What It Takes is an audio podcast produced by the American Academy of Achievement featuring intimate, revealing conversations with influential leaders in the diverse fields of endeavor: public service, science and exploration, sports, technology, business, arts and humanities, and justice.
Entrepreneurship is: You jump off a cliff and you assemble an airplane on the way down.
Reid Hoffman was born in Palo Alto, California and raised in Berkeley, where both of his parents were attorneys. He attended public schools in Berkeley until high school. Convinced that he learned best in smaller classes, he successfully lobbied his mother and father to place him in a private high school close to home. Still restless and eager to live away from home, he finally persuaded his parents to send him to the Putney School in Vermont. The Putney School stressed breadth of experience, giving him the chance to try his hand at everything from art to farming chores. Having enjoyed a measure of independence at school in Vermont, he was content to return to his native Northern California and attend Stanford University.
May 2012: Reid Hoffman featured on the cover of Forbes magazine as “Silicon Valley’s Best-Connected Billionaire.”
Stanford’s program of “structured liberal education” stimulated his interest in philosophy and ideas. His wide-ranging interests might have made it difficult to select a single course of study, but a sympathetic advisor guided him to a solution. After asking Hoffman to list all the courses he wanted to take while at Stanford, the advisor steered him towards the university’s program in symbolic systems, which included philosophy, linguistics, psychology, mathematical logic and computer science.
In all these areas, his overriding fascination lay in the communication of ideas and the exchange of information. He was intrigued by the works of media theorists such as Marshall McLuhan and Neil Postman. McLuhan explored the influence that evolving modes of communication exert over human thought, exemplified by his oft-quoted maxim “the medium is the message.” Postman’s most famous book, Amusing Ourselves to Death: Public Discourse in the Age of Show Business, argued that the visual nature of television undermines the public’s capacity for following rational argument.
Joi Ito, Director of the MIT Media Lab, and LinkedIn Founder and Chairman Reid Hoffman in conversation with Academy delegates and members at the 2014 International Achievement Summit in San Francisco, California.
From his studies at Stanford, Hoffman was aware that more profound changes might soon transform the media landscape in ways that even McLuhan and Postman had not anticipated. He became increasingly concerned not only with how information is communicated, but with what is communicated and why.
Hoffman graduated from Stanford University in 1990 with a bachelor of science degree in symbolic systems and cognitive science, and won a Marshall Scholarship to study at Oxford. He earned a master’s degree in philosophy from Wolfson College, Oxford University, in 1993. At Oxford, Hoffman had considered the claims of the schools of analytic philosophy dominant in the English-speaking countries, as well as those of continental schools, with their greater emphasis on the historical and cultural context of ideas.
Hoffman aspired to a career as a writer, professor and public intellectual, but following his studies at Oxford, he began to look for a way to have a more direct impact on society than he believed he could achieve through an academic career. On returning to Northern California, he canvassed Stanford friends for job prospects in the region’s burgeoning technology sector. A temporary job in the User Experience sector of Apple Computer led to a longer assignment as a junior product manager. At Apple, he worked on eWorld, an early attempt at creating a social network. Although the project did not lead to a sustainable enterprise, Hoffman was convinced there was a future in deploying the power of the Internet to foster human relationships for social networking.
Academy honoree Reid Hoffman, a 1993 Marshall Scholar at Oxford University, meets a new generation of Marshall Scholars at the 2014 International Achievement Summit in San Francisco. (American Academy of Achievement)
Apple realized a profit when it sold eWorld to AOL in 1996. Hoffman left Apple that year and continued his exploration of the new technology industry at Fujitsu. Although he was well aware that the chance of success on a first venture was slim, he had already decided to start his own company as soon as possible, and in 1997, less than three years after he entered the tech industry, he left Fujitsu and founded his first company, SocialNet.com. Initially, he had conceived of his venture as something akin to an Internet-based dating service, but he soon realized the new technology could be applied to building all kinds of relationships, including business ones. This maiden voyage would prove to be an intense learning experience for the novice entrepreneur.
At the same time, Hoffman’s Stanford friend Peter Thiel approached him about joining the board of his own start-up. Thiel’s firm, which focused on processing transactions over the Internet, became PayPal. Hoffman’s experience at SocialNet enabled him to help Thiel and his partners refocus their venture from processing person-to-person payments to one focused on processing payments from customers to merchants.
By 2000, it was clear that SocialNet would not achieve Hoffman’s ambitions for it, while PayPal would require his full attention. Hoffman folded SocialNet, returning all of his investors’ original capital, and became PayPal’s Executive Vice President and Chief Operating Officer. In 2002, PayPal was acquired by eBay for $1.5 billion. Hoffman’s share of the sale enabled him to invest in other promising ideas while pursuing one of his own.
His experiences at both SocialNet and PayPal had demonstrated the importance of an individual’s professional identity in the online sphere, and he was ready to test this idea on his second start-up. He founded LinkedIn in his living room in the last month of 2002 and the site went live in May 2003. At the end of the first month in operation, LinkedIn had a total of 4,500 members in the network. It soon became the Web’s pre-eminent business-focused social network.
While LinkedIn was developing, Hoffman was approached about leading the first funding round for Facebook, as he had earlier done for the consumer network site Friendster. Hoffman was impressed with Facebook’s plan and agreed to make a substantial investment, but he felt that taking a more prominent position in Facebook would pose a conflict of interest with his leadership role at LinkedIn. He introduced Facebook founder Mark Zuckerberg to his friend Peter Thiel, who agreed to provide the initial “angel” investment of $500 million. Hoffman has called this “the most expensive decision” of his business career, but his smaller investment in Facebook, as well as his other ventures, have earned him a considerable fortune. He has made angel investments in more than 80 technology start-ups, such as Airbnb, Groupon, Zynga and Flickr.
At the end of 2009, Hoffman joined the Greylock Partners investment group, where he runs the $20 million Discovery Fund. His areas of focus at Greylock include enterprise software, consumer Internet, Enterprise 2.0, mobile, social gaming, online marketplaces, payments, and social networks. After LinkedIn made its initial public offering in 2011, Hoffman’s personal stake in the company was valued at $2.34 billion. By 2014, his personal fortune was calculated at over $4.5 billion. By that point, it was estimated that LinkedIn was adding more than two new members per second.
2014: Sequoia Venture Capital “founders” at the Tesla Motors’ factory, Fremont, CA.: Jerry Yang, Chad Hurley, Julia Hartz, Jan Koum, Max Levechin, Reid Hoffman, Arash Ferdowski, John Chambers, Brian Chesky, Elon Musk, Adi Tatarko, Kevin Systrom and Fred Luddy are “founders” that Sequoia has helped. (Forbes Media LLC/Getty Images)
Reid Hoffman was LinkedIn’s Chief Executive Officer for the company’s first four years; he continues to serve as Chairman of the Board. In addition to sitting on the board of the Mozilla Foundation and numerous nonprofits, he is a founder of FWD.us, which lobbies for immigration reform and the improvement of American education. He has been honored by the World Affairs Council and Global Philanthropy Forum for Technology for Social Impact.
March 2023: Impromptu: Amplifying Our Humanity Through AI written by Reid Hoffman with GPT-4, offers a travelog of the future — exploring how AI can elevate humanity across key areas like education, business, and creativity.
By 2016, LinkedIn was operating the world’s largest professional network on the Internet, with more than 400 million members in over 200 countries and territories. In June of that year, Microsoft Corporation announced plans to acquire LinkedIn for $26.2 billion, the largest acquisition in Microsoft’s history. The merger will require regulatory approval in the United States and other countries where the companies operate. LinkedIn’s stock price soared on news of the proposed deal. Reid Hoffman, who remains LinkedIn’s largest individual shareholder, has approved the plan.
2018: Blitzscaling: The Lightning-Fast Path to Building Massively Valuable Companies by Reid Hoffman and Chris Yeh reveals the innovative, aggressive growth strategies behind the world’s most successful tech companies, offering unparalleled insights into how speed trumps efficiency in the strategic race to dominate global markets.
Reid Hoffman’s expertise in technology and entrepreneurship is showcased in his 2018 book “Blitzscaling: The Lightning-Fast Path to Building Massively Valuable Companies,” co-authored with Chris Yeh. The book outlines the concept of blitzscaling, a growth strategy emphasizing speed over efficiency in competitive markets. Highlighting examples from tech giants like Amazon, Facebook, and Google, Hoffman and Yeh discuss how rapid scaling can lead to significant market dominance and value creation. They explore critical strategies for blitzscaling, including understanding market conditions, innovating business models, and managing the chaos of rapid expansion. The work serves as a guide for entrepreneurs and business leaders interested in achieving explosive growth.
Inducted in 2014
Reid Hoffman has been called “the most connected man in Silicon Valley,” the “über-investor” who “has had a hand in creating nearly every lucrative social media start-up.” As entrepreneur, executive and investor, he has played an integral part in building LinkedIn, PayPal, Facebook and many others.
A former Marshall Scholar with degrees in symbolic systems from Stanford and philosophy from Oxford, he pioneered the social network concept as a project manager of eWorld at Apple. He founded SocialNet, one of the first online networks. As a founding director, Executive Vice President and Chief Operating Officer of the online payment processing business PayPal, he was responsible for forging its partnerships with Intuit, Visa, MasterCard and Wells Fargo, and facilitated its $1.5 billion acquisition by eBay.
In 2002, he started LinkedIn in his living room. Following its 2011 IPO, his stake in the company was worth an estimated $2.34 billion. Today, LinkedIn is the world’s largest professional networking service, with more than 300 million members in 200 countries around the world. As an investor, he participated in the first round of financing for Facebook and led Greylock Partners’ investments in Groupon and Airbnb, among others. He has shared his insights on the new world of work in his book The Start-Up of You: Adapt to the Future, Invest in Yourself, and Transform Your Career.
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You were one of the original participants in PayPal before you founded LInkedIn. How did that transition come about?
Reid Hoffman: So the PayPal story to LinkedIn is fun, because in August of 2000, PayPal burned $12 million in one month and didn’t really have a dime of revenue and the cost curve was exponentiating. So Peter, Max, and I did an offsite for Labor Day weekend, I think it was, it was one of the weekends in September where we spent three days. The first day was, “What’s our strategy for how we change course for PayPal?” Because we could chart the mushroom cloud from the plowing on the side of the mountain. We could almost chart it by the hour when we would blow up. And we decided to be a master merchant. And fortunately for us and for the world, that turned out to be a good strategy and it worked. Because we had one. We used a lot of Star Wars metaphors, you know, “the attack on the Death Star.” You know, one shot in the trench. Because it was like we had one strategy we could play. And other than that, we didn’t have time.
Maybe you could explain what that means, “master merchant.”
Reid Hoffman: So what we would do — the business model for PayPal would be that we would charge people for taking credit card payments and that we would essentially be their merchant of record, even though… So usually as a merchant you establish your own relationship with a bank. By being a master merchant, we would have merchants who were not large enough to establish a relationship with a bank, but actually would have a direct relationship with PayPal. And PayPal would have the relationship with the bank. The second day, because Max, Peter, and I were, “Well, if this blows up, we’re going to have one of the spectacular Silicon Valley failures on our hands.” So we might as well do our next business together. So let’s each of us talk and say, “What is our best alternative idea?” and the early germinations of LinkedIn — some early components were one of the things I was working on. Because I had concluded from SocialNet that actually, in fact, your professional identity was really important. It had an effect on what your economic opportunity was. That everyone should have a public professional identity. It would help transform their work life, whether or not they’re an employee, or an entrepreneur, or a lawyer. All these things that having an identity would be really important. And that this could be a driver for how you lived and worked your work life. And so that was the idea I presented. And then PayPal worked out and so, actually, I didn’t go back and think about that idea until after we sold PayPal to eBay. I was like, “Well, what do I want to do next?” Because I now had what I was calling my ransom, which was enough money, a salary, so I could go back to being a public intellectual and writing books or something if I wanted to do that.
I realized the pattern of the consumer Internet company was something that was actually just beginning. Like the Silicon Valley had gone — the typical pattern for Silicon Valley is you all run to one technology trend and call it networking equipment or enterprise software or clean tech software. And you all do that, and then you run to the next one. And so they had all thought consumer net was over. And I was like, “No, no, it’s just beginning and there is decades of interesting companies and work here. And I would like to participate in those. I would like to invest in them. I would like to create them. I think one could have a massive change of the world through these companies.” And so I invested in such companies as Friendster and Facebook and Flickr and a number of others, Zynga. And then I started LinkedIn. And that was because this whole notion of how networks can be a platform for identity and for applications that help us navigate the world in a much better way. That was what I had started this whole thing — you know, my whole path in the Silicon Valley with. And now was at least a time, if not the time to really do that.
It’s remarkable how quickly it has evolved from its very beginnings to all the offerings now.
Reid Hoffman: One of the strengths of the commercial models is it causes a lot of year-by-year investment. And that’s one of the reasons why, when you have an impulse to improve the world, commercial models are one of the tools you need to pay a lot of attention to.
Academy Golden Plate awardees: Joi Ito of the MIT Media Lab discusses the future of Internet commerce with LinkedIn founder Reid Hoffman at the 2014 International Achievement Summit in San Francisco, California.
You were arguing that the “consumer net” was just beginning, when everybody was telling you it was over. That can be a lonely place. How did you know you were right?
Reid Hoffman: I knew there was a very high probability I was right. Because I was close enough to it to know. Now, would I have known you would have had these giant companies like LinkedIn, Twitter, Facebook, Airbnb, Dropbox, I wouldn’t have necessarily known how big they were, but I knew the phenomenon was real. And this is one of the areas where expertise really matters, because I knew the cost of developing these services was going way down. There was open source software. There was cloud hosting. That essentially much cheaper models were running these services. I also knew that the business models for the media attention — just advertising alone — would get better. And that the consumer demand for these products was there. So I couldn’t have told you that some of these companies would be massive, multi-billion dollar businesses, but I could have told you that I know the products would work. I knew the business models would work. So it was a worthwhile thing to engage in, both as an entrepreneur and as an investor. And then, personally, the way of transforming how you impact the world — through software ecosystems that help people establish identities, connect with each other, communicate with each other, coordinate with each other, seek entertainment, build social relationships — all of those things were the precise reason I got into Silicon Valley software creation, software entrepreneurship in the first place. So it was like, “No, this is the play.” I had originally thought I was going to take a year off. And I said, “No, I don’t — I’ll take two weeks. I’ll go visit my friend Ned Hoyt in Australia and then I’m back to work, because this is the time.” And I was right about that.
What gives you the confidence to take a leap like that? Is it the data — the research and experience — or is it just some kind of intuition?
One of the metaphors I use for entrepreneurship is you jump off a cliff and you assemble an airplane on the way down. Now if you do this in a particularly — to do this more intelligently — you’re choosing your cliff, you’re choosing when, you’re preparing yourself with the right materials, the right teammates to jump over the cliff with, these sorts of things. But sometimes you just have a love of this technology or this area and you stumble your way into it. So you can be more systematic; you can increase your probabilities; you can increase your scale of outcome. But also, sometimes people just happen to be doing something they love, and all of a sudden the commercial models and venture and everything else goes into it. And all of a sudden, it’s off to the races. There were a number of successful companies that started that way. So it’s both, but it’s skill and knowledge, and networks help.
