Guy Kawasaki, author, speaker, investor and business advisor, here shares 12 lessons he learned from Steve Jobs while working at Apple. This is a transcript of the keynote speech he made at Silicon Valley Bank’s CEO Summit on October 6, 2011.
Good morning. Although arguably it’s not a good morning because the passing of Steve Jobs is definitely left a large hole in the universe. And I worked for him from 1983 to 1987 and then from 1995 to 1997, I worked for Apple again. And just as he came back towards the end of 1997, so we overlapped again. So arguably I am one of the few people in the world who worked for Steve Jobs twice and survived. So I consider it an honor to have worked for him. He fundamentally changed my life. He changed the lives of many Apple employees and he also changed the life I think of many, many people in the computer business, in the phone business, in the tablet business, in many places in the music business.
So if you look at your agenda, I am supposed to give a speech today about how to enchant people, how to be an enchanting person – to change people’s hearts, minds and actions. But because of Steve’s of death yesterday, this morning I wrote a completely new speech. And so you’re not going to see what’s on the agenda. I have a speech that’s sort of dedicated to what I learned from Steve Jobs and I think the lessons of Steve Jobs that you can apply to your startups. Because fundamentally Steve was arguably the world’s greatest CEO, the world’s greatest entrepreneur. I don’t think anybody did anymore for his customers or shareholders or employees as Steve Jobs. Truly, truly no one has done more.
So I have compiled the top 12 lessons that I learned and that I think all of you can apply to your companies. And so I have 12 key points – usually I have 10 – so there’s a little bit of inflation in my speech. I use the top 10 format because in the last two and half decades I have seen so many high tech executives speak and I can tell you there are two key points about high-tech speakers other than you of course. The two key points are they suck and they go long. And that’s a bad combination. If you suck and you’re short, it’s okay. And if you’re good and you go long, it’s ok but if you suck and go long, it’s like being stupid and arrogant. It’s a bad combination. So these are my lessons that I learned from Steve Jobs and I think that you can apply as entrepreneurs.
Lesson 1: Experts are clueless
If you start listening to the so-called experts, the A listers, the journalists, the analysts, they cannot help you as entrepreneurs. They’re going to tell you to do better sameness, to do what everybody else thinks is right. They’re going to tell you what their concept is often from a very arrogant point of view. Usually they are disconnected from customers. I cannot tell you – Steve Jobs did not listen to experts. Quite the contrary experts listened to him. And you could make the case that, that’s even more true today because of social media, that the Twitter, Facebook and Google Plus you can get so much closer to people so much faster that listen to the interpretation of experts and the pronouncements of experts is an absolute mistake. And I learned this from Steve. I watched him in action.
Experts are clueless, especially people who declare themselves experts. You meet someone who calls himself or herself a social media expert or guru, that’s the person to avoid. As an entrepreneur, you’re going to have to figure stuff out by yourself. Don’t rely on others. So that’s first thing.
Lesson 2: Customers cannot tell you what they need
If we had asked customers in 1983 what they needed, they would’ve said I need a bigger, faster, cheaper Apple 2, or I need a bigger faster cheaper MS-DOS machine. No one would have said give us a cute little graphics toy that was slow, that had no software thanks to me, that couldn’t use any of the industry standards, which had a little mouse instead of cursor keys that had a graphical user interface with a trash can in the lower right hand corner. No one could have described that.
And so you can ask customers about how to evolve something that you’ve already shipped, how to make a revolution better. But I don’t think you can ask a customer how to create a revolution, because customers are going to describe what they want in terms of better, cheaper, 10% improvement. If you truly want to change the world, if you truly want to be the great entrepreneur you cannot listen to customers, honestly. The day that you hear that Apple is using focus-groups to decide on its future products, that’s the day to short Apple’s stock. I tell you right now customers cannot tell you what they need.
Lesson 3: The biggest challenges beget best work
Quite to the perhaps people’s surprise what I learned at Macintosh division working with those hundred or so other great people was that we rose to the occasion. We did our best work in our careers because we were presented with the biggest challenge. And so rather than trying to break things down into bite size small little things, I think you should give your employees and your co-founders magnificent challenges, just challenges because that’s truly why and how you get the best work out of people.
Now if you ask an employee of Apple, why do they put up with some of, shall I say, the challenges of working at Apple, they will tell you that despite all the challenges the reason why they work at Apple is because Apple enables you to do the best work of your career. And so if you provide your employees with this challenge, a big challenge they will rise up and do the best work of their career. So big challenges is what you should present.
Lesson 4: Design counts
Next thing I learned is that design counts. In a world where everybody’s talking about price, lots of people care about design. Lots of people do. And this is something that’s probably contrary to what most experts will tell you. Most experts will tell you there’s a price point and people are price-sensitive and there’s this curve of demand and I think to a great degree Apple has disproved that. Design counts. There is an element of people – maybe it’s only 10% of the people but 10% of people truly care about design. So you should care about design. Don’t put out crap.
I have tried to enchant people with great stuff and I’ve tried to enchant people with crap. And let me tell you it is a lot easier to enchant people with great stuff than crap. So Don’t think of human interface and design is simply like a little layer on top of your great engineering algorithms. For what it is, it is the product for most people. It’s not the great algorithm; it’s the skin of it. That’s what counts. Design truly does count. Steve Jobs has proven that five times – Macintosh, iPhone, iPod, iPad. You could make the case that many other companies could have done what he did, starting with Xerox PARC. But let’s face it, Steve understood, Steve had the vision, Steve had this ability to anticipate what customers need before they could articulate it. Design counts.
Lesson 5: Use big graphics and big fonts
Next thing I learned is that in your presentations, it’s a very simple algorithm. Use big graphics and big font. It’s probably contrary to most of your PowerPoint presentations. You’re 8, 10 or 12, right? And you’re going to read your slide and you’re going to put up a competitive matrix and there is going to be your column and your competitor’s column and guess what your column is going to be completely checked off and your competitor’s column is going to full of holes. And that’s going to be in a 8 point font and no one can read it.
Steve Jobs puts up slides that have one word. He has slides that his minimum font size seems to be about 60 points. How many of you have slides with 60 point minimum font? Probably not many. Big graphics, big font. If you go look at the archives of Steve Jobs’ keynotes, big graphics, big font. 8 point font is out.
Lesson 6: Jump to the next curve
Next thing I learned is that if you truly want to be an entrepreneur and innovator, you have to jump curves. You don’t do things 10% better; you do things 10 times better. I’ll give you some classic examples of curve jumping. First of all, we’ll start out with a historical one. There used to be an ice harvesting business. In the ice harvesting business in the 1900s, this meant that baba and junior would go to a frozen lake or a frozen pond in the winter and cut blast of ice. And in 1909, million pounds of ice was harvested in the United States.
33 years later was the beginning of the ice factory curve. The ice factory curve now meant that you didn’t have to be in the winter, you didn’t have to live in a cold city. You could freeze water essentially any time of year and then the iceman would deliver ice to your house. So imagine the advantage of going from ice harvester, cold city, cold time of year to ice factory, any city any time of year. Fast forward another 20 years, now we have the refrigerator curve. This is Ice 3.0. Ice 3.0 meant that you had your personal ice factory. You didn’t go to a centralized ice factory, or the centralized ice factory didn’t deliver ice to you. You had your own ice factory. You had a PC, if you will, a personal chiller.
And so if you look at this, the great values, the great innovation occurred because people went from one curve to the next curve. Actually I said that incorrectly. Very few people went from ice harvester to ice factory to refrigerator curve. Most people, they were ice harvesters, they defined their business as ice harvesting. They died as the ice harvester. Then there were ice factory curves. People on the ice factory curves defined their business as “we freeze water essentially and then we deliver it”. Those people died as ice factory. They did not become refrigerator companies. And refrigerator companies are not looking at biotech.
So one very important lesson is if you really want to change the world, you can’t necessarily do it on the curve you are on. If you’re on this particular curve and you try to do something 10% better, it’s not good enough. If you were the best daisy wheel printer company, you said, uh, next year we will be really innovative. We will introduce three more typefaces in three more font-sizes. That’s incremental.
What truly is a curve jump is to go from daisy wheel printer to laser printer. If you were the best telegraph company, it’s not they have better telegraphs. It’s to be telephone company, ice factories to refrigerator. Jump curves. It’s not about 10% better, it’s about 10 times better. Real innovation happens on the next curve, not on the curve you are on.
Lesson 7: Something works or doesn’t work
Next thing I learned is that all that really matters is something works or doesn’t work. In other words, don’t worship religions and faiths. At one point, Apple believed that a closed system would work. At one point it believed an open system would work. Apple was never sort of stuck on whether we followed the open model or the closed model. All that mattered to Apple and Steve was it either worked or didn’t work, not that it was open or not open.
A very good example with the iPhone. Many people don’t remember this. When the iPhone first came out, third-party apps were not permitted. The Apple story for a third-party app on the iPhone initially was Safari plugin. That was the answer. And the whole pitch was with the phone unlike a computer, which didn’t make any sense to me at the time – with the phone unlike a computer, a phone is a very complex thing. Lots of messages coming in, phone calls coming in on this constant data network. You don’t really want to screw around with a phone and that third-party apps interfere with the quality of your phone experience. So we’re locking out third-party apps. If you want to do anything as a third-party developer, it has to be through our browser as a safari plugin. That was story number one with the iPhone.
Six months go by, opened up the iPhone and they declared victory again. And they say we’re opening up the iPhone. We have had such demand and such interesting creative third-party apps . We realize that we need to do this for the benefit of our customers and the benefit of developers. It’s now an open system. You can develop apps. It doesn’t have to be a Safari plugin. Apple completely reversed itself. Where it’s stuck on the religion of closeness it would have stuck to closeness. Whereas it’s stuck on the religion of openness, well arguably it would have started with openness. The point here is that what Apple and Steve Jobs has proven is that what really matters is not whether it’s open or closed no matter what sort of industry jargon is being used. What truly matters is it works or it doesn’t work.
Is the iOS apps store an open or closed system? Well, you could make the case that it’s an open system because anybody can write an app. You could make the case that it’s a closed system because unless somebody at Apple approves your apps it’s not going to go into the store. And if it doesn’t go into the store, unless you have a jail broken iPhone you can’t install it. Again work or doesn’t work is all that truly matters.
Lesson 8: “Value” is different from “price”
Next thing is for a long, long time people used to beat Steve up and Apple about price. Macintosh was too expensive. iPhone is too expensive. iPad is too expensive. You know you can get a cheaper iPad from BlackBerry. You can get a cheaper iPad from HTC. You can get a cheaper iPad from HP depending on whether HP has discontinued it or not that day.
So I mean what Steve has proven is that there are a class of person that cares about value, which is different than price. Arguably, a Macintosh is more expensive. But is it truly more expensive when you consider the increased productivity, the ease of use, the less support costs. So Apple’s testimony that value is very different from price. If you compete on price as an entrepreneur, it’s a very, very difficult thing.
I want you to think of a two-by-two matrix, okay. And in this two-by-two matrix, of course, you want to be in the upper right-hand corner because if anybody worked for McKenzie or went to business school, you know in a 2 by 2 matrix you are always in the upper right-hand corner, right it’s just where it is. So the parameters on this matrix are uniqueness vertically and value horizontally. So in the upper right-hand corner you are unique and valuable. That’s where you want to be. Only you produce your product and it is a very valuable product. The problem is many other people are in the other three corners. Let’s discuss the other three corners.
Let’s say you are at the bottom right corner. In the bottom right corner, this means that you are, in fact, valuable but not unique. In the valuable but not unique corner, you’re going to have to compete on price. If you slap the same operating system on the same hardware, guess what, you compete on price.
In the opposite corner, the upper left corner. In the upper left corner, you’re unique but not valuable. In other words, you’re just plain stupid. You’ve created a product that nobody cares about. Only you have created it but nobody uses it because it is of zero value. The bottom left corner is where you’re not valuable and you’re not unique. So this would be a corner where you do something really stupid and stupid people like me in the venture capital business has funded more competition to do the same stupid thing. That’s the worst corner of all.
You could make that case about let’s say Pets.com. Hopefully you are old enough to remember Pets.com. So Pets.com, 10 to 15 years ago. The pitch was we have patent pending curve jumping paradigm shifting way to sell dog food online. The dog food business is fundamentally a supply chain management business.
Dog food business, let me explain it to you. On one side, we have a cow and the other side we have a dog. All we need to do is kill the cow, cut it into little pieces, put it in a can, get it to the dog. How hard could that be? So why was there a pet food store in the middle sucking up 25% of the margin. Revolutionary thought, let’s eliminate the pet food store in the middle because nobody wants to drive to a pet food store, park at the pet food store, look at the pet food, pick up the pet food and drive to their house. Right, so let’s eliminate stupidity in the supply chain. That’s our value. We make pet food much more convenient.
The problem with that is that pet food is not so good online. For one thing you may eliminate the pet food store but then you have to add back shipping and handling. And it’s kind of inconvenient to buy pet food online because you have to be at home when UPS drops off the dead cows in the cans. So it’s no more cheaper and it’s a pain in the ass because you have to be at home when the dead cows in the cans come to your house. So it’s not that valuable.
And then there was pets.com and since there was pets.com the venture capitalists figured, well we need our own pets.com. So that’s why there was i-Pets.com, e-pets.com, lastminutepets.com, discountpets.com, you are 16 ways to spend as much money for dog food online as at the pet food store and have the added inconvenience of having to be home when the pet food came to your house. That’s dot com corner, not unique, not valuable.
So the corner you want to be in is the upper right-hand corner. If you’re an engineer, you have to create a unique product or service. If you’re a marketer, you have to convince the world that it is unique and valuable. It’s that simple.
I’ll give you some examples of products that are in that corner for me. I love to go to movies. I have four kids. We love to take our kids to the movies. One thing you will learn taking kids to the movies: it is a pain in the ass to get four kids to the movies. So you really want to know before you go that you have tickets. We live in [Anderson], we go to Redwood City 20. Redwood City 20, you can buy tickets at home using Fandango. That’s the only service that theater supports. Therefore it’s unique. If i want to buy tickets online, you print them at home, I have to use Fandango. Unique. It’s also valuable, because now I know that I have a ticket before I get to the theater. I also skip the ticket buying line. I go straight into the theater. For me that Fandango is unique and valuable.
This is a Breitling emergency watch. This watch, if you unscrew this big knob, you pull it out there is an antenna. That antenna broadcasts the emergency signal at the 121.5 band and this signal is caught by airplanes. So if I’m ever in a life threatening situation, I have gone skiing and gone off the path, I am sailing and I am like lost or something like that, I could pull this and this watch could save my life. This is not something you do. You took rainstore, consider Shoreline coming here today. This is something you do when you’re about to die. This is a very unique watch. This watch can save my life. High into the right. This watch is not the cheapest watch. But arguably if you are in those kind of situations, the value is so great that the price becomes less relevant. Steve Jobs taught me that value is different from price.
Lesson 9: A players hire A+ players
Next thing Steve Jobs taught me that A players hire A players. B players hire C players. When you hire a C player, guess what the C player hires – a D player. Guess what a D player hires – an E player. This is called the Bozo Explosion. You need to fight the bozo explosion. Right now you are all small companies. You’re thinking you’re hiring A players. The moment you lower your standards and hire a B player is when the bozo explosion starts. You hire a B player, the B player is going to say I have to hire people who are not as good as me because they would show me up. They would be better than me. They might rise above me. So B players hire C players. And then C players get in a position of hiring – guess who they hire – the D players. And you wake up one day and you’ll be freaking surrounded by bozos. That is a bad thing.
In fact, I think I have a way to improve what Steve said. I think A players hire A+ players. That arguably you would hire people better than you, not just equal to you. And I’ll tell you in my experiences engineers have the hardest time with this concept. And the reason why is that engineers think that engineering is hard and everything else is easy. So typically when you meet an engineer, the engineer says uh, engineering is really hard. Programming is really hard. Design is really hard. But finance is easy. If I wanted to, I could be the CFO. If I wanted to, I could be the CMO. If I wanted to, I could be the VP of operations. If I wanted to be, I could be the Vice President of Sales because engineering is hard and everything else is easy. So an engineer in particular violates this because an engineer is always trying to hire people that for positions that they think they can do better. It’s a very dangerous thing. If you’re an engineer be very cognizant.
Let me tell you something. Finance ain’t easy, sales ain’t easy, marketing ain’t easy, ops ain’t easy. Engineering ain’t easy either but don’t denigrate the other positions. Hire people who are better than you. If you are the CEO, you should say with great pride that I have someone in charge of sales who is better at sales than I am. And if you are the CEO, you should hire someone who you could say I hired a VP of Marketing and this VP of Marketing is much better than I am at marketing. That should be a source of pride for you.
Lesson 10: Real CEOs demo
Next thing is real CEOs can demo. Seriously, real CEOs can demo. It’s not bullshit MBAs, you know that you brought them in because of their credentials. Real CEOs can demo. They can actually use the product. And I have said in many, many pitches where CEOs come in and they say well, now I am going to let my VP of Engineering demo the product. Like why? Can’t you demo it? Don’t you know how to do it? If you really want to be a great CEO, you have to demo your own product. You can’t demo your own product, quit. Something’s wrong with you. Real CEOs do demos. Steve Jobs proved that. Nobody could do a demo better than Steve Jobs. It’s going to be one of Tim Cook’s biggest challenges. Real CEOs can demo.
Lesson 11: Real entrepreneurs ship
Next thing, real entrepreneurs ship, not slip, they ship. My theory is taken off from Bobby McFerrin. Bobby McFerrin had a great song “Don’t worry, be happy”. Real entrepreneurs don’t worry, be crappy, which is when you have jumped curves, when you’ve gone from ice harvesting to ice factory to refrigerator company, when you’ve gone from daisy wheel printer to laser printer, the first version of the laser printer can have elements of crappiness to it. Right, the first laser printer from Apple was $7000, slow AppleTalk network, single sided, no envelopes, 8.5 by 11 only. Piece of crap. But it was a revolutionary piece of crap.
If we had waited for the perfect world of double-sided, envelope feeding, multiple megabytes of RAM, faster network, we would have never shipped. So as an entrepreneur you have to understand that you need to ship. You need to ship. Don’t worry, be crappy. I am not saying ship a piece of crap. I am saying ship something that’s jumped curves that have elements of crappiness to it. Big difference. But real entrepreneurs truly do ship.
Lesson 12: Some things need to be believed to be seen
And the last thing I learned from Steve Jobs is some things need to be believed to be seen. Most of the time you hear this in the opposite way, which is some things need to be seen to be believed. Not for an entrepreneur. This is how it works for an entrepreneur. You have to believe in your product. You have to ship your product. And then people will see it and you will see it. And if you don’t believe it’ll never happen. If you wait for proof, it’ll never happen. If you wait for customer validation, it will never happen. You have to believe.
The reason why Macintosh was successful is that at the core, 100 people starting with Steve Jobs believed in Macintosh. And because we believed in Macintosh, we made it real, which is very different than if Macintosh were real, then we would believe it. If that were the case, Macintosh would never have succeeded. You have to believe in some things if you want to see some things.
So this is the 12 lessons that I learned from Steve and can we take Q&A? Yes, I would like to take Q&A. Usually if I gave you my enchantment speech, I’d be pushing it. It will take one hour. So this is unusual I have time to do Q&A. So let’s do Q&A.
Questioner: First of all, thanks for sharing your lessons and your insights. I’ve heard you speak many times and it’s always enlightening. My question is regarding the point about A players need to hire A+ players. And this is a point that’s been stated several times by many individuals that hire people better than you. What are your suggestions regarding people developing the emotional understanding that they have to let go; it’s not about them, it’s about hiring the best talent in terms of getting the best people?
Guy Kawasaki: Yeah, you know one of the things that is, I think, most difficult for a CEO and Founder is letting go. And it’s perhaps an overused metaphor but it really is like your children. At some point your sons and daughters will go to college and you need to let go. This doesn’t mean you disown them. But you need to let go. You need to let the person in charge of Apple stores really do Apple stores and the people who are in charge of various functional groups of your company, you need to let go. Well for one thing it’s a very practical reason is if you are succeeding, you cannot possibly handle everything.
Another practical reason is that if you truly hired A+ players, A+ players do not want to be constantly micromanaged. And so almost by definition if you can micromanage somebody, you probably don’t have an A+ player. That would be a very good test actually. This is one of those cases where it’s easier to be the keynote speaker than to be the entrepreneur, because as a parent, it is difficult to let go of. I have a son who is 18 years old. So he is the senior year. And he’s applying to colleges now and I know it’s going to be very, very difficult moment for my wife and I to let him go. Although we still have to pay tuition for four years but it’s going to be a very challenging moment. So you just have to understand that, that is something that’s going to come down the road and it’s going to happen just like parenting. What else?
Questioner: Just a little bit on the same point. It looks like you left the puzzle in your A, B, C analysis. So who hires B players? A guys hire A+ players.
Guy Kawasaki: That’s a good question. I don’t know. By definition who would hire – I know who hires B players. Boards of Directors, which is a code word for VCs. What else?
Questioner: I love the concept of jumping curves and I also like (inaudible) going to talk to somebody about capitalization and you emphasized the uniqueness and value. How many of these have been sold in the market thus far to just financial pro forma? How do respond to that when you are really trying to set a new tone, come out with the new product?
Guy Kawasaki: Well, when you encounter that kind of response, I would say one of two conditions exist. One is it’s a clueless venture capitalist. Or that person is essentially telling you no. So basically when you deal with venture capitalists, there’s only one response that is yes. And the one response is let’s start due diligence. That’s a yes. Everything else is no. If they say, when you get a customer, come back to me. That’s a no. If they say, when you get a co-investor, come back to me. That’s a no. Everything is a no except we want to start due diligence. That’s a yes.
So now you might ask, well, why do venture capitalist not say no? Arguably it’s harder to get a venture capitalist to give you a direct no than it is to get a direct yes. And the reason why venture capitalists never say no is because they have the fantasy of maintaining an option on you. This way – the way it works is if I say come back to me when you have – when you’ve proven the dogs are eating the food, or come back to me when Kleiner Perkins or Sequoia has taken a lead, I’d be happy to co-invest along Kleiner or Sequoia. Well, who wouldn’t want to invest along Kleiner or Sequoia? Right, any idiot would do that.
So that’s kind of the problem that they cannot say no. They don’t want to say no because they don’t want in their minds to close down the option. They say no and you become the next Google, they look like an idiot. So what they have to do is they would tell the founders of Google – if they knew that it was going to be Google, they would tell the founders of Google, well, come back to me when you have a business model for your new search engine. So this way if they missed Google, they can say to themselves, I didn’t miss Google, I told those bozos Larry and Sergei to come back to me, they didn’t come back to me. It’s their fault. So now when I go meet with Calpers, I’m not going to tell Calpers I missed Google. I am going to say I saw Google. I knew Google was going to be successful. They didn’t come back to me. It’s their fault, not my fault. I still need $20 million of Calpers. That’s what happens.
So if you want to hear a yes – can I give you some tips about pitching? Okay. So tip number one about pitching is I’ll give you a metaphor. Think of pitching like online dating. There is two kinds of online dating theories. One is e-harmony. You fill out questionnaires. Do you like long walks on the beach? Do you like white wine or red wine? Do you like opera, classic or rock? Are you open to adoption, not open to adoption? You want many kids, few kids? Because according to e-harmony, you are finding your soul mate. You are going to be walking on windswept sunny beaches holding hands for the rest of your life. You need a soul mate.
The opposite end of e-harmony is hot or not. Look at this picture, is she hot or not? Guess which one venture capitalists – it ian’t e-harmony. It’s hot or not. In 30 seconds, they are going to decide are you hot or not. It’s that simple. And so what happens in that 30 seconds? Most people stumble and fumble in thirty seconds. What venture capitalists want to hear in the first thirty seconds is not who the hell you are. Because the odds are you don’t have a proven track record, because if you had a proven track record, frankly you wouldn’t be raising money.
So what you need to do is in the first thirty seconds, explain what the hell you do. Really. Because until you explain what the hell you do, it doesn’t matter who you are. I have said in pitches where the first thirty minutes are talking about – my relatives came over on a Mayflower. They settled in Connecticut. They had the first butcher shop in Connecticut. They did extremely well. So my great-grandfather, he went to Connecticut college and my next, my grandfather went to Yale. Then I went to Dartmouth and I majored in Oriental Art History but I always wanted to be a technology. So I started thinking .NET classes on the side. And I studied all Microsoft and I’m really professional in PowerPoint and Excel and I’ve always admired what your firm does. And I am sitting and thinking what the hell do you do? And then they say well, according to Forrester and Jupiter, this is a market of $100 billion. And how hard could it be conservatively get 1% of this? And I’m still wondering what do you do? Is it hardware? Is it software? What do you do? What market are you in?
In the first 30 seconds you need to explain what the hell you do. Really. Because until you explain what the hell you do, it doesn’t matter who you are. Because very few people have this kind of background they would just say, O my God, I have to invest.
I will give you some examples. So let’s say you say I was the first VP of Engineering of Akamai. So I truly understand how to scale something. That would be a competitive advantage. Or I was the VP of Engineering of Google. That would be proven engineering. Of course, arguably if you were the VP of Engineering of Google or Akamai, why would you be trying to raise a million dollars because you’re worth a billion dollars. Something’s wrong with this picture, right? That’s the kind of thing. So you want to talk about – many people believe that venture capitalists are looking for proven teams. Maybe later you are going to have a panel of venture capitalists, are you? Okay. Watch, watch what’s going to happen.
If the moderator is smart, the moderator is going to say what do you look for in a team you’d like to invest? You know what every venture capitalist is going to say: proven team. Proven team. We invest in people. We are proven people. All you are going to write that down. They invest in proven people. So you think, oh, I go to the pitch, I have to prove. So that’s why you start your pitches – yeah, we took a lot of .NET classes. I’ve Rockstar programmers. I have never met a CEO who did not hire Rockstar programmers. How come there is so much shady software out there? I don’t know. Everybody hires Rockstar programmers, okay.
So you know what, the reason why venture capitalists publicly say we’re looking for proven team is because they’re afraid that in the audience is someone who represents CalSTRS or CalPERS or one of the big LPs, right? And so you don’t want the CalPERS person to hear the truth. The truth is you’re looking for unproven teams with unproven products in unproven markets because I just described Apple, and Google and Yahoo! and Cisco. That’s what they were: unproven teams, unproven markets, unproven technology. Besides that perfect. Absolutely perfect.
So as a venture capitalist, you can’t sit on the stage and say well we’re looking for unproven teams, unproven people, unproven markets because you are afraid that someone in CalPERS is going to write down. Uh, uh, that fund is looking for unproven people, we can’t put our money in there. So you say we’re looking for proven people. So now you write down they are looking for proven people. So now you believe you have to prove your proven person to get an investment, you’re meeting with the wrong VC.
If you could get, if you could talk to someone like Michael Moritz of Sequoia and ask Michael Moritz, what do you look in? And arguably Michael Moritz is probably the most successful VC in the last twenty years, right? Michael Moritz will tell you, we’re looking for two guys or two gals in a garage or dorm, engineering students who are trying to build the product that they themselves want to use. Because that describes Google and Apple and Yahoo! and YouTube. That’s what they want.
So when somebody says come back to us when you have more revenue. Come back to us when Kleiner Perkins or Sequoias leading around. Come back to us when you have a world-class team. They are saying no.
Questioner: Going back to the 12 things you learned from Steve, customers cannot tell you what they need. What was the process of customer development like at Apple that not surveying people, asking them what they need was your process observing what they were going to use?
Guy Kawasaki: The process was Steve Jobs said do this. A focused group at Apple is defined as Steve’s left hemisphere was connected to his right hemisphere. That was the two members of the focused group. His left brain and his right brain were connected by cortical structure; that’s it. Having said that I don’t necessarily recommend that you all think you’re mini Steve Jobs and you can anticipate the future. But I will tell you that it’s very unlikely that you could put together people in a focused group and ask them what they want. And you come up with anything useful because I will tell you, I’ll save you the money they’ll tell you: better, faster, cheaper, status quo. Whatever you do, if you do better, faster, cheaper, status quo focused group will love you. That’s it.
I can take one last question because I have to go to something that I cannot miss actually.
Questioner: There is a lot of pressure on me now. So I have a question about point three, about the biggest challenges begetting the best work. And I know, and I’ve talked to a bunch of people now where I live in New York about how, we’re frustrated that always people are just building iPhone apps instead of trying to tackle world trending problems. And I am wondering to know, how – are you concerned at all that there seems to be because it’s easier to start a company now that there are people who are more comfortable solving smaller problems or what do you think could be done to address that?
Guy Kawasaki: I think that as you look back, I don’t think that at the time you’re starting a company, you’re sort of a bifurcation. And some entrepreneurs say I’m solving big problems and some entrepreneurs say I am solving shady little problems. So you’re saying well too many people are solving shady little problems, it’s not going to change the world. The way I think it works is most entrepreneurs start off trying to solve shady little problems and lo and behold, they create these enormous successes. So I don’t think that Bill Gates or Steve Jobs or even Steve Case when they first started their company, they saw this big macro picture. I don’t think Bill Gates saw that some day I will have an operating system business, I’ll have an applications business. Some day I will have an Xbox game business. Some day I will have a Bing search business. Some day I will have a MSN business. I think that Bill Gates said I could build the operating system. Well build is a loose term – build an operating system for this cool thing called the PC. And Woz said wow we can like scam parts of HP and we could build this board and this board can like put up a character on this TV, how cool is that.
And so you start off with these very humble beginnings and twenty five years later you have this huge success. That’s very different than saying I don’t think Woz and Steve when they first started out says we see the future of personal computing and this future includes iPhones, iPads, iPods, Macintoshes. So we’re starting now but twenty five years from now that’s the future. I think the most relevant question that engineers start a company with is not what’s the future as much as wouldn’t it be cool if. Wouldn’t it be cool if we could search better? Wouldn’t it be cool if instead of having to drive to a computer you could have one in your house? Wouldn’t it be cool if my girlfriend could sell paste dispencers on the internet, so I started eBay. Total bullshit story but a great story.
So wouldn’t it be cool if people could upload copyrighted video and millions of people watch it and wouldn’t it be cool if people could take video of themselves dropping mentos into diet cokes, so we started YouTube. So I think the salient question is wouldn’t it be cool if. And then if you have a lot of people answering the question wouldn’t it be cool if, some of them will grow into mighty, mighty Redwood forest trees. Many of them will die. Some people will create sort of Christmas tree height. But some people will create Apples, Ciscos, and Yahoos, but at the time you’re planting the seed, nobody knows.
I mean like venture capitalists like to be able to say, yeah we knew. We knew that company would be successful. They had a proven team. They had a proven business model. They were in a proven market. So we knew that company would be successful. That’s why we invested in it. If you ever encounter that, then ask the VC, well what about the other 19 investments that you made? How come they failed? And the VC will say well I told my partners not to do that. It wasn’t me. Go ask the people who funded Webband? Webband is a very good example. Webband – proven team, proven market. Everybody has to eat. Proven business model – you know imagine the convenience you could go online and order someone to bring you broccoli. That is a great business model. So proven team, proven business model, proven technology. Build the distribution site and automatic picker puts the broccoli in your basket, sends into a van to your house. Everything is perfect about Webband. Raised $450 million. Where is it today?
You should solve small problems. Solve small problems and hope that many people have that small problem. That would be my recommendation.
Okay. Thank you very much. Enjoy your conference.