This article was taken from the April 2012 issue of Wired magazine. Be the first to read Wired's articles in print before they're posted online, and get your hands on loads of additional content by subscribing online.
https://www.wired.co.uk/topic/amazonHe may be the billionaire cofounder of LinkedIn, an early investor in Friendster and Flickr, a board member of Zynga, Airbnb and Mozilla, and the man Sean Parker approached back in 2004 to invest in a promising new startup called thefacebook.com. He may also be the digital world's best-connected networker, the man his VC colleague Aneel Bhusri calls "the Kevin Bacon of Silicon Valley", who each day receives 500 emails and 40 business pitches. But all Reid Hoffman ever wanted to be was a philosopher. "My original plan was to become an academic," the 44-year-old LinkedIn executive chairman and Greylock Partners investor reflects over lunch one crisp November afternoon in a riverside Cambridge hotel. "I won a Marshall scholarship to read philosophy at Oxford, and what I most wanted to do was strengthen public intellectual culture -- I'd write books and essays to help us figure out who we wanted to be." Within months of starting his course, however, Hoffman concluded that "spending one to two decades answering a professional philosophical question" might not impact sufficiently on the world. "I realised that academia wasn't the right platform -- it didn't have enough scale," he says. "So I decided I would be a software entrepreneur."
The switch has suited Hoffman just fine. LinkedIn, the professional business network which launched in 2003, went public last May at a $4.3 billion (£2.76bn) valuation, and within hours the share price had more than doubled from $45 to $94.25 -- with Hoffman and his wife, Michelle Yee, owning 21.4 per cent of the company. Before that, he founded Socialnet.com, one of the earliest social networks; was executive vice-president of PayPal when bought by eBay for $1.5 billion in 2002; and then declined Parker's offer to lead Facebook's first funding round ("the most expensive decision of my life"). Still, after he suggested instead that PayPal cofounder Peter Thiel lead the $500,000 round, he made a five-figure investment of his own ("I don't comment on my percentage ownership"). He was also in the first round of investments in Zynga, Digg, Shopkick, Friendster, Six Apart and Kongregate; put the first Silicon Valley money into Flickr and Last.fm; and also bought into Groupon -- an unusually consistent track record in a sector littered with failures. "When presented with an investment that I think will change the world in a really good way, if I can do it, I'll do it," he says.
Hoffman is in Cambridge today to further that mission, co-chairing a packed four-day programme called Silicon Valley Comes to the UK which temporarily imports talents such as Google's Megan Smith and Thomas Ryan of Threadless to inspire students and inform politicians. He has just completed a session on gamification: LinkedIn's "profile completeness" bar, he reveals, took an hour of coding but spurred a 20 per cent jump in profile length. His next session will elaborate on why he sees data as Web 3.0 -- and why every business needs a "big data strategy". In another panel, he'll explain why the potential of mobile may take three years to be realised, and why "biology as code" will spur extraordinary innovations. "The future," he says, "is sooner and stranger than you think."
It's a rare break from his intense West Coast schedule, normally split between LinkedIn's offices in Mountain View, California, and Greylock's in Menlo Park. That is, when he's not advising nonprofits such as Endeavor, Kiva and Questbridge; exploring further investments in "marketplaces, networks or platforms", most recently in education startup Edmodo; advising entrepreneurs such as Groupon's Andrew Mason; and, at long last, publishing his own 245-page philosophical treatise.
The book, published in February, is called The Start-up of You, and its overarching message is that "every individual is a small business". Cowritten with Ben Casnocha, it urges readers in their careers to "craft iterative, flexible plans... be in permanent beta... build a network of relationships... budget time for randomness". It cites as case studies the rise of Netflix and the fall of Detroit, the pivots of Flickr and Intel, and the contrivance of George Clooney's acting career, with a reading list that includes Nassim Taleb, Joshua Cooper Ramo and Steven Johnson. The insights shared, naturally enough, rely heavily on stories from Hoffman's professional and social network -- as well as his own extraordinarily focused technology career.
His goal, he explains over lunch, is to encourage all of us to "think about our lives as entrepreneurs, using this playbook as a way five years from now to be in more control of my life, create more value in myself and the world around me, by proactively investing in growing my capabilities and adding more to society.
People sometimes think it's morally wrong to talk about investing in themselves," he says, animated and engaged. "Absolutely wrong.
In a flatter world with more competition, how do you succeed? How do you invest in yourself and gain those skills? You can't do it accidentally."
It is a message straight out of the LinkedIn marketing pitch -- indeed, the hardback cover uses the site's familiar blue and white logo. "Reid in some ways is a perfect embodiment of LinkedIn," says
Peter Thiel, who met him at Stanford University in 1987 when Hoffman was studying symbolic systems. "One of the conversations I remember having with him was what is the meaning of life. His answer was it has something to do with the people you spend your life with and the connections you make. That ethos has very much informed Reid's thinking -- that there are questions about how to connect people, how to create new types of community that are at the core of what you need to do to make the world a better place.
Reid thought through the social networking part of the internet revolution earlier and more methodically than anyone else."
Thiel describes LinkedIn as the stealth social network of the Web 2.0 era. "It's not been as spectacular as Facebook, nor quite as overnight as Groupon or Zynga or Twitter, and it's the least glamorous of the five big new internet companies of the last decade. But it has the clearest core value of helping people connect with people, mainly to get jobs. It's probably in some sense the most underrated because of that."
LinkedIn -- where Hoffman lists himself as an "entrepreneur/product strategist/investor" -- may lack some other networks' sex appeal or user engagement (TechCrunch once called it "the boring social network that won't find you a date but may land you a job"). However, being unsexy isn't the same as being unpopular: it now has more than 135 million members, according to Hoffman -- "and we're growing at over two members per second".
Hoffman arrives for breakfast at the Four Seasons, Palo Alto, in the same green Acura he bought when PayPal sold ten years ago.
Thiel at the time bought a Ferrari. "There's a Warren Buffett-like element, whereby Reid is very good at making money and investing, but is strangely indifferent to spending it," Thiel says. "He lives in an average four-bedroom house in Palo Alto. It's an upper-middle-class life."
Hoffman -- dressed noticeably casually for the hotel's Quattro Restaurant, in Levi's jeans and a black T-shirt "bought by Michelle" -- admits cheerily that he is finally thinking about upgrading his ride to an Audi S7, though he won't have time to test-drive it first. "The S7 would be the most extravagant purchase I've made for myself," he reflects. "I bought a prepayment card for
Flexjets in case I need to fly at short notice, but I didn't buy a plane."
Extravagance fails Hoffman's intrinsic-value test. "When we were going public, I sold a tiny amount of [LinkedIn] stock, and the
Wall Street Journal reported that Hoffman's buying a second yacht," he says rolling his eyes. "My response was, where's my first? "What makes the meaning of life is people, so you try to be good to people immediately around you and in your broader community. So a lot of my projects are about how I can affect the world in the hundreds of millions. I only spend money when it helps one of these vectors." His only acknowledged weaknesses: fine dining, and electronic devices. "I'll buy a piece of computer equipment in a heartbeat," he grins. "I also have five mobile phones."
So it's not money that's driving his big ambitions for LinkedIn. "My belief and goal is that every professional in the world should be on a service liked LinkedIn," he says over breakfast. "Because all of the attributes that apply to a business now apply to an individual, like business intelligence. If you can get better at your job, you should be an active member of LinkedIn, because LinkedIn should be connecting you to the information, insights and people to be more effective." The only threat to the site's continued growth would be a failure to innovate: a "fumble" that allows a better adapted upstart to swoop in, as he remembers Facebook doing to Friendster. "For example, Google's concern is not that Facebook can simply just build a better search engine -- it's that the social graph, and all that private information, are two essential elements for the next generation of search engines that Google won't have access to."
Ownership of that private information, he accepts, is a key question facing social networks. "We take a co-owned perspective," he says. "We try as much as we can to give you the authentic individual choice of what you want to do. So we allow people to download their entire list of connections into a CSV file -- but we don't allow a third-party service to scrape it on your behalf."
Why, then, doesn't he use his position to encourage Facebook to allow users similar control? "I've never really talked to them about this," he says after a moment. "So I can't really speculate on what their real views are -- generally speaking, Zuck [Mark Zuckerberg] tends to think the whole world is better when it's more transparent. I don't know, I'll ask him and find out the intellectual substance."
Still... as a philosopher, does he see any ethical concerns in a private company controlling access to users' digital histories? "Well, I think it's not unethical if the designer of these systems is trying to design something that they think is for the better society. Zuck is actually on a mission: it's not just, I want to own it to be a monopolist -- he has a vision for a better society.
The question is, why is this configuration of ownership important for that? I'll ask him. He's trying to move to a space that is enhancing the social sharing of information and making sure people's level of knowledge and connectivity with each other is massively increased. If you don't want to participate, then don't sign up." Besides, good behaviour is governed by commercial realities. "If you do anything that is substantially evil, Google would love to say, hey everyone, we're much better, come over here.
And once you're very large, governments can always turn and regulate too. I would be flabbergasted if Facebook were ever to say, you can't have access to your pictures unless you pay us. The outcry would be so substantial that there would be House and Senate inquiries the next day." He messages himself as a reminder to speak to Zuckerberg about ownership of user data. "I know Zuck," he says, "and I know he's trustworthy and has no nefarious intent."
Has he himself used Google Plus? "I'm on it, I've played with it, but I'm not really that active with it," he says. "I think there's a lot of credit to Google for realising that social is very important." Cautiously, he adds: "One concern most of the folks in the Valley have about Google Plus is over how much they build social into search. It should be a platform as opposed to a tied proposition. On the other hand, for Google Plus to really get some steam it has to be substantially unique from Facebook. I'm personally not of the strong belief that Circles is that. It's interesting, it's an innovation, but for a feature to be substantially differentiated, it has to be something that 30 to 60 per cent of the user base would use actively. I don't think Circles is that. The dynamics around social, I don't think they have the full tool set yet."
His own dealings with Zuckerberg go back to 2004. "I'd tracked the launch of Facebook as an interesting thing, and if Zuckerberg had been in Silicon Valley [rather than Boston] I'd have gone to find him. I had in the interim been building a relationship with Sean Parker. Sean moved out of Plaxo, called me and said, 'I've got this really hot company, it's Facebook. They've moved out here and we're looking to put together an angel round -- would you be interested in leading it?'"
Hoffman then made that expensive decision to decline, concerned with potential conflicts of interest. "None of us knew how big Facebook would get, but LinkedIn cared about college too. So I set up a meeting with Peter, Zuck, Sean, Matt Cohler and me at Peter's office in San Francisco. Zuck was very quiet. But we didn't just talk about Facebook: we also talked about this other peer-to-peer file-sharing thing he had called Wirehog. 'I've got these two things,' he said. I said, 'You should focus on the Facebook thing.
This could potentially go somewhere.'"
Hoffman split his co-investment with long-term friend Mark Pincus, later founder of Zynga. "It was substantially under $100,000 each. I sold a little earlier [last] year, 30 per cent of my position on the secondary market as I didn't want to sell any LinkedIn stock." Thiel's $500,000 convertible loan bought him 10.2 per cent of the company, since diluted.
Does Hoffman now kick himself about passing up the opportunity? "Not really," he says. "The only thing I kick myself for is, it would be more fun to be on the board working with [Mark Zuckerberg]."
And after Facebook's IPO? "There's a lot of growth prospect in the company -- China, additional services that would add revenue. My sense is they'll supplant [Google's] Orkut in Brazil. Mark learns really fast. One of the conversations we have is, should we keep Facebook as it is, or should we modify it thinking about the China strategy. If we're blocked and we're not playing, are we doing less good than if we modify it? The position that I advocated was modifying it, as long as it's still in the vector of the mission."
In a brutally competitive industry, Reid Hoffman's name triggers unusually warm tributes from a stellar list of associates and friends. "I haven't met a single person in more than 20 years in Silicon Valley who's more generous with their contacts or time, who's more willing to listen and learn and brainstorm, or who genuinely wants everyone he meets to become as good an entrepreneur as they can possibly be," John Lilly, Mozilla's former CEO and now a Greylock partner, said when introducing him at an Innovation Catalyst Award ceremony in December. Long-time friend Joi Ito, now running MIT's Media Lab, says of Hoffman: "He looks at the world as a huge game where he's trying to optimise for the common good. I don't know many businessmen with his level of social thinking." And Elon Musk, a former PayPal colleague and now CEO of Tesla Motors and SpaceX, sees him as driven simply to "create something truly useful to fellow human beings".
This bright Saturday morning, Hoffman is talking about the meaning of life. "I don't see it as happiness," he says. "It's nice to be happy. But the meaning of life is meaning -- what's the impact you're having on the world. Suffering to accomplish that is a perfectly fine thing."
Today we are meeting at Mike's Café near his Palo Alto home. He scans the menu and debates "how healthy or not healthy" he should order. He is, he acknowledges, overweight. He chooses a Monterey egg-white omelette, fruit instead of potatoes, a side of ham, and a cranberry orange scone. Healthy, then. On the back of Hoffman's Android phone is an Ansel Adams self-portrait. "It's his own shadow," he says. "The self-reflection part of it appeals. I roam the world with a mobile phone that's a mirror of where I've been and my connection to the world."
He grew up in a liberal Berkeley household, the only child of two Democrat lawyers. "My dad, who graduated from Stanford, did public-service law and went to Woodstock. He would take to sleeping at the Black Panther headquarters in case the police kicked down the door." His mother studied environmental law at Berkeley; they met when she entered a beauty contest. They were 23 and 22 when Reid was born. "From an early age I thought of myself as someone who hangs with the adults," he says. "How society should run, what is a meaningful life, these questions I encountered fairly early." As a baby, he was carried through tear gas at demonstrations; as a teenager, his first concert -- with his dad -- was The Grateful Dead. Ethics discussions were common: why Ronald Reagan was wrong to bomb Libya; why a greater society needed strong public education. But as Reid hit ten, a babysitter introduced him to a new obsession: Dungeons & Dragons.
When a school friend told him that RuneQuest was published by nearby Chaosium, 12-year-old Reid turned up one day and listed the flaws he had found in a recent game. "I remember Steve Perrin, the guy I handed this to, thinking, I shouldn't have let this kid through the door. But then he changed, and he said,
'Some of the things you're saying are pretty interesting. We're in the process of publishing something else, could you look at that?'
It was a Friday, I came back on Monday, and he gave me a cheque.
For $162.70."
Hoffman was underperforming at his local school until at 14, without his parents' knowledge, he applied to board at the private Putney School in Vermont. "When I got in, I persuaded them to send me. I was directed. I remember sketching out when I was 12 a plan to change the world where all my friends and I would all go get various positions of power -- I was thinking about being the director of the CIA.
My theory was that wars are the biggest source of suffering and they happen because of a lack of intelligence. I got put off that plan by reading a book called The Crimes of the US Intelligence Agencies."
During his time at Stanford University in Palo Alto, he shared intense political debates with Peter Thiel. "His friends said you should meet this pinko commie; my friends said you should meet this person to the right of Attila the Hun. We argued for eight hours the first time we met, but I thought, hey, this is fun. We merged our [successful] election campaigns for student senate. We'd drive around and put up fliers together." He also began dating Michelle Yee, now working in healthcare, whom he married in 2004. "I describe her as my better half," he says. "Most of my network in Silicon Valley hasn't met her. She runs her own life." Children are not in their plans. "I work seven days," Hoffman says with a shrug. "I couldn't do this if I had children."
Returning from his Oxford postgrad course, he camped in his grandparents' spare room and began reading about venture capital and software entrepreneurship -- and started networking. A Stanford friend, Stefan Heck, introduced him to Jesse Ellenbogen, then at Apple Computer, and in 1994 Hoffman joined the user-experience group. Two years later he moved to Fujitsu, in search of product experience. "I basically believe I can learn the skills to do most anything, but I'm paranoid that I'm not good enough. I thought, I'll put in as many years as I need to learn to be effective."
By 1997, he was ready to start a business -- and saw that capital would soon dry up. So he quickly used his network to assemble a team -- engineers from Apple and Fujitsu, a Stanford classmate, the founder of GamePro magazine -- and then figured out an idea: a dating site. He called it Socialnet.com and raised $1.7 million (£1 milion). "I learned lots of things," he recalls. "But the price was paid in blood."
Match.com already existed. "I thought, I'll build a much better version. I hadn't yet learned a really key thing -- being contrarian is extremely important for entrepreneurial success."
Hoffman's site partnered disastrously with local newspapers in search of customers; an Arizona newspaper drove only two customers in a month. It was, he now realises, just "half an innovation", whereas "a really great idea ends up with three innovations -- product service, product distribution, and revenue model". He eventually left in 2000, a year before Socialnet was sold to match.net.
Thiel had already tapped Hoffman to sit on the board of the company he founded in 1998 with Max Levchin that would become PayPal. Originally focused on mobile-phone encryption, the business shifted to online payments. Hoffman joined full-time in January 2000 and became Thiel's "fixit man". "His most important role was ensuring that we didn't get shut down by eBay, Mastercard or Visa," recalls Elon Musk, whose X.com became part of PayPal. "He was a very important ambassador." Thiel says Hoffman was the business's "most rigorous strategic thinker" who used his empathic nature to defuse potential conflicts. "I don't know what's the opposite of a sociopath, but I think of Reid as whatever's at the opposite end of that spectrum. The anti-sociopath understands other people incredibly well, what concerns they have, and tries to craft things that work for them."
And yet... Hoffman must have an Achilles' heel? "Well, the negative to being an anti-sociopath is you don't care enough about yourself," Thiel explains. "I've often expressed to Reid that he doesn't take enough care of his health. A number of years ago I helped organise a few of his friends to pay for a personal trainer -- whom he'd have to use as other people paid for it. He's in a little better shape than he was, but he's definitely neglected himself." Joi Ito agrees with this analysis. "He's so busy and so optimised to help others that I don't think he takes care of himself enough. He does need to slow down, maybe say no a little more, take a break -- but he feels he's in the zone right now and is making an impact."
It's during the third of 13 courses during a five-hour molecular-gastronomy dinner that Reid Hoffman lets his customary measured reflectiveness give way to a palpable frustration. It's Saturday evening at Palo Alto's two-Michelin-starred Baumé restaurant, famed for its 62-degree egg with green lentils in a vermouth zabaglione, and as Yee listens attentively, Hoffman wonders aloud why LinkedIn has failed to achieve Facebook's levels of user engagement. It's not simply a natural conservatism around work profiles, he says: "I have a frustration that people don't understand it. I had a CEO at one of my portfolio companies say to me, 'How do I use LinkedIn to find a CFO?' I said, 'Well have you tried typing "CFO" into the search box?' It's flabbergasting." So there's a design failing? "Well, maybe," he says. "The question is, I don't think people even realise there is a tool to solve this sort of problem. Someone will say, 'I love your service, I use it all the time.' And I'll talk to them about how they use it, and they accept invitations. I'm like... er, OK..."
The primary weakness, he says, "is the vast majority of people don't understand what it's a platform for. Ask the average person, they think it's a place they keep their CV online, and maybe have some connections with people they know professionally. They don't think of it as a place they can get business intelligence, establish an online presence where other people in the network can find them, research problems. We're a screwdriver when people don't really realise what screws are. If the light bulb went off in their head on how to use LinkedIn, it would raise the country's GDP. The vast majority of people don't really have all the synapses connected about what it is to operate in a networked world."
As Hoffman sees it, we're moving from an information to a network age. "In an information age, you'll generally say that the right way to live a good life is information," he says. "Well, the right way to know which is the right information is a network.
Everyone should see themselves as the centre of their own network.
It's the hyperconnectivity -- you used to only be discoverable in a network by people talking to each other. If I'm reading a news article, I can now see which of my friends has read it. It's not just about me, it's about us. I wanted LinkedIn to be a software platform that would let people take control of their life."
Hoffman's own network now extends to governments. He has been called in to advise, he says: by Rohan Silva in Downing Street; by the assistant head of a US small-business association; by the US Federal Communications Commission chairman; and by a US Army general seeking to understand how network thinking might improve military effectiveness (Hoffman suggested the force analyse its opponents' network structure). When he met David Cameron, "He was generally attentive to entrepreneurship [as a way of boosting the economy]. I think he's looking for a fix. My worry is, do more.
Intensify it."
He has seen progress in his annual trips to Britain, and has invested in London-based businesses including moneylending site Wonga, social-gifting service Wrapp and art-discovery platform
Artfinder. We should, he says, stop making comparisons with Silicon Valley and instead focus on building locally differentiated clusters, as Cambridge has done for software. "Entrepreneurs realise how difficult what they do is -- the metaphor I use is, you throw yourself off a cliff and assemble an aeroplane on the way down. So create an energetic, vibrant entrepreneurship cluster that's a reason to make them want to move to the right area. "The good news is, the UK has some of the best entrepreneurial baseline culture in Europe. You need to improve the entrepreneurs' visa; you need to get over the anti-immigration bias that bringing in someone of Indian or Pakistani heritage means fewer jobs for English folks.
There are bold things governments can do, such as creating the equivalent of a Khan Academy for entrepreneurship. Tech City is not a bad effort -- but I don't yet know if it's a great effort. Is it doing anything to increase network density? That's essential."
Britain could also do more to boost the status of entrepreneurs, he says, such as through royal recognition. "You want the rest of society to go, oh, creating new businesses is really important for all of us. I'm not sure how many of the unions are this farsighted -- the unions need to realise that change is inevitable."
As dinner enters its fifth hour, conversation turns to Hoffman's own legacy. "I will be very surprised if Michelle and I leave, say, a building," he says. "The question is how you have an enduring impact in the direction in which people evolve. Money is a social artifact: yes, you can enjoy its benefits, but you also have responsibility to society. That's what's great about [Bill] Gates's pledge [to give most of his wealth to philanthropy]. "I've discovered through the Silicon Valley process that, if you go to market with a potentially disruptive technology, with an investment of $5 to $30 million you can affect the lives of 10-million-plus people in a sustaining way. So I want to take those tools and apply them in entrepreneurship, education, anything that's a massive problem, to have a massive impact." Foundations aren't the way: they are too risk-averse. Instead, Hoffman intends to "take intelligent risks for breakout success" -- hence his support of non-profits such as Kiva, Endeavor, Do Something and Fonderie47, which provides a financial incentive to disarm AK-47s by turning them into jewellery.
In the meantime, Hoffman and Yee have a quiet Thanksgiving Sunday in Palo Alto to plan. He, naturally, will be working, with a break for a morning personal-training session, and later perhaps some DVDs. Dinner, he tells the maitre d', has been excellent, perfectly paired with course-by-course wine. "You've had [Château] d'Yquem, I presume?" he says as we leave. "Next time we're in London we'll make sure there's an Yquem. The point of life is sometimes to spoil yourself."
David Rowan is editor of Wired. He wrote about Facebook and social design in 01.12
Click the final page to read what Hoffman's Siliocn Valley peers say about him
Elon Musk on Hoffman
"A lot of people at PayPal weren't primarily driven by financial motivations. It doesn't hurt, but most were interested in doing things that would have a productive impact on the world -- to create something truly useful to fellow human beings. That's Reid's motivation as well. There's a lot more that will be written about him: he's the intellectual entrepreneur, he believes in creating things of value and in stimulating public discourse. It's the idea that we can do more collectively than as individuals."
Peter Thiel on Hoffman
"I like to characterise myself as libertarian, Reid is more socialist. There's that Margaret Thatcher line that society doesn't exist, only individuals and families do -- if one had taken that too seriously, I would never have invested in social-networking companies. Reid was both a practical and philosophical counterpoint to a kind of thinking that would have kept me away from making those investments. One of the reasons he's become so successful is that he combines brilliance with a great deal of humanity."
Joi Ito on Hoffman
"We've done a lot of investing together -- probably 20 deals. I think about communities and products in an intuitive way; he's more about figuring out the business model, the distribution model. He's got a very analytical mind that understands game theory and risk, and he rarely loses a board game. He looks at the world and society as a huge game -- an intellectual exercise where he's trying to optimise for the common good. I don't know many businessmen with his level of social thinking."
Ben Casnocha on Hoffman
"His favourite words are 'massive impact'. That's the litmus test with which he evaluates every opportunity. That was so with the book. We'd have a two-and-a-half hour meeting, and he'd spend the first 45 minutes debating the Singapore model. There's an intellectual curiosity -- he gave me books on the philosophy of the ancient Greeks and DVDs of Japanese anime. It was, 'What can we learn from anime about the philosophy of life?' His brain isn't tremendously linear -- Reid lives a life of chaos."
This article was originally published by WIRED UK
