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tv   The David Rubenstein Show Peer to Peer Conversations  Bloomberg  May 28, 2022 12:00pm-12:30pm EDT

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david: this is my kitchen table and also my filing system. over much of the past three decades, i've been an investor. the highest calling of mankind, i've often thought, was private equity. [laughter] and then i started interviewing. i watched your interviews, so i know how to do some interviewing. [laughter] i've learned from doing my interviews how leaders make it to the top. >> i asked him how much he wanted. he said $250,000. i said fine. i did not negotiate with him and i did no due diligence. david: i have something i would like to sell. [laughter] and how they stay there. you don't feel inadequate now being only the second wealthiest man in the world, is that right? [laughter] one of the most important companies in the travel industry today is airbnb. it started less than two decades ago as a concept of renting out one's room as a way to make money. now, all over the world, people are renting out their rooms,
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apartments to other people. i actually used an airbnb in alaska and found it to be a good experience. i sat down with brian chesky, who conceived airbnb, and has built it into one of the largest travel companies in the world. when you came up with the idea with your partners of starting this company around 2007, 2008, did anybody tell you it was a good idea? brian: no, it was pretty universally considered a terrible idea. the first person i told the idea to, i said, we have an idea we are going to build a website where strangers let strangers in their home, and the person who was kind of someone i looked up to in los angeles, he looked at me with a straight face and said, "brian, i hope that's not the only idea you're working on." that was, by the way, one of the nicer things people said. but the reason it worked was i stumbled into this idea with my roommate. there was a design conference coming to san francisco. october 2007. i could not afford to pay rent. this design conference in san
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francisco, all the hotels were sold out. we had this idea, what if we turned our house into a bed-and-breakfast for the design conference? them to beds with joe had beds and we pulled them out of the closet. we had enough to pay our rent. more importantly, we ended up making friends with these three people because they lived with us for a week. at that point, i think we realized, if people could experience what we experienced, that this would be an idea that would spread around the world. but little did i know that it was going to be a very difficult, uphill road. david: where did you get your initial money? was that the y combinator from paul graham? brian: actually, there's a weird story about how we raised money. we had a quirky idea to sell collectible breakfast cereal. barack obama and john mccain were running for president. we thought we are a bed and breakfast, we are not selling beds, so maybe we can sell breakfast. so, we started selling collectible breakfast cereals. a barack obama themed cereal called obama o's, like cheerios.
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we called it the breakfast of change. we learned about john mccain, the captain of the navy, we called it captain mccain's. we made this funny looking cereal boxes and we ended up selling $30,000 worth of collectible breakfast cereal, and that was originally how we funded the company. now it is late 2008. we are desperate. we have launched three times. no one is using it. i'm thinking to myself, i wonder if mark zuckerberg or steve jobs ever had to hot glue cereal boxes in their living room. the answer was no. they hadn't done it. this was a foreboding sign. i'm going out to dinner at a thai restaurant in san francisco with the founders of y combinator, and they said, "you guys should join y combinator." because you guys are dying, and i said it was too late because we already launched. paul graham allowed us to apply, we actually got and we missed the deadline. we got an interview and that is when paul graham said, you know,
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first question, people are actually doing this? i said yes, and he goes, what's wrong with them? the interview went downhill from there. he admitted he hated the idea at first. he did not get it. but as we were leaving the interview, my roommate hands him a box of barack obama cereal that we made, and he looks at it and he goes, why am i getting this, and this is how we funded the company. he said, if you can get people to pay $40 to get a four dollar box of cereal, and maybe you will convince them to sleep in each other's homes. so, y combinator let others in the program. we barely got in. the moment we got into the program, the recession is occurring, people are desperate to save their homes, and a lot of people turned to airbnb to save their homes by renting them out. at the same time, you have the great recession, which is causing a lot of young people to feel like they need to save money. facebook and social media are growing. people are comfortable meeting people on the internet, and it
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was kind of this supernova of forces that led to an opening for airbnb to take off. david: traditionally, people might build a company like yours and five or six years later take it public and liquefy for the employees, the founders, and the investors. but you were resisting pressure to do that. why didn't you go public sooner? do you have any regrets about not going public sooner than you did? brian: i just did not feel like we were ready to go public sooner. i think in hindsight, maybe we could have gone public sooner. this is important to remember, when we were growing really quickly, there were not regulations on the books, and a lot of people were wondering if this business is going to get regulated out of existence. that, to me, was one of many existential questions. eventually, we were able to get laws on the books in nearly every big city in the world. we were able to collect $4 billion in hotel tax. we became legitimate.
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we built an executive team, expanded internationally, but i felt like going public was a big stage. this is kind of a weird analogy, but if you are baking a cake, going public is putting it in the oven. it is hard to change the ingredients after you go public, right? so, i wanted to make sure everything was kind of baked before we went public. waiting too long and having missed the ipo window. i would have never imagined what had transpired over the course of 2020. but i think looking back, it worked out really well for everyone. david: you went public in december of 2020. after the pandemic. but you obviously -- probably you had to lay off some people during that period of time. is that right? brian: when the pandemic, i was working on our s1.
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like many people, i came back from the holidays in 2019 thinking my life was going to go in one direction, not realizing our entire world was about to get rocked. i felt like the captain of a ship and a torpedo hit the side. we lost 85% of our business in eight weeks. and we were doing tens of billions of dollars a year in bookings. to suddenly go from highflying to people predicting the end of airbnb, there were multiple mainstream journalists predicting, were we going to go out of business? it was almost like our business flashed before our eyes, and i ended up having to confront this reality, david, that i realized we were going to lose half of our business. it's like running into a burning house. if you can only save half your furniture and half your stuff, what do you take with you? i said we were going to get back to the original idea of airbnb, the individual people that are sharing their homes and experiences all over the world. we had to make the hardest decision i ever made, layoff 25% of our workforce, nearly 2000 employees, but i wanted to make sure even in a layoff, we could show compassion and be really principled. we ended up giving people a year of health care. we were, i think, very generous with our severance. david: when you went public in december of 2020, you priced the ipo or the underwriters did at half the price that it ultimately ended up that day, so some people might say you left $23 billion or $24 billion at the table. were you thinking it was mispriced or were you ok with that? brian: we came back from 2019
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with a $30 billion, $40 billion valuation. at the depth of the pandemic, our valuation was $18 billion. we probably would have struggled to raise money. we had warrants. to be able to be a $100 billion company seven months after that low point, it was really hard to imagine any of that was going to happen. part of the reason the stock popped was i believe we had hundreds of thousands of people in retail trying to buy our stock, so i don't feel bad. i never took the highest price in any around. we totally could have priced higher, but it was pretty hard at the time to foresee that this was going to be a company that this was going to reach a valuation like that. david: as we talked, you just reported earnings for last quarter, last year. they were record earnings, record revenues. you said, i think at the release, that covid has changed everything. people are changing the way they work and the way they travel. can you explain what you mean? brian: i think the world is never going back to the way it was fully before the pandemic.
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one of the changes i think is a change in how we work. for many people -- not all -- but many people had a job at an office. they will not be required to come back to the office five days a week. i don't think ceos, per se, are going to determine these policies. i think workers will, because all the ceos want the talent, and i think flexibility will be the second most important benefit after compensation. i think we are now living in a world where many people might work remotely. they might going to the office but not five days a week. if you don't have to go in the office five days a week, you are more flexible, less tethered to any one city. i think what that means is for millions of people, they can now live anywhere. some people that don't have kids, like me, can literally live nomadically, city to city, hopping around. i think a lot of young people and retirees will do that. all this has culminated in airbnb not just being a company
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about traveling but now a company about living. what people don't realize is half of our nights booked are for stays longer than a week. half of our nights booked are for stays longer than a month. there's a whole new category of travel that is not classic 2, 3 nights in a city, not long-term housing, and it is completely emerged because of the pandemic. ♪
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david: let's go back to your background for those who do not know your background. what part of the united states are you from? brian: i'm from a small town in in upstate new york called mischimena, which a suburb of schenectady outside albany. david: your parents, they were social workers? brian: yup, my mom and dad were social workers. both of my grandfathers worked for general electric, but my mom and dad lived normal lives as social workers. david: when you were growing up, i understand you wanted to be a hockey player, is that true? brian: when i was five years old, that would have been 1986, wayne gretzky was the greatest hockey player in the world and i wanted to be him. i had a posters of him on my wall. the problem with athletics, your dreams come crashing down pretty quickly. by the age of six, i realized i was not going to be wayne gretzky. david: when that dream went away, you decided you wanted to
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be an artist. because you had good skills in that area? brian: exactly. i got a scholarship to the rhode island school of design. they only give out a few scholarships, so it was kind of a big deal. my mom said, you can go to art school, but you got to promise me you will one day get a real job. i said, what is a real job? she said, a real job is a job that gives you health insurance. i said, ok. i'm going to go to risd and one day i'm going to get a real job with health insurance. that was my ambition. my high school yearbook quote literally was, i'm sure i will amount to nothing. i think i was being sarcastic, but i did not really see very much beyond my small town. david: let's talk about it. you graduated from rhode island school of design and then you moved to california, los angeles, to become a designer. you ultimately did not like it that much and decided to move to san francisco. is that right? brian: i liked it for, like, three months because there's a thrill. when you are a student, nothing you make is real, and you have this yearning that you want to make something that is real and
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that is on a shelf and people pay money for. after a few months of doing that, maybe a year, i kind of remember thinking, i was 24, maybe 25 years old -- i remember feeling like i could see the rest of my life and the rest of my life looked like a road that disappeared in the horizon. it kind of terrified me. i thought, i don't really want to just be a designer. i realize at this point i think i want to be an entrepreneur, but i don't know what i'm going to build or where i'm going to start. this was now 2007. i think the internet revolution was really taking hold. youtube was just sold to google. facebook was rising. tech had come out of the ashes of the dot-com crash, and it just felt like the gears of the world were starting to turn in san francisco. i had this premonition that i have to come to san francisco, it is pulling me. david: you started the company with your roommate, joe. brian: yup. david: you brought a third partner in? brian: not long after -- it was joe and i, we were designers.
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we could design a website but we could not code or build a website. you need a software engineer to do that. after we hosted these three guests, i looked at joe and i said, who is the best engineer you know? joe said, it is funny you asked. because there was an engineer who used to live with me for you -- before you moved in the house with me named nate. the three of us got together and said, what if you could build a website where you could book someone's home the way you can book a hotel anywhere in the world? that was the original vision. little did i know how hard it was going to be to get off the ground. but it was a pretty simple idea. david: as you look back at what you built, what would you say was the best decision you made and what was the biggest regret you have so far? brian: the most important piece of advice i ever got was when i first started airbnb, it was actually paul graham. he told me something. he said, it is better to have 100 people love your service than have one million people that are kind of apathetic.
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you should start with small groups and perfect your product. turn them into advocates. if those 100 people love your service, they will tell everyone about it. they will become your marketing. and it is easy to improve your service when you only have 100 customers. when you have one million customers, it is hard to change it. so, do things that don't scale. go above and beyond. and that was something we did. i think that helped explain why we are so successful. i think the biggest mistake i made was -- when you are in your 20's and you never imagine being an entrepreneur and suddenly you are a multibillion dollar company and somebody gives you billions of dollars and you hit on something that is hugely successful, you tend to start to believe that you can do anything and you try to do everything at the same time. before the pandemic, we had, like, 10 divisions, and in hindsight, i think having too much money is sometimes worse than not having enough money. i think not having enough money
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creates constraints, creates discipline, creates focus, forces you to create trade-offs. when startups and corporations get overcapitalized, they can avoid making tough decisions. the accountability goes down. there's a real sense of complacency that goes into the company, and i think a little of that lack of focus happened at airbnb before the pandemic. david: you have a lot of mentors that have helped you over the years. how did you get to know barack obama? and is he staying at airbnbs? brian: [laughs] he has stayed at airbnbs, actually. you might recall that we lifted the embargo on cuba. president obama went to cuba and he wanted to bring american businesses with him to show that business is open between america and cuba. the problem is there were not any u.s. businesses in cuba except airbnb, so i went with him. i got to know him and we kept in touch, so i think it was helpful to have someone that could help me see the world in a broader way and think more systematically about my decisions and the consequences would have on society. that is how he became very helpful to me.
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david: for someone that is young, what is the advice you would recommend for how to build a company? brian: the first thing i would say is don't listen to your parents. most of them will try to talk you out of crazy things, but the crazy ideas are the ones that do spread around the world. ♪
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david: as i understand it, you are spending a year or so going to airbnbs around the united states? brian: yeah, most of the united states, kind of reasonable time zones. david: so when you want to book an airbnb, do you have trouble getting a place you want to go? brian: no, there are 6 million homes to choose from, so i have got more than enough options. i don't really say who i am. sometimes they find out, sometimes they do not. i kind of book last minute. i was in atlanta, nashville, charlston, los angeles, now miami. i need ideas where to go next. david: when you book airbnb, do you book yourself or do you have a team of people that pick it for you? brian: i do it myself. i have got to see what everyone else is doing. i always feel like people who build great products are building products they want to use. i also think there are only so many things you see in the data, you have to have a feel for the product. i try to use it as much as i can. david: i always wonder -- who sets the rate? do you set the rate or do the hosts set the rate and do you negotiate rates? brian: no, no, no, hosts set rates. they can charge whatever they want from $10 or $10,000 a night
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or beyond. we have people renting luxury villas that are incredible. 20,000 square foot villas, and we have people renting, like, you know, little spaces in their backyard. we had in 2009 when we first launched, we had people renting spaces under their kitchen table. it is kind of everything from a couch to a castle and everything in between. they set the rate and we take 15%. david: when you stay at a place, do you ever tell the host, you are charging too much or not enough? brian: i try to give feedback less on the value but more on the hospitality. sometimes a host will want me to go through some -- they will give me, like, a rental contract, and i'm like, airbnb is the contract. you don't need to do this. but it would be pretty weird to be the founder of airbnb and say, you are overcharging me. that would send a weird message. i try to give them feedback. we have a review system. 70% of guests and hosts review each other at the end of the
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stay, so i try to write a pretty detailed review for every host. i try to be positive but honest. david: do you sign bc or brian chesky? brian: brian chesky. they know by the time i review who i am. half the time, they know who i am when i book, the other half they don't. i don't want to be a secret shopper where i'm lying to them, and then booking under a pseudonym. but i also don't want to tell them who i am like i'm expecting special treatment because then i will not get the real experience. half the time, they know who i am, half the time they do not, but it is pretty fun. david: you're are 40 years old. at 40, you have already achieved more wealth than almost anyone could possibly imagine. have you thought about stepping back and smelling the roses or doing something else with all the money you have? brian: no, i feel like i'm just -- it is really just getting fun now. it was fun when i started, and then there was this corporate adolescence which was kind of painful, growing of the company. but i'm having so much fun right now. if i were to step back, i would probably only do that to start another company, to spend
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another 10 years just to get back to this place. when you have a good thing going, you want to keep going. i just feel like i have so much i still want to do with the company. i think there's a lot of loneliness in the world and i think part of our bigger contribution is try to help bring people together around the world, living communities. that is what i'm focused on. david: the company i built had two partners with me for the entire 30 plus years and we are still together. it is hard to have three people work together for a long time. you have had three people working together for quite some time as well. don't you ever have fights with each other or get jealous? how do you work together so well? brian: it is a great question. we are one of the only companies in the world as valuable as we are in tech with three founders who have been together 14 years. i think it is a couple things. number one, i'm really lucky because i have the gift of having two incredible cofounders who are really high integrity and always put the company before themselves. they were very supportive of me as ceo. the other thing is we had a principle.
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we said we would never allow being right to get in front of the relationship. if you try to be so principled that you try to win every single argument, you will kind of see the trees and lose the forest, which was to say we knew the company would only survive if it had a strong founding team intact. that means that occasionally each of us are going to have to make compromises. so, we try to never let debates get so far that winning an argument got in the way of the relationship. i think that made a big difference. david: on philanthropy, giving away money sounds easy but it takes time to do well. how are you thinking about it? are there certain areas you want to give away some of the money? you committed to giving away half of your net worth, but you have to take time to do it. brian: so, for me, i wanted to join the giving pledge in my 30's. i thought the main reason was, even though i was not at that point ready to give away all my money, i did want to set an example for the next generation of entrepreneurs. we distribute the majority of wealth back to society seemed like a reasonable thing to do and better for everyone, but i did not know what i wanted to
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focus on. i did write in my giving pledge letter that one of the issues i want to focus on is just helping maybe create scholarship programs, helping young kids like me. you know, i was not poor. i was not underprivileged. i was just kind of obscure middle-class, but had it not been for a series of people in my lifetime, i would not be here talking to you today. you would have never heard of me and i would have never left my town. and so, i think so many kids have untapped potential, like me, that their teachers never would have predicted would have the journey i have had and i want to help kids see their unrealized potential and change the trajectory of their lives. that is maybe one area i'm passionate about. but make no mistake, there's a lot of other things i would like to learn about and be able to help. david: final question, for someone younger than you, if they want to be the next brian chesky, what is the advice about how you would recommend they build a company? brian: i would say a couple things.
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the first thing i would say is don't listen to your parents. don't take career advice from your parents. i love my parents. they want what is best for me -- and i use parents as a proxy for anyone wise and old. most of them are going to try to talk you out of crazy things, but sometimes the crazy ideas are the ones that do kind of spread around the world. the second thing i would say is probably solve your own problem. a lot of people are looking for markets. we were not looking to go into a good market. we were just trying to solve our own problem. if you solve your own problem, you may have just solved the problem for a million other people and it might be quite monetizable and it might be quite marketable. the next thing i would say is focus on love. sounds like a weird thing, but i think a business is simple. build a company people love working for that creates something people love consuming or using. i just -- i don't want to say it is so simple, but it all comes back to compassion. ♪
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