将恐惧与逆境化为燃料｜Doug Leone，Sequoia Capital

All right, we were just talking before recording, and you just said something that's very interesting. We were talking about people who dominate for decades. You're one of them, and you said an interesting question is to ask how and why somebody would dominate for decades. What's your answer to that?

My partner in India said there are many roads to heaven, and so there are many ways to dominate. Take Steve Jobs: he had really one job, and he dominated in that domain for a lot of years. Or Jensen Huang. Those are more linear. Those are gifts where you find yourself in the middle of the hurricane, and you just want to keep on going because, as the world changes, your job changes.

What's more interesting is, how do you dominate when you have to remake yourself over and over again? And why do you dominate? Starting with the why, I think it's a deep and secure need to remain relevant and prove to yourself that you're not getting old and you're not going to be out of date.

If I look back on my career, each time I remade myself, it wasn't really done out of a vision of greatness. It was done out of fear of just being gone. Even a few minutes ago, I asked you, "Let's not make the interview be about yesterday. Let's make it about all tomorrow." I still have that fear at the age of 69.

And the how, I think you have to be willing to let go of your ego. You have to assume you know nothing each time, and you're willing to start at the bottom. So when I came back to Sequoia, they gave me this fancy title of chairman. We were in front of our LPs, our investors, for the first time about 6 months ago, and someone asked me about chairman. I told them, "It's a bunch of bullshit."

What I really am is an analyst. I'm a low-level analyst, and I have to prove myself. I just got back from vacation this morning. I've had 90 days of getting calibrated, and my partners asked me, "How do you feel after 90 days?" I said, "I feel like I'm good for nothing. I feel like AI has gotten further away from me than when I first started 90 days ago."

And so I'm terrified. I told one of my partners just an hour ago that if, 9 months from now—which will be 1 year since I returned—I feel just as irrelevant, then I'm going to take myself out. I don't know if I can do it yet another time. And therein lies the fun, and therein lies the answer to your question.

Do you know who Jimmy Iovine is?

No.

Okay. Jimmy Iovine—he's another guy who dominated for decades. He was in the music industry for 50 years. A lot of people know him because he had the insight to start building businesses with his artists. So he co-founded Beats with Dr. Dre. They wound up doing Beats Music and the headphones, and they sold it to Apple. I think he's the guy who was involved with John Lennon at the very end.

John Lennon.

He was an engineer and a producer for John Lennon.

Yes.

You love him. He's a fucking Italian from New York.

1. Turning Fear Into a Tailwind

I know who he is. I forgot his name.

He's awesome. I did an episode with him, and now we've become friends. We talk all the time. He's quite a character. But there are 2 things that, when you were talking, he said the same thing. He's like, "I don't have a rearview mirror." He said the same thing when we sat down. He's like, "I don't want to fucking talk about the past. I want to talk about what I'm doing now." He's like, "There's no trophy room in my house."

Yes.

"I can't even tell you what I did 5 years ago because I forgot. I'm worried about tomorrow." It was very interesting. But then my question: you brought up being terrified, and then you said fear before that. What's your relationship like to fear?

2. Staying Grounded & Developing a Sniffer for People

Jimmy gave me some of the best advice. He's like, "Most people, when they feel fear, let it be a headwind." He's like, "I train myself to make it a tailwind. As soon as I feel it, that means I have to fucking go forward right now." Yes—right now. Do not think. Step forward. What's your relationship with fear? How do you deal with it?

Throughout my life, I felt an awful lot of fear, and it's always been the challenge in front of me. I was afraid of public speaking, so I made sure I became the very best. I was afraid of heights, so I worked on sailboats. I made sure I was up on 96-foot masts. Whenever I feel it, I face it head-on. It's almost a challenge.

Look, there's a story that my partners know. I had to get a tooth drilled for a root canal, and I had to go to a meeting right after that. I told the dentist, "Drill without any Novocaine." He said, "You're out of your mind."

My whole life, I wanted to see if I was a badass or not. In other words, am I a fake badass that has this veneer nobody can see through, or am I really a badass on the inside? I told the dentist, "Take it out with no Novocaine." He drilled, and I jumped. I told the dentist, "I won't move again," and I didn't move again.

I used the trick of thinking what it must be like to go to war and lose an arm or 2 legs. That's pain with consequences. Mine was pain with no consequences. I just said, "It's just nerve endings from there to my spine to my brain. Fuck it. I'm not moving."

3. Immigrant Drive, Hard Work & the Beach Club

I had to go home and change my shirt because I was a puddle of sweat, but I didn't move. I love fear. It does wonders for me. It gives me the challenge to overcome, which then gives me a sense of security.

You mentioned working on sailboats. I read something about you—you were doing this when you were a young kid, right? You were in high school?

Yeah, high school and college.

And it was across the street from—or across the river from—a country club?

No, it was in a country club. The country club had the yachts in the water, in the pool, on the side.

Do you remember what you said about this?

Yeah, I know exactly what I said. I said, "I'm going to get those fuckers later." It was all the rich kids.

What does that mean?

It was all the rich kids being lifeguards, talking to all the girls at the age of 16 or 17 by the pool, having the times of their lives—kind of having the life that some of my kids have now. I was crawling in sailboats, running wires through, sweating like a pig, working overtime, and just looking over at kids my age having the times of their lives.

I said, "I'm going to get you all fuckers later." And I did.

That is such a recurring theme throughout the history of entrepreneurship. I felt it that way. People are like, "Oh, I'm the first person to go to college." No one in my family even graduated high school.

4. Why AI Is Different From Every Previous Technology Shift

I remember going to public school, and there was this kid who would drive $130,000 cars 20 years ago. He was in one of my classes, and his dad owned a fucking ton of Domino's franchises, which I had no idea were phenomenal businesses. The insane thing is, he had a phenomenal business. He did, yeah.

He and his dad went to lunch. They took a helicopter about 200 miles to lunch. I was like, "What are you talking about? I'm working full-time at 15. What are you talking about?" That's exactly how I felt.

I'm working on this other project for my other podcast, Founders. I'm starting to read a lot about Mike Tyson, and Mike Tyson has a video where he talks about the difference between the way he grew up and the way his kids grew up. He says his kids would be about 15 years old, and they'd say, "Look at the star athlete at school. Wow, look at Tracy[?]. She's so amazing." And he goes, "I wasn't like that. What I thought when I saw these people was, 'Wait till I get my shot. Wait till I get my chance. I will show you exactly what that actually means when I come around.'"

Now, the trick is to use that as a motivator without being an asshole when you're later in life. Don't do unto others as it was done unto you. How do you take this incredibly negative experience, make it a positive experience, and then, as you mature, use it in a positive way for the benefit of not only yourself, but everybody else around you?

Point 1. Point 2—

Before you get to point 2, how have you done that?

My need to get them back kind of ended by the time I got to 50 or so. I mean—

50? Yeah. Well, it seems like a long time—

But it's not. It took a good 30 years to overcome that weakness, because in some ways it is a weakness. It's a false narrative. Those were not bad kids, and I don't want to live in a false narrative. I finally outgrew it.

But the other point, which is more important for me anyway, is what you do with your kids. Giving your kids that level of life is not necessarily a good thing, because what they're going to be missing is the drive that Mike Tyson, you, I, and many people we know had. That's not the best thing ever.

I think you have to inject some misery into your kids' lives so they have that hunger. It can be fake, because they know it, but you can't give them everything. Otherwise, they won't be hungry.

How many people who grew up wealthy have that drive?

A good amount of kids who grew up wealthy have drive. Drive can be caused by many things. We have a partner who, I'm sure, grew up with means, but his drive came from competition with his twin brother. They both attended the same college. They were both wide receivers on opposite sides of the field. They adore one another, and they love nothing more than beating the shit out of one another.

So drive comes in many ways. I have a son-in-law who is driven like crazy. He has an older brother; I’m sure they fought. He cannot stand cheese because his older brother loves eating cheese. It shows you these little things.

We had a session at Sequoia where we checked in, and one of my partners suggested that, for the check-in, we say, “What is the vignette in life that made you who you are?” One partner said—and he cried when he said it, and a lot of us cried—he got on a bus when he was 11 or 12, and a girl he thought was cute looked at him and said, “Boy, you’re fat.”

Now, to you and me, that sounds like a minor thing. To him, it changed his life. 30 years later, he still wakes up at 4:00 to work out. The stories were, in some ways, ridiculous, but in some ways, it’s really amazing to see how a little kid is affected and how long that vignette carries someone through life.

What was your vignette?

It was the beach club. It was being ridiculed in high school because I couldn’t speak English. It was being made fun of in a classroom. It was being called pasta in high school. Those are all the things that, because I was an immigrant, when you’re not strong enough, you survive and endure, and then you try to overcome while remaining a good human being.

5. Simplifying Life & Choosing Discomfort

You mentioned the importance of inducing misery into your kids’ lives. Do you still induce misery into your own?

Yeah, no. I’ve gone full cycle and have spoiled myself with material things. I realized they don’t make me happy at all. I got rid of a whole bunch of material things. I sold my fancy cars at a great discount. I just wanted them gone. One day I woke up and just didn’t want to have cars with vowels at the end of the name. I just got rid of them.

I wanted a simpler life. I wanted to start to enjoy the little things in life. Now, having said that, I do have toys. I don’t want to make it sound like I’m living the life of a monk, but I’ve shed assets on purpose just to simplify my life.

If you get down to the really important things in life, which really, at the end of the day, are your family and friends, that’s the most important thing. It’s not just shedding material things or inducing pain or misery into your life at this point in your life.

Going back to work definitely wasn’t the easiest move I’ve ever made, and I’m in the middle of that right now. I’m quite miserable at Sequoia right now, not because of what anybody else does, but because I feel that, 3 months into it, I’m really good for nothing.

Let’s say when you were building, in your first few decades there, did work always feel like work, or was it something you were addicted to doing? You were obsessed with doing it.

No, it felt like an overwhelming challenge that I didn’t know how to conquer. And I felt that until the day I stopped working at 65.

You’ve got to spend time with Jimmy Iovine, dude. I’m telling you, I think you’d love him. He’s been around some of the greatest, most talented people in history. He worked with John Lennon, Bruce Springsteen, Dr. Dre, Eminem—just crazy people.

Everybody great has a bend in the pipe. There’s just something wrong with them that makes them different. Also, the same side of their genius is their dysfunction. For himself, it’s the same thing. He’s like, “It was never fun to me. It was work. It always felt like work.”

6. The Homeless Sequoia Partner With No Plan B

And he goes, “My bend in the pipe was that it has to be done.” What he meant by that is, if I’m taking on this business, if I’m taking on this project, if I’m telling you I’m going to do something, I will do it to the point where I almost kill myself before I give up. I have to succeed at it. It’s very similar to the vibe I’m getting off of you.

Yeah. Look, failure was never an option in my life. I had no Plan B. I remember when I was made a partner at Sequoia, I was down to $0. I’ve never said that to anybody, but there was a time in my first month as a partner when I was homeless. I slept in my car for a week. I showered at 3000 Sand Hill Road. I was down to $0.

Sequoia, back then, would buy you a car when you made partner. I bought a car. I didn’t have a home. I slept in my car for a week, and then I had some money and started renting a place.

What was going on in your life that you were homeless?

I went through a divorce when I was 30 years of age, and I gave my ex-wife everything. I was living on my car allowance of $400 a month, so I didn’t have a home for a month. For a week or so, I slept in my car. Then one of the other associates let me live with him for about 3 weeks, and then I had enough money to rent an apartment.

So I chuckled for a week that I was a partner at Sequoia and I was homeless. I was the only homeless partner that Sequoia has ever had. I don’t think I’ve ever told that in a public setting.

At this point, you can’t go any lower than you already are.

Oh, no. You can go a lot lower. First of all, I was healthy, so you can get a lot lower than that. You can be sick with a disease.

Good point.

And second, I was a partner at Sequoia. Are you kidding me? My present value, my future earnings, was going to be terrific. So I wasn’t panicked. I just knew it. It was only an inconvenience, and I saw the humor in that for about a week.

7. Stepping Down, Coming Back & Starting Over

Clearly, it would not have been funny to be homeless for a lifetime. And if you’re truly homeless, that’s not funny. But in my case, it was: I was a partner at Sequoia, showering in the shower at 3000 Sand Hill Road, parking my car a little bit further away from the office, and sleeping in my car.

So go back to what you were saying—the level of discomfort that you’re currently experiencing. Why did you retire to begin with, and then why did you return? If you found a company, you have a CEO seat. You can stay as long as you want. You can take it public. You can sell it. It’s your gig.

I didn’t found Sequoia. I was a hired gun. So it seemed to me the right thing to do was to get out of the way and let the next generation have their turns at bat. Don Valentine founded it. He stepped away at around the age of 63. I figured 65 was the natural age, and on my 65th birthday, I stepped down. I chose a successor.

Did you want to step down, though?

It wasn’t a matter of whether I wanted it or not. It was the right thing to do for Sequoia, and so I chose Roelof. I was the old king; he was the new king. It seemed to me that, being the old king with a new king around, you shouldn’t be around. You should be removed. And so I stepped out.

I was on 10 boards, and I thought that would keep me busy. I founded a biotech company. I thought, “10 boards, a biotech company—I’m going to be busy as heck.” Not even close, because I had the curse that all my companies were working. When a company’s working, there is nothing to do.

I had a great backlog of companies and I wasn’t busy. So I started taking drum lessons, guitar lessons, and piano lessons, and that took me for about a year. After a year, I thought I was going to lose my mind.

It turned out Roelof stepped down. Pat and Alfred took over. They weren’t the kings I chose, and 30 days into it, they came to my house and said, “Would you like to come back?” I wasn’t on 10 boards anymore; I was on 6 boards. We sold 4 companies. There were companies like Wiz and so on.

I said, “Sure.” We cut a little deal in an afternoon on a single sheet of paper that we scribbled.

For the 2 years before, they always asked me publicly, “Why aren’t you around more?”

My answer was, “It seemed to me that it’s best to stay away and let the new king just do his thing.” When the old king–new king dynamic went away because Roelof was gone, it was much easier for me and for them.

They came over—a surprise visit. I don’t know whether they wanted to see me, and I said, “Sure,” right on the spot. It wasn’t that long a conversation.

Yeah. That’s why I asked if you saw it coming, because you—

No, it was, of course, a surprise. We agreed that I would attend partners’ meetings. I would be in the inner circle. I would help them spot crucible moments, as we say, to figure out how to navigate them, and make a couple of investments.

I’ve done everything but make a couple of investments. I told them I wanted to do nothing for 90 days.

I want to get calibrated. And here I am now, day 91, panicked.

8. Fred Luddy, Israeli Founders & Radical Directness

Yeah. But you obviously know this: we're going through this massive technological revolution, this technological shift. Somebody with decades of experience who has seen so many things, and so many different companies and founders come and go—that's valuable, invaluable wisdom to have inside the company.

Yeah. Except that the world changes, and this changes more dramatically, too, through AI.

Yeah. But how many different changes have you been through?

I understand, but this is the most radical change. This is an industrial-revolution kind of change. And so, as I said, I'm 90 days into it. I feel further away now than when I got into it.

I came back from vacation over the weekend, and I saw a memo. I won't tell you the name of a startup company that wants to raise money without anything at a $10 billion pre-money valuation. It gets my head spinning. I didn't know if it was a joke, or if maybe their partners wanted to do that to make fun of me. No, because they would do that.

And it wasn't a joke. I've never seen revenue growth in this space. I've never seen prices like this. One could say all you have to do is add 3 zeros. It's the same type of business, but it's more complicated than that.

I've seen a lot of changes. I have good instincts, but I don't want to rely too much on the past. It's not like I just have a little corner of the past that I check things against. I have my heuristics, my 3 or 4 questions I ask myself with each investment. I can discuss those, but I'm focused on what the world is going to look like.

I would love to know these questions and these heuristics that you ask. I'm very skeptical because I read history for a living, right? Every time throughout history, you hear, "This time is different. This time is different," and it's never different, right? But this time actually might be different.

I was thinking, who could I talk to who could actually answer this question for me, who's just seen a lot more? I was talking to Michael Dell about this, and I asked him, "Is this time actually different?" And he's like, "Yes." Then we had this 30-minute talk where he went through why he thinks that business is being rewritten and this time is actually different. What are the heuristics that you were mentioning earlier?

9. Doug's Three Investment Heuristics

I have 2 or 3 of them. One of them is, "Would I put my kids' money into it?" Second, "If I only make 20 investments in my life, is this one of the 20?" Third, "Can I return the whole fund with this investment?" If I don't pass those 3, I'm not going to make the investment.

The reason I put my kids' money into it is that it gives me the judgment of quality. The reason for the 20 is that it raises the bar. It could be investable, but is it really the home run? That's the same thing as the third question. Those are questions that I've always asked myself.

Can you say more about the bounding of only having 20? There's probably 200 investments that you can make in your lifetime, and a lot of them are going to return 2 times your money or 3 times your money.

I only want the ones where you can return 100 times your money. That's all I'm interested in. I want the outliers. I want the ones that really drive tremendous returns.

In my lifetime, the first was $100 million, then $500 million, then $1 billion, then $5 billion. Then Alfred hit $10 billion, and now Shaun hit $20 billion. I told Shaun, "You ruined it for me. I'm not going to show up now with a $4 billion gain."

Was that SpaceX? What was that?

Yeah, it's SpaceX. We haven't cashed out yet or whatever, but there's a shot at a $20 billion gain and more. He ruined it for all of us.

10. The Cost of Selling Great Companies Too Early

The ones that are your best-performing investments, I'm always curious if you can actually see it back then.

They always surprise you on the upside.

Right?

Always. They never surprise you when they fail, because that was always one of the scenarios you had thought about, or almost always was. But when they run, they surprise you, and every venture investor has made the mistake of selling their winners too early—every single venture investor.

If you look at the great companies, they've compounded 20 years after the IPO: NVIDIA, Google, or Meta. If you had a little sniff that this thing had, essentially, an unbounded market for many years, you should never sell a share.

You can make way more money holding those, because if you're compounding a $5 billion gain, that can turn into a $50 billion. If we held Google and hadn't sold, that would be worth a great deal; NVIDIA would be worth half a trillion dollars. There are no investments that can give you that.

We owned 20% of NVIDIA. Think about that. We owned 10% of Google, and there are many others. Apple—are you kidding me? We were the first investor in Apple. Cisco—we owned a quarter of Cisco Systems. Those are big ownership stakes in very big companies. But we all made that mistake.

Sometimes the best financial decisions are not financial at all. If you think about the wealth created by Sam Walton, obviously he gave it away before it accumulated for his kids. But if it was still in one person, it would be worth half a trillion, whatever the number is now.

He wasn't making a financial decision. He just liked Walmart. It goes back to what Nick Sleep said. Nick Sleep has this great quote: "The best investors aren't investors at all. They're entrepreneurs who never sold."

11. Helping Founders Turn Products Into Businesses

Exactly. That's exactly right.

You've mentioned a few times, and I've heard you say elsewhere, "I'm on boards of cybersecurity companies. I don't know anything about cybersecurity. I'm on the board of a financial-services company. I don't know anything about financial services." What does that mean?

It means that I'm interested in the business and the building of the business of a company, not in shaping the technology of a company. I'm not a product-manager type. That's what founders know. In some cases, that's the only thing they know.

They're getting younger and younger. They're 23 years old or 22. They're engineers, and they know that domain. If they have to rely on me to help shape the product 10% or 20%, we're in big trouble.

But then you have the business. You have the selling of shares, not the selling of product. In the selling of shares, you have to wrap everything into it, which is the analysis of the market, the product marketing of the final 10% of the product so it's saleable. I can help with that: the product marketing and messaging, demand generation, lead generation, the revenues, support, accounting, and so on.

Oftentimes, companies break or suboptimize that. That's what I get involved in. In order to do that, I don't have to be an expert in the technology. In fact, I'm only partially interested in technology. I'm much more interested in helping founders build a business.

Say more about that. How do you take a 22-year-old who, when he comes to us, is an outlier in something in life, probably with an IQ of 150 or above? All the adjectives venture guys use in a negative sense, I use in a positive sense: irreverent, they don't listen. Love it. Give me those founders all day long.

Who wants a founder who changes his or her mind depending on who they last spoke to? I want a founder who, for the last 5 months, has gone to sleep and woken up 3 hours into their sleep just thinking about the problem, thinking of a solution, crystal clear on what they want to build. No one can distract them. They're driven like crazy, and so on. That's what I want.

But now we've got to build a business. Who do you recruit as the first 10 engineers? What does your first salesperson look like? Do you want people who are up-and-comers? No one who's established and great is going to join you as a startup. That means you have to have an eye for these up-and-comer people in sales and marketing, because the established people are going to play it a little safer.

To help navigate all the sets of issues, that is what we at Sequoia, I think, are the very best in the world at.

12. David Vélez, Nubank & the Psychology of Founder Support

Can you give me some examples of founders you partnered with where you felt you had the best partnership—founders who responded to this, and whose business you helped mold, shape, and build with them?

David Vélez of Nubank. The reason I choose him for this example is that he was an associate at Sequoia, so I knew him well. I hired him out of Stanford Business School, and I had to give him the bad news that we were not going to open a Brazil office after he moved to Brazil.

He committed to Sequoia and moved to Brazil. We made 2 investments, and we finally figured out there were no engineers. A few engineers come out of Brazil, and everything coming out of Brazil was, "We are the Uber of Brazil. We are the DoorDash of Brazil." No real novelty.

We had to make the call: "David, we're not going to open the Brazil office." We offered him a job in California. He had a notion of a financial-services business, a credit-card business in Brazil. Minor problem: he wasn't from Brazil, and he knew nothing about financial services. But he had a heart of gold and a heart of a lion. He was a good man, driven like crazy, and no one could stop him.

We seeded him, and I remember the call. One night I was at Epic Roasthouse.

I still remember getting a call at dinner. It was him. We had committed $1 million. He said to me, “What do I do next?”

I was in the men’s room. I took the call from the men’s room. We talked it through. He knew what to do next; he was just all alone. “What do I do now?” It was more of a psychological-assistance call than a call about what to do next. He wanted some support. We made a plan for the first 2 or 3 things, and he didn’t miss a beat. He didn’t miss a single beat for the first 2, 3, or 4 years. We built a company now worth—I mean, it was big numbers a few years ago—$60 billion now. Like I said, I just saw a startup that wants to raise money at $10 billion pre-money with no run rate. I don’t know what things are worth anymore.

Well, David has a fantastic reputation. There are a ton of people who have come on the show, or people who want to come on the show, and I always ask them, “What other founders should I talk to?” It’s like, “This guy is incredible.” This is surprising: an associate at a venture firm then becomes a world-class founder.

Are there other examples that you can think of that follow his pattern?

I’ve seen it the other way. I haven’t seen too many associates becoming founders.

Yeah, you’re actually one of the few. I think most VCs are full of shit when they say, “The founder is the star and the founder is the most important.” You use this thing where 0 to 1 is the black magic, and that’s the founder’s job. I can’t help with that. If you need me to help with that, then we’re all fucked.

We’re all fucked.

And he’s like, “If the VC could do that, they’d be founders then.” And I’m like, you know, Dax from ICONIQ.

Yes. He’s a killer.

I just had a fucking crazy lunch with him.

He’s a killer in our conversations.

I wish we had just recorded that. I literally came straight from there, and I was talking to him about you because I’m like, I actually think Doug believes this. I think when other VCs say this shit, they’re full of shit. They actually want to be the guy, and they’re very uncomfortable not saying, “No, I’m actually assisting them. I’m in the service business.” I think you actually fucking believe it.

No, we are. The trick is to retain that founder in a company forever, if you can, and for as long as possible, because once you lose that founder, you do lose the soul of the company. A company has many refounding-type moments, and we saw that with Meta. Think of what Meta would be without Instagram. That company might be gone. Who pulled that off? Who bought that company on the weekend?

13. Why Founders Must Remain the Soul of the Company

We closed the investment in Instagram on a Thursday, and he sold it on a Sunday. Great IR, but we didn’t make any money, really. You want that founder in the building for as long as possible. Think of the refounding of Apple.

Your partner—I quote this on my other podcast all the time—Moritz has that great book. He wrote, obviously, The Little Kingdom in whatever, the ’80s or ’70s, whenever it was, and then he updated it, I think, in 2009, to Return to the Little Kingdom, and that updated it forward again. Moritz is a crazy writer. His writing is—

He’s incredible. You should have seen his internal memos. His reports to the limited partners were funny as heck.

It kills me because I read biographies for a living, and the 60-page ones—you know, all these obscure ones that people are not supposed to have—they all come to me anyway because I do this for a living. I sat down and read the Don Valentine one that he wrote in one sitting, and then somebody who’s mentored by Moritz, who I’m friends with, I was like, “Dude, I have to fucking do a Founders episode on this.” It came back, “Absolutely not.” I’m like, “God damn it.”

I remember when Mike and I—we both ran Sequoia—a cold-blooded, strategic Brit and a tactical, gregarious Italian. We had no business being partners, but we made it work for 25 years. I remember I had a dictionary in my desk, a little black dictionary, because Mike, in a partner meeting, would use a word that you had to know the meaning of because it was the key to the sentence. I remember faking like I had to go to the bathroom and going to look it up: “What does that mean?”

Well, the writing that he put in there—I think he said turnarounds are difficult no matter what. In technology businesses, they’re doubly difficult. They’re almost unheard of. He’s like, “When has there ever been essentially a refounding of a technology company in the middle of a turnaround?” And then he has a great line. He was like, “The first time, he had a partner; he had a co-founder. The second refounding, he was by himself.”

By himself, yes.

Even if people don’t read the entire book, which I’d highly recommend, just buy Return to the Little Kingdom and read the foreword that Michael Moritz wrote. It gives you an insight into the psychology and just how rare a talent Steve Jobs was.

One could argue that NVIDIA had a refounding moment. It was a graphics-chip company, no? No company up to then had made it through 2 cycles in graphics chips, and it had already achieved the 2-cycle thing, which shocked all of us. And then we all fell asleep. They came up with a GPU; for many years, it was, “Okay, it’s a faster CPU.” And one day we all woke up and NVIDIA was an AI company. That was a complete refounding by the same founder.

I found one of my all-time favorite quotes when I was reading the book Zero to One. The quote says, “The single most powerful pattern I have noticed is that successful people find value in unexpected places, and they do this by thinking about business from first principles instead of formulas.”

14. Torturing Yourself Into Greatness

When I asked you if you induce any misery into your life, like you were saying you should induce it to your kids, I was thinking about Jensen Huang because there’s this book by Tae Kim called The NVIDIA Way, which is kind of a company history of NVIDIA, but it gives you enough biographical background that you can function as a biography of Jensen Huang. And he says something in there where he’s like, “I don’t like giving up on people. I’d rather torture them into greatness.” And you get to the book, and he’s like, “Oh, he does that to himself.”

Of course he does.

He tortures himself into greatness. He wakes up in the morning, looks in the mirror, and asks why he sucks so much.

And if you’re willing to do that to yourself, people will follow you. People will torture themselves all the way until the goal is met. But you have to be willing to do that to yourself, and people see that.

Did you torture yourself?

Absolutely. My whole life. That’s all I know.

So your inner monologue is negative?

I’m kind of a miserable soul on the inside.

Say more about this.

I’m always a little unhappy. My instincts are to be unhappy, and I carry a positive vibe. People see me as fun to be around. It’s not an act, but in my private moments, I’m pretty unhappy—always. I’m pretty miserable, and nothing changes. I’ve had a reprieve when I’m with my kids, my grandkids, some good friends, or on a golf course. I don’t play golf—I suck at golf—but it’s the same 3 guys, so we can laugh for 4 hours.

I’m going to interrupt you real quick. Did this start when you came to this country? You tell the story of being this precious, sweet little boy at 10, and then at 15—

Yeah, yeah. David Ogilvy has this great way to put this. He says all great people who do great stuff are divinely discontent.

Yes.

Just never satisfied.

A word I’ve always hated, that I’ve learned to like, is “content.” I hated that word until about 2 or 3 years ago. It felt like settling for something. Now, as I get older, it’s okay to be content at this point. Maybe I’m over the hill because I’ve accepted that word.

Stop talking about yourself that way. You’re not over the hill. You’re not quitting either. I don’t like this attitude. You’re 91 days in. You’re not giving up 9 months from now.

I’m not giving up, but I’m scared. Maybe it came through that I’m scared shitless.

Good.

Yeah.

That means you’re fucking doing something.

I haven’t done anything yet. I want to—

Okay. You’re not ready to be out of the game.

So I was never out of the game.

Exactly. That’s my point.

I was never out of the game. Well, one of them—I don’t think of it as a game.

I think it was a business where people were employed. 70% of our capital comes from nonprofits and charities, so I never thought of it as a game. In fact, when I ran Sequoia, I made sure we used all the right words. It’s not a game. It’s not money in the ground. It’s a business where we’re trying to help founders build great companies so we can have great returns for our limited partners. That’s the business we’re in.

But if I take myself out, it won’t be out of fear; it’ll be out of good taste and kindness for my partners. It’s not out of fear. I’ll never give up out of fear. But if after a year I’m not good for anything, I’m going to be the one who looks in the mirror and says, “You’re done. You couldn’t do it this last time.”

Now, I’ve done a whole bunch of good things in the last couple of years that I want to get into, including starting a company and so on. I happen to think I’m at the top of my game, but in this one, I have to show it. I haven’t shown it yet. It’s all in performance. It doesn’t matter what you do; it’s the results at the end.

15. Don Valentine, Succession & the Sequoia School of Hard Knocks

Have you seen anybody in your business stay too long?

Stay too long? Many people.

Did Don?

No, Don. Don stepped down in 1993. I believe—I’m going to guess—he was probably 58 to 60 years of age. He didn’t stick around for too long.

Why did he stop?

I think he had enough. He had 2 guys, Mike Moritz and me, whom he thought could take over. He had older people who wanted to take over. It’s interesting how Don told us we were the guys. There wasn’t a big conversation. It was a yellow sheet of paper.

Don always wrote in green pen on a yellow sheet of paper. One day, we got a little note that said, “Mike 1.1, Doug 1.1, the other name—another young man, I don’t want to embarrass anybody—1.0. You know, the older guys, that was division of the carry for the next fund. DTV, done? You figure out what you want to give me.” That’s how Mike and I knew we were the 2 guys who were chosen.

There wasn’t even a conversation.

No conversation.

So, I’m a big fan of the way he thinks and the talks he gave.

Maybe he talked to Mike Moritz. He didn’t talk with me. I just saw this sheet of paper.

(Laughter.) To me, when I think about him, there’s a simple genius to the way he thought and operated. Would that be an accurate way to describe him?

I think part of it was accidental. Look, I love Don Valentine, and there’s not a bad thing I can say about Don Valentine, but Don also made a ton of mistakes, as we all did. We sold our Cisco shares for cash for a total gain of $90 million. We owned a quarter of Cisco Systems. How big is that mistake in dollar terms?

What’s Cisco’s market cap at its height? It might have been half a billion. So, what’s a quarter of half a billion?

A lot more than—no, sorry, not half a billion. Half a trillion. Yeah, I understand.

Half a trillion. A lot of money.

A lot more than $90 million.

But look, we all made mistakes. How many distributions did I push for at ServiceNow? I left a 10x-er on the table. 10x. It’s crazy. We left billions upon billions of dollars on the table, as we all did in the venture industry.

But you know the story. I’m sure that you’ve heard the story of my review by Don Valentine.

I came out of a presentation with Don, me, 2 other guys, and a founder. I guess I asked some questions, maybe too aggressively. There was a note on the table when I got up: “Doug—not fit to listen to founders.” He left that on the table for me to see.

I love whenever I hear young guys say, “I’d like some feedback,” and I get a 3-month review. That was my review right then and there. That was the school of hard knocks. Those were the semiconductor days. Of course, we evolved through time.

Founders are the most important person in our business: founder first, our client second, and us third. It’s not that we’re Boy Scouts; it’s that we are third. But we knew if we did right by founders, we’d have great returns, of which we’d share.

Don Valentine was wonderful. Don Valentine was the one when everybody wanted me out at Sequoia because I was insufferable. Don Valentine was the one who said, “Give the young guy a little more time.” So, he saved my ass.

Back to this mistake of selling early: I just finished reading this book. It’s essentially a biography, published in 1966, about all the merchant-banking families. It’s called The Merchant Bankers. At that time, they were all family businesses.

One of my favorite quotes in the book is this guy bitching because they owned, like, 20% of some company, like DuPont or something, back in the day. He’s saying this in 1915: “Do you understand? If we didn’t sell this, we’d be billionaires in 1950.”

Yes. Yes.

So, that’s a very common mistake. Most companies, if you hold them too long, go away because technology changes. But if you have a sniffer for one of these that happens maybe 5 or 10 times a cycle—maybe it’ll be a lot more in this cycle—if you can sniff one of those and hold on to it for 20 or 25 years, there’s really nothing else you have to do in life.

Are most of your friends investors or entrepreneurs?

Most of my friends are neither. Most of my friends are people I met in my early days of life who have blue-collar jobs and are nowhere near the technology world. I have maybe 2 friends in this environment. Most of my friends are from high school and maybe college, or from Italy.

Even further back. Yeah, even further back.

You know, I just came from Italy a couple of days ago. I spent a couple of days with a friend of mine who’s a cop at the airport in Genoa, Italy. He’s one of my closest friends.

So, you’re still able to relate to people even though—

Just the notion of “relate to people”—I find that kind of weird.

Relate to people. It’s almost as if, “Ah, you’re there. I can relate to you.”

No, but you know how this goes. People start out with nothing, they get really successful, and it’s like they isolate themselves.

No, no. Thankfully, I’m still normal, and that’s maybe one of my few good traits. I make sure that I lead my life with no handlers.

Look, I have everything in life that somebody needs, but I have no handlers. I have no personal assistant. I don’t have anybody who cleans up after me. I still take my water glass down in the morning and put it in the dishwasher. I cooked yesterday afternoon. I washed all the pans and everything on my own.

Those are the things that keep me grounded in this crazy world in which we live here in Silicon Valley. In a way, I think of myself as a fairly simple man who found himself in the right place at the right time, didn’t screw it up, and whose only true skill is a sniffer.

You keep saying “sniffer.” What is it?

I have an ability to walk into a room in a business meeting and know what everybody’s thinking, and know what everybody wants to hear. I really haven’t lost an investment in 30 years in Silicon Valley. People have beaten me because of price, but I haven’t lost otherwise.

Relating to not losing an investment, I have a sense of what people want. That same sniffer takes me through what a business is like, what’s a real business, what’s a dream, and what’s a pipe dream, even though I do not know much about the technology. Maybe a way to say it is EQ. That is really my main skill.

The other thing that I pride myself on is that I’m a very good soul. In fact, the Sequoia spec for the people we want to hire has changed. We had this complicated spec; it’s now down to a hypercompetitive person with a heart of gold. That has become our spec in the people we hire.

16. Hypercompetitive With a Heart of Gold

We want people not like me, but who are willing to do the right thing when it’s highly inconvenient for the person doing it, and who are willing to walk through walls in order to win in an ethical kind of way.

How do the people you want to hire differ from the founders you want to back?

Same thing. Same. They need to be outliers. The founders we want to back have to be extreme outliers in something: IQ, drive. It’s kind of the same thing in the people.

We have all these adjectives when you walk into a Sequoia office: reverence for the outliers. To me, they’re the same adjectives in the people that we want to back and the people we want to hire. I think we look a lot like our founders. We don’t give up.

When we go back to this idea that you said earlier, where it’s like, “Hey, some of these other traits that other venture people don’t like in founders,” I love them. I’m very attracted to them.

Going back to the founder of Nubank, did he have those founder traits?

He had a combination of smarts, drive, clarity of thought, toughness, goodness, and judgment. He was mature, way beyond his years.

Look, here’s what I have to tell you. We interview people, and Mike Moritz had a great line. He called them half-pages or full-pages. You interview someone, you write a half-page, and there’s nothing else to write. You’re there for 30 minutes, you look at them, you watch them, and think, “God, I can’t believe it. I’m done.”

Then you have people where you look at your watch and an hour has gone by, and you can’t believe it. David was one of them. The hour flew by, and it was clear to me that we loved this person.

He tells the story to show you how Sequoia works. I said, “Yeah, there’s somebody else I want you to meet.” He made it to his car, his phone rang, and it was Mike Moritz.

He didn't make it out of the parking lot. That's how fast we move. We pulled him right back in, and Mike met him. Within 2 minutes, Mike and I knew we were going to hire this kid.

I had interviewed 10 or 15 people from Brazil. They all looked the same. They were all super-smart, fine, wonderful guys and girls. They all went into consulting because that's how you self-select in these new markets. I saw it in India and so on, but they all looked the same. I couldn't tell them apart.

Then I met David Vélez, and within 1 hour I knew for sure that he was going to be the person we were going to hire.

Who are some other great founders besides him that you partnered with?

Fred Luddy of ServiceNow. He was older, but he made everything simple. He came to Sequoia to present, and he told us everything that was fucked up with this company. It was wild.

Everything that he screwed up—I mean, if you didn't want to sell shares, of course he knew what he was doing, but if you didn't want to sell shares, that would have been the type of pitch. Now, we all still saw through that and so on, but he was terrific. Complete clarity of product.

He simplified this thing called workflow, where I ask for something and you respond, and you answer back and ask me for something. He simplified workflow to the most basic way that people can communicate. That was the foundation of ServiceNow. That was incredible, incredible.

And then you get into the Israeli founders, which I adore. They are tough. Keep in mind, they think incoming missiles are kind of everyday occurrences, and so they're naturally tough. They don't take any shit. They're smart as hell.

Somehow, they know what America needs way over there when they work at Unit 8200, which is one of the units in the Israeli government. They're very trustworthy. They're terrific. I love them, and they're tough as hell.

The conversations with these founders are usually with men. No, actually, there's a woman who used to be a spy in Iran. She's tough as hell.

Now she's a founder.

Yeah, she's a founder.

What's her company do?

It's a cybersecurity company, but not with her—although, a little with her.

It's almost like when you talk to these founders. Have you seen that sport—I don't know what it's called—where you smack the shit out of one another? One guy smacks the other guy. We had the founder of Dana White's company on the show.

You take it, and then the guy smacks you. It's not quite that bad when you're in front of them, but there are no holds barred. They will tell it to you straight. You'll give it to them straight. It's productive, it's not personal, it leads to an outcome, it leads to an agreement, and it takes 15 minutes. It's just terrific.

17. Trust Is the Accelerant of Business

How do you build trust with the people that you want to invest in?

It doesn't start with trust. It always starts with fear. We had the big, bad venture guys who, in their minds, wanted to own their whole company. In fact, I love to tease founders when they ask me, "How much do you want to own?" I say, "We usually start being happy at about 100%, but we can go from there." I do that on purpose to take the nervousness out of the room.

The way you build trust is first to go in and explain to them, "We don't want to screw it up." It all starts with that. Then, having the conversation with them that begins to show them you might know something about their business, and paving the way for them to ask you the first question, which may come in an email—the first little bind they find themselves in.

If you rush in and help them, take no prisoners, and don't make it painful, when they're down, you help them. Don't turn the screws when they're down. If you're going to turn the screws, do it when their ego's up here because they beat the quarter by 30% or something.

When you help them out when they're in a jam, slowly by slowly, you build trust, which usually takes about a year. It's not done immediately. There's usually lots of fear at the very start: "Oh no, I got Doug Leone on my board." It's almost like they want Doug Leone, but they're scared of having Doug Leone.

The reason I ask is because you have one of the greatest quotes I've heard, where you said, "Trust is the grease that makes all business run."

It accelerates. I created the tenets of Sequoia. One was performance, 2 was teamwork, and the other 8—I said, if you don't have the first 2, the other 8 don't matter.

After I wrote those and published them, I said, "Shit, I forgot the zeroth one, which is trust."

Yeah.

With trust, if you have trust in an organization, you can fly. You can make decisions extremely quickly.

Trust is interesting, though, because it has both knowledge and intention. In other words, I can trust your intention, but I think you're a putz, in which case I'm not going to trust you. Or I can trust your skill, but I don't trust your intentions, in which case I run the other way.

I've taught my partners early on to make sure they understood trust as having those 2 components.

That's interesting. I've never heard it broken down like that. What came to mind when I heard that quote from you is a quote from Charlie Munger, who said something very similar: that trust is one of the greatest economic forces on Earth. It's necessary in order to have a business.

You see these companies with broken cultures where no one trusts one another, and you can't get shit done. By the time someone who knows something makes the right decision and it gets to the VP or the CEO, forget it. It's a whole different thing.

I'm glad you just said that, because I had dinner with Charlie at his house right before he died, and he told this story where he was, like, this Munger—

Charlie.

—at the ripe age of 99 years.

I know. Then I had another dinner scheduled after his 100th birthday, and obviously he passed away the previous November, unfortunately. He told us a story about the Enron blowup.

He and Buffett knew all the assets they actually wanted, and they had decade-long relationships with a lot of people. They saw this—I think it was a pipeline business that Enron owned. A guy Buffett trusted called on Friday and said, "Hey, this is happening, but you have to wire the money now." It was a couple hundred million, I think. I forgot what it was. Let's call it $400 million.

The Berkshire lawyer was like, "You can't do this. We have to check it. You're going to be liable if this thing blows up," or whatever. Munger goes, "We wired the money without even an email." Then, I think food was dripping down his mouth, if I remember correctly. He's like, "We made a couple billion on risk-free."

Yeah.

Because he's like, "Why?" Because Buffett trusted the guy that was on the other end.

It's quite interesting because I'm a trusting soul by nature, and I've never been screwed in business. I've never pre-wired money, if you will, as a metaphor, and paid the price.

Mhm.

This is why I wanted to read about the merchant bankers, because there's just something very appealing to me. They have an old-school, gentlemanly way of doing business where, in many cases, there's no paper at all. It's just, "You said you're going to do this. I said I'm going to do this." We don't even write anything down. We just do it.

Yeah. Well, it's the value of a term sheet. A term sheet is not worth the paper it's written on. But once you sign it, both sides, I think you have to honor it.

Many times, I'm on the board of a company and we signed a term sheet with an investor, and then 3 days later someone is interested at a much higher price. There's no way. There's no way. No, no. We shook somebody's hand and we both said—

"Well, you have a fiduciary duty to take the higher price."

No. I have a fiduciary duty to make sure the culture of the company is a clean culture and we do business the correct way.

Yeah. At the end of the day, you have to be comfortable with your own—

Absolutely.

Yeah, 100%.

Absolutely.

I'm actually surprised that you're trusting by default.

Yes. I have a round head, a deep voice, and people are scared shitless of me. No, I'm serious. Then people find just the opposite. I will bust my ass to help you, probably more than anybody else you've ever met.

It makes me feel good. It's a very selfish thing on my part. I don't do it for you. I kind of do it for myself.

What do you mean?

I really like helping others. It makes me really, really happy.

Yeah. One of my closest friends is kind of an adviser and older brother. He says he finds it intoxicating to be dependable for his tribe.

Yeah.

That's the way he puts it.

Yeah, yeah. Look, I ran Sequoia for 26 years. I never viewed it as running Sequoia. I viewed it as working for all the other people.

I used to tell them, "You all have it backwards. I work for you guys or gals. You don't work for me." Yes, I get to make a decision here and there, but the decision I make is so we can all win.

You tell me what you need, and I'll do whatever I can just to get it done.

18. Starting From Zero & Hunting for the Next Great Founder

So, looking forward, you're on day 91. What do you think is going to occupy most of your time in the next 30, 60, or 90 days? What's on your mind right now if you're not looking backward?

Looking for investments, because at the end of the day, it doesn't matter if it helps a company during a crucible-type moment and so on. As I said, what's going to matter is what's on that sheet of paper—what I've done in the first year.

We have a little thing we do on Mondays called MIT, the most important thing for the week, and everybody talks about, “I've got to do this.” I have nothing going on. I just came back from vacation. I don't think I have—I don't think anybody ever said they have nothing going on.

I mean, it takes guts to say in front of 9 people, “I have zero going on.” My MIT is to go scrounge. I use that word for deals. That means getting on the phone, calling people I know, networking like crazy, and trying to intercept some very nice investments. It's 1 of the 20 or 1 of the 30 that I want to make in my lifetime.

But is that process different for you today than it was when you were previously at Sequoia?

It was, because I was more in the deal flow of my generation. In fact, it's very different because the founders of the super-interesting companies are 23 years of age. I don't have a network of 23-year-old friends.

This is very interesting to me. I want to hit on that. Before I forget, though, I remember setting a friend of mine up with one of the smartest people I know. He had 2 businesses running and was trying to figure out which business he should give his attention to. Within 15 minutes, my smart friend identified the core of the issue.

The guy I hooked him up with texted me. He's like, “Man, this guy just fucking nailed it. He understood it.” And I sent a text back. I go, “He's my favorite type of person. Very hard to get to, hard outer shell, but once you break through, he'll do anything for you.”

I think that's very similar to what you were saying. Don't be confused by the round head and the booming voice and the—

Bald, round head.

Yeah, the bald, round head.

The other thing that's very interesting to me: I don't hang out with venture capitalists. I just hang out with founders. I have no friends who aren't entrepreneurs. I work on Founders podcast during the day and hang out with founders at night.

Well, I'm so proud that I'm a founder of a company. I actually—I love that.

Well, no. The reason I bring that up is because this has happened on a few occasions, but it happened recently. Another venture capital firm was like, “Hey, we have an issue with our story and everything. Can you meet with my partner and talk to us about this? Have lunch?”

I was like, “I fucking like you. We'll just have lunch. I don't give a fuck about you, but I really give a fuck about your business, so let's talk.”

Then I asked this guy, who's been in venture his whole life—which is interesting to me—who he thinks, if you're a young founder right now, is the first person you're going to call. You can pick anybody, and they're going to be your first investor. He starts naming off all these firms.

So I go, “How could you work in this business and not understand it? You're hanging out with too many venture capitalists, not enough founders.” It's nobody on that list. It's exactly what you're talking about. These young kids are identifying a vastly different group of people than the previous generation has.

In the ideal world, a 25-year-old says, “Let me get some experience. Let me call Doug Leone.”

It doesn't work that way. So, how do you find them? What's the solution to that?

I think you have to hustle, just like everything else in life. It's what you're doing in your business: You hustle like crazy. All the books you read, all the people you meet, all that you're doing for your business.

Yeah, but here's the thing. I just talked with Dev about this, too. I have this uncontrollable obsession. I can't tell you why. Since I was a little kid, all I wanted to do was sit in a room and read books. That's never stopped. And then, once I found podcasting, I just can't stop thinking about it.

I get sad. This whole crew that you see here—all these cameras and stuff—they didn't tell me that somebody on the team was getting married. They went to Italy. They took 2 weeks off. I was sad as fuck. I went to Italy for, what, 3 days, Rob? How long was I gone? They're like—I'm like, “I'm going back. I've got shit to do. I want to get to work.”

So, it doesn't even feel like a hustle to me. It's just this compulsion.

I think it's the best kind.

Yeah.

I mean, it can feel like a hustle because then you're exhausted. Then you need Friday, Saturday, and Sunday off. No, it's your love.

Yeah. But one thing that did change for me was Brad Jacobs.

He was spending time with him.

Mm-hmm. I mean this in a beautiful way: weird cat.

Unique. Just read his book, How to Make a Few Billion Dollars. Half of it's on his—not hypnotism—his meditation practices. It's all about his mind and stuff, but he's an unbelievably joyful—

Human. Yeah. And he's the one that changed this for me, because I was just like you and all these other founders and anybody else—these deeply discontented people were my inner model. I would just wake up every day and focus on what I did. It was like, that wasn't good enough. You could have done it better. It was just super-negative.

Until he sat me down one day and said, “This doesn't serve you anymore. That got you from where you started to where you are now. But now your drive is generative. Your drive is that you fucking love what you do, so stop being mean to yourself.”

It was weird. He was 68 years old when I had this conversation with him, and overnight, my inner model changed.

No. The things I think about are not all the successes I've achieved, but all the opportunities I let slip and all the screw-ups I made as an investor. I don't think too much about rebuilding my life—or redoing my life, I should say.

But all I think about is, “Oh, my God, the venture community and I have screwed up so badly. I could have done so much better.” Look, I've done fairly well.

Oh, that's an understatement.

No, no, both. I'm not saying just financially, but in the things I've done, all I can think about is how much better I could have done it.

19. Architect Your Board Like Your Product

As I think about my next board or 2, I think about it the same way. All the other boards I've done, I've done a decent job, but I've got a lot of room to really go. I can't wait for my next one to exercise, yet another time, all my learnings for the next founder, for his benefit or her benefit.

We should actually talk about that, because you have a ton of experience with it. So many of my founder friends have just completely fucked up their boards. They don't know how to run one, or they don't like the one they have. What advice do you have on this?

Choose to architect your board the same way you architect your product.

You know, a lot of people choose boards like they choose—or find—a girl or a guy in a bar. She talked to me: “Let's go out Friday night.” He talked to me: “Let's go out.” It's no more complicated than that, and then they don't put any thought into it.

A board is like a mate, a lifetime mate. They're your mate for the next 5 to 7 years. I bet you most marriages last probably 5 to 7 years these days. Be extremely careful. It's not about the first term sheet; it's about who you need, who has the skill set and temperament you need to complement what you have.

Complement means a bit of discomfort, because if both of you have the same background, there's probably a little more comfort. You want to find a little bit of discomfort. You want to find someone with a very different set of experiences, which means that initially you're going to talk like this. Initially, you're not going to understand what he or she is telling you. But that's where the learning comes.

And so, I find people don't do it at all. “I got a term sheet.” How many times have I heard, “I got a term sheet. I got a lead term sheet”? So what? Who cares? Of course, you got a lead term sheet. Everybody gets a lead term sheet.

So, talk about some of the mistakes you've seen in board construction.

Is it just that? Is it that this person volunteered and I took them? There are domain skills, level of knowledge, and personal traits. Early on, when you're building a business, I don't think it helps you at all to find a board member who's an engineer. You're an engineer yourself. That's not the skill you need. That's what I mean by domain skill.

In terms of experience, you have no experience. To put a board member with no experience on the board, I don't think it helps you at all. It doesn't mean you have to find someone who's 68 years old, but find someone who's been through the cycle. Then there are personal traits.

Out of 10 venture folks—and I've said this, and I've taken shit for it—maybe 30% are incompetent. They don't know what they're doing. Another 40% are, I call them, no-ops: no damage, no anything. They nod with the group. Maybe 30% or fewer, perhaps 20%, know what they're doing.

That's one overlay. The other overlay is managing their firms, their stature, or their status in a firm. “I need a win. I need an exit. What's my partner going to say?” You don't really have the board member there. You have the shadow. You have the interpreter—what he or she thinks the firm wants.

If you take a combination of lack of experience, a duplicative domain, covering your ass with the partnership, and incompetence, that's the worst of all kinds. I see that all the time. I see that all the time. Just completely, let me put it in your terms, completely fucking clueless. Completely fucking clueless—not at a no-op stage, but at a damaging stage.

The best boards that you've been on—are the board meetings contentious?

No, but issues are put on the table. Real conversations are put on the table.

But you're willing to argue forcefully.

You're willing to have the real conversation. The word “argument” implies a tonality, a combative stage. I don't view it as that. I view it as a supportive exercise to come up with the answer the founder needs. We're willing to get the real job done. I won't concede the word “argument.”

Interesting.

It's the same thing at a partners' meeting. We don't argue, but we have the real conversation. At times at Sequoia, we have to take a 5- or 10-minute break. We walk around, go back in the room, and the temperature has cooled down by 10°. We have the conversation, come up with an answer, and we're all in. We all agree. No more conversations when we go out. It's done. It's the same thing with board meetings. It's okay to disagree. It's okay to disagree.

20. Truth, Disagreement & the Art of Difficult Feedback

I would say that one of the most interesting things I learned this year from doing the show is that Ed Catmull was nice enough to let me come to his house and record a conversation with him. He said, “A lot of people don't know that in the 10 years that Pixar was a public company, before the acquisition by Disney, Steve Jobs fired 2 of our board members.”

They might know that he fired them, but they don't know why he fired them. So I asked him one day why he fired them, and he said, “Because they didn't disagree with me.” He said, “They always agree with me. They serve no purpose.”

He was saying that a lot of people say they want to get to the truth. I think Ed said on the episode, “Most people that say that are actually full of shit.”

Full of shit. Steve actually wanted to get to the truth. Here in California, more than on the East Coast, people don't like the direct conversation. I had to learn that when I first came here. I went from Italy to New York City, which was halfway to America, and then to California, where everybody told me, “Yes, give me the honest feedback.”

Nobody wants to hear the honest feedback. Are you kidding? Everybody's full of shit.

But the best founders have to.

They have to. And you have to figure out a way to do it in a fashion in which it's understood, received, accepted, and acted upon. It's almost an art. It's not just giving it; it's giving it in the right way, at the right time, with the right tone, with the right words, with examples, and so on.

Look, it's like telling a founder, “Your VP of sales sucks.” You're not going to get anywhere. But what if you said, “There are a couple of VPs of sales I'd like you to meet, just so you can gauge yourself”? He or she will meet 2 people who know what they're doing. Suddenly they'll say, “Holy shit.”

Okay, this is like Inception.

Well, I don't know about Inception.

I'm a big fan of Christopher Nolan. I just reread his biography for the second time. One of my favorite lines in Inception is, “What is the most resilient parasite?” Is it bacteria? Is it a worm? It's an idea.

The whole thing is that it can't be an idea that somebody else gave you. You can't say, “Doug, you should believe this.” You have to incept them with the idea so they believe that they came up with it.

Yeah. It's like your kids. What are you going to tell your kids—all the things they shouldn't do? Good luck.

Yeah.

Forget it.

Are you familiar with the shit sandwich?

The shit sandwich?

On how to get feedback. I don't know if this is the art you were talking about, but the shit sandwich is compliment, negative feedback, and then another compliment. That's why I call it the shit sandwich.

Well, I don't know how to do that. If anything, the mistake I make is that I'm too direct. I remember there was a venture guy, Jim Breyer. I heard him turn down an investment once, and I said, “Oh my God, the founders are going to walk away from this thinking he won the freaking lottery.”

I don't know how to do that. I've always been an admirer of how he could do that. I'm more direct. I hear people are talking on the phone for 20 or 30 minutes. My conversations are 3 or 4 minutes at most: “Hi, what do you need? This and that.” Done. “Okay, yes, I got it. All right, I'll let you know.”

30 seconds. Not even 3 minutes.

21. Humanity, Introversion & the Value of Relationships

Yeah. Most of my conversations are less than 3 minutes long.

Yeah. Don't you think it's interesting that you don't like to hang around with other venture capitalists?

Why?

I don't know. Founders hang out with other founders. I think it comes down to the fact that I grew up from dirt, and inside me there's still mostly dirt. I really think that's it. I really think that's it. I'm not an intellectual.

To me, technology is terrific. It's interesting. It changes every day, but it's not my lifeblood. I think humanity and one-on-one relationships are probably the most interesting things for me.

Are you introverted?

I'm right on the line. According to Myers-Briggs, I'm right in the middle. I do not like meeting new people in general. In fact, every time I have to meet somebody new, the thought—and it's kind of nasty—that goes through my mind is, “Another fucking person I have to meet.” Where I'm told extroverts find energy, they get energy, so they love meeting new people. For me, it's, “Oh my God, another person I have to meet.”

Yeah, I do it. I can turn the charm gene on. I can fake it. I can be at a cocktail party and walk around and network with everybody. But I get home and I'm exhausted from that.

Yeah, you're definitely an introvert. I am, too.

And I think there's a very similar thing. I think about opportunity cost, and I always quote Munger. The way intelligent people make decisions today is all about opportunity costs. For me, it's, “I'm going to spend 2 hours with somebody new.” That's very expensive compared to maybe the 5 true friends that you have in your life—the cop in Italy, or your friends back in New York, or whatever. I'd rather just deepen the relationship that I have.

But I realized, though, that putting myself out there and meeting new people makes me happier later. In other words, if I let my instincts take me to the same 3 restaurants or hang out with the same people, if I do that all the time, I'm less happy than if I put myself out there and take these minor emotional risks.

I find myself happier because I feel more well-rounded. At the end of the day, I feel like I've done something.

Could you even be in the business that you're in without meeting new people?

No, absolutely not. Although it's not a social setting, right? It's presence. It's work. It's presentation, being present, helping, and assisting.

I think the closest friend I have as a founder is Vélez. All the other founders are pure business. I don't socialize with spouses or anything with any of the founders.

But you do with him?

Yes, because he was an associate. I hired him. We had kind of a paternal, father-son relationship.

Yeah. Is there any venture capitalist who just made maybe 1, 5, or 10 investments and then that was it?

Crosspoint Venture Partners had a hell of a run for 7 years, and then they went away. It's a name you may not remember. Look them up now. They still exist, but all the partners left after making a whole bunch of investments.

There was a venture firm called TVI. You may not remember it: Technology Venture Investors.

That's the one that bought Microsoft right before the IPO.

They didn't buy Microsoft, but Dave Marquardt was on the board of Microsoft.

Yeah. They got 900.

One guy started Benchmark with 2 other people from another firm.

But Dave did, I think—if I remember correctly from this book called Hard Drive.

He was on the board of Microsoft. He was the only venture investor in Microsoft the year before Microsoft went public. If I remember correctly, they were doing $140 million in revenue and $38 million in profit, and they sold 995,000 shares for $1 million to him.

No, I don't think so. I don't know what we're going to do. We're going to put this in a venture firm that had the keys to the kingdom.

Yeah.

And somehow didn't last as a venture firm, whereas Crosspoint just called it quits and they all went their merry way. This is a firm that just couldn't coexist, even though they had everything.

Yeah, there's something interesting about that. I can't name who, but it's one of the best entrepreneurs living. They were talking about the greatest seed investors of all time, and he's like, “The greatest seed investor is my dad. He made 1 investment. I made $40 billion. He didn't invest in anything else.”

22. What Doug Learned From Michael Moritz

That's it. That's awesome. So, I asked you if you're introverted. I want to ask you something that I think is definitely more introspective. You don't strike me as introspective at all.

Moritz taught me how to listen. Moritz taught me how to listen to the exact word that's said and the timing of that word. You really can understand a human being by just listening to the adjective and so on. I took Moritz's basic training and used it and expanded on it. I love listening to people speak.

Wait, what do you mean you can learn by listening to the adjectives?

The way they use them when they describe a situation. Human beings can let it out by showing themselves in how they use the word “I” versus “we.” When they say, “I can sell you this,” I'm thinking to myself as he's presenting, “Fuck that. You can't sell me shit.” That's what I think during the presentation, as I have that stupid grin on my face.

But just listen to the specific words that are said and when they say them. We often choose a founder without a line of code, without anything, based on a presentation and a clear vision, but we also want to get the interpersonal tics. You can learn a lot if you just pay super careful attention. Moritz used to do it to me all the time. He used to quote my words back to me, or the way I said them, and it would drive me nuts. It drove me nuts enough that I learned.

What was happening there? Why would that drive you nuts?

We used to write memos at Sequoia. The memos were “from” and “to.” Mike pointed out to me that the “from” puts myself first and the “to” puts the recipient second. Moritz was the first to write the memos “to” and “from”—to put the other person first and yourself second.

I understood putting the “from” first and the “to” second as being a somewhat egocentric move. It comes from you, so you had to put yourself first in that memo. That's one of the minor little things that I learned from Mike Moritz. There were hundreds of things like that.

What else did you learn from him?

Mike was brilliant. Let me tell you, he was a very painful co-head. He knows that I was painful for him. It was painful for me. Like I said, it's a badge of honor for me, anyway, that we made it work.

But Mike had the ability to dream broadly in ways that I've never seen before. He could answer the question better than anybody I've ever known: “What if everything goes right?” Not, “Oh, we're hedging on that.” No, what if everything goes right? What can this business look like?

If you look at the companies he's been an investor in, it's a spectacular list. Look, he had his faults, and we're not going to talk about all his faults here, but on that dimension, he was by far the best in the world.

All right, Doug, I appreciate you doing this. We're going to run this back, because a year from now, you're still going to be doing this. I have faith that you're not going to quit 9 months from now. If you're still around 9 months and 1 day from now, let's run this back. I appreciate you taking the time.

Thank you.

All right. Bye-bye.