Transcript

The Reid Hoffman Story (Part 1): Make everyone a hero

The very best founders I know are brilliant at building systems. They connect teams, they remove bottlenecks, and they eliminate single points of failure. And yet When it comes to their own wealth. Most are running a disconnected stack. A tax accountant here and a state attorney there, a wealth manager who doesn't talk to either one of them.

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After days of tumultuous travel through harsh rain and biting winds, You finally ascend the cold granite steps outside the gates of the mountain city of Grimgolir. Glancing amongst your comrades from under your soaked cloak, you reach out for the heavy brass knocker and hammer the massive stone door three times. That's Matthew Mercer. Creator of the hit.

Dungeons and Dragons web series. Called Critical role. And right now Matthew is

Your game master. The central storyteller and a game of dungeons and dragons. Which means Your fate. Is in his hands.

Listen carefully, because he has a question for you. One that could mean the difference. Between heroic success And epic. Failure.

The stillness takes the air. The sounds of rain almost fading as the door slowly opens, releasing the stench of death from within the chambers. Your eyes catch nearby torchlight inside, and what appears to be an armored ghoul slick with fresh blood as it drops some errant piece of a recent kill. and turns its head towards you with a growl. What would you like to do?

I'm gonna stab that nasty gho with my magical scimitar and save the day! Come on, lucky sevens. Oh you uh You quickly draw your scimitar, the cold metal warming with the flames that magically dance across its surface as you rush the undead beast, but in your haste, you fail to notice the body on the ground hidden in shadow, catching your foot as you stumble forward, barely catching yourself before you come to stop right at the feet of the now grinning ghoul. Can I try again?

Don't worry. This role playing game. It's about more than just winning. For me, the hallmarks of a good Dungeons<unk> Dragons game involve heroic feats and having the opportunity to uncover mysteries and hopefully stumble across physals that you have to work together to surmount. eventually leading to some sort of climactic battle with some terrible evil entity and

In hopes of saving some sort of innocent populace. The game master's role is to spin a complex and compelling story. Inside a coherent fantasy world. And also To keep all the players happy. There are people that want to be the strongest in the land and kill things as quickly as possible. There are some people that want the loot and the wealth that you can find in the game. And then there are people that really love

very, very deep character role-playing storylines and narrative. The most successful game masters know. The real role is to make sure every player Emerge as a hero.

On their own terms, And this doesn't just apply to fantastical forays into dragon infested dungeons. It works every day. For every leader. In every context.

There's a lot to learn from role playing games like Dungeons and Dragons. And this is a fitting start. To this episode. Because I'm about to change roles. to end season three and to kick off season four in a few weeks.

Our team proposed That we turn the tables. For this two part episode All answer the questions. And my good friend, June Cohen.

We'll ask them. June is one of the executive producers of Masters of Scale. And our friendship. Is the reason This podcast exists.

I'll tell that story in part two of this episode. A few years ago. June and a co founder. Darren Triff. Launched Wait What?

The digital media company. behind Masters of Scale. Early in her career, June was at the media center of the dot com boom as a VP. at Wire Digital.

But she and I first met. When she was the executive producer at Ted. June co hosted the conference. and also headed up media for Ted. June Darren and their small team.

Lunch. Ted Talks. and built it. From an underdog idea. to a billi annually.

June has great skill. for scaling ideas that people love. And one of the main ways she does this is is by understanding what each individual in her team and network has a passion for.

And then aligning that passion with the project at hand. So for this special episode of Masters of Scale, I'm handing the keys to the kingdom over Over to June. I'll be the guest. And she'll play my usual role as host.

Interviewing me. And proving a theory. Of our own. Along the way. Thank you, Reed.

After all these episodes, it feels very strange to be looking at you from this side of the microphone. But I'm excited for the chance to tell your story and to prove one of my own theories with you. It's a theory that launches perfectly from that role playing game. We heard Matthew Mercer describe the role of the game master to tell a story, yes, but also to make every player a hero on their own terms. It doesn't take a leap of imagination to see every company founder as a game master of sorts.

Casting everyone around them into a hero's role. Employees, investors, collaborators, customers, they all want to slay their own metaphorical dragons. I believe that to chart a truly epic journey to scale. You need to make everyone you enlist a hero. На часто і сторі.

But in their own. You gotta have incredible talent at every position. Huge push. There are fires burning when you're going out. Can you believe it? Such an idiot. And then you go back to this is totally gonna be amazing. There are so many easy ways. So I have no idea what to do. Sorry, we made a mistake. But you have to time it right. But well that's just how you do it. We haven't made just how you do it. This

is masters of scale. I'm June Cohen. Co executive producer of Masters of Scale Former head of media at Ted, and for just this special two part episode. Your host.

Reed is our guest today, so it's my job to prove a theory. I believe that to chart a truly epic journey to scale. You need to make everyone you enlist a hero. Not just in your story. But in their own.

Now one of the things I've learned over the years is that everyone has a movie of their lives playing in their heads. Your колікс, іркастемер, кофандер. So don't ask what they can do for you. Ask what you can do for them. How can you make them the hero in the story of their lives?

As a leader You have to constantly shut off your own reel and watch all the movies playing around you. Your goal is to shape all these stories into one massive intertwine story with infinite heroes. If you do this, if you make every person your company touches the hero in the story of their lives. They'll join forces to make the story of your company.

A truly epic journey. I wanted to talk to Reed about this because he spent his life thinking deeply about what connects people. both one on one and in groups of massive scale. And Reed has been thinking about this since he first discovered role playing games. It started in the mid seventies.

At his father's house in Northern California, at a table strewn with strangely shaped dice and small figurines of fantasy characters. I first discovered Dungeons and Dragons when I was nine. And it was because the babysitter that my father was hiring, his technique for dealing with otherwise rambunctious and difficult to manage young boys was to introduce them to Dungeons and Dragons. Back then Many saw Dungeons and Dragons as a refuge for social misfits. But for Reed it struck his curious young mind.

He treated Dungeons and Dragons as a fascinating laboratory for strategy built around human motivation. You're going off, you know, being a hero and defeating villains and saving the town and that kind of stuff. And some people do the role playing where they're actually interacting. They say I am Thor and you know I have come here to save your town. I was always more of the strategist, which is okay, I'm looking around like okay, the orcs are attacking the village. Hmm, maybe they're attacking from the left side. Maybe we could create like a a fortress and a defense and like it was more of a puzzle for me within the interactive story.

Reed's thirst for adventure grew. He recruited a band of classmates and took on the role of game master himself. He was now responsible for creating and running a fantasy world. A world in which his friends were spending more and more time. We'd soon realize this involved more than coming up with fantastic situations and presiding over geeky dice rolls.

As part of it you also wanted to have people feel like they kinda earn their heroism. So What they did is they would have a difficult challenge. They'd have something and really have to figure out. It would take effort and they might not get it right, and you had to make sure they didn't die,'cause no one likes to be in the story where like, Oh, you all died. Right. But that struggle, you would set that up.

with some depth to it so that People would enjoy the path for figuring out how they could be heroes. It's interesting because because by your description, it is very much a game of complex human motivations. What did you learn about human motivation playing Dungeons and Dragons.

I did learn that people wanted to ha be the hero of their own story, that that was a fundamental kind of human drive across You know, almost everybody. I learned that kids tend to be a little simplistic and shallow, so their definition of heroism as kind of a pretty simple like Hit.

Dragon with sword. Yeah. Now that gets richer for some of us as we get older. I suspect there have been moments as a CEO and investor when you longed for the days when people were as simple as just wanting to kill something with a sword. Uh yes, although f sometimes all you have to do is scratch at it to figure out where that is.

Very often people's motives have a fairly simple character. Like I want to be the important person who solved that problem. I want to have the credit for it. I was like, Well Actually in fact there were five of us.

Right, who were all working on it, who all contributed a component. And yes, your component was important. But your weird behavior is because you're trying to kind of assert that claim. Life is a team sport, not an individual sport. And once you start thinking that way. Everything goes a lot better.

Life is a team sport. And it's the team leaders role to make everyone a hero. Reed learned this early, and it all started with role playing games. Because Reed loved role playing games. And you have to understand, when Рied fell in love as a kid.

He fell in love hard. I was an obsessive child. I would literally go to the local public library and I would start reading in a section, I would just pull off the next book and pull off the next book and pull off the next book. I basically played fantasy role playing games from age nine to about age fourteen. So about five years of Pretty deep obsession.

Reed's next obsession was a game called RuneQuest. Like Dungeons and Dragons, it let players take on the role of fantastical characters and embark on mystical adventures. And Reed loved using Grune Quest to create worlds that would transport his friends from the cozy confines of suburbia to become heroes in their own adventures. One day when he was twelve,

Reed discovered that a friend of his lived near the actual office where the RuneQuine was designed. This guy said, Well I live down the street from the game company. I'm like, What? The two of them hatched a plan for a real life quest to meet the creator of their favorite game. I was like Well I'd like to go there. And he's like

Well, you know, I could bring you with me. I'm like, Yes, please. Reed and his friends set off on an arduous half-mile journey by foot across the suburban expanse of California's East Bay near Berkeley. They braved wide sundapled streets. March past seemingly endless ranch style homes. Dodge the Volkswagen buses that rattle by, and finally made it to the unassuming lair of RuneQuest creator Steve Perrin.

І вас себербан хаус. But to twelve year old Reed, it held all the promise of a wizard's palace atop a mystical mountain. That was a little bit of a kind of a classic kind of Berkeley Emeryville house, which is it was a little inset from the street and it was kinda long path through this kind of grass. the entrance to the house and therefore the main office Was up a staircase.

Reed and his friend mustered their courage. And asked to speak with Steve. we started kind of trying to show our credentials by saying, Hey, and we we played this one of your things and we did this and we did this. And you know, obviously the normal thing for adults with a twelve year old walking in is oh my God. Who let the twelve year old in? And they were I think

Decent folk. Get out of her office. They're like, okay. And why are you here? Reed and his friend grasped for the connection that would get them into Steve's office. They identified themselves.

As neighbors. It's like, Well, I'm your neighbor and I'm kinda brought my friend by'cause he really likes the stuff that you do. We both really like it and so forth. Read, I love the fact that you referenced that you were a neighbor. It's like your first LinkedIn introduction. Yes, exactly. I'm connected to you. Yes. Just right next door. Of course you'll take my invitation. Well Actually, I'm following the neighbor in the door. I'm not the neighbor. It takes me forty minutes to walk here. But right, my neighbor You know, you allow him in the door and I kinda come in the door with him.

The analogy gets better and better. Like any good adventurer. Reed had come prepared. He wielded the secret weapon that would let him establish his mastery. I happen to have bought one of their new scenario packs.

And I looked at it and said, Oh, this is really incompetently done and I was like, Well This is just bad math. This character design is wrong. This would be more interesting if it had this twist. And I really marked it up. Kind of classic red ink. It was bleeding. And so

I brought it in to Steve Perrin and said Here, uh you just published this and there's a bunch wrong with it. I wanted you to see it. You can totally imagine young Reed. Marching up to Steve and thrusting that scenario pack into his hands. At first, Steve has the reaction you'd expect of any grown up confronted by a precocious kid.

'Cause you know, I can see him rolling his eyes, like, Oh God, this kid's wasting my time. And then he started really looking at it and went, Oh Huh. I got another thing you could look at. Would you like to look at another thing and I'm sure. Stів saw an opportunity.

To cast Reed in a bigger role. One that helped RuneQuest. and gave Reed a shot at Hero Dom. So he gave me the next thing he was working on, which was a an entire book of scenario packs. And being an obsessive kid, I think I went home Thursday, worked on Thursday night, left school as fast as I could on Friday, worked on Friday, worked on Saturday, worked on Sunday, and then brought it back I think Sunday afternoon.

just completely revised and said, oh here. And he said, Oh, this is real work. And so he gave me a check and I brought the check home and then my dad, who had previously been worrying, Oh my God, I've lost my kid to this role playing game cult, was like, Oh Maybe this isn't such a bad thing after all. To this day, RuneQuest lists Reed as one of their contributors.

You can see his name inside the cover of the latest edition released last year. What I love about this story is Is that Reed's obsession with RuneQuest demonstrates so clearly the dilemma that every successful company faces. When you create something that people love It takes on unexpected meaning in their lives.

Your product becomes a canvas upon which their hopes and dreams are projected. For these super fans, the path to hear them is paved straight through your company headquarters. No, not every fan who brings you an idea will be a Reed Hoffman. Many you'll brush aside, you'll have to. But listen closely to what they say.

Some of these unexpected visitors may turn into unlikely heroes in your journey to scale. This happened to me at Ted. Uh Shortly after we launched TED Talks in 2006, I started getting these curious emails from fans saying, I wanna subtitle your talks in Polish, or Here are six talks I translated into Bulgarian.

Each translator had a different hero story. Some cared deeply about a single talk, some were passionate about their language, and some just loved Ted. The email's gotten more and more specific, saying, We want you to launch an open translation project where volunteers can subtitle talks into any language. So We did. We launched the TED Open Translation Project, which grew into the world's largest volunteer subtitling effort, with 20,000 translators in 120 languages. It became one of the hidden engines that drove TED's international growth.

Powered by those twenty thousand heroes. RuneQuest gave Reed his first paycheck. But he never set his sights on game development. He didn't want to be an entrepreneur either. In fact, his plans for the future at that time sounded even more outlandish than the fantasy worlds he was dreaming up. I was planning on being the director of the CIA.

Yes, you heard that right. Reed wanted briefly. To be the director of the CIA. But hear him out. In my kind of thirteen year old mind.

There was obviously a ton of suffering in the world, and I was trying to figure out how one would solve that. How would he solve the world's problems? By teaming up with his smartest friends and forming an alliance of superheroes, of course. I said well, if we all kind of formed a pact, and each of us would go for a different leadership position. You know, someone's gonna be president, someone's gonna be this is back then, CEO of IBM. And if we all went to these different positions, Then we could collaborate and we could then make the world a better place. By having high trust and and being in all these different leadership positions, we could impose a different structure.

Useful idealism Yes, of course. But what fascinates me about this story is the way Reed was already thinking about his friends as different kinds of heroes. And how he could unite them toward a common goal. Notice too that Reed didn't imagine himself as leader of this cabal.

His hero's role was the initiator and connector. That's pretty amazing for a kid in junior high, an age when a pimple on your nose seems like the center of the universe. Thirteen year old Reed soon realized that becoming a super spy chief wasn't exactly for him. But he didn't give up on his belief in building networks of like minded people who could transform society. At this point in the episode, I feel I should mention that Reed's Life provides enough fodder for at least 10 different Masters of Scale episodes.

Фром гіз інфлюенців, інвест, ти стартапсь, тиз імпактворк. We joked about it in our two marathon interview sessions. I have seven thousand follow up questions. Read again, eight thousand follow up questions I won't have time for. So many follow up questions I'm leaving in our wake. Okay, Reed, so excited for part two of our thirty part interview with you. We've made this episode a two parter.

But even so We have to skip over Reed's time at Stanford, past his year at Oxford, and leave unexamined his early desire to be a philosophy professor. That's because I want us to zoom in on his return to Silicon Valley. Reed's formal education was behind him. And for the first and last time.

He was at an uncharacteristic loss in deciding what to do next. When you've built substantial wealth through your business, it's often tied up in a single equity position. The upside is real, but so is the risk, and knowing when to act isn't always obvious. Creative planning works with business owners to build a strategy around concentrated equity. When to diversify, how to manage tax risk, and how to protect what you've spent years building.

Creative planning where wealth works together. Lear more at creative plating dot com slash masters of scale. Humans will never be more intelligent than AI. There's gonna be two types of companies. Those are great at AI and those that went out of business because they weren't. How do we build a future? That is human centered.

I'm Rana El Calyubi. And on my podcast Pioneers of AI, we answer that question and so many more. As an AI scientist, entrepreneur, and investor, I know what it takes to build AI that works for everyone. Every week, I sit down with the pioneers shaping our future, and we take you behind the scenes of the AI that's transforming our lives. Find pioneers of AI wherever you tune in. Hey listeners, Bob here. If you listen to Rapid Response on Masters of Scale, you may be missing half the show.

Because every Friday we release a second rapid response exclusively in the rapid response feed. The guests and topics are just as compelling and timely from Ford CEO to NASA's administrator to the lessons from The Devil Wears Prada. It takes about 10 seconds to find, just search rapid response wherever you listen to podcasts and hit follow to make sure you never miss an episode. I hope to see you there. Reed had pondered a life in academia. But he yearned for a practical impact on society that academic journals couldn't deliver.

So he looked around him in Silicon Valley, but And he started to think. Maybe he could spread his ideas through software. I said, Well, what if you look at software as a medium? Software is the medium by which

We organize our thinking by which we organize our thoughts, by which we find other people, by which we communicate. It was a different way of wielding influence. As opposed to writing essays, you're writing software. Reed started looking for the kind of software that could have the greatest impact on individuals and on society as a whole. What I was looking for was a change an inflection point in the human ecosystem.

And that was the kind of software that I was looking to participate in to make happen. Reed now had a movie playing in his head. In it, he would create software that both connected people and fundamentally changed them for the better. His path to hero dum lay in creating that software. Mind you, he had no idea how to build software.

But he was determined to figure it out. Okay, how do I get there? How do I do that? How do I get there? How do I do that? How do I get there? How do I do that? Reed's friends offered him solid advice. Maybe you should work for a software company before you try to start one. Through a series of lucky connections he learned of a job at Apple.

One that was suitable for someone with no prior experience. One of the roommates and good friends of a good friend of mine from college was working at Apple. And he said, Well, we do have a kind of a weird contracting job. Which is we know there's a set of problems that don't fit within normal skill sets. If you're willing to go throw yourself at these random questions.

And try to figure out answers to them. then that's something that we'd potentially be willing to experiment with. And I said, That sounds perfect. It was a perfect opportunity. But definitely different from academia. So you had this massive learning curve because it was kinda like nothing like anything I'd been doing as a student. I mean, like zero relationship with it.

Reed found his place as a product manager and started moving from role to role, first at Apple's online service EWorld, and then at the virtual community Worlds Away, operated by Fujitsu. Each new job extended his massive learning curve. People have this experience we say, Oh you're jumping into the deep end. No, actually in fact you're jumping into the raging torrental river. Right. It's much harder than the deep end. But that's the way you essentially learn. And and that was the arc of my learning between Apple

And Eworld and Fujitsu. What's so interesting to me about this phase in R's life was how intentional he was. The film of his life, the one where he emerge a heroic launcher of software. Each role he took brought him a step closer. But notice how he never loses sight of the other movies playing around him.

With each new role, Reed was crystal clear on what he would get out of it and what his employer would get from him. I didn't join Apple saying, I want to work at Apple my whole life. Or I want to be a CO at Apple. I joined Apple thinking I need these skills And I'll help with this project as I'm doing it.

So that they will go, Okay, you were super helpful. We're really glad you were here. Reed didn't plan to work at Apple his whole life, and I relate. When I first joined Ted, for example, I thought I would stay two or three years. I'm a start up person. I love building things from the ground up. But I don't think I knew that at twenty two. Most of us take years to figure out the conditions that make us feel like a hero.

Reed got there faster. Following Apple in Fujitsu, Reed felt ready to launch his first startup. Social net. As you might guess, he had a theory he was out to prove. I've often heard you say, Reed, that every entrepreneur has a theory on human nature.

What hypothesis were you trying to prove with your first company, Socialnet? So Part of the theory was that What gives people the most fabric and meaning and joy and Ca.

present in life is other people. The theory of human nature is that we're social animals. that while there are introverts and extroverts and while there's some people who really like being hermits, Actually in fact the vast majority of human race.

Finds themselves. getting meaning and joy and satisfaction and evolution on the people you're connected to. А інш хума дrive Рен Орті. Social net would bridge the online and offline worlds, connecting people digitally so they could meet in real life. social network say, Well what if we put the two of them together? What if we took

The online ability to discover and find people. But bring that to the right people for the elements of your life. It could be The romantic side in terms of who you'd be dating. It could be the work side in terms of who you should work with. It could be the activity side.

And it could be the roommate side. And as a platform across all of that. How do you identify the right ten to twelve people that all of a sudden has the most Enrichment to your life. It was a very new idea at the time.

Mind you, this was nineteen ninety seven when the phrase social network still meant your actual personal circle of friends. Read launch social net. And like the countless founders that he would later mentor and invest in and Create a podcast for

Reed was on a serious learning curve. At social lot I basically more or less Would have concrete things every Friday that I wish I knew Monday. Right. It was like literally the intense learning curve was so much that you get to the end of the week and you're like, Ah, I wish I knew that at the beginning of the week. As a new startup founder.

I have to say, I find Reed's description both intensely familiar and incredibly helpful. Like by the end of every day, my co-founder Darren and I have learned something we desperately wish we had known at nine AM But that's start up life. And Reed was just starting to understand how much he had to learn. how to do interviewing, how to build a team from scratch, how to do financing, how to think about the founding team.

Івен продукт девелмент was a challenge. Apple in Fujitsu Reed worked on product that someone else had started. Building something from scratch. Before it even reached V one was something entirely different. I had worked on essentially V one to V one one and V one to V two, but I hadn't worked on V zero to V one. And I hadn't realized that the third game was a totally new game. I thought I I'm ready. Yeah, yeah, you've done V one to V one one and V one to V two

Those are not the same games as V zero to V one. So it was like oh God, I'm in this entirely new game. Once again, Reed had jumped into the deep end, or rather the raging torrential river of rapids. And from this experience, Reed learned some of his earliest lessons on turning team members into heroes. What I realized is that in the early stages, what in blitz scaling I call you know the family stage, maybe even the the tribe stage, is actually in fact you want intense learners. As opposed to saying, Oh, I've got ten years of experience being an operations manager, you want someone who says, look, I understand what being an operations manager is, I am experienced, but really what I am is I'm a fast learner and I'm a team player. And if I were to call myself and say, look,

Just do one thing differently. From the early stages of social and it would have been like okay. Do your Company construction. with a heavy bias towards

Fast learning people. Who have a little bit of experience, but are not seriously experienced in what they're doing. If they have serious experience, great. But it's that fast learning curve of something new that matters. Note that when Reed had to choose the one piece of advice to give his younger self. Хіфоси з на фундем, а та тім. His most treasured lesson is that it's easy to mistake a talented person with the right person.

А не с комбатия зам и мувіоз. Early stage startups are about embracing chaos and learning fast. If you hire people whose personal idea of puritum requires perfect calm or Predictable timelines. The film reel in their heads will fly off the projector and catch fire. No matter how talented a person is, if you cast them in the wrong movie, they won't be a convincing hero.

It's fair to say that Socialnet didn't work out. Reed fell prey to one of the classic pitfalls of founders. He and his investors were watching very different movies about the company's journey to Herodom. He and the board parted ways. And Reed considered his next move. So I went, okay, I'm off the board.

What should I do? Well, I've learned a lot. I've learned theories of human nature, I've learned you know, how to start a company, how to get investors, I've learned all that now. And so I should go start another consumer internet company. And that's probably where the the seeds of the ooh something around LinkedIn should happen. So in Social Netfolded Reed already had the idea that would become LinkedIn.

But he doesn't pursue it. Yet. He starts bouncing the idea off of other smart people. A strategy read is quick to recommend. One of the things I've also learned is to go talk to my network.

As opposed to like standing in a closed dark room and having the idea of genius occur to me. Going and talking to your network is the most important thing for Refining your ideas, seeing if it works, um, getting good criticism. Like the advice I always give founders is ask people what's wrong with your idea. Reed took his fledgling idea to Peter Teel. A former Stanford classmate and co founder of PayPal.

Peter didn't just sharpen Reed's idea, he offered a sharp left turn. I was like, Well, you know, I think I'm gonna go start another company, it's gonna look like this, and you know, what do you think? And he was like, No, you shouldn't start another company yet. And I was like, Really? I think I should. He's like, No You should come join PayPal. This to me is the most surprising turn in Рід стої.

Of course, in hindsight, we all know that Reed made his name at PayPal, but at the time PayPal was not an obvious choice for Reed. It's not about the social network or online identity, and he already had the idea for LinkedIn. How on earth did Peter get the engine of Reed's passion behind PayPal? Peter isn't particularly known for emotional intelligence, but clearly he is a master at persuading hero to join him on a mission. I had to know how he did it.

I mean Exactly. how he did it. Listen closely as Reed recounts his conversation with Peter. This is a master class in hero creation.

He was like, No, you shouldn't start another company. Yeah. And I was like, Really? I think I should. He's like, No, no You should come join PayPal. First. Peter played to Reed's natural curiosity.

We figured out some really interesting things. We figured out this growth curve for customers, this interesting area of payments. Then he played Tarid's friendship and connection. We've always wanted to work together, that'd be fun. Uh you're already close to the company because you've been on the board since it was founded. Next. The opportunity. You have a chance to be part of RocketCHIP.

But most importantly, Peter positioned PayPal not as a replacement for Reed's next startup. But a stepping stone. He understood that for Reed to be the hero in his own story, he'd ultimately need to launch his own startup. But PayPal. Could get him closer.

It was just a six month gig, Peter said. But you know, what's really gonna happen, because we have no business model whatsoever, is we're gonna sell this company to somebody, and you could come and spend six to twelve months here. And then you could go start your company. So it's a six to twelve month detour. Reed was persuaded by this idea of a six to twelve month detour. I was like, okay, that makes sense to me. I'll do that because it's only putting off the next phase of startup. And of course

PayPal itself became this roller coaster, you know, was nearly three years of this really intensive You know, how do we make this? Company work. So Peter clearly had a lot of arguments lined up for why you should join and he clearly knew you very well.

Was there one particular argument that made you say yes? It was probably two things. It was working with Peter and Max. And then also The fact that the really difficult thing on consumer internet businesses is to break out of the noise is to get some really interesting traction.

There are just literally probably tens of thousands of consumer internet startups that fail every year that you just never hear about. And so as a combination of working with Peter and Max. And something that it already found a a path to scale. I break out of the noise. And that was like, Oh, those two things together, this is the absolute right thing to do.

Пітер was more than just persuasive. He was right. Paypal could and would play a pivotal role in Reed's life. It wasn't his destiny. But it was an enabler.

And what I really want you to hear in this story is the strategy involved in recruiting the heroes who will join you in your epic journey of scale. А ферст ім'я сquиші ідея. Just make people feel good, shake hands, kiss babies. But making heroes is actually a complex strategy. Peter was watching Reed's trajectory toward hero dum and figuring out how to intercept him.

How could he harness the power of Reed's momentum and use it to propel both Reed and PayPal forward? If you do this, you're like a NASA scientist. Calculating a complex series of slingshot orbits across the solar system. A rocket can't possibly carry enough fuel to accelerate through space for years. So instead, scientists have them pick up momentum by plotting a path around planets.

You'll do the same. But instead of circling celestial bodies, you'll gain speed by crossing paths other people who have their own energy. If you can find common goals and aspirations with enough people who can bring you enough of their own momentum. You can reach truly astronomical speeds. You'll cover galaxy spanning distances with only a small amount of rocket fuel.

This is how we think of every guest we invite to masters of scale. You have to remember these leaders are crazy busy. They don't have an hour to get a haircut, much less appear on a podcast. So we tell them about you our audience of passionate entrepreneurs and change makers. We show them your tweets and emails and explain how our guest insights really matter to people. And we show them that we know what matters to them as our guests.

The release of their episodes can accelerate their mission. And that gives Masters of Scale extra rocket fuel, too. After this course altering conversation with Peter, Reed brought the rocket fuel of his passionate focus to PayPal. And PayPal set read on course for the rest of his career. It was the kind of mutually beneficial short term engagement that Reed calls a tour of duty.

As I pictured Peter persuading Reed, I couldn't help but think of one of my favorite lesser known readisms. His playful description of the Jedi Tours of Duty. Inspired, of course. By Star Wars

Now when you first started working at PayPal Were you a Luke Skywalker then or a Han Solo? Hilarious question. So it wasn't Yoda yet. I've been actually called several times the Yoda of Silicon Valley entertainingly.

I've actually called you that before. Like we could just do the rest of the interview and uh Yoda speak. That would be very disorienting for everybody involved. I would say that at the time I was probably Luke Skywalker. Young

Impulsive overly certain that I actually knew the right path. And kind of definitely fighting for the good and inflamed with passion. I probably kind of did this little arc that's kind of more like sky walker. Han, so uh

And then maybe I'm somewhere between Han Solo and Yoda now, even though people occasionally describe me as Yoda. Oh, you're a hundred percent Yoda now. Yeah. Рід девелопт<unk> ідея в Jedi Tours of Duty, along with his book The Alliance. He says there are three different tours of duty.

Rotational. Transformational and foundational. Each maps onto a Star Wars character. And probably some colleagues of yours. I asked Reed to take us through the three archetypes.

The first was rotational, which is kind of you're a hired gun, you're doing the work, you're not really tied to the mission. That was Han Solo. The second was a transformational tour of duty. which is how both you as an individual as an employee are transformed and how you also transform the organization. Of course.

That's Luke Skywalker. Just beginning his Jedi journey. And then the foundational tour of duty is where your mission is so closely aligned with the organization that the organization is part of your own mission as an individual. And that's the foundational tour of duty, where you're

Life's mission. is part of growing in the impact of the organization. That's Princess Leia's tour of duty. The Star Wars metaphor is funny.

But it's also deeply useful for anyone assembling a team. It gives you a framework for thinking not just about what you could get from this new team member, but what they get from you. Reed's ideas about tours of duty have always resonated with me because it's how I think about team building. As a listener, you know the work of Reed Hoffman and Ted speakers like Ken Robinson and Brene Brown. But extraordinary people in the spotlight usually have a team of heroes behind them, too.

Personally, I always love seeing the tweets and reviews that shout out to this show's production team. The music, the editing, the research, the immersive storytelling in the cold opens. The show is a labor of love fueled by the passion of many Luke's Leas and Han Solos. At PayPal, Reed was hired to be chief operating officer. But he had a different unofficial role, which I had to ask him about.

You're Unofficial job title at PayPal was Chief Firefighter, and you were and are famously cool headed in the face of hot burning situations. So tell me. And just One sentence each.

What was the biggest fire you put out at PayPal and what was the biggest fire you let burn? Well The one problem with the one sentence biggest fires is there were multiple fires that could have killed the company. And so I had to solve all of them. Otherwise value PayPal zero.

Like you know, roadkill. out of business. So the biggest fire Probably the biggest fire for PayPal was would eBay drive PayPal off the platform? Would eBay simply say we disallow PayPal from operating on our platform?

And we're gonna only allow Bill Point our own custom solution. This really was a big fire. А тайпал гайн трактин. Almost all of PayPal's customers were on eBay. And eBay had purchased a different payment solution called Bill Point, which was a competitor to PayPal.

How did Reed persuade eBay that PayPal was actually in their interest? And how did PayPal put out the fires raging all around them? Regulatory challenges, power struggles, a heart stopping burn rate of 10 million dollars per month, an email backlog of 10,000 customer support emails each week. How on earth did they survive it all? We'll find out.

In part two of this special episode, which will lead off season four of Masters of Scale. But don't despair. If you need a PayPal binge right now, you can find one version of the full nail biting story on our episode with Peter Thiel called Escape the Competition. And a few incredible details are shared on the episode called Let Fires Burn. But you won't hear in either of those episodes the story that Reed shares in part two.

We'll pick up with PayPal and follow Reed right through the launch of this podcast. All while proving the theory. I believe that to chart a truly epic journey to scale. You need to make everyone you enlist a hero. Not just in your story.

Button there's. For the transcript of this episode and to sign up for our exclusive emails to keep you informed through the break. Visit us at mastersofscom If you're a fan of the show and your career is in media, maybe you want to work with us. Visit our company page at WeightWat.com or just email us at hello at masters of scale dot com.

Masters of scale. is a Wait What original. The show is recorded on site in California and produced at the studio inside SY Partners in New York. Our executive producers are June Cohen and Darren Triff.

Our producers are Chris McLeod, Adam Skust, Jenny Cataldo. Timothy Lou Lee, Dan Kedme, and Ben Manila. Our supervising producer is Jay Punjabi. Original music and sound design is by the Holiday Brothers.

Mixing and Mastering by Brian Pew. Speaks. To Christi Bob Safian. At least a shriver. David Sanford, Saida Sepieva, Christina Gonzalez, Sarah Sandman, and Lauren Poussell.

Visit mastersofscale.com to find the transcript for this episode, and be sure to subscribe.