Interview With Airbnb CEO Brian Chesky
Airbnb CEO Brian Chesky discusses how it got started, the future of the business, and globalization.
welcome Brian Uli and thank you for having me today. So it's great that you have been doing a lot of talking about, you know, they actually talk with you. I'm sort of on a book tour now, but, uh, first off, where you staying? Most critically. I am staying an Airbnb in Harlem on I think it's your 125th Street. It's with, uh, these two host Matt Gena. They are interior designers, like it's a brownstone. You walk up and actually really cool because they travel a lot themselves, and they try to pick up something every place we travel and they bring it back. And so they've got, like, the saddles from they went horseback riding. So it's a really cool experience. And of course, my mom's here. My girlfriend years. We got a cook food last night in the house, and sometimes we do these things in hotels, But here we're not. Yeah, it's often that you and I have conversations at a banquet room in the hotel interviewed in hotel. So it goes, So there's so much I want to talk to you about it. But before we do that, I think a lot of people in the room. I certainly am very gently with your story, but I think a lot of people may not be familiar with just your story of your origin. So I just want to briefly touch on how you came up with this idea of the wars. Yeah, probably. They probably give my mom, I guess they get awards and stories. Start with your mom. So, um, you know, growing up, I grew up in Albany, New York. So I actually think of myself more as the New Yorker I was for 18 19 years, and, um, my parents are both social workers growing up. And, um, you know my mom. I remember my mom giving me advice, and I grew up. She said, um, you know, Brian, your father and I, we chose a job because we love it, But we didn't really get paid a lot, So you should do the job with money, and so, like, it's very obvious. It's like we're looking at, like what job? A lot of money. And so one day I told my mom like, you know, I think I'm going. I'm going to go to the Rhode Island School design. I'm gonna become an artist, at which point, she said. You somehow manage to pick the only job in the world that paid less than a social worker. You'll get paid nothing. And I said, I'll make an income, I'll get a job. I promise. And she said, Well, I do want you to promise me that you get a job. That job has health insurance one day, and so this was the kind of beginning of my endeavor. I went too risky and was totally different because that risky everyone was making stuff. They were like they embraced entrepreneurship and, um, I graduate risky. I get this job, health insurance. I'm living in L. A. But one of my best friends are risky with a guy named Joe Gambia and Joe Gabby and I were like you kind of entrepreneur people on campus, and we both started sports teams at art school. It's the hardest marketing job in the world. Get artists to come to a sports game and Joe lives in San Francisco. Disappointment like 2007 and he's trying to get me to come to San Francisco with Brian, come to San Francisco, we're gonna start a company together. We started coming together, and I'm like having this job in L. A. And I remember at one point my life was like I was in the car and the road front looks exactly the road behind me. And that kind of terrified me. And I wanted to take a detour. So I had this moment. I'm sure all of us have these moments in our life where we make a change and everything changes. After that, I quit my job and I I, uh, put every I have an old Honda Civic. I put everything I own in the back seat in the trunk of old Honda Civic, including a rolled up home matchup. I have $1000 the bank and I call Joe and I said, I'm coming. Let's go. And you know, it turns out that Joseph Ball, the rent is $1150 so I actually can't pay rent. It turns out that weekend this international sign conferences coming to San Francisco, all the hotel we are the hotel. You will go to the conference website. All the hotels in the conference webs, they're sold out as we have this idea. We said, Well, what if we just turn our house into a bed and breakfast for design conference? Unfortunately, on Hannity Bed. But Joe had three air beds. We pulled the airbags out of closet. We inflated three our beds. We called it the Air Bed and Breakfast. Yeah, I love that noise. And yes, that's how it started. Air bed and breakfast dot com. So I guess the answer is no. When I started dot com, I don't think I'd be at the New York Stock Exchange. And, um, we imposing three people a 35 room from Boston, the third girl from India. A 45 year father, five from Utah. But what ended up happening with the end of becoming friends and we made enough money pay rent? At this point, we say, you know, we're ordinary guys. I bet you the fire or their ordinary people like us who want to make some extra money, be cool people. I asked Joe, I said, Well, who's the best engineer you know? Just said, Well, my old roommate natives and the three of us got together, and we had a simple idea. What if you can book someone's home to bleed could book a hotel anywhere in the world. And that's how it started and cut to today uh, where you have. As I said, I think it's more than 160 million guests arrivals, as you call it, two million people stayed in their being be on New Year's Eve alone that night. And, uh, and you're worth $30 billion. Or maybe it's 31. As of last week, I read, so I just I had done this before. But does everyone know what Airbnb is? Raise your hand if you know what everybody is because he's still sometimes that okay, I knew I never stayed in there. Be used it. Anyone's kids staying there being B. I usually get before we get onto other stuff. Just one thing that really surprised. We have a full story that you don't often hear about how hard it was for you guys once you decided to This is gonna be your idea to get it off the ground. People fled and ran away from this idea. People thought this was crazy. We were trying Thio. In summer of 2008 I meet a guy named Michael, Sybil and Michael. Sybil says they're these people called Angel and they'll give you money. And the first thing I thought is I can't be This guy believes in Angel. That's how naive I was. And he introduced us to about 20 angel investors in a couple of venture capitalists. At that point, we're trying to raise $150,000 um, at a $1.5 million valuation. So we tried a 1,000,000 with an M. Yeah. So 10% of company and 20 probably got 20 introductions. About 10 12 or 13. Probably didn't meet us. You probably met 1/2 dozen people. People mostly ran away from the people. Everyone ran within India. No one funded us. Uh, I guess 33 reasons for two reasons. The first reason was Joe and I were designers and before there were concerns, desires start companies like we didn't look like a Tek founder, which I think is ridiculous because I don't think you should ever hire some because they look like something else. Like you want a new thing? Well, maybe they'll look different, but everyone was looking for either the sucker burn. Harvard dropout a harbor. You didn't drop out of a PhD program at Stanford? Well, you weren't gonna be the next cool. We're Facebook in The point was well, like the previous tech company founders didn't drop out of Stanford, so it was a little absurd. But the bigger issue was people ask Well, first of all, how many air beds are there in the world? In fact, when we were trying to do our first investor deck, we had to create a total adjustable market. It's the first thing we thought, Well, how many air bed cells are there? And this is before we actually realized, like, because one day somebody said like, I want to write my whole I want in my bedroom And I said, Well, all you do is get a mattress inflated and put on your mattress, And I thought at some point we should open the model up. But But the bigger problem was a simple idea. People did not think strangers would stay with other strangers. They thought it was crazy. In fact, I remember everything you've written about this. But a one person told me to Brian. I said Yes. I said he said. I hope that's not the only other you're working on. And at some point in late 8 2001 the investors told us to the financial crisis hit and he goes, Listen, the financial crisis is create. It hit the stock market cratering. I can't even invest in good company. You're going to invest in the air bed. And so that kind of hit home. So we ended up not raising money, and we ended up providing how, like way say, we did the V's around the joke, Joe says, which is basically we got those binders to put baseball cards and we took the credit cards. Probably each of us rack I got. I think I racked up like $25,000 of credit card debt. We just, you know, until the game was credit card and then late 2008. We provide housing for the Democratic National Convention in Denver, and then we didn't make a lot of money with their beds, so we thought, Well, we can't sell money with their beds were air bed and breakfast. Let's go into the breakfast business. So we took your career detour and we ended up making collectible breakfast cereal. Barack Obama Theme breakfast. Zero for the Democratic National Convention. We took Cheerios. We called it Obama. The Breakfast of change, and we had a John McCain seems theme cereal Capt. McCain a maverick and every bite. And we basically handmade like a cereal box in our living room in 2008 made $30,000 selling collectible breakfast cereal, and this is actually how he funded the company. At late 1008. My mom asked, Are you with cereal company now in the province would know because technically we were actually, that's where we made most of revenue. And so at some point, I'm like, Well, serial seems like a good business for now, But I don't have a cereal company, and so you know that those were kind of the dark time. So what's the lesson in there for other entrepreneurs? Well, I think there's two things. First of all, I you know, a lot of entrepreneurs meet me and they say I need to have investors. I need to raise capital, and I think like we were, the first round we raised with $20,000 of capital like that was the first round we eventually raised. I think that started today Over capitalized. I mean, easy for me to say now, but like things get expensive with scale, but you don't need millions of dollars to start an idea. And actually, we almost have a rule that you unless you have fixed costs like you're in the hardware you fix caught. Ideally, you don't need any capital to create a prototype. Ideally, your cofounders, all with sweat equity, can create the product themselves. But there's a bigger lesson there, which is this. I think we just didn't quit. And I think a lot of people who try to do what we did or tried to do other things. They quit, They stopped short, and a lot of people ask, Well, why didn't you quit? And the reason we didn't quit? If you start a company very simply, you have to know something no one else notes about your business. Otherwise, why are you doing it and why doesn't already exist? So the big question is, what do you know that no one else knows about your business? You need to have a unique insight, and we had a very simple, unique insight and was totally by happenstance. Underwoods. We randomly rented her home one weekend, and your unique insight was It's actually not weird for strangers. The other strangers and you can make a bunch of money. And the people who travel there conceive money, have amazing experience. If people could just experience what we experience that one weekend, this would be an idea that would spread on the world. And again, maybe thousands of people one day would use Airbnb. And that was our unique insight. And so that was kind of on our star. And so we just kept thinking that first week, and that's why we kept going. So you spread very fast, very far and wide. But that's sort of when, uh, you know hasn't been easy because as soon as you started to get a a sizable, uh, guys, you know, all opposition way became disruptor, Then you became disruptors, but you which I was growing up and that wasn't a good thing. I was always in principle. You don't like that word, but it is. You are sort of exhibit A of disruption that you talk a little later. But, um, you know your your end user like you. That's very clear, but many other stakeholders have not, and on that's because it But the core business of renting out a home for short term violates local laws in many markets, and you've worked to turn those over in many, many places. But there some markets that just won't budge in New York is one of them has been a big source of opposition for you. So talk about that a little bit. Why has there been so much pushed back? And what's the endgame? Yeah, so maybe to back up for a second when I went to risky and we designed products before I got to risk the good design. What if somebody hears the product like that and I got to risk the Suddenly there was a thing called green design sustainability, and the idea was, it can't just be your product. People like your product has to be good for the world, and so we call these externalities. So it's not just guessing host. When we started Airbnb, we didn't found the 1,000,000 people doing this, so I did not consider landlords. I didn't consider cities. It was there would have been it was so bigger than what our idea waas Our idea was just to bring two people together. It grew so fast, and I came from the school thought like Craigslist, that the community immune system and that people would get written from the site by the review system. And I think a few years and it became very clear that we had to be much more mindful of how we design the platform. And we hired some great people. One of the people we hired early on who had a huge influence. Me with Brenda Johnson. She's our chief in repairs and legal officer and to a lawyer by training, and she told me something very simple. Growing up, I felt like if people didn't like you kind of stay away from them because like, you're gonna get in a fight and that's really bad And she said, You have to meet with people. You have to meet with cities and even if they don't like you, if they hear your story and you hear their story, you can come to resolution, you have to partner with cities and we decided that we would have a principle that we would partner with cities now. It didn't go totally smoothly, and I wish it was much easier here in New York City. But we started meeting cities city by city, over the period of time we've been able to accomplish. I'll say this and I'll get to New York in a second is we now have agreements with 200 cities in the world. We collect her in the hotel tax. We have typically regulatory schemes. Those regulatory schemes often involve a registration, and they have some, you know, like I just came from London. London has their own scheme where if you want your tire home, it's limited to 90 days, so you don't take housing off the market. You can rent bedrooms and every city's got a different process in New York City. I think there were a number of things going on. I think the first thing is that we were slow to be here. Um, I think we don't get our story out early. There was a bit of misinformation about who our company waas, but I also think there's some subset of problems. There was a phenomenon that occurred were landlord decided you could make a lot of money by kicking units off the market and just renting him on a short term basis. And though I think the scope of it was overstating our platform, this was a real problem and people were doing this and I would consider to be a very bad negative externality. So we were a little behind in this and we've had to play catch up. And so in New York City, we've done a number of things we've made clear. We want to pay question, limit hotel tax like we do in San Francisco in Chicago and all these cities around the world. We want to limit host toe one home. So just the home you rent. And I think the basic premise we want is if a city is a housing constraint. San Francisco's House constraint, New York City's and House constraint. We want people to write the homes they live in, not take off units off the market. And so right now we've San Francisco Institute a cap. They figured after X number of days. You probably don't live there, and so we work with the cap, and this is how we decided to use it The last thing is landlord, I know there's some major landlords in this room, and I know not all of them love to have activity in the building. And so we were instituting in the process of Student, a friendly landlord program where landlords consign up in. We can allow them to get information about who's in the building using it, they can get. They can even get a revenue share of the income and and they get the peace of mind knowing like the rent checks probably come. And we're trying to get much more tight around. People understand the rules regulations of their city and their buildings, and I think a bit more hands on. And so you have to do these, like, kind of counterintuitive things. And it's what Jeff Basis did. This is a Steve Jobs did. This is what Walt Disney did. I mean, what does he bet the entire company in Disneyland? It seems obvious today, and he took the very best animators and studio is really angry. So one of the things that's interesting to me about this move for you is that your first product, the way that Airbnb was created and became viral became huge, was almost by accident. I didn't think it was gonna work. And lo and behold, it was transformative. And now you have kind of the opposite of that where you spent the past few years developing this product in the Airbnb lab and now released it onto the marketplace. What we made for you. So how is that better or worse, Just different, I think. Different. Unclear If it's better or worse. I think there was element of luck involved with the founding of the company. I mean, we're lucky that we chose home first and not get We chose chips experiences first. It wouldn't have worked because you need demand and people aren't searching for expanses. They're searching for places to stay. So it was better as an add on to start. Um, the major thing is that you launched, you get a lot of user feedback, so I don't think it. I think both are fine. Like Amazon apple. They all were very intentional about their 2nd 3rd 4th product. Everyone's first product was totally by accident. For the most part, um, so that I don't find that being defining factor. I think the key is, Do you put the best people on it or really talented people? Does CEO spend more of their energy in the new stuff, Not mature stuff What you think is important and are you constantly testing? And the other thing is, a lot of one of the reason companies fail is a great story of why didn't like California adventure not succeed in Disney? For Disney's Disneyland? That's the saddest thing called California Venture. It's actually now doing pretty well, but initially with a huge failure. And the reason is a huge failure was there was, like 50 executives who went to an off site, and they were basically trying to figure out what a new park. So it looked like they basically violated most laws of how to build a great product. They realized. Well, actually, we make a lot more money on food and beverage than ride. We're gonna have way more restaurants. We're gonna serve alcohol so parents can drink. We're gonna do a California theme park in California, even though most people visit from California. So it was basically created in the business plan. It was actually amazing, visible and only problem if you don't want it. And so then they had to basically redo the park with a multi $1,000,000,000 renovation. A lot of products fail because they started business plans, and the problem is the only thing that really matters, that people want it. And your customers do not care that you're successful and they do not want to be too successful because they want to know that they got the value. And so I think the key thing is, Are you making something that people want? And if you're starting it because it's a good revenue generator like your customer doesn't care about that, and so might be a great business. But not if no one were almost out of time. I have one more question. I talk about your future and in the book and say that your 10 year hole is to be the first online travel company to reach $100 billion in market value. Is that right? No. I mean I I think the market cap goal is not a great goal. I think I think a different goal would be this. You know, we've completely changed. We've given we've created a whole new category of how to stay. And so now we've had 160 million people from every country, the world but North Korea, Iran, Syria, Cuba in a Syria yesterday in the Crimea, So 191 countries are now living together and its two million people over New Year's. And pretty soon that will be every night. So that's what we've already done. I want it in the next 10 years. Get to this place where we can sell end end trip that we can have hundreds of millions of people every year booking end and experiences where the home might be a minority of what we're doing. We've completely changed what to dio 10 years from now. Your Friday night, Saturday night. You're like, What's fun to do around here? Whether you live in or see your traveling, you'd look to Airbnb. We've created tens of millions of entrepreneurs that are creating experiences Ah, whole new part of the economy with experience based economy. And then we've also gone to aviation and started to redefine how we fly because what if lying was the best part of travel? Not the worst part of travel. So we call this like magical trip, Basically trips that are just amazing, memorable and end experiences. And this is what we want to be doing next 10 years. All right, well, it sounds like we're gonna be booking our flights on Airbnb or something like that. We'll wait to see. But, Brian, thank you so much for being here today so much. Yeah.