies that are IPOed by the time I graduated, and they were all located here, with the exception of Amazon up in Seattle. So it's pretty obvious. I didn't have to be that-
Geoff Ralston:
[crosstalk] Silicon Valley was-
Paul Buchheit:
I was trying to figure out where Silicon Valley is. So I took a job out here at Intel, with the hope that I would just, there had to be startups everywhere, I'll just find one or something.
Geoff Ralston:
Right. So you went to work for the man?
Paul Buchheit:
So, yeah, I went to work at Intel, Intel is a big company, it wasn't awesome and it wasn't terrible, it wasn't a bad job, I don't want to ... But it wasn't something I look forward to continuing to do, year after year.
Geoff Ralston:
Yeah, we used to call working at HP where I first worked the far line rot.
Paul Buchheit:
Yeah.
Geoff Ralston:
It's comfortable, but it's a rot.
Paul Buchheit:
Yeah, I actually have a specific memory, hanging out with a couple of other friends who worked at Intel. And I'm like 21, 22 years old, something like that. And they're talking about, "Oh, yeah, they've got this really great retirement plan where if you work there for however many years, your age plus your number of years of service, you could retire at 55 or something." I'm, "Ah, oh yeah, why don't I just take the next 30 years of my life and stick it in a box and bury it?"
Geoff Ralston:
Yeah, it's worse. There are people there, when you're sitting there at 22, who have been there for 30 years, who are just doing their time.
Paul Buchheit:
Yeah, so I wasn't really into doing time. But I was really into Linux. So that was my obsession. I had gotten interested in Linux, actually really early like '93, when it wasn't actually very good and so I was an early Linux zealot who was, "Oh, this is so awesome. This is how the future is going to be." And back then businesses didn't really ... Linux wasn't a serious operating system, they were like, "No, serious businesses will always use Windows, you need enterprise operating system, not some hobbyist junk." So I was looking for something to work in Linux, everything at Intel was pretty much Windows-based. And so that was my criteria when looking for startups. So it's just that I wanted to be technically interested in Linux stuff. Again, there weren't great resources on a huge list of startups. So I just scouted out what I could find basically on Slashdot, because I would read Slashdot a lot, and I came up with a list of like six startups, that seemed like they might be interesting, doing stuff with Linux and so I just emailed my resume to all of them. Ironically it immediately bounced from Google, because their mail server was mis-configured. So I didn't hear back from most of them ever. I interviewed at one other company, and then I resent my resume the next day and then it went through, they had fixed, I think MX record was broken or something. So I only interviewed at Google and one other company. And the other company, I wasn't interested, and I think maybe they weren't interested, because neither one of us really contacted each other. And so Google was really the only offer I had. So that made it easy to choose inside. So I went to work there in 1999.
Geoff Ralston:
And how many employees did Google have?
Paul Buchheit:
I was the 23rd at that point. And so we were in Palo Alto on University Ave, on the second floor above what is I think, a bookshop or cafe or something like that.
Geoff Ralston:
What did it feel like at Google when there were 20 employees there?
Paul Buchheit:
It was really cool. Actually, I was really impressed when I was interviewing with them that they asked actually, really smart questions, which I think is a pretty good indication. That was one of the other reasons I wasn't excited, the other startup I went to, that I'd interview at, it was just like I went into their office and I just sort of felt depressed. You could just tell people weren't really that excited to be there, and then they'd ask dumb questions that I didn't think were ... Anyway, it just wasn't a good sign versus Google, they were into whatever it was they were doing. And actually, after I was there for, maybe a week, I went back and I'm, "Hey, I want more equity." They were like, "Sorry, you have to negotiate that before you start." So, yeah.
Geoff Ralston:
That might have been the smartest pseudo investment decision you've ever made, even though it didn't, I guess it worked out but-
Paul Buchheit:
Yeah, I mean, it worked out overall. But yeah, I do wish I'd gotten more. So the thing about their office I mean, you asked about the environment, it just had a buzz of productivity, right? Because we were doing these really exciting things, and I think they had hired people who are really into building these big systems, and creating great products and everything. So it was an exciting place to work where I would actually wake up in the morning and be eager to go to work because I've got stuff I want to do.
Geoff Ralston:
Do you think that was because, not just they were working on exciting things, but because they believed they were going somewhere?
Paul Buchheit:
Yeah, I mean, there is an irrational belief, right? Objectively, we were just this tiny little company or wherever. But Larry would be talking about whatever crazy ideas, we were just, "Wow." I remember having an early memory where I was building this system, and then I'm talking to Larry about, he's, "Why are you even bothering with the disk? We're just going to store everything in memory, or whatever." Which at the time was absurd, we didn't have enough RAM to store all the data, but he was always thinking so many years ahead. And it was a little bit insane, but it made it a very exciting place to be.
Geoff Ralston:
It seems like there's something fundamental, if you're thinking about whether you have the potential to build a really big business, if you don't have some vision, some idea of a future, it's hard to believe you're ever going to get there.
Paul Buchheit:
Yeah, I think you have to have some notion of the big picture. And it doesn't mean you look like a detailed step by step plan, occasionally I'll run into a startup where they're, "Here's our five step plan, for how we become whatever." And it isn't until the fifth step, that actually they have a product, anyone would want to use. I mean, you have to have something today that's good. And you have to have something tomorrow, day after day have a product that people actually want.
Geoff Ralston:
Yeah, you almost want a certain amount of vagueness around your vision, because if you have too much detail, you're just guaranteed to have wasted your time, because it's not going to be right. So you spent how much time at Google?
Paul Buchheit:
So I was at Google for seven years.
Geoff Ralston:
Well, that's just about how long you've been at YC now.
Paul Buchheit:
I've actually been at YC for over seven years now.
Geoff Ralston:
So what happened during those seven years? Stuff happened, right?
Paul Buchheit:
Stuff happened, a few things.
Geoff Ralston:
And when did you know? When did you realize that Google was a thing? That it was going to be this secular juggernaut that was going to take over the world?
Paul Buchheit:
Earlier this year. I mean, it builds. I think like many people, I continually underestimated its potential. But from very early on, after being there for a week, I was, "Ooh, there's something magical going on." I didn't think it would be what it is today, as as big as it is, but it definitely felt like we were somehow creating the future. And then when we started really, like when we got the Yahoo deal and started really displacing-
Geoff Ralston:
You're welcome.
Paul Buchheit:
Yeah. We started really just crushing all the other search engines. And then there was like a feeling of inevitability, it was pretty clear, we were just going to win because no one else like they just didn't even know what they were doing. Competition just wasn't very good.
Geoff Ralston:
Before we move on to leaving Google and starting your own company, just maybe say a word about the founding of Gmail and how that happened.
Paul Buchheit:
Sure. So email was actually a thing that I've been interested in for a long time, I actually-
Geoff Ralston:
Ever since your resume bounced?
Paul Buchheit:
Yeah. No actually before that. So in college, I had actually been thinking a lot about this, because like, again, back in the '90s, people, their email would download to their computer, they would run like Eudora, or something, and they would use pop three to pull the email down to their computer. And I remember people would be, "I need to go to my room to check my email." I'm, "That's dumb, that doesn't make any sense. It's information, it shouldn't be stuck in a box." Right? And so I'd been thinking about this idea that everything is just going to be online. And then we'll just be able to access it anywhere, anytime we want. And so I actually in the summer of 1996, I think, I had gotten maybe a little bit excessively arrogant and had only applied for a couple of summer jobs, just assuming they would want to hire me, and they didn't. So I ended up with a job. And so I'm, "That's fine. I'm just going to start my own company." And so I actually tried to start this thing of a web-based email. But I-
Geoff Ralston:
That's funny, because that's right when we were building web-based email.
Paul Buchheit:
Yeah, mine would have been better.
Geoff Ralston:
'95, '96. Rocket mail was really good.
Paul Buchheit:
But anyway, I had grand visions for it. But my approach to developing it was wrong. It was very much like, I had this great big grand vision, and then I started trying to implement it, piece by piece, the components, and then I got bored and gave up.
Geoff Ralston:
Yeah, it's actually a multi-person job to build email. Yeah, it's a lot of work, but-
Paul Buchheit:
It's a lot of stuff, but the way I went about it, was wrong. Because I actually did this detailed design or this very intricate system and everything. And at least for myself, I've come to decide that that doesn't work, and this is what we preach to the startups is, "Figure out what you can launch today." And so to jump forward to Google, it was 2001, there was a big reorg, where they got rid of all the managers, and just gave engineers more of a free range engineering thing, gave us all projects. And so they were just, I should build an email thing. They knew I had an interest in email, whatever, but it was just like we want to do something in email, we don't really know what exactly like, just go build it. So having learned from my prior experience, I decided to ... I know I have a short attention span, so the very first version of Gmail I wrote in a day, and it wasn't really good. But I had previously been working at Google Groups, which was a Usenet search at the time, now it's something different, but I took the code that I've been working on for that, and then I just took all of my email and shoved it into that database, into that indexing engine. And then, I had an email search, and then I just-
Geoff Ralston:
So your first thing was just an email you could search.
Paul Buchheit:
Yeah, and so then I emailed that out to the engineering team, I'm, "Hey, I built this email search, let me know what you think." And then people reply, "Yeah, it's okay, but it would be better with my email instead of yours." So I'm, "All right, I have a feature request." So version zero, only searched my email, and then the next version, I made it so it would search other people's email-
Geoff Ralston:
There's a stunning lesson in there, I think, which is, the point wasn't so much that whose email was being searched. It was that email was being searched. You guys got to realize back then you couldn't really search email, or you could do is find the email you wanted, and click on it. So searching was a thing.
Paul Buchheit:
Yeah, and I figured, I mean, a lot of our emails and comments. So it sort of works, right. We're on a lot of the same mailing lists, everyone [crosstalk] . So yeah, so then version two is just it indexes other people's email and so I sent that out, and they'd be, "All right, this is cool. Now, I want to be able to reply to one of the messages." All right, feature request, right? And so the whole thing was just iterating, to step by step, trying to make something that would make people happy. And so we actually had as our launch gate, this idea that we needed to have 100 happy users inside of Google, because, we hadn't it launched it to the world, obviously. And so I actually embedded in the interface, this thing will pop up and be, "Are you happy? Yes, or no?" It was just a single question. Are you happy with Gmail? Or it was at the time known as caribou? Yes or no? And it would get a list then, I would look at, of who said yes, and who said no. And then I'd go to all the nos and be, "What's it going to take to make you a happy user?" Right? And actually just get them one at a time, and some of the people they're, "It basically has to be a clone of Outlook." I'm like, Well, you're never going to be a happy user.
Geoff Ralston:
You are dead to me.
Paul Buchheit:
I know. I did end up getting those people. And the way I would get them is that Outlook at the time, when you would hit two gigabytes in your mail file, it would corrupt the database, and they would lose all of their mail. And then I had the only copy of their email. And so then they would become a Gmail user, not always a happy user, but they would become a user. But anyway, other people, it would just be a minor thing, where I just need to add one feature, or fix a bug or something, and then they'll be happy. And so we slugged through, just one user at a time, until we got to 100 happy users.
Geoff Ralston:
Is that the genesis of what we call at YC, the Buchheit rule, maybe you can just tell these guys what-
Paul Buchheit:
[crosstalk] -
Geoff Ralston:
It's better to have-
Paul Buchheit:
Right. So, one of the ideas is when you're starting out building something new, especially if you're going into an established category, like email, literally email was like 30 years old, when we started on it, right? So there is a lot of history and a lot of opinions about how email should be, and people would sometimes angrily tell me, I'm doing it wrong, because we made the reply on top instead of the bottom, weird stuff like that. And so there's all this history. So it's pretty much impossible to enter a space like that, and make a thing that appeals to everyone. And if you try to do that, what you end up making is just a mediocre product that nobody really loves. And so my philosophy and what we try to get all the startups to do is figure out a thing that will just have really deep appeal, even if it's to a tiny fraction of people, if you can make that small fraction of people just obsessively love what you're doing, it's easier to then grow that group, because, there's always people at the margin, where if I just make something slightly better, they're going to join into that group. So it's easier to start with that like that deep but narrow appeal, and then broaden it over time than it is to start with just broad me, and then try to convert people from me to loving your thing in mass.
Geoff Ralston:
Yeah, I've been thinking about that lately. Just in terms of retention. If you get 100 people who never leave, that's a great place to start than if you have thousands of people, all of them turn eventually.
Paul Buchheit:
Yeah.
Geoff Ralston:
Okay. So Gmail happened, and then you left.
Paul Buchheit:
Yeah, so Gmail happened, and yeah, a couple years later, I left the company. It was becoming a big company again, and I just decided that wasn't the direction I personally wanted to go. And I just had a baby who had a pretty dramatic start at life. So I had other things going on. So actually, around that same time, actually, even before I left Google, I was again reading Slashdot, because that was where I got all of my information. And I saw this thing about the Summer Founders Program, which I thought sounded super cool, because I'm only just looking for an idea, that's actually novel.
Geoff Ralston:
And for those of you don't know, the Summer Founders Program, that's YC. That's Caribou.
Paul Buchheit:
Right. That ended up being YC batch Summer '05, that's the one that had Reddit, and a bunch of companies that did [crosstalk] , Sam's company, Justin and Emmett's company, Kiko, were all in that batch. So I saw that-
Geoff Ralston:
Justin Kan is the founder of Justin.tv and Twitch and atrium.
Paul Buchheit:
So yeah, a few things.
Geoff Ralston:
A few things.
Paul Buchheit:
Yeah. So I was just really interested. I didn't know Paul Graham, or any of these guys. So I was just keeping it on my radar, I'm really excited to see. And part of that was my own experience, being there in Ohio, and thinking I'm excited about startups, and I wouldn't even know where to begin, right? Because if you go to Stanford, your roommate probably has a startup or something like it, it's just in the water. But if you're from someplace else, if you're not from Silicon Valley, if you're not from this environment, it feels like you're just excluded, and I really liked the idea that it was just this open thing, anyone in the world, you didn't have to know anyone, you could just submit an application. And they were going to bring you in. And so that idea-
Geoff Ralston:
Turns out startup school's the same way now.
Paul Buchheit:
Yeah, exactly. I mean, that's the idea that I think really resonated with me, is that it was opening it up to everyone, even if you're not an insider or something. So I followed them pretty closely. I was one of the very first Reddit users, I think, when that launched, and then-
Geoff Ralston:
Did you go to the Demo Day?
Paul Buchheit:
No, I didn't make it to the very first one.
Geoff Ralston:
Is that the only one you ever missed.
Paul Buchheit:
That's the only one I missed. I've been to every Demo Day, except the first.
Geoff Ralston:
Paul actually has the distinction of having been to more demo days than anyone.
Paul Buchheit:
Yeah.
Geoff Ralston:
Than anyone, including P.G and Jessica.
Paul Buchheit:
I don't know if it's a good distinction but-
Geoff Ralston:
It is a distinction.
Paul Buchheit:
Yeah, it is a distinction. So yeah, then that fall, they announced, P.G put out this thing, "Hey, for the second batch, we're going to do it in Mountain View, in this room, it turns out." And so I was like, "Oh, that's cool." I just dropped them. I didn't know them. I send a cold email, introduced myself, I'm, "Hey, if I can help out in any way, just let me know." So he's, "Yeah, come on, by." And I started just attending the dinners, and actually made my very first angel investment in a company in the second batch winter '06, which was Kevin Hale, who then later became a YC partner Wufoo, which is a form filler, it isn't a company that IPOed, it actually turned out to be really good investment.
Geoff Ralston:
Nice first win.
Paul Buchheit:
Yeah, I forget what the multiple is, but pretty high.
Geoff Ralston:
Yeah, my first investment returned like 10 X. And it was actually a little unfortunate, because it made me think I was better at it than I was.
Paul Buchheit:
Yeah, it was maybe like 50 X, something-
Geoff Ralston:
Yeah. Not bad.
Paul Buchheit:
So that was how I got hooked into this stuff. So I started at that point, just getting to know the founders and each batch. And I've invested in every batch since then, at least a few of the companies.
Geoff Ralston:
And how did FriendFeed emerge during that time?
Paul Buchheit:
So yeah, after I left Google, I sort of retired and then would just get depressed because it turns out-
Geoff Ralston:
Retirement's not fun.
Paul Buchheit:
Yeah. And maybe I have issues with depression, I don't know. But working distracts me, so I started talking some other friends from Google who were thinking of leaving, and basically ended up starting a new company, which was FriendFeed, and the actual goal of FriendFeed was was just to build a place that was really awesome to work at, I was actually just trying to create a job for myself.
Geoff Ralston:
Were you trying to recreate what it felt like when you were at Google in the early days.
Paul Buchheit:
Yeah, the best of parts, because there was also a lot of stuff about Google that I found just tremendously frustrating. And so I had this idea that we could take the good parts and not the bad parts. It's a little bit naive, but that was the hope and managed to get an incredibly strong team, mostly of a former group of people.
Geoff Ralston:
Did you ever feel like, I mean, FriendFeed, it went fine, but it didn't obviously end up becoming like 100 billion dollar company. Did you ever feel you could pinpoint what was missing from the beginnings of friend feed that might have led you on that path? Or was there a grand vision? Was that missing?
Paul Buchheit:
I'd say explosive growth was missing. For those of you who don't know it was it was a social network, we actually created the like button, so the very first like button was on FriendFeed and then mysteriously appeared on Facebook a number of months later. They-
Geoff Ralston:
Coincidence [crosstalk] .
Paul Buchheit:
Yeah, I know. Anyway, social stuff is just really hard. We've had a lot of social stuff come through YC, Google has tried it, it's a really hard space, somehow some of these things, Twitter or Facebook, they just catch, and you can go back in time and make up a bunch of stories about why it is. And some of those stories may or may not be true, but it's one of these things that I think is one of the hardest product categories to engineer success. But actually, I will answer your question, which is that I did come to realize this, because in the process of trying to make FriendFeed a success, we kept running into this company, Facebook, who actually knew what they were doing, and part of why ultimately, I came to believe that Facebook, which is this unstoppable force and that we weren't going to beat them, and Google wasn't going to beat them, and Twitter wasn't going to beat them, certainly not my space, right? None of these people are going to stop them is, having competed with them, you start to realize, "Oh, they're really good at this." Right? That was why I sold FriendFeed to Facebook, because I'm like, "Wow, this is going to be another Google size-
Geoff Ralston:
Because they were the best at what you were doing.
Paul Buchheit:
Yeah.
Geoff Ralston:
Google was a best in the world at what they were doing, when you were there, And they were the best in the world, and you weren't.
Paul Buchheit:
Right. And so I was just like I should go there, because it's going to be, first of all, I feel like another one of these Google size companies, and then hopefully, I can learn how they do it. And I think like being there and reflecting on it, one realization I had, is that we brought ... Google always had a very product-oriented mindset. We would try to build products that were what the user wants. So it was-
Geoff Ralston:
And you guys were your users, you build product, like you said, you build Gmail originally for Google people.
Paul Buchheit:
Yeah, sure. And so with FriendFeed it was the same thing of, we're just thinking about, what do I want? And I think one of the really powerful insights that they had at Facebook was that it's almost it's not the end user who you have to please, it's the network, because they understood that the most important feature of a social network is that your friends are there. And so sometimes there's actually a tension between what's good for the individual and what's good for the network? And they would always do what's good for the network.
Geoff Ralston:
Do you think that's just specific to network effect businesses, social media? Or is that a more general rule, do you think? Like an enterprise product, probably doesn't need to think about-
Paul Buchheit:
Yeah, I mean, enterprise has some of the similar thing where you have to make the buyer happy, not the end user, which is, I think a lot of times why enterprise software is not really lovely to use, is because the person using it isn't the person making the buying decision.
Geoff Ralston:
So both cases, you have to have a meta level where you're ... We always talk about making something people want, but people, you have to think more broadly than just the end user, it's everyone who's involved in the system.
Paul Buchheit:
Right. People get this wrong a lot of times where they think there's this meme out there that oh, if you're not paying, you're the product, not the customer, whatever. But it really isn't, right, you have to identify who's happiness makes you successful. So for Google, it really is the end, the people using Google search, if they go to a different search engine, there's Google script, right? You have to keep those people happy. And with the enterprise example, it's whoever the buyer is, I think the subtle thing with Facebook was that what makes those people happy, is that you have this huge network, right?
Geoff Ralston:
That's efficient and easy to use, and-
Paul Buchheit:
Right. And so you really have to think in terms of almost what the network wants, which is a different way of thinking, yeah.
Geoff Ralston:
So, FriendFeed was bought by Facebook, and so you landed in Facebook? Did it have a similar feel too? I guess Facebook was a little bigger by the time you get bought, but did it have a have a Google feel, then?
Paul Buchheit:
I mean, there are a lot of people from Google. So yes, they, "Hi." Former co-workers. Similarities and differences. So again, one of the reasons I was excited to go there was just like I had this experience going through Google, and it's very easy to overgeneralize, "Oh, wow, the reason we were successful is we had brightly colored balls." Or something like that. You can make up all of these rationalizations for what made you a success, but in retrospect, everything looks different-
Geoff Ralston:
The truth is-
Paul Buchheit:
I think the majority of the reasons you come up with are probably wrong. There's a few key things. I will say, though, that going into the office, it had that vibe of, "This is a place that's going somewhere." Right? And I think it's a really powerful indicator. And it's a subtle thing. And it's a little bit almost metaphysical, or everybody, you walk into an office and you're just, "How's the energy? How does it make me feel? When I watch my own energy levels, am I going up? Is this making me feel like, Oh, wow. Or is this pulling me down? Am I depressed?" And I think the reason that works is because the employees actually know what's going on, right? And so if you're just there, because you're collecting your paycheck while you wait for the company to go bust, you're going to have a different energy from-
Geoff Ralston:
Yeah, you feel that.
Paul Buchheit:
Versus if you think, "Oh my God, I got to launch this thing, it's going to be so exciting, it's going to take over the world." It's just a very exciting feeling to have these products, when we were building Gmail and maps and stuff, there was this feeling, this palpable feeling of, "This is going to blow people's minds when we put it out there, right?" And that's a real exciting thing.
Geoff Ralston:
So part of the energy comes from these amazing products that you're building, but it seems like part of that has to come from the founders and just the attitude that they bring, the belief that they bring, whether it's soccer, Larry and Sergey or-
Paul Buchheit:
Yeah, absolutely. I mean, I think there has to be a founder conviction, they have to believe in what they're doing, and not that they're just chasing after some trend, like, "Oh, I read an article in TechCrunch, I'm going to go off in a new direction." I mean, I actually think Zack is probably the most extreme example of this, I've seen, I almost feel like the whole world could tell him he's wrong, and he'd be, "No, not really." And this is really reflected in some of the I think internal mythology of the company. There's a really interesting, and this is before my time, but back when they were just a college social network, they had something like 10,000,000 users, which for social network isn't that much, and Yahoo wanted to buy them for a billion dollars. And everyone is, "You should take the money, it's a billion dollars, it's a lot of money."
Geoff Ralston:
He actually took the money, but then it changed.
Paul Buchheit:
And then they-
Geoff Ralston:
Then it changed [crosstalk] , and he didn't want to, there's pressure on him to take.
Paul Buchheit:
Right. So everyone around him was pressuring him to take the deal, and then-
Geoff Ralston:
By the way, if you get offered a billion dollars, take the deal.
Paul Buchheit:
Right.
Geoff Ralston:
In case you have any doubts.
Paul Buchheit:
Right. And so finally, yeah, I mean, ultimately turns it down, basically replaces his entire management team after that, because they were all, "We should sell, we should sell." And so he brought in people who may be believed a little bit more. Oh, and then there's ... Actually, the story I meant to tell wasn't even that, it was that when they launched the News Feed, which was around the same time, and people were furious. And so again, they were something like 10 million users, something like 8 million of them joined a group protesting it. It's impossible to get that percentage of your users to do anything, even if you want them to. Sort of suddenly have the majority of your users revolting or whatever. And they're just, "No, I think people are going to come around on this." And they were right, obviously, the newsfeed was a fundamental thing. But that required
Geoff Ralston:
The News Feed is Facebook for most people, am I right?
Paul Buchheit:
Right, of course.
Geoff Ralston:
There's nothing else.
Paul Buchheit:
But I mean, that requires, I think, a pretty high level of conviction, when essentially all of your users are furious at you, and you're, "No, I think you're going to come around on this."
Geoff Ralston:
For somewhat unclear reasons, this reminds me of another Paul Buchheitism, which is that Sam actually repeated in his introduction to the course, which was that, what a company really needs is frugality, focus, obsession, and love. And it seems like, if you encapsulate those things, even in the very beginning, and you think about leaders like Zack, they go together and make sense.
Paul Buchheit:
Yeah, I think focus is one of the most important things because as a startup, it's actually, I think, your most powerful weapon, right? The reason that you're able to take on these big companies, or whatever, is because they're doing 1000 different things, right? And so the only way you can win is if you take everything you have, and you focus it at one point, right? Because you are underpowered in every way, versus these other companies, so the one thing you do have, that they don't have is, you can be absolutely 100% focused on the thing that you're doing. With Google, that was part of the reason that we won at search was that was all we were focused on, early on, right?
Geoff Ralston:
And you became the best in the world at it.
Paul Buchheit:
Right. Versus everyone else is, "Oh, we want to be a portal." Right? "We need all this other [inaudible] ." So that's really key. Frugality, I think is also really essential. I think one of the best in indicators of if you're doing it right, is essentially your input to output ratio. So you want to do more with less. Unfortunately, most startups do less with more. So you give them money, and they just burn it up, and there's no results. So being able to produce a lot of outputs with a minimum amount of time ans money-
Geoff Ralston:
Mostly amplified.
Paul Buchheit:
Right.
Geoff Ralston:
But you have to amplify the money.
Paul Buchheit:
Right. If you can get that ratio where it's I give you $1, and you turn it into $10, my God, that's a good business, right? We just scale that thing up.
Geoff Ralston:
Even if it's $10 worth of something, like $10 worth of product, $10 worth of innovation.
Paul Buchheit:
Right, and this goes back to always figuring out how to do things in the absolutely minimal way, and it means this is one of the key startup things where if you're not embarrassed of your product, you've waited too long to launch, these things are at the route, there's a lot of like frugality there, right? Because you don't want to spend too much time or too much money, you want to get it out there as quickly as possible in as little cost.
Geoff Ralston:
Also you don't want to spend too much time on the wrong thing. And you just don't know enough, right?
Paul Buchheit:
Right, exactly.
Geoff Ralston:
You could have built too much email and you wouldn't have learned what to actually build.
Paul Buchheit:
Right. It's easy to go completely off the rails, and one of the most surprising things I've learned, just working with so many startups, is how often the cause of death is too much money. I think there are companies that if they had not been so well funded, could have been successful. And the company I like to make fun of, not because they may have been successful, but just because it's funny to laugh at is Juicero, the $700 juice bag squeezing machine. And the thing that made that I think such a tremendous train wreck is that they gave them 120 million dollars for that thing, before they ever like talk to any customer. If Juicero had gone through YC and we gave them $120,000 they would have had to go talk to a customer and be, "Hey, we want to sell you this $700 juice bag squeezer, right? They would have had to talk to customers. And that's the thing like we push so on the startups, you have to go talk ... I think I just lost the mic. You have to go talk to your customers. It is so easy to become detached and off in this bubble of delusion, and the problem with having lots of funding before you're really ready for it, is that's exactly what happens. So you can sell yourself on this idea, "Oh yeah, once we build the perfect juice bag squeezer, we're going to take over the world, everyone's gonna want to spend $700 I mean, plus you get this giant box in the mail that has 20 bags of juice in it, it's awesome. Everyone's going to want this." Right? And they're able to live in that delusion for years because they never had to go out and talk to customers.
Geoff Ralston:
Right. If I recall, you could actually just recreate everything you did my just going like that.
Paul Buchheit:
Right the reason for it ... So I cut up in one of the bags. The reason is, I think to actually get it to work, they had to really have macerate the fruit. So that's why I call it a juice bag squeezer, is because it was actually already juiced. It was really just separating the pulp from the juice. Which is why also it's no better than just going to the store and buying juice. The whole thing was built on a number of flawed premises. But in particular, you weren't really even juicing it, it has already been juiced, you're just straining the juice.
Geoff Ralston:
But there's a deep lesson there, which is, no matter what you raise, if you raise $50,000 or 5,000,000, you should think of the amplification you need. If you raise $5,000,000 that doesn't mean you can create $150,000 worth of value and be happy, you have to create $50 million worth of value.
Paul Buchheit:
Yeah. It's easy. Again, I think to come up with stories in your mind about how you're doing it, because once we released this juice squeezer, and that's why I think you just have to stay close to the customers, you have to be out there selling because you can just become delusional otherwise. And so that's why with startups, I've just seen it again and again, if they get a huge round of funding before they have product market fit, it kills the company. Because it's just too hard for the founders to resist that. Because actually going out and dealing with the fact that you don't have product market fit, it's really painful. It's easier to tell yourself stories about how, "Oh yeah, we're killing it. I'm hiring. I just hired a whole new team. We've got this cool office. There's all these ..."
Geoff Ralston:
Working at cool technology.
Paul Buchheit:
Yeah, we're doing all this amazing stuff.
Geoff Ralston:
Technology is great.
Paul Buchheit:
I'm in the press all the time, I go to conferences, I'm up on stage, [inaudible] it's easy to just be completely detached from reality, because you're not out there selling a thing, and you're creating a thing that people actually want to use.
Geoff Ralston:
We were talking earlier, it seems like there's this interesting juxtaposition that if you really want to be creating an epic company, you have to be thinking about the future, but you better be paying attention to the past, at the same time. Because there's a lot of lessons to be learned about what goes wrong, more things go wrong, than go right with startups-
Paul Buchheit:
Yeah, I mean, that's just the past. But I think more importantly, the present. You have to maintain a dual, a dream, or a vision of what that future is, of something that gives you an orientation, "I need to head in that direction." I think about the Lewis and Clark Expedition wherever they're, "We're going west, we're going that direction." But you don't really know all the streams and rivers, and forests, and mountains, you are going to have to cross along the way, right? So you have to be very focused in the moment so that you don't get eaten by a bear or something like that. But at the same time, you have to have that vision of where you're headed. And so I think those are the two things-
Geoff Ralston:
[crosstalk] right?
Paul Buchheit:
Yeah.
Geoff Ralston:
Almost between just paying incredible attention to your current customers.
Paul Buchheit:
Right.
Geoff Ralston:
And having take over the world-
Paul Buchheit:
Right. And I think the thing that happens with too much money is you just spend all of your time dreaming of the promised land, but you're not actually dealing with the problem that's in front of you.
Geoff Ralston:
I want to turn it over to Q and A, and we may have covered most of this already, which is fine. But you've been spending a lot of time with YC batch companies doing I think, what you're called 100 billion dollar office hours, which my understanding is a way for you to help them think about what it might mean to actually become an epic company. What are the other two or three things maybe that we haven't talked about that you cover in those office hours? I thought this would be like a group office hour or $100 billion office hour with all of our startup school companies.
Paul Buchheit:
Yeah, so I thought a lot about, what is it that makes these companies that are, Google, Netflix, Amazon, all these just huge companies, what is the thing that gets you there and it's not, I don't think it's that you're smarter necessarily, and it helps to be smart, it isn't that you're harder working, there's a limit to how hard you can work, what I think necessarily to get to that point, you're sitting on top of a big exponential change in reality or in the world. So Intel and Microsoft, in the early days, Apple were sitting on top of this, the rise of microcomputers. Right? And so what made Microsoft the big company is that they got in early on microcomputers, and then they owned that space, right? Where the microcomputer operating system, and they were able to ride that, if it weren't for microcomputers, they wouldn't have been able to do that. And likewise, Google obviously, was sitting on the growth of the internet, that the reason that Google made sense. Part of the reason other people got it wrong was they weren't thinking about the fact that the amount of information online was increasing exponentially. And so we were going to have to get a lot better, or organizing it, right? Google's mission from the beginning is to organize and make useful all the world's information. People are always surprised that they're aggressively gathering information. It's right there in the mission statement. All the world's information.
Geoff Ralston:
Shocking.
Paul Buchheit:
So what I try to have the founders, I give them a two part question, and so the first part is let's say, I hop in my time machine, which is hopefully a DeLorean and I travel 10 years into the future. So I get out, it's the year 2028, I take a look around, I grab some nearby people and talk to them or whatever. I asked questions, "What about the world of 2028 is fundamentally different from 2018? What's the thing that's totally different?" Right?
Geoff Ralston:
Donald Trump will no longer be president.
Paul Buchheit:
We don't really know the future. Now, you just completely derailed me.
Geoff Ralston:
That was the first thing I'd have to.
Paul Buchheit:
Anyway, so the thing is, what I want them to do is identify the change, and this should be as it pertains to their startup, because obviously, there's going to be a bunch of changes, but as it pertains to your startup, but factoring out your startup, because even if Facebook didn't exist, I guarantee someone would have built a giant social network, right? Facebook was sitting on top of that exponential change, and they were the ones who were most able to capture it, that position and hold on to it. But if it wasn't them, I guarantee someone else would be in that ecological space.
Geoff Ralston:
There's inevitability about-
Paul Buchheit:
There's inevitability, these companies will exist in some form. And maybe you're making it a little bit faster, or a little bit better, or something like that, but that position is going to exist. And then the second part of the question is simply, how are you going to be the one who captures it? Right?
Geoff Ralston:
Awesome.
Paul Buchheit:
So let's do some Q and A. Any questions?
Speaker 3:
[inaudible] , we found a way to change coffee. So that's actually going to switch the entire market. I was wondering, what's the tipping point where you really approach the market and know that you're going to convert a lot of it, for us in customer interviews, about 80% of the people want to try what our product does. And we even had people pay 40 bucks for a cup of coffee, I just take my money give me-
Paul Buchheit:
So what's your question?
Speaker 3:
So how do you identify the tipping point? And really how you execute that tipping point that gets a market to that 100 billion-
Paul Buchheit:
So the question is, how do you identify a tipping point for a market?
Speaker 3:
And execute, really, how do you make sure that it's-
Paul Buchheit:
I almost feel like this has being overthought. If you've got people who will pay you $40 for a cup of coffee, I would just start selling $40 cups of coffee. That sounds like a really good business. The tipping point is when you can't keep up with demand, right? And so again, you don't find this by thinking about it, if you think about it too much, you end up it just in delusional land. You find out by talking to the market, and having them give you dollars, and so it's like literally, when you're just scrambling to keep up with demand. And that's the thing that you get into, in these hyper growth companies. One of the biggest problems inside of Google is, we couldn't build data centers fast enough, right? Things were just exploding so quickly, that you can even scale out, that's what tells you that you have that.
Geoff Ralston:
Yeah, kind of hits you over the head, right? You don't have to give instruction for when you're in hyper growth, you know you're there. In the back.
Speaker 4:
[inaudible] Can you maybe advise on how [inaudible] ?
Geoff Ralston:
Best practices for enterprise companies, where maybe you can't launch something that's really bad, because there's requirements around security, et cetera.
Paul Buchheit:
So the danger, I feel like with a lot of these enterprise things, is that you end up not really solving an urgent problem, because when you talk to people, they're, "Oh, yeah, it would be great to have this solution." Or whatever. And so then you go off, and you build this thing, you spend years maybe building this product, and then you go to them, you're, "Here it is, we got it." And they're, "We're really busy this quarter, and actually we don't have it in the budget until maybe next year. So can we talk again in nine months, or something?" Right? That's deadly for a startup. So the way I try to think about it is you want to find someone who has a really, urgent problem, right? And so the analogy I like to use is, imagine that your arm is pinned underneath a boulder, and you have two options. One option is to [inaudible] your own arm with your teeth. Or the other option is to sign an LOI with this promising young startup, right? That's the kind of customer you want, is someone who's like, desperate, right. And because they're desperate, they're willing to put up with a shitty product, maybe, they're willing to spend a lot of time working with you, right? And so actually, one of the things that works really well, is if the founders are actually able to just go into the organization and actually work there, that was how the very early Stripe installs, Patrick Collison would show up and integrate Stripe into your code. He would just show up and do the work. And so that's a good thing, and if they're not really eager to have you come in and integrate into their systems or talk to their people or whatever, maybe they're not in enough pain, and you need to go find a different customer who's in more pain. And if it's a big enough market, there's got to be someone who's desperate.
Geoff Ralston:
Back there.
Speaker 5:
Do you believe in using personas to represent your customers?
Geoff Ralston:
Do you believe in using personas to represent your customers? Do I have that right?
Speaker 5:
Not really. I don't believe in using people to represent my customers.
Geoff Ralston:
Yeah.
Speaker 6:
I saw you clearly have a good eye for investments in companies that are going to reach 100 billion dollars. So have you found any common denominators on the founders or the products or something they did at some point, stage?
Geoff Ralston:
Sorry, common denominators for the founders of 100 billion dollar companies.
Paul Buchheit:
So this was actually where the focus frugality, obsession, and love thing came from is I was actually trying to distill it down into a small enough number of words. And then I was here try to translate it into emoji, but I failed at that part. I couldn't figure out what is the emoji for obsession like love, okay, a heart. But there is, I think this obsessive focus, there's almost an irrationality in some of these founders. The example that comes up as the most insane version of it is probably Elon Musk. So he came into the Google, gave a tech talk, I want to say 2003 or something like that, and it was after he had started SpaceX, but before they had done the first rocket launch, and someone was, "What are you going to do if the rocket explodes when you launch it?" He was, Well, I have enough money for three launches. So I hope one of them succeeds. He literally ploughed his entire fortune.
Geoff Ralston:
The first three blew up too, I think.
Paul Buchheit:
Yeah, the first three did blow up, he managed to scrape together enough money for a fourth rocket, but if that fourth rocket hadn't gone, there would be no SpaceX and Elon would be bankrupt, right? That is insane. I would not take all of my money and plough into some harebrained rocket scheme. Right? That's a level of irrationality that is, I think wonderful. Yeah.
Geoff Ralston:
Yeah, you.
Speaker 7:
First thank you for the [inaudible] and then I understand that you were saying Google [inaudible] so much control over the [inaudible] . The question is why do you think Google has not reached that control of [inaudible] ?
Geoff Ralston:
So I think the question is, how come Google never made it in social networking?
Paul Buchheit:
It just wasn't, I think, really, in the DNA. So we actually had even before Facebook, do you remember Orkut. We actually could have, at the time-
Geoff Ralston:
It's big in Brazil, right?
Paul Buchheit:
Yeah. Well, it became big in Brazil. But I actually tell you, Orkut actually was taking off and you can make up a bunch of reasons why maybe it didn't end up being the social network, but it was exploding, and then it was growing so fast, it became unresponsive. So just that was why it died off in at least the United States, is that it was just so slow. But part of the thing is that within the company, I think, it just didn't resonate with people enough. It didn't become this crisis where like, "Oh, my God, we have to make this thing succeed." It was this thing that's over here to the side, right? And so Google is very much about these really interesting big computer science problems, and stuff like that, that's what really would get people excited. And this stuff seemed like a distraction. I mean, like the founders of Twitter, or at least like two of the three founders of Twitter, were Google employees, right? And they never would have built that at Google, because if you had built, it'd be, "What is this thing? There's nothing technically interesting about Twitter." Right? And so I think it just wasn't really in the DNA. And then when they did try to do it, it wasn't because Larry has a deep love for social networking or whatever, right? It was because they wanted to be competitive with Facebook, but by then Facebook was way ahead of them, and had a much deeper understanding of what makes this stuff go. So if you're behind and not as good, you're guaranteed to lose.
Geoff Ralston:
Not a good outcome. So I think we're going to call it there. Thank you very much, Paul.
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