LIVE! Patience or speed? Both. w/Tory Burch

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Іс то сі асфар інтер азюкан. To make decisions that are going to protect your crew And your vessel.

And to make sure you're going on the right path. That's Luhua Kamalu. A navigator who captain an epic journey around the world in a traditional Polynesian Double hold canoe.

And if Lahoo's voice sounds particularly resonant. It's because she's speaking from the stage at our very first Master of Scale live recorded in Boston. This July. Lahua story.

Open the evening's event. And the music you'll hear was performed live from stage. I'll let Lahua. Tell the story from here. We set sail from Tahiti to Hawaii.

on a Polynesian double hulled canoe. Designed like the ones my ancestors sailed. We'll travel for two thousand. Five hundred miles. And seventeen days.

A journey over open ocean so long and technically challenging that historians didn't believe my ancestors could have sailed it. My crew and I Sail the way our ancestors did. And every time we sail this route, we prove yet again what our ancestors were capable of.

We don't use modern instruments. Not even a compass. Sale from Tahiti in May. twenty seventeen.

The first seven days go by fast. We're banking time, knowing the most unpredictable waters, lie ahead. Seven days into our journey, we hit the doldrums. The flat calm that you can find at the equator. The wind and the water.

Are completely still. Clouds. Cover the stars. When you're in the doldrums, it's easy to lose faith. There are stretches of hours and even days when almost nothing happens.

And we have to be patient. But it isn't a lazy patient. It's a vigilant, watchful. Patience. You're always looking for the signs.

If you miss them, you can find yourself lost at sea. On the eighth day of our trip and second day in the Bildrums. The weather starts fluctuating. And a layer of clouds so thick that the sun can't shine through at all. It's pitch.

Wow. You can't even see the waves. But you can feel them. What we're getting is just wall after wall. After wall.

After wall of water. I feel the force of each wave as it punches the side of our canoe. It's like boom. Boom. Boom.

You're in this rhythmic. Pounding. For five days we have these super intense waves and Total darkness. So we look.

And we wait. And we look. And we wait. Knowing that the sign will only be there for a moment. And we have to be ready to move.

Yeah. Finally, on that fifth day of darkness, the sun was able to penetrate the clouds for just a moment. with this diffuse, intense red light. Which we started calling the Dragon Eye. It's the most blood red sunset I've ever seen.

It's a sign and I know what it's telling me. I know exactly where the setting sun touches down. I can take stock of my entire horizon. Of the wind and the ocean.

And the waves. as they relate to this sign. Everyone is really excited now because they know I've been looking for this. We've all been looking for this. So when I spot that unforgettable sunset,

I realize I've gone a little too far west. I instantly correct course. I hone in on my target. to get to the latitude of Hawaii on the east side of the big island.

I'm confident now and I'm getting continuous signals that I'm on the right. Yeah. We've held patiently in these uncertain waters, holding our ground. But now It's time for speed.

That's Was like whoa. Kamalu. The first woman to serve as both captain. And lead navigator.

For the Polynesian Voyaging Society. The trip she just described. Was the last leg of a voyage. Circumnavigating. The globe.

But who is storing? is a perfect metaphor. For leadership. Great captains. And great COs.

Both now. You can't move fast. Every minute of the journey. If you're going to go the distance. You have to recognize

That the conditions around you are always changing. You have to be strategically patient. But that doesn't mean Sitting back and waiting.

It means leaning in. And watching for the moment. To break out. And move fast. I believe

Тай сустайнвал бізнес. You need to combine patience. Patience. Patience. And move.

With explosive speed. 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. I have no idea what to do. Sorry, we made a mistake. But you have to time it right. I'm like, well that's just how you do it.

Yes. This Masters of scale. I'm Rud Hoffman. Founder of LinkedIn, partner at Graylock.

And your host for the very first even of MasterSке Live. Here in Boston. On each episode of the podcast. I set out to prove a theory about how businesses scale. Tonight will be no different.

Over the course of the evening. I'll try to prove the theory. That in order to scale a sustainable business. You have to combine Patience.

Patients. Patience. And also Explosive speed. If you listen to the podcast

You know that I'm a big believer in what I call Let's scale it. Moving with explosive speed to capture market. So you may be surprised. Do you hear me champion patience?

But patience doesn't mean slowness. Patience means Choosing the moment. Yeah. Choose your

Okay. Okay guys, that's good. Got it. Okay, The moon is not right now. to imagine the kind of strategic patients I'm talking about. Picture a great blue heron.

You know, those stately birds With impossibly long legs and beaks. A heron will stand perfectly still in a marsh. It might appear. To be quite lazy.

That is. Until it spots a fish. Then it strikes. With incredible speed. And precision.

Because we're in the room together. I can show you what I mean. Sorry to break in again. I have to explain what the audience is seeing here. So on stage there's a video playing.

A parent. This fish eating bird with long legs. An S shaped neck. Just standing in the water. It can almost be a stale image.

Except for the barely noticeable ripples in the water. Bird is patiently waiting to strike its prey. Waiting. Waiting. Imagine this patients.

The heron. slowly stalking its prey, and then striking is a living embodiment. А в стратеги пацієнс та паза And there we go. You can watch the відео for yourself.

At mastersofscale dot com. This kind of patients is Isn't lazy. It isn't about moving slowly. It's about watching carefully for your moment.

than moving with certainty and speed when the time is right. I wanted to talk to Tori Birch about this. Because she built a billion dollar business from the ground up. by speeding forward when others might have hit pause. and showing watchful patience when others may have gone full tilt or

Or worse. Give it up. What strikes me most about Corey is that from day one, her business plan centered on building a foundation for To help women. The company.

would exist. To support the foundation. Not. The other way around. The idea of

Was ahead of its time. And as you'll hear throughout her story. That's where strategic patience Comes in. With that.

Let's go back. To the live recording. Before we welcome Tori to the stage. I should add one more thing. Those of you who listen to Master of Scale

Are probably used. My podcast voice. But actually I talk like this. And when I move over to the interview chairs,

You'll hear the real read voice. Right. But right now I'm behind the mic. So Podcast voice it is.

And with that Please welcome to the stage. The wonderful Tory Burch. I am so pleased that you could join us. I'm so happy to be here. We've been trying to do this for so long. Yes, exactly. And of course, not New York, not Silicon Valley. Here in Boston.

So let's start with your childhood. Your brother describes your childhood As Huck Finn. Meet

Andy Warhol. That's true. There's perception and reality. And I think people have this vision of how I grew up and it's the opposite of how I grew up. I grew up on a farm in the middle of nowhere with three brothers and we spent our entire time outside and we Our parents would travel and leave us at home, so we were left to our own devices a a lot and we had the best time. We were very into sports and as I said it was the middle of nowhere, so we really had to make do and we didn't have a lot of friends around. So uh that sounds like the Huck Finn part. Where does the Andy Warhol come from? So the Andy Warhol must be that my parents would have all of these we always said random people to dinner, we never would know who. So it could be the plumber, it could be a poet, it could be an artist. And it was always insightful. We were always intellectually curious to understand uh all different kinds of people and it was always about inclusivity and accepting um people from all kinds of places

Now I was surprised when we were prepping for the interview But Is it true that you had very little Interest in fashion until your teens that what's what sparked the interest I had no interest. I I didn't put on a dress until I think junior year for a prom And I was a total tomboy. Um so no, I had no interest in fashion and that's true.

So another thing that surprised me to learn is that you were apparently quite a prankster. And this started early. I hear there was one particularly epic prank. You played on your brother.

Would you tell us that story? No, so many but I give my one of my brothers, I had three I have three. And he would come out Christmas morning and be so pleased because he would have more presents than any of us. So I spent a good portion of the night before um wrapping anything I could find around the house. So uh blenders, rocks, and he came down and he was so happy until he started unwrapping. Oh and it's still to this day quite humorous, but Have you ever given another wrapped rock? No, but I will. That's a good idea. Pet Rock. Yes, exactly.

So Apparently you also got your first job in fashion by cold calling. And How is cold calling a way to essentially punch above your weight? First of all, I'm always out of my comfort zone, so cold calling is sir is definitely an example of that. And

Y my mother used to say, What's the worst that can happen? They can say no and and they often did, but I called a designer to get a job in fashion. I wasn't really even interested in fashion. I was just trying to get a job to move to New York after I graduated from Penn and I called him and he said, You can start but it has to be next week and I was graduating on Friday Moved to New York and started a job on Monday. Well. Usually I actually recommend because of LinkedIn that people get a warm introduction. But you may be the enormously successful exception that proves the rule. I think he just needed the help, to be honest. He was desperate and I was I was available. Well, but you know, it worked out.

So you describe yourself as a shy person. Did that make it unusual to do the cold calling and then Later go into this entire world of entrepreneurship. Because you know, um

Usually people don't think entrepreneurs are shy. Yeah, I mean it's been incredibly hard, actually. I'm incredibly shy. I've had to be out of my comfort zone and I had to push myself. And when you think about starting after I've decided I wanted to start a company to build a foundation. That was my business plan. My parents said you have to buckle up and thicken your skin. Negativity is noise and and and because they knew that I was shy and also took things to heart. And I think when you're a sensitive person and you go into a business in fashion or any business for that matter, you have to be ready to go through some challenges. Because this is the podcast version of the live interview. I get to rewind.

And I wanna make sure. You caught what Tori just said. I wanted to start a company to build a foundation. That was my business plan. It's true. Torre's original business plan centered not just on a fashion, but on a nonprofit she wanted to build to help women.

It was a radical idea ahead of its time. And so the idea for the foundation Until the time was right. But Tory.

Move forward with speed on her idea for the business. This is One of those Key entrepreneurial junctures. When did you know?

I wanted to start a company. What was the kind of motives and the drive for that? I had a great career and I was offered a wonderful job and found out I was pregnant with my third son. And I w had three boys under the age of four and I realized that I would not be able to do both well. So I had to make one of those tough decisions that women often have to make and I gave up a career and became a stay at home mom. But knowing that I really wanted to go back into the workforce. So when I became a stay at home mom, it was for four years. And I knew that I wanted to build

Some company and I had so many ideas and I was so tired of hearing myself talk about things that never came to fruition. And then I decided I wanted to start this idea of a company that to design beautiful things that didn't cost a fortune. And it was because I was missing something in the market, but that I also knew that I wanted to start a foundation for women. And I didn't have the money to do that. So I had to build a company in order to do that. You sort of referenced that, but it was quite true. But knowing that it would take a great time. So I had this idea and then nine eleven happened and we were in New York and I thought, wow, this is just not the right time and um put it on hold. And then I became addicted to watching CNN after nine eleven and there was this commercial of a little cartoon figure about a startup and follow your dreams and build a business. And it every time I turned on CNN, it would come on. It would it was like clockwork. And so it really eight months after nine eleven is when I said, Okay, I'm going to really do this and um I had an idea, I had a concept, and did it

Pretty much differently than everything I was advised. And y well yes, let's go through that a little bit because one of the things was you know, that you were doing the company in part to start a foundation. Did you tell that to your prospective investors? I did. And I went to raise money and I was basically laughed at and told never to say business and social responsibility in the same sentence. And it was almost as if I was um, you know, they were looking at me as the the lady who wanted to do or a young person who wanted to do charity work. And it was Uh made me a bit more determined. Um and it was quite funny actually. Last Christmas that same investor I called him and I said, Hey, I just came from this great conference

And the the it was doing good is good for business. I think it was fortune and Forbes and he said, What do you want? I just remember that conversation fifteen years ago on your couch. I want a check for the foundation naturally. And he said, Okay, one time check and I said, Okay, well I'll call you next December. So I was constantly told that rate. I can see how investors would do it, because as you know, as a super successful entrepreneur Focus, focus, focus is usually the thing and you say, Well, I'm focusing on this in order to get the foundation. But I think it's exactly right. I mean building a brand, having an aspiration

You know, you pineapple. But the most important thing to that point is I never realized how good it would be for the bottom line. And and that is something that investors can relate to. One thing I want you to notice about Tori is the way she responded. When an investor told her she was wrong about the foundation. Uh made me a bit more determined. That determination is key for any patient strategy.

Because things that require patience are usually involve a lot of people telling you You're wrong. And a lot of people. Would tell Tori she's wrong.

You'll hear it over and over as she builds her business. With speed. And it started. With that church. For her first investors.

So I had Found an investor. I was lucky because I did have a network that I could reach out to, but we didn't raise that much money. We um had one investor and I reached out to 150 friends and family and I said, put in what you're going to lose because I was terrified of losing people's money. And so some people put in ten thousand dollars, some people put in two thousand dollars. And we raised I think it was eight million dollars and that's all we've raised in the beginning. Yeah, that's one more of an unconventional story.'Cause usually when you're pitching investors, the answer is you're gonna make a lot of money with this, not put in what you're gonna lose. I mean, I still don't love taking people's money, but that was Um and it was it was great because some people it really transformed their life. So

Small investment. Difference. From kind of traditional entrepreneurship within Kinda consumer in fashion as you

You went direct consumers and I opened your own store on day one. Say a little bit about why that's also like unusual and also then why you did it. You know, I I mean fifteen years ago is very unusual and I was advised not to do that. I was really interested in direct to consumer and more of a retail concept and I had this idea of a lifestyle brand and back then it wasn't an overused term and I think when you go direct to consumer you can control your own destiny. You can really uh make sure that people aren't cherry picking how they buy your line. So we went to a street in the middle uh downtown New York. There was nothing on Elizabeth Street.

It was a Chinese furniture store and it w the rent was very inexpensive. And we opened a shop there and it was twelve categories. I spent eight months researching, going to Asia. I set up a supply chain in Asia from day one. So I knew that if we were going to reach that price point that we needed to be great at sourcing. So I we we learned on the job, really. Surrounded myself with great people. As we say often happens. How did you uh start getting people Like aware of it. Right, because you're you go open because cost is super important, you open in an unusual area of town.

In a place that people weren't Previously doing foot traffic and then you have to bring people in. So it's during Fashion and we had an event and I had grown up in fashion because I worked at Vera Wang and Ralph Lauren and L VMH and and I said we're going to have this event. It's gonna be start at ten in the morning to six at night. We're gonna invite friends, family, out of town press, press. I had no idea if anyone would even come. It was really far downtown. It was in Tribeca. And we opened the store without the doors, actually. They didn't arrive. That's right. Tori literally opened the doors of her business before the actual doors arrived.

She knew she had a moment in time during Fashion Week when she could capture attention. And if she hesitated, it might be gone forever. Listen in her story for the explosive speed she applied. In opening the store and what follows. And we opened the store without the doors, actually. They didn't arrive. And um it was very cold out. It was February. And we work I have three stepdaughters. We work through the night and I had my brothers drive out to Southampton to grab pillows because we didn't the pillows didn't come. And then we opened the doors and

At ten till six it was Amazing. I mean it was almost as if we were giving the product away. So we kind of realized that we're onto something and and as I said it was this White space in a market that we had touched that I was missing and and hopefully well I realized that other people were missing it as well. And which hour in that day did you know? Was it the first hour? No, it was probably when I started seeing people changing in the middle of the store and watching my one of my best friends like becoming helping with as a salesperson and it just was we we couldn't keep up and we we sold through most of our inventory. So We had to uh figure out that we weren't whiz's at retail. We had to learn what that meant.

And what would you have uh wish that you had known at that moment. Was it like inventory management? Was it still learning inventory management. Yes. It's very difficult. Yes, inventory management and um it has been such a learning curve and as someone that didn't have design experience and I never went to business school to Be on this journey has been just such an honor, but has been excruciatingly hard as well. Well you don't know this, but one of the things actually when I give talks at business schools

that I say is the two negative factors that need to be explained away for me to invest. One is an MBA and the other one is a background and management consultant. So that like the entrepreneurial bias is like let's go do it exactly as you've done. So Let's shift to the Oprah moment. Yes. When you first receive the call from Oprah's producer about coming on the show. Had you had any inkling it was coming? I had no idea. And I thought my brothers were playing a joke on me. So it was I'll never forget because it was spring break and we were going away and a friend in PR sent open our clothes for Christmas. So they called and said we're doing the next big thing and I said, Great count me in thinking he was one of my brothers. So it turned out it wasn't a joke and they were doing the next big thing on fashion and I went to Chicago we filmed a fashion show on real people we had to figure out we didn't have size runs at the time

We were using samples and we had to figure out how to make things on the spot. But I've never been on TV. I had never been in an interview and and over looked at me. She said, Don't worry, it's only thirty million people. Very comforting. Stay chill. Okay. And so that transformed our I it was a first year of business and luckily we launched with e commerce fifteen years ago. And that was something else people told me that no one would ever buy online. And so that um Oprah's team um Said to back up our website and we had eight million hits on our website. And did it stay up? It stayed up. I'm not exactly sure how and it wasn't because of my But that was in in in in those early days of these things. The normal thing was two thousand and five launched.

Yes. And um Once you've had that open opportunity, because remember part of what we're showing here for entrepreneurs is patience first, then grab the opportunity. So what was that experience and then what was the thing of going, Oh my God This could change the trajectory. We already have a great one, but it can even be greater. I think I was so in the moment that I wasn't thinking about this as changing the trajectory as much as it was changing the trajectory. And that's something that we had a business plan and it said we would open five stores. No, maybe it was five stores in five years and it ended up being seventeen. Three stores and five years. You know better than I'm three stores in five years and it ended up being seventeen. And we were trying to keep up with demand. We we were doing trunk shows. I was having friends host events and and building it that way. I was obsessed with the Avon model and

And the idea of how do we build an aggressor's way, we didn't have budgets at all, so we had to be incredibly scrappy. In a way, our customer has helped us build our brand over the years, and certainly my friends have been a big part of that. And we would have an event uh a trunk show at a friend's house in Atlanta and then we'd see if there was traction and would that be a great place to open a retail store and uh then we'd start to study the website as best we could, which data wasn't as easy then as it is now. Exactly. No, it's a a lot of technical revolution. On these trunk shows, would you if there were inspiring entrepreneurs that were thinking about doing a similar pattern, like saying, Okay, I'm gonna go and kind of do a combination of e-commerce, a combination of of market study

Would you recommend to do that path again? I would definitely recommend to do direct to consumer in e commerce now more than ever. Yes. Exactly. So when did you start thinking about laying down the cultural values of the company? So the values came from the first day. I think working in our industry, one of the things that struck me is that Women have a more difficult time. Um I was taught that you treat everyone the same, whether it's a cab driver or

The Queen of England, if you're ever to meet the Queen of England. And I feel that you get the best work when you have a great environment and you're creating a place that people want to come that's inspiring. It's about excellence, but it's also about being transparent and straightforward and have a healthy environment. We named it after my dad, which is kinda funny. He would have loved that. Um he was very sarcastic and he had a very dry sense of humor. So in a way, having our culture named after him would be just up his alley. And what was the name? Um Buddy. So when you describe it to a new employee is they have muddy values, do they know that's actually after your dad or do they assume something else? And when you have a culture that is paramount and so important, if someone is not a cultural fit, it becomes very clear very quickly. How do you interview for them? How do you Bring people on onboard people with them.

I think interviewing is something I've learned is just such a crucial thing and I sometimes when you're desperate to fill a role you make the wrong decisions and then you realize it takes forever and it's so much more expensive to get out of that decision. So we're very careful with that. We obviously talk about the values, but we also have people who have been with me for ten years or more and that and and a lot of people have. Yeah, no exactly. Check in and never leave. Most people are of an age, they they catch the reference, but never never never quite know. I'm dating both of us, but yes. The eagle. Um

But one of the things that I've discovered in doing a lot of these master the scale interviews Is that Defining that culture early is so important because when you're scaling and you're going really fast. You need everyone to be living the culture. You need everyone to be onboarding and bringing that culture in. And so it's it's been actually, in fact, a constant theme throughout all the interviews.

So like for example one thing Runo Reed Hastings famously known for doing the Netflix deck. Have you guys written it down? Have you We have written it down. We have a pamphlet. I have it in my wallet. It's actually what you said. Everyone has to live it and it can't just be coming from the top down. It has to come from the bottom, top, all over. And I say to the team, we're all responsible for the culture because it can change in a minute. And it often does. And you have to constantly dial it back and Remind people what the culture is and For sure. I mean one of the things that I did at LinkedIn

Is I put the six values that we have on most of the conference rooms that I would be in and also my office. Because what I wanted to do is I wanted to make sure that an employee, anyone would feel comfortable challenging me. Yeah. They said like members first was the very first one. And they say why is that there? Like and I was like, Well, because if you hear me ever doing anything that professional courage. Exactly. I'm not sure. D does that happen? Because for me it's it's hard to get I really want that and you don't want people to yes you and

And we're working on that. What I try to do is I try to get someone to model it in a meeting. Right. So I say here, I'm gonna say this and you're gonna challenge me on it. So you're setting the up. Yeah, yeah, yeah. Well, but so other people can see it. Yeah. Right. Because if you do that, then they go, Oh, that's okay. He doesn't really get angry. No, exactly no. It's such an important part of of growth and and moving things forward. Mm. When you build 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. Learn more at creative plating dot com slash masters of scale.

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. Humans will never be more intelligent than AI. Those were 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 Kalyubi. 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. Tori. applied explosive speed to capture opportunity after opportunity. But she also has the courage to say no to quick wins. When they don't serve her long term goals.

This is where strategic patients Comes in. Listen, as this theme about patients has Comes up again and again. From Tor's entry.

Into China. To a departure. From certain department stores. And so you also took your time Before launching the brand in China.

Why was that? We never wanna be the company that goes in with a bang. We always wanna learn our markets and be respectful and understand cultures and we've been very careful that way. And often we go into a market and we'll partner with someone from that market and then we'll have a clawback of three years and take back our business or not. And China was so daunting. And being an American brand, it's daunting anyway to think about business globally and and certainly American brands don't resonate in certain places. And We're proud to be an American brown, but women globally are what inspire me. So we definitely look to other countries for inspiration. China was a place that just seemed like the wild west and and still is. And and we just wanted to be careful. I just think it was almost like Brazil. Everyone started talking about Brazil. Everyone went in, including us, not in the best way, and realized we had to pull back and get a partner in Brazil to make the business okay. China we I wanted to wait and see. Uhhuh and

And how's the China story gone? It's super exciting. I I think we now have thirty stores in China and it's just the start of a what could be we launched on T Mall last week and that's super exciting. So we're doing it as you said in a slow way for industry standard search or and so for example you've held back on opening more outlets In some context. What's that impulse? What's that thinking? Yeah, it's funny. I had lunch um yesterday with a journalist and she said you're known for protecting your brand where uh to the point where it's uh must be annoying to your investors. And I said, I don't know. I mean I think we've had those tough discussions and certainly The outlet business is like a drug. It's a very easy fix, but it's not a long term solution. So everyone needs to have an outlet business in our industry, but to me it's not a business strategy. And we need to do it in in a careful way. And we want to protect our full price selling, but use the outlet as I feel it should be used.

That's very different from what a lot of people are thinking, but I think it can be very diluted to your company. And similarly, at one point you pulled your line out of major department store. Yes, we do that every now and then. Why? That's usually not what investors are thinking that the business is running. You know, I think and I was thinking about it earlier. Women and or at least no offense to men, but the women I know in business have a long term view and and they're always thinking about each thing that they're doing and how it affects five and ten years out. And wholesale, as you know, is is rethinking wholesale at the moment. They used to be in charge and now the customer is in charge and brands to a certain extent. So when you're not treated in the in the way that you think your company should be treated with the right assortments, the right adjacencies, if they put it on sale before you're ready to And you can't have that conversation. You just have to move on and then go in in a more inspiring way.

That makes total sense. One of the things you probably noticed as Tori speaks is the conviction she has in what she's building. and her clarity about what matters to her. That clarity is essential to making any patient strategy work. You have to know what you're building.

And what you're waiting for. And that's why I want you to hear this story from Rana Al Khalyubi. Rana. is the co founder and CO of affectiva.

An AI company. Whose software can read your face. And know what you're feeling. Here. Is Rana.

Mm. Hi everyone. The first thing I want you to know about My story is that I'm on a mission to humanize technology by building artificial emotional intelligence into our devices and our interfaces.

You see, as AI systems become more mainstream and as AI continues to take on more roles that were traditionally done by humans. It's not enough for AI to have lots and lots of IQ cognitive intelligence. It really needs eq emotional intelligence empathy when you think about human communication. Only seven percent of how we communicate with one another is in the actual choice of words we use. Ninety-three percent is non-verbal. It's all about facial expressions, vocal intonations, gestures. And today in our digital universe, all of that nonverbal communication disappears into cyberspace.

So we're trying to capture that by using machine learning, deep learning, and tons of data to build algorithms that can understand and capture these nonverbal signals. So Rana's AI technology Read your facial expression. And based upon the teeny muscles around your smiling eyes. Or your furrowed brow.

The AI knows How you feel. And if that leaves you feeling curious. But also uneasy. You're not wrong.

Listen on. There are many, many, many applications of this technology. There's applications in mental health, facial and vocal biomarkers of depression and Parkinson's. There's applications in automotive to make our roads safer, in education to democratize access to learning, and many, many more. But I'm not naive. In the wrong hands this technology can be

quite abusive and can be used to discriminate against all sorts of people, including minority groups. So when we spun out of MIT ten years ago, my co-founder, Professor Rosalind Picard, who heads up the Affective Computing Group at MIT Media Lab, and myself And our first employee we sat around her kitchen table And we said, Okay, we recognize that there are so many applications of this technology. Where are we gonna draw the line?

And we wanted to only play in industries where consent was quite explicit. Where people understood how this data was gonna be used. And there was this kind of transparency about the technology. And so we were very clear about very early on actually where and where we weren't gonna play. As a young company.

Бо вистачило тваті елевен. We were literally a couple of months away from running out of funding, and we got approached by the venture arm of an intelligence agency and they said, We're gonna give you forty million dollars of funding, which for us was a lot of money at the time. And they said, on condition that you pivot the company to security and surveillance and lie detection. And it was a very hard decision because on the one hand we could take this money and it you know

We would continue to exist. And I remember going home one night and just kind of Cling it up. It just did not feel right for us. So we turn them down. We turn them down.

Um luckily we're still around today, so luckily we were able to raise funding from investors that shared both our vision and our core values. And so this really became a foundational story for us, a s a story of strategic patience. And knowing who we are and what we stand for. I like to say we're an AI company. Well But we put the human before the artificial.

Thank you. But Rana's story demonstrates so clearly. Is the strategic patients. You need to turn down opportunities that aren't right.

Even when they're tempting. Rana and our co founder We're smart. And agree from the beginning.

On their mission and standards. It's a model everyone should follow. Why? Well, first of all It's almost universally true that a successful company will have to turn down

Tempting offers of investment. and acquisition along the way. And second It gives you the standards by which to make key decisions. At the most difficult moments.

At the center of any patient strategy. Is this courage to say no? When the timing or chemistry isn't right. And the certainty. To say yes.

When it's right. Not a tentative. Yes. But a definitive. Go after it with all you've got.

Yes. But how do you know for sure when it's the moment? That's Where Torre and I went next. I was reflecting on the discussion we just had.

And I realize that You do have these two different speeds. Like one of it is like okay, we're not doing You know, just a few outlets. We're gonna do 17. Here we go. We've got it ready. We're doing these trunk shows, et cetera. On the other hand, it's like well, okay, let's Let's risk assess China. Let's pull back from the department stores.

Was that Natural in instinct? Or learned? It's funny. I mean I do think there I'm a Gemini. I do think there's a bit of a th a war going on inside of yes and no. But um I also have um my brother Robert who uh keeps me in line a bit. He's I'm more the risk taker. He's a very measured in-house legal and is always dialing me back. Uh I'm definitely a risk taker by nature. That said, I um don't want to take ridiculous risk. And so we wanna take smart risk and Um it's that attention that is so important of

Of knowing when it's the right time. I don't think you ever really know until it happens and you really do it. But I often say um we we never mind if we wait because we generally don't miss something from like opening a store. We can really do that and once we assess whether it would be a gr a great business or not. So but it depends on what, because timing is everything. So you can't wait on certain things. And You have to know that. And we we often are too early for some things. Well, and and by the way, if you're not taking some risk, you're not You're not being aggressive enough. But what are the signs that you use? How do is it is it is it talking to people, is it got cause

When we listen to La Hua story, you it's the waves and it's the and it's the sun and it's the position. What are those signs for you? Well I definitely am an information gatherer, there's no question. But then I generally when I don't go with my gut is when I regret it. And your business has a a cycle when it tells you also certain things that you need to do. And and we had this rapid growth for 10 years and Every person, probably every person like you, told me there would be an inflection point of ten years of business. And like clockwork it happened. I mean it was it was literally like clockwork and I realized that At ten years we had to look at the next phase and we weren't set up to do that. So it was like steering this giant ship of looking at our management team, thinking about do we have the right team to take us into the future, do we um looking at product, how do we perfect product, how less is more Less uh of everything and we wanted to do less product, but product that was more inspiring. It's been a journey th particularly the last five years. It's been very hard.

Like taking your exec team and doing an off site and And saying look we we now need to change the game. We did all of that and that really interestingly, we've gone a very different way. And the company No offense to B C or McKinsey. Look actually sometimes the the mirror or the foil is like Oh yeah, not that this It definitely makes you have the conversation. Yes. In those times, how do you know how to listen to your gut the right way? How do you how do you think you always know and I think when you realize you made a mistake, I think being agile is the most important thing you can do and quickly recovering. And and I always think of grace under pressure because If you're frenetic and and have drama at the top, then your whole company feels that and so do your children. So I really try to be calm. For some reason when things get frenetic, I get more focused. But I don't think you ever really know until you take the plunge and really do it. Particularly in our business, as you said early on.

The macro is changing at lightning speed. Tories Company. Alrew with lightning speed. It now brings in more than a billion and a half in annual sales. But what about our original idea?

For a foundation and a company living side by side. It took five years before she launched the foundation. And ten more years before she was ready to fully publicly integrate the two. That moment. Came just three months before interview.

And an email she sent to her entire staff. Finally. It was the moment. For speed. So all on the foundation, three months ago you sent an email.

Why did you send that email? What were you what were you thinking? What were you shifting towards? So we as I said launched the company um with a business plan that was to start a foundation for women and we started the company in 2004 and the foundation in two thousand and nine. And it took me ten years to send an email to our team saying that we we finally have impact and scale and we are changing women's lives and we are ready to start messaging externally about the foundation in a significant way. And how do we integrate the two in a much more uh meaningful way where our customer really associates Us with changing women's lives. And by the way, we need men to be part of that conversation. And that's something that we we don't want it to be a women's issue. We go to these conferences and we all agree women have a tougher time getting loans. There's so many things that we all agree on, but we need to all make the progress together. But I sent that to the team. And it was very exciting. It's now we have given out over fifty million dollars with Bank of America. They've just increased it to a hundred million, which is very exciting. Thank you.

Yeah, so they're great partners and and to have them as a partner and identify entrepreneurs in the United States it has been very gratifying. We're averaging a million a month with them. And we have a fellowship program where we have fifty entrepreneurs come in for a week of you'd be the perfect person for them to meet of of learning Um they're in awe and they would be in awe of you and just meeting them is inspiring. They're often single mothers, they often have uh two jobs, they have incredible businesses and when we see them reach a million mark, we see sustainability and we see really traction in their business. There's a particular story That's related to the gift that we've put on everyone's. Can you tell

Uh there's a chocolate company, Coco Andre. Mother daughter. They've decided they needed, after they were both let go on the same day, they were going to start a company. They're from Dallas. They started an incredible chocolate company. They have changed their neighborhood. They're now a hub for women to go and meet or anyone. It's doing incredibly well. They're going into Whole Foods, they're going to be chocolate in American Airlines. So we see real potential with this business and you wanna say? Yes. Exactly. I think the moment is

So everyone you should take this you're on your seat a box that looks like this. Podcast listeners. I'm sorry I can't hand you this gift. It was a small box. Mark, do not open.

Until we say so. And inside. Was a chocolate. From Coco Andre. They're one of the women led companies who want investment and mentorship from the Torre Birch Foundation.

You can find them for yourself. at cocoandre.com And now Back to the room. Thank you.

And enjoy the chocolate. So going back to Supporting women entrepreneurs. Вота саме лес да і в лент. And how to

best support women entrepreneurs because as you mentioned It isn't just for women to do. We both have to be doing this. It's super important. No, I mean listen, I think first of all, women are an important part of a business equation of a successful business and they think differently. Let's just state that. I just I think it's time that women's equality should not even be a discussion, it should be a given. And that's how I look at it. And I think Thank you. I I I well there's so many ways that I think we can help. And certainly our foundation is tackling things like ambition. And when you think about ambition and it being applied to a woman versus a man, it's a negative. And when I first started, there was an article in the New York Times and the journalist looked at me and he said, Are you ambitious?

And I was like, wow, that's such a rude question. And so then my friend call me after, and this was fifteen years ago, and she said, nice article, but you shied away from the word ambition. And that's something we have to change. I from that moment on decided that we need to really Take So we did a PSA, a public service announcement, and it ended up reaching a hundred and ninety two countries. And that's something that we will continue to message. Yeah, one of the things that I completely agree on this Is that one of the things you frequently f find, this is like Cheryl Sandberg's lean in and everything else is

You say uh to women it's like, Are you ready yet for this? And they go, No, I gotta prep more. It's like no no Go. Men are always ready. Right. I mean But it is true, no offense. Women need to be better advocates for themselves. They need to and we try to help and I'm I'm guilty. I was I bought into that negative stereotype. And I definitely have confidence issues. And I think that's something that when women need we all need to build women's competence and they need to build their own. And so what are the things that you have learned from constructing this amazing business. which is scale globally.

To now thinking about how to help women entrepreneurs. Like what are the things as you're beginning to map that? Because part of what's amazing about your journey is not just the Okay. Decided I want to go start a business. didn't have an MDA who was going to do it.

But I started it with a foundation in mind. I knew where I was going. I mean one thing I don't want to underplay is just how difficult it was to build this business. And you know, all of a sudden it's sort of when people say, Oh, you're such a success. And that There has been so many pitfalls a along the way, and I think that preparing people when they go into business for that and when you're an entrepreneur things come at you morning, noon, and night, and you have to be again back to being agile, but you have to be equipped to deal with that kind of turmoil. And and it is turmoil, but it's also incredibly gratifying. So when we think of how we're going to make the two play off of each other now that we do feel that we have a lot to talk about externally Uh it's still the the beginnings of the conversation because it's interesting. A lot of our customers, a lot of people don't even know about our foundation yet. And that's something that I understand because we didn't message it externally for a very long time, but now we're ready, but also we We we're coming from an authentic place and I think that's really important and that's something that's setting us apart. We're not just picking something to jump onto because now businesses with purposes are important. You have it all the way from your early discussions with investors.

One of the things that I think is also really important with entrepreneurs is is how to pick investors. Yes. Say a little bit more about what you've learned. And how entrepreneurs looking at this can go, Okay, here's how I navigate these waters. Okay, I've learned so much picking investors. I also learn that when people say they're long term, it generally is not the case. And and long term really depends on how you look at it. I think when you look at some private equity groups or venture capital, it's all different, but

Long term generally means five years, maybe seven. But it that's not the cycle of a business when you think about long term when you're making decisions for the health of the business. So I've always go to integrity and I feel I've been very fortunate picking incredible partners. That said, it's it's hard and it's not always easy and you have to be able to be strong and have conflict on the board, but resolve it in a healthy way. And did and picking them was it the was it the which questions they ask you and the actual interaction Was it reference checking? Was it reputation? What was the what was those set of signals for you? I I think it was uh again going back to instinct and gut. When you meet someone you have an immediate feeling and definitely reputation for sure, but their track record comes in to play. But I think we've picked incredible partners in in the the private equity world. The number one question people would say to me, when are you going public? I mean we're our company is only fifteen years old and and it's a luxury to be private. So for as long as I'm there, that's going to hopefully be the case. I'd like to keep it private for a very long time.

That's not always consistent with what investors want to hear. Would you invest? Oh yes. Knowing that. Yes. Yes. No, but I actually think the funniest thing is I've heard from uh VC, who I obviously won't name. It's like Well I I uh invest in companies to hold them forever. And whenever you hear that five years, whenever you hear that, I'm selling.

But but the the point is actually in fact how do you compound over very long time periods. Yeah, and you want your partners to do well also. That's another thing. Like I do care about their investment. I don't want it to come across as that. Oh no, of course. So last question. Advice for your younger self. If you could call your younger self through a phone line that goes through time. As you were just starting.

What would you tell yourself to do differently? Like do some do this, don't do this. What would be that advice I would probably say to be more present. And really be in the moment and um Take it all in. I feel like the uh the last

Ten fifteen years have been a bit of a blur. And I wish that weren't the case. It was just so busy and so Crazy all of the time, as you know, that I wish I was more present. Um about you. Um Well, a number of my friends would say that I should follow your advice.

And you know, there's there's meditation, there's other things. Um I think the thing that I would tell my younger self at the beginning of LinkedIn Yes to there's always this dial in entrepreneurship about how much you pay attention to the competition and how much you don't. And I think in the first few years I was dialed too much on paying attention.

Like I was kinda going, okay, make sure that you just changes. Make sure that like when I was watching their moves, I would have a strategy that was counter the move. And you do need to pay attention, but like You know, we launched the group's product LinkedIn, like Ten years too early. I mean oops. Right. And so Uh it took us a long time to get around to making that product better.

All right, so I think now As we close out tonight, I want to bring out all of our guests. And the whole crate of pea. Back to the stage. Come on up, guys.

Special thank you to Tori. The evening sponsor, Thought Exchange. to the amazing production team and thank you rings such great beta testers.

It's been our honor to share it with you. Good night. Masters of Scale is a white water original. This episode was recorded live in Boston at the Wilbur Theater and produced at the studio inside SY Partners in New York. Our executive producers are June Cohen and Darren Triff.

Produced by the entire team at Wait What, including Edmund Chang. John Go Forth. Christina Gonzalez Adam Heiner Timothy Lou Lee, Chris McCloud.

Jordan McLeod. Evelyn McManus, Jay Punjabi, Sarah Sandman, and Adam Skuse. Stage production. By Carrie Kennedy, Cod Clark. Christopher Ren, Natalia Chay.

Tanya Zakarova The production assistants from Madeline Triff and Max Triff. Mixing and mastering. by Brian Pew. Special thanks to Tori Birch and her team.

The Hua Kamalu. Rana El Kaliubi. And Sayra Sapiava. Visit. Masters of Scale dot com to find the transcript for this episode.

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