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In “The Upstarts,” Silicon Valley journalist Brad Stone dissects the “killer companies” fueling the gig economy, led by Uber, co-founded by Travis Kalanick, and Airbnb, co-founded by Brian Chesky. Stone’s book tour included a recent talk with Microsoft employees and an interview during which he looked ahead – toward where and how tech innovators may next change the world.
Transform: The definition of an upstart, as you note in the book, is someone lacking respect for the established ways of doing things. Is that contrarian trait essential to becoming a truly transformative entrepreneur?
Brad Stone: I have fun with the definition of the upstart because I feel like there are two meanings. One is someone who just creates something new. And then there’s the sort of negative meaning that maybe it is someone not showing proper deference for an established way of doing things. I wanted to frame the definition and the two meanings as a choice for the reader.
Are they pure innovators? Or did they succeed by breaking rules and trampling on the status quo? It’s definitely a little bit of both. I think that, actually, the entrepreneurs in these two spaces – ride sharing and home sharing – who just played by the rules didn’t succeed. I devote a chapter to that in the book and I think it’s important. If you just played by the rules, if you tried to change, for example, taxis from within, you got nowhere. So it required a little bit of deviousness or maybe a little bit of ruthlessness on the part of these two entrepreneurs.
Transform: You describe a 2008 speech by venture capitalist Greg McAdoo. He used surfing to compare how world-changing entrepreneurs can spot, sooner than the rest, the next great technology wave. Are some now seeing – or riding – the next great wave?
Brad Stone: There is this idea that the upstarts rode this wave of smart phone penetration and wireless broadband and GPS and identities provided by Facebook. All of these things had to coalesce for these businesses to succeed. And they had to time them right. And they had to get the right people around the opportunity and, of course, they have a little bit of a ruthless disposition.
In terms of whether there’s another wave happening right now? You guys here know as well as I do that if there is a next wave, and people are beginning to look at that, it’s around artificial intelligence and machine learning and perhaps virtual reality or augmented reality. Those are the platforms on which new things will be built and there will be interesting opportunities. Although, sometimes, the waves emerge and it’s confusing. Some things can be hyped too early and then you’ve mistimed it. I will say this: It’s never evident to me beforehand. If it was, I probably wouldn’t be a journalist.
But I think now we can look back in retrospect and say there was a wave over the last eight to 10 years and the upstarts that emerged are Uber and Airbnb and Lyft and Snap and Didi (Chuxing) in China, and Stripe. Sometimes the waves are visible only in retrospect.
Transform: In your view, what sector is next destined for successful disruption?
Brad Stone: It’s interesting to look at some of the industries that have somehow resisted disruption by the internet. Real estate is one because of either the size of the transactions or the entrenchment of agents and their consortiums. Even though there have been successful companies like Zillow, Trulia and Redfin, somehow real estate has never been fundamentally truly disrupted. That continues to be an opportunity for some pioneering or disruptive internet company.
I think health care is obviously one that a lot of entrepreneurs are looking at. Like, why is going to the doctor so expensive, so time consuming, so inefficient? Why do we no longer have personal relationships with our primary care physicians? Why don’t they visit us? Why do we visit them? And why are drugs so expensive? There’s definitely opportunity there to make that more efficient. Are the dynamics of the industry so firmly entrenched and so encrusted in regulation that they become hard to dislodge?
Transform: You interviewed entrepreneurs about the role luck plays in success. How did they answer, and after talking to them, what’s your take?
Brad Stone: It’s maybe fashionable to credit luck. An entrepreneur or founder wants to appear humble so they do that. But at least the companies that I’ve looked at like Amazon or Uber or Airbnb, they’ve had plenty of competition and plenty of skeptics and low moments. It wasn’t luck that got them through that, or market timing. It was sheer versatility and tenacity and questioning the dynamics of their own business and taming the chaos of their own operations.
There’s certainly some amount of luck. But the companies in this book, Uber and Airbnb, emerged from careful understanding of their own industries and a willingness to go above and beyond, and staying either under the radar or resorting to tactics to defeat the opposition that stood in their way.
While entrepreneurs talk about luck, it’s fairly low on the list of factors that make a difference.
Transform: These same entrepreneurs – Chesky from Airbnb and Kalanick from Uber – have an innate ability to roll with negativity and the stream of rejections that often accompany truly new business concepts. Does this mental toughness come from their belief in their ideas, or are they just born this way?
Brad Stone: I do think these CEOs had to be different than, let’s say, Bill Gates or Mark Zuckerberg or Larry Page. In the first two or three generations of internet or technology companies, you had, let’s face it, admittedly somewhat geeky and introverted founders who were absorbed in the mechanics of their own business.
These guys (Chesky and Kalanick) had to be different. They had to be charismatic storytellers. They had to be politicians because their businesses encountered regulatory obstacles right from the beginning. So these founders had to be more politically astute. And it helped that they were, at least in the case of Travis and Uber, kind of pugnacious. Because if they had backed down, if they had said they would work within the framework of the law, they never would have succeeded.
While Airbnb has a different brand and is seen as somewhat friendlier, they were every bit as dogged as Uber. And they launched in cities like New York where they were plainly illegal. They did it with a smile on their face and a nice, shiny halo, but they did it nevertheless. These guys, they were different.
Transform: What was the single smartest move Chesky and Kalanick made in creating their companies?
Brad Stone: I’ll start with Uber. It was I think three years into Uber’s history when Lyft and Sidecar launched in San Francisco, which was then this novel idea of ride sharing, that anybody – you didn’t need a taxi license – could make their own car available to passengers. And Uber at the time was using chauffeured black cars. It’s funny, Travis tried to get the State of California to shut down Lyft and Sidecar. But his smartest move was giving that up early and taking that idea and launching it as UberX, which now is 90-plus percent of their business and has changed transportation around the world. So in fact being an imitator, which is not a name that Uber embraces, turned out to be their smartest move.
Airbnb, actually it was something somewhat similar. A couple years into Airbnb’s growth, they started being cloned by companies all around the world. They were content to be really small and let Airbnb grow organically. They wanted to keep their overhead low. When they saw these imitators popping up all over the world, they decided to be a lot more aggressive and they started opening up offices all around the world. Pressing down on the accelerator turned out to be a very smart move. Because Airbnb right now has the advantage of being this global network, and they wouldn’t have gotten there had they not put down the roots in all these countries and started to embrace the opportunity of their business.
Photography by Scott Eklund/Red Box Pictures