Magazine. I have been there for 33 years. It seems like ive known you for at least 20 years. It does feel that way. So, lee is my closest friend at fortune. Full disclosure. But you can still ask me tough questions. This will not be edgy or challenging so its up to you to ask the challenging questions, the really tough questions i was flattered when i was in the middle of the airbnb story when she asked me if i would do this tonight. She gave me incentive to finish it. [laughter] the book is great and we expect all of you to read it. I was a big fan of her first book, the end of the suburbs. That is about the movement from the suburbs to the city of people, companies and money. This airbnb story is kind of a natural for you, as a followup. How natural was it and how did it come along . A lot of people after that. Thank you to the core club for having us here tonight in this lovely room and lovely setting. Its really wonderful. Thank you. And thank you patty. The way i came to this idea, first of all i like documenting big seismic trends in the consumer died that are rooted in economic data. Thats what led me to write about this. Were moving in from the suburbs like a giant idea because the suburbs were america so long. Many years ago back in 2009, at fortune one of my jobs is to edit one of these 40 under 40 list. Bill be the next big thing. They have to be on your list so you get a little used to these companies that say like there the next big thing and then the next year theyre not nothing. Everyones talking about this Company Called airbnb. I rolled my eyes and said, ive used home away. Com for years, ive used the rpo. Com and this is the tech Company Think they can take an idea and reissue it to the marketplace and i dismissed them. Very quickly after that it became clear that they were growing incredibly incredibly fast. They were clearly struck a chord shortly after that, our colleagues asked me to interview the ceo and that was when i dug into the numbers to get ready for the interview. I was pretty shocked by what i saw. I learned a lot more about the back story and then when i met him and interviewed him i was struck by him and the journey that he had been on. This was back in 2012 from basically, being an Art School Student and not knowing anything about business to now running this company that was controversial, disruptive, huge, successful, beloved by consumers , hated by regulators and all this stuff. Then it just continued. Exponentially, three more hockey sticks from their, the companies doubled every year including last year. Honest, for nine years. I saw the way the consumer had seized on what they had offered and it was this cultural test on i thought all of this and all the things that can go wrong on a platform, the drama, there was so much there and these three total outsiders had accidentally stumbled upon this. I thought the whole thing was a business tail for the ages. There had been a book done on it before. My editor who is here really really wanted it. That always helps. I met rick, your editor, and was it a matter of rick coming to you or you going to rick and saying. I cant totally remember. I knew i had access to the company and to brian chesky. I knew he trusted me and i knew there was a book to be written about this company. I was in a pretty good position to do it. I also thought it was a natural followon to my last book and its the thing i like to write about. Im not a Silicon Valley reporter. Im not one of the people, many people who cover these Companies Day in and day out and they know every wrinkle and every move and every venture capitalist and i am not one of those people. I heard coming at it from this 30000foot angle. For a more cultural change angle , i guess. Here has used airbnb . Who here hasnt not many. Rick has not smacked rick get with it. Who has had a great experience with airbnb . Who has had a bad experience . Interesting. By the way, when i came in here earlier tonight, there were two people busy building a business around home sharing. There was one person jennifer who is selling the book is on her next trip, its everywhere. You bring it up at a Cocktail Party and everyone has a thought about it or used it. It goes to show that it started out for millennial thing and now its everyone. They got luxury and everything. You went into this knowing a lot about the company, knowing brian chesky, getting his trust, once you got in deep, what surprised you . A couple things. I thought i knew the company, i had already written and done a big feature on him. A couple things oppressive. One is how incredibly hard it was for them to get it off the ground. I sort of knew that but i didnt know the full extent. The company many times a very close to dying and not getting off the ground. For a couple of reasons, no one thought this was a good idea. People thought this was crazy. People thought are you kidding yourselves strangers will stay with other strangers . One of his biggest mentors, looked at him and said i hope thats not the only thing youre working on. Chris was a very wellknown investor said theres very many investors who said no to this and missed out on hundreds of millions of dollars and chris is one of them. He said he pulled him aside one day and said someones going to get murdered in one of these houses and youll have blood on your hands. Im not going to this. This is the reaction of everyone they had no money. They couldnt make it. They launched three times and said if you launch and no one notices again and then once again. They just kept wanting because no one was using the service. They hustled, they had a pitch deck at one point and they had it all ready to go in the night before the presentation there was an investor who agreed to meet with them, they had a conversation with sam altman who is another entrepreneur in Silicon Valley and they said, no one wants to hear the items they want to cds. Investors want to see billions. So they changed the numbers to billions and the two cofounders, [inaudible] they were very practical and serious and he is much more by the book and he said he took one look at it and said 2 billion and said you guys the bs factor will go wild. They will know thats not true. Okay, okay. The next day they were in a presentation and they get to that side and they had changed it to 20 billion. [laughter] they were renegades. They hustled. It worked. What is the difference between airbnb and home away and these other companies that came along first . There are some really important differences that i wasnt aware of when i dismiss them summarily. One is that a lot of discussion is made over the fact that two of the three cofounders are designers. There are three cofounders, brian, joe and nate. Brian and joe were graduates of the Rhode Island School of design. They were Industrial Design makers and they were design people. Part of the reason they could get funded was because that didnt fit the mold of what Silicon Valley was looking for. They werent two phd dropouts or coders from harvard. No one had heard of their school the way they designed the school website, it was userfriendly and they made the photography a big deal so that when you looked through the pages it was looking at magazines pictures of real estate and they offered free photography for everybody so that was a big difference. They set up a review system which is meant to be a natural checks and balances from the keeps everybody honest. Everyones reviewed both the travelers and the people who are renting other homes. That was something. Another thing was that it was urban. A lot of the sites were exclusively vacation, second home rentals. They were in beach towns, mountain towns, where airbnb was a selfcontained community and they took a cut of the booking. Those differences were all very important. The inventory is also what made a difference as well. Airbnb pioneered didnt fully pioneer but they didnt do sharing where youre in the space at the same time. That was the disruptive. What you mean by that . You might stay in someones house and in their second bedroom wall there also there. I see. That was the crazy thing. Its a sharing economy. Im not exactly sharing but sharing the space was very new and disruptive. Although things are what made it really appealing to millennials which at the time was unclaimed by the Hospitality Industry and obviously as we know an enormous market. They really seized on the media that first of all it was cheap, when youre sharing a property like that, the price is better. They also like that it was this countercultural or anticorporate adventurous, authentic, every property is different, all these things it was a new way to travel that really really caught on among lineals. Mecca plays into the hold arches and all, culture, local that we all crave. They also like that not to treat millennials with a broad brush but theres a dislike for anything to corporate and it was at a time when Hospitality Industry itself say that things have become so commoditized and consistent that thats what they had tried for to offer the same thing but that wasnt what lineals were looking for. Im going to ask one more question and then open it up to you. I have some more questions but we want to make this a group interview. My favorite chapter in your book , i think, isthe chapter where what brian and the others, mainly brian, learned from his mentors. It was john donohoe the former ceo of ebay said brian is a learning machine. Learning animal. Learning animal. Talk about some of the people this iconic Business Builders who brian asked for help. This is interesting. These three had no real expense running a company of this size. Joe and nate had tried to get their own businesses off the ground but brian didnt really know, a slide deck was, didnt know what Angel Investors were, these people are crazy, they believe in angels. Thats how outside he was. He didnt know what it entrepreneur was. He grew up in upstate new york and he says this all the time newer was like bobs pizza shop. You just didnt know anything about anything. He knew that. He knew that he didnt know anything. He just said there was no time for even as soon as they started to turn the numbers around, got there First Investment from sequoia in the growth took off, from their until today just hasnt slowed down. There was no time to learn in any of the traditional ways. You could take some night classes are going to an executive mba or sitting down and getting some tutoring. Basically, came up with a strategy for going to the source and he told me about this. If you had to know everything about the topic and you didnt have that much time what would you do. But what if you only had one hours point was spend most of your time identifying the single best person for what that topic is and then go right to that person and ask them. By that point, he had access to some of the top minds in Silicon Valley. He was able to go to people like johnny ive for design from apple or mark zuckerberg. Name some of these people. What did he name learn from x and y and z. The cofounder of linkedin and the early investors, he learned about growing and scaling a marketplace of business because linkedin is very much a marketplace and airbnb at at core is a marketplace business. From a lot of the venture capitalists he learned everything. He went to for example, george tenet who iran the cia and talk to him about culture because he thought who to talk about culture and someone who iran an organization where basically everyone is a spy and doesnt trust each other. He took a lot from george tenet. He told him the importance of walking on the office and recording people saying you did a good job and writing those down. He learned about john donohoe from ebay. They learn from each other. They had this reverse mentoring thing going on. He went to omaha and talk to Warren Buffett. From Warren Buffett he learned its important to remove yourself from all the noise. He was really struck that Warren Buffett assisted head office in omaha and would read all day long. He doesnt get wrapped up in things doesnt think big picture that was an incredible meeting. He went back at the airport and wrote a 4000 word meeting letter to write these emails for his old company that are always on a different thing. He wrote one about this whole philosophy of going to the stores. Sources. Sources versus mentors. At one point i asked one of their investors was telling me about how special this was about brian and i said, hes up early pretty privileged spot. If i can call and pick up the phone and call mark zuckerberg, id have a lot of good ideas too hes got this privilege of being able to call up these a list of the alist of Silicon Valley. This person said to me yes, thats true but a lot of these on viewers have that same access and have that same privilege and they dont make the most of it. They dont use it. Even if they use it, they dont this early see the results of scaling. Thats a word thats used over and over in Silicon Valley. Do you scale with the company that the goal for these three founders. Could a scale with the country could they grow with it i dont think theres any doubt that brian is a great example of how to scale as a ceo. Going from where he was to where he is now is a journey that weve never seen before possibly in business. It wasnt until this current wave of Silicon Valley that someone could be in a place to start a company. In the old days, you had to go through all the traditional channels. Right. Right. Who has a . If youre comfortable, wait for the mic. Identify yourself. Dale, would you mind going over there. Yes, work. So glad youre here, lee. You said he launched three times what was the moment after the three times . What was the moment of traction where a grabbed hold . What were the elements of where it turned around. Good question. The third time they launched was at the 2008 Democratic National convention in denver. There was a housing shortage, Hotel Shortage and was a big deal. They saw their moment and they got a lot of press and 800 listings out there and they got some business but after that they realized if theres a convention every week were great but there isnt so we dont have a business. They had this idea where they would did a marketing gimmick for the created brands of cereal because they wanted to pitch themselves as a air bed and breakfast. They did this whole thing were made these two cereals cabin mccains and obama owes for obama and they were cheeky and quirky and they sold them for 40 a box as collectors additions. They defeated them to the press and i thought the press would like that. They were right. The press ate it up. They made 30000 from the cereal that didnt turn the company around. Brian mother called him and said are you a Cereal Company now . He didnt know how to answer that question. That was the most depressing thing. They were making more money on the cereal than they were on the business. Ultimately, one of their advisers said you have to go apply for why comp later which is an Accelerator Program in Silicon Valley, highly regarded and the rebounder said that we launch. Weve been written up, we dont need to go to a. [inaudible] michael looked at them and said you are dying, you have to go. Going to. [inaudible] , it was the cereal that got them into. [inaudible] and he was a very tough critic. He didnt think it was a good idea either. He said whats wrong with people that they will stay in peoples homes, thats crazy. They mentioned that they sold the cereal and he said, what if you can get people to buy cereal for 40 a box, you can probably convince people to sleep in other peoples air mattress. That it was the advice that he gave them once they were in was go to your users and to shower them with love. They didnt have mary users but they were here in new york and they didnt even think about doing that coming to visit their users here. They sat with them for hours on end and watched them use their product and realize they didnt know how to post photos video where well, didnt know how to write listings in a way that made them appealing so they sat with them and help them merchandiser listing in a better way and dress them up, gussy them up and doing that they saw their numbers after a few weeks double. Thats what turned the numbers around. From there it was still a long journey but thats what thats when the turning point hit. Again, when sequoia came call me calling and wrote them a check. I have to go over here. Lee, you point out that home away in some of the other competitors are a more vacation oriented whereas airbnb has picked cities. Its more challenging in cities. Yet the Hotel Industry which is not happy with airbnbpeople who live in apartments dont really like that some random person is across the hall and iran a person in your opinion, knowing the leaders and so forth , will they be able to whether those kinds of challenges . Anyone who reads the headlines knows theres been a tremendous amount of latch back against airbnb. In many places its come down but in particular new york city. San francisco and new york city are the toughest cities in the state. It is illegal. It is illegal to rent out your home for less than 30 days when you are not there. Its only if you live in an apartment building. They came in anyway and they grew and grew and grew. That had a lot of people challenged and not happy. And they did a Big Ad Campaign . Yeah, they did a bunch of ad campaigns. This is not something they were truly prepared for, again, being a little naive to everything in the bigger airbnb got the more pushback, the stronger its gone every city has its different issues, here in new york its a big center for the Hotel Industry. Hotel union is a very powerful, powerful force. Unions in general are theres theories about how they are on the decline but the hotel unions are not. I think that the consumer even the hotels know that. They know that this company is touch on something that is working. The Hotel Industry also says hey , you can get away you can make money because you dont have to sprinklers, adhere to the ada rules, they dont think its a level playing field. Theres been criticism that airbnb that people use it to operate illegal hotels. They take housing and use it for only airbnb. There are some of that onsite. They say they dont want it and theres a lot less than there used to be but in the beginning there was a lot of that activity its been an ongoing drama and the drama continues. I think everybody recognizes that airbnb is here to stay and home sharing in general because technically the oversights are now getting to these as well. It has been a huge headwind for them. Were going to go to the back. Yes, sir. Come on down. Im brad. Ceo and founder of. [inaudible] ive been following brian on instagram and social and twitter and hes been fault talking about this United Airlines debacle. He keeps asking questions like if you were to disrupt the Airline Industry, what would you do or if you had the perfect flying experience, what would you do. Just because you cover so much industries and because what you do, do you think the Airline Industry is destructible . Brian deftly does and he wants to do it. I think it is. Its a horrible experience. There was that united crisis this week that we all saw. It was the top story every single day this week. Air b b airbnb did expanding into offering reservations, concert tickets and soon ill be doing something involving flights. Brian has been hinting at this for a while. Hes looking at this the same way he looks at anything. Design can be a solution for any problem. Even with the regulation stuff, how do we design our way out of this. Thats how he and joe were trained. He is looking at this exactly like that. And he said this, what if flying were the best part of the trip, not the worst part of the trip. What if the plaintiff felt more like a home. You can see where hes going and hes using twitter to reach out and say what do people think we should do. If you can imagine the best fine expense, what would it be . He said that hes a little disappointed with what people are suggesting because theyre not thinking big enough. As a person a fortune and patty may agree, do you think the Airline Industry its a complicated industry. Its an industry even Warren Buffett has said you cant go near the Airline Industry. But he owns that debt. That would be the best flying experience selling fine privately. Absolutely. With enough time and money and the right idea its easily destructible. This is fascinating to me and i did not know that brian is treating about this and its very interesting and im trying to imagine that if you know more than you are saying about how he might disrupt the Airline Industry. Do you know any more . I dont. We didnt talk about this when i was reporting the book. We havent gotten specific. Now that this is happened i will try to find out whatever i can. I will. What strikes me though is one of the things that is so interesting, one of the many things that is so interesting about airbnb versus huber is that you have this in the book that air b b has spent so far, since its launch about 300 million total and huber spends 33 billion they spent one point to billion in the first half of 2016. So airbnb has a 31 or 30 plus billion dollar valuation now and what is ubers valuation now . Sixty something. The fact is that uber has gone to the size of 30 billiondollar valuation by not spending a lot of money. Airbnb has gone. When youre talking about airlines suddenly are talking about major capital. Thats why im wondering what theyve got up their sleeve. I wouldnt be surprised if they do something this year or next year. Theyve clearly had discussions about it