Why Chris Yeh—Co-Author of the Global Best-Seller 'Blitzscaling’—Says We Need to Move Faster in the World of Impact

Companies of the likes of Amazon, Alibaba, and Airbnb have many things in common: They’re global giants reaching a record number of clients daily. Their offerings have shifted the potential of their respective fields at a grand scale. And they each have followed the wisdom of “blitzscaling.”

In the world of business, blitzscaling has become a household name. Coined by Chris Yeh and Reid Hoffman, the term essentially defines the modern science and art of building rapidly growing successful world-changing companies that will then go on to transform industries. Some view it as a phenomenon. Others, like Yeh and Hoffman, see it as a philosophy in our age of rapid globalization.

Recently Eva Yazhari sat down with Yeh to discuss blitzscaling, which is the title of Yeh and Hoffman’s book, and how this approach can be put toward other forces worthy of rapid scaling—including impact, social impact, environmental impact, and stakeholder capitalism. As Yeh tells Yazhari, “I don't think there's enough being talked about in terms of impact investing and its importance in the world, and so I'm glad to be a part of the discussion.”

The following are excerpts from their conversation, edited and condensed for clarity. You can find their talk in its entirety here and below.

A Conversation with Chris Yeh

You've had this front row seat to the world of tech startups, and you've seen technology be a tool for building businesses. Would you talk about blitzscaling and how you think impact can be brought into the equation?

We use blitzscaling to describe a philosophy of pursuing speed over efficiency. What it basically means is we are going to sacrifice what we normally think of as efficiency and certainty in exchange for moving faster. The question becomes: Why would you want to do that? In the business world, the reason is if you're going after a valuable winner-take-most market, your goal should be to win the market. Then once you've won the market, you can print money and basically rake it in at your leisure. That's why there's trillion-dollar companies roaming the landscape today. They're all blitzscalers that have won winner-take-most markets.

You can look at Amazon and say, wow, Amazon's the leader in eCommerce but also on the cloud. You can look at Google as the leader in search and online advertising. Facebook, social network and online advertising, and so on and so forth. That really makes a lot of sense for the business world, which is why we say that it's the way that you build the world-changing companies. But what's also true is that if you need to move quickly in the world of impact and social change.  Everyone will tell you as we look at the news, as we read articles, that the world desperately needs change—and it needs it fast. We don't have a lot of time to make some of the changes we need to have happen. While I think it would be great if the average human consumer was willing to change their behavior, I don't think they're just going to do it on their own. I'm a big believer in the fact that human beings tend to be a little lazy and it's hard for them to change their habits. The best way to get them to change their behaviors is not to say, "Hey, for the good of the planet or your own long-term good, you need to do X." Because I guarantee you, they're not. It's to create new products, new services, new ways to displace the old that are more appealing to the consumer but also are more sustainable and ultimately, hopefully, change the world for the better. Those are precisely the kinds of things that we need to blitzscale.

On the concept of needing to move quickly in the world of impact, the concept of blitzscaling prioritizes speed over efficiency. Impact is also a precious quality of a company. You can't give somebody a better livelihood and then take it away because it hasn't been working. What are your thoughts there?

We can think about one of the classic concepts that Amazon has talked about, although they're not the first to come up with it, which is the concept of a flywheel. The concept of the flywheel is that as you get it in motion, it becomes easier and easier to spin it. That's why these businesses are so successful. Now, you can apply the concept of the flywheel to money and making money. It's fantastic that people have done that.

In the impact, the question becomes are there also flywheels? Are there things whereby getting change to happen, we make it easier for more change to happen? For example, let's take the effort to get companies to start thinking about their carbon footprint and carbon impact. It's hard to get them started because they're not used to it being a thing. But the more you get people to adopt the concept of carbon impact being a big issue and something that they're being measured on, the more it becomes a norm to worry about it and do something about it.

I think that getting things going is a big deal. Getting things past that initial activation energy really makes a big difference and that's where the concept of blitzscaling can help.

How do investors think about making mistakes and losing money, and this could be investor perspective, founder perspective, to learn a market?

Well, there's a couple of lenses on making mistakes I'll offer up. The first is the venture capital lens. Both you and I are venture capitalists. We make investments. Every time we make an investment, we think, "This company's going to succeed," or, "I really believe that this company is going to have a huge impact." And yet the venture capital model is that 90 percent of the investments do not deliver a breakthrough in results. It's only through the fact that there's a portfolio usually of 20 to 40 investments with a couple of them in there that really return the entire fund that the model works. In terms of thinking about making mistakes, if moving faster lets you get more bets on the table and you ultimately have a small number of those pay off but pay off in a big way, that's one way to think about the lens of failure or the lens of making mistakes.

The other lens on mistakes is something that Jeff Bezos has talked about: Is this a one-way door or a two-way door? In other words, if we do this and we discover it's a mistake, is it easy to just close the door, walk back into the previous room? When it's a one-way door, you must really think about it carefully because you're like, "Okay, if I do this, there's no going back and it has to be something that I feel comfortable with and I'm confident in." But it's a two-way door, the bias should be: “Okay, as long as I believe that this is going to have a positive outcome, let's just do it because we can walk it back.”

You famously have said you help interesting people do interesting things. Are there any common challenges that the founders and the entrepreneurs that you work with face, and how do they blend in some of the stakeholder challenges as well?

One of the big challenges, and I think you touch on it when you talk about innovation, is whenever you try to do something new that's something that people haven't done before, there are a lot of people who aren't going to believe in it. That's something that every entrepreneur, whether they're a financial software startup kind of entrepreneur or a social impact entrepreneur, must face. There is a chorus of voices saying, "This is not going to work. This is not going to happen."

The funny thing is those voices are technically correct because we just said, "Well, there's a 90 percent chance it doesn't really work." So yeah, if you just say no to everything, you're going to be right 90 percent of the time, which is good enough to win you an A in school, but it also means that no progress would ever happen. The biggest issue is how do I persist in the face of people who are discouraging me while at the same time knowing—as Kenny Rogers said—when to fold them. Because you could spend your entire career focused on something and maybe it just happens to be that success is around the corner, or maybe this is not a good idea because not everything works. Balancing the persistence through criticism with the ability to know, hey, now is the time to quit, is a big challenge. The way that I like to frame it for people is to say, "Okay, when you get up in the morning, do a little inventory and ask yourself, do I still believe that this has a decent chance of succeeding?" Once you've gotten to the point where you no longer believe it's going to succeed, if you don't believe it, certainly no one else is and it probably is time to quit. There's no virtue in keeping going even when you no longer believe. But if you still believe and other people do not, then you may very well keep going, but please do try to be honest with yourself about whether you have a real chance.

One of the deeper concepts that is embedded in impact is stakeholder capitalism. It's the concept of servicing more than just your shareholders and your customers, being of service to your employees, the government, the community, the environment around you, and being a servant leader. How have you worked with founders and entrepreneurs around that issue?

The stakeholder issue, I view it basically as a long-term issue versus a short-term focus, which is why it's hard to deal with on the startup side—because for startups, six months is long-term planning. The world changes for them so quickly that six months out is something they can barely even consider. But when I think about stakeholders and the importance of stakeholders, why are stakeholders so important? Well, there's a moral imperative, but it's also the case that they are critical to the long-term success of the company.

Think about all the issues that big tech companies are running into right now with governments: One of the things we argue in Blitzscaling is that responsible self-regulation is the best way to preempt heavy-handed government regulation. You should not be surprised if you decide that you are going to move fast and ask for forgiveness rather than permission that eventually somebody decides to put some rules on you. But if instead you behave in a responsible way and you go ahead and say, "Hey, here are steps that we're taking because we know it's the right thing to do and it's good for the long term," then it's much less likely that people are going to say, "Well, we got to focus on those people over there who are responsibly behaving themselves," versus the vast majority of people who are irresponsibly growing at all costs. I think that there's a real value to considering the stakeholders in advance.

The difficult thing is in establishing and being able to explain the way that you're measuring it. Because at the end of the day, the reason why shareholder capitalism has been so successful is because it's super easy to measure. Everything is based on one thing, the price of the stock, and all you must do is look at that. It's easy, but it's like the old story about, hey, I lost my keys. Why are you looking for it under the streetlight? Well, because it's too dark where I lost it to find them, so I'm looking for them over here.

People are focused on shareholder capitalism just because it's convenient and easy to understand, but if you're able to make stakeholder capitalism easier to understand, whether it's by having a measure like number of good jobs created or amount of carbon sequestered or what have you, then I think it becomes a lot easier to tell people, "Here, here is one of the stakeholders we're serving and here's how we can tell that we're serving them well rather than just wishing that we did."

There's a whole bunch of reasons. And by the way, this has been going on for many decades. If you think about management theory, back in the 1950s and '60s Douglas McGregor very famously said, "There is theory X and theory Y of management. Theory X and theory Y of management, basically there's two primary theories." One theory is that people are good and what you should do is you should try to remove obstacles from them and allow them to flourish. And the other is that people are lazy bums and you have to crack the whip on them if you want to get them to do anything.

I want to talk more about technology. How do you think AI will effect change and maybe even effect impact? Do you see it as a tool for good or something that needs to be responsibly self-regulated or both?

Both. The first thing is in terms of a tool for good, if you spend time and look at your daily activities, there is an absurdly large amount of your time that you spend on things that really are not the best use of your brain power and are not the thing that really brings you alive. Yet, you must do it anyway because we just inherently rely on what I call human artificial intelligence just knowing stuff.

There are significant chunks of our days that could be made much better with an AI, or we could have AIs that could take the place of a human assistant that most of us can't afford. I have the great fortune of working with people like my co-author, Reid Hoffman, who are very wealthy. Reid's a billionaire and he has a phenomenal assistant, Saida, who has been working with him for a decade or two. He can trust her completely and she does a phenomenal job for him. That's great for him, for somebody who can afford to pay someone well to make their life easier.

I, sadly, do not fit into that category. However, if there was an AI service, would I be willing to spend a couple hundred bucks a month on something that would really do all those things for me, that would remind me about the things I'd forgotten, that would help make sure I don't drop balls that people are tossing to me? Absolutely.

There's tremendous promise to AI, but the big concern with AI, of course, is several things. The first thing is that AI is inherently biased. We're doing AI primarily based on machine learning, which means the dataset that we feed into it really is what determines the algorithms and how it works. If we feed in data without thinking about the potential for bias, if we feed in data from a biased world, we're going to get biased AIs. That's something that every entrepreneur who's working on AI needs to stop and think about. Again, in the early days people didn't. They were just trying to get it to work, but we've now gotten to the point where it's irresponsible if you don't think about that.

The other thing about AI is that it's going to cause tremendous dislocation in the markets. I mean there's tremendous amounts of work that is basically human artificial intelligence. All that work, I mean things like accounting and routine legal work, is that always going to be done by human beings? Not clear. People are like, "Oh no, robots will never replace these things." I'm like, "Robots have never been replaced in the past. That's no guarantee they'll never replace them." So, I think that there will be tremendous dislocation. There will be a need for a huge number of new jobs. There's going to be people who are going to need to be re-skilled in all these things. That's going to be a society-wide challenge, not just something that individual companies have to deal with.

One other application that came to mind of artificial intelligence and, frankly, just tech enablement for us in our pipeline is using artificial intelligence in diagnoses for lower cost medical. So, there's the healthcare application where you can really lower the cost but increase the quality of the healthcare visit, of the patient's visit, and even use it as a tool to augment perhaps a nurse or not a fully medical doctor to be able to take care of that visit and see that patient and still have a good patient outcome. We've seen it across the board even in Africa. I think it's a major part of most strategies in blitzscaling return and business but also impact in emerging markets, there's a big application there.

You clearly care about impact. You're raising your own fund right now. Is there anything you can say about how impact will play a role in your investment strategy?

Blitzscaling Ventures is not explicitly an impact fund. What we promise our limited partners is that we will try to make them as much money as possible. We’ve said, "Look, while we may not be an impact fund, we are definitely not an impact-neutral fund or a negative impact fund. We will not invest in businesses, no matter how promising, no matter how much we think they're going to make money, that is a net negative to society. We only want to invest in things that are going to make our lives better."

Now again, I think that people don't know in advance. Certainly, there are plenty of people who invested in companies like Facebook who never imagined the sort of negative outputs that would've come. For example, if you think about JUUL and vaping, it was begun as a project that was explicitly by some folks who were smokers who were like, "I wish we could find a way to reduce the harm that smoking is doing to us." They designed a product that was designed to reduce the harm of smoking, but the unintended consequence was it became something that was a gateway drug for young people and teenagers. It's difficult to know what the consequences are going to be, but you must be willing to acknowledge when that happens.

I think that the most important thing is to have the self-awareness and intellectual honesty as a fund to say, "Okay, are we making investments that we believe are going to make the world net better? And if we make investments that start going down the wrong path, do we have the moral courage to speak up and say, you know what, this is not something we can support?" It's very easy to do that when there's no money at stake. It's hard to do it when there's a lot of money at stake, and we'll have to see how that plays out.

Chris Yeh is the co-author, along with Reid Hoffman, of Blitzscaling, the book that explains how to build world-changing companies like Amazon, Alibaba, and Airbnb in record time. A writer, investor, and entrepreneur, Yeh has had a ringside seat in the world of startups and scaleups since 1995. His books help founders, venture capitalists, corporate leaders, policymakers, and everyday people better understand how the internet has changed the way we work together to build amazing organizations. To learn more visit chrisyeh.com.
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