#206 The Venture Mindset _ Ilya Strebulaev, Professor at Stanford School of Business

**The Power of Venture Mindset**

500 bucks a day still seems a lot okay but but half of that, also 1% of profits in the future, it turns out to be that some people will say oh no I would like thousand bucks a day and some people will say no I would like a small compensation now. But I believe in the success and sometimes you actually want those people who you know who do not want all the compensation now and so you would like to have people self-select. I think that's very important by the way, that is one of the major reasons and that's why VCS uh really care about this they know that by structuring incentives right to ensure that there's a long-term incentive people who are going to draw in the startups who are going to Bas who you know who are going to leave apples of the world and join them are those who um becoming less risk averse who uh are more adventurous perhaps who are ready to incur more effort who are ready to become more resilient um and I think that is very important especially if you initiate a project absolutely.

**The Importance of Shadow Stocks**

There are a lot of parts of business particularly as business gets bigger where you aren't tied directly to revenue or like major business impact. So having that sort of startup like feel um is going to be incredibly important there. I think the idea of Shadow stocks in particular was especially interesting. So, if we think about it, when people join a startup they are typically drawn by the promise of equity and the potential for high returns. But what happens when the startup grows and becomes less tied to individual effort? That's where Shadow Stocks come in. By giving employees a small stake in the company without making them wait until the entire business is successful, you create a sense of urgency and motivation that can help drive innovation and growth.

**Adopting a Venture Mindset**

My first advice would be to read the entire thing and understand all the principles. But I have specific advice for this and what I find out is that by teaching you learn now I'm a teacher, I'm professional teacher, okay, so I've had more than 5,000 Stanford students graduate from my classes and talks sessions Etc. And you know what every single time I come into the classroom well, being a professor I know more the truth is I learn every single time. So, what I suggest is for everybody in our audience to learn more about the Venture mindset but then to talk about all these principles and all these provide examples and encourage debate and discussion with their friends, colleagues, their families during dinner time, during lunch time. I actually think a lot of examples like we're given are cool enough that you can discuss at a party um and that generates a lot of debates and I love debates.

**The Importance of Debate and Discussion**

I do this all the time when we're given a book for example, I think a lot of examples are cool enough that you can talk about them at a party um, and that generates a lot of debates. So, people situate data facts but also a lot of anecdotal debates where people say well let's think about this, let's think about that. Here's my encouragement to you is just do not learn yourself okay, don't be too ambitious right away which is oh this is great I'm going to change everything do it step by step uh and try to evaluate yourself.

**Putting It into Practice**

I mentioned some examples where I myself changed my behavior so I truly believe in um um any mindset working only if you try to change your behavior don't be too ambitious right away which is oh this is great I'm going to change everything do it step by step uh and try to evaluate yourself. Okay, and I think that every single principle that I talked about and more principles we didn't have time to talk about every single one of them I changed as a result of those I changed my own behavior as a result so I believe in specific actions that people take and those actions could be different it depends on are you a data geek working all the time alone are you working in a group are you the leader of the group are you the boss of a large organization so those actions are going to be different and you will find something that in fact you would like to implement yourself.

**Sharing Your Experience**

And, I love the idea of just communicating more talking about what you're doing and sharing these ideas maybe a bit hesitant on the idea of talking about this sort of thing but uh yeah that that's brilliant advice um so all right yeah, uh thank you so much for your time. Like, so many great tips there I think Richie it's great having you great having you and I hope that everybody in our audience became just a little bit more Venture minded as a result of our conversation today absolutely super, thank you

"WEBVTTKind: captionsLanguage: enas an investor the last thing you want is to throw good money after bad money and of course the same with all of us so just ask yourself a question how often do you continue incurring a lot of effort putting a lot of time into the project that in fact you kind of already know is not working out hiia welcome to the show Richie it's thanks so much for having me excellent so uh just to begin with what is the Venture mindset the vure mindset is a new mental model how to make better smarter decisions in an innovation driven World in a world where there's a lot of uncertainty unpredictability I I call it unknown unknowns disruption and so on where the traditional way of making decisions both quantitatively and qualitatively does not work very well so that is that is the idea behind the Venture mindset okay so uh you talk about unknown unknowns and it seems like there's a traditional way of doing business that's worked very well for a long time has something changed in the world that means that um it's no longer relevant and you need this new Venture mindset a lot of things have changed in the world I'm not saying that the traditional way of making decisions uh is not completely irrelevant uh it's still relevant uh but but not all the time so when I say unknown unknowns is that um in the past when we think about businesses when we think about data analyst for example then we can predict the future much better because we knew for example that if we think about companies the business models would be the same if we think about various data Trends data Trends um would still would would would kind of be on the continuous path and nowadays there is so much disruption uh in uh academics we talked about Chaos Theory so there's so much new chaos uh that is very difficult to predict and it's not just generically but with specific individual decisions um you know I'm teaching at Stanford I have hundreds of students who are taking my class who become either investors or the founders of venture back companies and I'm helping a lot of them and I stay in touch with them after graduation and you know just yesterday I talked to four of my former students and I'm helping them to to raise money so three are of four and now raising funding for generative AI startups okay well I guess not a big surprise rich either for you or for our audience but the whole point about this is that if you think about this it's a lot of unknown unknowns so unlike many of my students in the past what is the business model of the generous VAR startups very often they don't don't know what is going to be the technology very often we don't know how large is the market uh it's very difficult to predict and so on and so forth and so that is the idea behind the Venture mindset and by the way the idea I call the reason I call the Venture is because really uh for for the past 50 years Venture capitalists were making bets on startups and they were facing all this unknown unknowns all the time it just that now we are far away from Silicon Valley far far away from VCH capital is facing the same I would say hostile environment when we make decisions okay so I think this is going to be quite terrifying for a lot of people in the audience who are data analyst or data scientists saying that actually your ability to predict things is decreasing because there is more chaos in the world and more unexpected things going on so I I agree with this Richie but but but you know what you should not get pessimistic so that's the whole idea about the Venture mindset is that is that it's a different mental model so that you still can make decisions you still can make I think very high quality decisions even though it's much more difficult to predict and let me tell you right away I think uh what is really important for for data guys is that um if you think about what is really most important for venture capitalist okay and um identified in my research at stamp over the last 20 years what I call nine principles of the Venture mindset but like if you have to rank them like by far the most important one is the following and I'm going to use a sports analogy home runs matter strikeouts don't so if you are uh in something that you don't expect a lot of changes you actually do not want strikeouts you want every single line of code work perfectly ideally you would like every single data point tell you something and so on every single mini project to succeed The Venture mindset thinks completely differently home runs matter which means that it's okay to fail it's okay if a lot of manyi projects do not work as long as you experiment try them quickly scale fast and then abandon them if they do not work but it's some but some projects some of the analysis is going to be truly impactful and the whole idea is to use the Venture mindset to identify and scale and put put all your effort on those projects that will become a home run so that is the whole that is the whole idea okay so you're having or you just allowing for some failures to be built into your business model then you think that something's are going to go wrong but he's got to concentrate on uh getting those wins as well I think built-in is a very good word Richie because because uh failures in the Venture mindset that don't have happen just because you know they have to happen uh they are built in which means we expect a lot of failures to happen over time okay so if you think about home runs and strikeouts how big do your home runs need to be in order to compensate for these strikeouts that is a great question so uh because we're talking to the audience of data Geeks right let me let me tell you the numbers and the numbers based on my research soay at Stanford um I'm I'm the found of the um Venture Capital initiative and we have perhaps the best data set of uh all the VCH Capital Investments investors Founders startups and so on okay so here are statistics for you if you take on average um typical 20 early stage Venture Capital Investments okay so 20 typical startups about 15 of them we expect to fail think about this okay so 75% 15 out of 20 we expect to fail investors expect to lose money on them then there's going to be couple of startups maybe three maybe four that will be kind of successful or semis successful uh as VC is used to say uh we will get 2x 3x or 4X of our money meaning that you invest $1 and you'll get back you know $2 $3 $4 if you're a banker like investment Commercial Bank okay you'll be extremely happy with this result VCS are unhappy why because if they get three act it will not allow them to return the money on their losses to cover their losses and so so those outcomes are considered to be mediocre and then there is one and perhaps two Investments that will return you a 100x so that is a home run so home run really starts at people say 10x the reality is it starts at much higher than 10x so I just talked to a friend of mine um Zin capitalist and uh he's an early stage investor his typical check size is between1 million and $3 million okay um and uh uh just one of his startup that he invested in about three years ago uh was sold and so he put in 1.5 million it's actually data startup 1.5 million and just got sold and he got 120 million back so that's about a little bit less than 100 x about so that was a successful investment here's the way to think about this by the way about a home run um the VCH cap is think and I always tell the founders about this because that's critical the way v c thing is um if I reach consider whether to invest in you in your startup okay I will ask myself the following question if everything goes according to the plan in fact if everything goes better than the plan then will my investment in you allow me to return my entire fund which is the entire pull of money okay that I'm really managing and um and that it would be an amazing investment so a fund returner is a true home run because effectively if I have one fund returner everything else is a cherry on top so that's how they think about the vent the home runs and I really think in the today's unpredictable disruptive scenario when you think about your data projects like like when you prioritize what you do I think you should uh you should really use the same home run approach okay so um that's sort of investing one and a half million getting 120 million back that seems like a dream scenario and I'm sure like everyone would love that sort of uh 80 times 100 times sort of win but there are also sort of methodologies for think about decisions so things like the Toyota Way Six Sigma which all about incremental improvements to what you have already so when might you want incremental improvements and when might you want to go for this Venture mindset uh situation where it's like you just want a few big wins thank you Richie first of all um I think that is a great comparison there is a toota way movement there is a Six Sigma movement uh and I hope that uh we're going to launch the with your help the vent mindset movement okay now those are not really contradictory they're very different but they're not contradictory approaches because I believe the Six Sigma the Toyota way uh approaches are very useful and they're very useful when you don't expect big changes when your improvements are incremental okay um let me give you uh an example so um every single year okay um Gillette produces releases a new razor blade um now that is an innovation okay and uh they of course then try to push so that you know we reach here you and I uh use all those new Fantastic blades okay I'm not doing very well on that maybe they lost you as a customer okay but they have not yet lost me but but um first it's an innovation and I think that likely using Toyota Way approach there makes sense by the way it is an innovation do you know that proon gamble is the parent of J do know that Pro G employs more phds but Stanford MIT and cak combined so it's it's a big R&D heavy organization okay now that is incremental approach uh but let's consider a situation where suddenly a competitor appears that offers a completely different business model okay so for example um you actually don't need Gillette plates but you order a a blade and every single week blade comes to you and U it's like a subscription model so that's very different okay and in fact VAP is back to Startup like this and um uh and that is the that is a completely different setup and that will require the Venture mindset so so the moment you the moment There's A disruption in the way how technology works in the way how business model works or the disruption how really you do business by the way professionally or personally then toot way is not only helpful it's hampering you because it doesn't allow you to go outside your cage that you built for yourself and this is this is exactly where V vention mindset should be used okay so if you want to make incremental improvements um it needs to be something like a continuous business case where you've got this discontinuities that's where you need the Venture mindset all right so um so principal one that was the um home runs matter strikeouts don't what's the second principle so uh another principle that I really think is important um and in particular maybe Rich for our audience today is the one that I call get get outside the four walls what I mean by that is that again I'm doing this research and venture capitalist okay I met thousands of them and one thing I noticed about them is that you canot find them in their office now they typically are on their office once a week okay to meet with their Partners their colleagues the rest of the time they're traveling or you can find them in a coffee shop talking to some other people uh trying to find out the new new stuff again the moment you are incremental in the incremental life you don't mean the Serendipity you don't mean to meet people that you know will tell you something unusual but once you are in the disruption in this um unpredictable stage you really do not know what's going to what's going to be important tomorrow so you would like to open up to new ideas and new people and uh it's interesting because uh so I've done research and um I showed that Venture capitalists have dramatically bigger LinkedIn networks than the LinkedIn networks of corporate innovators think about Chief Innovation officer for example okay chief R&D officer and so on but more importantly I think they LinkedIn Network are much more diverse different Industries different backgrounds different education different geographies while if you're let's say corporate innovator um you tend to well like 20% of all the LinkedIn connections are going to be from your present company 15% are going to be from your previous employer and then the rest will be from your high school and your college okay and that is not a great idea whenever you would like to um achieve something unusual so get out of this get out of side the four walls meaning that try to get outside the try to open yourself up and I think especially when we think about uh about new data opportunities new unusual patterns uh new connections that is particularly important principle let me give you my personal example um first you know one thing is being a professor who is studying stuff another one is being somebody who says you know what that actually has an impact on me personally so I've been studying VCH capital for 20 years okay and I've discovered this um kind of princip principles and I tested them Etc and then I realized that for many of the principles I'm actually going to use them in my life so here's my own example that I'm pretty sure data kicks will appreciate so I've been at Stanford for 20 years and I've been traveling a lot you know for academic conferences to speak whatever um so what do I do when I travel well uh I come to the airport okay and I have my earbuds on because I'm listening to something okay because I kind of don't like noise very much and then uh when I wait for the plane what do I do well I open my academic article or maybe my laptop and work on my data very intently what do I do in the plane well the same I when I when I don't drink I open my laptop or I read something okay now that is not getting outside your forwards because in fact amazing enough when you travel um that is a good opportunity to meet somebody whom you don't know who is definitely outside your network you never know what's going to happen so after I decided to apply this principle to myself every time I travel and nowadays I travel even more I have a goal uh every single plane right I take I must speak to at least five people whom I don't know it could be a person sitting next to me in the plane it could be a person standing in front or behind me in the passport uh queue Etc and you know what it's like home runs met strikeouts don't it is true that a lot of conversations you know hello hello where you from what do you do ET Etc there's no connection and suddenly wow let me tell you a story I was just returning from uh New York recently from New York airport and my flight was delayed big surprise so I was waiting there and waiting um and and I started talking to the guy um again I would have never ever talked to to him um had I not had this bad minded principal me okay and by the way you have to force yourself sometimes uh because you know like there's a person standing next to you he does not know you I don't know you he's actually um kind of reading something but there's always a way to start a conversation it turns out that he's a journalist he is um was coming from Dubai from the Dubai World Cup horse racing because he was covering horse races for the major US publication and we start conversation and I told him do you know that I studed venture capitalist and Venture capit all about what is important Joy meaning the founder or the team and the horse meaning everything else product Market business model Etc and we spent like 40 minutes in debates about about Joy versus horse and startups versus horse races and I think he's not going to write uh an article for his publication about you know hor races and the and the and the venture capital and startups and the Venture mindset and I've learned a lot from this conversation as well so you never know so my suggestion Rich it to you and to all the listeners get outside your four walls as you can imagine from my job I'm very enthusiastic about talking to strangers so I'm fully on board with you uh on on that point um Okay so we've got uh home runs matter get outside your four walls what's Point number three so uh Point number three is uh um I think very important and it is called say no 100 times what do I mean by by that again first of all coming from my research I'm a data guy okay for every single deal that V capitalists consummate like they give you a check and you accept the check okay they consider hundreds in fact even more than 100 opportunities just think about this okay uh now if you're a Founder that has huge implication for you because fact you know what the odds are against you statistically okay so you have do something to increase them uh but I think that goes Way Beyond um you need to learn to say no too many deals too many opportunities in life too many projects and here is the trick how to do it and the trick how to do it is what I found out is that Venture capitalists ask a very different question when they start considering their potential Investments initially and I call this fast lane there's a fast lane and there's a slow lane fast lane they ask the following question why should I not want to pursue this opportunity not as very is critically important instead of asking yourself a question that you know I observe for example in a corporate setting is a typical question so why do you want to approve budget for this project okay uh the a better question might have been why we do not want to approve a budget budget for this project and I think that when we ask ourselves about whether we would like to pursue a or b like whether we would like to accept a job offer whether we uh would like to actually seek that job offer um you know um so our audience is doing a lot of data projects I'm doing a lot of research projects and before I discovered this myself I was asking do I want to pursue this research project like is it promising enough I have changed to the fastl and I to oh why do I not not want to pursue this research project and I found this so efficient so amazingly different and I call this so that it's you can remember this better I call this the red flag approach so you're trying to identify red flags that will make the project is not interesting enough note by the way that the Venture mindset the venture capitalist they don't make uh a final decision at this point so the idea is to put a filter on if the project the startup the idea uh doesn't meet the Red Flags Okay then they will not consider it and then they will put all the effort all their time a lot of time on doing much more detailed due diligence on the project that passed the first filter then they switch to slow lane and will ask a question question well okay why are we anxious to pursue this and so the challenge is I think that in the traditional mindset we're too often asking ourselves effec an inefficient question for every single project why do we want to do it um and again if it's incremental that's okay but the moment there are potential for home runs you do not want to for every single project to ask why do you want to do it you will not be able to consider a lot of opportunities then so therefore remember this principle say no 100 times okay so this actually reminds me a lot of like a project manager mindset where you get hundreds and hundreds of tickets being filed with ideas for things to do with the project and you just have to reject most of them because you've not got enough time exactly and again the F the the point is to find a very efficient way to do it and I think the Venture Minds that will tell you do it by asking a different type of question and what I found out in my research is is that when you change the nature of the question your approach dramatically changes so it seems there's an implicit assumption here so um the first stage is saying no to lots of things very rapidly and then you can spend a lot more time concentrating on the few that remain the the assumption is that you got lots of different things to choose from um like how many sort of different projects you have to choose between in order for this to start making sense as an approach well that of course depends you know for early stage v c it's at least 100 okay in fact it's interesting that for software VC so those who invest in IT projects it's impact more it's like 130 140 on average P each deal uh done um if you're on Healthcare we see it's it's a little bit it's it's fewer it's still a lot but that's and I think the reason behind this is that typically software startups much more uncertain much more unpredictable than Healthcare ones so in healthcare ones let's say very often we know the market the market is there uh there's technology and um farmer risk that let's say the drug will not work or the medical device will not work but if it works we know the market is there for IT projects for a lot of data projects we don't know what the market is there and so therefore you actually consider even more opportunities okay so we're looking at at least a 100 different opportunities and that's the point where you really do need to filter on uh reducing that number that's right rich and for this you of course need to increase the number of opportunities and this is where going back to the previous principle getting outside the four walls is really important so uh the example you mentioned before about this conversation with the person from Dubai was about um should you bet on the horse or the jockey uh do you want to tell me a bit more about that like where did you land on this well the that's another principle of the Venture mindset and the principle is very simple bet on the JY not just the horse um and that is first a critical principle for Venture The Venture mindset so venture capitalist will not invest in a startup if they do not think that the team behind this idea can execute the idea uh and the truth is and I've seen this again and again you know the world of ideas is overrated uh there are too many IDE ideas and uh I know we talked about intellectual property and copyright but the truth is that there are so many ideas that especially when we don't know how good they are um the ideas are less important than the people behind them if I I can come up with a great idea but I'm unable to implement it and for each great idea there will be so many teams that who would like to try it out let me give you let me give you rich an example so um I hope that not everybody in our audience is so so young that that nobody remembers um the day when the first iPhone was released back in 2007 okay but if I take you for a second back to that period um at the time there was no possibility to share files or rather you would use a you know do you remember USB sticks well you remember maybe some of the audience doesn't but but but USB SS and even if you're a little bit older I still remember the um the discat okay kind of the the discs the floppy discs okay so that was the way to share files uh but the idea that the future of file sharing is going to be disrupted uh was there was out there and of course iPhone obviously supercharged this okay so 2007 in fact there was a a popular tag blog called Mashable and it fostered the list of I think more than a 80 um startups that were pursuing this kind of file sharing file hosting stuff okay now um many VCS looked at that and um one VC in particular his name is Samir Gandhi he was a partner at sequ vent Capital firm and he thought file sharing is really cool it's going to be big by the way again the market did not exist at all the technology was not there yet okay um but he thought it's actually coming out it's coming out it's a huge vertical I would like I would love to make an investment okay how he approached that well he went out and met with dozens of these startups this that Mashable uh listed that um he met he learned a lot about this technology he did not invest in any of them and then one day uh serendipitously he was introduced to this two guys who didn't have any money in fact I think he needed to take a Greyhound bus from Boston uh to the Bay Area because they didn't have money to fly and um they didn't have a prototype because obviously they couldn't do anything okay and they were kind of outside this community uh but in like several minutes he invited them for pizza and I think very quickly he said I would love to invest in them why and that was because the jocky remember the horse was the same for all those teams the the file sharing idea was exactly the same the market was the same nobody really knew about how technology is going to evolve what he realized in that really first five minutes I think is that is that these two guys and their names were Drew Houston and AR fi they um they knew much more than everybody else he talked to they in fact thought deeper about many issues that thought and by the way Venture cap is love investing and Founders who know more than them about the stuff that they think they're experts in and so he realized those guys can execute if anybody can they will execute and so he of course proposed and SE invested and I think that investment turn out to be one of the the bad Investments dollar per dollar um that company was renamed uh and became known as Dropbox and maybe some of us still using drop box every day but that is the point so the point is that there were like 80 startups perhaps doing exactly the same but really only two plots survived there's a drawbox there's a box and of course there's a Google Drive which is an which is a startup inside Google and I'm not really sure whether you can name any other successful um file sharing uh companies okay so that's about the JY so I think venture capitalist will not invest unless they believe in the JY and I think that also holds a lesson for for everybody for all of us um I'm often asked being a professor I'm often asked so what is the purpose of Education okay so one of the purposes is to ensure that you improve your joy skills now I don't mean host racing skills I mean that that when you talk like when when I when I when I talk to you okay uh and I think of myself as an but in your field I'm still impressed by what you do and so so I think that is a skill um but I don't I don't think there's too much luck involved so my suggestion is to think about your jocky skills as a result of that so that is fascinating because drop walk was incredibly uh successful in the face of like you said about 80 other different uh startups trying to compete for this space um so you said one of the things that the venture capitalist appreciated about um the the founders was that uh they knew more than he did so beyond domain knowledge are there any personality traits that make for a good um a good leader or a good founder a great question and the answer is yes and um um it you can see it both quantitatively and qualitatively okay uh and there's no one single personality trait but there are many um one is difficult to Define but easy to see when you encounter it is charisma uh let me let me give you another example okay and um again I've been very lucky at Stan I met so many students of mine who had this Charisma and again all them are different and so if you ask me can I Define charisma not really but I can give you example okay let me give a specific example and in fact we'll give this example in in my in my book The Venture mindset so I had a student his name is Rene Cassi um he is a originally a doctor a surgeon from Canada he came to Stanford to study business and the idea was because he really wanted to uh find he didn't have really an idea he wanted to find an idea um that would merge you know business data technology and medicine because he he really cared about healthare okay and he came up with the idea this the EXA idea kind of is irrelevant here actually the idea is amazing it's a platform um to match the patients um who have rare diseases okay those that maybe a few hundred patients have in in in the country uh with the hospitals and and the providers so that's actually not the point the point is that you know I have like hundreds of students come to my office and talk to me about their aspirations and a lot of them are amazing but when some of them come um you know and I'm a professor I'm sitting in my comfortable chair okay uh and I'm tenur you know I I don't need to go anywhere and I talk to some of them and my heart starts beating faster because I would I say gosh I actually would love to join this guy okay and so that's what happened with Rene he came and talked to me and the way he talks and the way he looks at you Etc that's what I call Charisma and he convinced when he didn't have money when he didn't have prototype when he didn't have any success of any kind he succe he succeeded in um getting some uh some students join him full time he succeeded some top um top U person who worked at at a kind of well-known large company drop everything and join him and so when as a Founder you succeed um in making people follow you when you don't have success when you don't have you know millions of dollars to show I think that is very very very impressive okay that's one so Charisma is one two is passion and that is because the reality of the Venture mindset is that the real home runs are likely to be longterm Endeavors um venture capitalist joke so they laugh every single time I tell them that one of my kind of research insights which I would say maybe one of the least important but the most cool research insights is that if you look at the um average period of time that startup spends before it kind of becomes public if it's successful startup and it's now 8 9 10 11 12 years depending on exactly how you count is actually longer long some metrics than the median marriage in the United States okay so you have to be very patient and for this you need to be patient and for example if the founder tells the V capist you know I'm here for a quick Buck I have this great idea I'm great I'll be in a couple of years I'll sell it like for 100 million bucks bench capitalist immediately it will be immediate red FL immediate turn off the end of the conversation and the final feature which I think is really important is resilience um and resilience means you know in my experience every single startup even the ones that became amazingly successful amazing home runs they're like on the verge of going busted uh so many times and it's tough and you have to make as the founder as a team member you have to make a lot of tough decisions and I think resilience is something that ven capitalists um are very very curious about when they evaluate Founders and also builds to work on a team so I'm getting calls all the time from vure Capital who are doing reference calls on my former students who would like to raise money from them okay and you know what um I had maybe 500 calls this years and you know what not a single time they asked me about the grade like nobody cares about the great in my class okay um they asked me about so how this do you remember this go did the person stand out uh they asked me about so uh what was that person a captain of the team because we have a lot of um case study teams um how did that person uh interact with other group members how was the resilience if there was some disagreements among the group among the groups and so on so those sort of type of questions that I think the Venture mindset really really cares about okay so we got Charisma patience and resilience these all seem like good qualities in people to have regardless whether you want to be a founder or not uh so yeah certainly uh useful thing to know um so you mentioned just then like what happens when you have disagreements and it feels like you're going to get a lot of cases where it's like well I want to do this one project someone else says I want to do something else do you have any advice on how to resolve these sort of disputes yeah that's that's really that's really fascinating uh because um it's amazing because you know I often work with the leaders of large organizations like large level companies and uh I go with them through every single principle of the Venture mindset and they're surprised by a lot they're taken back by a lot but I think this stuff about disagreements is the one that they're really kind of shocked okay and um that's why also the reason why we in fact in this the Venture mindset book that I mentioned we call a chapter agree to disagree and this is the chapter where like like I just met the CEO of a large organization and he said oh wow uh and also it's a while because in fact you can make changes right away like some stuff it's very difficult it's very difficult to make myself charismatic if I'm not but some stuff you can actually Implement right away right there okay so what does agree to disagree mean and why you should use it in the Venture mindset situations not in the traditional mindset situations so um typical typical decision making uh in groups work like this like think about meetings you had when you have had to make a decision so there could be a lot of debates uh but at the end of the day people try to come to consensus and many organizations in in fact either require consensus okay or they require unanimity so everybody says yes let's go forward and that could be done for culture for politics the truth is it's human psychology and there's a lot of research including mine shows that if we don't design the system then trying to reach consensus is something that is that is innate to us okay to human beings amazingly enough and I I don't have time to go into the detail but one of the most amazing examples is not from my research because I'm doing research on human humans I'm not doing research on monkeys but one of the most amazing stuff about monkeys and consensus is from Professor Erica Deval who's professor at the University of lazan and she's been studying verid monkeys and in Africa and she showed that Conformity desire for consensus monkey unanimity kind of okay uh is is really so widespread so maybe not surprising that we're also uh human beings are also similar and by the way it makes sense again if you if we live in the world of incremental Innovation or incremental changes it actually makes sense because we make small step and we kind of would like to sure because there's not that much uncertainty that we take everybody's view into into the account and everybody's okay with that but the moment you are trying to catch an outlier to uh secure a home run the whole point is the future is unpredictable and you know what most of the uh Amazing Ideas will seem stupid at least took somebody uh let me give you an example that that I give in the book which which uh which which I find fascinating but let me preface it by saying rich is important um I give a lot of examples here they're all typical I give examples I try to give examples so people know the names but it's typical example okay so here's a typical example um in 2008 I believe uh a VCH capitalist his name is R Hoffman and he's in fact known as a one of the co-founders of LinkedIn but then but but by then he was a partner at Venture Capital film called Greylock he met those kind of two um Scrappy guys who created this kind of weird startup where strangers could sleep on a mattress in your living room okay and he uh came to his partnership and he said this is actually really cool idea you know I met this Founders they're really into something they're charismatic passion resilient and etc etc and by the way I think that's potential huge Market of course the market didn't exist at all all okay and Greylock partnership said how about stupid idea in fact one of his Partners said you know read every single V CST has a right to uh to make deals that that fail and let this deal called Airbnb be your failure okay uh but here is a very important Point Richie and this is something that makes the Venture mind different from the traditional mindset in the traditional mindset organization that would have been the end of the conversation so I have an idea I bring it you know Rich you say what stupid idea IL you brought to me today um and I try to convince you and you say no and that would be the end of it especially if maybe somebody else says yeah I agree with Rich that's stupid and so therefore we would not make an investment and yet despite the fact that his Partners disagreed R Hopman proceeded making investment and I'm sure that that became one of the most successful of great Lo Investments okay um so and here is the point that critical and I really would love everybody to pause and listen to me carefully because I think that is something that shocks people is that disagreements and descent is very important in the situations where there's uncertainty unpredictability and so on you have to design it it will not happen by itself and what I found out by studying Venture Capital firms by studying the Venture mindset that there are many ways to design it and um VCH Capital firms designed in a different way but they are thoughtful they're purposeful about that okay so if you don't do anything that will not happen so let me give you some examp examples um in one example the VCH Capital firm called vrock every single partner comes in and um brings a deal and then everybody debates they write investment memers due diligence and so on and then after the meeting that partner who brought the deal um leaves the room and has to make their own decision there's they don't have an investment committee they they they don't vote very unusual okay it will not work in many organizations that pursue an incremental approach that should not work but the moment you trust an individual make an outli decision that's the way to proceed or another example in another vure Capital firm called Founders fund um for a smaller deal it's enough for a partner to convince just one another partner so if we R and I if we're Partners it's not for me to it's my deal I'm excited about this it's not for me to convince you Richie even if everybody else kind of thinks like it's bizarre we'll proceed okay so there are many many I won't discuss describe all those methods so that is at the decision- making stage there's also something that is really important at the what I call information exchange stage so you know you and I get together and we discuss couple of points for for those um of our audience who actually make decisions in groups or discuss stuff in groups uh let me give you two examp two um um two actions to implement one I think is very intuitive for most people one I find amazingly unintuitive okay let's start with an intuitive one in every single meeting uh my recommendation is Juniors should speak first for example in our recruiting meetings at Stanford when we try to hire you know best professors to come to to us um we always have Junior professors speak first and there are great reasons for this you know in fact very often they know um younger faculty members who are trying to join us better and they know the most recent Trends better but more importantly when you know a very very senior Professor speaks up and you think that that's I disagree with that it's much more difficult to go against it so my suggestion is that and again be purposeful about this like this is a rule a rule is you you know if I'm Junior to your richer in terms of the number of years or whatever title I should I always speak first it's kind of intuitive well at least I find intuitive one is counterintuitive okay and um um so so make sure that everybody the entire audience must sit down at this point because that's what generates all of debates experts should speak last now again in the situation where there's an incremental change I don't think experts should speak last like you know if we know a lot of stuff and the experts I should speak and then what is there to discuss but we're trying to catch out Liars the whole idea of now Li is perhaps there are no experts in fact maybe experts are in their own golden cages okay um and I think the idea is that when experts speak clust is that you do not try to remove the freshness from the debate or from the information exchange so whenever you're thinking about well we trying to find this home run um let those who are fire away from the field speak first because once the expert spoke or the perceived expert rather uh and and you disagree it kind of would be difficult for you to speak up and for everybody else to listen to you attented so this is my specific recommendations for how to change the decision making process within groups this seems incredibly important for for example running meetings I think that's when a lot in most organizations that's where a lot of decisions get made and just that simple change of getting uh the most Junior person to speak first uh seems uh like it could be an incredible uh uh sort of change to Innovation across the company now um you mentioned the idea uh of Airbnb and Greylock almost sort of didn't invest um so making mistakes seems um like it's going to happen like if if you investing something or if you start a project at some point you're going to hit roadblocks things are going to go horribly wrong do you have any advice for what to do when things go A bit South thank you Richie you are bringing up another venture minded principle that I call Double Down or quit uh let me first of all step back in the VCH Capital world startups fund raise again and again and again okay and that makes sense uh which is if you're growing fast you would like to raise money the challenge is is that if you're about to fail you also need money if you would like to continue okay and as an investor the last thing you want is to throw good money after bad money and of course the same with all of us so just ask yourself a question how often do you continue uh incurring a lot of effort putting a lot of time into the project that in fact you kind of already know is not working out okay and by the way you can always find justification why you would like to continue this and um it's called academically in the world of psychology is called escalation of commitment okay um and what my research finds out is that VCH CS who succeed in managing this who succeed in being kind of more ruthless um and concentrating on their best startups with the highest potential are those that are more successful now um how to do it okay so here are specific tricks one is that doing this decision making this decision yourself is very difficult if you're engaged in this like Rich you spent six months on a project it's maybe not going anywhere okay but you can think well let me spend another six months and uh and then maybe it will maybe it will go somewhere so the first that VCH cappers do and what I recommend you is ask somebody else who has not been engaged in the project but you kind of trust or you consider that you know they are experts or they can advise you so come to them and I think it's in the world of V Capital that means they are Partners okay partners of the r capital film you can go even further you can say you know what um I would like to get commitment from somebody else like if I if I cannot find somebody who is excited enough to join me then maybe I should not continue by the way this very H happens very often to my students they've been working on some startup and then at some point I tell them look guys um it seems like you're unable to attract another person to join you now if you cannot attract a team you unlik succeed alone okay and by the way here's a deadline for you eight weeks so you have eight weeks to convince at least two people to join you part time if you cannot do it I think you should do something else with your life and when cers do it in fact many rench caps will invest uh in the same startup again only if they find another rench capital f a reputable one that will also put in the money okay and I think that this is something that all of us can all of us can can do um let me give you my own example so when I'm doing research and you know I started so many research projects in my life that failed luckily I also had I also caught home runs that succeeded uh but the the trick is that um had I spent more time on projects that failed likely I would not have been able to catch those home runs and so earlyer on in my career I think I spent too much time on projects that really were not going anywhere because I felt you know the question I was ask myself like look I'm a young assistant professor at Stanford I'm doing this project that I kind of know is you know like deep inside me I kind of know this is like not going anywhere but maybe I'm working with the PhD students and I actually even feel commitment and um and I feel maybe I I'm going to spend more time on this maybe something will come out of it and I think that was a mistake and that was a disservice not only to myself but also to that PhD student and so so now what I do is I very often seek outside feedback much early on so I go to somebody who I trust and say look here's the idea here's what I've done do things that make sense and then we debate and then I try to try to put um the Hat of that person on me and very often very these days very often I stop the project much uh much earlier and had I done this I think 15 years ago maybe I would have been even more successful so I advise everybody to avoid the escalation of commitment and this is why I call the principle double down or quit because you have to make purposeful timeline like a milestone where you say either I quit or I double down Double Down meaning really kind of down my double my effort on my resources my time whatever um but you can't double down on everything you do in your life okay there's only 24 hours a day and therefore you have to quit some projects as well now a typical typical VCH Capital statistics is that in every single round of fundraising VCS drop about 50% of their startup so every second project and again that kind of depends on I found out in my research yeah um I I drop every second project at various at various stages and I think it and I think it works so again think about this especially if you pursue many projects at the same time okay yeah so I can see how um psychologically it can be very difficult for a lot of people to just completely abandon things that they've started you know they want to get to the end but in terms of yeah you've only got so many hours in the day you're gonna have to drop some of the losers um all right so I'd like to talk a little bit about um productivity and how you can incentivize employees like um are there any ways um that you can change uh employee compensation or what they're doing in order to make them work work harder or more productively thank you Richi and um I think incentives Drive Behavior that's kind of very simple okay um and the principle that um that I keep in mind that all the time that Venture caps use and the principle is very simple to State difficult to implement is called make the pie bigger make the pie bigger so uh you're making the pie bigger by ensuring that everybody's incentivized now by the way when I say the word incentives it doesn't mean you just pay the more money uh because different people are incentivized by different things so finding out what really drives people is important but these incentives Drive Behavior you would like the people with whom you work well you would like yourself to be driven okay by incentives um a bit of history is going to help here so if any of our audience Works in maybe tech companies or in startups Etc uh they might have um shares they might own shares of those startups they might have options they might have rsus restricted stock units that are vesting over time okay and amazingly enough it's a new development well Rel in development and it was kind of invented or maybe rediscovered really by Venture capitalists uh back in the 1970s okay so prior to that you know that was something that nobody was doing um and financially I think it makes sense especially if you are in this um unusual unpredictable environment where the outcome is unclear to incentivize people by giving them even a small fraction of the pie rather than paying them a fixed salary so if I pay reach even a lot of money like million bucks a year okay but it does not depend on how you perform what you do okay you have to appear at your work from 9: to 5 or whatever okay and you have to uh you have to appear as you work but if it's a fixed salary um however excited you initially you know this excitement will over time disaar but if you if my goal let's say I'm the owner of this project and your goals are the same which means that you in fact benefit from this project being being um being successful then our incentives will be aligned for longer that is also why I think in many large companies um they create what is known as Shadow stocks Shadow meaning for stocks like for a specific project like say Google is doing that okay let's say um you work in a um Google group that is not uh involved in search engine uh then you know whatever you do really doesn't impact the Google stock the AL alab bet stock price okay uh but whatever you do really impacts your group and so if your group is like a separate startup within a company you can get a shadow stock where the stock the shadow stock price will really depend not on the entire company's value or success but on your group success and so another um another point about making the P bigger is try to make the P also very specific if you if if you can and I think that my advice um to our audience first is whenever they join a company or negotiate a deal uh try to think about longterm incentives try to negotiate for yourself long-term incentives if somebody wants just to pay your money but you will not participate in the success that's okay but you will not be able to catch a home run and likely uh and likely you will not participate in the big success if it comes and by the way more likely the success will not come uh and then on the contrary or not the control on the reverse if you're hiring somebody or you're trying to convince somebody to join you um try to find out those who who care about incentives who care about the success the success of the whole Enterprise okay um and by the way you know there is an important word in science called self selection which means that um if I rich let's say offer you um a000 bucks a day if you're going to work for me or I'm going to offer you only 500 bucks a day still seems a lot okay but but half of that but also 1% of of the profits in the future it turns out to be that some people will say oh no I would like thousand bucks a day and some people will say no I would like I would love a small compensation now but I believe in the success and sometimes you actually want those people who you know who do not want all the compensation now and so you would like to people self- select and I think that's very important by the way that is I think one of the major reasons and that's why VCS uh really care about this they know that by structuring this incentives right to ensure that there's a long-term incentives people who are going to draw in the startups who are going to Bas who you know who are going to leave uh apples of the world and join them are those who um becoming less risk averse who uh are more Adventures perhaps who are ready to incur more effort who are ready to become more resilient um and I think that is very important especially if you initiate a project absolutely um so I think the idea of Shadow stocks in particular was especially interesting so there are a lot of parts of business particularly as business gets bigger where you aren't tied directly to revenue or like major business impact so having that sort of startup like feel um is going to be incredibly important there um okay so um before we wrap up it'd be nice to know how you get started with this like um do you have any advice for like what's the first step you need to take in order to adopt this Venture mindset well first of all um we we had time to cover on some principles so obviously um these principles are interconnected work together so so of course my first advice would be to uh to read the entire thing and to understand all the principles but I have um I have specific advice for this and what I find out is that by teaching you learn now I'm a teacher I'm professional teacher okay so I've I'm very proud that I had more than 5,000 Stanford students uh graduate from my classes and talks sessions Etc and uh you know what every single time I come into the classroom well by virtu being a professor I know more the truth is I learn every single time and so what I suggest is for everybody in our audience uh I encourage them to learn more about the Venture mindset but then to talk about all this principles and all this provide all this examples and encourage debate and descent and disagreements with their friends their colleagues their families during dinner time during lunch time I actually think a lot of examples like we're given a book for example I think a lot of examples are cool enough that you can you know discuss at a at at a party um and that generates I I do this all the time uh whenever end party and that generates a lot of debates and I love debates uh when um both statistical debates so people site data facts but also a lot of anecdotal debates where people say well let's think about this let's think about that so here's my encouragement to you is just do not learn yourself okay and finally Richie I mentioned some examples where I myself changed my behavior so I truly believe in um um any any mindset uh working only if you try to change your behavior don't be too ambitious right away which is oh this is great I'm going to change everything do it step by step uh and try to evaluate yourself okay and you know it's interesting that every single uh principle that I talked about and more principles we didn't have time to talk about every single one of them I changed as a result of those I changed my own behavior as a result so I believe in specific actions that people take and those actions could be different it depends on are you a data geek working all the time alone are you working in a group are you the leader of the group are you the boss of a large organization so those actions are going to be different and you will find something that in fact you would like to implement yourself and then when you do it talk about that talk about that to everybody if you're present on social media you know say here's what I've done and whether it worked or it didn't work and why that's I love the idea of just communicating more talking about what you're doing and sharing these ideas maybe a bit hesitant on the idea of talking about this at parties you got to be very careful about like the kind of party you start discussing this sort of thing but uh yeah that that's brilliant advice um so all right yeah uh thank you so much for your time OT like so many uh great uh tips there I think Richie it's great having you great having you and uh uh I hope that everybody in our audience became just a little bit more Venture minded as a result of our conversation today absolutely super thank youas an investor the last thing you want is to throw good money after bad money and of course the same with all of us so just ask yourself a question how often do you continue incurring a lot of effort putting a lot of time into the project that in fact you kind of already know is not working out hiia welcome to the show Richie it's thanks so much for having me excellent so uh just to begin with what is the Venture mindset the vure mindset is a new mental model how to make better smarter decisions in an innovation driven World in a world where there's a lot of uncertainty unpredictability I I call it unknown unknowns disruption and so on where the traditional way of making decisions both quantitatively and qualitatively does not work very well so that is that is the idea behind the Venture mindset okay so uh you talk about unknown unknowns and it seems like there's a traditional way of doing business that's worked very well for a long time has something changed in the world that means that um it's no longer relevant and you need this new Venture mindset a lot of things have changed in the world I'm not saying that the traditional way of making decisions uh is not completely irrelevant uh it's still relevant uh but but not all the time so when I say unknown unknowns is that um in the past when we think about businesses when we think about data analyst for example then we can predict the future much better because we knew for example that if we think about companies the business models would be the same if we think about various data Trends data Trends um would still would would would kind of be on the continuous path and nowadays there is so much disruption uh in uh academics we talked about Chaos Theory so there's so much new chaos uh that is very difficult to predict and it's not just generically but with specific individual decisions um you know I'm teaching at Stanford I have hundreds of students who are taking my class who become either investors or the founders of venture back companies and I'm helping a lot of them and I stay in touch with them after graduation and you know just yesterday I talked to four of my former students and I'm helping them to to raise money so three are of four and now raising funding for generative AI startups okay well I guess not a big surprise rich either for you or for our audience but the whole point about this is that if you think about this it's a lot of unknown unknowns so unlike many of my students in the past what is the business model of the generous VAR startups very often they don't don't know what is going to be the technology very often we don't know how large is the market uh it's very difficult to predict and so on and so forth and so that is the idea behind the Venture mindset and by the way the idea I call the reason I call the Venture is because really uh for for the past 50 years Venture capitalists were making bets on startups and they were facing all this unknown unknowns all the time it just that now we are far away from Silicon Valley far far away from VCH capital is facing the same I would say hostile environment when we make decisions okay so I think this is going to be quite terrifying for a lot of people in the audience who are data analyst or data scientists saying that actually your ability to predict things is decreasing because there is more chaos in the world and more unexpected things going on so I I agree with this Richie but but but you know what you should not get pessimistic so that's the whole idea about the Venture mindset is that is that it's a different mental model so that you still can make decisions you still can make I think very high quality decisions even though it's much more difficult to predict and let me tell you right away I think uh what is really important for for data guys is that um if you think about what is really most important for venture capitalist okay and um identified in my research at stamp over the last 20 years what I call nine principles of the Venture mindset but like if you have to rank them like by far the most important one is the following and I'm going to use a sports analogy home runs matter strikeouts don't so if you are uh in something that you don't expect a lot of changes you actually do not want strikeouts you want every single line of code work perfectly ideally you would like every single data point tell you something and so on every single mini project to succeed The Venture mindset thinks completely differently home runs matter which means that it's okay to fail it's okay if a lot of manyi projects do not work as long as you experiment try them quickly scale fast and then abandon them if they do not work but it's some but some projects some of the analysis is going to be truly impactful and the whole idea is to use the Venture mindset to identify and scale and put put all your effort on those projects that will become a home run so that is the whole that is the whole idea okay so you're having or you just allowing for some failures to be built into your business model then you think that something's are going to go wrong but he's got to concentrate on uh getting those wins as well I think built-in is a very good word Richie because because uh failures in the Venture mindset that don't have happen just because you know they have to happen uh they are built in which means we expect a lot of failures to happen over time okay so if you think about home runs and strikeouts how big do your home runs need to be in order to compensate for these strikeouts that is a great question so uh because we're talking to the audience of data Geeks right let me let me tell you the numbers and the numbers based on my research soay at Stanford um I'm I'm the found of the um Venture Capital initiative and we have perhaps the best data set of uh all the VCH Capital Investments investors Founders startups and so on okay so here are statistics for you if you take on average um typical 20 early stage Venture Capital Investments okay so 20 typical startups about 15 of them we expect to fail think about this okay so 75% 15 out of 20 we expect to fail investors expect to lose money on them then there's going to be couple of startups maybe three maybe four that will be kind of successful or semis successful uh as VC is used to say uh we will get 2x 3x or 4X of our money meaning that you invest $1 and you'll get back you know $2 $3 $4 if you're a banker like investment Commercial Bank okay you'll be extremely happy with this result VCS are unhappy why because if they get three act it will not allow them to return the money on their losses to cover their losses and so so those outcomes are considered to be mediocre and then there is one and perhaps two Investments that will return you a 100x so that is a home run so home run really starts at people say 10x the reality is it starts at much higher than 10x so I just talked to a friend of mine um Zin capitalist and uh he's an early stage investor his typical check size is between1 million and $3 million okay um and uh uh just one of his startup that he invested in about three years ago uh was sold and so he put in 1.5 million it's actually data startup 1.5 million and just got sold and he got 120 million back so that's about a little bit less than 100 x about so that was a successful investment here's the way to think about this by the way about a home run um the VCH cap is think and I always tell the founders about this because that's critical the way v c thing is um if I reach consider whether to invest in you in your startup okay I will ask myself the following question if everything goes according to the plan in fact if everything goes better than the plan then will my investment in you allow me to return my entire fund which is the entire pull of money okay that I'm really managing and um and that it would be an amazing investment so a fund returner is a true home run because effectively if I have one fund returner everything else is a cherry on top so that's how they think about the vent the home runs and I really think in the today's unpredictable disruptive scenario when you think about your data projects like like when you prioritize what you do I think you should uh you should really use the same home run approach okay so um that's sort of investing one and a half million getting 120 million back that seems like a dream scenario and I'm sure like everyone would love that sort of uh 80 times 100 times sort of win but there are also sort of methodologies for think about decisions so things like the Toyota Way Six Sigma which all about incremental improvements to what you have already so when might you want incremental improvements and when might you want to go for this Venture mindset uh situation where it's like you just want a few big wins thank you Richie first of all um I think that is a great comparison there is a toota way movement there is a Six Sigma movement uh and I hope that uh we're going to launch the with your help the vent mindset movement okay now those are not really contradictory they're very different but they're not contradictory approaches because I believe the Six Sigma the Toyota way uh approaches are very useful and they're very useful when you don't expect big changes when your improvements are incremental okay um let me give you uh an example so um every single year okay um Gillette produces releases a new razor blade um now that is an innovation okay and uh they of course then try to push so that you know we reach here you and I uh use all those new Fantastic blades okay I'm not doing very well on that maybe they lost you as a customer okay but they have not yet lost me but but um first it's an innovation and I think that likely using Toyota Way approach there makes sense by the way it is an innovation do you know that proon gamble is the parent of J do know that Pro G employs more phds but Stanford MIT and cak combined so it's it's a big R&D heavy organization okay now that is incremental approach uh but let's consider a situation where suddenly a competitor appears that offers a completely different business model okay so for example um you actually don't need Gillette plates but you order a a blade and every single week blade comes to you and U it's like a subscription model so that's very different okay and in fact VAP is back to Startup like this and um uh and that is the that is a completely different setup and that will require the Venture mindset so so the moment you the moment There's A disruption in the way how technology works in the way how business model works or the disruption how really you do business by the way professionally or personally then toot way is not only helpful it's hampering you because it doesn't allow you to go outside your cage that you built for yourself and this is this is exactly where V vention mindset should be used okay so if you want to make incremental improvements um it needs to be something like a continuous business case where you've got this discontinuities that's where you need the Venture mindset all right so um so principal one that was the um home runs matter strikeouts don't what's the second principle so uh another principle that I really think is important um and in particular maybe Rich for our audience today is the one that I call get get outside the four walls what I mean by that is that again I'm doing this research and venture capitalist okay I met thousands of them and one thing I noticed about them is that you canot find them in their office now they typically are on their office once a week okay to meet with their Partners their colleagues the rest of the time they're traveling or you can find them in a coffee shop talking to some other people uh trying to find out the new new stuff again the moment you are incremental in the incremental life you don't mean the Serendipity you don't mean to meet people that you know will tell you something unusual but once you are in the disruption in this um unpredictable stage you really do not know what's going to what's going to be important tomorrow so you would like to open up to new ideas and new people and uh it's interesting because uh so I've done research and um I showed that Venture capitalists have dramatically bigger LinkedIn networks than the LinkedIn networks of corporate innovators think about Chief Innovation officer for example okay chief R&D officer and so on but more importantly I think they LinkedIn Network are much more diverse different Industries different backgrounds different education different geographies while if you're let's say corporate innovator um you tend to well like 20% of all the LinkedIn connections are going to be from your present company 15% are going to be from your previous employer and then the rest will be from your high school and your college okay and that is not a great idea whenever you would like to um achieve something unusual so get out of this get out of side the four walls meaning that try to get outside the try to open yourself up and I think especially when we think about uh about new data opportunities new unusual patterns uh new connections that is particularly important principle let me give you my personal example um first you know one thing is being a professor who is studying stuff another one is being somebody who says you know what that actually has an impact on me personally so I've been studying VCH capital for 20 years okay and I've discovered this um kind of princip principles and I tested them Etc and then I realized that for many of the principles I'm actually going to use them in my life so here's my own example that I'm pretty sure data kicks will appreciate so I've been at Stanford for 20 years and I've been traveling a lot you know for academic conferences to speak whatever um so what do I do when I travel well uh I come to the airport okay and I have my earbuds on because I'm listening to something okay because I kind of don't like noise very much and then uh when I wait for the plane what do I do well I open my academic article or maybe my laptop and work on my data very intently what do I do in the plane well the same I when I when I don't drink I open my laptop or I read something okay now that is not getting outside your forwards because in fact amazing enough when you travel um that is a good opportunity to meet somebody whom you don't know who is definitely outside your network you never know what's going to happen so after I decided to apply this principle to myself every time I travel and nowadays I travel even more I have a goal uh every single plane right I take I must speak to at least five people whom I don't know it could be a person sitting next to me in the plane it could be a person standing in front or behind me in the passport uh queue Etc and you know what it's like home runs met strikeouts don't it is true that a lot of conversations you know hello hello where you from what do you do ET Etc there's no connection and suddenly wow let me tell you a story I was just returning from uh New York recently from New York airport and my flight was delayed big surprise so I was waiting there and waiting um and and I started talking to the guy um again I would have never ever talked to to him um had I not had this bad minded principal me okay and by the way you have to force yourself sometimes uh because you know like there's a person standing next to you he does not know you I don't know you he's actually um kind of reading something but there's always a way to start a conversation it turns out that he's a journalist he is um was coming from Dubai from the Dubai World Cup horse racing because he was covering horse races for the major US publication and we start conversation and I told him do you know that I studed venture capitalist and Venture capit all about what is important Joy meaning the founder or the team and the horse meaning everything else product Market business model Etc and we spent like 40 minutes in debates about about Joy versus horse and startups versus horse races and I think he's not going to write uh an article for his publication about you know hor races and the and the and the venture capital and startups and the Venture mindset and I've learned a lot from this conversation as well so you never know so my suggestion Rich it to you and to all the listeners get outside your four walls as you can imagine from my job I'm very enthusiastic about talking to strangers so I'm fully on board with you uh on on that point um Okay so we've got uh home runs matter get outside your four walls what's Point number three so uh Point number three is uh um I think very important and it is called say no 100 times what do I mean by by that again first of all coming from my research I'm a data guy okay for every single deal that V capitalists consummate like they give you a check and you accept the check okay they consider hundreds in fact even more than 100 opportunities just think about this okay uh now if you're a Founder that has huge implication for you because fact you know what the odds are against you statistically okay so you have do something to increase them uh but I think that goes Way Beyond um you need to learn to say no too many deals too many opportunities in life too many projects and here is the trick how to do it and the trick how to do it is what I found out is that Venture capitalists ask a very different question when they start considering their potential Investments initially and I call this fast lane there's a fast lane and there's a slow lane fast lane they ask the following question why should I not want to pursue this opportunity not as very is critically important instead of asking yourself a question that you know I observe for example in a corporate setting is a typical question so why do you want to approve budget for this project okay uh the a better question might have been why we do not want to approve a budget budget for this project and I think that when we ask ourselves about whether we would like to pursue a or b like whether we would like to accept a job offer whether we uh would like to actually seek that job offer um you know um so our audience is doing a lot of data projects I'm doing a lot of research projects and before I discovered this myself I was asking do I want to pursue this research project like is it promising enough I have changed to the fastl and I to oh why do I not not want to pursue this research project and I found this so efficient so amazingly different and I call this so that it's you can remember this better I call this the red flag approach so you're trying to identify red flags that will make the project is not interesting enough note by the way that the Venture mindset the venture capitalist they don't make uh a final decision at this point so the idea is to put a filter on if the project the startup the idea uh doesn't meet the Red Flags Okay then they will not consider it and then they will put all the effort all their time a lot of time on doing much more detailed due diligence on the project that passed the first filter then they switch to slow lane and will ask a question question well okay why are we anxious to pursue this and so the challenge is I think that in the traditional mindset we're too often asking ourselves effec an inefficient question for every single project why do we want to do it um and again if it's incremental that's okay but the moment there are potential for home runs you do not want to for every single project to ask why do you want to do it you will not be able to consider a lot of opportunities then so therefore remember this principle say no 100 times okay so this actually reminds me a lot of like a project manager mindset where you get hundreds and hundreds of tickets being filed with ideas for things to do with the project and you just have to reject most of them because you've not got enough time exactly and again the F the the point is to find a very efficient way to do it and I think the Venture Minds that will tell you do it by asking a different type of question and what I found out in my research is is that when you change the nature of the question your approach dramatically changes so it seems there's an implicit assumption here so um the first stage is saying no to lots of things very rapidly and then you can spend a lot more time concentrating on the few that remain the the assumption is that you got lots of different things to choose from um like how many sort of different projects you have to choose between in order for this to start making sense as an approach well that of course depends you know for early stage v c it's at least 100 okay in fact it's interesting that for software VC so those who invest in IT projects it's impact more it's like 130 140 on average P each deal uh done um if you're on Healthcare we see it's it's a little bit it's it's fewer it's still a lot but that's and I think the reason behind this is that typically software startups much more uncertain much more unpredictable than Healthcare ones so in healthcare ones let's say very often we know the market the market is there uh there's technology and um farmer risk that let's say the drug will not work or the medical device will not work but if it works we know the market is there for IT projects for a lot of data projects we don't know what the market is there and so therefore you actually consider even more opportunities okay so we're looking at at least a 100 different opportunities and that's the point where you really do need to filter on uh reducing that number that's right rich and for this you of course need to increase the number of opportunities and this is where going back to the previous principle getting outside the four walls is really important so uh the example you mentioned before about this conversation with the person from Dubai was about um should you bet on the horse or the jockey uh do you want to tell me a bit more about that like where did you land on this well the that's another principle of the Venture mindset and the principle is very simple bet on the JY not just the horse um and that is first a critical principle for Venture The Venture mindset so venture capitalist will not invest in a startup if they do not think that the team behind this idea can execute the idea uh and the truth is and I've seen this again and again you know the world of ideas is overrated uh there are too many IDE ideas and uh I know we talked about intellectual property and copyright but the truth is that there are so many ideas that especially when we don't know how good they are um the ideas are less important than the people behind them if I I can come up with a great idea but I'm unable to implement it and for each great idea there will be so many teams that who would like to try it out let me give you let me give you rich an example so um I hope that not everybody in our audience is so so young that that nobody remembers um the day when the first iPhone was released back in 2007 okay but if I take you for a second back to that period um at the time there was no possibility to share files or rather you would use a you know do you remember USB sticks well you remember maybe some of the audience doesn't but but but USB SS and even if you're a little bit older I still remember the um the discat okay kind of the the discs the floppy discs okay so that was the way to share files uh but the idea that the future of file sharing is going to be disrupted uh was there was out there and of course iPhone obviously supercharged this okay so 2007 in fact there was a a popular tag blog called Mashable and it fostered the list of I think more than a 80 um startups that were pursuing this kind of file sharing file hosting stuff okay now um many VCS looked at that and um one VC in particular his name is Samir Gandhi he was a partner at sequ vent Capital firm and he thought file sharing is really cool it's going to be big by the way again the market did not exist at all the technology was not there yet okay um but he thought it's actually coming out it's coming out it's a huge vertical I would like I would love to make an investment okay how he approached that well he went out and met with dozens of these startups this that Mashable uh listed that um he met he learned a lot about this technology he did not invest in any of them and then one day uh serendipitously he was introduced to this two guys who didn't have any money in fact I think he needed to take a Greyhound bus from Boston uh to the Bay Area because they didn't have money to fly and um they didn't have a prototype because obviously they couldn't do anything okay and they were kind of outside this community uh but in like several minutes he invited them for pizza and I think very quickly he said I would love to invest in them why and that was because the jocky remember the horse was the same for all those teams the the file sharing idea was exactly the same the market was the same nobody really knew about how technology is going to evolve what he realized in that really first five minutes I think is that is that these two guys and their names were Drew Houston and AR fi they um they knew much more than everybody else he talked to they in fact thought deeper about many issues that thought and by the way Venture cap is love investing and Founders who know more than them about the stuff that they think they're experts in and so he realized those guys can execute if anybody can they will execute and so he of course proposed and SE invested and I think that investment turn out to be one of the the bad Investments dollar per dollar um that company was renamed uh and became known as Dropbox and maybe some of us still using drop box every day but that is the point so the point is that there were like 80 startups perhaps doing exactly the same but really only two plots survived there's a drawbox there's a box and of course there's a Google Drive which is an which is a startup inside Google and I'm not really sure whether you can name any other successful um file sharing uh companies okay so that's about the JY so I think venture capitalist will not invest unless they believe in the JY and I think that also holds a lesson for for everybody for all of us um I'm often asked being a professor I'm often asked so what is the purpose of Education okay so one of the purposes is to ensure that you improve your joy skills now I don't mean host racing skills I mean that that when you talk like when when I when I when I talk to you okay uh and I think of myself as an but in your field I'm still impressed by what you do and so so I think that is a skill um but I don't I don't think there's too much luck involved so my suggestion is to think about your jocky skills as a result of that so that is fascinating because drop walk was incredibly uh successful in the face of like you said about 80 other different uh startups trying to compete for this space um so you said one of the things that the venture capitalist appreciated about um the the founders was that uh they knew more than he did so beyond domain knowledge are there any personality traits that make for a good um a good leader or a good founder a great question and the answer is yes and um um it you can see it both quantitatively and qualitatively okay uh and there's no one single personality trait but there are many um one is difficult to Define but easy to see when you encounter it is charisma uh let me let me give you another example okay and um again I've been very lucky at Stan I met so many students of mine who had this Charisma and again all them are different and so if you ask me can I Define charisma not really but I can give you example okay let me give a specific example and in fact we'll give this example in in my in my book The Venture mindset so I had a student his name is Rene Cassi um he is a originally a doctor a surgeon from Canada he came to Stanford to study business and the idea was because he really wanted to uh find he didn't have really an idea he wanted to find an idea um that would merge you know business data technology and medicine because he he really cared about healthare okay and he came up with the idea this the EXA idea kind of is irrelevant here actually the idea is amazing it's a platform um to match the patients um who have rare diseases okay those that maybe a few hundred patients have in in in the country uh with the hospitals and and the providers so that's actually not the point the point is that you know I have like hundreds of students come to my office and talk to me about their aspirations and a lot of them are amazing but when some of them come um you know and I'm a professor I'm sitting in my comfortable chair okay uh and I'm tenur you know I I don't need to go anywhere and I talk to some of them and my heart starts beating faster because I would I say gosh I actually would love to join this guy okay and so that's what happened with Rene he came and talked to me and the way he talks and the way he looks at you Etc that's what I call Charisma and he convinced when he didn't have money when he didn't have prototype when he didn't have any success of any kind he succe he succeeded in um getting some uh some students join him full time he succeeded some top um top U person who worked at at a kind of well-known large company drop everything and join him and so when as a Founder you succeed um in making people follow you when you don't have success when you don't have you know millions of dollars to show I think that is very very very impressive okay that's one so Charisma is one two is passion and that is because the reality of the Venture mindset is that the real home runs are likely to be longterm Endeavors um venture capitalist joke so they laugh every single time I tell them that one of my kind of research insights which I would say maybe one of the least important but the most cool research insights is that if you look at the um average period of time that startup spends before it kind of becomes public if it's successful startup and it's now 8 9 10 11 12 years depending on exactly how you count is actually longer long some metrics than the median marriage in the United States okay so you have to be very patient and for this you need to be patient and for example if the founder tells the V capist you know I'm here for a quick Buck I have this great idea I'm great I'll be in a couple of years I'll sell it like for 100 million bucks bench capitalist immediately it will be immediate red FL immediate turn off the end of the conversation and the final feature which I think is really important is resilience um and resilience means you know in my experience every single startup even the ones that became amazingly successful amazing home runs they're like on the verge of going busted uh so many times and it's tough and you have to make as the founder as a team member you have to make a lot of tough decisions and I think resilience is something that ven capitalists um are very very curious about when they evaluate Founders and also builds to work on a team so I'm getting calls all the time from vure Capital who are doing reference calls on my former students who would like to raise money from them okay and you know what um I had maybe 500 calls this years and you know what not a single time they asked me about the grade like nobody cares about the great in my class okay um they asked me about so how this do you remember this go did the person stand out uh they asked me about so uh what was that person a captain of the team because we have a lot of um case study teams um how did that person uh interact with other group members how was the resilience if there was some disagreements among the group among the groups and so on so those sort of type of questions that I think the Venture mindset really really cares about okay so we got Charisma patience and resilience these all seem like good qualities in people to have regardless whether you want to be a founder or not uh so yeah certainly uh useful thing to know um so you mentioned just then like what happens when you have disagreements and it feels like you're going to get a lot of cases where it's like well I want to do this one project someone else says I want to do something else do you have any advice on how to resolve these sort of disputes yeah that's that's really that's really fascinating uh because um it's amazing because you know I often work with the leaders of large organizations like large level companies and uh I go with them through every single principle of the Venture mindset and they're surprised by a lot they're taken back by a lot but I think this stuff about disagreements is the one that they're really kind of shocked okay and um that's why also the reason why we in fact in this the Venture mindset book that I mentioned we call a chapter agree to disagree and this is the chapter where like like I just met the CEO of a large organization and he said oh wow uh and also it's a while because in fact you can make changes right away like some stuff it's very difficult it's very difficult to make myself charismatic if I'm not but some stuff you can actually Implement right away right there okay so what does agree to disagree mean and why you should use it in the Venture mindset situations not in the traditional mindset situations so um typical typical decision making uh in groups work like this like think about meetings you had when you have had to make a decision so there could be a lot of debates uh but at the end of the day people try to come to consensus and many organizations in in fact either require consensus okay or they require unanimity so everybody says yes let's go forward and that could be done for culture for politics the truth is it's human psychology and there's a lot of research including mine shows that if we don't design the system then trying to reach consensus is something that is that is innate to us okay to human beings amazingly enough and I I don't have time to go into the detail but one of the most amazing examples is not from my research because I'm doing research on human humans I'm not doing research on monkeys but one of the most amazing stuff about monkeys and consensus is from Professor Erica Deval who's professor at the University of lazan and she's been studying verid monkeys and in Africa and she showed that Conformity desire for consensus monkey unanimity kind of okay uh is is really so widespread so maybe not surprising that we're also uh human beings are also similar and by the way it makes sense again if you if we live in the world of incremental Innovation or incremental changes it actually makes sense because we make small step and we kind of would like to sure because there's not that much uncertainty that we take everybody's view into into the account and everybody's okay with that but the moment you are trying to catch an outlier to uh secure a home run the whole point is the future is unpredictable and you know what most of the uh Amazing Ideas will seem stupid at least took somebody uh let me give you an example that that I give in the book which which uh which which I find fascinating but let me preface it by saying rich is important um I give a lot of examples here they're all typical I give examples I try to give examples so people know the names but it's typical example okay so here's a typical example um in 2008 I believe uh a VCH capitalist his name is R Hoffman and he's in fact known as a one of the co-founders of LinkedIn but then but but by then he was a partner at Venture Capital film called Greylock he met those kind of two um Scrappy guys who created this kind of weird startup where strangers could sleep on a mattress in your living room okay and he uh came to his partnership and he said this is actually really cool idea you know I met this Founders they're really into something they're charismatic passion resilient and etc etc and by the way I think that's potential huge Market of course the market didn't exist at all all okay and Greylock partnership said how about stupid idea in fact one of his Partners said you know read every single V CST has a right to uh to make deals that that fail and let this deal called Airbnb be your failure okay uh but here is a very important Point Richie and this is something that makes the Venture mind different from the traditional mindset in the traditional mindset organization that would have been the end of the conversation so I have an idea I bring it you know Rich you say what stupid idea IL you brought to me today um and I try to convince you and you say no and that would be the end of it especially if maybe somebody else says yeah I agree with Rich that's stupid and so therefore we would not make an investment and yet despite the fact that his Partners disagreed R Hopman proceeded making investment and I'm sure that that became one of the most successful of great Lo Investments okay um so and here is the point that critical and I really would love everybody to pause and listen to me carefully because I think that is something that shocks people is that disagreements and descent is very important in the situations where there's uncertainty unpredictability and so on you have to design it it will not happen by itself and what I found out by studying Venture Capital firms by studying the Venture mindset that there are many ways to design it and um VCH Capital firms designed in a different way but they are thoughtful they're purposeful about that okay so if you don't do anything that will not happen so let me give you some examp examples um in one example the VCH Capital firm called vrock every single partner comes in and um brings a deal and then everybody debates they write investment memers due diligence and so on and then after the meeting that partner who brought the deal um leaves the room and has to make their own decision there's they don't have an investment committee they they they don't vote very unusual okay it will not work in many organizations that pursue an incremental approach that should not work but the moment you trust an individual make an outli decision that's the way to proceed or another example in another vure Capital firm called Founders fund um for a smaller deal it's enough for a partner to convince just one another partner so if we R and I if we're Partners it's not for me to it's my deal I'm excited about this it's not for me to convince you Richie even if everybody else kind of thinks like it's bizarre we'll proceed okay so there are many many I won't discuss describe all those methods so that is at the decision- making stage there's also something that is really important at the what I call information exchange stage so you know you and I get together and we discuss couple of points for for those um of our audience who actually make decisions in groups or discuss stuff in groups uh let me give you two examp two um um two actions to implement one I think is very intuitive for most people one I find amazingly unintuitive okay let's start with an intuitive one in every single meeting uh my recommendation is Juniors should speak first for example in our recruiting meetings at Stanford when we try to hire you know best professors to come to to us um we always have Junior professors speak first and there are great reasons for this you know in fact very often they know um younger faculty members who are trying to join us better and they know the most recent Trends better but more importantly when you know a very very senior Professor speaks up and you think that that's I disagree with that it's much more difficult to go against it so my suggestion is that and again be purposeful about this like this is a rule a rule is you you know if I'm Junior to your richer in terms of the number of years or whatever title I should I always speak first it's kind of intuitive well at least I find intuitive one is counterintuitive okay and um um so so make sure that everybody the entire audience must sit down at this point because that's what generates all of debates experts should speak last now again in the situation where there's an incremental change I don't think experts should speak last like you know if we know a lot of stuff and the experts I should speak and then what is there to discuss but we're trying to catch out Liars the whole idea of now Li is perhaps there are no experts in fact maybe experts are in their own golden cages okay um and I think the idea is that when experts speak clust is that you do not try to remove the freshness from the debate or from the information exchange so whenever you're thinking about well we trying to find this home run um let those who are fire away from the field speak first because once the expert spoke or the perceived expert rather uh and and you disagree it kind of would be difficult for you to speak up and for everybody else to listen to you attented so this is my specific recommendations for how to change the decision making process within groups this seems incredibly important for for example running meetings I think that's when a lot in most organizations that's where a lot of decisions get made and just that simple change of getting uh the most Junior person to speak first uh seems uh like it could be an incredible uh uh sort of change to Innovation across the company now um you mentioned the idea uh of Airbnb and Greylock almost sort of didn't invest um so making mistakes seems um like it's going to happen like if if you investing something or if you start a project at some point you're going to hit roadblocks things are going to go horribly wrong do you have any advice for what to do when things go A bit South thank you Richie you are bringing up another venture minded principle that I call Double Down or quit uh let me first of all step back in the VCH Capital world startups fund raise again and again and again okay and that makes sense uh which is if you're growing fast you would like to raise money the challenge is is that if you're about to fail you also need money if you would like to continue okay and as an investor the last thing you want is to throw good money after bad money and of course the same with all of us so just ask yourself a question how often do you continue uh incurring a lot of effort putting a lot of time into the project that in fact you kind of already know is not working out okay and by the way you can always find justification why you would like to continue this and um it's called academically in the world of psychology is called escalation of commitment okay um and what my research finds out is that VCH CS who succeed in managing this who succeed in being kind of more ruthless um and concentrating on their best startups with the highest potential are those that are more successful now um how to do it okay so here are specific tricks one is that doing this decision making this decision yourself is very difficult if you're engaged in this like Rich you spent six months on a project it's maybe not going anywhere okay but you can think well let me spend another six months and uh and then maybe it will maybe it will go somewhere so the first that VCH cappers do and what I recommend you is ask somebody else who has not been engaged in the project but you kind of trust or you consider that you know they are experts or they can advise you so come to them and I think it's in the world of V Capital that means they are Partners okay partners of the r capital film you can go even further you can say you know what um I would like to get commitment from somebody else like if I if I cannot find somebody who is excited enough to join me then maybe I should not continue by the way this very H happens very often to my students they've been working on some startup and then at some point I tell them look guys um it seems like you're unable to attract another person to join you now if you cannot attract a team you unlik succeed alone okay and by the way here's a deadline for you eight weeks so you have eight weeks to convince at least two people to join you part time if you cannot do it I think you should do something else with your life and when cers do it in fact many rench caps will invest uh in the same startup again only if they find another rench capital f a reputable one that will also put in the money okay and I think that this is something that all of us can all of us can can do um let me give you my own example so when I'm doing research and you know I started so many research projects in my life that failed luckily I also had I also caught home runs that succeeded uh but the the trick is that um had I spent more time on projects that failed likely I would not have been able to catch those home runs and so earlyer on in my career I think I spent too much time on projects that really were not going anywhere because I felt you know the question I was ask myself like look I'm a young assistant professor at Stanford I'm doing this project that I kind of know is you know like deep inside me I kind of know this is like not going anywhere but maybe I'm working with the PhD students and I actually even feel commitment and um and I feel maybe I I'm going to spend more time on this maybe something will come out of it and I think that was a mistake and that was a disservice not only to myself but also to that PhD student and so so now what I do is I very often seek outside feedback much early on so I go to somebody who I trust and say look here's the idea here's what I've done do things that make sense and then we debate and then I try to try to put um the Hat of that person on me and very often very these days very often I stop the project much uh much earlier and had I done this I think 15 years ago maybe I would have been even more successful so I advise everybody to avoid the escalation of commitment and this is why I call the principle double down or quit because you have to make purposeful timeline like a milestone where you say either I quit or I double down Double Down meaning really kind of down my double my effort on my resources my time whatever um but you can't double down on everything you do in your life okay there's only 24 hours a day and therefore you have to quit some projects as well now a typical typical VCH Capital statistics is that in every single round of fundraising VCS drop about 50% of their startup so every second project and again that kind of depends on I found out in my research yeah um I I drop every second project at various at various stages and I think it and I think it works so again think about this especially if you pursue many projects at the same time okay yeah so I can see how um psychologically it can be very difficult for a lot of people to just completely abandon things that they've started you know they want to get to the end but in terms of yeah you've only got so many hours in the day you're gonna have to drop some of the losers um all right so I'd like to talk a little bit about um productivity and how you can incentivize employees like um are there any ways um that you can change uh employee compensation or what they're doing in order to make them work work harder or more productively thank you Richi and um I think incentives Drive Behavior that's kind of very simple okay um and the principle that um that I keep in mind that all the time that Venture caps use and the principle is very simple to State difficult to implement is called make the pie bigger make the pie bigger so uh you're making the pie bigger by ensuring that everybody's incentivized now by the way when I say the word incentives it doesn't mean you just pay the more money uh because different people are incentivized by different things so finding out what really drives people is important but these incentives Drive Behavior you would like the people with whom you work well you would like yourself to be driven okay by incentives um a bit of history is going to help here so if any of our audience Works in maybe tech companies or in startups Etc uh they might have um shares they might own shares of those startups they might have options they might have rsus restricted stock units that are vesting over time okay and amazingly enough it's a new development well Rel in development and it was kind of invented or maybe rediscovered really by Venture capitalists uh back in the 1970s okay so prior to that you know that was something that nobody was doing um and financially I think it makes sense especially if you are in this um unusual unpredictable environment where the outcome is unclear to incentivize people by giving them even a small fraction of the pie rather than paying them a fixed salary so if I pay reach even a lot of money like million bucks a year okay but it does not depend on how you perform what you do okay you have to appear at your work from 9: to 5 or whatever okay and you have to uh you have to appear as you work but if it's a fixed salary um however excited you initially you know this excitement will over time disaar but if you if my goal let's say I'm the owner of this project and your goals are the same which means that you in fact benefit from this project being being um being successful then our incentives will be aligned for longer that is also why I think in many large companies um they create what is known as Shadow stocks Shadow meaning for stocks like for a specific project like say Google is doing that okay let's say um you work in a um Google group that is not uh involved in search engine uh then you know whatever you do really doesn't impact the Google stock the AL alab bet stock price okay uh but whatever you do really impacts your group and so if your group is like a separate startup within a company you can get a shadow stock where the stock the shadow stock price will really depend not on the entire company's value or success but on your group success and so another um another point about making the P bigger is try to make the P also very specific if you if if you can and I think that my advice um to our audience first is whenever they join a company or negotiate a deal uh try to think about longterm incentives try to negotiate for yourself long-term incentives if somebody wants just to pay your money but you will not participate in the success that's okay but you will not be able to catch a home run and likely uh and likely you will not participate in the big success if it comes and by the way more likely the success will not come uh and then on the contrary or not the control on the reverse if you're hiring somebody or you're trying to convince somebody to join you um try to find out those who who care about incentives who care about the success the success of the whole Enterprise okay um and by the way you know there is an important word in science called self selection which means that um if I rich let's say offer you um a000 bucks a day if you're going to work for me or I'm going to offer you only 500 bucks a day still seems a lot okay but but half of that but also 1% of of the profits in the future it turns out to be that some people will say oh no I would like thousand bucks a day and some people will say no I would like I would love a small compensation now but I believe in the success and sometimes you actually want those people who you know who do not want all the compensation now and so you would like to people self- select and I think that's very important by the way that is I think one of the major reasons and that's why VCS uh really care about this they know that by structuring this incentives right to ensure that there's a long-term incentives people who are going to draw in the startups who are going to Bas who you know who are going to leave uh apples of the world and join them are those who um becoming less risk averse who uh are more Adventures perhaps who are ready to incur more effort who are ready to become more resilient um and I think that is very important especially if you initiate a project absolutely um so I think the idea of Shadow stocks in particular was especially interesting so there are a lot of parts of business particularly as business gets bigger where you aren't tied directly to revenue or like major business impact so having that sort of startup like feel um is going to be incredibly important there um okay so um before we wrap up it'd be nice to know how you get started with this like um do you have any advice for like what's the first step you need to take in order to adopt this Venture mindset well first of all um we we had time to cover on some principles so obviously um these principles are interconnected work together so so of course my first advice would be to uh to read the entire thing and to understand all the principles but I have um I have specific advice for this and what I find out is that by teaching you learn now I'm a teacher I'm professional teacher okay so I've I'm very proud that I had more than 5,000 Stanford students uh graduate from my classes and talks sessions Etc and uh you know what every single time I come into the classroom well by virtu being a professor I know more the truth is I learn every single time and so what I suggest is for everybody in our audience uh I encourage them to learn more about the Venture mindset but then to talk about all this principles and all this provide all this examples and encourage debate and descent and disagreements with their friends their colleagues their families during dinner time during lunch time I actually think a lot of examples like we're given a book for example I think a lot of examples are cool enough that you can you know discuss at a at at a party um and that generates I I do this all the time uh whenever end party and that generates a lot of debates and I love debates uh when um both statistical debates so people site data facts but also a lot of anecdotal debates where people say well let's think about this let's think about that so here's my encouragement to you is just do not learn yourself okay and finally Richie I mentioned some examples where I myself changed my behavior so I truly believe in um um any any mindset uh working only if you try to change your behavior don't be too ambitious right away which is oh this is great I'm going to change everything do it step by step uh and try to evaluate yourself okay and you know it's interesting that every single uh principle that I talked about and more principles we didn't have time to talk about every single one of them I changed as a result of those I changed my own behavior as a result so I believe in specific actions that people take and those actions could be different it depends on are you a data geek working all the time alone are you working in a group are you the leader of the group are you the boss of a large organization so those actions are going to be different and you will find something that in fact you would like to implement yourself and then when you do it talk about that talk about that to everybody if you're present on social media you know say here's what I've done and whether it worked or it didn't work and why that's I love the idea of just communicating more talking about what you're doing and sharing these ideas maybe a bit hesitant on the idea of talking about this at parties you got to be very careful about like the kind of party you start discussing this sort of thing but uh yeah that that's brilliant advice um so all right yeah uh thank you so much for your time OT like so many uh great uh tips there I think Richie it's great having you great having you and uh uh I hope that everybody in our audience became just a little bit more Venture minded as a result of our conversation today absolutely super thank you\n"