Planning for Volatility

This episode of Greymatter features a portion of a virtual town hall held in May with Greylock general partner and LinkedIn co-Founder Reid Hoffman, moderated by general partner David Thacker. Portfolio company founders joined the session to hear Reid’s assessment of the current economic, political and public health landscape. He answered questions about how entrepreneurs, investors and new graduates can adapt to the new market and societal conditions.

Below are key highlights from the session:

How do you approach investing?

“There is this classic question of what the recession will look like and what the recovery will look like, but the much higher truth is that there will just be volatility. And that volatility will affect across the entire front. I think investing in new things will continue. I think investing at scale will obviously be much rarer. On one hand, you still have essentially a very similar pattern to investing before – at the macro level. You take a 10+ -year view. On the other hand, the volatility is very new. The question about how you take measurement to factor in on the learning journey that is a startup and is investing – there is a kind of tap dancing a lot more and adjusting a lot more. It’s much more like a constant and immediate dogfight.”

What should CEOs be thinking about?

“[In a downturn] Obviously there’s a bunch of things that become challenges. But also, this disruption changes the entire market landscape. It can open up new opportunities. These are very general principles, but the details are very specific to each kind of company or market or product or service. Adaptability and measurement has a much higher premium versus earlier because things are constantly changing. [Maintaining sales pipeline] is a super hard problem right now. There isn’t an easy [solution] like, ‘take the blue pill and it will work’ or ‘take the red pill and it will work.’ Everything just takes a lot more work. You need to deploy your network – you need a network to measure what’s going on and a network to help. Having these connections is important because everyone is just going to move slower.”

You have to look at your business and say, ‘am I playing the longevity game, or am I playing a gold rush game?’ In a bull market, a longevity game is very rarely not zero, but much more rarely the right strategy. In a volatile and recessionary market sometimes the competitive advantage is that we can play the long game. The good news is this: predicting future product-market fit is precisely one of the reasons entrepreneurship is going to take us out of the recession. That’s the reason to be 1000x behind entrepreneurship.”

Is Blitzscaling possible?

“Obviously, the degree to which you can do raw blitzscaling – when you get way over your skis because you’re predicting success – is something you do much more rarely in this environment. But it’s not zero. For example: we’re on a Zoom call right now and using Zoom videoconferencing, and products ranging from that to G Suite to Coda and Figma — these companies are ‘Go, go, go!’ because of the natural market demand. We see these companies picking up because of the environment.

That’s still blitzscaling. That’s still, ‘Here we are,’ and these companies are super important, and in two years they will be even more important than they already are because of the way businesses are operating. But the vast majority of companies are not in that spot.”

Within the landscape, you still have blitzscaling techniques; you still have the application of the principles, but you have to reevaluate given these markets. You may still be blitzscaling because you’re moving faster than your competitors. The true north of blitzscaling is the first to market scale. So being the first is what really matters.”

How do new graduates navigate their early career path?

“When you look back at classes that graduated during recessions versus classes that graduated during bull markets, the class that graduated during bull markets do a whole lot better. And it can literally be a one year difference. That’s just true throughout history. It is what it is. [Classes that] graduate in bull markets do a whole lot better. What I think that means is that current graduates need to say, ‘well, what are the things I need to do to create that long term compounding value?’

You have to work extra hard to lean into those things and make it happen. You need to use your network, to get a good sense of what is relevant and then move towards it. And one of the things about graduating in that pandemic is that it is very network-squashing. All of the things you naturally do to build network — going to certain schools or events and other kinds of things — all become much harder. So you have to invest a lot more work in doing that, and you have to be creative about how you do it.”