Turning Fear & Adversity Into Fuel | Doug Leone, Sequoia Capital

Key Takeaway

Turn fear into a cue for immediate action. When you notice avoidance—whether it is a difficult conversation, a new skill, or an intimidating project—take one concrete step toward it today rather than waiting to feel ready. Doug Leone’s practice is direct exposure: confront the thing that scares you, then use the resulting proof that you can endure discomfort to build confidence. Pair that courage with humility: approach each new challenge as a beginner who must earn relevance again.

Episode Overview

Doug Leone reflects on sustaining excellence across decades, returning to Sequoia amid the AI boom, and using fear, adversity, and dissatisfaction as fuel. He shares his investing heuristics, approach to backing founders, model for building trust, and advice for designing boards that help rather than harm companies.

Full Transcript

Transcript of Turning Fear & Adversity Into Fuel | Doug Leone, Sequoia Capital from David Senra. Auto-generated from episode audio; may contain minor errors.

Okay, we were just talking before recording and you said something very interesting. We talked about people who have dominated for decades. You are one of them and you said that an interesting question is how and why someone would dominate for decades. What's your answer to that? My partner in India said there are many paths to heaven. And therefore, there are many ways to dominate. Take Steve Jobs. He basically had one job and dominated in that field for many years , or Jensen Huang. Those cases are more linear.

These are gifts where you find yourself in the middle of the hurricane and you just want to keep going because, as the world changes, your work changes too. What's most interesting is how you excel when you have to reinvent yourself time and time again. And why do you dominate? Starting with the why, I think it's a deep and insecure need to remain relevant and prove to yourself that you're not getting old and won't become obsolete. I mean, if I look back on my career, every time I reinvented myself, it really wasn't because of a vision of grandeur.

It was out of fear of simply disappearing. Just a few minutes ago, I asked you: let's not make the interview about yesterday. Let 's make it about tomorrow. And I still have that fear at 69 years old. And as for how, I think you have to be willing to let go of your ego. I think you have to assume that you know nothing each time and be willing to start from the bottom. So when I returned to Sequoia, they gave me that fancy title of president.

We were standing in front of our limited partners, our investors, for the first time about 6 months ago, and someone asked me about the chairman thing. I told them it's pure nonsense. What I really am is an analyst. I am a low- level analyst and I have to prove my worth. I just got back from vacation this morning. I've spent 90 days calibrating and my partners asked me, how do you feel after 90 days? I said that I feel like I'm good for nothing. I feel like I've delved deeper into AI and it's become more distant from me than when I started 90 days ago.

So I'm terrified. I told one of my partners just an hour ago that if in 9 months, on the one-year anniversary of my return, I feel just as irrelevant. Then I'm going to retire. And that's why I don't know if I can do it one more time. And that's where the fun lies. And therein lies the answer to your question. Do you know who Jimmy Iovine is? No. It's fine. Jimmy, he's another guy who dominated for decades. He was in the music industry for 50 years.

But many people know him because he had the vision to start creating businesses with his artists. So he co-founded Beats with Dr. Dre. They ended up making Beats Music and headphones. They sell them to Apple. I think he's the guy who was involved with the Beatles at the end. John Lennon. John Lennon. He was an engineer and producer, and then one Saturday he suddenly appeared, you know, yeah. You love it. He's a damn Italian from New York. How do I know who he is? I forgot his name.

It 's incredible. I did an episode with him and now we're friends. We talk all the time. He's quite a character. But there are two things that, where you were talking, he said the same thing. He says, "I don't have a rearview mirror." He said the same thing when we sat down. He says, "I don't want to talk about the past. I want to talk about what I'm doing now." He says, "There is no trophy room in my house." Yes. I can't even tell you what I did 5 years ago because I've forgotten.

I'm worried about tomorrow. It was very interesting. But then my question, you mentioned being terrified and then you said fear before that. What is your relationship with fear? Because he gave me one of the best pieces of advice. He says that most people, when they feel fear, let it be a headwind. He says, "I'm training myself to turn it into a tailwind." As soon as I feel it, that means I have to move forward right now . Yes. Right now. Don't think. Take a step forward.

What is your relationship with fear? How do you deal with it? Throughout my life, I felt a great deal of fear. And that has always been the challenge in front of me. I was afraid of public speaking. I made sure to become the best. I was afraid of heights. I worked on sailboats. I made sure I was on 96- foot masts every time I felt it. I confront him directly. It's almost a challenge. Look, there's a story that my partners know. I had to have a tooth removed.

In fact, a dental drill for a root canal treatment. And I had to go to a meeting right after that. And I told the dentist, "Drill without novocaine." And he says, " You're out of your mind." And all my life I wanted to see if he was a tough guy or not . In other words, am I a fake tough guy with this facade that nobody notices, or am I really a tough guy on the inside? And I told the dentist, "Take it out without novocaine." And he drilled and I jumped.

And I told the dentist, "I won't move again." And I didn't move again . And I used the trick of thinking about what it must be like to go to war and lose an arm or two legs. That's pain with consequences. Mine was pain without consequences. So I simply said, "It's just nerve endings from there to my spine and my brain." To hell with it. I'm not going to move. I had to go home and change my shirt because it was soaked with sweat, but I didn't move.

And that's why I love fear. It does wonders for me. It gives me a challenge to overcome, which then gives me a sense of security. You mentioned working on sailboats. I read something about you. You used to do this when you were a little kid, right? We were in high school. We started working on ships. Yes. High school and college. And it was across the street or river from a country club. No, I was at a country club. The country club had the yachts in the water and the swimming pool to one side.

Do you remember what you said about this? Yes, I know exactly what I said. Can you repeat that? I said, "I'm going to get revenge on those bastards later." You know, they were all rich kids. What does that mean? Well, they were all rich kids, you know, being lifeguards, talking to all the girls, uh, at 16, 17 years old by the pool, having the time of their lives , having a life like some of my children have now. And here I was, dragging myself around on sailboats, laying cables, sweating like a pig, working overtime, and just watching guys my age having the time of their lives .

And I said, "I'm going to get my revenge on all of you bastards later." And I did it . That is such a recurring theme throughout the history of entrepreneurship . That's how I felt. It's like my people saying, "Oh, I'm the first one to go to college." "Like nobody in my family even finished high school ." And I remember going to public school and there was this kid who drove. I had $130,000 cars about 20 years ago and I was in one of my classes; His dad owned a bunch of Domino's franchises, which I didn't know were phenomenal businesses.

The idea that I had a phenomenal business, yes, my dad and I just went out for lunch. They took a helicopter about 200 miles for lunch. I was like, "What are you doing? I'm working full-time at 15." What are you talking about? And that's exactly what I felt. I'm working on this, uh, on this other thing for my other podcast, Founders. I'm starting to read a lot about Mike Tyson . And Mike Tyson has a video where he talks about the difference, what you just mentioned, the way he grew up compared to the way his kids did...and he says that his kids , like 15 years old, would say, " Look, the star athlete of the school, wow, look, Tracy is amazing." "And he says, 'I wasn't like that.'" "He says, 'What I thought when I saw those people was: wait until I get my chance, wait until I have my moment, I'm going to show them.'" Exact.

When it arrives, I'll see what that really means. Now, the trick is to use that as a motivator without being a jerk when you're older. Do not do to others what was done to you. So how do you take this incredibly negative experience, turn it into a positive one, and then, as you mature, use it in a positive way for the benefit not only of yourself, but of everyone around you? Point one. Point two, before we get to point two, how did you achieve that? My need for revenge ended more or less when I turned 50.

I mean, 50. Yes. Well, yes, it seems like a long time, but it isn't. It took a good 30 years. It took a good 30 years to overcome that weakness, because in a way it is a weakness, since it is a false narrative. Those weren't bad boys. And I don't want to live in a false narrative. I finally got over it. But the other point, which for me is more important anyway, is what you do with your children. Giving your children that standard of living isn't necessarily a good thing, because what they're going to lose is the drive that Mike Tyson, you, me, or many people we know had, and that's not the best thing in the world.

I think you have to inject some misery into your children's lives so they have that hunger. It can be faked because they know it, but you can't give them everything because otherwise they won't be hungry for anything. How many people who grew up wealthy have that drive you know? A good number of kids who grew up wealthy have that drive. The impulse can be caused by many things. We have a partner who I'm sure grew up with resources, whose drive came from competition with his twin brother.

They attended the same university. Both were wide receivers on opposite sides of the field. They adore each other and love nothing more than beating each other up . So the impulse comes in many forms. I have a son-in-law who has a crazy impulse. Big brother, I'm sure they used to fight. He can't stand cheese because his older brother loves to eat cheese. I mean, it shows you, it shows you these little things. You know, we had a session at Sequoia where we met and one of my partners suggested for the presentation to say: "What is the vignette in life that made you who you are?" And one partner said, and cried when he said it, many of us cried.

He got on a bus when he was about 11 or 12 years old and a girl he thought was cute looked at him and said, "Boy, you're fat." Now, for you and me, that sounds like a minor thing. For him, it changed his life. 40 years later, 30 years later, he still wakes up at 4:00 to exercise. I mean, the stories were kind of ridiculous, but in a way it's really amazing to see how it affects a little kid and how long that vignette stays with someone throughout their life.

What was your cartoon? It was the beach club. It was being ridiculed in high school because he couldn't speak English. Uh, it was being the target of ridicule in a classroom. It was because they called me pasta in high school. All the things you know because you were an immigrant, all the things that when you're not strong enough, you survive, you endure, and then you try to overcome it, doing so while still being a good human being. I want to tell you about the main sponsor of this podcast, Ramp.

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That's ramp.com. You mentioned the importance of inducing misery in your children's lives. Are you still causing misery in your own life? Yes. No. I've completed the cycle and I've treated myself to material things. I realized that they do n't make me happy at all . I got rid of a lot of material things. I sold my luxury cars at a great discount. I just wanted them to disappear. It was a day I woke up. I simply didn't want cars with vowels at the end of their names.

I simply got rid of them. I just wanted a simpler life. I wanted to start enjoying the little things in life. That said, I do have toys. I don't want it to sound like I'm living the life of a monk, but I've deliberately divested myself of assets just to simplify my life. And if you focus on the really important things in life, which at the end of the day are your family and friends. That's really the most important thing. Not only getting rid of material things, but also inducing pain or misery in your life at this moment in your life.

Well, I think going back to work definitely wasn't the easiest move I've ever made, and I'm in the middle of it right now. I'm pretty miserable in Sequoia right now , not because of anything anyone else is doing, but because I feel like, three months into the job, I'm not good for anything. Let's say that when you were building , right?, your first decades there, did the work always feel like work or was it something you were simply passionate about doing? You're obsessed with doing it.

No, it felt like an overwhelming challenge that I didn't know how to overcome. And I felt that way until the day I stopped working at age 65. You need to spend time with Jimmy Iovine, mate. I'm telling you, I think you'd love it. He's been close to some of the best, you know, the most talented people in history. You know, he worked with John Lennon, Bruce Springsteen, Dr. Dre, Eminem, amazing people. And he says, "All the greats have a bend in the pipe." There's simply something wrong with them that makes them different.

And also, the same side of his genius is also his dysfunction. Yes. And all his...and he says that for him it's all the same. He says he says it was never fun for me. The work always felt like work. And he says, "My bend in the pipe was that it has to be this way ." And what I meant by that is that , if I accept this business, if I accept this project, if I tell you that I'm going to do something, I'll do it to the point of almost killing myself before I give up.

I have to succeed at it. Very similar to the vibe I get from you. Yes. Look, failure was never an option in my life. I didn't have a plan B. I remember when I became a partner at Sequoia, I ran out of money. In fact, I've never told anyone this, but there was a time in my first month after becoming a member that I was homeless. I slept in my car for a week. I used to bathe at 3000 Sand Hill Road. I ran out of money .

I was left without a penny. Back then, Sequoia would buy you a car when you became a member. I bought a car. He had no home. I slept in my car for a week, and then I had some money and started renting a place, and so on. What was happening in your life that made you homeless? I went through a divorce when I was 30 and gave everything to my ex-wife and lived on my $400 a month car allowance. So I was homeless for a month.

So, for a week or so, I slept in my car. And then one of the other associates let me live with him for about 3 weeks. And then I had enough money to go shopping, uh , to go rent an apartment. So I laughed for a week about being a partner at Sequoia and being homeless . I was the only homeless partner Sequoia has ever had. I don't think I've ever told that story in a public setting. I mean, at this point, you can't get any lower than you already are.

Oh , no. You can go much lower. First of all, I was healthy. Alright . So you could be much worse than that. You can be sick with an illness. Good point. And second, I was a partner in Sequoia. Are you kidding me? My current value, my future earnings were going to be fantastic. So I didn't panic. I just knew it. It was just an inconvenience. And I saw the funny side of it for a week. I mean , it clearly wouldn't have been fun to be homeless your whole life.

And if you really don't have a home, that's no fun. But in my case, I was a partner at Sequoia, showering in the sun , uh, in the shower at 3000 Road, parking my car a little further from the office and sleeping in my car. So going back to what you said about the level of discomfort you felt when you came here, what you are currently experiencing. Why did you retire in the first place, and why did you...? I didn't retire. If you start a company, you have guaranteed seats.

You can stay as long as you like. You can make it public. You can sell it. It's your business. I didn't found Sequoia. I, I was a hired mercenary. So it seemed to me that the right thing to do was to get out of the way and let the next generation have their turn at bat. Don Valentine founded it. He retired around the age of 63. I thought 65 was the natural age. And on my 65th birthday, I resigned. I, I chose a successor. But did you want to quit?

It wasn't a question of whether he wanted to or not. It was the right thing to do for Sequoia. And so I chose Roelof. Uh, I, I was the old king. He was the new king. It seemed to me that, being the old king with a new king nearby, you shouldn't be present. You should be removed. And then I withdrew. I...was on 10 boards of directors. And, uh, I thought that would keep me busy. I founded a biotechnology company. I thought 10 meetings and a biotechnology company would keep me extremely busy.

Not even close, because I was cursed that all my companies worked out. When a company is working, there's nothing to be done. Uh, so I had a large portfolio of companies and I wasn't busy. So I started taking drum, guitar, and piano lessons, and that took me about a year, and after a year I thought I was going to lose my mind. Uh, it turns out Ruof resigned. Pat and Alfred took command. They were not the kings I chose, and 30 days after we started, they came to my house and said: would you like to come back?

You are no longer on 10 boards of directors. You are in six meetings. We sold four companies. These were companies like Whiz and others . And I said, "Sure." Uh, and we closed a little deal in one afternoon and, you know , on a single sheet of paper that we scribbled, you know, wrote. I was always asked publicly during the previous two years, " Why aren't you more present?" And my answer was: it seemed to me that the best thing to do was to stay out of it and let the new king do his thing.

And when the old king and new king dynamic disappeared because Ruof was gone, it was much easier for me and for them. And so they came, a surprise visit. Uh, I don't know if they wanted to see me. And I said yes, right then and there . It wasn't a very long conversation. Yes. That's why I asked if you saw it coming, because you... No, it was, it was of course. And we agreed that I would attend the partners' meetings . I would be in the inner circle .

It would help them detect crucial moments, as we say, to discover how to navigate them. Uh, and make a couple of investments. Uh, and I've done everything except make a couple of investments. I told them I wanted to do nothing for 90 days. I want to calibrate myself. And here I am now, on day 91, panicking. Yes. Yes, but I mean, obviously you know we're going through this massive technological revolution, this technological shift; Someone with decades of experience who has seen so many things happen and so many companies and founders come and go, that is invaluable wisdom to have within the company.

Yes. Except that the world is changing, and this change is more drastic because of AI . Yes. But how many different changes have you gone through? I understand, but this is the most radical change. This is a change of the type of industrial revolution. And, as I said, I've been doing this for 90 days. I feel further away now than when I started. I mean, look, we're looking at a company. I returned from vacation this weekend. I saw a memo. I won't tell you the name of a startup that wants to raise funds with nothing at a pre-valuation of 10 billion.

You know, it makes my head spin . I didn't know if it was a joke. I had enough; his associates wanted to do that to mock me. No, because they would do that. And it wasn't a joke. And I've never seen revenue growth at this rate. I've never seen prices like these. One might say that all that needs to be done is to add three zeros. It's the same type of business, but it's more complicated than that. So I've seen a lot of changes. I have good instincts.

But I don't want to depend too much on the past. It's not that I use the past as a small corner to contrast things. I have my heuristics, my three or four questions that I ask myself with each investment. I can discuss them, but I'm focused on what the world will look like. I would love to know those questions and heuristics that you ask yourself. I'm very skeptical because I dedicate myself to reading history, right? And each time throughout history, you hear that this time is different.

This time it's different . And it's never different, right? But this time, it really could be different. So I thought, well, who could I talk to who could really answer this question for me and who has seen a lot more? So I was talking to Michael Dell about this and I asked him, "Is this time really different?" And he said, "Yes." And then he gave, like, we had a 30-minute talk where he really explained why he thinks business is being rewritten and this time it's different.

What are the heuristics you mentioned earlier? I have two or three of them. One is: Would I invest my children's money in this? The second question: if I only made 20 investments in my life, would this be one of those 20? Third: Can I recover the entire fund with this investment? And if I don't pass those three, I'm not going to make the investment. And the reason I put my children on the test is that it gives me a benchmark of quality; The reason for the 20 is that it raises the standard from "it could be reversed" to "is it really a home run?", which is the same as the third.

And those are the questions I've always asked myself. Can you say more about the limit of having only 20? There are probably 200 investments you can make in your lifetime . And many of them will give you back 2x or 3x your money. I only want the ones that allow you to recover 100 times your money. That's the only thing that interests me. I want the outliers. I want the ones that really generate a tremendous return, which in my life were : first it was 100 million, then 500, then one billion, then five billion , then Alfred reached 10 billion, and now Shawn reached 20 billion.

I told Shawn, " [ __ ] you." In a way, you ruined the picture for me. I'm not going to show up now with a profit of 4 billion dollars. Was that SpaceX? What was that? Yes, it's SpaceX. Now, we haven't been paid or anything like that yet. But, you know, there's the possibility of a profit of 20 billion dollars or more. So, it ruined us all. Regarding your best- performing investments, I'm always curious if you could really see it back then . They always surprise you in a good way, don't they?

Always. You're never surprised when they fail because that was always one of the scenarios you had considered, or at least that's usually the case. But when they take off, they surprise you, and every venture capitalist has made the mistake of selling their winners too soon, every single one of them. Because if you look at the big companies, they have grown compoundly 20 years after going public: Nvidia, or Google, or Meta. If you had a good instinct that this essentially had an unlimited market for many years.

You should never sell a stock. And you can make a lot more money by holding onto them, because if you capitalize on a profit of 5 billion, that can turn into 50 billion. If we had kept Google and Nvidia, that would be worth half a trillion dollars, you know? And there are no investments that can give you that. Oh, and you know, we own 20% of Nvidia. Think about that. I mean, you know, we own 10% of Google and there are many others. You know, Apple, are you kidding me?

We were the first investor in Apple. Cisco, we own a quarter of Cisco Systems. You know , those are large stakes in very large companies. But we all made that mistake. Yes. Sometimes the best financial decisions aren't financial at all. So, if you look, for example, if you think about the wealth created by Sam Walton, obviously he divided it among his children before it accumulated, but come on, if it were still in one person, it would be worth , you know, half a billion, or whatever figure it is now.

Um, and you realize that I wasn't making a financial decision; He simply liked Walmart. That brings us back to what Nick Sleep said. Nick Sleep has this great quote where he says: "The best investors are not investors at all, they are entrepreneurs." You never sold. Yes, exactly, that's exactly right. You've mentioned it a few times, I've heard you say in other places: "Hey, I'm on the boards of cybersecurity companies and I don't know anything about cybersecurity." I am on the board of a financial services company.

I know nothing about financial services . What does that mean? It means that I am interested in the business and building the business of a company, not shaping the technology of a company. It means I'm not a product manager type. That's what the founders know. In some cases, it's all they know. The only thing is, they are getting younger and younger . They are 23 or 22 years old. They are engineers and know that field. If they have to depend on me to help shape the product by 10 or 20%, we're in serious trouble.

Alright . But then you have the business. You have the sale of shares, not the sale of products. And in the sale of shares you have to include everything. What is market analysis, product marketing, the final 10% of the product to make it sellable. I can help with that. Product marketing and messaging, demand generation, lead generation, and revenue. Then you have the support, the accounting, and so on. Companies often fail to do or suboptimize that. That's where I get involved. And to do that, I don't need to be a technology expert.

In fact, I'm only partially interested in technology. I'm much more interested in helping founders build a business. Tell me more about that. So how do you take on a 22-year-old who, when he comes to us, is an outlier in life, probably with an IQ of 150 or more? Uh, all the adjectives that venture capitalists use negatively, I use positively. An irreverent imbecile. They don't listen. I love it. Give me those founders all day. What else do you have to say about that? Why do you like it?

Oh, because who wants a founder who changes their mind depending on who they last spoke to? I want a founder who, in the last 5 months, has gone to sleep and woken up after 3 hours of sleep just thinking about the problem, thinking about a solution, with a clear vision of what he wants to build. Nobody can distract them, they are incredibly motivated and so on. That's what I want. Uh, but now we have to build a business. So, who do you recruit as your first 10 engineers?

What's your first salesperson like? Do you want up-and- coming talent? No one who is established and great will join you in a startup. That means you should keep an eye on these up-and-coming sales and marketing professionals, because established people will play it a bit safer. And so, to help navigate all those problems, that's what I at Sequoia believe we are the best in the world at. Can you give me some examples of founders you partnered with, with whom you feel you had the best relationship, who responded to this, and whom you helped shape and build their business with ?

With David Vélez from Nubank. And the reason I chose it for this example is because it was associated with Sequoia. So I knew him well. I hired him from Stanford Business School and had to give him the bad news that we would n't be opening an office in Brazil after he moved there. He got engaged to Sequoia. He moved to Brazil. We made two investments and finally discovered that there were no engineers. A few engineers arrived from Brazil and all that came out of there was: we are the Uber of Brazil.

We are the DoorDash of Brazil. Nothing really new. And one day we had to make the call: hey, David, we're going to open the Brazil office. We offered him a job in California. And he had the idea for a financial services business, a credit card business in Brazil. A minor problem. He wasn't from Brazil. He knew nothing about financial services , but he had a heart of gold. He had courage and the heart of a lion. So he was a good man, incredibly motivated, and nobody could stop him.

So we supported them and I remember the call. One night I was at a steakhouse. I still remember receiving a call during dinner. It was him. We committed to one million dollars. He says to me, " What do I do now?" And I was in the men's bathroom. I took the call from the men's restroom. And, you know, we talked about it. He knew what to do next. I was simply alone. What do I do now? I saw it more as a call for psychological support than one about what to do next.

He wanted some support. And we drew up a plan with the first two or three things. And he didn't lose his rhythm. He didn't miss a single step during the first two, three, or four years. And we built a company that's now worth—I mean, it was a big number a few years ago. Now it's 60 billion dollars. As I said, I just saw a startup that wants to raise money with a pre-valuation of 10 billion and no revenue. So I no longer know how much things are worth.

Well, David has a fantastic reputation. There are so many people who have come on the show or who want to come, and I always ask them: which other founders should I talk to? It's like this guy is incredible. This is surprising. So, an associate at a venture capital firm who then becomes a world-class founder. Are there any other examples you can think of that follow this pattern? I've seen the opposite. I haven't seen many associates become founders. Yes, you are actually one of the few; I think most venture capitalists talk nonsense when they say, "Oh, the founder is the star and the founder is the most important thing." You use this idea that "zero to one" is black magic and that's the founder's job .

I can't help with that. If you need my help for that, then we're all screwed. We're all screwed. And he says, "If VCs could do that, they'd be founders." And I say, you know, Dash from Iconic. Yes. So, just, just... It's a phenomenon. I just had a [ __ ] awesome lunch with him. He is present in our conversations. It's a phenomenon. I wish we had recorded it, but I literally came straight from there and I was talking to him about you, because I think Doug really believes this.

I think when other VCs say these things, they're talking complete nonsense. They really want to be the main characters and they are very uncomfortable not to say: "No, I'm just helping them." I'm in the service business. I think you really believe it, damn it. No, we don't believe it. And the trick is to keep that founder in the company forever if you can, and for as long as possible, because once you lose the founder, you lose the soul of the company. A company has many moments of reinvention, as we saw with Meta.

Think about what Meta would be without Instagram. That company could have disappeared. And who accomplished that? Who bought that company over a weekend? We closed the investment in Instagram on a Thursday. And he sold it on a Sunday. Great rate of return, but we did n't actually make any money. Yes. Uh, so you want that founder in the building for as long as possible. Think about Apple's reinvention. Your partner, I quote this on my other podcast all the time. Uh, Morris has that great, well, he wrote "The Little Kingdom" in the '80s or '70s, whatever, and then he updated it in 2009 to "Return of Little Kingdom" and updated it again.

Morris is an incredible writer . I mean, his writing is... it's incredible. You should have seen his internal memos; His reports to limited partners were hilarious. It kills me, because I make a living reading biographies and those 60-page ones, you know, all those obscure ones that people shouldn't have, they all end up in my hands anyway because that's what I do for a living . I sat down and read Don Valentine's book that he wrote in one sitting, and then I said to someone Morritz mentors, who I'm friends with, "Dude, I have to do a founders episode about this." And the answer was: absolutely not.

I was like, "Damn." I remember when I was there, Mike and I, you know, we both ran Sequoia, a cool-blooded, strategic Brit and a sociable, tactical Italian. We weren't supposed to be partners, but we made it work for 25 years. But I remember I had a dictionary on my desk, a small black dictionary, because Mike, in a meeting, used a word whose meaning you had to know because it was the key to the sentence. I remember pretending to go to the bathroom to go find her and saying, " What does that mean?" Well, the writing he put there, I think he said, you know, um, restructurings are difficult no matter what.

In the technology business, they are doubly difficult. They are something almost unheard of. He says, " When has there ever been an essentially refounding of a technology company in the midst of a restructuring?" And then he has a great line that says: "The first time, you know, I had a partner, I had a co-founder; the second time, I was on my own." Alone, yes. Even if people don't read the entire book, which I highly recommend, just buy "The Return of the Little Kingdom" and read the prologue written by Michael Moritz; It will give them an idea of ​​the psychology and how rare that talent that was Steve Jobs was.

One could argue that Nvidia had a moment of reinvention. It was a graphics chip company. No. And no company had ever gone beyond two cycles in graphics chips before. And he had already achieved the two cycles, which surprised us all . And then we all fell asleep. They released a GPU over many years. Okay, it's a faster CPU. And one day we all woke up and Nvidia was an AI company. That was a complete refounding by the founder himself. I found one of my all-time favorite quotes while reading the book "Zero to One".

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You set the goal and AppLovin achieves it. There is no complex setup, no experience is needed. And AppLovin scales rapidly. They can put their ads in front of more than a billion potential customers. Other businesses have seen immediate results, scaling up to hundreds of thousands of dollars in spending per day and increasing their revenue by millions. So you'll want to get started quickly before all your competitors are on AppLovin. And you can do it by going to apploven.com. That 's apploven.com. When I asked him if he induces some misery in his life , as he said he should induce it in his children.

I was thinking about Jensen because there's this book by Tay Kim called Nvidia Way, which is kind of a history of the Nvidia company, but it gives enough biographical background that it can work as a biography of Jensen. And he says something there where he says, you know, I don't like to give up on people. I prefer to torture them until I lead them to greatness. And when you get to the book it's like, oh, he does that to himself. Of course he does. He tortures himself in pursuit of greatness.

He wakes up in the morning, looks in the mirror and wonders why he's so bad. And if you're willing to do that to yourself, people will follow you. And people will torture themselves until the goal is bad. But you have to be able to do it, you have to be willing to do that to yourself, and people see it. Did you torture yourself? Absolutely. My whole life. That's all I know. So his internal monologue is negative. I am a kind of miserable soul inside. Tell me more about this.

I'm always a little unhappy. My instincts are to be unhappy, but I project a positive vibe and people see me as someone fun to be around . It's not an act, but in my private moments I'm always quite unhappy. I'm pretty miserable and nothing changes. my children. I have had a respite when I am with my children, with my grandchildren, with some good friends on a golf course. No, I play golf. No, I'm terrible at golf. They're the same three types, so we can laugh for 4 hours.

I'm going to interrupt him quickly. Does this start when you come to this country? You go from telling the story of being like this precious thing to...? Beautiful, positive boy at 10, sweet boy, sweet little boy, and then at 15, yes. Yes. So that divine David Ogilvy has this great way of expressing this. He says that all great people who do great things are divinely discontent. Yes. It's like they 're never satisfied. A word I've always hated but have learned to appreciate is happy. I hated that word until about 2 or 3 years ago.

He hated the word happy. I felt like I was settling for something. I hated her. Now that I'm older, it's good to be happy at this point. Perhaps I'm finished because I've accepted that word. Stop talking about yourself like that. You're not finished. And you're not going to quit either. I don't like this attitude, you've been doing this for 91 days. You're not going to give up in 9 months. I'm not going to give up, but I'm scared. Perhaps it was noticeable that I'm scared to death .

Good. Yes. That means you're doing something important. I haven't done anything yet. I want... okay. You're not ready to quit the game. So, I was never out of the game. Exact. That's what I'm getting at. I was never out of the game. Well, one of the things is that I don't see it as a game. I think it's a business where people are employed. 70% of our capital comes from non- profit organizations and charities. So I never saw it as a game. In fact, when I was directing Sequoia, I made sure to use all the right words.

It 's not a game. It's not money thrown away . None of that nonsense. It's a business where we try to help founders build great companies to generate great returns for our partners. That's the business we're in . But if I retire, it won't be out of fear. It will be out of good taste and consideration for my partners. It's not out of fear. I will never give up out of fear. But if after a year I'm no good for anything, I'll be the one to look in the mirror and say, "You're finished." "That you couldn't do it this last time." I've done a lot of good things in the last few years that I want to mention, including starting a company and more.

I think I'm at my best right now , but in this, I have to prove it. I haven't proven it yet. And it all depends on performance. No matter what you do, what counts are the results in the end. Have you ever seen someone in your business stay too long? Staying...with a million people. Did Don do it? No, sir. Don left his post in 1993. I think he must have been between 58 and 60 years old. He didn't stay for too long. Why did he retire?

I think I'd had enough. I had two guys, Mike Moritz and me , who I thought could take over. I had older people who wanted to take over. And it's interesting how Don told us it was us. There wasn't one, there wasn't a big conversation. It was the yellow sheet of paper. Don always wrote with a green pen on a yellow sheet of paper . One day we received a small note that said Mike 1.1. Doug 1.1, the other name, another young man, I don't want to embarrass anyone, 1.0.

You know, the veterans .76, that was the profit split for the next fund. DTV ready, question mark? You decide what you want to give me. And that's how Mike and I knew we were the two chosen ones . There wasn't even a conversation. No conversation. So I'm a big fan of his way of thinking. He gave some talks. Perhaps he spoke with Mike Moritz. He didn't talk to me. I only saw that sheet of paper. That's it, for me, when I think of him, there's a kind of simple genius.

In terms of his way of thinking and operating, would that be an accurate way to describe him? I think some of that was accidental. Look, I adore Don Valentine and I have nothing bad to say about him, but Don also made a lot of mistakes , just like all of us. We sold our Cisco stock for cash for a total profit of 90 million. We owned a quarter of Cisco Systems. How big is that error in dollar terms? What was Cisco's market capitalization at its peak?

Perhaps half a trillion? So, what is one-quarter of half a billion? Much more than...no, sorry, not half a billion. Half a billion. Yes I understand. Half a billion. Big money. Much more than 90. But, look, we all made mistakes. How many distributions did I push to do in ServiceNow? I left a 10x profit on the table. 10x, it's insane. We let billions of dollars slip through our fingers, just like we all did in the venture capital industry. But you know the story, I'm sure you've heard the story of my evaluation by Don Valentine.

I came out of a presentation; it was Don, me, two other guys, and a founder , and I guess I asked some questions that were perhaps too aggressive. There was a note on the table when I got up. Doug: Not suitable for listening to the founders. She left it on the table for me to see. I love it when I hear young people say, "I want feedback," and I get a three-month review. That was my review at that precise moment. So , hey, that was the school of life .

Those were the days of semiconductors . Of course, we evolve over time. The founders are the most important people in our business. First the founder, second our client, and third us. It's not like we're saints. We are third parties, but we knew that if we did the right thing for the founders, we would have great returns that we would share. Uh, so Don was wonderful. Don was the one who, when everyone wanted me to leave Sequoia because I was unbearable. Don was the one who said, "Give the young man a little more time." So he saved my skin.

Returning to this mistake of selling too soon. I just finished reading this book. It is essentially a biography published in 1966 about all the merchant banker families. It's called "The Merchant Bankers." And back then, they were all family businesses. And there's one of my favorite quotes in the book of this guy complaining because they own, like, 20% of some company like Dupont or something back then. And they say, "Do you understand that if we didn't sell this?" And he says this as if it were 1915.

He says, "We would be multimillionaires by 1950." Yes. Yes. So that's a mistake, you know, a very common one. Most companies, if you keep them for too long, disappear because technology changes. But if you have a good nose for one of these that appear maybe five or ten per cycle, there may be many more in this cycle. If you can spot one of those and hold onto it for 20 or 25 years, there's really nothing else you have to do in life. Are most of your friends investors or entrepreneurs?

Most of my friends are neither of those things. Most of my friends are people I met in my early years, who have manual jobs and are not even close to the technological world. I have perhaps two friends in this environment, in this world. Most of my friends are from high school , maybe college, or perhaps from Italy, even before that. Yes, even from much earlier. Uh, you know, I just got back from Italy a couple of days ago. I spent a couple of days with a friend of mine who is a policeman at the airport in Genoa, Italy.

You know, he's one of my closest friends. So, can you still connect with people despite everything? Just the notion of "connecting with people". I find it strange. Good. Connect with people. It's almost as if you were there, I can connect with you. No, but you know how it is. Yes, indeed . People start with nothing. They become very successful. It's as if they've isolated themselves a bit. No no. Fortunately, and perhaps this is one of my few good traits, I am still normal. I make sure to live my life without representatives.

Look, I have everything in life that someone needs, but I don't have representatives. I do n't have one, I don't have a personal assistant. I don't have anyone to, you know, clean up the mess I make. I still take my glass of water downstairs in the morning and put it in the dishwasher. I cooked yesterday afternoon. I wash all the pots and everything myself. Those are the things that keep me grounded in this crazy world we live in here in Silicon Valley. In a way, I consider myself a fairly simple man who happened to be in the right place at the right time, didn't mess it up, and whose only real skill is his sense of smell.

You keep saying "sense of smell". What is the sense of smell? I'm a people sniffer. I have the ability to walk into a room at a business meeting and know more or less what everyone is thinking. More or less knowing what everyone wants to hear. You know, I really haven't lost an investment in 30 years in Silicon Valley. People have beaten me on price, but I haven't lost in any other way. But you associate not losing with "I have a nose for what people want." And that same instinct guides me on what businesses are, what is a real business, what is a dream, and what is an illusion.

Although I don't know much about technology, perhaps one way to put it is that my emotional intelligence is really my main skill. And the other thing I'm proud of is that I am...I am a very good soul. In fact, Sequoia's specifications regarding the people we want to hire have changed; We had these complicated specifications, now they can be summed up as a hyper-competitive person with a heart of gold. That has become our profile and the people we hire. We want people not like me, but who are willing to do the right thing when it is highly inconvenient for the person doing it, and who are willing to break down barriers to win in an ethical way.

How is the difference between the people you want to hire and the founders you want to back? It's the same thing. Equal. They need to be exceptional. The founders we want to support have to be extreme outliers in some way, whether it's IQ or drive. It's more or less the same with people. We have all these adjectives when we walk into a Sequoia office: reverence, outlier values, and I see it and, to me, those are the same adjectives for the people we want to support and hire.

I think we are very similar to our founders. We will not give up. So, going back to this idea you mentioned earlier, where, hey, you know, some of these other traits that other venture capital investors don't like in founders, I love, I'm very attracted to them. Going back to the founder of Nubank, did he have those founder traits? He had a combination of intelligence , drive, clarity of thought, tenacity, kindness, and judgment. Maduro far beyond his years, far beyond his age. Look, this is what I have to tell you.

We interviewed people and Mike Moritz had a great phrase, he called them "half pages" or "full pages". You interview someone, write half a page, and then there's nothing more to write. You're there for 30 minutes, you look at the clock and think, " God, I can't believe it, I'm already done." And then you have people with whom you look at the clock, an hour has passed and you can't believe it. And David was one of them. And I remember talking to him. The hour flew by and it became clear to me that we loved this person.

And he tells this story to show how Sequoia works. I told him, "Yes, there's someone else I want you to meet." He gets to his car, his phone rings and it's Mike Moritz. He was unable to leave the parking lot. That's how fast we move. We brought him back immediately, Mike met him and , within two minutes, Mike and I knew we were going to hire this guy. I had interviewed about 10 or 15 people from Brazil. They all looked the same. They were all super smart, excellent, and wonderful boys and girls.

Everyone went into consulting because that's how you select yourself in these new markets. I saw that in India and other places. But they all looked the same. I could n't tell them apart. And then I met David Vélez and within an hour I knew for sure that he was going to be the person we would hire. Who are some of the other great founders besides him with whom he partnered? Fred Luddy of ServiceNow. Well, he was older, but he made everything simple. He came to Sequoia to give a presentation and told us everything that was wrong with his company.

It was crazy. Yes. Everything he ruined, I mean , if you hadn't wanted to sell shares, of course he knew what he was doing , but if you hadn't wanted to sell shares, that would have been the kind of presentation. Although we all saw beyond that and, uh, etcetera, it was fantastic. Absolute clarity of the product. He simplified this called workflow, where I ask for something, you respond, you answer, and you ask me for something . He simplified the workflow to the most basic way people can communicate, and that was the foundation of ServiceNow.

That was incredible, incredible, and then you get into the Israeli founders, whom I adore. They are tough. You know, keep in mind that they consider incoming missiles to be an everyday occurrence. Uh, and that's why they 're naturally tough. They don't accept nonsense. Wow, they're incredibly intelligent. Uh, somehow they know what the United States needs from way over there when they work in unit 8200, which is one of the government units, uh, you know, in Israel. They are very reliable. They are fantastic. I love them and they are incredibly tough.

And the conversation with one of these, usually men. No, actually there is a woman, she used to be a spy in Iran. Wow, she's incredibly tough . She is now a founder. Yes, she is a founder. What does your company do? It's a cybersecurity company, but not with her. Although a little bit with her, yes. It's almost like when you talk to these founders. Have you seen those, uh, I do n't know what that sport is where you beat up another guy and get hit? We had the founder on the show, Dana White's company, and you put up with it, and then the guy, well, he's not so bad when we find him, but there are no restrictions.

They'll tell you directly. You will tell them directly. It is productive. It 's not personal. It leads to a result. It leads to an agreement and takes 15 minutes. It's simply fantastic. How do you build trust with the people you want to invest in? It does n't start off with confidence. It always begins with fear. We had the big, bad venture capital types who in their minds want to own their entire company. In fact, I love to joke with founders when they ask me, "How much do you want to own?" I tell you that we usually start to be happy at around 100%.

But we can start from there. And I do it on purpose to almost eliminate the tension in the room. The way you build trust is by first going in and explaining that we do n't want to ruin it. It all starts with that. And then, have that look or conversation with them that starts to show them that you might know something about their business, and thus pave the way for them to ask you the first question, which may come in an email. The first little predicament they find themselves in .

And if you rush to help them, without hesitation, without making it painful, and when they are down, you help them. Don't tighten the nuts when they're down. If you're going to tighten the screws, do it when their ego is through the roof because they beat the quarter by 30% or something like that . When you help them in a pinch, you gradually build trust, which usually takes about a year. It is not achieved immediately. There is usually a lot of fear at the beginning. Oh no, I have Doug Leone on my board of directors.

It's almost as if they want Doug Leone, but they're terrified of having Doug Leone. The reason I'm asking is because you have one of the best quotes I've ever heard, where you said that trust is the lubricant that makes every business work. It's an accelerator. I created the principles of Sequoia. One was performance, two was teamwork, and about the other eight I said: if you don't have the first two, the other eight don't matter. And after writing and publishing them, I said, "Damn, I forgot number zero, which is trust." Yes.

With confidence. Trust, if you have trust in an organization, you can fly. You can make decisions extremely quickly. Trust is interesting, however, because it has both knowledge and intention. In other words, I can trust your intention, but I believe you are incompetent, in which case I will not trust you. Or I can trust your skill, but I don't trust your intentions, in which case, I run in the opposite direction. That's why I've taught my partners from the beginning to make sure they understand trust as something that has those two components.

That's interesting. I had never heard it broken down like that. What came to mind when I read, well, when I heard that quote of yours, is like a quote from Charlie Munger, who said something very similar when he stated that trust is one of the greatest economic forces on earth. Yes, it is necessary to have a business, and you see these companies with a fractured culture where nobody trusts anybody and you can't do anything; And you know, by the time someone here who knows something makes a decision, the right decision, until it gets to the vice president or the CEO, forget it.

It's something completely different. I'm glad you said that because I had dinner at his house just before he died and he told this story where, this Munger ... Charlie. And, uh... At the advanced age of 99 years. I know. And then she had another dinner party scheduled after her 100th birthday and, obviously, she passed away that November, unfortunately. He said, he told us a story from when he was there during the Enron collapse. Yes. He and Buffett, they knew all the assets they really wanted and had decades-long relationships with many people.

Yes. And they wanted it, they saw this, I think it was like an oil pipeline business that Enron owned. A guy Buffett trusted called on Friday and said, "Hey , this is happening, but you need to transfer the money right now." And, I think it was a couple of hundred million. I forgot how much it was, let 's call it $400 million. And the Berkshire lawyer said: "They can't do this, we have to review it, they'll be liable if this explodes or whatever." And Munger says, " We transferred the money without even an email." And then I think food was dripping from his mouth, if I remember correctly; He said: "We made a couple of billion, with no risk." Yes.

Because he says, "Why?" Because Buffett trusted the guy on the other end. It's very interesting because I'm a naturally trusting person and I've never been scammed in business. I have never transferred money in advance, if you will, as a metaphor. Mhm. And the price was paid. That's why I wanted to read about commercial bankers, because there's something very appealing about it to me. They seem to have an old-school, gentlemanly way of doing business , where in many cases there is no paperwork. It's just: you said you were going to do this.

I said I'm going to do this. There isn't. We didn't even write anything. We just do it. Yes. Well, that's the value of a term sheet. A terms sheet is not worth the paper it is written on. But once both parties sign it , I believe it must be honored. You know, many times, I'm on the board of directors of a company and we sign a term sheet with an investor and 3 days later someone is interested at a much higher price. Absolutely not . There's no way.

No. No, we shook someone's hand and we both said, " Well, you have a fiduciary duty to accept the higher price." No, I have a fiduciary duty to ensure that the company culture is a clean culture and that we do business the right way. Yes. At the end of the day, you have to be comfortable with what you do. Absolutely. Yes. 100%. Absolutely. In fact, I'm surprised that you're trusting, like trusting by default. Yes. I have a round head, a deep voice, and people are terrified of me, and, you know, no, I'm serious.

And then people discover just the opposite. I will do my best to help you, probably more than anyone you've ever met. It makes me feel good. It's very selfish of me. I'm not doing it for you. I do it mostly for myself. What? What do you mean? I really enjoy helping others. It makes me very, very happy. Yes. One of my closest friends is like an advisor and older brother to me. He says he finds it exhilarating to be someone his tribe can trust . Yes.

That's how he puts it. Yes. Yes. Look, I ran Sequoia for 26 years. I never saw him as directing Sequoia. I saw it as working for everyone else. I used to tell them that you have everything backwards. I work for you, boys or girls. You don't work for me. I mean, yes, I can make decisions here and there, but the decision I make is so that we can all win. But tell me what you need and I'll do everything I can to get it for you.

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We have something we do on Mondays called MIT, the most important thing of the week, and everyone says "I have to do this" or "I have nothing pending." I just got back from vacation. I don't think anyone has ever said they have nothing pending . I mean, you have to have guts to say in front of nine people "I have nothing to do". My MIT is to go out and search. I use that word for deals. And that means picking up the phone, calling acquaintances, networking like crazy, and trying to intercept some kind of really good investment.

It's one of the 20 or 30 things I want to do in my life. But is that process different for you today than it was when you were at Sequoia previously? It was, because I was more in the flow of deals for my generation. In fact, it's very different because the founders of the super interesting companies are 23 years old. I don't have a network of friends who are 23 years old. I find this very interesting. I want to address that. Oh, but before I forget, I remember putting a friend of mine in touch with one of the smartest people I know.

He had two businesses going and was trying to decide which one to focus his attention on. In a matter of 15 minutes, my smart friend identified the core of the problem. So the guy I introduced him to messaged me and said, "Man, this guy nailed it ." "He understood it perfectly." And I replied with another message. I told him, "He's my favorite type of person." "Very difficult to reach, with a tough exterior, but once you break through that barrier, he'll do anything for you." I think it's very similar to what you were saying, like not being fooled by the round head, the booming voice, and the damn...

round, bald head. Yes, the bald, round head. Um, the other thing, um, is very interesting to me, I've had a couple, it's that I don't hang out with venture capitalists, I only hang out with founders, I don't have any friends who aren't entrepreneurs, I work on the founders' podcast during the day and I hang out with founders at night and... well, I'm very proud to be a company founder. In fact, I really love that. Well, no. The reason I mention this is because it has happened on several occasions, but it has recently happened that another venture capital firm says, "Hey, we have a problem with our story and all that." "Can you meet with my partner and talk to us about this?" "Let's have lunch." I said, "I like you , damn it." "We'll have lunch." "I don't give a damn about your business, but let's talk ." And then I asked this guy who's been in venture capital his whole life, which I find interesting.

Uh, you know, who does he think, if you're a young founder right now, who's the first person you're going to call? You can choose anyone and they will be your first investor. And he starts mentioning all these firms. So I say to him, " How can you work in this business and not understand it?" I tell him, "You hang out with too many venture capitalists and not enough founders." "It's nobody on that list." That's exactly what you 're talking about. These young people are identifying a very different group of people than the one identified by the previous generation.

So, in an ideal world, a 25-year-old says, "Let me gain some experience. Let me call Doug Leone." No, it doesn't work that way. So, how do we find them? Yes. What's the solution for that? I think you have to put in the effort, just like in everything else in life. It's what you do in your business, you know, you work like crazy. All the books you read, all the people you meet, everything you do for your business. Yes. But I like it, here's what I talked to Dev about it too, where it's like, I have this damn uncontrollable obsession.

I can't explain why. Ever since I was a child, all I want to do is sit in a room and read books. That's never stopped, has it? And then, once I discovered podcasting, I can't stop thinking about it. I get sad. All this equipment you see here, all these cameras and things. They didn't tell me that someone on the team was getting married. They went to Italy. They took two weeks off. I was very sad. Why did I go to Italy , for three days, Rob?

How long was I gone? They said, and I 'm like, I'm going back. I have things to do. I want to get to work. So, it doesn't even feel like a chore for me. It's just like this compulsion. I think he's the best guy. Yes. I mean, it can feel like a strain because you're exhausted afterward. So you need, you know, Friday, Saturday and Sunday off. No, it's your passion. Yes. But one thing that did change, you know, Brad Jacobs, was spending time with him. Mhm.

I say it in a beautiful way. Rare , unique type. And I just finished reading his book, How to Make a Few Billions of Dollars. Half of it is about his, like , uh, not hypnotism, his meditation practices, it's all about his mind and stuff like that, but he's an incredibly joyful being. Yes. And he's the one who changed this for me, because I was just like you and all these other founders and any of these divinely discounted people, he was like my internal role model, I just wake up every day now focused on what I did.

It's as if that weren't enough. You could have done better. It's simply super negative. Until one day he sat me down and said, "This is no longer useful to you." It's as if that's taken you from where you started to where you are now. But now your motivation is generative. Your motivation is that you love what you do, so stop being so hard on yourself . And it was strange. You know, he was 68 years old when I had this conversation with him and overnight he changed my inner morale.

No, what I think about is not all the success I achieved, but all the opportunities I let pass, all the mistakes I made as an investor. Uh, you know, I don't think too much about rebuilding my life or remaking my life, I should say. Uh, but all I can think about is, oh my god, the community, the venture capital community and I have messed everything up so badly. I could have done much better. Look, it's gone quite well for me. Oh, that's an understatement. No, no, both.

No, I don't just mean financially, but, you know, in the things I've done, but all I can think about is how much better I could have done. When I think about my next meeting or two, I think about it in the same way. I mean , in all the other boards I've been on , I did a decent job, but I have a lot of room for improvement. I ca n't wait for my next one to once again put all my learnings to use for the next founder , for their benefit.

We should talk about that because you have a lot of experience with the subject. Many of my founder friends have simply completely ruined their boards. They do n't know how to run one. They don't like the one they have. What advice do you have on this? Choose to design your board in the same way you design your product. You know, a lot of people choose their boards like they choose a girl or a guy at a bar. You know, she talked to me, let's go out Friday night.

You know, he talked to me, let's go out. It's no more complicated than that. And then they don't put any thought into it. You know, a board is like a couple, a lifelong partnership where you bond for the next five or seven years. I bet most marriages last probably five to seven years these days. Uh, I'm being extremely careful, and this isn't my first investment deal. It's about who you need, who has the skill set and temperament necessary to complement what you have. Uh, and complementing means a little discomfort, because if both of you have the same background, there's probably a little more comfort and you want to find some of that.

You want to find someone with a very different set of experiences, which means that at first they will talk this way. At first, you won't understand what he or she is telling you. Uh, but that's where learning happens. And then, I see people who don't do it at all. I received a terms sheet. How many times have I heard, "I received a terms sheet"? "I received a main terms sheet." So what? Who cares? Of course you received a master terms sheet . Everyone receives a master term sheet.

So, talk about some of the mistakes you've seen in the formation of boards of directors, man. Is that all ? It's like: this person offered and I accepted. So, there are mastery skills, knowledge level, and then personal traits. So, in the beginning, when you're building a business, I don't think it helps you at all to find a board member who is an engineer. You are an engineer yourself. That's not the skill you need. That's what I mean by mastery skills . And experience, uh, you have no experience.

Putting an inexperienced board member on the board, I don't think it will help you at all. It doesn't mean you should look for someone who is 68 years old, but look for someone who has gone through the cycle. And then there are personal needs. Out of every 10 venture capital investors, and I said this, and I've taken Shiffford as an example, perhaps 30% are incompetent. They don't know what they're doing. Another 40% are what I call "zero operations" - they do no harm, they do nothing.

They nod, you know, they nod along with the group. Uh, and maybe 30% or less, perhaps 20%, know what they're doing. And that's an overlay layer. The other layer is, you know, managing their businesses, their stature, or their status in a company. I need a win. I need a way out. What will my partners say? So, you do n't really have the board member there. You have his shadow. You have the interpreter of what he or she thinks the company wants. If you take a combination of lack of experience, duplicate domain, covering your back with society, and incompetence, that's the worst of all cases.

I see it all the time. Simply put, let me put it in your terms. Completely clueless. Completely [ __ ] ignorant to a point of harm, not a point of inaction, a damaging point. Do the best boards you've been on have contentious meetings? No, but the problems are being brought to light. The real conversations are on the table. But you are prepared to argue forcefully. You, you, you are willing to have the real conversation. The argument implies a tone, a combative point. I don't see it that way.

I see it as a starting point to find the answer the founder needs. So we're ready to do the real work. I will not grant the word argument. Interesting. It's the same at partner meetings. We don't argue, but we have a real conversation. Sometimes, at Sequoia, we have to take a 5 or 10 minute break. A break of five or ten minutes. We walked around, went back to the room, and the temperature had dropped 10 degrees. We have the conversation. We arrived at an answer .

We are all committed. We all agree. No more conversations on the way out. It's done. And it 's the same with board meetings. And it's okay to disagree. It's okay to disagree. I would say that one of the most interesting things I learned this year while doing the show was that Ed Catmull was kind enough to let me go to his house and record a conversation with him. And he was saying, "Hey, you know, a lot of people don't know that in the 10 years that Pixar was a public company before, you know, the Disney takeover, Steve Jobs fired two of our board members." And maybe they know that he fired them.

They don't know why he fired them. So one day I asked him why he fired them. He said it was because they didn't disagree with me. He said, "They always agree with me. They're useless." And he was saying that, you know, a lot of people say they want to get to the truth. And, I think Ed said in the episode that most people who say that are actually talking complete nonsense. Pure nonsense. Steve really wanted to get to the bottom of it . Here in California, more so than on the East Coast, people don't like direct conversation.

I had to learn that when I arrived. You know, I, I, I went from Italy to New York, which was halfway to the United States , and then to California, where everyone was saying to me, "Yeah, give me, give me the feedback." Honesty...nobody wants to hear honest feedback. Brilliant. Are you kidding me? Yes. You know, are you...? Everyone talks nonsense. But the best founders have to do it. They have to do it. And you have to find a way to do it so that it is understood, received, accepted, and acted upon.

It's almost an art. It's not just about giving it, it's about giving it in the right way, at the right time, with the right tone, with the right words, uh, with examples and so on. Look, it's like telling a founder: your VP of sales is a disaster. You're not going to get anywhere. But what if you said: there are a couple of vice presidents of sales I'd like you to meet just so you can evaluate yourself? He will meet or she will meet two people who know what they are doing.

Suddenly they'll say, "Damn." Alright . This is like Inception. Well, I don't know anything about Inception. Alright . So, I'm just...a big fan of Christopher Nolan. I just reread his biography for the second time. And one of my favorite lines in Inception is: "Which is the most resilient parasite?" You know, uh, is it, you know, a bacterium? Is it a worm? It's an idea. And the thing is, it can't be an idea someone else gave you. You can't say, "Doug, you should believe this." "You have to plant the idea in their heads so they believe they came up with it themselves." Yeah.

It's like your kids. Are you going to tell your kids all the things they shouldn't do? Good luck. Yeah. Forget it. Are you familiar with the [ __ ] sandwich? The [ __ ] sandwich. About giving feedback. I don't know if this is the art you were talking about , but the [ __ ] sandwich is like a compliment, then negative criticism, and then another compliment. That's why I call it the [ __ ] sandwich. Well, I don't know how to do that. If anything , the mistake I make is that I'm too direct.

I remember there was this venture capitalist, Jim Brier . I heard him turn down an investment once. And I said, "Oh my God, the founders are going to walk away here thinking they won the lottery." "And I don't know how to do that. And I was always an admirer of how I could do that. And... I'm more direct. Uh, I hear people talking on the phone for 20 or 30 minutes. My conversations last 3, 4, 3 or 4 minutes at most. You know, hello, what do you need of this and that?

Done. Okay. Yes, I've got it. Okay. I'll let you know. 30 seconds. Not even 3 minutes. Yes. Most of my conversations last less than 3 minutes. Yes. Don't you find it interesting that you don't like to surround yourself with other venture capitalists? Why? I do n't know. Founders hang out with other founders. I think it's because I grew up from the ground up, and inside me, there's still mostly ground. I really think that's it, you know. I really think that's it. I'm not an intellectual. I don't find...

For me, technology is fantastic. It's interesting. It changes every day, but it's not my essence. I think humanity and one-on-one relationships are probably the most interesting thing for..." Me. Are you an introvert? I'm right on the borderline. According to Myers-Brigg, I'm right in the middle. I do n't like meeting new people in general. In fact, whenever I have to meet someone new, the thought that goes through my mind—and it 's kind of unpleasant—is: crap, another idiot I have to meet. Right? Where I remember talking about where extroverts, they tell me, get their energy.

They get their energy, so they love meeting new people. Oh my God, another person I have to meet. Yeah. And yeah, I do it. I can turn on the charm gene. I can fake it. I can be at a cocktail party walking around and mingling with everyone. But I get home and I'm exhausted from it. Yeah, you're definitely an introvert. I am, too. And I think there's something very similar, you know, I think about opportunity cost. And I always quote Munger, where he says that the way smart people make decisions today is all about opportunity cost.

And for me, it's like, I'm going to spend two hours with someone new. That's very costly compared to maybe the five real friends you have in your life , the policeman in Italy, or your friends over there in New York, or whatever. It's like I'd rather deepen that relationship I already have than go out and meet new people. But I realized that putting myself out there and meeting new people makes me happier afterward. In other words, if I let my instincts to go to the same three restaurants or hang out with the same people take over, if I do that all the time, I'm less happy than if I put myself out there and take these little emotional risks.

I feel happier because I feel more fulfilled. At the end of the day, I feel like I've done something. Could you be in the business you 're in without meeting new people? No, absolutely not. Although it's not a social environment, right? It's presence. It's work. It's introducing yourself , being present, helping, assisting. You know, I think the closest friend I have as a founder is Valz. All the other founders are purely business. I don't socialize with their wives or anything like that with any of the founders.

But with Valz, I do. Yes. Because he was an associate. I hired him. We had almost a father-son relationship. Yes. Yes. Are there any venture capitalists who only made one, five, or ten investments and that was it ? Cross Point Ventures had an incredible run for seven years and then disappeared. It's a name you might not remember. Look them up now. They're still around , but all the partners left after making a bunch of investments. There was a venture capital firm called TVI. You might not remember Technology Venture.

It's the one that bought Microsoft right before the IPO. They didn't buy Microsoft, but Dave Marquart was on Microsoft's board of directors. Yes. They raised 900. It was a guy who started Benchmark with two other people from another firm. But Dave did it, if I remember correctly, because of the book called Hard Drive. He was on Microsoft's board; he was the only venture capitalist in Microsoft the year before Microsoft went public. If I'm not mistaken, they had 140 million in revenue, 38 million in profit, and they sold it.

995,000 shares for a million dollars. No, I don't think so, I don't know what we're going to put this into at a venture capital firm that held all the keys to the kingdom. Yes. And somehow it didn't last as a firm, whereas Cross Point just shut down and everyone went their separate ways. This is a firm that just couldn't coexist even though they had everything. Yes, there's something interesting about that. So, I can't say who, but he's one of the greatest entrepreneurs alive. And he says, in fact, they were talking about the greatest seed investors of all time.

He says, the greatest seed investor is my dad. He made one investment. I made 40 billion dollars. He didn't invest in anything else. That's it. That's it. That's incredible. So, I asked you if you were introverted, uh, I want to ask you a question that I think is definitely more introspective. You don't strike me as introspective at all. Morris taught me to listen. Morris taught me to listen for the exact word that's said, the moment it's said; you can really understand a human being just Listening to the adjectives and all that.

I took the basic training I got from Morris, used it, and expanded on it. I love listening to people talk. And wait, what do you mean you can learn by listening to adjectives? Oh, the way they use them when they're describing a situation. Humanity, humans, can help each other by letting it out, showing themselves, and how they use the word "I" versus " we." Uh, when they're describing, "I can sell you this." I'm thinking to myself as he's presenting, "[ __ ] that." You can't sell me [ __ ].

You know, that's what I'm thinking during the presentation, you know, while I have this stupid grin on my face. Uh, but just listen to the specific words that are said when they're said. We often choose a founder without a line of code, without anything, based on a presentation, a clear vision, but we also want to pick up on the interpersonal tricks. And you can learn a lot if you pay close attention. I mean, Morris used to do that to me all the time. He used to repeat my own Words.

Uh, or the way he said them, you know, that drove me crazy. Driven me crazy enough to learn. What was going on there? Why did that drive you crazy? We used to write memos at Sequoia. And the memos were from and to. And Mike always, Mike pointed out to me that the "from" puts me first and the " to," the recipient, second. And Morris was the first to write memos as "to" and "from," to put the other person first and yourself second. I understood that putting the " from" first and the "to" second was a somewhat self-centered move, since it comes from you.

You had to put yourself first in that memo. And that's one of the little things I learned from Mike Morris. And there were hundreds of things like that. What else did you learn from him? Well, Mike was brilliant. Let me tell you, he was a very difficult colleague. And I, you know, he knows I was difficult for him. It was painful for Me. Like I said, it's, it's, uh, it's a source of pride for me, however we accomplished it. Uh, but Mike had the ability to dream big in ways I'd never seen before.

He could answer that question better than anyone I've ever known. What if everything goes right? No, oh, we take precautions and all that. No, what if everything goes right? What might this business look like ? And if you look at the companies he's invested in, it's a spectacular list. You know, look, he had his flaws . And we're not going to talk about all of his flaws here, but in that respect, he was by far the best in the world. Okay, Doug, I appreciate you doing this.

We're going to repeat this because a year from now, you'll still be doing this. I have faith that you won't quit in nine months. And if when you're still here, nine months and a day from now, let's repeat this. I appreciate you taking the time. Thank you. Okay. Goodbye. I hope you enjoyed this episode. Please remember to subscribe wherever you are. Listen and leave a review. And be sure to check out my other podcast, Founders. For nearly a decade, I've obsessively read over 400 biographies of history's greatest entrepreneurs, searching for ideas you can use in your work.

Most of the guests you hear on this show first found me through Founders.