Uber Needs to Transition from “Pirate” to “Navy”

October 10, 2017 •

Uber recently named Dara Khosrowshahi as its new CEO. I’ve known Dara for a number of years, and Uber has made an excellent choice in picking him. Dara is a steady, capable, well-respected executive, which will be important as he works to turn around Uber’s woes, including multiple lawsuits, government investigations, a troubled culture, and most recently, simply astonishing board shenanigans.

Yet while Dara will be dealing with many flashy, well-publicized issues at Uber, these have largely masked a fundamental underlying problem. One of his biggest challenges (and greatest opportunities) will be steering Uber through one of the key but difficult transitions required when you try to blitzscale a company: The shift from “Pirate” to “Navy.”

This essay explains the challenge facing Uber, the origins of the problem, and what he can do about it. As the Uber story continues to unfold, it will become one of the canonical examples of scaling, like the stories from my Masters of Scale podcast, and in my upcoming book on Blitzscaling. Whether Uber changes its approach will determine whether it becomes a positive example or a cautionary tale (or both).

The pirates of entrepreneurship

For decades, technology entrepreneurs have had an affinity for pirates. As with many of the classic tropes of the startup world, the link between startups and pirates was codified by the late Steve Jobs. When Jobs gathered together the Macintosh team for an offsite shortly after the release of the Lisa, he kicked off the proceedings by laying out three “Sayings from Chairman Jobs” as guiding principles for the project:

  1. Real artists ship
  2. It’s better to be a pirate than to join the navy
  3. Mac in a book by 1986

Inspired by these words, the Macintosh team created a homemade pirate flag, complete with the classic skull and crossbones, and a rainbow-colored Apple logo decal as an eyepatch. Piracy became so associated with startups that when, in 1999, the cable network TNT released a movie about the heated rivalry between Steve Jobs and Apple, and Bill Gates and Microsoft, it was titled, “Pirates of Silicon Valley.”

Entrepreneurs (and the press that covers them) have found the image of a swashbuckling pirate so appealing that they’ve allowed the popular conception of pirates to lead them into patterns of behavior that hurt, rather than help, their companies.

Much as with Silicon Valley’s fondness for the term “disruption,” piracy is a sexy label which projects the wrong image of entrepreneurship, and promotes connotations that can lead entrepreneurs astray. It may sound cool to say that you’re disrupting a market, but to the rest of the world, you sound like you’re focused on destroying the old rather than creating the new. It may sound cool to say that you’re a pirate, but to the rest of the world, you’re essentially saying, “I’m a no-good thief.” Entrepreneurship is about creating new value for many, rather than destroying or stealing what’s already there.

That’s why to be truly successful, any startup that begins as a pirate has to eventually join the navy, as Steve Jobs did when he returned to Apple to become one of the greatest CEOs (and Admiral!) in the history of business.

Startups ARE a lot like pirates

One of the reasons the pirate label seems so appealing is that early-stage startups are a lot like pirates. They both lack formal processes, and are willing to question and even break rules to “steal” from incumbents (market share and booty respectively). This adaptability is critical in the early stages of building a great company. My favorite analogy for entrepreneurship is that it’s like jumping off a cliff and building an airplane on the way down. Pirates don’t convene a committee meaning to decide what to do when the ground is approaching—they act quickly and decisively, and are willing to take risks because they know that the default outcome is failure and the death of the company.

Startups are used to behaving like pirates—striking quickly, using surprise as a weapon, and taking on risks that established companies can’t and won’t. This is one of the main benefits of being small. We coined the word “blitzscaling” in our class at Stanford to describe the process of rapid growth from startup to scaleup. During the early stages of blitzscaling—the Family (1-9 employees) and Tribe (10-99 employees) stages—it’s easier to take risks.

As Kris Kristofferson wrote and Janis Joplin (among others) sang, “Freedom is just another word for nothing left to lose.”

In the long run, it’s better to join the navy than stay a pirate

But if you succeed as a pirate, your stockpiles of treasure will grow. The territories you control will widen. You’ll need more manpower to protect all that booty and patrol all that terrain. Once you move from the early stages of blitzscaling to the Village (100 – 999 employees), City (1,000 – 9,999 employees) and Nation (10,000+employees) stages, you’ll lose the ability you enjoyed as a pirate to communicate and collaborate effectively on an ad hoc basis, and you’ll have to trade in your Jolly Roger for the flag of legitimate, disciplined navy.

In other words, the impulsive Captain Jack Sparrow has to grow up and start acting more like the sober and responsible Captain Picard. This transition can be challenging; founders and early employees often resist changing their approach; after all, didn’t it bring initial success? But failing to make the transition from pirate to navy can lead to disaster.

Ethical vs. criminal pirates

Before we go further, we need to spend at least a little time on dispelling some of the connotations of the word “pirate.” In print and on screen, pirates fall into two basic categories: Lovable rogues, and sociopathic criminals and thieves. The lovable rogue may question and break the laws of polite society, but always adheres to a personal code of ethics and tries not to harm others (think Captain Jack Sparrow). They are willing to break the rules, but remain moral — an ethical pirate. In contrast, a criminal pirate behaves in a purely selfish manner, breaking rules and harming others whenever doing so brings material benefits.

While startups and their founders may benefit from behaving like ethical pirates, they should never behave like sociopaths, thieves, or criminals. The key is to assess whether or not you’re being an ethical pirate.

The broad question you should ask yourself is, "Am I a creator who is trying to improve the state of the world for everyone, or am I a thief who is just trying to grab things for myself?" In creating a company, entrepreneurs are creating something for themselves, but in order for them to become wealthy, their companies usually have to make a wide variety of consumers and businesses better off.

Ethical pirates have ethics that most of their crew members share. The executives and employees following a founder or leader should ask themselves, are we on a mission to improve the world, or are we just in it for the booty? Do we truly care about the importance of diversity and inclusion for our team? Are we following the principles of The Alliance and creating mutually beneficial relationships with managers and employees? If you’re working with an ethical pirate, you should feel proud of your shared values.

At PayPal, for example, we bent and broke some rules, but we did so because we believed we were working towards a better future for society at large. We felt that our actions were ethical because we believed that in the long run, we would convince the world to change its rules, and that the economy would be better off as a result. History demonstrates that we were right. The various parties that were upset by our “piracy”—eBay, banks, regulators—all see the value of PayPal today, and by changing the rules, we helped pave the way for other payment companies like Square and Stripe, which have improved the world even further.

A present-day example of a field where there are both ethical and criminal pirates is the rapid development of cryptocurrencies like BitCoin, and the development of Initial Coin Offerings (ICOs) as a financing tool. The startups that are creating currencies and holding ICOs are operating in a grey area, and are likely breaking rules. Some of these startups are ethical pirates, who are working to change the rules for everyone. Others are simply thieves. Both types might make money in the short term if the market is hot enough, but only the ethical pirates will be able to build lasting businesses, and only the ethical pirates will have a positive impact on the world.

Uber and the consequences of failing the pirate-to-navy transition

This brings us to the situation facing Uber. The ride-sharing company, which at its last round of financing was the world’s most valuable startup, has been in the news quite a bit for a number of serious issues.

Some of these issues are due to clearly unethical behavior, including internal problems such as the sexual harassment reported by former Uber engineer Susan Fowler, and various external attempts to subvert free competition, regulation, and the press, such as (allegedly) appropriating intellectual property from Waymodeveloping software to prevent law enforcement and regulators from accessing the service, and then-executive Emil Michael suggesting that the company spend money to hire opposition researchers to intimidate journalists.

This kind of behavior is unacceptable, regardless of the size or stage of the company undertaking it, and has rightly been widely condemned.

Yet even if Uber had never engaged in the unethical behaviors outlined above, the company would still be facing real issues because of its historic reluctance to abandon the principles of piracy (even ethical piracy) despite its much greater size and scope.

These structural and management issues haven’t attracted nearly as much attention as Uber’s potential unethical behavior, various lawsuits, and leak-intra-board conflict, but they represent a completely separate but similarly serious threat to Uber’s long-term success.

Dara has a reputation for running a no-drama operation (a classic naval leader, in other words). But just as important is his experience in successfully growing Expedia into a profitable $20 Billion, 20,000 employee giant that has won praise as one of the best managed companies in its industry. Over his tenure as CEO, Expedia tripled its number of employees and more than quadrupled its gross bookings, demonstrating his ability to command a major enterprise through a period of significant growth. In other words, he is a successful Admiral, who has demonstrated the ability to manage a company’s growth from a scale below that of Uber (which currently has 12,000 employees) to a scale above.

From pirate captain to navy admiral

Most startups recognize the value to being small. Small means innovation, nimbleness, focus, and outcome as opposed to process, internal communications, and meetings. Successful entrepreneurs realize that they need to keep the positives of staying small, while building in the virtues of bigness.

When an organization makes the transition from single pirate ship to a fleet under naval discipline, there are well-established techniques and approaches that can help make this transition smoother and more effective. A fleet isn’t just a large collection of pirate ships. While the individual ships still have some freedom of action, captains are both individuals and part of a larger organization. You can’t run a successful navy if what you really have is a set of pirate ships pretending to work together.

If you’re building a global business, there are three key elements you need to put in place:

  1. A set of country managers who are responsible for, and have strong executive control over, their individual markets
  2. An understanding of how those markets differ, which leads to a variety of plans for how to grow in each of those markets
  3. A unified executive team to coordinate global operations, including the activity of the individual country managers

Elements 1 and 2 involve a decentralized command structure that allows the individual “captains” in the fleet to operate with entrepreneurial vigor. Element 3 involves a centralized staff that can help the “admiral” coordinate the actions of the fleet for maximum impact.

Uber actually did a good job with Elements 1 and 2. Uber’s General Managers are like individual ship captains, and their ability to act independently helped Uber develop innovations like surge pricing (which was an independent experiment conducted in the Boston market). Where Uber failed was its inability to commit to Element 3 — a unified executive team. When you have strong individual captains, and an admiral who can’t or won’t build a staff to help him or her actually manage the fleet, you end up with an uncoordinated group of pirates.

The failure to build a unified executive team is sadly common. Some entrepreneurs find it difficult to accept the increased structure and decreased freedom of a formal staff; many of these people started companies precisely because they disliked the feeling of working in a large organization. In his book on Uber, “Wild Ride,” Adam Lashinsky describes how Uber’s founder and former CEO Travis Kalanick tried to navigate this shift:

I ask if he likes running a big company. “The way I do it, it doesn’t feel big,” he says, falling back on a favorite trope: that he approaches his day as a series of problems to be solved. He obviously thinks of himself as troubleshooter-in-chief as much as a CEO.

Bigness clearly is scary. “I would say you constantly want to make your company feel small,” he says. “You need to create mechanisms and cultural values so that you feel as small as possible. That’s how you stay innovative and fast. But how you do that at different sizes is different. Like when you’re super small, you go fast by just tribal knowledge. But if you did tribal knowledge when you’re super big it would be chaotic and you’d actually go really slow. So you have to constantly find that line between order and chaos.”

Kalanick’s words reveal a pirate’s discomfort with running a large organization. Being a “troubleshooter-in-chief” might be a good fit for his personality, but diving into the details of individual problems is generally a poor use of a CEO’s time.

The purpose of hiring a management team is to solve the organization’s problems in a more scalable way. The CEO should be the hub, and the executive team the spokes that connect the CEO to the frontline managers and employees where the rubber hits the road. Kalanick was trying to be the hub and the spokes, rather than building up the organization’s ability to get things done without his personal involvement. Another symptom of this dysfunction was Kalanick’s habit of cancelling his executive staff meetings. Without spending time together, it is difficult for a management team to cohere, or to coordinate the many initiatives of the organization.

Kalanick is absolutely correct when he argues that staying small helps organizations stay innovative and fast, but staying small isn’t always a possibility. Rather than avoiding “getting big” for as long as possible, it is better to steer into the process so that you can iterate the organizational structure multiple times as you scale. This means you make the transition over time, instead of making the shift in a single giant leap “someday”.

As you blitzscale, you have to build structure in order to have a functional organization. Even someone as smart as Larry Page learned this during the early days of Google. Page initially tried to run Google’s entire engineering department without management by having all 400 employees report directly to Wayne Rosing. The failure of this experiment convinced him to allow Eric Schmidt to build a real organizational structure at Google.

Any given management structure is likely to be temporary; you can’t run a Village (100 – 999 employees) the same way you run a Tribe (10 – 99 employees), and you can’t run a City (1,000 – 9,999 employees) the same way you run a Village. But without a management structure that works for your current size, you won’t make it to the next stage of blitzscaling.

Larry Greiner wrote about precisely this dynamic in Harvard Business Review in 1998:

“The critical task for management in each revolutionary period is to find a new set of organizational practices that will become the basis for managing the next period of evolutionary growth. Interestingly enough, those new practices eventually sow the seeds of their own decay and lead to another period of revolution . Managers therefore experience the irony of seeing a major solution in one period become a major problem in a later period.”

It appears that Kalanick’s discomfort with Uber feeling “big” led to a dysfunctional organizational structure where he clung to his previous ways. Rather than a cohesive management team, Uber seemed to operate on a model that Susan Fowler described as “a Game of Thrones political war” with managers fighting for advancement:

The ramifications of these political games were significant: projects were abandoned left and right, OKRs were changed multiple times each quarter, nobody knew what our organizational priorities would be one day to the next, and very little ever got done. We all lived under fear that our teams would be dissolved, there would be another re-org, and we’d have to start on yet another new project with an impossible deadline. It was an organization in complete, unrelenting chaos .

When Uber tried to transition from pirate to navy by hiring experienced executives like Jeff Jones from Target, those executives ended up resigning rather than changing the organization. During the first half of 2017 alone, Uber lost eight VPs or department heads.

In contrast, companies like Facebook and Amazon, and leaders like Mark Zuckerberg and Jeff Bezos found ways to successfully recruit leadership from the outside, blending them with existing team members to change and strengthen the organization. Facebook promoted insiders like Chris Cox, but also brought in compatible outsiders like Sheryl Sandberg and Mike Schroepfer. Jeff Bezos’ key lieutenants like Jeff Blackburn and Andy Jassy are Amazon lifers, but he also brought in key outsiders like Rick Dalzell from Walmart. These outside hires can help even at massive scale. When Microsoft acquired LinkedIn, it also brought in executives with different and valuable skills and experiences.

Facebook joins the navy

Uber can take heart from the example of Facebook, a former ethical pirate that overcame scandal and skepticism to become a respected and responsible Navy.

Do you remember the early days of Facebook? Back then, Facebook wasn’t one of the most valuable companies in the world, and Mark Zuckerberg wasn’t viewed as one of the world’s great CEOs. In fact, Mark faced criticism for many of his early actions, and the company had to live through significant turmoil, such as the user revolt over the introduction of Newsfeed, now the core of the service.

The reason Facebook is Facebook today is that the company made steady progress from pirate to navy. This is readily apparent in the transition from the motto, “move fast and break things,” to “move fast with stable infrastructure.” On the management side, Facebook continued to develop and hire “navy captains” like David Marcus. Mark has been able to balance being a hub for his “captains”—he literally sits with them and collaborates on a daily basis—while still giving them the broad authority to operate independently that helps keep Facebook nimble and innovative.

Both Mark and Facebook have grown a lot since those early days, and it is precisely many of those changes which allow Facebook to be so successful.

Blitzscaling means turning in your pirate swords for naval cannons

When it comes to startups, Steve Jobs was right—it’s good to be a pirate. But if you’re a successful pirate, you have to become the navy.

First, and foremost, you have to be an ethical pirate, even if you’re challenging norms and rules. Be a lovable rogue, not a criminal; not only is it the right thing to do, but it also makes going legitimate later on that much easier.

As your fleet of pirate ships and followers grows, you need to intentionally shape them into a disciplined navy. A fleet of ships requires strong captains AND a strong centralized staff that can coordinate and harness their entrepreneurial vigor. Navies can establish nations, whereas pirate fleets eventually collapse.

Every successful founder and every successful organization need to go through these changes. But as Uber has discovered, Blitzscaling makes this change simultaneously harder (because of the speed at which it must happen) and more important (because of the risk inherent in investing in speed over efficiency).

In Uber’s case, even if the company had stringently adhered to the standards of ethical piracy, its failure to transition from pirate to navy would still have caused a host of major issues and challenges. Uber is a great example of blitzscaling in many respects: from its aggressive capital acquisition and deployment strategy, to its speed in entering different global markets and its willingness to challenge outmoded transportation regulations. Nevertheless, Uber has failed to do some of the key things that are a part of successful blitzscaling, like the transition from pirate to navy. Fortunately, it’s not too late for Uber’s pirate fleet to change its ways. Dara Khosrowshahi will absolutely need to fix the company’s values and culture so that it acts like an ethical pirate, but he must also make fixing its organizational structure a top priority. No doubt these changes will be difficult, and require the reform or departure of many pirates, as well as the recruitment of many experienced officers from the outside. But there is no shortcut. Scaleups need to manage risks and coordinate numerous groups and initiatives. They need become a navy.

An Update on the First Disobedience Award

September 21, 2017 •

In April 2015, a mother in Flint, Michigan concerned about the city’s seemingly tainted water supply contacted Marc Edwards, an engineering professor who had previously helped expose a similar issue in Washington DC.

While the initial tests Edwards made on samples the woman provided revealed high levels of lead in Flint’s water, local officials and the EPA ignored his efforts to draw attention to this fact. But Edwards continued to investigate the issue, heading up a team of volunteer researchers and self-funding more research to help show how government officials were covering up the issue.

Later that year, a Flint, Michigan pediatrician named Dr. Mona Hanna-Attishatested lead levels in local children. In September 2015, she took the bold step of publicly releasing her findings before they’d been peer-reviewed – in order to accelerate the process of holding local officials accountable.

Thanks to the efforts of these two individuals, the Flint water crisis eventually received national attention – along with an admission from government officials that the crisis was real.

In July 2017, the pair were honored with the MIT Media Lab’s inaugural Disobedience Award, which was presented during the course of the Media Lab’s Defiance event.

As the funder of the $250,000 prize, I was on-hand to honor Mr. Edwards and Dr. Hanna-Attisha and thank them for their commitment to truth and justice in the face of official attempts to hide the problem.

When MIT Media Lab Director Joi Ito, my friend and long-time collaborator on a number of different projects, first raised the idea of a prize for disobedience, I was immediately intrigued. I’ve always appreciated prizes and the cultural leverage they create. They’re an extremely effective way to shine light on the values we aspire to as a society, and on individuals who are putting those values into practice.

Joi’s idea of honoring acts of principled and non-violent disobedience seemed both unique and highly useful. Throughout history, human progress often comes from speaking truth to power, in acts of defiance against entrenched interests and the status quo.

That’s why it’s so important to reinforce the idea that principled and non-violent disobedience is a core value that every healthy democracy should nurture and celebrate.

I also liked that a prize for disobedience could apply to both a wide range of domains and a wide range of tactics. Potential recipients included scientists, activists, artists, entrepreneurs, legislators, and others. A prizewinning action might take the form of an individual defying an established institutional protocol, or thousands of people marching in the streets, or something else entirely.

Still, as excited as I was about Joi’s idea, there were also plenty of questions.

Was it impractical to try to formally recognize something as mutable and undefined as disobedience? Would attempts to identify worthy recipients get mired in arguments about what qualifies as principled or not? Would our core message of recognizing the positive social impact of civil and non-violent disobedience be twisted or sensationalized?

Instead of trying to error-proof the Disobedience Award in advance, we decided we would simply experiment. I’d provide the funding for an initial award. In conjunction with the MIT Media Lab, Joi would recruit a panel of multi-disciplinary judges to assess candidates. Eventually, a call for submissions would go out. And then we’d see what happened.

As soon as we publicized the call for submissions, entries started pouring in. Eventually, more than 7800 were submitted, from six continents. As the prize’s funder, I didn’t participate in choosing members of the selection committee, or in the committee’s work of assessing entries. Because of the quality of entries that were arriving, Joi floated the idea of awarding smaller prizes to a limited number of finalists along with the overall winner. I agreed to fund those as well.

The selection committee included Joi; director of the Center for Civic Media at MIT, Ethan Zuckerman; reporter and analyst Farai Chideya; Harvard University chemist and geneticist, George Church; scholar, activist, and associate professor of Civic Media at MIT, Sasha Costanza-Chock; filmmaker Jesse Dylan; Stanford University statistics professor Jerome Friedman; senior lecturer in public policy at Harvard University, Marshall Ganz; hacker, author, and researcher, Andrew “bunnie” Huang; physician and international peace activist, Alaa Murabit; Executive Director of the Albert Einstein Institution, which promotes strategic non-violent action, Jamila Raqib; and geophysics professor and Vice President for Research at MIT, Maria Zuber.

This multidisciplinary and highly accomplished judging panel put many hours into reviewing submissions and ended up identifying an inspiring range of individuals and groups advocating for positive, principled change.

Along with our inaugural winners, Marc Edwards and Dr. Mona Hanna-Attisha, the MIT Media Lab awarded three $10,000 honorable mention prizes to the following individuals and groups:

  • James Hansen, a climate science professor at Columbia University, who made early, data-driven predictions about climate change while working at NASA and publicly pushed back against the agency’s efforts to monitor and shape his public disclosures.
  • The Water Protectors of Standing Rock, who led the protests against the Dakota Access Pipeline near the Standing Rock Sioux Reservation. 
  • The founders of Freedom University Georgia, which offers free classes to undocumented Georgia residents who would otherwise have to pay out-of-state tuition to attend state schools there.

Having all these people on stage at the same event confirmed what we’d hypothesized about the Disobedience Award. It is a powerful and flexible point of leverage that can shine light on a wide range of worthy causes and principled actions.

Amongst our winners and finalists, we had people who had risked their careers and livelihoods for their beliefs. We had people who had put themselves in professional and even physical jeopardy, who’d been ridiculed and harassed and arrested.

These are the dangers that anyone who sets out to challenge entrenched interests with unwelcome truths inevitably faces. And yet as our winners and finalists attest, the dangers that attend dissent are never enough to dissuade those who truly have the courage of their convictions.

Such individuals know that standing up for what is right outweighs the sacrifices and penalties such actions may trigger. And we, as a society, are incredibly fortunate we have people like Marc Edwards, Mona Hanna-Attisha, James Hansen, the Water Protectors of Standing Rock, and the founders of Freedom University Georgia working on our behalf. Their courage, their passion, and their commitment to truth sets a standard we should all aspire to emulate.

It was my great privilege to participate in honoring them. Inspired by their efforts, we have decided to make the Disobedience Award an annual event.

Information about the 2018 nomination process will be available soon. To receive this information as soon as it becomes available, you can sign up here.

The United Nations: a Network of Networks

September 19, 2017 •

Entrepreneurship for the Sustainable Development Goals

My keynote remarks at the UN General Assembly’s High-Level Event on Innovation and Technology – SDG Innovation.

Mr. President, Ladies and Gentlemen, Your Excellencies:

Good morning. It’s a great privilege to be here with you today. My name is Reid Hoffman. I’m the founder of LinkedIn and a partner at the venture capital firm, Greylock Partners.

We’re here because we have a shared vision of a better future world. A world where poverty is reduced by half by 2030. Where agriculture grows more productive but also more sustainable. Where every child has access to quality education and every adult has productive employment.

The UN Sustainable Development Goals are both optimistic and achievable. We recognize we can only get to that better version of the world by 2030 with massive innovation. To succeed, we will need innovation that is both original and deployed at global scale. To achieve that vision, we need new technologies; new collaborative strategies between governments, NGOs, and the private sector; new methods of sharing and scaling what works.

The question is: what is required in order to achieve these technologies and these strategies?

The short answer is networks and entrepreneurship.

Networks enable communication, collaboration, and coordination that in turn enable innovation. Great innovations always require a set of interlocking discoveries, such as these:

  • scientific discoveries,
  • ideas in what you can build with technology,
  • available markets for technologies,
  • means of reaching those markets,
  • the talent to build organizations, and
  • the business models to sustain and grow.

Entrepreneurs find the right innovations from networks and build them into products and services with business models. These business models might be focused on economic profit, even as they deliver key new technologies that increase quality of life. Or these business models might just fund the global availability of products and services with minimal profits.    

So, let’s start with networks. In a sense, the United Nations has the potential to be a great connector of networks—a network that helps other networks connect. For networks to work, they require connection. Information and communication needs to flow. Specifically, the right information needs to get to the right people. At LinkedIn, we try to match job-seekers and companies with each other by using the network. In short, we connect talent with economic opportunities.

Then, in addition to communication, the network needs to establish the ability to transact safely, reliably, and quickly. The task may be establishing a partnership; it may be selling a product or service; it may be financing a venture. So, the network needs to have a framework to evaluate and establish trust.

The UN can work to establish networks—not just between the member states—but also with the right businesses, the right NGOs, the right universities, and even the right technology inventors. These networks are key, because it’s network collaboration that generates the right innovations.

So, why is entrepreneurship key? Many of the great inventions will come from new opportunities, new ideas—especially in response to challenges as great as those we face. Challenges which are exemplified by the Sustainable Development Goals.

Entrepreneurs are the individuals and teams who put together the various insights and resources from networks—and then work to build the organizations that provide the new products and services. In my personal experience, entrepreneurs are essential to innovation—either founding a new business or working within an existing organization. Entrepreneurs take the ideas and make something from nothing.

We need entrepreneurs of all sorts. Commercial entrepreneurs can mean more than economic profits. They can bring returns to society, too. And there also need to be social entrepreneurs and intrapreneurs within organizations.

Why do I stress this? Because entrepreneurs challenge the way things are; they challenge the status quo. And we—those of us who govern the status quo or have powerful positions within the status quo—need to make room for entrepreneurs and encourage them.

To achieve the UN Sustainable Development Goals, governments, NGOs, and the private sector must all work together to unleash a massive wave of entrepreneurship that generates breakthrough companies at a record pace. That’s how we’ll create cleaner, more affordable power. That’s how we’ll produce and distribute more food. That’s how we’ll create hundreds of millions of new jobs for the growing, global middle class.

To succeed, entrepreneurs need networks. Networks of capital. Networks of talent and expertise. Networks of customers and trading partners. Networks of distribution.

Governments, in turn, should leverage their power as rule-makers and conveners, and help develop the networks that help entrepreneurs turn their breakthrough ideas into scalable businesses.

For example, in Finland, broadband Internet access is enshrined as a legal right—because the Finnish government recognizes how important Internet access is now to personal and professional development.

In Chile, the government helps facilitate networks of talent and expertise through a highly selective seed accelerator program called Startup Chile, which offers international entrepreneurs a one-year visa and grants of around $30,000 to develop their business ideas in Chile.

In Germany, the government partners with local industry and unions on an apprenticeship program in which nearly 60 percent of the nation’s young people receive extended training in hundreds of occupations. This ensures that local businesses have a highly skilled workforce to draw upon, and that millions of German citizens acquire skills and expertise that are in high demand from employers.

At LinkedIn, we are developing something we call the Economic Graph—a corpus of information that will ultimately map the professional profiles of roughly 3.3 billion people in the global workforce; every full-time and part-time job opportunity; and the skills that are needed to obtain those jobs.

We are now sharing information from our Economic Graph with governments and NGOs around the world, to help countries, states, and cities better develop the kinds of networks that catalyze entrepreneurism.

In India, the Government of Kerala is using LinkedIn’s data insights and technology to understand skills in demand, to design appropriate curricula, and to connect job seekers with mentors and other support mechanisms and ultimately to jobs.

In London, the Greater London Authority incorporated LinkedIn data about current employer skills requirements into its Digital Talent initiative, a 7 million pound sterling fund designed to help young people get the right skills to fill jobs in London’s digital, creative, and technology sectors.

We also have a multi-year agreement with the World Bank to develop a “Competitiveness and Insights” dashboard for over 300 cities across the world.

This partnership will enable both the World Bank and local policymakers to evaluate the entrepreneurial capital of cities. Our “entrepreneurial index” will capture the movement and growth of entrepreneurs in a given city, and measure the strength of their local and global networks. This will help these 300 cities track how well they’re producing and retaining entrepreneurial talent, and lead to better, more data-driven decisions about the economic and education policies these cities are using to facilitate business development and innovation.

As projects like these suggest, the tools are now available for assessing overall economic conditions and intelligently improving them.

Similarly, the technologies that researchers and entrepreneurs around the world are developing in AI, robotics, genetics, transportation, energy, and more have the potential to dramatically improve lives for billions of people.

But we will never achieve the more equitable and prosperous world the UN Sustainable Development Goals envision if it’s just venture capitalists and entrepreneurs making bold bets on the future.

Government and civil society leaders must act boldly too—and look for opportunities to enable entrepreneurship and innovation.

Of course, in times of great technological change, there is always the urge to hit the brakes and slow down. But while we certainly should move forward with thoughtfulness and prudence, our focus should always be on the future—and on the technologies and policies that will create new industries and new jobs, and the next wave of prosperity.

Enshrining the past through policies that protect entrenched interests will not produce the kinds of major breakthroughs we’ll need to achieve the UN’s ambitious and inspiring vision of a better world. 2017 is no time to look backward or inward. Now, we must experiment, innovate, and collaborate to build that future for generations to come. I look forward to working with and learning from you all. 

Thank you.

Building a better board of directors

September 12, 2017 •

This post is part of theBoardlist‘s #BeABetterBoard series of posts and interviews with leading CEOs and VCs from the tech industry. Thought leaders share what they’ve learned while serving and managing boards, what they wish they knew when they started, and what they’re focusing on now. Here are a few of my reflections.

The ideal board member should have skills, knowledge, and a network that is mission-critical to the company, but that you cannot easily hire. Rather than treating your board as a collection of names, use it as a way to fill the critical gaps you don’t have other ways to fill. One of the key challenges in front of Change.org is that it needs to find a way to define both an impactful mission (in this case, empowering people everywhere to create the change they want to see through petitions) and a valuable business model that is connected to that mission. One of the best people I know at figuring out business models that dovetail with impactful missions is Nancy Lublin, who was the founder/CEO of Dress For Success, the CEO of Do Something, and is currently the founder/CEO of Crisis Text Line, which provides anyone who needs it with crisis counseling via SMS messaging. Because she’s dedicated to her own mission, she’s not someone that Change.org can hire as an employee, but Change.org can leverage her unique expertise by bringing her on board as a board member.

You must have a clear idea of how each board member can add value, both individually, and more importantly, as part of the team. Far too many board members are selected for their brand value. A board of directors is a team, not a collection of “all-stars”. Hustle is a critical virtue. A world-famous CEO may look great on an annual report, but she may not have the time to be much help in scaling and running the business. For a company like my recent investment Nauto, which develops autonomous vehicle technology, it might seem like it made sense to target an industry titan. Actually, you want someone who has deep experience with both automotive and high-tech, and who has the time to provide in-depth advice. Someone, in other words, like Nauto’s latest board member Karen Francis — who has experience as an executive at GM and Ford, but also as the former CEO of a tech company AcademixDirect.

When you’re early in the lifecycle of your startup, the main challenge is to get the product to market so it can prove that it has a valuable, scalable business. Therefore, the key criteria for selecting board members is whether or not they have relevant skills (product, sales, marketing, etc.) to help the company get the product to market. For example, when PayPal was pulling together its board, Peter Thiel and Max Levchin decided that rather than looking for an industry expert in encryption or payments, that each would choose their friend who had the most startup experience. As a result, Scott Banister and I joined the board; Scott knew Max and had founded Submit-It and merged it with LinkExhange, while I knew Peter and had experience from founding SocialNet.

When your company goes public the board members have to perform the vital governance role of evaluating the CEO and executive team. The best way to do this is for each key executive to be “owned” by a board member, who will develop a closer working relationship with that executive. These relationships are essential for evaluating the CEO and her potential successors. The art is developing these relationships without undermining the CEO. The board members should have the competence to talk with executives without introducing problems. That means avoiding damaging questions like "So, what is the CEO’s greatest weakness?" in favor of something like "What do you see as the greatest challenges and opportunities facing the company?" This also provides the board member with a window into the thought processes of the executive, their career trajectory, and the state of the business.

Why the best entrepreneurs let fires burn

July 19, 2017 •

Every growing startup is surrounded by fires — whether issues of product, market, competition, or operational scalability. Smart entrepreneurs don’t try to fight every fire. Instead, they figure out which fires they can let burn — so they can focus on the ones they absolutely have to fight. It’s a delicate balance, because if you let fires go on too long, you’ll get burned.

In this week’s season finale of Masters of Scale, we learn how to think about letting fires burn from serial entrepreneur Selina Tobaccowala, the co-founder of Evite, former President of SurveyMonkey, and founder of the new fitness startup Gixo. Selina has experienced the pain and strain of blitzscaling multiple times, including discovering, right after she joined, that SurveyMonkey didn’t have any backups of its customer data. Yet that’s precisely the kind of deliberate neglect that may be necessary for a startup to make the most of its opportunity. (LinkedIn didn’t have a failover database for its first six years, for example.)

While these kinds of stories seldom make it into a Fortune profile or Harvard Business Review article, you’d be surprised how many “overnight successes” flirt with disaster the very next morning. When you’re moving this quickly, you don’t have time to study the issues for six months to get them right; that would just mean you’re six months behind. And while we should certainly celebrate the “touchdown passes” involved in growing a business, we should also celebrate the brilliant punts that bought those businesses time to succeed.

We’ll hear from Selina on her techniques for intelligent firefighting, including how she hires people who can see fires before she does, and how she keeps communications from breaking down during a crisis. You’ll also hear tips from other entrepreneurs, like how Airbnb’s Brian Chesky manages his to-do list, how Jerry Chen, former VMware and current Greylock partner, used customer complaints as a positive success metric, and how Cheryl Kellond of Apostrophe, a mobile health clinic, dealt with an actual fire!

As always, I’d like to hear your thoughts and reactions to this conversation. What are some of key fires you let burn that helped you succeed? How do you keep your team focused when the flames are licking at the door?

Please write a short post on your LinkedIn newsfeed to share your answers with the wider community. Tag your post #mastersofscale so I can find it. And if you’d like, Tweet it at me (@ReidHoffman) and @MastersOfScale.