How Airbnb & DoorDash Succeeded: First Principles (3 steps for billion dollar startups)

Summary

This video script advocates for 'first principles thinking' as a means to break free from societal norms and conventional wisdom. It emphasizes the importance of curiosity, empathy, and serenity in challenging preconceived notions and fostering innovation. The script uses examples from successful companies like Airbnb and DoorDash to illustrate how these principles can lead to breakthroughs and offers practical advice on applying the five whys analysis for problem-solving.

Takeaways

• 🚀 **Breaking Out of Norms**: The script emphasizes the importance of breaking free from societal norms and standard ways of thinking to achieve success.
• 💡 **First Principles Thinking**: It introduces the concept of first principles thinking, which involves starting from what is absolutely true and questioning preconceived notions.
• 🏫 **Challenges of Traditional Learning**: It points out that traditional learning environments often teach conformity and discourage innovation.
• 🔍 **Curiosity**: The first key to first principles thinking is curiosity, which involves asking questions and seeking deeper understanding through methods like the five whys analysis.
• 🤝 **Empathy**: Empathy is the second key, which is about understanding the experiences and feelings of others, particularly customers, and can lead to the creation of successful businesses.
• 🧘 **Serenity**: The third key is serenity, the ability to accept what cannot be changed and focus on what can be improved or innovated upon.
• 🔄 **Five Whys Analysis**: The script highlights the five whys technique as a method to deeply understand the root causes of problems, which is attributed to Toyota's success.
• 💼 **Airbnb's Empathetic Beginnings**: The story of Airbnb's founders illustrates the power of direct experience and empathy in building a billion-dollar company.
• 🏆 **DoorDash's Strategic Serenity**: DoorDash's example shows how serenity in accepting market conditions and focusing on profitable areas can lead to significant growth and success.
• 💰 **Profitability Over Capital**: It suggests that profitability and strategic focus can be more effective than just raising more capital in competitive markets.
• 📚 **Lifelong Learning**: The script concludes by encouraging lifelong learning and promoting a platform for learning life-changing skills, emphasizing continuous personal development.

Q & A

What is the main idea presented in the video script?

The main idea is the concept of breaking out of societal norms and preconceived notions using first principles thinking, which involves curiosity, empathy, and serenity.

What is first principles thinking?

First principles thinking is a method of reasoning that starts from the most fundamental truths and builds up from there, challenging preconceived notions and analogical thinking.

Why is curiosity important in the context of first principles thinking?

Curiosity is important because it drives the process of asking questions and seeking deeper understanding of how systems work, which is essential for challenging the status quo.

What is the five whys analysis and how does it relate to curiosity?

The five whys analysis is a method of repeatedly asking 'why' to understand the root cause of a problem, which stems from the Toyota production system. It exemplifies curiosity by digging deeper into issues to find fundamental solutions.

How does the script use the example of Airbnb to illustrate empathy?

The script uses Airbnb's founders' experience of hosting guests in their own home to demonstrate empathy. By directly interacting with their customers, they gained insight into the potential of their business idea and the importance of understanding customer experiences.

Outlines

00:00

🤔 Embracing First Principles Thinking for Breakthroughs

This paragraph introduces the concept of first principles thinking as a means to challenge societal norms and expectations, which often confine individuals to a predetermined path. It emphasizes the importance of questioning the status quo and seeking truth through direct experience. The speaker outlines the need for curiosity, empathy, and serenity as foundational traits for this approach. Curiosity is highlighted through the 'five whys' technique, which is used to uncover root causes of problems, as exemplified by Eric Ries' story about a website outage. Empathy is illustrated by the early days of Airbnb, where the founders' direct interaction with customers provided invaluable insights that fueled the company's success. Serenity is introduced as the acceptance of what cannot be changed, setting the stage for focused and effective action.

05:02

🚀 Leveraging Empathy and Serenity for Business Success

The second paragraph delves deeper into the importance of empathy and serenity in achieving business success. It recounts the story of Airbnb's founders who, by hosting guests in their own home, gained a profound understanding of their customers' needs and desires, which contributed to the company's billion-dollar valuation. The paragraph then contrasts this with the serenity demonstrated by DoorDash, which strategically retreated to suburban areas to establish a profitable foothold before eventually winning in the urban markets. The speaker concludes by advocating for first principles thinking, suggesting that it enables individuals to break free from conventional scripts, learn deeply about customers, and engage in battles that can be won, ultimately leading to success.

Keywords

💡First principles thinking

First principles thinking involves breaking down complex problems into their most basic elements and building up from there. This approach encourages questioning assumptions and starting from what is fundamentally true. In the video, it is presented as a way to break free from conventional thinking and innovate effectively.

💡Curiosity

Curiosity is the desire to learn and understand more about something. It is emphasized as the first step in first principles thinking, driving individuals to ask questions and dig deeper into how systems work. The video highlights curiosity as essential for understanding problems and finding innovative solutions.

💡Empathy

Empathy is the ability to understand and share the feelings of others. In the context of the video, it refers to gaining an intuitive sense of the experiences and needs of customers. This direct understanding can lead to better product development and customer satisfaction, as exemplified by Airbnb's approach.

💡Serenity

Serenity is the state of being calm and peaceful. The video discusses its importance in accepting things that cannot be changed while focusing efforts on what can be influenced. This mindset helps in making strategic decisions, as illustrated by DoorDash's approach to finding profitability in the suburbs before tackling urban markets.

💡Five whys analysis

The Five whys analysis is a problem-solving technique that involves asking 'why' five times to uncover the root cause of an issue. It is highlighted in the video as a method for understanding and resolving problems effectively, using the example of a website outage caused by an untested code loop.

💡Thinking by analogy

Thinking by analogy involves solving problems based on comparisons with similar situations or experiences. The video contrasts this with first principles thinking, suggesting that relying on analogies can limit innovation and maintain the status quo. Challenging these analogies is crucial for breakthrough ideas.

💡Direct experience

Direct experience refers to firsthand knowledge or involvement in a situation. The video underscores its importance in gaining true understanding and conviction, as seen in Airbnb's founders living with their users to refine their business model and build a successful company.

💡Toyota production system

The Toyota production system is a manufacturing methodology developed by Toyota that focuses on efficiency and quality. It includes practices like the Five whys analysis. The video uses Toyota as an example of how curiosity and systematic problem-solving can lead to exceptional reliability and success.

💡Airbnb

Airbnb is a platform for renting short-term lodging, started by Brian Chesky and Joe Gebbia. The video uses Airbnb's origin story to illustrate the power of empathy and direct experience in creating a successful business. Initially a fringe idea, their close interaction with users led to a breakthrough in the hospitality industry.

💡DoorDash

DoorDash is a food delivery service that achieved success by strategically focusing on profitable suburban markets before expanding into cities. The video highlights DoorDash's approach as an example of serenity in business strategy, showing how understanding market dynamics and customer needs can lead to significant market share.

Highlights

The importance of breaking free from societal norms and expectations to create and innovate.

Introduction to 'first principles thinking' as a method to challenge preconceived notions.

The necessity of starting from absolute truths to make well-informed decisions.

The role of curiosity, empathy, and serenity in adopting first principles thinking.

The 'five whys analysis' technique for deep understanding of problems, originated from Toyota.

Example of the 'five whys' applied to a website downtime issue, illustrating its effectiveness.

Transcripts

- You get up, you brush your teeth, you eat cereal.

You go to school.

Do as you're told, sit up straight, show up on time.

Don't talk back.

Be a good person. Fit in. Don't make waves.

Stay in your lane.

The nail that sticks out is hammered down.

But isn't that the problem?

A whole system, a whole society, a whole civilization

dedicated to telling you how to live

and what to do and how to think.

But there is a way to break out

and it's a way that repeats over and over again.

And the founders that I've worked with

who have gone on to create massive businesses.

What do you need to break out of it?

Let's get started.

(upbeat music)

What do you need to break out of it?

First principles thinking.

Can you start from what you are absolutely sure is true?

Can you have direct experience with a thing

or get more experienced such that

you can make a more well-informed decision or guess

as to how something works

or the state of a particular thing?

Remember where we started: the classroom, the workplace.

These places where we sometimes spend

years and years of our lives are designed to teach you

to stay in the box that you live in.

You learn the history. You learn how it's been done

and then you were programmed to believe

that that is how they will be for forever.

And this is where first principles thinking can help you.

Because in contrast, you will end up challenging

the preconceived notions and the thinking by analogy

that the rest of the world has imposed on us.

There are ways you can make something new and different

and it starts with three things I think you need.

Number one is curiosity.

Number two is empathy.

And three strangely is actually serenity.

Those are the three key things that will allow you

to start on your path towards first principles thinking.

First is curiosity asking questions

and digging further to understand how those systems work.

One of the key ways to do this

is actually the five whys analysis.

It's something that the Toyota production system

came up with years ago in Japan.

Here's one of my favorite examples

from a blog post by Eric Ries,

the creator of the Lean Startup.

So imagine your website's down.

First why, why was the website down?

Well the CPU utilization on our front end servers

went to a hundred percent.

Second why, why did the CPU usage spike?

Well, some code contained an infinite loop.

Third why, well, why did that code get written?

A programmer made a mistake.

Why did that mistake get checked in?

He didn't write a unit test for the feature.

Well, why didn't he write a unit test?

He's a new employee and he wasn't properly trained

to do test-driven development.

So if you ask why it will allow you

to fully explore why something happened.

Eric says because the most common problems keep recurring,

your prevention efforts are automatically focused

on the 20% of your product that needs the most help.

That's also the same 20% that causes you

to waste the most time.

So five whys actually pays for itself awfully fast

and it makes life noticeably better almost right away.

The five whys is why the Toyota production system

made Toyota so successful.

Today we think Japanese cars are incredibly reliable

but they had to come up with a process to get there.

And curiosity is a key part of understanding

why things are and then how to fix it.

Second is empathy, getting an intuitive sense

for the lived experience

and feelings of other people particularly customers.

Listening to users and getting their direct experience

is something that a lot of people know how to do.

When you do it well sometimes it can help you create

a billion dollar startup.

Airbnb just had an incredible IPO,

but when it first came out, a lot of people said,

Airbnb, wasn't going to work.

It was literally just air beds and breakfast.

Brian and Joe at Airbnb worked on something

that was kind of a fringe idea.

They needed money for rent

and a design conference was in town.

They thought they could make rent by making a website

and letting people crash on the floor

of their San Francisco Soma loft on Roush street.

Here's Brian describing what it was like

to host people for the first time

- We ended up hosting three people from around the world.

A 35 year old women from Boston,

a 45 year old father of five from Utah

and a 30 year old from India.

And now I got to tell you,

the reason we started doing this

is 'cause we thought it was funny, cool and we make money.

'Cause we had to make rent.

There's something that happens though

when somebody lives with you,

it's kind of like the arc of a friendship

gets contracted from a year or to a day.

In other words, if you were to meet somebody

maybe here at Stanford or in the real world,

and you get to know them

how much time does it take to like invite them

over your house and have dinner with them?

It might take like months, even a year.

Like you don't just get to know people.

And indeed we realize is

it contracted this year-long friendship

into a couple of days.

And so these people came as strangers.

They literally left us friends.

We ended up keeping in touch with them.

In fact, one of the guests ended

up inviting me to his wedding.

The other guests, this woman moves

from Boston to San Francisco.

And I think we're realizing there's a bigger idea here.

- This is a really interesting experience

in empathy because it was so direct.

You can't get closer to someone

than literally sleeping under the same roof with your users.

And what they heard in that first experience

was what they use to pursue that idea.

They had direct experience

which gave them direct belief and conviction

that this was something that was going to work.

Airbnb is now worth more than a hundred billion dollars

and counting on the public markets.

Third and most counterintuitively, you need serenity.

The ability to accept things that you cannot change.

This of course is from the serenity prayer

by theologian Reinhold Niebuhr.

God, grant me the serenity

to accept the things I cannot change,

courage to change the things I can

and the wisdom to know the difference.

One of the best recent examples is actually DoorDash.

I worked with the startup at Y Combinator.

They reached 50% market share

in the United States through a brilliant mix of strategy

but also extreme customer focus.

Now picture this, you're DoorDash,

your competitors like Uber have incredible access

to capital and they're fighting it out in the cities

in a pitched battle for market share.

Early DoorDash employee Michael Block,

recounted this in a recent tweet storm.

Seamless had a 17 year headstart.

Uber had 50 X, their marketing budget.

They retreated, they retrenched to Long Island,

New Jersey, Westchester and Connecticut.

They found product market fit there

and were profitable in a matter of months.

Door Dash had the serenity to accept things

they could not change.

They went to the suburbs where their competitors were not.

And here's the key thing.

They took the profits in the suburbs

and won the cities and a capital war.

There are two ways to win.

One is just to raise more money

but what can you do if you can't raise more money?

You've got to do what DoorDash did-

be more profitable, outflank and outsmart.

Don't fight a losing battle.

Fight the battle you can win.

DoorDash is now worth over $55 billion

on the public market.

If you have first principles thinking,

you'll have the curiosity, the empathy

and the serenity to find a better path.

You'll break out of the standard script.

You'll go direct.

You'll learn more about the customer

and you're going to fight the right battles.

You can win this.

Thanks for watching all the way to the end.

I know if you've watched this far

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Separately, I wanted to thank you for watching this year.

It's been a crazy year

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Take care everyone.