20VC Dick Costolo on The Balance of Vision and Realism in Startups, The Biggest Challenge in Scaling Twitter & How To Optimise Decision Making Internally

In this episode of the 20 Minutes VC, host Harry Stebbings interviews entrepreneur Dick Costolo, former CEO of Twitter and co-founder of Chorus, a startup reshaping personal fitness. Costolo shares insights from his diverse career, starting with his computer science background and foray into improv comedy, which he credits with developing his improvisational skills crucial for entrepreneurship. He discusses the importance of culture and operational dynamics in scaling a global company, the necessity of resilience and mental toughness for CEOs, and the value of mentorship. Costolo also emphasizes the need for optimism balanced with honesty within a startup and advises new CEOs that the entrepreneurial journey is perpetually challenging. He reflects on board management during Twitter's growth and the transition back to startup life with Chorus, underscoring his passion for supporting other entrepreneurs and CEOs.

• Harry Stebbings expresses gratitude to Dick Costolo for inspiring him to pursue his dream.
• Dick Costolo is introduced as a key figure in tech, with roles such as CEO of Twitter and cofounder of Chorus.
• Dick Costolo's background includes being a mentor at Index Ventures and involvement in startups like Feedburner.
• Costolo has also contributed to HBO's Silicon Valley and sits on the board of Patreon.
• Acknowledgment of Julia Hartz for introducing Harry to Dick Costolo.
• Mention of Cooley, a global law firm, and Zoom, a video and web conferencing service.

"Now today's guest has a very special place in my heart. As fun fact, it was his commencement speech at Michigan that gave me the courage to follow my dreams, leave law school, and do the 20 minutes VC full time, which for that I will obviously be eternally grateful."

This quote highlights the significant impact Dick Costolo had on Harry Stebbings' career decision.

• Dick Costolo grew up in Detroit with a family background in the auto industry.
• He was introduced to computers early on by his father, a computer scientist.
• Costolo started coding at around 12-13 years old and pursued a computer science degree in university.
• During his last year at university, he began doing stand-up comedy and took acting classes, which led to an interest in improv comedy.
• After graduating, he chose to pursue improv comedy in Chicago instead of a career in computer science.

"I grew up in Detroit. Almost all my family is in the auto industry, so born and raised in Detroit, spent all my childhood there."

This quote provides background information on Dick Costolo's upbringing and family environment.

• The combination of stand-up comedy and acting classes sparked Costolo's interest in performing arts.
• Costolo found he was good at improvisation and enjoyed the thrill of performing without a script.
• He realized that if he didn't pursue comedy immediately after graduation, he might never do it.
• After unsuccessful auditions, including one for Saturday Night Live, he returned to his computer science roots in the late '80s.
• Costolo started his own company when the internet began to take off in the early '90s and has been an entrepreneur since.

"I just sort of learned via the acting classes and doing stand up that I was good at, that I was a good improviser, that I was quick on my feet, that it was fun, that it was exciting, it was theater without a net."

This quote explains Costolo's discovery of his talent and passion for improvisation and stand-up comedy.

• The empty stage is a fundamental aspect of improvisation, representing the starting point for creativity.
• Costolo relates an acting class experience with an empty stage to the concept of improvisation in comedy.

"When you're improvising, you're always presented with an empty stage. I mean, that's all you have when you're improvising."

This quote emphasizes the concept of starting with nothing and creating something in the moment, which is central to improvisational theater.

• Starting a company is likened to improvisation on a stage with only two real chairs and everything else made up on the spot.
• Entrepreneurs must make up everything as they go, starting without a base, strategy, team, or any pre-existing elements.
• Improvisation teaches valuable lessons for entrepreneurship, such as trusting one's instincts and running with the first idea.
• Entrepreneurs often face second-guessing and doubt, both internally and from others.
• The ability to block out negativity and focus on one's vision is crucial to pushing forward.
• Dick Costolo uses the metaphor of improvisation to describe the entrepreneurial experience and highlights the importance of resilience and instinct.

"You're given the blank slate, and you got to make it up as you go. You have to make up everything as you go. There's nothing there."

This quote encapsulates the essence of entrepreneurship as a creative and spontaneous process, similar to improvisational theater, where one must start from scratch and rely on ingenuity.

"Things like, you just have to run with whatever you've got to go on, whatever your first idea is, whatever your instincts are, run with those."

The quote emphasizes the importance of trusting one's initial ideas and instincts in the uncertain journey of starting a business, akin to improvising on stage.

• Entrepreneurs should be optimists and pursue their vision with a heavy dose of positivity.
• Honesty and self-awareness are necessary to balance optimism and ensure that the team is not blindly following a flawed vision.
• Startups must learn quickly and avoid turning their vision into unquestionable dogma.
• Encouraging questioning and interrogation of the "North Star" helps in getting closer to the truth and making better decisions.
• Dick Costolo discusses the importance of optimism tempered with truth and open questioning within a startup environment.

"I think for an entrepreneur you have to overweight optimism and pursuit of the vision."

This quote suggests that entrepreneurs should lean more towards optimism and the pursuit of their vision while also being cognizant of reality.

"We always have to be able to tell each other the truth, and we always have to be able to interrogate what we believe to be true."

Costolo underscores the importance of honesty and critical thinking within a team to ensure that their guiding principles and goals are grounded in reality.

• Managers should create conditions for success rather than imposing strict metrics.
• Ownership of decisions and metrics should be delegated to the team to foster creativity and responsibility.
• Teams should be held accountable for their own proposed solutions, not for arbitrary targets set by management.
• This approach to accountability encourages proactive problem-solving and reduces fear of failure.
• Dick Costolo reflects on his experience with culture building at Twitter and Chorus, emphasizing the importance of empowering teams.

"Your job is to create and set the conditions for success."

The quote highlights a manager's role in fostering an environment where teams can thrive and be successful through their own initiatives.

"They're probably going to be aggressive and creative, and then it's easy to hold them accountable to the solution they've proposed."

Costolo explains that when teams have ownership over their solutions, they are more likely to be innovative and will naturally take responsibility for the outcomes.

• Entrepreneurs and CEOs must have the ability to compartmentalize to manage constant pressures and challenges.
• Focusing on the highest leverage activities is essential, while being aware of but setting aside other issues.
• This compartmentalization is sometimes misunderstood as indifference, but it is a necessary coping mechanism in high-stress positions.
• Dick Costolo discusses his personal method of dealing with intense pressure and stress, which involves prioritizing and compartmentalizing issues.

"I have maybe a sociopathic ability to compartmentalize. I really have to."

Costolo candidly shares his personal strategy for handling the multitude of challenges that come with leading a company, which involves separating and prioritizing concerns.

"You have to choose what you're going to focus on. Focus on those couple of things that are the highest leverage, things you can be focusing on right now, and really block everything else out."

This quote advises on the importance of prioritization and focus for effective leadership and stress management, suggesting that not all problems can be addressed simultaneously.

• Transition from early-stage investor board to a more governance-focused board was necessary as Twitter became a global company.
• Early board consisted of early-stage investors and founders, EV and Jack.
• Introduction of independent directors was a strategic move to enhance governance.
• Transition involved replacing early investors with experienced global operators like David Rosenblatt (ex-CEO of DoubleClick) and Peter Chernon (ex-COO of Newscore).
• The new board members brought valuable experience in scaling organizations to large sizes, which was beneficial for Twitter's growth.

Well, when I took over as CEO in 2010, we had a board that was composed mostly, maybe entirely, of early stage investors and the two founders, EV and Jack, of course, who remain on the board today. And we needed to transition that board from an early stage investor board as we became a global company in 2011 to a board of more independent directors.

This quote explains the composition of Twitter's board when Dick Costolo became CEO and the need for transition to a governance-focused board as the company expanded globally.

• Scaling a global company involves ensuring that all offices operate cohesively with the headquarters.
• Common mistake is assuming international offices understand the priorities and culture without explicit guidance.
• Strategy involved sending leadership team members from San Francisco to international offices to establish culture and operating dynamics.
• This approach ensured consistency in culture and operations as Twitter scaled globally.

I think the biggest challenge is making sure, particularly as you scale globally, that the other offices around the world are operating and functioning the way that you have gotten headquarters to operate and function.

Dick Costolo emphasizes the importance of aligning global offices with the headquarters' operations and culture to ensure a coherent global scaling process.

• Disagrees with the notion that people are destined for specific stages of a company's lifecycle.
• Believes people can adapt and transition between roles in large companies and startups effectively.
• Looks for early employees who are willing to wear multiple hats and not be confined to one functional role.
• Flexibility and adaptability are key traits sought in early-stage startup employees.

No, I don't agree with that thesis. I think that people surprise you and people who were in very specific functional roles in company X when it was 10,000 people can jump into a startup and be what I would call a stem cell and play multiple roles and wear multiple hats and then switch back into specific functional roles.

Dick Costolo expresses his view that individuals have the capacity to adapt to different company stages and roles, challenging the idea that people are suited only for certain phases of a company's growth.

• Dick Costolo's recommended business book for a Christmas present is "Creativity, Inc." by Ed Catmull.
• A good venture capitalist (VC) has ample capital to invest and is helpful in areas like recruiting without giving unsolicited product advice.
• Mentors played a significant role for Dick; he learned calmness and thoughtfulness from Susan Wojcicki at Google.

Creativity, Inc. By Ed Catmol about the entire story of founding and running Pixar. I think it has become probably one of the best books on leadership out there.

Dick Costolo recommends "Creativity, Inc." as a valuable book on leadership, reflecting his appreciation for the insights it provides on managing and leading a creative organization.

Good vcs have a lot more capital to invest. I think know great investors are helpful when you ask them to be helpful and need them to be helpful, and they dig in and roll up their sleeves with things like recruiting, particularly in areas like recruiting or another area where a CEO may need help.

This quote highlights Dick Costolo's perspective on what differentiates a good VC from an average one, emphasizing the importance of being supportive, particularly in critical areas like recruiting.

• Leaders are constantly observed by their team for cues on how to react in various situations.
• Maintaining a consistent, calm, and thoughtful demeanor can reassure and stabilize a team, regardless of external pressures.
• Managers should be aware of the influence their behavior has on their employees.

"Your people are always watching you and they're always looking for cues, physical cues, emotional cues, language cues from you as the sort of stress signals. Is Dick stressed out? If Dick's stressed out, we should be stressed out."

This quote emphasizes the importance of a leader's composure in the workplace. Employees often look to their leaders for guidance on how to react emotionally and professionally to different situations.

• Young professionals should focus on pursuing what they are excited about rather than following a predetermined script.
• Engaging in work that is personally meaningful leads to greater resilience when challenges arise.
• It is often not possible to predict the impact of one's work until after it has occurred.

"You have to be doing things that you want to be doing and are excited about doing, because when things go wrong, as they inevitably will, in that case as well, you'll be resilient, because this is what you wanted to spend your time doing."

This quote advises young professionals to pursue their passions rather than a prescribed path, highlighting that personal investment in one's work fosters resilience in the face of adversity.

• Silicon Valley often perpetuates the myth of entrepreneurial superheroes with unique abilities.
• In reality, everyone has strengths and weaknesses, and success can be achieved in many different ways.
• Emulating another's path to success is not universally applicable.

"The reality is that all of us have a few superpowers, and all of us have a few probably super weaknesses, and there's much less difference between those we mythologize, those we hold up as heroes and everybody else."

This quote challenges the common misconception of the entrepreneurial superhero, suggesting that everyone has unique strengths and weaknesses, and that success does not require extraordinary abilities.

• Self-awareness of personal attributes is crucial for personal development.
• Acknowledging one's strengths and weaknesses can help in setting realistic goals and expectations.

"I think I have mental toughness and resilience. If I had to pick one thing I try to spend time on and think about a lot, it's those two things. My weaknesses are many. I have no willpower."

This quote reflects on personal strengths such as mental toughness and resilience while also recognizing areas for improvement, such as willpower.

• Aspiring to assist other entrepreneurs and CEOs, particularly those who are new to their roles.
• There is a desire to counteract the bad advice often given based on success biases.
• Involvement in mentoring and board positions is a way to contribute to the success of others.

"I would like to spend more time helping lots of younger CEOs and entrepreneurs who are doing it for the first time."

This quote indicates a future focus on supporting emerging business leaders, aiming to provide guidance based on experience rather than success biases.

• Expressing gratitude for the opportunity to share insights on the show.
• Recognizing the contributions of individuals and organizations that facilitated the podcast episode.
• Mentioning partnerships with law firms and technology services that support startups and venture capital.

"I want to say a huge thank you to Dick for giving up the time today to be on the show. And if you'd like to see more from him, you can follow him on Twitter at Dick C."

This quote is a token of appreciation for the guest's participation and also directs listeners to further engage with the guest's content.