Invest Like The Best #115: Keith Rabois
|David Senra||Dec 18, 2018|
If you have an asymmetric ability to perform a function then you should take advantage of that: You don’t want to sell a service to someone else. You actually want to build the full stack yourself. Vertically integrated businesses are what I like to fund. Opendoor is a great example. Fundamentally being a component in someone else’s stack doesn’t usually end well.
The biggest reason for founders to do this: When you sell a product directly to a customer you control your own fate. Don’t outsource your fate and destiny to someone else.
I think it is fundamental for founders to be specific about which strategy they are following and where their strategic leverage is coming from: Read 7 Powers: The Foundations of Business Strategy. The book will force you to become concrete and tangible, as opposed to abstract and non-differentiated.
All interesting companies are predicated on at least one secret: A secret is a belief about the world that the rest of the world doesn’t appreciate. Over time as the company becomes successful other people will reverse engineer what that secret probably is. You will then have to reinvent yourself when this happens.
What is the secret for Opendoor?: Homes are much more like a commodity than people believed. People thought homes were like a piece of art. They thought you had to see it, touch it, feel it. The truth is that is false.
Love this idea: When analyzing a company ask why does this business get better every year? Specifically, identify why next year going to be easier. And ask why is the year after that going to be even easier?
The lean startup movement was a stupid idea followed by stupid people: It was poison for Silicon Valley. That said, not everybody has a choice. There are ideas and people that would struggle to raise a lot of money. I think some of the best ideas that are more differentiated, interesting, etc... tend to require more capital. OpenDoor is a fat startup.
Startups are like a movie: You have an inspired narrative. Then you have to cast it properly. Imagine Rocky without Sylvester Stallone. It’s a very different movie. It probably doesn’t work. You have to get the right characters [founders, executives, employees] in the right places to make the movie potentially successful. Then you have to create a trailer [the value proposition succinctly described]. Then you have to sell tickets. This is basically true for any product.
Ruthlessly say no: Steve Jobs would talk a lot about how saying no to good ideas is what allowed Apple to focus on one or two amazing ideas.
People need to emulate people and companies that have been successful:When you find something successful you should ask why. You should try to deconstruct it. It’s how you learn to play sports. For example, you don’t watch poor tennis players and try to emulate them. You watch great ones. [Keith is inferring you should listen to Founders podcast]
More companies should emulate Apple. Here are the traits they should emulate: Their obsession with design. Nonempirical decision making. Vertical integration. Closed systems. Highly recommended book to understand how Apple works: Creative Selection: Inside Apple's Design Process During the Golden Age of Steve Jobs.
Great question: If you were a product what would your value proposition be?
Career advice: Find someone who is amazing and works with them. A lot of Silicon Valley is a craft. Osmosis is the best way to learn a craft.
More career advice: Put in more effort if you want to get ahead in life. Most people won’t.
Something believed that is probably not true: Large incumbents destroy high growth startups. You have to struggle to come up with examples.
Book recommendations: I highly recommend reading Who Is Michael Ovitz?. One of the most important books you can read is: The Upside of Stress: Why Stress Is Good for You, and How to Get Good at It.