In the end, the measure of your life will not be money or time. It's the impact you make. It was Steve Blank who said that. He's largely credited with laying the groundwork for modern entrepreneurship. We believe every founder should know his work. He's an 8 time founder himself, a pioneer of the lean startup movement, and he's written some of most iconic books about building startups. He's been a senior fellow at Columbia and also teaches at Stanford.
In this episode, Steve and James Currier break down what it takes to build startups in this downturn and why speed is your number one asset right now. So, Steve, you are a Stanford professor. You're a senior fellow of entrepreneurship of Colombian, and and largely, I think, We all know you as one of the fathers of modern entrepreneurship. You know, you came up with a customer discovery methodology and, and really gave birth to the lean startup.
Methods that we've seen from Eric Reese and other people you've collaborated with. How entrepreneurship is Todd has really changed under under your watch? Over the last few years. I mean, you you're raised in New York, live in Pescadero, and, one of the foremost thinkers about innovation on West Coast, and just incredibly grateful to have you here. The last time I think we saw each other was at a dinner at Avia with Digi Levy-Weiss, my partner.
When people were actually, having dinners at restaurants. That's right. And so, you know, let's just jump right in because, there's so much to, to be learned Pete, but in this new remote digital world, how do you think startup formation changes? Is there anything that you're noticing in terms of how you think the startup should be acting right now to to get going? I think number 1 is figuring out what the new normal looks like. Because that affects what your business model is.
And what I remind people is if your business model looked the looks the same as it did the 1st March, either you were one of the luckiest people on the face to the earth, or you've been hiding under a rock. 11 of the 2. And, you know, I'd be, like, say, check with your investors to see if they agree. Number 2 is if you're building your product for some startups, oh, I can't talk to anybody. Therefore, I could just go and build a product. No customer discovery. I've actually found the opposite.
It's true. Customer discovery is a lot easier right now, and so is early James. At least early sales calls, is that, people aren't home. They're no longer surrounded by a series of gatekeepers, like admins and secretaries and whatever. I mean, some of them, and we're like, are happy to be like, dear, you deal with the kids, you know, and and she hands the kids to the husband, and she'll take the call. Right?
You can now get the VP you know, I I spend a good chunk of my time, now consulting for the largest corporation in the world, which is Department of Defense, and I can now get on the phone to 4 star generals who are wearing their, you know, t shirts and whatever who, like, you can usually, you gotta talk to free colonels and an an an assistant to get to their scheduler. You could get to CEOs of major corporations.
As I said, though, what becomes harder is if you wanna do serious deals versus demos and trials, And if you're trying to close 100,006 or 7 digit orders, that's a lot tougher. It doesn't mean it's impossible, but, again, that connection is missing. And also large enterprises are are less amenable to spending cash right now until they understand what their future looks like in their customer but but almost everything Beller, B2C is a lot easier. People are at home.
They're spending money at least those who are employed. You know, we have a a 15% unemployment rate in this country as of, as of this podcast. So we gotta take into account the large chunk of who would have been our customers are no longer there. But I think for for startups, it's it's time to rock and roll. And if you're making a list of excuses, other than you're out of cash, I'd be putting the pedal to the metal. And let me go back to that question again. One more piece.
It might be that your existing head sales or existing head of marketing is still living in the pre pandemic world. And by now, they should have either pivoted or you need to part ways. So that's the 2 Pete rather than the 3 d's, you know, pivot or part ways. If somebody is still saying in marketing, I need to run the same, you know, campaign as I did before, you know, time out.
And if I'm like a VP of sales who's giving you a forecast that just heading downward because oh, we can't make personal calls and lose sales calls anymore. Yeah. I can understand that that efficiency has gone down dramatically. But don't tell me you were doing the same process that you were doing before. Yeah. People have to have to adjust psychologically and emotionally to the new state. If they can't, then they're not they shouldn't be in a startup. Here's the other piece of that.
You just said something wonderful, and I wanna at least make everybody feel both good and bad on what you just said. You know, people compare it to what's going on effective as Ben Horowitz who I love, but, he uses the phrase wartime versus peacetime CEO. And says, gee, we're now in wartime.
You know, I haven't been in 1. I I gotta say it's a little disservice to, you know, people who serve because in wartime, if you fail, it's not measured by whether you missed your numbers or your you lose your corner office. You measure failure by KIAAs. On the other hand, what's also unfair, it's unfair to start up CEOs because if you're in the army or marines, you spend your career mostly training for the fight. You're running battlefield drills all the time.
You you were assuming that you are about to hit something head on, and you train that it will be chaos and uncertainty and whatever. Not, oh, okay, we're on step 23 revenue goes up to the right. So so while it's unfair to kind of say it's, you know, just as easy as being a wartime CEO, It's also unfair to to to start up and and corporate CEOs who haven't trained for the fight. People didn't sign up for chaos and uncertainty at this level.
The government didn't, and we're seeing how some of them do well or not. It's state and local federal. And we're seeing how some people rise to the occasion The point is is that after some period of time, you either need to step up to the fight or the fight will take over your business. And you will fail. And if you're on the other side as an investor, you can't let that happen. You you have to, in fact, replace wartime CEOs with people who can deal with the fight.
It's about, that flexibility, that mental fluency that that we all need in order to adjust to any sort of startup situation. In particular, this massive dislocation of of the of the pandemic. Yeah. This is disruption with the capital. The we we've we've talked about it and how we're all living it. And, you know, you and I, talk a lot about speed is often the secret weapon. And you wrote that, to adjust and tackle an acute crisis, speed is the key ingredient.
So this is an acute crisis is now turning into a persistent crisis. Right? I mean, it's months months months. Do you think anything changes about using speed as a tool, with startups. How do you think about speed now? It when I was writing about this in the beginning of March, it was like, Hey. The world is over. I know it was fun kind of with infinite capital and and everything looked like this, and people would give you money. That's over. Take some action. Don't sit around.
That's what I meant about speed and urgency. And, hopefully, the survivors have kinda like 8 cuts and and turn down burn rates and whatever. And now I'll suggest it's time for speed again. That is uncontended. It's not time for hunkering down. But we are gonna go into a different recovery than back to normal. So now the speed and urgency again is, okay. What's your model for an extended recovery? That's not the same model as an extended shelter in place.
And and then your commune pick your community, maybe your community is still sheltering in place. Okay. So you continue that, but we could see states and cities and localities are doing limited openings. I'll go back to what's that new configuration again. So it's time to pivot with speed again to figure out what the new normal is, how to get business and survive and ultimately how to grow. And take advantage of it. And do you have a feeling?
I think you might have said this that startups should run like benign dictatorships. For those who don't know, I mean, you're a serial entrepreneur. You're involved in 8 startups, you've, you've gone through this road number of times. You wrote, the book, the 4 steps to the epiphany, your insights about how that company, epiphany, did really well and how it came to be. And and it was read by many, many people for those who haven't read those books, you should pick them up.
Yeah. It's when dinosaurs rule through Earth is when I was an winner. It was, most startups, not most, but a good number of them, when times were good. Really like this collaborative open relationship you know, we have, you know, Friday, Beller badges. We listen to everybody's input. We, you know, protect everybody's sensitivities. We go out of our way to make everything Flint free.
And and when you have infinite cash and infinite time and infinite whatever, and and we we don't make decisions before everybody buys in and, you know, we make sure everybody is respected. Well, that's fine until the engines are on fire and the wings about to fall off, and the plane is heading like this. Somebody has to be in charge.
And and by the way, if I'm smart as the leader of this activity, I will tap into the collective wisdom of everybody about Are there some business ideas I'm missing, etcetera? But why don't we make decisions? Just we're now in survival mode. And in survival mode, it is not a collaborative, like, we don't have time. It's not that I don't respect you. It's not whatever. But but if we debate which way to point the ship as we're heading down, we're all gonna die. I mean, metaphorically as a company.
We're gonna just run out of cash and and go out of business, and we're all going home. So what I mean about benign dictatorship is I'm sorry to hurt your feelings, but I've heard you. And now we've made a decision, and here's where we're going. And by the way, if you're unhappy, guess what? 15% unemployment. You could join them too, but there are lots of people who would like your job. So and by the way, if you're gonna continue with a bad attitude, I will remove you from this company.
And that's gonna be hard for a lot of employees, and it's also hard for leadership to realize this is not the time for if we're interested in speed and urgency and everybody moving in the same direction co you know, cohesively, we just don't have the time or bandwidth for this. We could come back to this, hopefully. That is the the military dictatorship will give rise again to civilian leadership when this is over. But it's the least efficient way to run a company.
And maybe there are some who who have figured it out who figured out how to do it and still have everybody but, I don't think so. I I, you know, on a battlefield, you don't take a poll of, you know, How does the squad feel about, like, taking the next objective? Right. Right. We're all we're all doing it, guys. You know, I think if you replay those republic again, you'll notice that says the the benign dictator is the best form of government.
The problem is when dictator's son takes over, and he's not that that great of a person or the the daughter takes over and forget it. So I guess the other thing is, you know, I was looking the other day at your secret history of Silicon Valley, which is a fantastic video, talk you've given.
And in it, you asked this really pressing question because you'd you'd pointed out that the foundation of Silicon Valley came from crisis that drove the military industrial complex to put a lot of money and people here in the valley to solve a crisis need primarily in the cold Morgan then that gave way over time to the profit motive. And now we've gotten into this profit cycle and Silicon Valley you know, probably about 15 years ago to start talking about money, money, money.
And prior to that, there was sort of a time where there was a balance between product and profit and then you said, is there another crisis that will restart this valley cycle of innovation? How do you think that the cycle of innovation has stalled really? And do you think there is gonna be a crisis that we'll get back to that will mobilize us in a new direction or a different way? You know, that's a great question.
I've been thinking about that a lot than thinking about that with my work with the Department of Defense, thinking about my work with the large companies. And, obviously, my fingers and and teaching my students and start ups as well. You you know, in the in the 20th century, you get by accident, country had a national industrial policy that was driven by venture capital that was aligned with the the country's needs.
Hard to imagine now, but VCs invested in both tech and hardware and software and life science at the same firm. And things got so specialized that almost every VC firm now few exceptions. They don't they don't even know where where the life science folks live, even though they might be across the hall or in South San Francisco. And messes the investors.
And what happens, post 1995 when Netscape went public and then accelerated in the first bubble and certainly accelerated 10 years ago is venture capitalists decided that social media was like a gold Flint. You know, initial dollars investment, the was incredibly low even though he might have needed 100 of 1,000,000 of dollars of scale.
It might have didn't require tens of 1,000,000 of dollars to ship a hardware product or or something as difficult as semiconductors or supercomputers or anything else. And so all of a sudden, the needs of national interest and the and the versus the profits that could be made, pulled investments away from what I consider were the national interests. It wasn't that the life science folks weren't still investing.
They were making a ton of money in in therapeutics and devices and diagnostics and and and this may be the small overlap with tech and digital Beller. But at least for the traditional tech and hardware stuff, most of those dollars now no longer went to what I thought was hard tech, the things that National Science Foundation made, it went from largest profit.
And because the phrase national industrial policy is the 3rd rail of the United States, there's no way politically It's like saying, let's reintroduce the draft. Those are 2 things you don't say. Even though I think people would support some kind of national service, I also think people should probably support kind of natural industrial policy, not like forcing VCs to where to invest, but actually giving them huge incentives if we had an opinion of what would be in the country's interest.
No, I think I was really driving at the fact that there's 2 motivations to innovate. Right? If you have enough fear of the Russians, you are willing to try all sorts of things. If you have a great desire for profit, you are also willing to try a great many things. Other than that, you're gonna stay in some sort of comfortable you know, unanimous opinion consensus type behavior that we see in large corporations and, you know, in large parts of the government and whatnot.
And The, the Silicon Valley has been for a while now, the sort of crazy uncle in the garage, where we do stupid things, and 1 out of 20, 1 out of 50, Those stupid things turn into something wonderful. And there's a culture around that and methodologies, but there are these 2 motivations, crisis, and profit, and it's been profit for quite some time.
And I'm wondering if the pandemic Morgan something else might create a crisis motivation for us to innovate and and shake things up a little bit so that we see more progress So now you're gonna get into personal and political opinions. I'm gonna try to stay away from, at least, the political stuff, but it's involved here. You know, in the you mentioned Russia when we competed with the Russians in the cold war. It was pretty clear that the Russians weren't our friends.
And number 2 is that they needed Silicon Valley technology for advanced weapon systems. And in fact, what called the opposite strategy that we used in the cold war was we actually didn't beat them with more tanks or artillery. We beat Pete them with software and and, and semiconductor. Building smart weapons, smart reconnaissance, and and stealth computing horsepower they just didn't have. And we didn't buy stuff from them. They tried to steal stuff from us.
Well, fast forward today is that, China is trying to turn us into Great Britain of the 1950s 60s, meaning the the also ran compared to the new superpower, and they've done that with a combination of, aggressive theft you know, aggressive growth and incredible entrepreneurship investment and talent and whatever.
If you haven't been to Pearl River Valley or Northwest Beijing, yeah, they stole everything, but then they figured out how to make it at a size and scale that we haven't done since the 1950s or sixties here in the US. At the same time, China's become an an not by accident because they've had their fingers in this. A politicized issue that now Pete you up for, you know, whether you're a Republican or Democrat when, in fact, it should be a bipartisan national issue.
A u does the US have any national interests? Check that box? Yes. No. 2 is what are they? You know? Three is who we're competing with. And then 4 is, what do we do about it? And what's the role of startups and and venture capital? And again, since venture capital and startups are a completely unregulated market, and are profit driven that some of their investments and some of their interests have not been in the national interest.
What you probably know, and I should just let your, your listeners know who have any of them are are interested in building what are called dual use technologies that is, products and services that could be sold commercially, but also to the military. There's a set of investors that now meet every 6 weeks or so called the defense investors network. That's probably now 50, 60 venture capitalists that invest in dual use companies.
And are interested in in building the next generation of companies that actually are in the national interest. If you're building something, you know, in UAVs or or something else or hardware software and imaging machine learning, it's it's an interesting group of investors, you know, and the US government is waking up to this as Beller.
And, entrepreneurship is bringing up in all the services and combatant commands and and field agencies like there's no tomorrow because all of a sudden, leadership is discovering that twenty year olds coming into the military know how to do things that look like magic to the forty five year old. They're all computer illiterate. They all know how to not get online, how to hack, how to make codes have been, you know, Beller hardware and whatever.
And we finally figured out that that's an enormous resource the tap. So we're gonna see some changes, I think, in the valley. I think we're gonna see some changes of, you know, the the defense department Pete something called DIU, the defense investors network in place here that, basically funds, and help connect early stage companies, the defense department as a customer. In Q Tel has been a venture capitalist for now 2 decades.
That funds early stage things of interest to the government, scaling as well. At Stanford, we started a program called hacking for defense, which is now in 30 university. Which, has our students work on serious and real problems in national defense and, use the lean method to build the minimum viable by the end of those 10 weeks, but also a series of of these things to to work on on problems at scam. You've written a in the end, the measure of your life will not be money or time.
It's the impact you make. And so many of your former students are probably reaching out to you with questions about their career path right now? What do you say to young Pete? Who are we thinking where to put their life's energy right now? I always think that these times, whether economic crises or, unfortunately, most people go through personal crises of, you know, break up with significant others, divorces, death, new birth etcetera.
They create an opportunity for reflection because normally your heads down, doing your job, living your life, things are good, think you have infinite time, infinite resources, infinite, you'll always be young forever and whatever until something happens. And those crises are actually huge opportunities, and you ask me when I tell my students, don't waste a good crisis. It's the time to simply think think about this is is like working in ecommerce. What do you wanna do for the rest of your life?
It's okay. It's okay if you say yes, But now's the time to look around. And when you go, what else could I do? You go, well, you're sitting at home. You're, you know, reading news about people in Beller care or people in education or people somewhere Beller. They're a ton of online classes, maybe you ought to figure out what it's like to work in life sciences and make a contribution in in diagnostics or some maybe you're gonna reinvent school.
Maybe you're gonna reinvent how to deal with the less fortunate. Maybe you're gonna do now's the time when you're sitting at home just staring at a screen to take stock of your life, both past, present, and future because nothing was preordained. Your master, your own fate. You know, if if there's anybody who's a who's a swimming testament to that, that's mine. That's me.
I mean, they're they're all by all odds, uh-uh, I should have not ended up where I ended up, but I just assumed that no one else was gonna do it for me, and I just showed up a lot and and assumed I could do whatever I wanted to do. I think that's what most people forget. Is your master your own fate? And this is the time to to remember what that word carpe diem means, which is seize the day. This doesn't last forever. And and so you wanna make it count because you don't get it back.
And for talented and ambitious people, dislocation is always opportunity. And without dislocation, there's not as much opportunity for for the talented ambitious people because they're being held down by the systems. And, and so now we're having a sort of a global dislocation. And so that means that there's opportunity everywhere. Everywhere. Not just in a particular industry or a particular geography. It it's it's, you know, it's uncomfortable. It's a de settling.
Unsettling time, but it's the it's the, you know, as as the opening of the book what goes. It was the best of James, and it was the worst of times. And so grab it with both hands. Steve, this has been fantastic to catch up you. Thank you for your time today. I always love chatting with you. I hope to hear you back here again sometime. Great. This was fun, Ben. James, I I I really appreciate the opportunity to talk to you and your audience.