Reid Hoffman: "It’s rare that you need to be first"
The LinkedIn founder on start-up mentality, buttoned-up Brits and Adam Smith’s invisible hand.
Reid Hoffman is contemplating failure.
“You have to take risks in order to achieve things of note,” he says. “If you haven’t failed a couple of times, you’re not trying hard enough.”
Hoffman is reprising one of the most notable differences between American and British business culture. In the United States, entrepreneurs wear failure as a badge of honour, an essential part of the learning process on the way to success. In the UK, meanwhile, there remains a reluctance to accept it as either an inevitable or necessary rite of passage.
Buttoned-up Brits, Hoffman says, need to get over their embarrassment and learn to embrace failure.
So speaks a serial investor and entrepreneur with a seemingly flawless track record. Ten years ago, he co-founded LinkedIn, a professional networking site that now boasts 150 million members. When it was floated on the New York Stock Exchange in May 2011, it was soon valued at over $5bn. Before that, Hoffman was part of the team that set up the online payment system PayPal and was responsible for engineering its $1.5bn sale to eBay. He was also a founding investor in Facebook and the games maker Zynga; and an early investor in Flickr.
He is still involved in LinkedIn today, acting as executive chairman, as well as a partner at the investors Greylock and serving on the board of a handful of companies including Mozilla, makers of the Firefox browser.
What he knows about personal failure is difficult to discern. His first company, SocialNet, he is quick to point out, was a dud by Silicon Valley standards.
Now, Hoffman wants to take the entrepreneurial essence of west coast America – embodied in this “Web 2.0” generation of companies – and apply it to the individual. He calls it “the start-up of you” and it happens to be the title of a new book that he has co-authored with his fellow entrepreneur Ben Casnocha.
In a world of stalling salaries, increasing global competition, creative disruption and job insecurity, Hoffman and Casnocha argue that individuals need to think and act entrepreneurially. They need to be nimble and self-reliant and – hardly a surprise, coming from the man from LinkedIn – they need to know how to network.
But what works for Hoffman, currently worth an estimated $1.8bn at the age of 44, may not work for the rest of us. Perhaps some people don’t have the start-up in them; perhaps most career paths don’t demand it.
Hoffman concedes that there is a “spectrum of relevancy” and if work is about clocking on and clocking off, then most likely this is not the approach to take.
Treating your career like a start-up company, explains Hoffman, is about “investing in yourself, creating competitive differentiation, taking intelligent risks”.
Is this another way of saying that we should become perpetual job-hunters? “[It’s about] learning new skills, finding out what’s going on in your industry, making connections so you are more capable and more adaptable. If that happens to be job-hunting, then great, so be it. But the vast majority of the time you are doing this, you are not on the market for a job. You are actually on the market to better understand how you can make progress within your industry.”
Hoffman is a relentless cheerleader for the risk-takers in business, believing that societies flourish when people are entrepreneurial. It’s a theme he returns to more than once in his book. How, I wonder, can he be so sure? He says wealth creation is the benefit capitalism brings – more companies, more products and more services add to the general value of a nation. “Maybe this is an unabashed American perspective.”
But doesn’t entrepreneurship involve an immense amount of selfishness, not selflessness? It’s about personal drive, it’s about personal goals, and if society happens to benefit along the way, that's just a happy coincidence.
Hoffman reaches for Adam Smith’s “invisible hand” by way of response. Nodding to Smith’s 1759 work The Theory of Moral Sentiments, he says: “Part of the benefit of capitalism and entrepreneurial capitalism [is that they bring] valuable services that people will buy and, therefore, it has to be something they value. And the contribution is not just the products and services but the jobs that it creates.
“I don't mean to suggest that entrepreneurship is the source of all good public works but I do think that the outcomes of it are very valuable.”
Naturally, Hoffman is well connected. Yet it’s not so much his 2,600 connections on his own site that proves the point; it’s more the calibre of those who offer endorsements for his book – the Twitter co-founder Jack Dorsey, Facebook’s chief operating officer, Sheryl Sandberg, and the New York mayor, Michael Bloomberg, among them.
Before speaking to Hoffman, I did the Web 2.0 thing and sought questions for him via Twitter. The suggestions fell into two broad categories – how would the business model have been different if LinkedIn was founded in 2012 rather than 2002, and why does LinkedIn send so many reminder emails? I ask the politer question first.
“It would certainly be fairly different, because LinkedIn is only valuable once you add millions of people to it. [Back] then, a lot of social sites could just grow. Now, there would be a much more immediate need for differentiation and pay-off.”
To the second question – that LinkedIn is bombarding people with emails – Hoffman responds: “Well, we don't actually send emails directly from LinkedIn. We have the privacy controls to turn off emails.
“Now, that being said, we don't put quotas on the people sending email.”
If Web 2.0 was characterised by the social, Hoffman believes the third generation will draw on data for its success.
“Because of mobile phones, because of social networks . . . a lot of data is being generated,” he explains. “And that data around our lives can then be indexed in a way that helps in our lives. An obvious example is [that] all of our mobile phones know roughly where we are and what our velocities are; if you put them together in a non-personalisable network, you have a great adaptable traffic map.
“These technologies will help us navigate not just the physical space but the economic space and social space.”
For now, the social web still has some way to run. Hoffman is excited by the prospects for Pinterest, the pinboard-style sharing site with 12 million members and rising. “It seems to have extracted a lot of interest from women, which is atypical for that kind of site,” he says.
He refuses to predict whether it will succeed in the long term but says that when looking for a potential investment, “The most important thing is the person [who runs the start-up], because ideas tend to iterate and change all the time.”
Innovation and entrepreneurship Silicon Valley-style doesn’t necessarily require a new idea. More often than not, it is the company that does it best, not who does it first, that succeeds. So it was Google, not the earlier AltaVista, which emerged as the pre-eminent provider of online searches. And it’s why Apple – which didn’t invent the tablet computer, the mp3 player or the smartphone – is now one of the most valuable companies in the world.
“Technology grows on itself,” Hoffman explains. “Every major technology is dependent upon some amount of technology that had been there before, including earlier versions of it. So the nature of invention is not, ‘Oh, I've just thought of something no one's ever thought about before.’ Actually, it is about the right time.
“So, you need to be early but it's relatively rare that you need to be first.”
“The Start-Up of You: Adapt to the Future, Invest in Yourself, and Transform Your Career” is published by Random House, priced £12.99
This article was updated on 25 April.