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David Friedberg: All right, next up is David Sachs. Come on up, David. For those of you who don't know who David is, David was one of the founders and a, was the president or COO of PayPal? COO of PayPal, you may have heard of. He was part of that very interesting group of people. An eclectic group, if you will, of interesting people.

SPEAKER_08: Many of whom we all know. Elon Musk comes to mind. Reid Hoffman comes to mind.

SPEAKER_12: Anybody else work there of note?

SPEAKER_11: A lot of people. A lot of people.

SPEAKER_12: A lot of people. Max Levchin comes to mind. So many interesting names. Any other names come to mind? Jeremy Stoppelman.

SPEAKER_14: A lot of great people work there. A lot of great people.

SPEAKER_15: It was an eclectic, interesting group.

SPEAKER_14: Yeah, very much so.

SPEAKER_15: Roloff, Roloff Botha from Sequoia. So many names on the tip of my tongue. Mm-hmm.

David Sacks: Just a, just... Keep going. I'm not sure exactly where you're going with this, but let's just, let's just get it out there.

SPEAKER_22: I think Chad Hurley from YouTube.

David Sacks: Amazing. We had an amazing founding group. And, of course, Peter. Oh, Peter Thiel worked there. Forgot about that.

David Friedberg: Forgot about that one. So, Peter Thiel was there before we delve into Zenefits and Yammer and the amazing stuff you've done.

SPEAKER_27: Just for the rest of us who looked at Peter Thiel's, you know, support of Trump at a very weird, peculiar time. Trump was going through the kind of nasty comments he made about women and the accusations. And Peter puts out this sort of tone-deaf $1.25 million or $1.5 million support right as that's happening. It seemed very weird to people here. But it turned out he was right. He was right that the country wanted Trump. That the country was looking to either say something to America that they felt like they were being ignored.

SPEAKER_29: When you look at Peter's bet and you look at the election results, what do you think we'll look at in another year or two when we get past this sort of, you know, very dicey time? How do you think we're going to contextualize all this? Peter's investment in Trump and Trump's winning?

SPEAKER_32: Well, you know, Peter's a contrarian and he, contrarians aren't always right.

SPEAKER_34: They may not even be right the majority of the time. But when they are right, they're often hugely right because everybody else gets it wrong. And so Peter is kind of known for making those bets. And he's really got a lot of courage of his convictions to stick with them even when everyone else is kind of denouncing him and saying how stupid they are.

SPEAKER_35: And I think he's kind of proven once again why he's Peter Thiel.

SPEAKER_38: Yeah. Is he a good person with good motivations? Because people are kind of painting him in like, well, you worked with him for many years. I think it's a valid question. Do you believe, having worked with him, having known him better than anybody in the room, that he's actually a good person with good motives?

SPEAKER_34: Yeah, and I think, you know, if you look at Peter, what Peter's been talking about politically for the last few years, not just this year, but for the last few years, he's been raising concerns that he has with globalization. And he's been talking about this for a while. And I think, you know, if you want to understand his support for the candidate, I think it has a lot to do with what he perceives as the excesses of globalization. And he sees Trump as the candidate to correct that. You know, I think that the way he was denounced and sort of really shouted down by Silicon Valley, I think he was treated very poorly. You know, the idea of trying to run somebody off of boards or run them out of Y Combinator or being a VC at all, I just think that is, you know, that's political correctness. And, you know, I think Silicon Valley is better than that.

SPEAKER_27: And what's your take on what's going to happen over the next couple of years? We've had many conversations about this. We're friends, obviously, for a long time now. What are your thoughts about the worst-case scenario, the best-case scenario? Because, let's face it, Trump is not a typical candidate.

SPEAKER_29: Trump has, you know, never held office before. And as Peter said, like, don't take him literally, you know, sort of think about the big message here. How do you think he will impact the technology industry and business over the next four or maybe eight years?

SPEAKER_46: What's the best case? What's the worst case? Because he hasn't told us what he's going to do exactly.

SPEAKER_34: You know, this is one of those areas that I just, like, tend not to get into at all. You know, obviously, I have my own political views personally. But not just this election cycle, but if you go back, you know, four years ago, really ever since I've been a CEO, I don't sort of take stands on partisan political issues or elections. And the reason is just that the country is very polarized by politics. And I think the last thing you want to do as a CEO is bring that polarization into your company. And, you know, we want everyone in the company to work well together. We definitely, you know, have a lot of employees in our company who are both – we have Hillary supporters, we have Trump supporters. And the last thing I want is for them to, you know, relate to each other the way that I see those people relate to each other on Twitter.

David Sacks: You know, you just don't want to bring that into your company. And so –

SPEAKER_38: But just on a pragmatic basis, immigration, you know, red tape and regulation, what do you think – just on a policy basis, putting aside the candidates, but on a policy basis, how do you think it will impact entrepreneurship and technology?

SPEAKER_32: Well, I don't think we know yet.

SPEAKER_34: You know, I think immigration is a good one where – it's a good issue as an example of this where, you know, Silicon Valley companies care a lot about, you know, H-1B visas. And we don't know what's going to happen with that because it will kind of depend on whether the administration makes a distinction between skilled versus unskilled immigration. We just don't know what they're going to do yet. So I really don't think we know. And, you know, as a company – being the CEO of a company that's highly regulated ourselves, again, the last thing we want to do is take – we have regulators who are Democrats. We have regulators who are Republicans. And, you know, I just try not to get involved in the middle of these, like, very partisan types of issues.

SPEAKER_27: Which is a good segue. Let's talk a little bit about regulation. Right. You built Yammer. It was a tremendous success. In fact, you launched it at the conference many years ago.

SPEAKER_46: And I should say, for full disclosure, we were in a couple of different businesses together. I'm an investor in a fund. That's an investor in Zenefits, a small investment. And you're an LP in my fund. And we co-invest in things and we're friends.

SPEAKER_27: Now, Yammer was a tremendous success. You sold it for a billion bucks to Microsoft. But then we saw Slack come. And essentially it was Yammer 2.0. And now it's become, whatever, a $3 or $4 billion company.

SPEAKER_58: Did you sell too early, do you think, when you look back on it? Any regrets there, I wonder?

SPEAKER_32: I mean, not really. I think Slack came along, like I said, a few years later. And it was a mobile first product.

SPEAKER_34: Yammer was really born in the web era. But I think Slack – and it is interesting because Slack took a lot of the Yammer concepts about spreading virally inside enterprises.

SPEAKER_27: They took your exact device, which was use your company's domain name to sign up and you'll put everybody in a group. Right, right, exactly. Which was built off of – you built that off of Facebook's attempts of having the .edu address. Right, exactly.

SPEAKER_65: And I'm not sure if I can track that growth hack to where that came from previously. Was there a previous person who did that?

SPEAKER_32: I don't think so. I think Facebook was the first to do it because they wanted to create social networks around colleges.

SPEAKER_34: You remember in the early days, in order to get into the Harvard network, you had to confirm a harvard.edu email address. And so that was like the big differentiator from MySpace was the fact that they would create these exclusive networks. And then they rolled up universities one by one, and then eventually they got rid of that concept altogether. But when we were thinking about Yammer, we were like, that's a useful idea for creating viral company networks. And so we took that, and the beauty of it was that before Yammer, in order to get into an enterprise, you'd have to go to their IT department and basically try to sell to them. And Yammer flipped that on its head and let the employees pull the technology into companies, sign up on their own. And then we'd go to the IT department and say, hey, you've got 5,000 employees on this product. Do you want to control it?

SPEAKER_70: Yeah. You want to have some insights.

SPEAKER_72: Yeah, exactly. And I remember being, back in the early days, we were attacked as this being like some sort of blackmail or something like that. Right. But now a lot of products do it. And it's really the consumerization of the enterprise where you can now create products for business that look and feel and behave like a consumer product.

SPEAKER_34: And that's a really good thing for employees.

SPEAKER_27: In a way, Slack is the first consumer product for the enterprise. It seems to have grown on a consumer basis. It grows like a consumer app, yet it is a SaaS product.

SPEAKER_32: Well, you know, Yammer did that too. And then we got acquired by Microsoft.

SPEAKER_34: And I think the acquisition made a lot of sense, which is you've got Office, which is Microsoft's most important product, $20 billion a year plus product. And they acquired Yammer to help them become more social, more mobile, more cloud focused. And I think the acquisition has helped them do that. But, you know, as a result, I think the Yammer product kind of has been, it's been a little bit lost in integration for the last few years. And that's allowed a company like Slack to come along and push those ideas even further.

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SPEAKER_83: Let's get back to this amazing program.

SPEAKER_85: So after exiting Microsoft, you had a lot of different people who wanted to work with you. You had a lot of opportunity. I think you could have easily become a venture capitalist. Right. But you found this company that was growing faster than any SaaS company had grown before. Right. And that company was Zenefits. You decided to join and you invested.

SPEAKER_88: And the growth was unprecedented for a SaaS product, would you say, in that company?

SPEAKER_44: Yeah. I think so. I think it was the fastest I'd seen.

SPEAKER_85: Right. Which I think is why you would come join a company like that as opposed to maybe start your next adventure. But that growth, it turns out, was perhaps too fast. And the company got itself in a little bit of trouble. Explain what happened there to the folks in the audience who don't know. Because we see headlines, Theranos, Uber fighting with regulators, Airbnb fighting with regulators, and Zenefits fighting with regulators. Tell us what happened and how you contextualize it on that spectrum of break things, move quickly,

SPEAKER_27: bend the rules, and then all the way over here at Theranos, which appears to be an absolute,

SPEAKER_63: complete, 100% fraud.

SPEAKER_93: Yeah. So, I put the word appears in there.

SPEAKER_34: So, I really put us on the opposite spectrum as something like Theranos because the company had a compliance issue, but we've completely fixed it. In fact, I think we got so good at fixing it that we're now an industry leader in this type of compliance, which has to do with licensing. We've been praised by regulators for what we've done. And we've actually created a new technology to manage our licenses that we've open source as an app on top of Salesforce. So, I think the company at this point has kind of passed all those problems. But to your question for the people in the audience here, I think that there is something valid about this idea that the company did move too fast in this area, and it did underprioritize compliance. And the culture didn't sufficiently respect compliance as a cultural value. And I think all those things ended up hurting the company.

SPEAKER_95: And we just had, Cyan, you caught the tail end of her presentation talking about culture, culture matters. And it comes from the top down.

SPEAKER_27: Yeah. Parker is a phenomenal growth CEO. The company grew incredibly fast under Parker. But it turned out when you went there, you discovered that in the licensing, to sort of just unpack it

SPEAKER_29: a little bit, people were going for insurance licenses. But they were kind of skipping the training through a little piece of software he wrote. And that macro really upset the regulators who said, hey, listen, you can't advance yourself through the reading materials faster than you're supposed to.

SPEAKER_34: Well, in California, one of the requirements to get your broker license is a pre-licensing education requirement. You're supposed to spend 52 hours going through coursework. And so, yeah, the macro was a piece of code that enabled people to get it done in less than 52 hours. That was the hack. It didn't help them, like, pass the test or anything like that. But it did help them get through it in less than 52 hours. And, you know, that was a problem.

SPEAKER_72: You know, I think it's just a bad idea to try and hack regulatory requirements.

SPEAKER_102: And now the regulators you spent a year with.

SPEAKER_103: Well, I mean, it's a small lesson for everyone in the audience. Small lesson for everyone to take the licensing seriously. Yeah, yeah.

SPEAKER_85: The licenses are there for a reason. How do you look at the difference between, say, reinterpreting the law, which many people would argue Airbnb is doing, versus, say, what Parker did and what happened at Zenefits, where, you know, one of them feels a little bit like cheating.

SPEAKER_105: One of them feels like sort of reinterpretation of, you know, very old laws about, can I rent my couch or not?

SPEAKER_34: Yeah. Well, what I would say is, if the law is sort of black and white, you do it. You know, you don't try and hack it. You don't try and reinterpret it. Disrupt it. Yeah, you don't try and disrupt it. I think that's a very bad idea.

SPEAKER_72: And I think we're, now, we're fortunate, because I think what happened was very peripheral to our business model. It didn't need to happen. It was just kind of a really stupid thing that shouldn't have happened.

SPEAKER_34: And so, we've already fixed it. I just want to be really clear about that. And, you know, and so the company's moved on. There have been cases, like take a Napster, for instance, where it was not peripheral.

SPEAKER_72: It was actually, like, fundamental. And I think what ended up happening is the company got shut down. So, what I would tell people is, if the issue is black and white, just don't do it. You know, you may get away with it for a while, but it's actually like a really bad idea. Now, if it's in a gray area, then I think you ask the question, well, what's in the interests of consumers? And it's a very valid principle of statutory interpretation that you ask, what would good public policy be? And so, what I would tell you is, if you're operating in the gray area, but what you're doing is good for consumers, then I think you should go out and do it. But there's no need to be, like, sheepish about it. You should be very aggressively, publicly advocating for your interpretation of the law. Right. And I think that what we've seen from, say, Uber and Airbnb and other people is that what the realization they've come to is they should have set up a public advocacy function a lot earlier and engage with regulators earlier. Right. And so, that's what we've tried to do. Like, we're very proactive now about going to regulators and engaging with them. And I think that works.

Chamath Palihapitiya: When you had to do the cleanup, what did you say to the regulators? Because it seems like you cleaned it up in six months. Yeah.

SPEAKER_27: It seemed like it was incredibly fast. And you look at something like Veranos, where they thumbed their nose at regulators and thumbed their nose at the Wall Street Journal's investigative Pulitzer Prize-winning team.

SPEAKER_96: Yeah.

SPEAKER_27: What was your approach in talking to the regulators? And how did you wrap it up so quickly? Because it seems like the majority of these issues, I saw press releases from Zenofits around the Z2 launch, that you kind of had put this stuff to bed. How did you do that? And what was the process like? I know there's some legal issues you can't get into. But just in general, if somebody gets in trouble like this, what's the right approach?

SPEAKER_32: I mean, our approach was admit, fix, settle, repeat.

SPEAKER_72: I mean, that's what we did. Admit, settle, fix, settle, repeat. Got it. And so, it's very straightforward. I mean, we hired outside auditors to come in and investigate the situation. They wrote a report. We then gave that report directly to the regulators. Wow. This was an external third party coming in to explain exactly what we did wrong. So, we admitted everything that went wrong. We then fixed it. We basically fixed our processes, our technology, our cultural values, our leadership, our board to get that fixed. And then we settled whatever liability came about because of what happened. And because we've just done that, had that approach, we've been able to clean it up very quickly. I think Theranos is an example. I don't really want to pick on them because I only know what I've read publicly. But I think you see a lot of people falling into the trap of taking the opposite approach, which I would say is defy, deny, and double down.

SPEAKER_118: Right. Which is, first, you break the rules. It's just a triple D. It's a triple D. Right. I mean, but see, I think there's a whole...

SPEAKER_121: It's a huge mistake.

David Sacks: It's a huge mistake.

SPEAKER_72: But weirdly, there's, like, a whole industry that's popped up around this idea of damage control. And what they try to convince you to do is to hunker down and, like, close ranks and spin your way out of the problem. And I think you saw that with Theranos where there's just, like, a total denial of reality around their problems.

SPEAKER_34: I mean, how are you going to fix the problem if you can't even admit it exists, right? Right.

SPEAKER_27: Imagine if they had an auditor come in and say, let's audit the Edison machine. Let's audit the technology. They're asking for it, and they wouldn't do that simple thing. Right. Exactly.

SPEAKER_125: Which is a huge mistake.

SPEAKER_72: Yeah, I mean, well, they seem to have some sort of cultural aversion to transparency. And we've just...

SPEAKER_34: The way to solve these problems is just to be very transparent and to... Look, you can't fix a problem unless you admit it exists in the first place.

SPEAKER_126: So let's... Now that we're getting through the dark days, it seems like the clouds have lifted its benefits and you're ready to grow again.

SPEAKER_27: You got rid of some of the bad apples, let's just say, people who maybe were, you know, not thinking properly or the old culture, you built the new culture, and then you launched the Senefits 2, Z2, I saw the billboards. Right.

SPEAKER_46: Seems like it's a pretty interesting value proposition for consumers. Why don't you explain what it is? And I don't know if we have a lot. Sure. Yeah, there's some slides.

SPEAKER_130: I need to show you some of the Z2 stuff.

SPEAKER_46: Yeah, we'll pop up the slides. Yeah. Here we go. You have a courtesy monitor right here, by the way. There we go, okay.

SPEAKER_132: Look in front of you, David.

David Sacks: Oh, cool.

SPEAKER_72: So, yeah, so these are actual billboards that were around the Bay Area. We were put up a few months ago to start advertising the event. And the first version didn't even have the Zenefits logo on them. We were just trying to get people interested in this idea of Z2. And that refers to this version 2 of Zenefits. It's our first user conference where we unveiled this product. And it alludes to this larger corporate reboot we've done.

SPEAKER_27: And we heard Jason Lemkin from Saster talking about a user conference. Why are the user in conferences important?

SPEAKER_34: Well, because it's really – that interaction with customers is so fundamental.

SPEAKER_72: And probably one of the things I would tell the people in the audience here is as you think about, like, scaling and growth hacking and all that stuff, I'm – personally, I'm really in more of, like, a back-to-basics mode on all of this stuff.

SPEAKER_25: You know, I'm very familiar with, like, viral tactics. And, you know, we use that stuff at PayPal and Yammer.

SPEAKER_27: Yeah, I mean, in fact, PayPal is the textbook example of virality, which is, you know, in order to use it, you have to get another person's e-mail address and send them money.

SPEAKER_72: Yeah, exactly. We were one of the first viral products. We were one of the first products that was essentially bootstrapped off someone else's platform, which was eBay. Yep. It was one of the first companies to use an embed strategy. Right. So I'm like –

SPEAKER_137: And the give-and-get strategy. If you gave somebody $5, you got $5.

David Sacks: That's right, referral bonuses. Referral bonuses. Yeah. So, I mean, PayPal was really a pioneer in all these areas.

SPEAKER_72: And so these tactics can be useful, but they have to be paired with a fundamental focus on customer success. And so where – Zenefits today is really obsessed with NPS. Which is net promoter score. Net promoter score. Yeah. And, you know, it's not that important to subscribe to any particular methodology around this, but the basic idea behind NPS is it's just a way to measure customer happiness. You know, positive word of mouth. And there's no way your company is going to grow very fast unless you've got happy customers who are spreading the word and recruiting their friends. And now, virality is a way to kind of take that word of mouth and actually formalize it. You can actually, you know – Quantify it. Yeah. And you can accelerate it by help pushing that word of mouth through various kinds of channels. But fundamentally, people have to want to spread your product because they like it. And that's the thing we've been really focused on as a company. And I think, you know, my guess is that there's been a lot of speeches today talking about really great ideas for growth hacks. And I'd say, like, don't ignore those things. But, like, what matters at the end of the day is listening to your customers, taking their feedback, making the product better. And that's what Z2 is all about. And you see photos here of – I mean, we had huge turnout. I think we had – there was room at the conference for 700 people. It sold out very quickly. We ended up having 1,500 registrants. And, you know, we had some keynote speeches. The whole thing was very product-focused. For us, the product is the star. And so we launched a new product and then had great breakout sessions and demo stations. We were able to demo the new product for people.

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SPEAKER_72: Well, what's unique about it is the whole product's been designed as an app store for HR. So, we know that – so, the value profits benefits this to be an all-in-one solution for HR. But we also know that no one company can do everything.

SPEAKER_150: In HR.

SPEAKER_72: In HR. So, we have focused on doing the things that we consider core, which is HR workflows, like hiring, terminations, promotions, transfers, things like that, benefits, and payroll. And so, that's sort of core to the employee system of record. But then we've created a platform to let any application build on top of that. And so, we launched with 17 app partners, including Expensify for expense tracking and e-shares for stock options. And there are performance management apps and productivity apps. And so, what we're trying to do is build a whole ecosystem because what it really means to be all-in-one for HR is to enable an entire ecosystem of applications.

SPEAKER_27: When you took over, you had just raised a very large round. It was a couple billion bucks.

SPEAKER_46: And we're going to take a couple questions. Jackie, you can take the microphone maybe and do it. Or actually, Mike, maybe you can do this for me. Grab the microphone. We'll take a couple of questions from the audience. You can line up right here. You did this extraordinary thing, which was you had raised money at a certain valuation. Maybe it was $4 billion or something.

SPEAKER_27: And then the company kind of did this reboot. And you re-upped the investors in that round at a lower valuation. Talk about why you took that step, which it's unprecedented in the history of Silicon Valley for a company to do this, which is to say, hey, maybe we weren't worth that $4 billion yet. Maybe we got ahead of our skis. We're going to reward the investors who believed in us through this tough time while we clean up the regulation issues, while we launched Z2.

SPEAKER_46: And we're going to just re-issue some shares. Explain your thinking there. It seemed very unique to me.

SPEAKER_32: I guess it is unique, but maybe it shouldn't be. So when I came in as CEO, the approach was we actually made a list of all of our key stakeholders.

SPEAKER_34: And we said, look, in light of what's happened, we're going to reset our relationship with all of these key stakeholders. And so it was regulators. We went very proactively to them.

SPEAKER_72: Customers, employees, partners in the industry, and then shareholders. And the thing that we did with shareholders to kind of reset our relationship was to reset the valuation at $2 billion, which is still a fantastic valuation. It was a 20% dilution event for the company. We re-upped all the employees so they weren't diluted at all. And the only people who actually took the dilution were, well, basically people like me and the founders. And, you know, I think it was totally worth it in order to be able to have happy investors, reset our relationship with investors. And also, you know, we got a release from investors of any claims against the company. And I got to tell you, when I saw Theranos getting sued by one of its investors, which, you know, on top of all the other problems they have, I mean, I don't see how they survive from something like that.

SPEAKER_34: And we're not going to have that problem because of what we did.

SPEAKER_29: It's really interesting.

SPEAKER_27: Theranos is now going to be the first unicorn if you count it by the number of and the value of the lawsuits against them because now they've got their second, which is another hundred and some odd million from Walgreens. So I think they're at a quarter billion dollars, so well on their way to a billion dollars in litigation.

SPEAKER_34: Yeah, and, you know, I think one of the things about the turnaround we've done at Zenefits is in nine months we've basically completely solved this compliance problem. We've reset our relationship with all of our key stakeholders. We've launched a new product, which I think is the leader in this space, and we've done it without having one lawsuit.

SPEAKER_158: Right, all being proactive and admitting mistakes. Exactly.

SPEAKER_38: Okay, so once again I'll ask you to please, please, a tight, concise question. Your name, your company name are not necessary. Do not say them. We'll boo you. Questions. Knowledge.

SPEAKER_165: Oh, you have to turn it on. I think it might have put it off. Sorry about that, Jackie. Okay, here we go. One more time.

SPEAKER_168: So after the crisis, how do you retain talent and how do you boost morale again?

SPEAKER_169: Great question.

SPEAKER_168: Yeah.

SPEAKER_72: So we did the things that you might think are pretty standard but are very important. So there's a lot of communication with the employees about what was happening. You know, normally we have all-hands meetings every two weeks. In this case, I was doing all-hands at least probably twice a week, and any time there was, like, some big breaking news story, I'd go in front of the company and explain it. That's important. We gave the employees more equity. So, you know, we increased employee ownership in the company. One of the things I'm proud, I'd say most proud of, is that the employees today own a lot more of the company than they did when I took over. I'd say that their employee ownership has more than doubled relative to when I took over. I mean, frankly, I think I'm the only person who owns less of the company today than I did back then. But that was really important. And then, you know, the really radical thing that we did was we did a thing called the offer, where after, this was about three or four months into the turnaround, where we had declared new cultural values and we had sort of, you know, fixed all of these things, we went to the employees and said, listen, we realize that the company today is a different company than the one you joined. It has different values. It has different priorities. If this is not what you signed up for, it's okay. We respect that. We will give you a generous voluntary separation package. And I got to tell you that, like, most of my exec team did not want to do this. They thought, like, half the company was going to quit just because we know that, you know, Silicon Valley can be a pretty mercenary place. And that works in your favor when you're the hot company. And if you hit a road bump, it doesn't work in your favor.

SPEAKER_63: And this was, like, two months of salary or something.

SPEAKER_72: Yeah, it was basically two months of salary at full OTE. So if you had, like, you know, a variable compensation plan, you get credit for that. You get four months of COBRA.

SPEAKER_27: So if you were a sales executive, you would get two months of salary with your sales. Yeah, full commission. Yeah, wow.

David Sacks: Yeah.

SPEAKER_172: Commissions, yeah.

David Sacks: Yeah.

SPEAKER_72: So at the end of the day, only 10% of employees took it. 90% chose to stay and re-enlist in the news benefits. Perfect. And, you know, what was amazing about that was that for everyone who stayed, they looked around and said, oh, everyone else wants to be here, too. And they wanted to be there, but they were all, like, worried that nobody else did. There's this big confidence problem.

SPEAKER_34: And after the offer, it just totally, like, all those morale issues just went away.

SPEAKER_174: It's sort of like all the people who secretly voted for Trump.

SPEAKER_175: Sorry. It's a joke.

SPEAKER_27: Okay, here we go. We have to laugh about it. We have to come together as a country. I mean, right now you believe that, right? We have to come together as a country. Oh, for sure. And we have to support the person who won. And we have to just hold them accountable and just make sure he does a good job.

SPEAKER_178: For sure. For sure.

SPEAKER_27: What choice do we have?

SPEAKER_178: For sure.

SPEAKER_179: Well, in hindsight, the turnaround seems to have restored a lot of confidence. But how would you, in foresight, at the time it happened, before you came in, when there was a lot of turmoil, how is that so different than Airbnb? If the problem was, as you said, peripheral, and the problem with Airbnb and Uber was really at the core. Or why did everyone clamor? Why was there such a perceived problem in Zenefits as opposed to the other companies?

SPEAKER_182: That's a good question.

David Sacks: Yeah, so I think it is a good question.

SPEAKER_72: And I think the things, there were things that the company, if you're asking what could the company have done in advance to prevent the problem, you know, I think the company didn't mature its culture fast enough. There was this, the number one value of the company before was, it was called ready, fire, aim. And it was, yeah, I know it's kind of funny.

SPEAKER_185: No, they codified that specifically.

SPEAKER_72: Yeah, yeah, so that was something that was learned when the company was in Y Combinator. But when the company was in Y Combinator, there was a few people kind of still throwing spaghetti against the wall. I think it's a perfectly fine value when you're in experimentation mode. When you're in scaling mode, especially in a highly regulated environment, I don't think it works anymore. And the company should have moved off of that. I think one of the things that would have helped a lot is one of the things we did, as soon as I took over, was I created a compliance department with a chief compliance officer. The company did not have that before. And so, licensing compliance primarily resided within the sales organization. And what I would tell you is, it's not that the sales people are bad people and want to break any rules or anything like that. But when you put people on a variable compensation plan, it, you know, it works, right? They're highly incentivized to pursue those behaviors. And what I would tell you is, do not rely on your sales department to do anything but sell. You know, if you have compliance issues that you need to make sure are taken care of, do not put them inside your sales department. Put them outside of it. Create a compliance department and incentivize them differently.

David Sacks: And I've seen this story over and over again. It's a great check and balance because... You really need checks and balances.

SPEAKER_27: If a sales executive has to meet a quarterly or a monthly goal, all kinds of things are going to happen with insertion orders on September 29th. Yes. All kinds of... Yeah.

SPEAKER_72: And by the way, for most of you who are not working in a highly regulated industry, this is still true for things like revenue recognition functions, right?

David Sacks: Which is, you don't want the sales department to be the arbiter of what constitutes a deal. You really... No, it's true. You really need a...

SPEAKER_118: This deal is for January. Right. The other 11 months, I comped them for free. Yes.

SPEAKER_72: I mean, you really need an external function. Maybe it lives in finance or under the controller or something like that where they do revenue recognition. Sales cannot be in charge of its own analytics. I'll tell you, and this is not like a Zenefit-specific thing. But, I mean, in my experience doing this stuff for like 20 years, whenever a sales department, if they're responsible for their own metrics and they're going to miss a number, all of a sudden they start talking about how, you know, the metrics we have, they're not really the best way of looking at this.

SPEAKER_185: Let me show you the pipeline. We've put things into buckets. We've come with a new... It's going to be awesome next quarter.

SPEAKER_118: Yeah, we've come with a new better way of looking at this. And I'll tell you another thing is you've got to make sure that they're selling the right things the right way.

David Sacks: I'll tell you a story at Yammer. However, we hired a sales rep and in our London office and they had, they were in charge of the Middle East as a territory.

SPEAKER_118: And within two months, they actually got us a million dollar deal out of Dubai. And we were like, wow, that's amazing. How did you do this? And, you know, this person was being hoisted on people's shoulders and like applauded. And then we actually looked at the deal and we realized that he had sold them our source code. They had to lean against the company. Exactly. And so, thankfully, we didn't actually sign that deal. But, you know, we fired the sales rep. But it goes to show that, like, you really do...

SPEAKER_209: You are the exclusive sales organization for Yammer in the Middle East now.

David Sacks: Exactly. So, what I would tell you guys is maybe the Zenefit story isn't completely relevant to you because you're not in a highly regulated environment.

SPEAKER_72: But what I would tell you is if you have a sales function where people are being paid with variable comp, you really do need an external check and balance on that organization.

SPEAKER_211: Final question. Final question. Nice, tight question.

SPEAKER_212: Yeah. So, you went through this transformation of culture. I'm guessing you had to tow a few cars, but you tried to keep as much of your top talent as possible.

SPEAKER_214: Is it still the same? Are your top producers the same? Or did you empower other employees, you know, through the culture change to, you know, sort of climb the ladder?

David Sacks: Yeah. So, you know, one of the things that we did when I took over is, you know, we did partway with some people who, you know, we thought were, frankly, part of the problem.

SPEAKER_72: But then we also created a room for a lot of other people to move up. And we promoted over 20 people to management positions, to either director or VP positions. Promoted a whole lot of people to VP who had never been VPs before. So, that's a really important part of the story as well is giving new opportunity to people.

SPEAKER_85: Yeah. Any other slides that we need to see or that's it?

SPEAKER_72: I think kind of.

SPEAKER_38: Yeah. Let me ask you a question about Twitter. There was a rumor you might have been lobbied to join Twitter and maybe become CEO.

SPEAKER_137: Is Twitter fixable? What do you think of Twitter? It's a very powerful, amazing platform. And why didn't you take the job?

David Sacks: No, I was never offered a job there. I never saw one.

SPEAKER_223: But there could have been some feelers. Let's just leave it at that, maybe.

David Sacks: No, look, I mean, so Twitter helped inspire the idea for Yammer. Sure. This was all the way back in 2007, I think. You know, I was thinking about the idea of corporate social networking.

SPEAKER_72: I had the idea of company networks with, you know, that sort of Facebook-like idea of networks. But I was still trying to figure out, like, what the killer feature would be, you know. And then Twitter came along with Feed, and that helped, you know, and we got that idea for the hook, you know, what are you working on? Sure.

SPEAKER_34: And so, you know, Twitter is, it's a product that, you know, I've always liked a lot. I mean, the things that need to be done in terms of fixing it.

SPEAKER_72: Yeah. I mean. Talk two or three product things. Well, I think everyone's kind of already put their finger on it. I mean, I think that, you know, the sense of trolling or harassment on it, it's out of control. They've got to fix that. I think that just the product hasn't changed very much. I mean, there's so many ways they could just, like, iterate on it. Just being able to publish things. So, you know, the publisher on the site, it doesn't even handle links in a consistent way. I mean, you look at, like, the way that Facebook handles links when you publish a story. They've had that feature for years. Why hasn't Twitter just, like, copied it and, you know, and brought it up?

SPEAKER_225: There's something wrong in the product organization, clearly.

SPEAKER_72: Well, it's just, there's just so many basic things that could get fixed about it, you know.

SPEAKER_38: How would you fix harassment? I'm curious.

SPEAKER_46: Would you just say, hey, we're going to go real names over the next two years, and if you want to use a pseudonym, you're going to be, your account will be deprecated in some way or less visible? Would you just do that?

SPEAKER_72: Well, it seems like Facebook's kind of solved this problem. Yeah. You really just don't have the same feeling on Facebook that you can have on Twitter. And I think it's mostly community policing with some sort of company back end that, like, arbitrates these things. Yeah.

SPEAKER_34: So, you know, I feel like most of what Twitter needs to do has already been done by other companies. They almost just need to, like, catch up with best practices.

SPEAKER_230: Yeah. All right. Listen, this has been an amazing discussion. Let's hear it for Mr. David Sachs.

SPEAKER_231: All right. Thanks.

SPEAKER_232: Please welcome my partner in crime and great friend over the last couple of years, Sian Bannister.

SPEAKER_235: So good to see you.

SPEAKER_237: Thank you so much. Yep. So this is going to be the longest talk I've ever given in my life. So now he always has to up it a little bit.

SPEAKER_239: It might be for two hours next time.

SPEAKER_238: All right. So I'm Sian Bannister. As you said, I'm a partner at Founders Fund. And today I'm going to talk about scaling culture, which is something that's near and dear to me. And so what is company culture? What is culture? I think culture is one of these weird things. As a visual person, when you ask me what is culture, you know, I think of parades. I think of, like, these visual images come to mind. But culture is very challenging as a topic. And so, you know, company culture can be as varied as, you know, all the personalities that you have in your company.

SPEAKER_237: So that's why I decided after reading a bunch of articles that I'm going to define company culture as the personality of your company. And the personality of your company emerges with or without you. And it starts from the day that you found your company and you incorporate.

SPEAKER_238: Because it's part of you. So you set the tone of what your culture is. And so as you go forward, your beliefs, how you build your business, you know, the efforts that you put into your company are going to shape your company for the future. So if you think about that, who are you and what kind of culture do you want to build with you and your co-founders? It can be something awesome and it can be something terrible. It's really, really up to you.

SPEAKER_237: So my favorite company that I've ever worked for built these amazingly sexy boxes.

SPEAKER_238: It was called Ironport. I don't know if there's any Ironport alumni in here. Maybe not. Charles Hudson was one of our alumni. So I was hoping he'd be here. But anyway, what would get me up in the morning at 7 o'clock in the morning? What would cause me to sleep under my desk? What would cause me to be, like, so passionate about these machines? You know, yes, we had a really beautiful bevel. You know, look at that. Isn't that amazing? Yes, they were really sexy when they were inside, you know, the rack-mounted server blocks. Yes, but no, it was their culture that got me to go there every day. It was the culture that caused me to want to stay there and never go home. And what was it about Ironport's culture when we just sold machines that made it exciting? Well, these were our first values in 2002.

SPEAKER_237: I'm going to take a little bit of time to walk through them with you because I think it's important. So we put these out and we've refined them over time. And what we said in the beginning is, you know, we give our opinions and we support each other's decisions. Now, this later on got changed to we had a speak-up culture and we encouraged dissent. And a lot of companies say they have a speak-up culture, but when you're actually at the table,

SPEAKER_238: when you're talking to your peers and you say, you know what, Jason, I disagree with you on that topic. And, you know, maybe Jason's like, you know, shush, sit down. You know, that's not a speak-up culture. A speak-up culture really does encourage speaking up, listening to ideas,

SPEAKER_237: and then the support part's really important because we encourage dissent for a reason. Dissent is when you get up and you say, you know what, I disagree with you, but then we fall in line and we support one another. So whoever's in charge of running the effort basically gets to make the decision in the end.

SPEAKER_238: Our products will be the best in the marketplace. You saw those machines. They were the best. We were unbeatable. We had an urgent focus on our goals. If we set a milestone, we beat it every time. And that was really, really important. If we didn't beat our milestones, we failed. And this was part of our culture. You know, we were good stewards of our resources. That meant that we weren't extravagant. If one of our coworkers went out and had a big party and had champagne and spent excessive money, that would go against our values. So we discouraged it. So, you know, one of the things that we did is everybody would have their holiday parties in December and we would have ours in February because that was part of our culture. We've always wanted to save money. We only employed the best people. And this was absolutely true. And I'll get to that in another slide. Our hiring process was rigorous. It was crazy.

SPEAKER_237: And the good part about that was anytime someone brought in an employee, you knew that they went through the exercise that you yourself went through.

SPEAKER_238: And so you trusted your peers because you're like, you know, they must have, you know, gone through the process. I trust my peers. They must be great. So you always took people at face value when they came in and you trusted that they were amazing. You know, we take teaching and learning seriously. This was something that we definitely championed. We always, you know, those machines, they have a lot of training that come with them. And so we always had to know exactly how they worked and exactly how to sell them. And every single one of our engineers had to be able to answer support tickets. So that was incredibly important. What's really interesting is the last one disappeared. Balance is important. You know, that whole work-life balance thing. I used to believe in that. I don't anymore. We got rid of it. And the reason why is you need to work on work-life integration.

SPEAKER_237: When you're in a startup, you cannot have, like, this whole thing where you're like, oh, you know, I'm going to try to figure out how to do this in 30 hours a week.

SPEAKER_238: And, you know, everybody's going to get free time and take vacations. It's going to be great. No, but as you scale, no. You're not going to be able to do that. And so you've got to try to figure out how to have fun and work at the same time. So how do you start your values in your company? Well, first and foremost, they cannot be bullshit. And this is going to be a recurring theme in my talk. So I see a lot of values where they're really fluffy. If you ask somebody what they are, they can't repeat them to you. They're like, oh, yeah, we've got some values, whatever, that's on our wiki. Really, you want people to really feel like it's part of them. And then so that way it becomes part of the culture. They need to be doable. You know, if I can't, you know, understand the values and I can't do them, then what's the point? It's never too early to create them and keep refining them. I, unfortunately, couldn't find the last values for Ironport because I wanted to show you what we ended up with. But it was something that stuck with us until we got to, you know, 500 employees and eventually sold to Cisco. Mission, again, don't have one if it's going to be bullshit.

SPEAKER_237: So I see a lot of people that have them. They're like, we're going to be the best. At what? I don't know. But we're going to be the best. We're going to be a market leader. Okay.

SPEAKER_238: You know, make it really, really defined and easy. And the mission can change constantly. So you should constantly reevaluate your mission and make sure that it's something that actually fits. Again, hard but achievable. So part of this talk, I went and talked to some early employees. And one of the employees that I talked to was an early Facebook engineer. And he said, you know, I loved working at Facebook because I believed they could build anything. And not only that, people wanted to use our products. And he talked about being able to get up in front of the entire company like this twice a month and basically pitch his ideas and then rally support from engineers and be able to build it. But that's because Mark Zuckerberg created a hacker culture. And it started from day one.

SPEAKER_237: And so if that's something that you want to have in your company, think about that. Start building systems around it and events around it that actually encourage it. So truth.

SPEAKER_238: Truth is not the same thing as transparency. So I see a lot of people are like, oh, you need to tell the truth.

SPEAKER_237: So I got to be transparent about everything. No. Truth is having integrity. So you can tell your employees, like, I understand that you have that question, but I can't share that with you right now.

SPEAKER_238: You know, or we can't talk about that right now. You know, I will as soon as I can. But it's a good question. But trust is one of these things when you have values and you have a mission statement, you should be able to live up to it. If you can't, trust erodes. People do not want to listen to you. They do not want to follow you. They do not want to do anything with you. And it doesn't make your employees feel safe or understood.

SPEAKER_237: So hiring and termination process, this is a huge part of your culture. When you fire someone and you let them go, everyone's watching. Everyone sees what you're doing. So when you fire someone, you want to fire them with integrity. And you want to figure out ahead of time how that works. You do not want to be angry, you know, and scream at someone, you're fired. No, you want to be able to have HR processes in place.

SPEAKER_238: You want to figure out what your termination policy looks like, whether or not you have severance if you're letting someone go, etc. Figure that all out in the beginning. Because as you scale, you are going to hire, but you are going to fire. It's an uncomfortable topic that a lot of people don't want to talk about. So I put FFS, I'm going to curse, sorry, but for fuck's sakes, learn about HR.

SPEAKER_237: You know, so many of my founders that I invest in call me and they're like, oh my gosh, I got into a heated moment. I said something I shouldn't have. I'm in trouble.

SPEAKER_238: You know, figure this stuff out in advance. I'm not saying hire a full-time HR person. That's probably excessive in the beginning. Eventually you're going to want to. But figure out HR processes in the beginning

SPEAKER_237: and how you're going to implement them in your company. This last point is really, really near and dear to me. So at Ironport, I managed probably 20% of our workforce over my time there.

SPEAKER_238: And one of the things I really prided myself in was getting ahead of our employees' needs. That means figuring out, like, if they need comp increases or if they need more shares in the company, surprise and delight them. I think it's horrible when an employee comes to you and they're about to quit because you didn't think of this. And imagine how much talent you're going to lose and bleed because of it. But it's an afterthought. A lot of people wait because they're like, oh, well, they're employees. They have to stand up for themselves. They need to agitate for what they want. But no, you're the manager. You're the CEO.

SPEAKER_237: You're in charge of the company. You should figure that out. So I talked to Kevin Hartz, who was my roommate for a little while at Founders Fund. He just joined us. And I asked him, I said, how did you scale your culture at Eventbrite? And he said, Julie and I interviewed the first 100 employees together. We took notes and gathered feedback. At some point, that doesn't scale and you can't interview every single person in your company. But that's really, really awesome. And at Ironport, what we did is our CEO took every two new hires out to lunch. And so that was really, really cool. So try to think of, like, how you can keep your finger on the pulse

SPEAKER_238: with your company as you grow. And it might be, you know, Kevin Hartz's solution, but it might be something that you come up with yourself.

SPEAKER_237: Another important thing is your direction and vision. You should have a roadmap that's very, very clear, very achievable.

SPEAKER_238: It can have some BHAGs. But it should also be driven by metrics. So in case you don't know what BHAGs are, they're big, hairy, audacious goals. Or ask goals. But make sure that you can, if you keep missing milestones, think about what that does to your company's culture. It's basically like, oh, we're a bunch of people who can't get stuff done. You know, it doesn't feel really good.

SPEAKER_237: So it's up to you to figure that out and try to figure out, like, where's the goalpost at and how are they going to reach it? Feedback is incredibly important. I've seen different companies do things different ways. I worked at AngelList for a little while and they did 360 feedback from employees and it was anonymous and it was brutal. I had somebody, I suspect I might know who it is, who said, when is she going to leave? I don't think she does anything here. Is her contract up yet?

SPEAKER_238: And, yeah, wow, right? But you know what? You can't work at AngelList if you don't have thick skin. You can't work at AngelList if you can't take constructive feedback because that's part of their culture. And they warned me about that when I came. And guess what? They live it. They breathe it. It's part of every part of their process.

SPEAKER_237: They are brutally honest with each other. And it hurts. But you know what I read that as? I read that as, I'm not communicating well enough. Nobody knows what I'm doing. I'm not in the office enough. I need to be more present. And so I fixed it. But, you know, again, that's not for everybody. A lot of people would buckle under that. So I recommend, you know, at a minimum, do reviews. This doesn't need to be process heavy. But do them at least quarterly. You know, do check-ins weekly, bi-monthly. And be able to receive feedback on yourself. I think that's really, really important. Always ask your employees, like, do you have any feedback for me? And you'll be surprised at what you hear. Like, sometimes they'll be like, well, you're intimidating. Or, I really didn't like how you handled this issue. And then take that feedback and incorporate it. And try to become a better leader. It's a really great opportunity. And then the other thing is that reward your employees. Reward ambassadors of your culture.

SPEAKER_238: And look for every opportunity you can to basically pat someone on the back. Because a lot of times they're not getting it themselves. They're not getting it from their teammates. So it really matters.

SPEAKER_237: So I'm going to tell you a little story that I'm really fond of. I met Simon Fuller once. And Simon Fuller said that he went to Google. And a bunch of Google engineers said, we can predict who the next American Idol is going to be. Based on all of our data. And he said, I bet you can't. And he says, oh, yeah. And the engineer said, oh, yes, we can. And he said, great. Well, let's just put our answers in an envelope. We'll seal it in a box.

SPEAKER_238: It's not rigged. Basically, Simon Fuller, he doesn't have any sort of say over who wins American Idol. So they put their answers in a box. And guess who was wrong? Google. Google was wrong. They assumed that the underdog, the villain, the most searched for person, was going to win. But it turns out that they didn't win. And so Simon Fuller said, you know, that's the one thing about you folks in Silicon Valley. You don't understand psychology. You don't understand human motivation.

SPEAKER_237: And you don't understand that I have editing control over who goes on first and who goes on last and where the number appears on the screen. So, with that said, yes, rely on data. You're going to need it. And you're going to want to watch your metrics. But you need to understand what the metrics really mean. And, you know, you're going to need to basically understand human motivation a little bit, too. I like to add a little bit of humanness to all of my talks. So, I interviewed one of the first ten Twitter employees. And he said, at Twitter, we had to rely on our metrics to survive. There wasn't any time for gut feelings. So, for him, the metrics were real. Twitter was scaling so fast. I don't know if you guys all remember the fail whale. But it was falling over daily. And part of that, you know, think about being an employee at a company who's worried about spam,

SPEAKER_238: keeping servers up, you know, just trying to keep Twitter alive.

SPEAKER_237: That was their culture for the first two years, was just trying to stay alive. And he said that basically the management focused on that. So, there's an example where metrics really matter, where you don't have time for Simon Fuller feelings. You know, management structure. I saw Jason talk a little bit about this earlier. But too many reports equals death. So, when I was at Ironport, I was drowning. I had way too many reports. And I learned very quickly that you want to have fewer reports. And you also want to raise people up so that they have more responsibility. You want to figure out how this works ahead of time. And then, most importantly, I think you need to be really, you know, some of you might disagree with this, but be stingy with titles. So, I think that titles should be like these magical things that you have to grasp from a master's hand.

SPEAKER_238: We hand them out like candy. You know, all these people are CTOs and VPs and, you know, why?

SPEAKER_237: And I think you're doing a great disservice to people when you hand these things out. And so, I've heard people say, ah, it's cheap currency. But you know what?

SPEAKER_238: They go on to get other employment at some point. They may not work for you. And when they go into the next person and they apply for a job, they're not qualified.

SPEAKER_237: And it hurts to have to step down. So, don't give people titles they haven't earned. I think that when people earn things, it's so much better. So, I'm really, really a big fan of, you know, definitely, many people who are CEOs haven't even earned the title yet. Just because you founded a company and you're legally the CEO, doesn't mean you're a CEO. You're not a good one yet. So, think about that when you hire people and when you give out titles. And if, you know, early stage of your company, if you're fighting over stuff like this, you're probably not going to survive anyway. So, read about other company successes and failures for the model that you picked. But, do not just copy-paste.

SPEAKER_238: I can't tell you how many people I've seen who are like, I read Zappos, Delivering Happiness. And, you know what?

SPEAKER_237: I'm going to do everything Tony Hsieh said. I'm going to do it all. We're going to be weird. You know, we're going to, like, we're going to dress crazy. We're going to be just like Tony. But, you know what? It doesn't work because you're not Zappos and you're not Tony.

SPEAKER_238: So, you can't do that. So, you've got to pick things from all the different companies that you love and put them into your own company.

SPEAKER_237: And it's really all about you and your first employees who figure this out. So, please, please, please do not copy and paste. This one's really, really important. Celebrate. When you're scaling and you're growing at enormous speed, you forget to celebrate. And you put it off. We'll do that next week. We'll do it tomorrow. No.

SPEAKER_238: Stop what you're doing and celebrate. And celebration doesn't mean drinking. It doesn't mean having a party. It means just getting together and saying, you know what? We achieved something great. And the other thing is to congratulate different people on their achievements. Because just a tiny little thing, just saying, hey, Jason, great job on this conference, means the world. The other thing is to reward top employees and the ambassadors of your culture.

SPEAKER_237: Anytime you see anyone who's really living the values, you know, get them more involved in the company. You know, make sure that they have a say in everything going forward. So, evaluate. Is what you've done working. So, you have to constantly check in with everybody and feel the pulse of your company and try to figure out. And don't be afraid to change it. However, don't rip it all out.

SPEAKER_238: I see a lot of people do that, too. There's the copy-paste phenomenon and there's all the, ah, it's not working. Let's do something else. Let's try this. Let's try that. It's the typical startup culture, right?

SPEAKER_237: But no. Because then what does that do? That creates distrust. Then you no longer have integrity. You know, it's an iterative process. And then, most importantly, you need to eliminate diseased culture as soon as you find it. Don't let it fester. I see a lot of people who are like, ah, there's this bad thing going on in my company, but I'm going to figure this out later. No. Learn how to fire people. Learn how to get rid of things. Learn how to do HR. That's how you get rid of diseased culture. Don't be afraid of it. Get rid of it. Because otherwise, that's what your culture becomes. Because sometimes it escapes you. Especially as you're scaling. So, I don't want to scare you all. But if you don't think of these things early, and you put a little effort into your culture continuously, it could be the death of your business.

SPEAKER_238: But the good news is that it only takes a little bit of effort, a little bit of checking in, the 10 things that, you know, sections that I gave you guys to figure it out. And trust me, if you do it, it will pay off. Thank you.

David Friedberg: So, well done. And this means we actually have time for questions, but you can line up here, and I will hold the microphone up.

SPEAKER_38: You can ask the question. No need to give a plug for your company or tell us your name. We don't care. But let me ask you the first question, which is, what if I've already got a company with 20 people, and I never thought about culture? How would you approach that? We have no culture. We haven't documented anything. And I've got, I just hired people as Band-Aids to fix problems.

SPEAKER_237: What do I do? Well, you've already got a culture. You just don't know about it yet. Got it. And your employees have probably formed it without you, without your consent or, you know, you being involved. So get them together and just say, hey, you know what? I realize we should probably figure out what we stand for and write it down and get some feedback. And then the other thing is to be able to assert yourself into the process if you're the CEO of things that you think align with the mission of the company going forward. Because sometimes when people will be like, you know, we're a culture of people who eat popcorn, you're like, awesome. Nope, not going on the list.

SPEAKER_272: So that's how I would get started. I'll hold it for you. Hi, my name is Arjun, like Argentina without a Tina. My question to you is...

SPEAKER_274: Hold on one second. I didn't turn it on.

SPEAKER_276: My question to you is, can you give an example of one company that has been socially aware and also socially aware for his employees as well? Like Etsy would be an example. Can you give an example of another company? Salesforce. Salesforce?

SPEAKER_237: I think Salesforce is like the number one champion of being socially aware and socially conscious.

SPEAKER_238: I think that all of their employees volunteer time. And they also encourage, you know, companies putting 1% of their equity towards charitable causes.

SPEAKER_279: So I think of Salesforce as like the top example there. Mark Benioff's amazing.

SPEAKER_280: Okay, let's take another question.

SPEAKER_281: Hi. If you're building a company of 1099 employees instead of full-time, how does some of these tactics change?

SPEAKER_237: Are they all 1099?

SPEAKER_281: For the most part, yeah. For the most part.

SPEAKER_237: Okay, wow. Good question. That's a very good question. And you have to be really careful with 1099 employees, right? So that's hard. I think the other thing is that, you know, to always operate with integrity and try to figure out what that customer relation is with them. Because I think of 1099 employees as customers. So you should probably become a very customer-oriented company. And try to figure out how to service them in the best way you possibly can. But it's less about, you know, one of the things. And also I assume these 1099 people are representing your company on the outside as well. So basically instilling customer support and service would probably be the number one goal for you.

SPEAKER_38: Isn't it also important, Cyan, to make sure that the people who are 1099 in fact want to be? Like they've opted into that? Because it feels like, to me, a lot of the companies that have 1099 employees, sometimes the employees don't actually know the difference. And then in other cases, they actually want to be 1099. They want to pick the number of hours they work a week.

SPEAKER_285: They want to not work for three weeks and then work 60 hours in a week and then not work for two weeks.

SPEAKER_237: I believe we're moving towards that future of a 1099 future. I recently met with Intuit, and, you know, they believe that too. I think more and more people want flexibility, and they want to work in multiple different companies. And that's just the way that we're heading. So I think, you know, it does propose a really interesting question about how you scale a culture like that.

SPEAKER_284: But it comes down to customer service.

SPEAKER_38: And how do you look at, or do you think there should be a third category? Because you have this full-time employment, which comes with, you know, a bunch of, you know, specific rules. Then you have 1099, which is, you know, very lightweight. But there are people who, it seems, are contractors who can, let's say, work for Lyft one day, work for Lux the next, work for Uber the next. But maybe in aggregate, they are working 40 or 50 hours a week across three or four different providers. But they don't have benefits from any of them. So is there some sort of third category you think should emerge?

SPEAKER_288: Because we live in a different world now, right? Where this opportunity exists, you can press a button and work.

SPEAKER_237: Yeah, I mean, I've seen some categories where people are moving to part-time employment. So that has started happening, where they hold several part-time jobs. And with those part-time jobs come benefits. But I don't see a quick answer for the 20 hours here, 20 hours here, 20 hours there. I think part of it is entrepreneurs like yourselves building products that help them save for health care. And, you know, I recently saw a company that does, like, tax withholdings for 1099 employees.

SPEAKER_284: So basically thinking about products and solutions for this workforce future, I think, would be a really good endeavor for a lot of you here. Great.

SPEAKER_294: Let's take another question. I'll hold it.

SPEAKER_296: Hi. You mentioned rewards. What's your focus regarding rewards and variable compensations in order to be fair and not leaving anyone frustrated and make the effect you want to get from the rewards?

SPEAKER_237: Yeah. I mean, rewards, every company is different. I can't tell you that there's one right way to do it. But I think from the very beginning, figuring out your option pool and how you're basically going to give out option grants and to whom and how is really important. Some people are very transparent about this, and that's their culture is transparency and truth and et cetera. And so they'll put, like, what option grants people have out there. Some companies don't do that. Financial rewards are always good. You know, sometimes in the early days you can't do that. You're financially strapped. So the only thing you have is equity.

SPEAKER_284: So basically trying to figure out, like, how you give that out to where it seems fair. Okay.

SPEAKER_300: Yeah. Actually, I had a similar question. What do you think about, like, cash bonuses and milestones and things like that?

SPEAKER_303: How should it be structured? How much should it be? How often should it be? Cash bonuses.

SPEAKER_237: I think yearly is good. I think going through and looking at your option grants and figuring out whether or not you need to refresh on a yearly basis is good. Normally, people start out with four-year grants anyway. Some companies accelerate a lot faster than that. I'm starting to see companies do six-year now, I think. Yeah. To try to basically keep people locked in so that they don't run off. So there's different things like that. But I think every year you should check in, look, and see who's your top performers. One of the things I didn't mention at Ironport, and this is really hard, if we hired nothing but A players, we got rid of the bottom performers every quarter. So that means that, like, five, ten people had to go.

SPEAKER_308: Did that create a culture of just fear?

SPEAKER_309: It did. It did.

David Friedberg: Was it effective? It was. Great. Listen, it worked for the Death Star.

SPEAKER_237: I mean, it was on time. If you got your performance evaluation and you were in the top percentile, you knew that you didn't have nothing to fear. Right. So if you were kicking ass, you had nothing to fear. But if you started to, like, fall behind, there was a trap door underneath your chair, and you were very aware of it. And so, yes, we had a culture of fear. But for enterprise sales, for a company that had competitors, we had to be fearful.

SPEAKER_284: So it worked for us, but I don't recommend making your employees scared.

SPEAKER_261: Yeah, it doesn't seem super sustainable.

SPEAKER_284: No.

SPEAKER_312: Let's take another question.

SPEAKER_313: What if you're small enough that you have, in some ways, two cultures or subcultures within your company, the employees that diehard and know what they're doing, and you love them, and then there are some stragglers? Obviously, you can get rid of the stragglers, but how, when you do additional hiring, do you maximize the chance that they fall into category A more than category B?

SPEAKER_237: Great question. Tony Hsieh did this in a really interesting way. He has, like, probably a thousand cultures in one culture. And how he does that is he creates these, like, pods of sort of affinity groups. And so there's the engineering group, and then there's the people who really like Nike and the people who like Doc Martens, et cetera. And believe it or not, it actually works. So when you walk through Zappos, you'll see, like, a tent of all the goth people, you know, hanging out, selling Doc Martens. And then you'll see, like, all of the really, like, cool sports people, you know, not that goth, I mean, I'm kind of the goth punk person. But anyway, over there with their Nikes on, you know.

SPEAKER_321: The less cool people. Yes.

SPEAKER_237: I'm calling them cool. But anyway, so basically each group had its own culture, and he celebrated basically a multicultural environment. I don't think you have to have one culture. You just have to figure out if that's something you're facing. Like, how do you scale with that, and how do you have multiple cultures within your company as you go forward?

SPEAKER_38: Let me ask you a follow-up question to that. You talked about Ironport having the sort of no balance, like, we're going to go for it culture. Do you think you could have a, we have a balance and an extreme culture, like, hardworking people doing 60, 70 hours a week who want their options to go up with a 9 to 5 culture? Can you have those simultaneously at a company?

SPEAKER_237: Well, you know, you know, I really hate to tell you this, but, like, I think if you want a 9 to 5 culture, you go to IBM. You know, you go to Cisco. But, like, I think that, because I tried it. I tried that, you know. The other thing I didn't mention in my talk is sometimes we leave companies that are successful, and I call it making dollhouses out of mansions. And so, one of the things we did in the company Zivity when I started it was try to take Ironport's culture and, you know, like, oh, this work, it's going to work here. No, it's not true. So, I think that's, you know, one thing to be aware of.

SPEAKER_173: Okay. We'll have one more question. Sorry. I'll hold it for you. Go ahead.

SPEAKER_325: If a company growing fast and hiring alert, how to keep culture and how to involve new generation of employers into your culture?

SPEAKER_237: Great. Right. So, that's actually a really good question. I should have included that. New hire training is an important part of, you know, getting people interested in your culture when they join. The other thing is interviewing for culture. So, to try to figure out if someone's, I know that's maybe a controversial thing, and I'm not talking about, you know, whether, like, they like motorcycles or not. But what I'm talking about is, you know, are these the type of people who can speak up? Like, for example, if you go to AngelList and you're not, you know, tough, you're not going to fit in with our culture. You're going to be gone in a week. You know, so those are certain things that you can actually interview for. And then the other thing is just from day one, you should be modeling your culture from the moment that person starts and sits at their desk.

SPEAKER_284: Okay. Lightning round. Quick question.

SPEAKER_332: Yeah. So, what about being present from a distance? Having leadership teams that are spread out through different locations when we're small and we have tiny teams?

SPEAKER_237: That is a great question. I think Slack really, really helps with this. So, I'm starting to see more and more distributed teams using tools that help you be present. And I invested in a company recently that most of their engineering force is distributed across the world. And what they do is they use, you know, video presence to try to be with one another. So, look into tools that help you come together. And you're going to have to get rigorous about communication. So, that has to be probably one of your core focuses of your culture is communicate. Because if you don't communicate, then that will fall apart.

SPEAKER_38: I told you it would be a great talk and it was. And I want to specifically thank the audience for concise, awesome questions. Big round of applause for the audience questions and Cyan. Great job.

SPEAKER_00: Our iTunes review of the week is from Zillian Gong. Jason's experience as an entrepreneur and successful angel investor adds to the extraordinary guests in the trenches, toiling to make humanity better via startups.