tv The David Rubenstein Show Peer to Peer Conversations Bloomberg March 18, 2022 9:00pm-9:30pm EDT
>> this is my kitchen table and it is also my filing system. over much of the past few decades, i have been an investor. the highest calling of mankind, i have often thought, was private equity. [laughter] > i learned from doing my interviews i leaders make it to the top. i asked him how much you wanted, he said to 50 come i said fine. i didn't negotiate with him. i did david: david: note due diligence. i also ask them how they >> >> stay there. you don't feel inadequate as the second-richest man in the world, right?
one of the most important travel companies in the world is airbnb. it started as a concept of renting out one's room to make extra money. all over the world, people are renting out homes and apartments to other people. i used in airbnb recently in alaska and found it to be a quite good experience. i sat down with brian chesky, who conceived of airbnb and has built it into one of the largest travel companies in the world. when you came up with the idea with partners of starting this company around 2007, did anybody tell you a was a good idea? brian: no. it was universally considered a terrible idea. the first person i told, i said we have this idea, we are going to build a website where strangers can let other strangers stay in their homes. the person was somebody i looked up to in los angeles and he looked at me with a straight face and said brian, i hope that is not the only idea you are working on. and that was one of the nicer
things people said. the reason i think it worked is because i stumbled into the idea with my roommate. there was a design conference in san francisco in 2007. i couldn't afford to pay rent. all the hotels were sold out and we said, why don't we turn our house into a bed and breakfast for the design conference. we had some beds, pulled them out of the closet and called -- we made friends with these people who stayed with us for a week. we realize that of people could experience what we experienced, this could be an idea that spread around the world. we knew it was going to be a difficult, uphill road. david: where did you get your initial money, paul graham? brian: it is 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 are a bed and breakfast, we are not selling beds, maybe we can sell breakfast. we started selling collectible breakfast cereals, a barack obama themed cereal called obama o's and we learned about john mccain in the navy and we called it cap'n mccain and we ended up selling $30,000 worth of collectible breakfast cereal and that is that we funded the company. now, it is 2008, we are desperate, we have launched three times, no one is using it, i am piling up cereal boxes in my kitchen and i wondered if steve jobs ever had cereal boxes in their living room. the answer was no. this was a foreboding time. i am going out to dinner in san francisco with my accommodate -- with the founders of
y-combinator and they stash my accommodaters and they said you should join, and i said it is too late, we already lost. paul graham allowed us to apply. we miss the deadline, but he allowed us to apply after the deadline. we got an interview and that is where paul graham said, people are actually doing this? i said yes and he said, what is wrong with them? the interview went downhill. he initially hated the idea of airbnb. he didn't get it. but as we were leaving the interview, my roommate joe gives him a box of barack obama breakfast cereal and he looks at it and says, what is this? and i said this is that we funded the company. and he said, if you can get people to pay $40 for a four dollars box of breakfast cereal, maybe you can convince them to sleep in each other's homes. the y accommodater allowed us into the program at the moment we got income of the recession is occurring, people are desperate to save their homes. a lot of people started turning
to airbnb's to save their homes by renting them out. you had the great recession causing a young people feeling, i need to save money. facebook and social media is growing, so people are comfortable meeting on the internet. it was a supernova of forces that led to an opening for airbnb to take off. david: traditionally, people might build a company like yours and five years later, take it public at liquefy for the employees, founders and investors. you were resisting pressure to do that. why didn't you go public sooner? do you have regrets about not going public sooner? brian: i didn't feel like we were ready to go public sooner. in hindsight, maybe we could have gone public sooner. this is important to remember. when we were growing quickly, there were not regulations on the books for airbnb. people were wondering if the business was going to get regulated out of existence. that is one of many existential questions. we were able to get laws on the
books in nearly every big city in the world. we became legitimate. we spent international. we spent internationally. we built a team. going public, a weird analogy, but if you are baking a cake, going public is putting it in the oven. it is hard to change ingredients when you have any of the oven. i wanted to make sure everything was baked before we went public. when the pandemic it, it was more than a decade after we started. i was accused of waiting too long and missing the ipo window. i would never imagined what transpired over 2020 but looking back, it worked out well for everyone. david: you went public in december 2020, after the pandemic, but you probably had to lay off people during that time, is that right? brian: when the pandemic yet, i was working on our s1 and came back from the holidays and 2019
thinking my life was going in one direction not realizing our world was going to be rock. i felt like the captain of a ship and a torpedo hit the side. we lost 80% of our business and were doing 20 million dollars in bookings and we were highflying and then people were predicting the end of airbnb. multiple mainstream journalists were predicting we were going to go out of business. it was like our business flash before our eyes. i ended up having to confront this reality that we were going to lose half of our business. it is like running into a perfect house, if you can only save half of your furniture at half of your stop, what do you take that half of your stuff, what do you take with you? i said we are getting back to the original idea of airbnb, people showing homes and experiences all over the world. we had to lay off 25% of our workforce, nearly 2000 employees. but i wanted to make sure that even in a layoff we could show compassion and be principled, so we ended up giving people a year of health care and severance.
david: when you went public in december 2020, you priced the ipo, or the underwriters did, at half the price that it ultimately ended up that day. some people say you left when he -- left $23 million on the table. was it mispriced or are you ok? brian: we came back from 2019 somewhere between $30 million and $40 billion valuation on the private markets. before the pandemic, valuation was below $18 billion. we would probably have struggled to raise money at a $18 billion valuation. to build a $100 million company after that low point, it was hard to imagine that was going to happen. part of the reason our stock popped was, i believe we had hundreds of thousands of people in retail trying to buy our stock. i don't feel bad. i never picked the highest price in any round, we could have priced higher, but it was art at -- it was hard at the time to
foresee this was going to be a company that was going to reach a valuation like that. david: you just reported earnings for last quarter and last year and there were record earnings, record revenues. and you said, i think, at the release, that covid has changed everything, people changing the way they work and travel. can you explain? brian: the world is never going back to the way it was before the pandemic. one of the changes is a change in how we work. for many people, many people had a job in the office and they are not going to be eager to come back to the office five days a week. i don't think ceo's per se are going to determine these policies. workers will. all ceo's want the best talent that flexibility is going to be the second most-important benefit after compensation. people might go into the office, but not five days a week. if you don't have to go five days a week, you are more flexible and less tethered to one city. what that means, millions of people can now live anywhere.
people that don't have kids like me can live pneumatically, city -- can live nomadically, city to city, live nomadically, city to city, hopping around. airbnb is a company about living. half of our nights booked are for stays longer than a week and a fifth are for stays longer than a month. there is a new category of travel that is not a classic, two or three nights in a city and is not long-term housing and that emerged because of the endemic. -- the pandemic. ♪
david: let's go back to your background, what part of the u.s. are you from? brian: i am from a small town in upstate new york that is a suburb of schenectady. david: your parents were social workers? brian: my mom and dad were social workers. all my grandfather's work for general electric, my mom and dad had normal lives as social workers. david: i understand you wanted to be a hockey player? brian: when i was five years old, 1986, wayne gretzky was the
greatest hockey player in the world and i had posters of wayne on my wall. the problem with athletics is that your dreams come crashing down quickly. i realized i wasn't going to be wayne gretzky. david: so you decided you wanted to be an artist because you had skills? brian: exactly, i ended up getting a scholarship to rhode island college of design. it was a big deal to get the scholarship. and my mom said, you can go to art school but you have got to promise me that you one day get a real job. i said what is a real job? a real job is a job that gets you health insurance. i said, one day i will get a real job with health insurance. that was my ambition. my high school yearbook quote literally was, i am sure i will amount to nothing. i was being sarcastic. but i didn't really think i was going to be a tech founder and didn't see much beyond my small town. david: you graduated from rhode island school of design and you
moved to los angeles to become a designer. you ultimately didn't like it much and moved to san francisco, right? brian: i liked it for three months because there was a thrill. when you are a student, nothing you make is real and you have this yearning you want to make something that is real that people would pay money for. i remember feeling like i could see the rest of my life, and my life look like a road that disappeared in the horizon, exactly like the road behind me. that terrified me. i didn't want to just be a designer. at this point, i realized i wanted to be an entrepreneur, but i don't know what i want to build or how to start. this is 2007 the internet revolution was taking hold. youtube was sold to google, the biggest company. facebook was rising. tech had come out of the dot com crash ended felt like the world
was starting to turn in san francisco. i had this premonition, i had to come to san francisco. it was pulling me. david: you started the company with your roommate joe and brought in a third partner? brian: it was just gel and i. -- it was joe and i. we were both designers. we could design a website but we could not code and build the website. you need a software engineer. after we hosted three guests, i said to joe, who is the best engineer you know? joe said, funny you asked, because there is an engineer that used to live with me before you moved in. the three of us got together and we said, what if you could build a website where you can book someone at home the way you can book at a hotel anywhere in the world. that was the original vision. little did i know how hard it was going to be. it was a simple idea. david: as you look back on what you build, what was the best decision on what is the biggest regret so far and what you built? brian: the most important piece
of advice i got was when i started airbnb. it was paul graham. he told me something. he said it is better to have 100 people love your service that have one million people who kind of love your service but are apathetic. he said, start with a small group and perfect your product. do things to scale. turn them into advocates. because of 100 people love your service, they are going to tell everyone. it is easy to improve your service when you have 100 customers. if you have one million customers, it is really hard to change. do things to scale. that is something we did, and that helps explain why we are so successful. the biggest mistake i made was, when you are in your 20's and never imagined being an entrepreneur and suddenly you are a multibillion dollar company and 70 gives you -- and somebody gives you
billions of dollars and you hit on something that is hugely successful, you start to believe you can do anything and you try to do everything. you try to do everything at the same time. before the pandemic, we had 10 divisions that were extending all different places. in hindsight, having too much money is sometimes worse that having not enough money because having not enough money creates constraints and focus and forces you into trade-offs. when corporations get over capitalized, they can avoid making tough decisions, accountability goes down, there is a sense of complacency in the company. a little of that lack of focus happened to airbnb before the pandemic. david: you have had a lot of mentors. how did you get to know barack obama's, has he stayed in airbnb's? brian: he has stayed in airbnb's, actually. we lifted the embargo in cuba when he was president, president obama ended up going to cuba and wanted to bring american businesses with him to show business was open between the u.s. and cuba. there weren't really any american businesses in cuba
except airbnb. i got to know he meant we kept -- got to know him and we kept in touch. it was helpful to have somebody who would help me see the world in a broader way and think more systematically about my decisions and the consequences on society. that is how he became helpful to me. ♪ david: for somebody that is young, what is the advice how you would recommend they build the company? brian: the first thing, don't listen to your parents. most of them will talk you out of crazy things, but the crazy ideas are the ones that spread around the world. ♪
david: as i understand, you are spending a year or so going to airbnb's around the united states? brian: yeah, reasonable time zones. david: do you have trouble getting a place when you book an airbnb? brian: no. there are 6 million homes to choose from. i have more than enough options. i don't say who i am. sometimes they find out, sometimes they don't. i book last minute. i was in atlanta, nashville, charlston, los angeles, now miami. i need ideas for where to go next. david: when you book on airbnb, do you do it yourself or have a team of people take it? brian: i think it myself. -- i do it myself. i have to see what everyone is doing. i feel like people who build
great products are ideally building products they themselves want to use. 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 at airbnb or does the host? brian: the host sets the rate. they charge whatever they want from $10 to $10,000 a night or beyond. we have people renting luxury villas that are 20,000 feet and we have people renting little spaces in their backyard. in 2009, when we launched, we had people renting spaces under the kitchen table because they thought it is space, i can rent any space. it is everything from a couch to a castle. they set the rate at we take 15%. david: when you stay at they place, do you ever call the host and say you are charging too much or not enough? brian: i tried to give feedback less on the value and more on the hospitality. sometimes, a host will want me to go through, they will give me a rental contract on their website and i will tell them,
airbnb is the contract. you don't need to do this. it would be weird to be a founder of airbnb and tell them you're overcharging me. a slightly weird message, but i try to give them feedback. we have a review system. 70% of guest post reviews of each other. i tried to write a detailed review for every host, i try to be positive but honest. david: do you sign it bc or brian chesky? brian: brian chesky. i would say half the time, they know who i am when i book. i don't want to be a secret shopper and lying to them and booking under a pseudonym but i don't want to tell them who i am and expecting special treatment because i am not going to get the real experience. half the time they know who i am, half the time they don't. it is a fun experience. david: you are 40 years old and have achieved more wealth than anybody could possibly imagine. have you thought about stepping back or doing something else with the money you have?
brian: no. i feel like it is really just getting fun. it was fun when i started and there was this corporate adolescence. the painful growing of the company, but i am having so much fun right now. if i were to step back, i would probably start another company and spend another 10 years to get back to this place. when you have a good thing going, you want to keep going. i feel like i have so much i want to do with the company. there is a lot of loneliness in the world and part of our bigger contribution is to help bring people together around the world. david: the company that i built had two partners with me for the entire 30 plus years that 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. you ever have fights with each other or get jealous? how do you work together so well? brian: we are one of the only companies in the world that are intact with three founders after 14 years. it is a couple things.
i am really lucky because i have the gift of having to incredible -- two incredible cofounders with high integrity and always put the company before themselves. and they were very supportive of me as ceo. the other thing is, we had a principle, we said we are never going to allow being right get in front of the relationship if you try to wean every single argument, you will see the trees and lose the forest, which is to say that we knew the company would only survive if it had a really strong founding team intact. and that meant occasionally, each of us was going to have to make compromises. we tried to never let it go so far that winning an argument got in the way of a relationship. david: in philanthropy, giving away money sounds easy, but it takes time to do it well. are there certain areas you want to give away some of the money, you have committed to giving away half of your net worth, but you have to take the time to do it? brian: i wanted to join the giving pledge in my 30's because
i thought the main reason, even though i wasn't ready at that point to give away my money, i wanted to set an example for the next generation of entrepreneurs. it is like redistributing the majority of wealth back to society seemed reasonable and better for everyone. but i did not know what i wanted to focus on. i did write in my giving pledge letter though that one of the issues i want to focus on is maybe create scholarship programs to help young kids like me. i was not poor, i was obscure middle-class, but had it not been for a series of people in my lifetime, i would not be here talking with you today. you would never have heard of me and i would never have left my town. i think so many kids have untapped potential, like me, that their teachers would never have predicted and would never have had the journey i would have had and i want to help kids see their unrealized potential and change the trajectory of their lives. there is a lot of other things i
would like to learn about and be able to help. david: for somebody that is younger than you, if they want to be the next brian chesky, what is the advice about how you would recommend they build the company? brian: the first thing i would say is, don't listen to your parents. don't take career advice from your parents. my parents want what is best for me, and i use parents as a proxy for anyone wise and old. most of them will try to talk you out of crazy thing spit but -- crazy things, but sometimes, crazy ideas are the ones that do spread around the world. the second thing is, solve your own problems. a lot of people are looking for markets. we were not looking to go into a good market, we were trying to solve our own problem. if you solve your problem, you may have solved the problem of millions of other people and that might be marketable. the last thing i would say is focused on love. it sounds weird, but i think a business is simple.
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emily: thank you so much for having us. so, do you have a direct line to the president now? pat: well, he is enthusiastic. obviously the project is significant, and a lot of interest around it. but, you know, also he says, hey, i really want your views. i want your views on the semiconductor industry, on the shortage, you know, how to be a more effective partner with business, some of the geopolitical topics. so, we have a date planned to get together again. emily: when you talk to him, do you feel like he learned something? pat: oh, yeah. emily: what do you take away from the conversation? pat: oh, yeah. i gave him a 20-minute briefing. people say, how is he? but he was engaged. he was asking questions, seeking