From losing 80 percent of your business to an IPO in nine months
Airbnb CEO Brian Chesky prides himself on thinking very differently than other CEOs, and his answers to the Decoder questions about how he structures and manages his company were almost always the opposite of what I’m used to hearing on the show. Airbnb is pretty much a single team, focused on a single product, and it all rolls up to Brian. That’s very different from most other big companies, which have lots of divisions and overlapping lines of authority.
And Airbnb’s relationship to cities is changing as tourism changes. Airbnb used to be the poster child for a tech company that showed up without permission and fought with regulators, but as the company has grown and the pandemic has changed things, it’s entered what is hopefully a more mature phase — it just came to a deal with New York City after ten years of argument. I asked Brian about that and about what it’s like to run a public company now — the transition from scrappy startup to public company engaged with regulators is a big one.
Of course, I also had to ask about cryptocurrency and the metaverse — does Brian think we’re all going to be visiting virtual NFT museums on vacations in the future? You have to listen and find out.
Okay, Brian Chesky, CEO of Airbnb, here we go.
Brian Chesky, you’re the co-founder and CEO of Airbnb. Welcome to Decoder.
Thank you very much for having me today.
I am excited to talk to you. It has been almost a year since Airbnb went public. You’ve made some product announcements. We should talk about all those. There is a pandemic going on — not sure if you have heard about it. I am very curious if the pandemic has affected the business. Airbnb is sort of a paradigmatic marketplace internet company. Uber is a taxi company that doesn’t own cars. Airbnb is a travel company that doesn’t own hotels. What has that been like during the pandemic? How have you changed the business? How have you had to react to that?
It is kind of interesting. To take you back to right before the pandemic: I remember coming back from the holidays in early 2020, thinking — like probably most people in the world — that my life was going to go in a certain direction, not knowing two months later that everything would be turned upside down. In late January, we noticed our China business dropped by 80 percent in a matter of weeks. I had never seen anything drop by more than 5 percent. I remember saying seemingly innocently at the time, “Wow, if this spreads outside of China, it would be very bad.” Not realizing that, within a few weeks, COVID-19 would go to Europe and then, of course, to the United States.
By March, our business started dropping precipitously and we lost 80 percent of our business in eight weeks. Losing that much business in eight weeks when you’re Airbnb’s size — it’s like driving an 18-wheeler at 80 miles an hour and slamming on the brakes. You just cannot change direction that quickly without really dramatic things happening. There was a lot of panic around me, certainly, in the public. There were a lot of predictions of our seemingly imminent demise. There were people asking: “Will Airbnb exist?” “Can Brian Chesky save Airbnb?” These are verbatim headlines from last April. I think that a lot of people thought that we would be more impacted than hotels and other companies.
Maybe the reason why is because they just assumed what kind of arrived recently would go away earlier. Airbnb has not been around for a hundred years, so how could it be the thing that endures for the next hundred years? I understand that line of thinking, but something totally different transpired. If you cut forward, by the end of the year, we suddenly went public. We were stronger than we were before the pandemic. So how did that happen? How do you even explain that? The way I would explain it is that we had an adaptable business model. We didn’t have to pour concrete. We had millions of homes. We had nearly every type of space you can imagine from small bedrooms and apartments to yurts, to tree houses, to villas and entire homes, in nearly every community in the world.
Airbnb is in 220 countries and regions: every country in the world but North Korea, Iran, South Sudan, and Crimea. Airbnb is in 100,000 towns and cities, at every price point from $20, $30 a night to thousands of dollars a night, for any length of time. You can only stay in a hotel for usually up to a week before the cost gets prohibitively expensive for most people, but you can literally live in Airbnbs for months at a time. Quite a few people are doing that — every type of traveler, from solo travelers to families.
Because of the fact that we didn’t have to hold inventory or pour concrete, we had a distributed network — a community. Communities are inherently adaptable and resilient, almost like Mother Nature. Airbnb was able to adapt to the changing patterns of travel better than probably anyone else in the industry, and I think that kind of spoke to what happened. Travel is completely changing. We are living in a revolution in travel. That explains part of our success.
That adaptability — you do not have to pour concrete or hold a lot of inventory — I think of Airbnb as a software product. Is that what you think the core product is, a marketplace software?
I think that is a part of our product. We are not a software company the way Microsoft is software. Microsoft literally sells nothing but the software. Airbnb is first and foremost a software company, but unlike Google and Facebook, our product is not the software. Our product is the thing you pay for: the home, the experience, the community. Our application is the gateway to that thing in the real world. While Airbnb is definitely software first, we are more than that because the customer is buying something more than just a digital product.
Do you think of yourself as a tech company?
There are a lot of ways to define what a tech company is. You brought up Microsoft and Google, two companies that have zero marginal cost scale: the next Google search page does not cost Google anything to make because the software can just generate it. Google has entire business models built around that. Do you think of your margin and your growth the same way that a software company like Google would think of it? Do you think of tech enabling your product in other ways? How would you define a tech company in a way that includes Airbnb?
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There are many definitions of a tech company, but I think that the primary definition is that a tech company has two characteristics. It is seemingly infinitely scalable: if you have to pour concrete, there’s only so much of it in the world. Concrete is very expensive — it leads to a lot of capital allocation, and also requires a lot of permits. The process requires decades. The first characteristic of a tech company is that it is seemingly infinitely scalable. The second is what you said: a low marginal cost. Windows 95 was the closest thing the world has ever seen to basically zero marginal cost — just a CD in a box. Maybe Google’s closer to zero marginal cost, since all they are paying for is the servers to host the data.
Airbnb has a pretty low marginal cost. To give you an example: if you look at our financials, our gross margins are approaching 50 percent. A couple of years ago, our margins were in the mid-30s. We did over a billion dollars in EBIDA [earnings before interest, depreciation and amortization] in the third quarter alone, even though we are built to be profitable at a much larger scale. In that way, Airbnb is a tech company. When an investor values the company, they’re just looking for how big can it be and how profitable it can be. Those require two characteristics: infinite scale and low or zero marginal cost. That being said, Airbnb is obviously not a tech company like Intel or Nvidia.
I think about it as layers of the stack. You’ve got the micro components which are like Nvidia and Intel. Then, you’ve got the companies making devices like Apple. Then, you’ve got the operating systems: Apple, Android. Then, you’ve got the application layer. Airbnb is at the application layer, but there’s even a layer above that: online/offline. You mentioned Uber is at this level as well. We have this offline world that Facebook, Google, and other applications don’t have to deal with. For example, we have to collect or remit money, which is tens of billions of dollars in nearly every country in the world. We have money transmission licenses in most countries. We have major financial regulation responsibility. Some nights we had more people staying in Airbnb than the population of Los Angeles.
We had to keep those customers safe. We have had to make government agreements with thousands of jurisdictions around the world and remit $3.4 billion of hotel tax. We have to exist on every application. Uber needs a mobile app, but Airbnb needs a mobile app, a desktop app, and an iPad app. We just launched AirCover: a million dollars of damage protection for every home on Airbnb for free. If one million homes a night are occupied and each home has a million dollars of protection, that’s a trillion dollars of protection Airbnb works with insurance partners to provide every single night.
There are a lot of things that go beyond the application. The iPhone stock app, for example, is a very two-dimensional experience. Airbnb is truly an application that has a three-dimensional experience. The real world creates quite a lot of complexity. The good thing about Airbnb is that we’re a community, so it’s inherently scalable. That’s why investors clearly like Airbnb. It feels like a tech company because it is.
You brought up a lot of things that I have follow-up questions on. I want to start with the simplest one. I have asked almost every other tech company exec that has come on the show about the chip shortage. Most have said that it is a problem. Is the chip shortage a problem for Airbnb?
I don’t think so, no.
You are the first one. There is something interesting there — Airbnb is deeply connected to the physical world but it has kind of abstracted the phone and the hardware component away, so that is interesting.
The second point is, you brought up currency transactions. I was not expecting to ask you about cryptocurrency, but I am curious: is Airbnb thinking about cryptocurrency?
We are definitely looking into it. Absolutely. Like the revolution in travel, there is clearly a revolution happening in crypto. Airbnb and crypto both have interesting relationships with trust. The original white paper on Bitcoin said that Bitcoin does not require trust because there is essentially a public ledger. Airbnb approached trust in a kind of similar way: we redesigned a system of trust where the reviews are the equivalent of a public trust ledger, essentially.
The founder of Coinbase was an early employee of ours. We have been following the space for quite a long time. With lots of technologies, there’s a hysteria around it. The key is when regular people understand how the new technology improved their lives, beyond the initial excitement. I’m really excited about certain applications that regular people could use to live a better daily life.
Are you thinking of accepting payment in Bitcoin to avoid currency exchanges?
At this point, this is not something that we have in the near-term plans. It is certainly something that we should be looking at. Everyone that’s handling a lot of money should be looking at this.
Holding a lot of any coin, you have a lot of volatility. One of the accounting challenges is that if you make a gain, you don’t get to realize those gains, but if you have a loss, you have to count for those losses. There are a bunch of things you have to think about if you are going to hold a lot of currency.
Here is my other buzzword question: you mentioned online/offline and how Airbnb mediates the two. You and I are speaking in the context of every other tech company in the world just saying the word “metaverse” and hoping something good happens. Is that something that you have to think about? How are you going to enable digital experiences that crossover into the real world experiences that Airbnb is currently selling?
Let me answer that question, if I may, in a kind of broad sense of the word. When Mark Zuckerberg announced the Metaverse, I think an abstraction that he said was that the internet will be three-dimensional rather than two-dimensional. I think he had a very specific vision of what that would look like. I do believe that the internet will become more immersive — there’s no question. But will the internet replace real life or just replace more two-dimensional screen time? I think, and I hope, that a more three-dimensional internet will replace a two-dimensional internet, not replace real life.
If we replace real life, then we will recreate the movie Wall-E, where everyone’s on screens, disconnected from the real world. I don’t think that’s any technologists’ vision that I’m aware of — that we never exist in the physical world. These digital experiences, to me, are gateways. There are ways for people to try Airbnb for $10 or $20. They can connect with a host without having to get on a plane and stay in someone’s home in another country. It’s a lower commitment. Generally, I like to either ride a trend or ride the opposite of a trend. The opposites of trends are always as powerful. Just to zoom out, I think we’re living in a digital revolution that clearly started decades ago.
The pandemic accelerated the adoption of lots of digitization. If you look at all the companies that did really well, they’re digital companies that are digitizing the physical world. The mall became Amazon, money is becoming crypto, hotels are becoming Airbnbs. Digital is benefiting. There is a major risk to the digital revolution: we are living in one of the loneliest periods in human history. When you take physical communities and you atomize them, they’re not always as nourishing as the physical world. No one has ever changed someone else’s mind in a YouTube comment section. When people that are different from one another interact online, they tend to argue and repel each other often and divide further.
There’s something about the lack of empathy of sitting face-to-face. The best way to change someone’s mind is to walk in their shoes — to stay in their home, go in their community. When you do that you’ll realize that it’s pretty hard to hate up close. The people you thought were “the other” are similar to you. Society spends a lot of energy, both good and bad, talking about how different and unique every one of us are, but we’re forgetting that we’re 99.9 percent the same. That’s a major risk to the world. This really exciting digital revolution that makes everything more ubiquitous, cheaper, freely accessible — it also is a major risk.
This notion of human connection and this risk of the world being isolated, lonely, and divided — if Airbnb has a reason to exist … it’s the ability for us to bring people together in the physical world from cultures all over the world. That will always be relevant so long as people are relevant in this world.
One of the big trends that you have talked about on Twitter is remote work online. Every time I see my boss Helen Havlak on a Zoom, she is in a different state. It has been a very entertaining year of talking to her. The people who are doing that remote work are not necessarily plugged into the communities. You are not selling a Republican an experience of blue New York City. You are not selling Democrats a move to a deep-red state. How do you connect the product of Airbnb — which is spending time in someone else’s house — to the actual communities those houses are located in?
That’s a great question. There is more to do. One of the great benefits of Airbnb is that behind every home is a host. A great Airbnb host brings you into the community. This is beyond the people actually living with hosts, where they’re inherently plugged into the community. Our very best hosts create guidebooks. They connect you to a local community. Sometimes they’ll even introduce you to the local coffee shop or the neighbors, people like that. Ultimately, first and foremost, it’s the job of a great host to bring you into the community and assimilate you. This is something that I’m very, very interested in: how do we continue to connect people to communities? We are truly living in a revolution in travel where more and more people are going to be flexible.
This is the world that we’re going to be designing for. We’re going to have a generation of people that are going to be less tethered to the office, be more nomadic. Twenty percent of our business by nights booked are for stays over a month or longer. The most important two criteria to connect to a community is to stay longer in the community and have people that can connect you to that local community. If we can encourage longer stays, and if we can encourage hosts to be really the connectors of the guest to the communities, those are probably two of the biggest things we can do to really make sure we’re enriching the communities, so that guests aren’t just transient. They’re not just invisible shadow members of the community. They actually are physically there. This is one of the big opportunities for Airbnb. It’s also one of the big challenges that we’re going to be focused on in the years to come.
You mention hosts as the center of the Airbnb experience. Who do you think your customer is on the platform? Is it the guests who are booking stays?
It’s the guest. We are very clear about this. We have five stakeholders: guests, hosts, employees, shareholders, and obviously the communities we operate in. Some could call it just society at large. Our hosts are not our customers, and we are very clear about that. Our hosts are our partners, so our guests are our customers. They come to Airbnb for a bunch of reasons. The number one reason a guest uses Airbnb typically is they want to live like a local. The number two reason is they want to save money. The third reason is they want to have a close proximity to something.
The guests are the customers, and our hosts are our partners. The interesting thing about having a partner is they have a customer-like relationship. We do things for them, but we also have to do things in partnership with them. We have to preview things to them. For example, we announced, yesterday, verified wi-fi speeds. We can’t do that without the host actually using the tool, so we have to make a promise to the guest that we have this feature, but we also have to educate the host. If we make a promise to the guests and the hosts don’t want to offer it, then everyone is out of luck.
What we have had to do is to deepen our connection to our host community. We created a Host Advisory Board. We created a host endowment, kind of like a college endowment. It’s worth more than a billion dollars. We do listening tours. We’re talking to hosts every single day. Our hosts are our partners, not our customers, but they have customer-like attributes, where we have to continue to deliver stuff and they have to be happy.
To just abstract that out to more basic vocabulary: the hosts are your suppliers. Your customers are the demand, correct? They are the ones who come to you. You mediate the demand between multiple sources of supply.
Just one thing about suppliers — I think that’s technically true, but when people hear the word supplier, I think what they often think of is suppliers have channels. The thing that’s unique about our supplier relationship, where the word “supplier” can throw people off, is that 90 percent of our hosts are individuals. Most would not have supplied their inventory had it not been for Airbnb. Very few cross-list. The supplier relationship with Airbnb, for example, is different than the supplier relationship on Amazon, but you are correct. Technically, it’s supply and demand. These are obviously basic laws of economics.
Yeah, that’s my question here. You have a relationship with these hosts, many of whom are individuals. You do have competitors, like VRBO and others. Do you think that hosts over time will begin to experience competition — that the platforms themselves will compete for hosts? There are only so many houses in America. At some point, you’re going to run out of inventory, and it doesn’t seem like you’re interested in pouring concrete yourself. So at what point does the leverage shift back to the supplier?
The leverage is the suppliers. Hosts have a lot of leverage. I don’t think they’re listing on Airbnb per se because we have the leverage. They’re listing on Airbnb because we have the demand. We have the tools. We provide what they want.
Let me just give you a couple stats. We have fewer hosts as a percentage of our inventory today that are cross-listed on competitors’ websites than before the pandemic began. Our inventory’s getting more exclusive over time, not less exclusive.
Now, why is this? Yes, we have competition, like everyone does. When hosts look at the choices out there, they see that only one platform is custom built for them. Only Airbnb gives, for example, $1 million of damage protection — $1 million of income loss protection. That’s just one of the things we offer. I could go down the list of many of the custom tools that we have built just for hosts. We provide the vast majority of demand for hosts. If you host on Airbnb, you can host people from 220 countries. Most of our competitors are regional competitors that only have demand in certain locations.
Our brand is a noun and a verb used all over the world. We are synonymous with this category. We created this category. We modernized this category; it was offline for the most part before Airbnb. We’re the innovators: we’ve innovated 150 upgrades this year alone, over Zoom in the midst of a pandemic, and we’re just getting started.
The answer to your question: I try to get out of bed every day knowing that our customers and our hosts have choices. Our communities have to consent to us. Our employees have a lot of other places to work. Our shareholders have a lot of other stocks to buy. We’ve got to always have the humility of knowing that every single day we have to prove ourselves. We have to be better than the day before.
If you look at what we’ve done in the last 18 months — to lose 80 percent of our business, to restructure the company, to ride this rebound, to go public in a pandemic and then make 150 upgrades and improvements — hopefully, if anyone’s evaluating our work in the last 10 years and especially the last 18 months, I hope they feel really good about the trajectory. That’s partly because we wake up knowing that we have to prove ourselves every day.
You’ve mentioned several times you’re not interested in pouring concrete, but you obviously need supply. We’re talking just about a week after Zillow had to lay off a few thousand people — 25 percent of the company — because they actually tried to get into the housing business. Zillow was trying to buy and sell homes using some algorithmically derived pricing structure. I’m just curious about your thoughts on that. Why do you think they charged into that market? Why do you think it failed so badly?
I want to preface this answer by saying that I did not follow what Zillow did very closely. One of our first investors after Y Combinator was a guy named Keith Rabois, He is a co-founder of Opendoor. I believe Opendoor’s core business was the thing that Zillow was trying to do. I know Eric Wu, the CEO of Opendoor. I know Rich Barton a little bit — he’s the CEO of Zillow, I think he’s incredibly talented. I don’t know exactly what went down. I don’t know what actually happened inside the company. I haven’t spoken to Rich. When a company moves beyond its core business, it’s got to be very careful.
We tried to get into flights and transportation. We thought that because we have a ubiquitous brand and so much traffic, why don’t we just add flights? The problem is that it’s really important for a company to understand what its capabilities are, not just what its assets are. Do you see the difference?
Our asset is a brand and traffic, but do we have a capability to actually fill seats on an airplane? That’s a whole different muscle that has nothing to do with filling people in homes. I don’t know if Zillow made this mistake or not, but a mistake commonly people do is they confuse their assets with their capabilities. Do you know how to do something? Amazon went from retail to AWS. That was not actually a crazy transition because actually retail was just giant fulfillment centers, which are massive efficiency machines. The fulfillment center server farms of AWS were not that different. They were in the efficiency and speed business.
When Apple put out the iPad and the iPhone, they were really the same platform built on iOS 10 as the computer. I think it’s really important that when you do line extensions, that you either stay within your area of capability or you acknowledge that you don’t have this capability, so you better build this capability and be an expert before you go big into it. Maybe that is a clue of what happened there. Be very careful extending beyond your core capabilities — even if you have the brand, the traffic, and the assets.
I’m assuming that you were not interested in buying homes and owning a lot of inventory before — and you’re less interested now?
Yes. That’s a safe assumption. I can say that if I ever were to get into something like that, a lesson I’ve learned is that we must become an expert in something. You have to be humble. It’s kind of like the second album problem. Your first album was successful. You don’t really know why it was successful. You kind of forgot all the hard work and all the struggling, so you think, “We’re successful. We can now do everything.”
I remember a teacher at my college said to me once, “Brian, you can do anything you want in your life, just not all at the same time.” I think a lot of tech CEOs have experienced — and I experienced a little bit of this — the little bit of hubris of thinking that because you can do one thing, you can do everything. Maybe you can do a lot of things, but certainly not at the same time. You always have to have a beginner’s mindset. As long as you stay curious, stay a beginner, try to tackle really one hard problem at a time and really understand what your capabilities are, then you might be able to stay on track.
Let’s talk about the structure of the company. I think of these as the Decoder questions because I ask everybody. You mentioned you had to restructure the company. You made a bunch of changes when the revenue went away, and then you ended up going public — all inside of a year. How was the company structured and how is it structured now?
This is a very fun topic for me. I’m very interested in this, because I’ve studied a lot of organizational structures.
Airbnb started like all companies start. They start as functional organizations. You have a marketing leader and a design leader and a product leader, engineer leader, finance, HR. Then the Andy Grove law of large organizations is that all organizations eventually become matrixes. Very few companies, when they grow, stay functional. The only large functional organization in the world is Apple, and even Apple is only quasi-functional because they have a whole services group now, which is a little bit quasi-divisional. But Apple is a functional organ; they’re an anomaly.
If you take the Fortune 500, every other company is a conglomerate or a divisional. Before the pandemic, we were divisional and we had subdivisions. We had actually 10 divisions: a homes division which had core host, pro host, business travel, luxe, plus. Then we had experiences, transportation, content, and a few other things — about 10 or 11 divisions. We were really scattered.
In hindsight, we were not so focused. Of course, you don’t know until after. It’s kind of like those movies where you think your life is great, and then the plot happens. The whole point of the movie is you realize that your life wasn’t as great as you thought and you grew from the experience.
That’s kind of what it was for us. We lost 80 percent of our business. I had to stare into the abyss. I never thought the company wouldn’t exist, but a lot of other people did. I had to stare into making some hard decisions. We had to lay off 25 percent of our employees. It was the hardest professional decision I’ve ever had to make.
We also lost about 10 percent of people that were contractors. A whole bunch of people tend to resign after a layoff because they’re like, “Okay, well, there’s not a lot of opportunities.”
So we lost almost half of our company. We had to shutter most of those divisions. We only kept the core. We kept homes and experiences. We put those under one group that we called Host.
The radical thing is we went back to a functional organization. I studied a number of other companies that were in crisis, and the most dramatic crisis I had encountered was Apple. In 1997, Apple was 90 days from bankruptcy. They were a divisional structure. Steve [Jobs] comes back. He shutters most of the divisions. The other thing Steve did is he went back to a functional org. I went to a functional org, as well, primarily out of necessity to cut costs and integrate, but something remarkable happened. When I got to a functional org, suddenly I took the very best people and I put them on one problem. Not only did we save money, we started growing faster.
The theory of a functional org is that it’s supposed to be slower. The whole point of divisional structure is that all these lieutenants are deputized to be able to make faster decisions. You’re supposed to be able to do many more things. A functional structure is, in theory, a way to slow things down. I found just the opposite. When Airbnb became a functional org, suddenly the entire company was on one roadmap. We all had the same exact priorities. There were fewer meetings. Decision-making was faster. Quality was better.
I now do design and marketing reviews every week. The main thing I do now is the two-year roadmap. We’re constantly talking about the things we’re going to ship. Most companies in Silicon Valley, as far as I can tell, are basically divisional or product group areas. They’re decentralized. They democratize data. All these people can kind of A/B experiment their way towards various optimizations.
To me, there’s a limit to working that way. Let’s use an analogy of a car. If I was designing a car and one team was iterating the tires — the tire now has to fit the wheel, but the wheel team is bigger. Then, suddenly, I now need to create a new car body, but that makes the car heavier. Now you need a bigger battery, but a bigger battery means a new factory. And now the finance team— you see, these products are all integrated at the end of the day anyway.
A customer sees one product. They see one app, not 50 little teams. The only group that’s not functional is the hosting organization. Otherwise, we’re run pretty simply. We’re a functional org with a multi-year roadmap. It keeps priorities really simple. I probably do 15 hours a week of design and marketing reviews, so I try to make sure I can constantly unblock people. It’s inherently a very creative organization again.
I went to the Rhode Island School of Design. There’s not a lot of companies our size run by designers and creatives. The primary thing a creative company wants is to run off a calendar. Metrics are secondary. Most companies run off metrics, and the calendar is secondary, but the way you do work is you have deadlines. We have two launches a year. One of them was yesterday. We design software a little bit like hardware. One of the challenges is, software was supposed to be much better than hardware because there was ubiquitous data. When you ship hardware, you don’t know how people are using your products. With software, everything’s trackable. There’s ubiquitous data. You can ship continuously every minute of every day.
The problem with software is the lack of constraints means that sometimes the software becomes a free-for-all: you open an app and it looks no different than the year before because it’s not a cohesive story. The way we run is totally integrated. It’s a little more like hardware. We do these releases, we do continuous integration, A/B experimentation between, but I try to take the best of hardware and software. Marketing and engineering are totally integrated. At most software companies, marketers are like waiters. They can’t go in the kitchen. The chefs yell at them. We try to just take a different approach. That’s how we do it: totally integrated, totally functional, pretty creative.
A lot of people think this is a slower way to run a company that will stifle innovation. Our experience this year, certainly since the pandemic, has been just the opposite: 150 upgrades doing it this way.
How big is Airbnb now?
We have 4,800 employees and we have a captive call center of 1,200 people, so it depends on how you want to define it, but it’s around 5,000.
More specifically, how many people report to you?
I think I have eight or nine. I have finance and legal, and we’re between HR leaders. I have an operations person, a marketing and design person. I have a hosting organization leader, a technology leader, comms and policy. So that’s seven. Then I have two co-founders, Joe [Gebbia] and Nate [Blecharchzyk]. That makes nine.
It’s a good exercise. Sometimes I can’t remember who my direct reports are.
I have to actually rattle them off.
I appreciate that you can do it. One of the things about The Verge is that we’re effectively a functional organization inside of a larger matrix company, but we ship one product. We ship stories on a website over and over again. We ship some videos on video players. We ship podcasts. Even inside of my own little org, I have editors. One of the ways you keep great people is you give them autonomy. You say, “There is a set of decisions you can make, and there is a set of goals you can achieve. We’re just not going to micromanage you.” How do you balance that? How do you bring people in? At some point, with every big tech company, a Google or a Facebook is full of very powerful executives who desire autonomy. To retain them, those executives have to get more and more autonomy. So how do you balance that trade-off?
I wonder, when people listen to this podcast, if they’re going to hear a bunch of unconventional views that I have. I’m going to give you another one, because I’m realizing I’m continually going against the grain. I don’t really believe in that principle. I don’t believe that the way to empower people is to give them autonomy. I tried that for 10 years. I kept trying to give people more and more autonomy.
What happened was control is not zero sum. There’s a way where everyone can be autonomous and no one can be empowered, because in an autonomous organization, you are only as good as the number of resources you have and the collaboration you have from other teams. So a team can be autonomous, but if they can’t get on the payments roadmap, they can’t ship anything.
What I decided is we are not going to have autonomous leaders. We’re going to be totally integrated. No one’s going to succeed at Airbnb without collaborating with other people. There’s this age-old truism, like, “Great leadership is hiring people and giving them operating room and” — I’m going to use the word pejoratively — “empowering them to do their jobs.” I don’t think that is good leadership at all.
Leadership number one: you have to audit the details. If I’m a CEO, my board empowers me, but they still audit me. How do you know your team is doing a good job if you’re not auditing them? That is, to me, the first expectation of a leader. More importantly, I think there’s another side of the coin than micromanaging, because I don’t think anyone wants to be micromanaged. I think of myself as partnering with my executives. I think of it as a creative organization where they’re not autonomous, but they’re in conversation with me. I don’t push decision-making down the organization. I pull decision-making in. I try to pull as many decisions into me as possible, like an orchestra conductor. I try to not have all the ideas or make all the decisions, but be in a constant conversation with my executive team about the decisions.
What I found is that my executives have felt more empowered than when they were more autonomous, because they’re not as much an island. Now they have the resources of the entire company behind them. There are certain personalities who want to do their own thing. They want to be CEOs and don’t want to be in an integrated collaborative organization, and that’s fine. Airbnb and a functional org might not be for them.
The notion that this way of working doesn’t empower people and doesn’t allow them to do as much is not true. Control is not zero sum. There is a scenario where everyone can have more control. There is also a scenario where everyone can be more powerless. I think that’s a very important thing to distinguish.
You mentioned your design background, but we’ve also talked about things like cryptocurrency, depreciation risk. CEOs can basically pick a job. You can be a financial engineering wizard. You can be a product person. You can focus on what color the logo is all day and night. What is your split? Where do you spend most of your time? Where do you want to spend most of your time?
That’s a great question. Because we’re more functional and more integrated, I don’t have per se two or three focus areas. I’m connected to every part of the company. If we’re launching a new product, I see myself as the orchestra conductor. I’m not a specialist, but I have to understand every instrument and every part of the sound — how it all works.
The areas that I’m particularly focused on are product design. If I had a job at a large corporation, I would probably be either a designer, a marketer, or a product marketer. I spend a lot of time on design and product marketing, product management, and marketing communication. I use those terms interchangeably. That’s probably my big area. I spend quite a lot of time on people, talent, and hiring.
The third bucket is telling the Airbnb story. I don’t mean the same old story over and over again. It’s a continuous story that evolves every single minute of every single day. I’m probably a little more hands-on than the average CEO because of the way I’ve chosen to run the company. When things are functional, they all kind of roll up to you. I do focus more on product, design, culture.
When you’re working out the mechanics of taking payments in 200-plus countries, what kinds of decisions have to come to you? What kind of decisions do you let be delegated away?
The areas that I’m less involved in — we talked about a technology stack, like application layer, to the kind of atomic components, or the processor chips. The same thing is true in a company. I’m kind of more in the top half of the layer. The financial accounting, the technology infrastructure, the data warehouse, and the hardcore underlying payments to infrastructure, I’m not as involved in.
I would consider that below the operating system of the company. That’s considered like the microprocessor, the graphics card — the very bottom of the stack. I’m involved in payments at the consumer and host level: what do we want to be able to offer in which countries, and what are the benefits?
I don’t micromanage. I trust the team understands the trade-offs and is able to deliver. I’m pretty involved in trying to understand what new benefits we want to be able to deliver to guests and hosts from a payment standpoint, but payments is highly technical. I try to not go too far into the stack.
I would feel the same way. Airbnb rolled out a new logo several years ago. I can imagine you spent a lot of time in the weeds on that logo.
Absolutely. I spent a lot of time on that logo. We had this great firm called DesignStudio that designed it. But the fun fact about that logo is the last person to pen it was actually Jony Ive, who now works with me. He actually was the one to refine that identity.
I spent a lot of time thinking about branding, design. One of my favorite architects is Frank Lloyd Wright. I like to reference architecture because when I say design, most people think that I’m referring to the color of a button or the logo — in other words, the way something looks.
Most people think that architecture is more than just how a building looks. It’s how a building works. That’s the kind of world I come from. I was an industrial designer. Design is not just how something looks, it’s how something fundamentally works.
Design thinking can be applied to every part of the company. I do care about the aesthetics of things and the story of things. But more than just the aesthetics, I care about how the things work, how they assemble. I wrote 14,000 words of the [SEC] S-1 [filing] myself, not because I want to micromanage and write everything, but because I wanted to create an archetype, or a Bible, of clear, first-principle thinking of who we were. I try to be very hands-on in key moments to make sure everything is organized in design. I also intend to let go over time. What I’m trying to do is teach a certain level of design thinking: simplicity and excellence of every detail. Then, hopefully, over time the organization learns it and builds that muscle themselves.
Next month will be a year since Airbnb became a public company. You’ve talked a lot about how you think about running the company and how it’s organized. How has being a public company CEO changed how you operate Airbnb?
It’s not changed too much. A lot of people told me that running a public company is really hard. I don’t want to diminish how hard it is, but I got to tell you: running a large private company feels harder because when you’re large and private, you have to run like a public company. We had a board, an audit committee, and public market investors. They were marking us to market every quarter, but it was actually worse than being a public company. Our financials kept leaking without our terms. We couldn’t even talk about our financials, so people were drawing wrong conclusions. When you’re big and private, I think there’s an assumption that you’re kind of hiding something. There’s this never-ending appetite to try to gather more and more information about the company.
The moment our S-1 was published and we put all the information out, the trust in the company increased because there was inherently more institutional transparency. We already had Fidelity, T. Rowe Price, Morgan Stanley, and a lot of institutional investors already in the stock. The big change when we went public is that suddenly the people could buy the stock. The day we went public, I think 600,000 people tried to buy our stock. That’s probably one of the primary reasons our stock price popped.
To answer your question: it’s not changed very much because I was running the company like a public company before. It’s certainly institutionalized a little more discipline and a little more rhythm. The pandemic institutionalized even more discipline. For anyone that says that running a public company is hard, I’d say: yeah, it’s hard, but what’s harder is running a travel company in the middle of a pandemic. That was significantly harder.
Fair enough. You brought up Jony Ive. This was the first question I wanted to ask you: Jony and his partners just made public their new design agency, LoveFrom. LoveFrom announced that it was going to be working with Airbnb. What is that partnership like? What is Jony Ive doing at Airbnb? What do you expect to develop and release?
It’s been an incredible partnership, as you can imagine. Let me preface all this by saying that the work I’m doing with Jony — we don’t have the same level of secrecy that Apple does, but we’re not going to open-source the design process to the world to have them follow along. I’m excited to surprise people with what we’re doing together, but I’ll try to give you something.
Most people know Jony Ive as an industrial designer, as making physical things made out of aluminum and glass. But I’m an industrial designer, I never got very far; I’m not Jony Ive. I got about two years of experience and then I moved on, so I wasn’t a very good industrial designer. But it’s notable that I’m probably one of the only designers running a tech company as large as ours.
Had I been a graphic designer instead of an industrial designer, I may not have had as many skills to run a tech company. I don’t want to disparage graphic design; it’s amazing, but industrial design is a very end-to-end way of thinking. If an architect designs a building and the building doesn’t get leased, that’s not really the architect’s fault. They’re not really worried. But if a designer designs a product that doesn’t sell, it’s kind of on the designer. You didn’t do a good job.
Suddenly an industrial designer has to worry about cost, manufacturing, marketing, and strategy. You have to put yourself in the shoes of the user and understand how they’re going to use it.
The answer to your question: Jony and I are working together on thinking through the entire Airbnb design and ecosystem — the system of trust, the reviews, the profiles, the payments, how the whole thing works together. Jony also ran all software design for the last six, seven years at Apple.
We are looking at designing some updated paradigm of trust. Maybe that’s the extent of what I should probably talk about with our partnership, but I do think that people will be pretty excited about some of the things that we’re going to be shipping together.
Does that relationship sit over the top of your design organization? Does it sit next to you? Are they embedded in your design organization?
It’s integrated. I would actually say we have four creative groups at Airbnb. Three are inside, one’s outside. So we have our design department, most companies have a design department. And we have two incredible VPs of design. And, they report to Hiroki [Asai] who was actually the creative director at Apple, reported to Steve Jobs. That’s one group.
Then we basically have our own version of like our own mini Wieden Kennedy [a marketing and advertising firm] inside of Airbnb. We don’t use agencies very often, so we built our own group. And then we have Jony’s group. His group is not solely dedicated to Airbnb. They have some other clients, but we’re one of their primary clients. They do software design and they do a lot of system thinking.
They collaborate with that core design team. And then we have another creative group that’s really iterating the offline experience. I hired the former head of Disney Imagineering, Bruce Vaughn, who led the redesign of California Adventure. He worked on Star Wars Land. And so we have these different groups. So the answer to your question, Jony sits outside of Airbnb, and he collaborates with the other three groups that I just mentioned.
When should we expect to see the outcome of some of Jony’s work?
Certainly by 2023. You might see some stuff earlier, but we’re thinking of some pretty big stuff. We’ll have to see. Certainly by 2023. There might be some stuff next year.
Alright. We’ll have you back when that happens. With Jony, it will be a fun conversation.
There’s another group of people who are very interested in how things work and how experiences go: the folks who run cities. Airbnb was a very classic fast-moving “Don’t worry about the regulators” company for a long time.
Now you’re a big company. You have a lot of inventory. Travel is changing. People are going to places for longer periods of time to work. That is changing cities in real and meaningful ways. Our producer Creighton noted to me that the last time he was in Rome, some of the neighborhoods were just all tourists in Airbnbs, and very few locals.
When was this? Was this recently or before the pandemic?
Creighton tells me that was 2016. Maybe things have changed now, but I have certainly seen that in New York City: Airbnb has changed various neighborhoods in that town. Now, where I live in upstate New York, I know a lot of people who are just buying housing stock here and renting it to tourists. How do you see that dynamic playing out as you grow the platform — as more people are committing to a more nomadic life? What is the push and pull between cities and where people live? How do you manage the regulatory relationship?
Such a good question. When we started Airbnb, we were very host-centric, very guest-centric, but I don’t think we were fully cognizant of another stakeholder, which was the communities we operate in. One of the challenges that we had— I want to just step back for a second. I came to Silicon Valley in October 2007. At that time, Twitter was a way to say you’re drinking a milkshake. YouTube was cat videos and Facebook was a way to keep in touch with your college friends. In other words, technology was seemingly innocent.
The iPhone had just come out. We didn’t know the effects of the mobile revolution yet, so the word technology might as well have been a dictionary definition for the word “good.” We thought that way as well. Therefore, since what you’re doing is good, your growth makes the world, quote end quote, “a better place.”
More than a decade later we’ve all acknowledged that that was a very limited way of thinking. Technology companies have significantly greater responsibility to society than we probably thought we did in the mid-2000s. There’s no way to build a platform with hundreds of millions of people where only good things happen. That’s not even possible. The first step is to acknowledge that reality: to acknowledge that good and bad things happen on platforms when you empower people, because people are allowed to make their own decisions.
I fortunately got a lesson on this probably earlier than other tech companies. Most tech companies don’t get scrutiny until they’re big. I don’t remember Amazon getting scrutiny when they were small.
We got scrutiny when we were small because Airbnb meant the internet moving into your neighborhood. In 2010, when I was working out of a two-bedroom apartment — that was the first time that we had major challenges with regulators in the city of New York. That really got embedded. I didn’t know what to do with cities. I thought when people don’t like you, you should avoid them; that was the way I lived my life. I hired my first executive: Belinda Johnson. She’s now on my board.
She told me a different lesson. She said, “When people don’t like you, you should meet them.” I said, “Why would I meet people who don’t like me?” She said, “Because you’ll learn from them. You can educate them. You’ll understand their issues. And you’ll leave them being better off than you started.” She said, “It’s hard to hate people up close,” so that’s what we started doing.
I think that we chose a slightly different path than some of the tech companies that we’re compared to. I don’t want to say we’re perfect. We did have challenges with cities, but I will say this: even before the pandemic, we had agreements with more than 1,000 jurisdictions. We’ve collected and remitted $3.4 billion of hotel tax. We’re soon to be the largest collector of hotel tax in the world. I hope that most cities say that we are good partners. We’re in 100,000 cities. Most of them aren’t complaining.
That being said, I want to acknowledge something: if I could have done Airbnb all over again, I would’ve designed Airbnb with more stakeholders in mind, including communities. I was 26. I didn’t really understand some of the things I understand today. When you’re behind, it takes a while to catch up.
What the pandemic did was reset relationships with our cities. Let’s take Rome for example: there were a lot of people going to Rome before the pandemic. Suddenly business travel gets cut off, borders close, international tourists stop traveling. We lost 30 to 35 years of international cross-border tourism in a single year at equivalent growth. We went back to like the early ‘80s or late ‘70s from international tourism.
Suddenly, cities that were experiencing over-tourism were starting to experience under-tourism. You can look at what was happening with Greece and Italy. Some people liked it, but there were some pretty big economic challenges. Cities started reaching out to us saying, “Hey, can you help us with this problem?” We had a bit of a reset with these cities, so we said, “Yes, of course.” We launched this tool called the City Portal, which allows a one-stop shop for cities to get data about Airbnb and make sure hosts are complying with registrations.
We’re working really hard to be able to do that kind of stuff. We have partnerships with over 100 destination marketing organizations. The big trend now is that many cities are seeing Airbnb as more of an inevitable solution to their challenges. But I want to say that we’re not perfect: I don’t think any tech CEO should ever come on this program and say they’re inherently making the world a better place.
We have to acknowledge that there’s unintended consequences with the products we’re making and that we have to institutionalize our intentions to serve multiple stakeholders. I work really hard with our team to try to make sure we’re having positive impacts on communities. We’ll make hard decisions when we have to.
Fundamentally, I think our relationship with cities is going to change because we’re going to live in a world where people aren’t as tethered to one location. To me, the holy grail solution is two ideas: number one, I don’t think there is such a thing inherently as too much tourism in the world. Over-tourism is too many people going to too few places at the exact same time. That’s bad. What we should do instead is redistribute people over more days of the week, more times of the year, in more cities.
That’s why on Airbnb, we have this big button: “I’m flexible.” What we’re trying to do is point demand to where we have supply and not overwhelm any one city. That button has been used 500 million times. My vision for travel is that suddenly cities that want tourism get tourism, while cities that don’t want tourism don’t get it. We are able to work with cities to point demand to places that want it.
The second thing is when people do travel on Airbnb, one of the big focuses is I want them to feel like actual members of the community. That is where I’m really focused on with our product roadmap: integrating people to the community, being good neighbors, being good partners. If there’s ever a problem, you can call Airbnb. We have a neighborhood hotline. We banned party houses. We are trying to just be very, very aggressive with these things.
This is where we are with cities. It’s going to be a very long journey and hopefully each year cities feel a little better about us than the year before.
New York City from the beginning has been sort of a challenge for Airbnb. You only just recently came to an agreement with the city in the middle of COVID. Do you think the pandemic changed the dynamic of negotiating with these big cities?
A hundred percent. It changed the situation with cities all over the world. Yes. Again, the reason why is because when cities used to reach out to us, it was because they had a concern. After the pandemic, cities actually reached out to us for help.
I’m not saying every city did, but the whole nature of the relationship changed. I tried to be proactive. At the depth of the pandemic, when cities were hurting, I tried to deputize as many people on my team to reach out to cities saying, “We’re here to help. We want to be a solution. We want you to know that we think we’ve learned from our challenges, and tell us how we can be better partners.”
I saw the pandemic as a giant reset button with many cities around the world. And I said, “The time to reestablish relationships with some of these cities is before we need something from them, and maybe when they need something from us.” I do think the relationships are a lot better with cities all over the world. Again, travel is being redistributed and that is also helping as well.
I want to end there, but you mentioned Jony and his work on reviews and comments. You mentioned community. I seem to ask every tech CEO about content moderation and policies. You regulate the Airbnb community. There are people you don’t want as guests in the properties that you have hosts for. How do you think about that problem? That problem touches every app where lots of people use it for all kinds of reasons. Do you have a big moderation function? Do you have a big review function? Is that something you spend a lot of time thinking about? Is that a product solution? How does that work?
Yeah. Probably before other companies were thinking about this, we were thinking about it. Many years ago, before 2011, I met eBay founder Pierre Omidyar and Craigslist founder Craig Newmark. Their view is that the internet is like an immune system and if you just give people the tools, they will moderate themselves. I learned the hard way early on that that is a very limited way of thinking about the internet.
In 2011, a woman’s home was trashed and I said, “Well, the host can leave a bad review on the guest.” The people on the internet did not think that was the right answer. I got an initial outrage on Twitter.
I said, “This is a wake-up call. We need to take much more responsibility. We can’t just think of the internet as an immune system because no one wants to be the experiment. No one wants to be the test subject.” We got significantly more hands-on in 2011.
In 2016, two other things happened. There was a hashtag trending that was extremely concerning to us. That hashtag was #airbnbwhileblack. Black people in the United States were experiencing discrimination on the platform. They were trying to book homes and they’re being discriminated against. Suddenly this was an existential crisis to Airbnb. We started working with civil rights leaders and we got really hands-on with that. We created a community commitment.
To use Airbnb, you have to click a button: it’s really an honor code saying that you’re not going to discriminate against people based on race, religion, orientation. Over a million people refused to click that button. We removed them from the platform.
Then later, I think it was in 2016 — I don’t know if my dates are correct — we got notice that there was going to be a major rally with a lot of white nationalists in a town called Charlottesville, Virginia. We banned a number of people that we deemed to be white nationalists. This was a kind of one-off move, but since then we’ve actually been fairly prescriptive about doing this. After the January 6th insurrection, we actually banned any reservations during the inauguration week in DC and still paid out hosts all their pending reservations.
All of this is just to say that we’ve been pretty hands-on for a decade and getting increasingly hands-on about content moderation. The reason why is because when it’s Airbnb, people’s personal safety is on the line. We could not screw around with this. We’ve been pretty hands-on and I think the trend is continually getting more hands-on.
Does that team live in your policy shop? Does it live in your product organization? I ask because Facebook’s team famously lives in its policy shop. Neal Mohan from YouTube said their content regulation team lives under the product team, which is really fascinating.
Ours lives under trust and safety, which is where we think it belongs. We have a team called the user knowledge operations team that is part of trust and safety. The trust and safety team is the team that makes sure that people are safe and that they’re using the product properly. The trust and safety team, by the way, is a product and operations team. It’s got engineers, product managers, designers, and operations. I’d say it’s half-product, half-operations.
Last question. You’ve given me a lot of time. I feel like the conventional wisdom for Airbnb, even before the pandemic, was that all people wanted from travel was experiences: curating Instagram moments, traveling to a place to take pictures. Airbnb was actually selling and curating experiences — that was the buzzword of the whole industry. Throughout this conversation, you’ve been telling me something else is happening — that travel is actually changing in some other deeply meaningful way. What do you think that is?
I think that we’re living in a revolution for travel. I’ll explain why. For centuries, people were tethered to where they worked: whether it was the farm, then the factory, then the office. If you work on a farm or in a factory, you’re still tethered — but for tens of millions of people in the United States and hundreds of millions of people around the world who work in an office, what the pandemic taught us is that you can get a lot of work done from home. Because of technology like Zoom, we’re going to live in a world with permanent flexibility.
The CEOs of Ford, PWC, Amazon, Procter and Gamble — these are not small companies — have all announced permanent flexible policies for a significant portion of their workforce. I don’t think the majority of the world is going back to the office five days a week because CEOs will learn they can save money. They can hire a more diverse talent pool. After compensation, flexibility will be the most important benefit for employees.
Remote work is here to stay. If Zoom allows you to work from home, then Airbnb allows you to work from any home. People now can travel anytime. They can travel anywhere. I don’t mean everyone — when all the people who are untethered do travel, they can stay longer. What I think this is going to lead is to a newfound flexibility where people cannot just travel on Airbnb — they can now live on Airbnb.
Twenty percent of our business, our fastest growing segment, are for stays longer than a month. We’re not just in the business of traveling: we’re now in the business of living. Traveling and living is part of Airbnb. That’s why being part of the community is so important. This is all before borders really reopen. Once borders reopen and people have flexibility, they won’t just live anywhere around the country. You’re going to see more and more people live around the world. This is going to create a whole revolution in travel, probably the biggest change of travel since the invention of the internet, possibly the biggest change of travel since the invention of the airplane. It just totally changes the identity of what travel is.
That being said, I do think experiences are really important. One challenge we’ve had is that, because of the pandemic, it’s not been historically safe for strangers to gather and have experiences together, but the more we live on screens, the more I think we also want to live on a countertrend. I don’t think all of us want to recreate the movie Wall-E, where we’re basically just on these self-driving pods staring at screens all day.
We also want to have real-life experience in the real world. You can only watch so many shows on Netflix; eventually you’ve got to get out of the house. If people don’t get out of the house, you’re going to have a pretty big mental health crisis and a lot of loneliness, a lot of isolation, and a lot of division. The number one thing that we’re thinking about is this changing way of traveling. The longer you’re away from a home, the more you want to be in a home on Airbnb. I also am very excited about the experiential opportunities going forward. I think in the coming years, you’ll see some exciting stuff from us in that front as well.
Do you think that that is a trend that lasts forever? Or is this a transient post-pandemic state — everyone’s going to run around and see people for a bit and then we’re all going to have kids and settle down?
People with kids aren’t going to be nomadic year-round because their kids have to go to school. I do think that schooling will primarily still be in person. I’m not an expert in education, but that seems inevitable. In the United States, the average kid goes to school 180 days a year. That means that 185 days a year, the kids aren’t in school. Funnily enough, in the United States, the fastest-growing days of the week to travel for families are Mondays and Tuesdays. When kids don’t have to be in school, parents are going away. You’re going to see more and more families going away for summers. If you can work remotely and your kids are out of school, summer is going to turn the world upside down because people aren’t going to be around.
If people don’t have kids, many of those people will be significantly more mobile. You’re going to see a whole generation of people being nomadic, maybe even at a global level. To answer your question: I don’t think the world’s going back to 2019 any more than the world’s going back to 1950. The genie is out of the bottle. We can’t undo technological progress. This moment, at this conversation right now, is the worst technology will ever be in our lifetime. The internet’s going to be more ubiquitous. Satellite internet speeds are going to go up. Camera technology will improve. Screen technology will improve. It’s going to become more immersive. I don’t think this is a temporary thing. Zoom is here to stay. Many of these trends are here to stay.
Alright, Brian. That’s a great place to end it. Thank you so much for coming on Decoder.
Thank you very much.
Decoder with Nilay Patel