📚 Book Notes: The Airbnb Story
By all accounts, Airbnb should not have become this big! The very idea of letting strangers into your home raises eyebrows, but the way they executed it with belongingness at the core is amazing.
Here are my notes from The Airbnb Story:
- I thought Chesky would be open to my idea, and he was—but not without some reservations. “The problem with a book,” he says, clearly having given it some thought, “is that it’s a fixed imprint of a company at a particular moment in time.” I wasn’t sure where he was going, so I asked him to elaborate. “I’m thirty-four,” he continued. “Our company is young. We’re going to go on to do many more things from here.” His point was that it was still early in the game. Whatever I would publish in 2017 about Airbnb, he said, would very quickly be outdated, yet that’s what readers would remember. The media, he pointed out, were already behind: “Where everyone thinks Airbnb is today,” he said, “is where we were two years ago.”
- The basic idea behind what Airbnb is doing is not new at all. Chesky likes to point out that the only person who didn’t tell him Airbnb was a horrible idea in the beginning was his grandfather, who, when he heard what his grandson was up to, just nodded and said, “Oh, of course. That’s how we used to travel.”
- What is new, though, and what Airbnb specifically has done, is to toss aside the barriers and build an easy, friendly, accessible platform inviting anyone to do it. Unlike on previous websites, Airbnb listings were designed to showcase home renters’ personalities; the company invested in individual professional photography services to make sure the spaces would look lush and inviting; and searching, messaging, and payment were all self-contained, seamless, and friction-free. (Many people suggest that Airbnb is not a technology company, since it traffics in homes and spaces, but it has one of the most sophisticated back-end engineering infrastructures in Silicon Valley.) The company built a series of tools to reinforce trust, like bilateral reviews that could be completed only by paying customers who’d completed a stay, and a verified ID system. And one of the biggest but least discussed reasons it was so different is that Airbnb was urban. Before it, most home-rental companies focused on second homes or listings in traditional vacation or resort destinations. For all the attention paid to treehouses and houseboats on its site, most Airbnb listings are studios and one- and two-bedroom apartments, which is what makes it so appealing to so many travelers—and so threatening to hotel companies. Airbnb invited everyday people—even if your only claim to real estate was a rented studio apartment—to profit from their space, and that had a transformative impact on both those renting and those traveling. It was urban, it was easy, and it was “millennial”; and in online marketplace businesses, scale begets scale, so once it reached a certain size, its dominance was hard to unseat.
- They decided that at South by Southwest, they would introduce Airbedandbreakfast.com as an entirely new site, to try to get another round of press. (It’s a tactic Chesky has since advised to other entrepreneurs: “If you launch and no one notices, you can keep launching. We kept launching, and people kept writing about it. We thought we’d just keep launching until we got customers.”) They spruced up the site, billing it as lodging for sold-out conferences (“Finally, an alternative to expensive hotels,” the site read), and notified some tech blogs. But almost nothing happened. “It wasn’t really a big moment for traction,” Blecharczyk says. That was an understatement: they got only two paying customers—one of whom was Chesky.
- In effect, Chesky and Gebbia were back at square one, in their apartment with no money. Chesky had lost twenty pounds over the course of the year. Out of money and out of food, for the next few months they lived off of dry Cap’n McCain’s; even milk was too expensive. (And yet even during these difficult times, Chesky was still strategizing. At one point Deb Chesky remembers urging her son to go buy some milk. “No, we’re just going to struggle through,” she says he told him. “It’ll be a better story someday.”)
- “What are you still doing here?” Graham said to them. “Go to New York! Go to your users.” So to their users they went. For the next three months, Gebbia and Chesky flew to New York every weekend. While Blecharczyk stayed behind coding, they went door-to-door, trudging through the snow and meeting or bunking with every user they could. They learned a lot from talking to their customers, but they learned more by simply parking themselves in their living rooms and observing them as they used their product online. Chesky and Gebbia quickly identified two pain points: people had trouble pricing their properties, and photos were a huge problem area. Users didn’t take very good ones, and back in 2009 many people still didn’t know how to upload them properly. As a result, homes that looked inviting in person looked tired and dingy on the site. So they decided to offer to send professional photographers to each host’s home at no charge. But they had no money, so Chesky borrowed a camera from a RISD friend and did it himself, often knocking on the door as the “photographer” to the same hosts he’d visited the day before as the CEO.
- Among other things, these experiences also opened their eyes to the narrow view they’d been taking of their business. To qualify for AirBed & Breakfast, the rules required that hosts had to rent out air mattresses, even if they had an actual bed to spare. (Chesky remembers suggesting to one user who wanted to rent out a real bed that he blow up an air mattress and put it on top of the bed so it would qualify.) Another host, a musician who was about to go on tour, asked if he could rent out his full apartment, but Chesky and Gebbia said no; if he wasn’t there, how could he provide breakfast? That musician was David Rozenblatt, who was the touring drummer for Barry Manilow, and he forever changed AirBed & Breakfast’s business: His request led the cofounders to see that their business could have much bigger potential. They eliminated the breakfast requirement and added the option to rent an entire residence. (Giving a talk at Y Combinator’s Startup School, Chesky later recalled Rozenblatt calling him while he was backstage, complaining to Chesky through muted chants of “Barr-y! Barr-y!” that he couldn’t log on to his account.) Graham had noted the limitations of the company’s early model, too, and somewhere around this time, he suggested they remove “airbed” from the name to broaden its market potential. They bought the domain Airbanb, but it looked too much like “AirBand,” so they chose “Airbnb” instead.
- All the while, the cofounders were still model students of Y Combinator, Chesky and Gebbia flying back every week and learning everything they could. They’d arrive to Y Combinator events early even as they were trailing their luggage fresh off the plane from New York. The three of them constantly pestered Graham to meet with them. “We got office hours with Paul Graham every single week, even though he doesn’t have time to do office hours,” Chesky recalls. “We just showed up before everyone else and stayed after everyone else. We were more shameless than other people, and we were more curious.” Graham agrees this was an accurate portrayal: “I certainly talked to them an awful lot,” he says. He also noted that, having seen several hundred start-ups come through the program, he’d observed an interesting pattern: the most successful companies always end up being the ones that participated most eagerly. “It’s not that the most successful thought they were too good for this,” he said. “It’s always the crappy companies.”
- One of the things Hoffman liked most was not just the idea but also the chutzpah and hustle the founders had demonstrated—skills, Hoffman says, that are especially critical for entrepreneurs who are starting online-marketplace businesses. “Different kinds of businesses require founders with different primary strengths,” he says. “And one of the strengths for marketplace founders is a willingness to think out of the box and be scrappy.” Some of the things the Airbnb founders had already done—doing unscalable things in order to later scale—were, Hoffman says, classic marketplace-founder behaviors. “If it were a network or gaming company, that might not have mattered much,” Hoffman says. “But in marketplaces, that’s really key, and that was in their founding story.” The challenge of making rent, the Obama O’s, the not dying—“That was the reason I immediately went to, ‘I’m going to immediately invest,’” he says.
- When Airbnb came along, it was different in a few significant ways. It had a more user-friendly interface than anything that had come before it. It brought the owner and customer together in a new, more intimate way, showcasing home renters’ personalities and displaying their homes with magazine-worthy photography. It was a self-contained system that handled everything: payments, messaging, and customer service. It had a sophisticated technological back end that benefited from all the novel breakthroughs coming from Silicon Valley’s new golden age—cheap and powerful cloud computing, fast horsepower, sophisticated searching and matching. And, perhaps most significantly, instead of focusing on vacation destinations in resort areas, it focused on cities. Despite the attention paid to the treehouses and tepees, Airbnb’s actual invention was that it was an almost entirely urban phenomenon from the very beginning, taking root with millennial travelers who were city-focused and millennial hosts who wanted to monetize their small urban apartments.
- There’s no question the hospitality landscape is changing before our eyes. One former hotel-industry top executive who says he, too, was initially dismissive of the threat posed by Airbnb and its ilk, says in hindsight he now understands why. “I superimposed my own forty-something personal preferences,” he says. “What about the sheets, the mattress? How would I get the key? I had all the fears of an older person.” The younger generation, he says, has grown up without the fears and biases that he had—and has known only a world with Airbnb in it. Young people are “Airbnb native” in the same way they are “digital native”; for many in this group, staying in a chain hotel room is as foreign as talking on a landline, walking into a bank branch, or watching a television show at the actual time it airs. “Airbnb educated an entire generation,” the executive says. And the company’s hand becomes even stronger, he says, the more it’s able to use its data to accurately predict and deliver exactly what its consumers want. “I would not bet a cent against Uber or Airbnb,” he says.
- Chesky already possessed a couple of key skills that would become essential to his growth as a leader: a knack for ringleading dating back to his days at RISD and a near-pathological curiosity. His solution to acquire the rest of the tools he’d need was to basically hack leadership by seeking out help from a series of expert mentors. But while any new CEO will seek out advice, Chesky’s process could best be described as obsessive, methodical, and interminable. He calls his practice “going to the source”: instead of talking to ten people about a particular topic and then synthesizing all their advice, he reasons, spend half of your time learning who the definitive source is, identifying the one person who can tell you more about that one thing than anyone else—and then go only to that person. “If you pick the right source, you can fast-forward,” he says. He’d already begun this process with Airbnb’s earliest advisers: first, the weekly office-hours sessions with Michael Seibel and Y Combinator’s Paul Graham; then, breakfasts at Rocco’s with Sequoia’s Greg McAdoo. Airbnb’s next investment rounds unlocked access to Silicon Valley icons like Reid Hoffman, Marc Andreessen, and Ben Horowitz, all seen as gurus when it came to the art of building tech companies in Silicon Valley. The more successful Airbnb became, the more top people the founders had access to, and as it began to get bigger, Chesky started seeking out sources for specific areas of study: Apple’s Jony Ive on design, LinkedIn’s Jeff Weiner and Disney’s Bob Iger on management, Facebook’s Mark Zuckerberg on product, and Sheryl Sandberg on international expansion and on the importance of empowering women leaders. John Donahoe of eBay was a particularly important mentor, schooling Chesky on scaling operations, managing a board, and other aspects of being the CEO of a large marketplace business. In what became a valuable reverse mentorship, Donahoe also quizzed Chesky for his advice on design and innovation and on how eBay could maintain characteristics of being young and nimble. From Jeff Weiner, Chesky learned the importance of removing those managers who weren’t performing. From Salesforce.com CEO Marc Benioff he learned how to push his executive team. He also had access to an informal support group among his current-generation start-up peers, including Travis Kalanick of Uber, Drew Houston of Dropbox, Jack Dorsey of Square, and John Zimmer of Lyft, all sharing their individual lessons about everything from running start-ups to balancing friends, relationships, and other elements of young founder life.
- The most consistent observation from those who know Chesky is that he possesses this extreme level of curiosity, and what could be described as an obsession with constantly absorbing new information. “Brian’s biggest strength is that he is a learning machine,” says Reid Hoffman. “It’s a skill set for all successful entrepreneurs—the phrase I use is ‘infinite learner’—and Brian is the canonical example of that.” Hoffman recalls doing an onstage interview with Chesky in San Francisco in Airbnb’s early years. When they were barely down the steps from the stage, Chesky turned to Hoffman and asked him for feedback on what Hoffman thought Chesky could have done better. “Like, it was literally the first thing he said to me,” Hoffman remembers. Chesky is constantly taking notes. “He may not say anything after a meeting the first time he hears a new idea, but he’s always pulling up his Evernote, and if you say something interesting, he writes it down,” says Sequoia’s Alfred Lin. “By the next time you see him, he went back, looked at the notes, thought about it, talked to a bunch more people about the topic, and then formed his own opinion.” That relentless focus on learning, Lin and others say, is the main reason Chesky has been able to scale with the company. “Yes, he’s product-minded, yes, he’s very, very focused on providing a great customer-value proposition,” Lin says. “But we know a lot of people who are also that who don’t scale as CEO.” Marc Andreessen says one of the things that makes Chesky distinctive is that he’s up for the challenge. “I’ve never had a conversation with Brian where he’s like, ‘Oh my God, it’s so much.’ He’s always trying to figure out the next new thing.” “He is a learning animal,” says eBay’s Donahoe.
- But while the learning came easy, mastering the nuts and bolts of dealing with people took some time. He learned the hard way, if two people had a disagreement, not to automatically take one person’s side of the story. Hard-earned experience taught him that his words and actions can carry major influence throughout the company. (Picking up a green marker on the table in front of us, he says, “It’s kind of like if I use this green marker. And then someone says, ‘Brian only likes green markers. Get rid of all the non-green markers in every room!’ And I might have just randomly picked up a green marker for maybe no reason.”)
- Once he had his full executive team—the company calls the group the “e-staff”—in place, he then had to figure out how to get them to take things up a notch. “How do you get people to play at the next level when they’re all tired, they haven’t seen their families that much, and they just need to have a rest—and you’re like, ‘Yes, but I need you to do ten times more’?” The answer, which came from a consultation with “source” Marc Benioff, was that he couldn’t ask them to work harder, but he could ask them to “massively up-level their thinking.” (“Up-level” is a common Cheskyism that means taking it up a notch. Other Chesky terms include “skip-leveling,” talking to different people at different levels of the company; and making a “step change,” not just an iterative step but a new way of thinking about something. And he is always talking about having a “North Star,” a phrase you can hear repeated throughout the halls of Brannan Street and even among hardcore Airbnb hosts and travelers.)
- Paul Graham says what drives Chesky is not the things that often drive founders: wealth, influence, success. “He is not working for Brian Chesky,” says Graham. “Really, honestly. I have seen so many different founders—literally, thousands. And I can tell the opportunists from the believers. It’s way beyond money or even fame for him.” For that reason, Graham says, Chesky may not be cut out for just any CEO role. “He’s the kind of leader who leads people to do things that he himself believes in,” he says. “You could not hire him as the CEO of some random company.” Warren Buffett sensed this, too. “He feels it all the way through,” he says. “I think he would be doing what he’s doing if he didn’t get paid a dime for it.”
- Thus began a huge education process for Gebbia. With the help of a coach (who was “brutally honest,” he says), he had to learn that it was OK to have products go out the door if they were less than perfect, and that a fast decision is sometimes better than a fully informed one. His team was behind him, and they even came up with a new mantra for him: “80 percent equals done.” “That was a very uncomfortable thing for me up until that point,” Gebbia says. Gradually he started asking people, in meetings and individually, “What’s the bad news I need to hear?” He came to realize that some of this behavior had spread through the rest of the company. “People look to the leaders for how to behave,” he says. “So if I wasn’t creating a space where people could have candor and be open about what was going on, that was showing up elsewhere in the company.” So in mid-2014, Gebbia turned what he had learned into a candid talk delivered in front of a few hundred employees and beamed out to the company’s offices worldwide. “We have a problem with candor at our company,” he began, before revealing in great detail the feedback he’d received about himself and how he worked to change his approach. He then introduced a theory he’d learned. Called “elephants, dead fish, and vomit,” it was a set of tools designed to encourage difficult conversations: An “elephant,” he explained, is a big truth everyone knows but doesn’t talk about; a “dead fish” is a personal grievance that needs to be aired out, usually with an apology, or it risks getting worse (“I had quite a few dead fish to deal with,” he told the audience); and “vomit” sessions were time put aside for people to get things off their chest without interruption and without risk of judgment. He revealed the specifics of his actions that he’d learned in the feedback that related to each one.
- With the help of professional animators, they “storyboarded” the Airbnb experience, detailing “frame by frame” what happened for both traveler and host from the moment a customer first logged on to the site to the moment he or she returned home from a trip. The big revelation from the project was that Airbnb itself was part of only a few of the frames, those that involved the accommodations, and they needed to work to fill in the rest of them. Months later, at the off-site, the founders realized they hadn’t been making enough progress toward that expanded vision for the future of the company: to own not just the accommodations but the full trip. It was time to start moving into those other “frames,” and soon it was decided that Gebbia would run an immersive prototyping exercise to start exploring how. He pulled together six people in design, product, and engineering and moved them all to New York City for three months, a timeline and setup modeled after Y Combinator. (They even drafted their own core values.) Living and working around the clock out of an Airbnb loft in Brooklyn, they hacked together several different in-app tools, outfitted a small group of international Airbnb tourists with phones that contained the jerry-rigged software, and sent them out to test their ideas. At the end of the three months, they would have a Demo Day back at Airbnb headquarters. The concepts they tested were all over the map: an “arrival tracker,” a sort of Uberlike geolocator that made it easier for the host to know when to expect the guest to check in; a “smart house manual”; and something called Local Companion, a virtual-assistant tool that let travelers request anything they needed, whether a local restaurant recommendation, food delivery, or answers to questions about the city. It also had a “magic button” users could tap to get an unknown, ultracustomized experience that would be tailored to their interests. One traveler who was a licensed pilot hit the button and got a helicopter ride above Manhattan; another got a custom nail manicurist who came to her door. A third asked for help planning his engagement, a challenge the Local Companion team took up with glee, organizing a post-proposal carriage ride in Central Park complete with a harpist; dinner and a night out; and brunch the next day where, instead of a bill, the waiter presented them with a photo album documenting their experience. Back in San Francisco, the prototype operation morphed into a team called Home to Home, led by Gebbia, to explore and test more ideas. One in particular showed promise: the Experience Marketplace, a platform where hosts with a particular skill or knowledge set could offer city experiences to guests in their city for a fee. Some hosts were already doing this; a guy in Park City touted in his listing that he would take guests skiing on local-only trails; a Boston host would take guests on a personal tour of Kendall Square. The team ran a pilot in San Francisco and Paris to recruit and build out more of these experiences. One host in Paris, Ludovic, told the team he made $3,000 from hosting people in his home but had earned $15,000 from giving walking tours around Le Marais. The project ran for most of 2014 and saw some traction, but this was right around the time that Gebbia had hit his wall, and he soon realized he was having trouble scaling and “operationalizing” the ideas. Out of the experience came a realization for Gebbia that he was more drawn to the creation of new ideas than the implementation of existing ones. He gradually started conceiving an idea for a new division of Airbnb that would be dedicated solely to advanced research and design. In 2016 the company launched Samara, an in-house design studio, overseen by Gebbia, that explores large-scale concepts, including the future of shared housing and new models for architecture and tourism that could help create social change. Its first project was the Yoshino Cedar House, a new model for a community center–meets–hostel located in rural Japan: Airbnb travelers can stay there, locals can set up stations to craft there, and the two can interact in ways that might also bring economic benefit to a declining rural area. Other explorations include iterations on the “magic button” that would better divine exactly what would most “delight” each individual user. Alongside Samara is something called The Lab, a small team focused on the short-burst iteration of products and ideas that are more experimental but can be quickly tested. Both teams were launched out of Gebbia’s home, an industrial loft a block away from Airbnb headquarters, and moved to a new space behind the Airbnb building in mid-November 2016. This kind of independent Skunk Works operation is common at other large companies, and it is Gebbia’s sweet spot. It brings him back to the Rausch Street days, when he and Chesky would come up with new ideas over fierce and sweaty games of Ping-Pong. “I want to be a creator of safe space for the invention of ideas,” Gebbia says.
- Beyond the travel experiences, the events and guidebooks also signal an attempt to get Airbnb users to use Airbnb in their home cities. “This is the beginning of Airbnb becoming integrated into your daily life,” Chesky tells me. “This is not just a new way to travel but it is a new way to live, in some ways.” The new venture will be called Trips, but he said that he hopes that one day the company will lose that distinction and all the products and services it offers on its platform will become known simply as Airbnb. Renting homes, he says, might ultimately represent less than half of the company’s revenue. The business case for getting into these new enterprises is that if Airbnb can offer a range of experiences throughout a trip, it can capture additional revenue across all activities throughout the trip—and even in one’s home city—and, critically, it can significantly deepen its relationship with its customer. The new offerings also have the potential to make the platform significantly bigger—but all while doubling down on its brand mission to offer unique experiences and to bring regular people together. “The reason we’re doing this is because we think Trips is the end game,” Chesky says. “It’s kind of where our heart has been.” That’s, of course, assuming the new venture takes off. As magical and inventive as it is, it may be a heavy ask for some people to spend most of their weekend away on an activity that’s directed by someone else, with other strangers tagging along, and to pay a few hundred dollars for it. Airbnb is putting its unique spin on travel, but it’s entering a crowded market and taking on a variety of existing players across the spectrum: traditional tour operators, Yelp, Foursquare, TripAdvisor, and even Lonely Planet and Condé Nast Traveler all at once. When Airbnb blazed its disruptive trail in shared accommodations, it did so by accident, tapping into something unexpectedly wondrous and huge and viral. With this launch, it is attempting the exact opposite of that: it is an idea that was conceived, engineered, tested, and tweaked by Airbnb’s team of specialists, and then formally introduced to the market. Success may not be as easy as it was the first time around. It begs an interesting question: Can true disruptions be planned and strategized, or are they more powerful when they’re accidental? This is also a significant new foray for a company whose core business is still growing so fast. But Chesky has been antsy to pivot for a while. He and the founders have been well aware of the ability of once-mighty tech giants to stick too close to their core product and become irrelevant over time. (BlackBerry, Blockbuster, TiVo—the annals of tech history are filled with such examples.) Chesky studied some of the big and lasting tech companies, like Google, Apple, and Amazon, and came to two conclusions: the survival of a tech company depends on a willingness to branch into new categories; and the CEO has to have the discipline to put the new venture ahead of the existing business and to take the new project on personally. For close to two years, Magical Trips has been Chesky’s main focus, taking up one-third to one-half of his time.
- Chesky says there is less pressure on him from his investors to enter the public markets than people would think, because the company is founder-controlled and has carefully chosen investors who share the founders’ vision for their company. “You choose, at the end of the day, who you listen to and the kind of courage you’re going to have,” Chesky says. “And it’s up to us to build the kind of company we want. We’re very transparent. We say we’re going to build a long-term company. There’s risk involved.” He says that during meetings with investors in the company’s biggest funding round in 2015, he spent ninety minutes explaining the company’s vision and culture and its commitment to a long-term horizon. “A bunch of people passed,” he said. “That wasn’t the kind of company they wanted. They wanted to know we were going to go public in a couple of years. I couldn’t give them that view.” He says he’s doing a lot of things that will actually slow the company down, like spending much of 2016 re-architecting its mobile apps instead of optimizing its website, and incubating the Magical Trips project for two years at considerable investment.
- “I really like these guys—they are genuine,” says Jessi Hempel, head of editorial for the online technology publication Backchannel, about the Airbnb founders. “But the bigger question is, is an Internet company that has to scale a flawed endeavor? If you believe in a mission, start a nonprofit. Be a Wikipedia, or a Craigslist,” she says, referring to Wikipedia’s nonprofit model and what Craigslist refers to as its noncommercial, public-service nature (it is a for-profit company but did not take venture funding). Hempel’s point is that the moment a technology company takes its first dollar of venture capital, it becomes hostage to investors’ desire to maximize returns. “The peculiar parameters of venture-based start-ups are that the demand for growth is so important that it takes precedence over everything,” she says.
- The move into Trips may come as a surprise to Airbnb’s critics. It lends no further evidence to the argument that the company is secretly seeking the biggest-spending corporate customers at all costs as it races toward an IPO. It’s not an evil land grab for more homes or more commercial properties. Chesky says that if the company wanted to be big at all costs, it could have easily done so with its existing platform. “We have such low penetration of housing and hospitality that if we just wanted to be big, we could be big,” he says. Instead, the expansion into the trips business is a move that doubles down on the “uniqueness” element of Airbnb, at least for now. (While the company may eventually face a similar issue of professional tour operators seeking to offer their experiences on the Trips platform, for now all experiences are approved and vetted by Airbnb.) If this is the future of Airbnb, it is one that seems to lend itself to less pushback from entrenched industries.
If you liked the above content, I’d definitely recommend reading the whole book. 💯
Until We Meet Again…