20VC Keith Rabois and Mike Shebat on Creating an Olympian Mindset to Work Ethic, Why FirstTime Founders are Better Than Serial Entrepreneurs, Why Remote Work Does Not Work, Why the Best Founders Always Start in their Teens & Why Companies are Cults

Summary Notes


In a dynamic conversation, Keith Rabois, General Partner at Founders Fund, and Mike Shabbat, CEO at Traba, dissect the essence of successful startups and the non-negotiables of company culture. Rabois emphasizes the significance of a company's early years and the unparalleled value of interns and first-time founders in laying the foundation for success. He also highlights the importance of in-office collaboration, revealing Founders Fund's stance against investing in remote companies. Shabbat shares Traba's ambitious vision, likening their work ethic to Olympian standards, with a focus on empowering the global supply chain through a labor marketplace. Both Rabois and Shabbat stress the criticality of an unyielding work ethic, a unique and intentional culture, and the pursuit of high-leverage activities for scaling a startup. They challenge the sustainability of remote work models and underscore the need for startups to be forthright about their culture to attract like-minded talent, ensuring alignment with their mission of building a generational company.

Summary Notes

Opportunity Costs and Success in Technology

  • Opportunity costs in technology are very high.
  • Successful individuals in tech often lay the foundations of their careers in their 20s.
  • The best workers Keith Rabois encountered were interns, suggesting that youth and potential are highly valued.
  • First-time founders are considered better, as per Keith Rabois' experience.
  • Successful companies are likened to unique cults.
  • Founders Fund, where Keith Rabois is a general partner, does not invest in remote companies due to a belief in the ineffectiveness of remote work.

"I think first of all, in technology, the opportunity costs in your very high. If you look at a lot of people have been most successful. The foundations of their career are in their 20s. Most of the best people I've ever worked with in my career were actually interns. I think first time founders are actually better. Every company that's successful is like a cult, and every cult that works is unique. We at Founders Fund have pretty much put a lie in the sand that we won't invest in remote companies. It's very obvious why it doesn't."

The quote emphasizes the high stakes and the youthful nature of success in the tech industry. It also highlights Founders Fund's investment strategy and skepticism towards remote work.

Introduction to Keith Rabois and Mike Shabbat

  • Keith Rabois is a general partner at Founders Fund with a background as an entrepreneurial executive and co-founder of companies like PayPal, LinkedIn, Square, and Opendoor.
  • Mike Shabbat is the CEO of Traba, a labor marketplace for the light industrial industry, aiming to be the AWS of labor across the global supply chain.

"So I'm primarily a general partner at Founders Fund. I've been to VC for about ten years after being a fairly entrepreneurial executive at companies like PayPal, LinkedIn Square, co-founded a company called Opendoor, and as a side project, also CEO of 130 person company based in Miami."

This quote introduces Keith Rabois and his significant experience in tech and venture capital, establishing his credibility.

Traba's Culture and Mission

  • Traba's culture is focused on dreaming big and having an Olympian work ethic.
  • The company values hard work and commitment to a common goal, which is reflected in their hiring and promotion practices.
  • Traba aims to empower businesses and workers to reach full productivity and potential, aspiring to impact the global economy positively.

"Yeah, so when my co-founder, Akshay and I started the company, we were thinking big. Just like how I mentioned to you, we plan on having a global impact, building a once in a generation company. And when you go back and you look at any of those once in a generation companies, Microsoft, Amazon, Apple, it was a group of people that were committed and they were working really hard, doing something that is very, very hard to make work. So our first value dream big. That correlates very closely to our second value, which is Olympians work ethic. We were just like, what we're going to do is we're going to work really hard together towards a common goal. We only hire and promote people that are bought into that mission."

Mike Shabbat explains the foundational values of Traba, which are to dream big and work hard, similar to other successful companies like Microsoft, Amazon, and Apple.

Olympian Work Ethic at Traba

  • Traba's Olympian work ethic is a mindset of commitment, similar to aspiring Olympians.
  • Employees are expected to work at least twelve-hour days, Monday through Thursday, with late Fridays, in an in-office culture.
  • The in-office culture facilitates collaboration and rapid progress, akin to sports team practices.

"Yeah. So it's a mindset. If you were to be in high school and telling everybody around you, I want to go to the Olympics, there is a certain commitment with that. You're waking up early, you're going to practice, you're showing up with other people that are also trying to vy to go to the Olympics together. So what it means in practice at Traba is we're all committed to at least twelve-hour days, Monday through Thursday. Friday we're working late. But people do tend to go out on Friday night. But it's an in-office culture, just like how you could technically become an amazing baseball player by hitting balls in the batting cage alone. But the real magic happens is when you're practicing with the other teammates to prepare for the big game."

Mike Shabbat describes how Traba's work culture is driven by a collective commitment to excellence, similar to the dedication required for Olympic training.

Work Ethic Across Successful Companies and Fields

  • A common characteristic of successful companies is a strong work ethic, with more than 80% exhibiting this trait.
  • Effort and dedication are crucial for success in any field, including technology, sports, music, and more.
  • Hard work creates opportunities, and a unique work ethic was historically required for starting a company.
  • Keith Rabois recounts the intense work culture at PayPal, where even living a short distance away was considered a waste of time due to the dedication required.

"I wouldn't say it's necessarily all of them universally, but more than 80%. It's a very common characteristic of successful companies. I actually feel it's a successful, or I observe that successful characteristic of almost anybody successful in any field, effort and input is what dictates results. I think there's never been a substitute for effort and dedication to your craft. If you want to be top 1% in any field, and if you interview people in athletics, as Mike pointed out, olympian work ethic, you interview people in music that succeed. If you interview people in technology that have been successful, it's always the people that work the hardest, that have the most opportunities. And if you have the most opportunities, you tend to have the opportunity to thrive."

Keith Rabois highlights the importance of work ethic in achieving success, suggesting that it is a common denominator among high achievers in various domains.

Sustainable Work Ethic and High Performance

  • The idea that long work hours are unsustainable is challenged by the notion that hard work is a passion rather than a chore.
  • High performers often engage in their craft beyond traditional work hours, and working with like-minded individuals towards a shared mission can be invigorating.
  • Consistency in work ethic across an entire company, as seen at Traba, is rare and contributes to success.
  • Momentum and progress are motivating factors that make additional work hours feel worthwhile.

"I think it's just simply not true. Even like a traditional, say like a normal nine to five, usually the hardest working people, if they do actually leave at five, they go home and they work on something else. That's their craft. So say they want to be the best piano player in the world. They're playing piano when they get home, and no one's saying they don't even think about that as work. So when you're with a group of like-minded people that are working towards making the world a better place at scale and trying to build something incredible, it doesn't feel like work."

Mike Shabbat argues against the notion that long work hours are unsustainable, suggesting that when work aligns with one's passions and goals, it does not feel burdensome.

Leverage of Time and Rest in High-Performance Work

  • The focus should be on the impact and leverage of time spent working rather than the quantity of hours.
  • At Traba, employees are encouraged to use their committed hours to have the highest impact on the business.
  • Rest and pushing oneself into hypertrophy (beyond comfort zones) are part of the process, ensuring growth and improvement.

"I think the right question is to ask, like, okay, for a certain number of input, what is your leverage on that time? But it's a shift of mindset, okay, if we're all committed to at least 60 hours a week of work, how are we leveraging that 60 hours a week to be the most high impact on the business and move things along even faster? So the reason why I wanted to change the mindset is because if you know that not only you but all your colleagues are also going to be there at 08:00 p.m. You're not even thinking about pushing it out the next day, you're doing it that night. At scale over time, compounded across a lot of decisions. The whole engine, the whole company moves so much faster."

Mike Shabbat emphasizes the importance of maximizing the impact of work hours and explains how a collective commitment to extended work hours can accelerate a company's progress.

Athletic Metaphor for Work and Preparation

  • Comparing work to athletic training, where preparation and strategy are as important as physical practice.
  • Emphasizes the importance of studying opponents and preparation in sports, which is analogous to work and business.
  • Training the mind and learning from preparation can lead to significant achievements, like a "heroic interception."

Let me just apply the athletic metaphor, too. It's not as if like, let's say you're a football player. You don't just go to the field and practice all day. Twenty four seven. You might study film, you might go home and spend 4 hours watching video of your opponent. And that makes you more successful. So your body is recovering, but your brain is training, but you're spending every incremental moment watching that film. And that's what leads to what looks to be this heroic interception. But it's all based upon preparation.

Keith Rabois highlights the importance of mental training and preparation, not just physical presence and work, in achieving success in sports, which can be translated to professional success.

Side Projects and Continuous Learning

  • The discussion revolves around whether employees should engage in side projects or focus on improving their core work skills.
  • Side projects can be beneficial for sparking new ideas and investing in oneself with a different time horizon.
  • Continuous learning, such as reading books, can lead to insights and ideas that can be leveraged in the future.

I do believe that there are things you can do that are maybe closer to what Jack was thinking, which is what I'll sometimes do, is I'll read books. Like, I have voracious appetite for reading. And the idea of reading the books is to spark ideas that I can later leverage.

Keith Rabois expresses his support for activities like reading that contribute to personal growth and can indirectly benefit work through idea generation, despite not being immediately practical.

Commitment to Company Success

  • Hiring people who prioritize the company's success and are excited by the prospect of hard work.
  • The importance of having a top priority and committing fully to the success of the company.
  • Developing a comparative advantage in life and focusing intensely on it.

So you want to hire people where it's like, we are all committed to making a once in a generation company. This should be everyone's top priority.

Mike Shabbat stresses the need to hire individuals who are fully committed to the company's vision and consider it their top priority, as this is essential for creating a transformative company.

Balancing Roles as Investor and Founder

  • Discusses the tension between being an investor and a founder, and the trade-offs involved in running a company.
  • The need to create alternative leverage and add value to offset disadvantages of dividing time between roles.
  • Leveraging hands-on experience to provide useful insights to other entrepreneurs.

Where the consequence is running a company, there are real trade offs. And Mike reminds me of this every day not literally. Reminds me just watching Mike, I am reminded of what I can be doing with the incremental time when I'm serving on boards, when I'm meeting with founders, on colleagues, when I'm taking new pitches.

Keith Rabois acknowledges the challenges and trade-offs of balancing his roles as an investor and a founder, particularly in terms of the time and attention he can give to his company.

The Importance of Culture and Hard Work

  • The significance of a company culture that values hard work and dedication to big dreams.
  • Observing potential hires' reactions to the company's culture can be telling of their fit.
  • The story of a finance head who sought out the company because of its hardworking culture.
  • The difficulty of finding people who truly align with such a demanding work ethic.

You have to correlate the hard work culture to the dreaming big, which is the reality of the matter. Like if I'm going to tell somebody, let's get together and try our best to build a trillion dollar business. And then I say that of course takes a lot of work and we want to hire people that are committed to that.

Mike Shabbat connects the company's culture of hard work with the ambitious goal of building a significant business, emphasizing the need for employees who are committed to that level of effort.

Compensation and Expectations

  • Discusses the relationship between high expectations and compensation.
  • The dynamic of managing cash effectively in a startup and the greater value of equity over cash compensation.
  • The impact of hiring people too focused on cash, which can affect the potential value of equity for everyone.

Yeah, we do pay people well. There is a dynamic of being a series, a startup, where part of our success is to also manage our cash effectively, especially in this market.

Mike Shabbat explains the balance between paying employees well and managing the startup's cash effectively, highlighting the importance of equity in compensation for long-term wealth creation.

Hiring and Cultural Fit

  • The red flags in the hiring process, such as excessive focus on titles or cash compensation.
  • The importance of a team-oriented mindset in a startup environment.
  • The concept of a "force multiplier" in a company, where individuals amplify cultural values and contribute to scaling the culture.

100%. So if they're way too focused on title, it's an immediate red flag.

Mike Shabbat identifies an excessive focus on titles as a warning sign during the hiring process, suggesting that it can hinder the collaborative and problem-solving culture necessary in a startup.

Scaling Culture and Maintaining High Performance

  • The challenge of maintaining culture as a company grows.
  • The necessity of adapting culture while avoiding regression to the mean.
  • The analogy of a company to an Olympic sports team, where performance and contribution are key.
  • The idea of constructing a self-sustaining "machine" through initial human effort and sacrifice.

I do believe strongly that everyone should be joining a company more like an Olympic sports team. It's not a family, it's an Olympic sports team.

Mike Shabbat compares the company culture to an Olympic sports team, emphasizing performance and the idea that those who do not contribute effectively may be removed from the team for the overall success of the company.

Advice on Preserving Culture During Scale

  • The critical mistake of hiring someone who does not align with the company's culture and values.
  • The importance of promptly addressing and correcting individuals who do not fit the culture.
  • The role of "force multipliers" in promoting and embodying the company's cultural values at scale.

Truthfully, the biggest mistake is usually hiring them on person. Everybody you hire, if you don't correct that person who's off on your culture and your values, will hire, like ten more people like that, and all of a sudden you've got a real problem.

Keith Rabois advises that hiring someone who does not fit the company's culture can have a cascading negative effect, and it is crucial to address such issues swiftly to preserve the culture.

High Leverage Activities

  • High leverage activities have both significant upside and potential downside.
  • It's crucial to stop activities with downside leverage and amplify those with positive leverage.
  • Filtering people and time management should be based on the potential leverage of activities.

Mike's translated it to Traba, which is basically everything's about what is a high leverage activity.

This quote emphasizes the importance of identifying and focusing on high leverage activities within a company, as translated by Mike to his company, Traba.

Celebrating Wins and Maintaining Momentum

  • Celebrating big milestones is important, but it's also crucial to avoid complacency.
  • Companies often fail after early success due to a loss of momentum.
  • Continuous focus on growth and improvement is necessary, even after significant achievements.

We do celebrate wins... But then, at the same way, you don't want to have a feeling that we already made it, because we definitely have not already made it.

Mike discusses the balance of celebrating successes while remaining vigilant and motivated to continue growing, highlighting the dangers of complacency.

Potential of Startups and Work Ethic

  • LinkedIn's success was limited by a lack of an "Olympic work ethic."
  • Early startup culture and hiring decisions can significantly impact the company's future.
  • A strong work ethic and culture are vital for achieving a startup's full potential.

LinkedIn... probably hit somewhere between five and 20% of its potential, because it didn't do some of these things.

Keith Rabois reflects on LinkedIn's potential and suggests that the company could have achieved more with a stronger work ethic and better early hiring decisions.

Balancing Parenting and High-Performance Work Culture

  • It's possible to be successful and a parent if you're disciplined with time management.
  • Parenting can amplify one's discipline and potentially lead to even better performance.

You can be very successful if you have kids. It requires you to be more disciplined, like about your time allocation.

Keith Rabois argues that successful parenting and professional life are possible through disciplined time management.

Opportunity Costs of Productivity vs. Life Experiences

  • The opportunity cost of not focusing on work in your 20s can be high, especially in technology.
  • Sampling different life experiences can be beneficial to find one's competitive advantage.
  • It's important to differentiate between conscious investment in experiences and distractions.

Technology, the opportunity costs in your very high... sometimes you do need to sample to figure out where your competitive advantage is and where to double bounce.

Keith Rabois discusses the importance of focusing on work in the technology sector during one's 20s but also acknowledges the value of trying different experiences to discover personal strengths.

Joining High-Growth Companies for Personal Development

  • Working in a challenging environment is crucial for personal growth and achieving potential.
  • High-growth companies provide opportunities to focus on high leverage activities and develop oneself.

Joining Traba in your company, like Traba, is actually by far the right move... You should actually be putting yourself in situations to grow from.

Mike Shabbat advocates for joining companies that push individuals to their limits, as it fosters personal growth and maximizes one's potential.

Importance of Early Entrepreneurial Experiences

  • Developing resourcefulness and an entrepreneurial mindset early on is crucial for success.
  • Challenging the status quo and not accepting pre-determined paths can lead to significant achievements.

I think that developing the skill of resourcefulness and basically being like, here's where I want to go, and I'm not going to just take these arbitrary rules or this system around me as an answer for that.

Mike Shabbat stresses the importance of developing resourcefulness and an entrepreneurial spirit from a young age to achieve one's goals.

Traits of Successful Entrepreneurs

  • Being relentlessly resourceful is a key trait for successful entrepreneurs.
  • Successful entrepreneurs often exhibit important traits such as work ethic and resilience early in life.

Paul Graham wrote this fabulous blog post called relentlessly resourceful, which is, I think, the trait that Mike's alluding to.

Keith Rabois references Paul Graham's concept of being relentlessly resourceful, highlighting it as a critical trait for entrepreneurial success.

Early Entrepreneurial Ventures and Resourcefulness

  • Starting entrepreneurial projects early in life can indicate future success.
  • Overcoming obstacles and not conforming to systems can develop a strong entrepreneurial mindset.

I think that whether it's building websites or other entrepreneurial endeavors or trying to find your way into some system, I think that that type of mentality is very important.

Mike Shabbat emphasizes the value of early entrepreneurial efforts in developing the mindset necessary for later success in business.

Value of First-Time Founders

  • First-time founders can be advantageous due to their ambition and lack of preconceived limitations.
  • Pairing first-time founders with experienced investors or board members can help navigate blind spots.

I think first time founders are actually better... Part of it is you don't know what you don't know, which means you don't accept any rules.

Keith Rabois expresses a preference for first-time founders, attributing their success to ambition and an openness to new ideas.

Correcting Mistakes in Startups

  • Being intentional about company culture from the start is crucial.
  • The culture of a company is difficult to change once it's established.
  • Early decisions in a startup have long-lasting effects on its culture and success.

The biggest mistake was not being as intentional as Mike and Akshay about the culture in the very, very beginning.

Keith Rabois reflects on the importance of being deliberate about establishing a company's culture and the challenges of changing it later on.

High Leverage Activities and Founder Growth

  • Founders should focus on the most high leverage activities to scale their business.
  • Learning to delegate and prioritize is key to a founder's growth.
  • Early mistakes often include treating all tasks as equally important.

I think when I was first starting the company, you think everything has an equal weight of importance, when in reality, you want to spend your time as you're scaling on the most high leverage activities that are actually going to ten x the business.

Mike Shabbat shares his learning journey as a founder, emphasizing the importance of focusing on activities that provide the greatest leverage for business growth.

Dealing with Underperforming Founders

  • Venture capital success is akin to baseball, with a high rate of failure expected.
  • The goal is to help founders leverage their talents to their fullest potential.
  • Founders don't always have to listen to investors, but feedback can be valuable.

If you're world class, you're right 40% of the time... So being 40% right and 60% wrong is what you're kind of signing up for.

Keith Rabois acknowledges the inherent uncertainty in venture capital and the expectation of a significant failure rate when investing in startups.

Corporate Secrecy and Competitive Advantage

  • Apple's success is attributed to its unique approach, which includes extreme secrecy and internal compartmentalization.
  • Employees are restricted from accessing certain buildings and information about other employees' projects.
  • The mainstream advice on transparency does not necessarily apply to building a successful company.
  • Each company must identify what makes it special and leverage its unique insights or "secrets" for a competitive edge.
  • The philosophy of a company should accommodate successful examples and be applied uniquely to its own operations.

"Apple has lots of beliefs about the world that most people don't believe in, but that's why they're very successful, and you can't apply that. Nothing that works at Apple would work at Google."

The quote emphasizes the importance of recognizing that the strategies that work for one company, like Apple, may not be suitable for another, such as Google, due to their differing corporate philosophies and cultures.

Investor Relations and Pitching

  • Founders should avoid trying to educate investors during pitches.
  • If an investor doesn't quickly grasp the value of a startup, it's often best to move on.
  • Practicing pitches with mediocre investors can be misleading as they may not focus on the critical aspects of the business.
  • Good investors tend to focus on the few key elements that truly matter to a startup's success.

"Actually, I don't think you should practice your pitch with mediocre investors, even though lots of people give that advice, because really good investors are going to ask completely different questions."

This quote suggests that rehearsing a startup pitch with less discerning investors may not prepare founders for the deeper, more insightful questions that a more experienced investor would ask.

Importance of Local Ecosystems and In-Person Work

  • Keith Rabois believes that being in person is essential for building a startup.
  • Founders Fund, where Keith is a partner, generally does not invest in remote companies based on historical data showing few successes with such models.
  • Mike Shabbat and his co-founder were contrarian in their in-person approach during the height of remote work trends.
  • Building a company in Europe is possible but requires a founder who can navigate local regulations and maintain a strong, uncompromising vision.

"We at Founders Fund have pretty much put a lie in the sand that we won't invest in remote companies because we've just watched 50 years that there's almost no examples of people building companies that way."

Keith Rabois explains Founders Fund's stance on not investing in remote companies, based on historical evidence suggesting that successful companies are typically built through in-person collaboration.

Remote Work and Exceptions

  • Some companies, like GitLab, can succeed with a remote model, especially if they are open source with global contributors.
  • Exceptions to the rule of in-person work are rare and specific to certain business models or stages.
  • The success of a remote work model may depend on factors such as network effects or the nature of the product or service.

"I think you can build an open source company predicated on open source software in a distributed way because you have thousands of contributors or hundreds of contributors all around the globe to open source software."

Keith Rabois acknowledges that the nature of open source companies like GitLab allows them to thrive with a distributed workforce, as their model relies on contributions from a global community.

Network Effects and Business Models

  • Airbnb is highlighted as an exceptional network effect business because it operates across multiple markets.
  • The company's success is attributed to its ability to match travelers with hosts, creating a global network effect.
  • Understanding the type of network effect a business has is crucial for its strategy and growth.

"Airbnb is great because you have travelers, let's say, going from China to New York and vice versa. And that's pretty rare when you can actually literally spread across markets."

Keith Rabois explains Airbnb's unique position in having a network effect that spans globally, allowing travelers from one country to influence the market in another, which is a rare advantage.

Quick Fire Round: Personal Insights and Predictions

  • Mike Shabbat would choose to be CEO of the New York Times for a day.
  • Keith Rabois believes interest rates will remain high due to structural inflation.
  • Mike Shabbat advises to be aware of competitors but not to obsess over them.
  • Keith Rabois is optimistic about the future but selective about startup investments.
  • Mike Shabbat envisions Traba as a publicly traded company improving lives and productivity.
  • Keith Rabois suggests Founders Fund should focus on nurturing young investment talent.
  • Identifying a great investor is challenging and requires observing their investment track record.

"I think we need to be younger and cultivate up and coming talent for investing because it's a decades long business."

Keith Rabois expresses the need for Founders Fund to bring in younger talent to sustain its long-term success in the venture capital industry.

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