Zigging vs. zagging: How HubSpot built a $30B company | Dharmesh Shah (co-founder/CTO)

Dharmesh Shah (00:00:00):
Some of the best startup advice I've heard is startups should focus on one thing and be really, really exceptionally world-class at that one thing. And one of our early zigs is we are going to do exactly the opposite of that.

Lenny (00:00:11):
You have no direct reports and I don't believe you've ever had direct reports at HubSpot?

Dharmesh Shah (00:00:16):
I could become passively okay at management with some training, with some coaching. I don't want to spend any years of my life becoming passively okay at something.

Lenny (00:00:23):
What was that process like to define the culture?

Dharmesh Shah (00:00:26):
My co-founder and I were having one of our founders meetings and he said, "Oh, Dharmesh, I hear this culture thing is really important. By the way, can you go do that?" I'm like, "Okay. Brian, of all the people in all the company, is like, I am the worst possible person." It's not that I don't like people, I just don't like being around them a whole lot.

Lenny (00:00:40):
Something that's really unique and interesting about you is you're obsessed with comedy and keynote prep.

Dharmesh Shah (00:00:44):
It comes down to this metric that stand-up comedians use called LPM laughs per minute. I have custom software that I've written that will say, "Okay, here are the points at which the audience laugh."

Lenny (00:00:57):
Today my guest is Dharmesh Shah. Dharmesh is the co-founder and CTO of HubSpot and also one of the most fascinating and first principled thinkers I've ever met. In our conversation, we cover a lot of ground. Dharmesh's hilarious and ingenious approach to putting together a talk, including measuring laughs per minute, his biggest lessons from being a public company exec for over 10 years now, especially while being a startup guy at heart, how he approached creating and scaling the culture of HubSpot, which you'll find both hilarious and inspiring.

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Why founders and product teams are all fighting the second law of thermodynamics, how to zig, while everyone else is zagging, how and why Dharmesh leans into his strengths, including never having a single direct report during his 18 years of running HubSpot and so much more. This episode is so fun and will expand your mind in many ways. With that, I bring you Dharmesh Shah after a short word from our sponsors.

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(00:04:11):
Dharmesh, thank you so much for being here and welcome to the podcast.

Dharmesh Shah (00:04:15):
Thanks for having me, Lenny. It's an honor.

Lenny (00:04:16):
It's my honor, and thank you for joining me. You are a wildly fascinating human and so I thought it'd be fun to start with just a bunch of fun facts that I found about you online. And what I'm thinking is I'll just walk through them. Tell me if they're true as I walk through them, and then this is going to lead to a bunch of different topics that I want to talk about. How does that sound?

Dharmesh Shah (00:04:34):
Sounds great.

Lenny (00:04:35):
Okay, here we go. So one, you have no direct reports and I don't believe you've ever had direct reports at HubSpot.

Dharmesh Shah (00:04:42):
That is correct. 7,000 plus employees? Exactly zero direct reports from time, T equals zero.

Lenny (00:04:47):
Okay, we're going to talk about that. You also don't do one-on-one meetings as a result. You don't have reports to have one-on-one meetings with?

Dharmesh Shah (00:04:54):
That's correct.

Lenny (00:04:55):
You built many side projects while at HubSpot, including a product called Wordplay, which at one point made $90,000 per month and had 16 million users.

Dharmesh Shah (00:05:06):
That is correct.

Lenny (00:05:06):
You also bought chat.com for $10 million and then you sold it two months later for more money than you bought it for?

Dharmesh Shah (00:05:13):
It was actually 15 plus million dollars, but I had kind of stated eight figures, but... well, yes.

Lenny (00:05:22):
Ooh. Is this breaking news?

Dharmesh Shah (00:05:23):
It's breaking news, yeah.

Lenny (00:05:24):
Wow. So that's not what you bought it for?

Dharmesh Shah (00:05:27):
Yes.

Lenny (00:05:27):
Okay, and you sold it still for an undisclosed amount, is that right?

Dharmesh Shah (00:05:30):
Undisclosed amount, yeah. And more than that, I'll just say that.

Lenny (00:05:33):
Yeah, there was a profit, and I know you gave some money to charity and there's some promises you made where people commented on your LinkedIn post and you gave more money away, so it was awesome. Okay. Also, you're a billionaire?

Dharmesh Shah (00:05:42):
That is once again true. It's still true.

Lenny (00:05:45):
Great. Also, you were born in a village in India that had no paved streets, no traffic lights, no hospitals.

Dharmesh Shah (00:05:52):
That is correct.

Lenny (00:05:53):
Okay. Before HubSpot, you founded two companies, but I think the more important fact there is you promised your wife you would not start another company before you started HubSpot and then you ended up and went on and started HubSpot.

Dharmesh Shah (00:06:05):
Yes. I had promised her that I would not do start... I had to hang up the proverbial entrepreneurial hat. Best laid plans and all that. I met my co-founder in grad school, which is that I was going to... The plan was, "Oh, I'll go back to grad school and go find myself." And then the plan was to go eventually teach, not do another startup. But then I met my co-founder there and one thing led to another as these things go.

Lenny (00:06:27):
I hope she's forgiven you.

Dharmesh Shah (00:06:29):
I do too.

Lenny (00:06:31):
Okay. Final fact. So Kipp, is that how you pronounce his name? Kipp, your CMO?

Dharmesh Shah (00:06:36):
Mm-hmm.

Lenny (00:06:37):
Okay, great. So I asked him what to ask you, and he tells me something that's really unique and interesting about you is you're obsessed with copywriting and comedy and keynote prep. That you have a very unique approach to preparing for a talk and how you think about humor and slide design and story arc.

Dharmesh Shah (00:06:52):
That's very true. Public speaking is not something that comes naturally to me. So we're going to start there. We can talk a little bit about the copywriting, other things that are sort of related. And one of the... and I try to not do things that I'm not good at and don't enjoy. One of the rare exceptions that has snuck through is the need for me to get on stages as founder when we have our annual HubSpot event, our conference, which at the time when we did our first one, it was, like, 150 people at the Marriott. And then it's steadily grown since then, and so now it'll be like, 10,000 people in the live audience and hundreds of thousands online.

(00:07:33):
But as I came to this realization that I was not going to be able to talk my way out of it, and I saw where this was headed, I'm like, "Okay, this is something I'm going to have to actually learn, because I can't delegate it, can't talk my way out of it." And so I'm a big believer in this talent versus skill. So we all understand talent. It's like if someone has a talent for music, someone has a talent for athletics, whatever it happens to be. And that's true. That exists, but the way I think about it is talent basically controls the slope of the curve, but most things are actually acquirable skills. So for instance, if you have a talent for music, let's say, you might learn music faster than someone else and your ceiling may be higher, but does not mean that other people can't learn music, right?

(00:08:18):
It's like an acquirable skill. That's lesson number one. And lesson number two is that there is a process, and this is the engineer in me of just kind of functional decomposition of a problem to say, " Okay, in order for me to be a pretty good public speaker, what are the underlying sub-skills required in order to accomplish that? Okay, skill number one, you have to be able to stand up on stage and not pass out." That's kind the bare minimum. And so what I did over the years is to say, "Okay, I'm going to functionally decompose this skill of public speaking in front of," what I call high-stakes speaking. I've got to actually hold the audience's attention. That's part of success. So it doesn't matter what the message is, nothing else will matter if I lose their attention, which is increasingly easy to do now in kind of short attention span society.

(00:09:06):
And every year I will pick a different part of the public speaking skill set and say, "Oh, I want to learn about slide design and visual expression," Not the actual design. I'm not a designer. But then the one thing that I came up that has had the most impact is humor. Then you break that skill down just like the engineer would do. It's like, okay, well there's humor writing, there's humor, execution on stage, whatever. There's standup comedy. There's like, okay, so how do you put all these pieces together? And along that journey, I came up with this... and I've always had this, I'm a very data-driven, quant based person. It's like, "Okay, well, how will I know whether something is actually funny enough or not, whether I'm losing the attention or not?" And so in preparation for one of these high stakes keynotes that I do every year, I will have my talk, I will do practice runs.

(00:09:57):
I will have increasingly larger actual live audiences that I will practice it in front of. I will record those talks, everything so far. Nothing unusual yet. I will have the talks transcribed. I have custom software that I've written that will say, "Okay, here are the points at which the audience laughed." Actually audibly laughed. That's the only way it counts. And this actually... and it comes down to this metric that standup comedians use called LPM laughs per minute. And there's actually a benchmark that you can say, "Oh, well..." And standup comedians have a very, very high LPM. Business talks have a very, very low LPM. The most popular Ted talks there's a high strong correlation between the most popular Ted talks and high. So I have a goal, look, I'm going to have a minimum I want to improve. And so I have software that will calculate the laughs per minute.

(00:10:48):
And so then you learn these little kind of tools of the tricks of the trades. It's like, okay, if you're solving literally for that ratio of laughs per minute, there are two ways to improve it. One is to add more laughs. Two is to decrease the number of words between laughs, right? So one of the things a software measures, it gives me a visual map. It's like, here's the entire talk broken down with little square per minute of talk, or 30 seconds, and it's like, here's what they like. It's like, "Oh, here I went one minute and 17 seconds and nobody laughed." So I have to do one of two things. Shorten that segment if there's nothing funny that can be said without being overt about it, or I have to say, "Okay, I'm going to find something funny to try to inject into this and kind of break it up."

(00:11:29):
Anyway. And that's a long way of saying if I can get up on a public stage and learn that particular skill, anyone can learn just about anything. It just comes down to practice and measurement and just getting incrementally better over time.

Lenny (00:11:45):
Wow. I feel like I've just learned so much about you and how you think just from that question and how you approach this problem. On this humor piece, I'm curious, any lessons to share on how to be funny?

Dharmesh Shah (00:11:56):
One of the kind of tricks of the trade in humor, and you learned this particularly in stand-up comedy, but just any comedy. And I just hadn't thought of it this way, is that... and this is very tactical, but it works and it's a very easy thing to apply. So let's say you're looking at... and most of us, we're not stand-up comedians. We're not going to tell jokes in a classic sense.

(00:12:14):
And even stand-up comedians don't tell jokes. They actually have stories and they happen to have a punchline or two. So, two tactical pieces of advice. One is when you're telling the story, whatever the funny bit is, those have to literally be the last words of that particular segment. So once you deliver it, then you have to stop talking. And the reason you have to stop talking is the audience needs about a half a second to react, and then they want the permission to laugh. And if you're continuing to say words, it's going to make them feel awkward and it's going to be less funny. So even if moving a phrase in the sentence that you're about to say, it's like, "Well, that sounds kind weird to put those set of words at the end of the thing." Do it anyway even though it's awkward because it will actually work better.

(00:13:00):
That's kind of tip number one. Tip number two on LPM generally is that having stories such that you can spend the time setting up the story, but then have multiple funny bits, multiple punchlines, because you've already made the investment. I've said 75 words in order to set up this context, say something funny that's amusing, that's whatever. Say some more things. You already have the... and you'll see the stand-up comedians do this all the time. And then say something else that's funny because a laugh is a laugh. Doesn't really matter that it was still the same story. So leverage the investment you've already made in establishing context and scene, and then just squeeze more humor into the end of it in punctuated fashion.

Lenny (00:13:37):
I feel like the entire podcast could just be this one thread, but I need to move on to other topics.

(00:13:42):
One quick question. So you said ideal laughs for a minute is two to three-ish? Is that what you said?

Dharmesh Shah (00:13:46):
Yeah, two plus is hard for a business talk because stand-up comedians, the reason they can do it is that's all they're really solving for is LPM. In business talks, you actually have another agenda other than just being entertaining. You actually have a message. You're trying to promote something. Promote an idea, promote a product. So anyway, in my mind, for most normal circumstance, even if you can get above a one, 1.2, 25, you're in the top decile in terms of top, generally given by non-professionals.

Lenny (00:14:19):
Wow, this is incredible. So after every talk, you run this transcript and audio through your program to see how you did.

Dharmesh Shah (00:14:25):
Yes, yes.

Lenny (00:14:26):
And are you ever going to publish and release this program? Because that sounds really cool.

Dharmesh Shah (00:14:30):
I have this notion of what I call SoloWare. And SoloWare is exactly what it sounds like. It's software built for exactly one person, and in my case, that one person is me. And so I've been doing this thing for 30 years right now. I just build things that I would myself find useful. And the nice thing about Solo, one of the many nice things about it is that the UI is only for one person. You don't have to do a whole lot of testing because it only needs to work for one person. And the most important thing is that because it's only for one person, if it stops bringing utility, you can just turn it off. You can just stop using it. Versus if you have users, even 10 users, and you put it out there and then people would be disappointed if you took it down for whatever reason, that's kind of hard.

(00:15:10):
So anyway, that's the calculus I go through, "Is this useful enough to enough people where it's worth the calories of making it non-solo ware, making it even micro-ware?" I just made that up, but yeah.

Lenny (00:15:22):
Wow. Okay. Let's see how the YouTube comments react and how many people would want this and slash pay for it.

(00:15:28):
Let me go in a slightly different direction. We talked about how you have no direct reports, you've never had any direct reports? I know that's somewhat related to a piece of advice you often share, which is to lean into your strengths and to not do things that you're not amazing yet. So can you just talk about why this is the case? Why don't you have any reports? And then I think this idea of just strengths and the importance focusing on strengths.

Dharmesh Shah (00:15:52):
Yeah. I'll tell you the quick story as to how this came about. My co-founder and I had the founding meeting for HubSpot. This is the week where we've decided we're going to do this, and then we have this list of questions or topics for the founders discussion. One of them, and I think I've published a list, these are the questions all co-founders should ask each other in that kind of early period. One of the ones it's like, okay, well who's going to be CEO? This was an easy one because I had been CEO twice before and had figured out I'm not that good at it. I actually suck at that. And one of the reasons I suck at that is that part of the CEO role is being good at managing people. It's not just about leading and having a vision or whatever. Actually have to do the management as a craft. And so, that part I already had in my head.

(00:16:40):
I think Brian, my co-founder, already had in his head that with... That's how this... that was a very quick conversation. And in the moment, as soon as I had that win behind me, it's like, "Okay, well I don't want to be CEO." Brian wanted to be CEO because he'd never done it before. I'm like, "okay, that was easy." And then I said, "Oh, and by the way, I don't want to have any direct reports." It just popped into my head as an idea. I had not pre-planned it or anything, and I sprung it on him.

(00:17:04):
He's like, "Okay, well..." And the reason is because I have learned that I suck at management. I'm a reasonably smart person. I think I could become passively okay at management with some training, with some coaching or whatever. I don't want to spend any years of my life becoming passively okay at something. I would rather take those same calories and take the things that I'm good at that I actually enjoy. And those things are highly correlated. You tend to be good at the things you enjoy. You tend to enjoy the things you're good at. And Brian was like, "Yeah, sure." And then I'm like, "No, no, Brian, you don't understand." Because then I was like, "There's going to be a time in the company." He was like, "Oh, our VP of engineering just quit. Just be interim with something or whatever and have this team report to you until we find.." It's like, "We're going to have those things and you're going to have to promise to me we're not going to do that. We're going to..." It's like I am not going to have direct reports.

(00:17:53):
And we had that kind of heart to heart conversation, and it was one of the best decisions I've made both for myself and for HubSpot. Had I not made that decision, I'm a startup guy, I don't know that I would've survived at a company at HubSpot scale. And right now I can honestly say I'm having a better time at HubSpot now at 7,000 people than I was having at 70 people. And the reason is, I get all the upside of scale, which is I can make big bets. So we can have long-term things and plans, whatever, and plan for global domination without the downsides of scale, which is, "Oh, you're having to manage all these people and all the kind of mechanics." And that's hard. It's a hard skill to have.

(00:18:33):
I appreciate other people that have it. I don't. And so I get all the upside with very little of the downside of scale, and that's what kind of keeps me engaged and energized and happy at HubSpot. So I think it's been both productive for HubSpot and good for me.

Lenny (00:18:46):
I love that this is an example of how you can build a company the way that you want to build it. You don't have to do it the way everybody else has done. I imagine there's a lot of challenges to this too, but I think it's inspiring to just like, "Hey, I'm going to design a company the way I want to build it."

Dharmesh Shah (00:18:59):
Yeah, it's amazing what you can get away with in terms of shaping the universe to your liking. I think people automatically assume that things have to go a certain way, especially founders and first time founders.

(00:19:11):
It's like, you should at least try it. It's like, "Okay, well I want to do it..." First of, I'll give you another tactical example. Both my co-founder and I are night people, not morning people. Just happens... I didn't pick him because of that. We learned that later. And so we made it just from the early days of HubSpot in the early years at least, we're like, "No meetings before 11 A.M. Period." That was it. And then we adjusted it, I think maybe three or four years and we're like, "All right, we could have meetings before 11:00 AM. You just can't invite one of the co-founders to it. So you're welcome to meet amongst yourselves if you choose to do so." But anyway, yeah, it's little things.

Lenny (00:19:50):
That's an amazing rule. I have a personal rule where I have no meetings before 3:00 P.M. because I don't work anywhere. I can more so create my schedule, but the idea is I create this deep work time in the beginnings of the day.

Dharmesh Shah (00:20:01):
I love that. Yeah.

Lenny (00:20:02):
Okay. So you talked about you're a startup guy. At the same time HubSpot is approaching its 10 years of being a public company and I think 18 years since founding.

Dharmesh Shah (00:20:13):
Yup.

Lenny (00:20:13):
I'm curious what lessons you've taken from that experience being someone that's clearly startuppy person, being an exec at a very fast growing and large company. And I'm thinking from the perspective of a founder who's maybe thinking about starting a company or starting company, what advice you might have to share for them? And also for people in the exact role today?

Dharmesh Shah (00:20:34):
A couple of things. One, since we are publicly traded down, this doesn't get talked about enough. I'm going to go and get this out there and use this as a platform to get this message out, which is I think too many founders, once they get to a... They are very apprehensive of going public and going through the IPO process and being a publicly traded company because they think... I mean, that's like the beginning of the end. "It's going to change everything and my life is going to suck."

(00:20:58):
And I think they're over indexing on what they think it's like to be a publicly traded company. In my own personal experience, and Brian, my co-founder would attest to this. And yes, there's certainly a tax or things we have to do now as a publicly traded company that we didn't have to do as a privately traded company. But there are actually benefits. For instance, if you kind of venture back in private, let's say, you're sort of at a little bit the whim of the market and how VCs perceive your category and all these things or whatever. And you get, every now and then, when you're out raising a round of capital, you sort of get marked to market. Now here's sort of what the valuation is based on what someone's willing to kind of fund the company at. One of the nicest things, and this is underappreciated, is that we know right now what the market values HubSpot at. I can tell you that any business day of the week. And there's a niceness to that. And that's the other thing I tell folks within the company is that the valuation, which is we're in a relatively efficient market. The public stock market is a relatively efficient by the economic definition of the term, in efficient market. So, the valuation will oscillate around the value.

(00:22:04):
So, if you focus on creating values, here's what we're actually building, valuation will sometimes be higher than you deserve, sometimes will be lower than you deserve, but over the fullness of time, those two things will move in lockstep, right? That's been demonstrated. That's what happens. That's almost a definition of an efficient market is that information moves essentially, and then the valuation catches up with the actual value.

(00:22:25):
But here's the other social reason why I think founders should go public, which is... So in HubSpot, and I hadn't thought about this so I'm not going to take credit for being this generous, magnanimous person, is that in our first pre-public years, I think we were eight years old when we went public, we had created roughly a billion dollars in market cap, give or take. We hadn't been a unicorn. So it was slightly below when we went public. So HubSpot was never a unicorn because that's private privately held company, over a billion.

(00:22:55):
In the subsequent years, we went from a billion dollars in market cap to 30 billion, which is roughly what it is now. That first billion of market cap creation, a very small number of people got to participate in. The rest of the $29 billion in market cap, everyone, every public investor got a chance to participate in. And so I like the idea of, okay, well you believe in your company. There's lots of people that believed in HubSpot. It's nice to let them kind of participate. Our customers, our partners, our well-wishers, and they can sort of now have the upside. And you don't get that in the private markets because it's a very closed... you can't just buy shares in every private company you like. I wish that existed, but it doesn't. So, it's a way to let the market at large participate in your growth earlier.

Lenny (00:23:42):
What about from the perspective of just staying excited and motivated and finding things to take on, is there any lessons there for founders that are, I don't know, at a larger company and just, "Okay, this is going to help me stay excited about what I'm doing"?

Dharmesh Shah (00:23:57):
Yeah, I think this is... and Bezos exemplifies this, I think the best, which is, just because you're a public company does not mandate that you do certain things. All that's necessary is the kind of transparency that says, "Here's what the company is doing, here's what we're about, here's what we're solving." And he had this with his very first annual shareholders letter, which he obviously writes every year, which is, "This is what Amazon is about, we're solving for the long term or whatever." And he didn't say this in a snarky way. If you reread the letter, but if you read between the lines, it's like, if you don't agree with this approach, you should not buy Amazon shares. It's like, it's a completely optional thing. "You don't have to buy it, but this is the way we're going to run the business."

(00:24:39):
And he stayed true to that. And you can continue to do that. I'll tell you one quick story. This is once again, the anti-dissuade founders that might be reluctant to go public. So one of the core values at HubSpot that's been part of the culture from the early early days, literally days, is transparency. And so, one of our mechanisms by which we implement transparency is we've had this thing that says all information within HubSpot is equally shared with everyone in the company, period.

(00:25:11):
Everything. So our balance sheet, what we raised capital at, whether we're going to be able to meet payroll in six weeks, all those things, everything was transparent all the time. And with two exceptions. One is if it was illegal for us to share, let's say if we were looking at some acquisition or whatever and we had non-disclosure or the information was ours, not completely ours to share. And one example of that was salaries. So, we feel that salaries are co-owned both by the company and by that individual. And it's not up to us to share someone's salary if they don't want to do that. Okay. All right.

(00:25:45):
So, we had that transparency and then as we go public, we have this meeting with our investment bankers and our lawyers. This is in the IPO prep process, and they sit down and as part of this all day meeting, one of the questions is like, "Okay, so who are your designated insiders?"

Dharmesh Shah (00:26:00):
So who are your designated insiders? Brian nor I had ever taken the company public before, we're like, "We don't know what that is." It's like, "Oh, it's this group of people that will have access to all the financials and will know." And we're like, "Oh, okay, so how long is that list?" And they're like, "Five or six." And so then Brian says, "Seven? Seven?" And they're like, "Yeah, you can do seven." And I say, "Eight? Could you do eight?" And so we discovered through that mathematical induction process, is like, "If it's true for N, is it true for N plus one?" Is that there's no actual legal limit to how many insiders a company can have.

(00:26:38):
And so we ended up doing, literally the day we went public, is we designated every single employee to be a designated insider. So that allowed us to maintain the transparency thing because there was no rule that said you could only have 5, 6, 10, and there was hundreds of people. And we did not make it optional. We didn't say, "Oh," because there are downsides to being an insider. There's windows within which you can't trade, there's stuff. But we're like, "Okay, well, we believe in transparency. Everyone's going to have access to it, and it's not an opt in kind of thing. You're like, "This is it. We're all in it together."" And we still do this to this day, even at 7,000 people, everybody's an insider, so we can still share all the financials with everyone all the time.

Lenny (00:27:18):
You have many contrarian opinions is what I'm getting from this conversation already. And the way you're pushing the envelope on, "Can we have 10, can we have 1,000?" I'm curious if there's anything else there of just contrarian ways of running a company. I know there's probably many, but what comes to mind?

Dharmesh Shah (00:27:36):
So one of the phrases we like to use in our industry overall is this notion of first principles. I don't know who popularized it, but it's used a lot. I'm not going to say something snarky, but I think most of the time first principles is used, it's actually used incorrectly. Because the way first principles is supposed to work, as Elon would probably describe it, is that it's not first principles like first principles of what we believe, these are our core first principles in the company, it's the first principles of the universe. It's not what you believe is true, it's what do we all collectively know to be true to the best of our knowledge? It's science. That's physics. Like the first and second law of thermodynamics, those are first principles. All the layers on top of that are things that you think are true, are your assumptions or the decisions you made, and that's fine. You may have made some decisions.

(00:28:23):
For instance, transparency is not a first principle, it's a founding principle. It's not everyone should do this, it's a completely core thing. And so yes, I can be a contrarian, but you have to limit the dimensions. So the number of things that you're a contrarian on has to be greater than zero, but not too high. So what I think of is high conviction, low consensus bets. So high conviction is, "We really, really believe this," and low consensus is that most other people don't. And there are other people have phrased this differently. I think Peter Thiel actually says it more simply and elegantly, which is, "You need to be right about something that other people think you're wrong about for a very long time." And you just have to be right.

(00:29:09):
So one of the early high-conviction decisions we made at HubSpot was that we were going to focus on SMB as our target market. And I'll make a case both for SMB and for having a high conviction bet. It doesn't have to be your target market, but something. Once you make that bet, because it's low consensus, it's going to be hard and necessary for you to have the conviction because everyone disagrees, including your board, including your investors, including potential investors. So we have that for literally all 18 years of HubSpot's history. We have always had the... All during the IPO roadshow, it's like, "Yes, we get that you've on SMB, but so what's the path to the enterprise?" No, you don't understand. This is not a go-to market strategy. This is not like, "Oh, we're going to conquer SMB first," this is not Bowling Pin, this is not Geoffrey Moore, this is a, "We are here for SMB." That's what we're doing.

(00:29:58):
And so we maintain that conviction for a very long time, and that helps you make other bets that are secondary. But you don't want to reinvent everything. So I'll give you an example of something that we had in the early years of HubSpot that we kind of forwent. So in the early years of HubSpot, we're like, "Okay, we believe in a flat organization." One of the manifestations of that flat organization is we had no titles in the company. Nobody had a title. So even though you had business cards, whatever, we had no titles. If you introduce yourself in a meeting, and we had this up to hundreds of people, when you introduce yourself like, "Oh, I work in product, I work in engineering," whatever, it's not like, "I'm director of X or VP of Y," because that, as a thing, didn't exist.

(00:30:41):
Then as we scaled, we came to the realization that there's actual value that people ascribe to titles. And the reason they ascribe value to titles is because there are rumors that there's life beyond HubSpot. I couldn't believe it. "What? There's a life out there outside of HubSpot?" It's like, " Yeah, looks like." And then when we go to the Thanksgiving dinner or whatever, and I talk to my aunt, I need some shorthand. It's like, "Oh yeah, I got promoted to director. I got..." Just to show some progression because it's a signaling device.

(00:31:11):
And in this life beyond HubSpot and outside of HubSpot, it's like, other people are also going to want to know where I was in... It's like, "Okay," and this was the winning argument. I love this argument. Because we had a daylong meeting on talking about this one topic. And the winning argument was, "Dharmesh and Brian, I recognize why we don't have titles. I recognize this." And so they made the case of, "Yeah, there's value. And by virtue of you not giving us titles, that means you're having to compensate us in an economic sense in other ways. So you're losing out because it's like, is that value high enough to not do that?" That's a strong case.

(00:31:50):
And then we had it down to three choices. We're like, "Okay, well," we could have chosen to just stay firm with still no titles. We could have said, "Okay, we're going to have classic titles." Then I had the option on the table of, "Make up your own title." You can be grand poobah of X, and that can be your... And then we ended up making the decision to go with classic titles because that actually served the need of, there's a benchmark, there's a standard, otherwise it doesn't mean anything. So having made-up titles is pretty much the equivalent of having no titles because they lack any meaning anyway. But that's one of those things that, okay, you iterate, you change things as they go.

Lenny (00:32:25):
Yeah. I think there's so much to this, "Let's just try things differently. Okay, that didn't work. Okay. It's fine. We're just going to do what everyone else is doing here." And then often you discover a thing that, "Okay, this is actually better."

Dharmesh Shah (00:32:36):
Yeah.

Lenny (00:32:36):
Just to understand, when people have no titles, so someone say as a product manager, do you call them a product manager, or just like, "I'm an employee at HubSpot, I have literally no title"?

Dharmesh Shah (00:32:45):
At the time, it was no title. And now we have classic titles, so we have levels of things and-

Lenny (00:32:50):
Yeah. But back then it's like, "You're just here-"

Dharmesh Shah (00:32:50):
No title. Literally no title.

Lenny (00:32:50):
"... we don't know exactly."

Dharmesh Shah (00:32:51):
No title.

Lenny (00:32:55):
I saw somewhere that you paid everyone $5,000 monthly as their salary at the beginning of HubSpot, including yourselves for a long time.

Dharmesh Shah (00:33:00):
Yes.

Lenny (00:33:01):
Is that right? Okay.

Dharmesh Shah (00:33:02):
Yep.

Lenny (00:33:02):
Another fun fact. How long did that last, by the way?

Dharmesh Shah (00:33:04):
I'm trying to think back. It's a long time ago. I want to say probably the first year, year and a half.

Lenny (00:33:11):
Amazing.

Dharmesh Shah (00:33:13):
One of the things that, and this is one of the core... And not everything that we... Obviously not everything was right, but not everything is applicable to other companies. But there are some things that I think are, and one of the things that I think are applicable is just this need to solve for simplicity. It's like the simpler you can make things in the early years, the better off you generally are. And this is going to sound weird, so how we wound up with transparency is not because of some moral, it's like, "Oh, everyone deserved to have this," and this is the truth, so it's not some moral position. It was a, when we hired the first employee, and both Brian and I [inaudible 00:33:54], when we hired the first employee, we had to make the decision, it's like, "Oh, so what files do we give them access to and what..." And so Brian is just like, "All of it. Nothing to hide. Why would we do that?"

(00:34:09):
And so then we thought out... And then the output of that was like, "Okay, well, A, binary decisions are much easier than non-binary decisions." It's like, "Okay, everything or nothing is much, much simpler." And then it's like, "Okay, well, if it works for Employee Number Three in the company, why wouldn't it work at Four? Why wouldn't it work at Five? Why wouldn't it work at 50?" And we just kept doing it because it's like, "Okay, well, until it breaks, we'll just keep doing that." And this applies to so many different aspects of HubSpot, but as we try to start with the simplest possible thing that might work, and then, if necessary, add the complexity, add the things or whatever. Even our original, this is actually the tactical thing that everyone should take away, especially early-stage startups, very first HubSpot office has exactly four tables because aspirations for growth, because we were in a co-working space, so, we lived in WeWork back in the day, here in Cambridge, Massachusetts.

(00:35:04):
And so we had four chairs, and the only distinguishing characteristic of the four chairs, there were two chairs that were by the window, two chairs, not by the window. Okay, great. Hire that first employee. Other decision we have to make is like, "Okay, well where do people sit?" And so this one is like, "Well, it feels unfair to us that we would just get the window seats or whatever." It's like, "Okay, we believe in a flat organization, why?" And so what we did is we said, "Oh, we'll just do a lottery." And it's not like, "Oh, whoever pulls the thing gets the window seat." Whoever pulls gets to choose from the remaining seats, because different people ascribe different utility to different seats. It's like maybe you don't want a window seat. Maybe you like the darker corner, whatever it is.

(00:35:42):
And so we did that with employee number one. Then we did that with employee number two, and we did it every time we hired a new employee, we would do a seat shuffle. We're going to do the lottery, we're going to go down the sequence, and of all the seats, that was the algorithm. And our investors were like, "Oh, that's cute and that's funny. It's not going to work at 15, 20 people. It's not going to work at 50." It worked at 25 worked at 50, worked at 100, worked at 200. We updated the algorithm, we did some local optimizations, which we said, "Oh, there are some groups that should not be next to other groups because engineers like quiet time and salespeople don't, and so we're going to try to optimize a little bit." So it's not completely random anymore. Now it's like within this part of... Well, we still would do it. Then we said, "Okay, we're not going to do it for every hire, we're going to do it every quarter." And that stood, by the way, for hundreds of people, that mechanism still worked. It's like it's... Yeah.

Lenny (00:36:37):
Oh my God.

Dharmesh Shah (00:36:38):
So the moral of the story is, that one decision of simplifying, can you imagine the amount of politics we avoided? In corporate America, the amount of calories spent is like, "Well, your office is bigger than my office. Your desk is one inch higher or one..." Like, "No." It's like all of that just went away by virtue of that one decision. And we don't even know, it's incalculable, honestly, how much grief that saved us. And then there's all other side benefits to it in terms of people getting to know each other better, better chemistry, there's lots of good upside, but just the simplicity is almost always a better answer.

Lenny (00:37:13):
I love that everything often comes back to some algorithm you've developed or this N-plus-one approach of, "Let's just keep going until something goes wrong." This is amazing. I'm excited for many more of these hilarious, amazing examples of how you did things differently. You've been talking about simplicity. The opposite extreme is, you could say, entropy, and someone told me that you have this concept that every leader in every business is fighting the second law of thermodynamics, which I believe is entropy.

Dharmesh Shah (00:37:42):
Yeah. Well, the actual law is within a closed system, entropy increases over time.

Lenny (00:37:47):
Okay.

Dharmesh Shah (00:37:48):
Yeah.

Lenny (00:37:48):
Okay.

Dharmesh Shah (00:37:49):
We don't have to get into the [inaudible 00:37:50] of this.

Lenny (00:37:50):
No, I love this.

Dharmesh Shah (00:37:50):
I'm not a physics guy.

Lenny (00:37:51):
No, we're getting to the first principles of everything. Talk about that. What does that mean when you... And what does that look like when you're running a business?

Dharmesh Shah (00:37:59):
Okay, so in lay person's terms, the second law of thermodynamics, I'm paraphrasing here, is that, "Over time, unless you intervene, everything goes to crap." I'm paraphrasing. Which is, essentially, the amount of disorder and randomness in a system is going to increase over time. You see this like when you break an egg, the molecules don't come together and form an egg. That doesn't happen. It's always the other way around becomes disorderly and more random. That's the second law of thermodynamics. And this happens in companies as well, and it happens in code, almost every level of abstraction, you will see some variation of this. And so the way I think about this is that in the early stages of a company, you're essentially fighting to survive. Just trying not to die. That's the thing. Okay, priority one, don't die. In the second phase of a company, you're trying not to stagnate. But it's like you still want to be able to drive growth and be able to do things like, "Okay, we managed not to die, because stagnation is essentially death, so we're still trying not to die."

(00:38:58):
But then the third stage is you're fighting complexity. And that's the thing that you will crumble under your own weight over time, absent some external intervention. And you see this happen all the time, and it shows up and manifests in different ways, which is, everything gets more complicated. You need more layers of management, more headcount, more this, more that, more everything. Everything becomes harder. Margins go... It's like just bad things start to happen, you become slower. And that's the eventual... It's a slower death, because you're at more scale now, but it's still eventual death. Complexity does kill companies. Maybe not as quickly as other things, but much more reliably than other things.

(00:39:38):
And so this is why it's never too early to plant the seeds of simplicity, put them in there, make that part of the culture of the organization. And we have a thing that are part of our culture and guiding principles around what I call "fight for simplicity." It's literally those three words. And the message we're trying to convey is, "Simplicity is worth fighting for." That's thing number one, it's important, but the other one is that it requires fighting for. It does not happen, and it will be a fight, because the universe is working against you. And it will take calories to fight for that simplicity, because everything, even well-intentioned people, will introduce complexity because that's the natural way of the world. We want more tiers in our pricing, we want these knobs and dials in the product, we want these more... It's like all of it tends towards the second law and entropy increases. So anyway.

Lenny (00:40:28):
I love this. The algorithm for seating is a good example of this. Is there any other examples, either in the product or strategy, where you pushed for simplicity and that ended up being right?

Dharmesh Shah (00:40:39):
Yeah. So on the product side, in the early years, and Brian gets credit for the actual implementation of this. So we had a relatively broad product, and we can talk about that, pros and cons of that even in the early years, but we were solving for simplicity, and we got this from Apple, we can talk a little bit more about genesis of this, but we had a rule in the HubSpot product as the product grew in those early years that every time you added what we thought of as a knob or dial, called a feature, you had to take one out somewhere else. That's a net amount of... And this is a very coarse measurement. It's like, "Okay, well, not every radio button, checkbox, drop-down, whatever menu item that you put in your nav is necessarily equivalent, but it's better than nothing. It's better than having no constraints.

(00:41:27):
And so once again, this goes to the binary thing, it's like it just at least forces you to think about it, versus the... The other mistake I think people make in product all the time is that we measure the cost of a feature based on the, usually, or even a new product, based on the cost of implementation. That's the first-order thinking, it's like, "Oh, it's going to take six months to develop, it's going to be Y engineers and Z designers or whatever." Second-order thinking is thinking through the maintenance of that feature. It's like, "Oh, it's not just the first version that goes out, it's like now we have this code base and we have to support and improve or whatever." I get that. The third-order thinking, which I think is the most nuanced, and it turns out to be the most important, is the other costs that complexity adds.

(00:42:12):
Okay, we'll come back to this. So when you go from product number one to product number two, it's like, "Okay, product number two is going to cost us this much to develop, it's going to have this risk associated with whether it's successful or not, all these things. So there's going to be this carrying cost for product number two." What companies don't think through is that that is... And the maintenance of that, it's like, "Oh, we're going to need a team to maintain that new product." No, what actually happens is that now when you go from product one to two, you have added dimensional complexity to your business.

(00:42:43):
What I mean by that, it's not an incremental increase like, "Oh, we went from one to two," it's like, now every decision you make has to be made through the lens of, "Now we have two products. We just hired an engineer, do they work on product number one or product number two? We're going to launch a marketing campaign. Do we spend five minutes talking about product number one and two minutes talking about product number two? How do we do anything?" Every chart you look at in terms of the growth, revenue per whatever, it's all of it. Now, every chart that you ever had now has to be sliced by product one and product two in order to really capture that precision.

(00:43:14):
And so now you have this new dimensional complexity that you just hadn't planned on. And this applies, once again, every level of abstraction. So everything you do in your business should factor in the long-term cost of that complexity. And it should be worth it. Of course, you need, and I can make the case that you need to build product number two and product number N, N plus one over time, but you should be mindful about the cost of that complexity. [inaudible 00:43:39].

Lenny (00:43:39):
Is there something you've done to help operationalize that? Because I imagine everyone's like, "Yes, this is great. Don't do too many things. Simplify." Hard to do when you're like, "Oh, we got to drive growth. We have this awesome idea, we have this opportunity, we have a competitor." I know that this is part of the culture, so maybe that's the answer, but how do you keep people to actually this principle?

Dharmesh Shah (00:44:01):
So it's really hard, I'll say that. And things that have made it easier, it's a little bit idiosyncratic to HubSpot, so part of what has made it easier for us to keep things simple is the early constraints we impose. And we didn't know this at the time. So because we're building for SMB, we have a freemium product. All right, well, when you're doing that, there is literally a limit to how much complexity you can add, because we don't have an army of people that are going to spend in 18 months implementing something. We have to be able to support a product that's free. That's hard to do. It has to be simple enough that someone can get value from this thing. And so there's these self-imposed things.

(00:44:41):
So the lesson I would carry away is come up with systematic ways and mechanisms, as Amazon would call them, of putting guardrails and constraints in to the degree that you can. Because you can put words on a page and try to infuse it in the culture, it's like, "Oh, we believe in simplicity, we fight for this," and you can have meetings and you can get up in all-hands meetings and reinforce that, which I encourage you to do, but a really, even a reasonably well done system will outbeat any other mechanism that you can try to put it [inaudible 00:45:14]. Those things deteriorate over time. It's hard to scale them. So I'm a big believer in systems and imposed constraints versus-

Lenny (00:45:22):
I can't help but talk about this SMB piece, because I do a lot of angel investing, and classically, companies that focus on small businesses are very challenging, because getting to small businesses at scale is very hard. They're often more old school, not early adopters. You sell one and that's just one small customer, and they're not going to upgrade and roll it out to this large group, and they're not going to increase spend very quickly. For founders that are exploring SMB or trying to win something SMB, any advice other than just, maybe the advice is, "Probably don't do it, it's very hard"?

Dharmesh Shah (00:45:58):
No, my advice is absolutely do it.

Lenny (00:46:00):
Amazing. Great.

Dharmesh Shah (00:46:02):
A, because it's hard, and we'll talk about that, but B, okay, so I'll tell you this quick story in terms of how we chose SMB. And so my co-founder and I met in grad school, and he had done software, he was on the sales and marketing side, I was on the product engineering side, didn't know each other before grad school, and we met there. But one of the things, as we were canoodling on possible ideas of working together on the startup, we said, "Oh," we had done both an enterprise software before, the opposite of opposite of SMB. And there are definitely challenges with enterprise software. One of the biggest one is that life as an enterprise software company sucks as a startup. Sales cycles are super long, feedback loops are super long, you have to have sale, there's all this kind of... You have revenue concentration, which means you don't completely own your product roadmap anymore because whoever's writing the biggest check will ask for these three things and it's really hard to say no, especially as a startup, all these things that go along with that.

(00:47:03):
It's like, "Okay, we sort of know that game." At the other end of the spectrum, you have consumer startups. It's like, "Okay." The problem with consumer startups is they have very bi-modal outcomes. It's like either you can be super successful, the next Meta, the next Google, the next whatever, or it's going to be to zero. It is very rare that you have, "Oh, you made a few million bucks or whatever." Because either worked, because this is a massive market. The case for SMB is you have almost the best of both worlds. You have the nicety of enterprise, which is, "Oh, I can solve a product and people pay me money for it. I don't have to be advertising subsidized, I don't have this bi-modal outcome. I can build an incrementally more valuable business that's measurable."

(00:47:43):
So we're "Oh," we went from a 100K in ARR to a million ARR, to 2 million ARR because we're a business software company. But it has the benefit of consumer because there's millions of them out there to sell to, and there is no revenue concentration. You do control your roadmap. You have very short feedback loops. You can try pretty much anything that you want because there's... Like, "Oh, we have 50 customers. If we do this and screw it up, it's like there's 5 million more." Don't intentionally screw it up, but you can experiment, you can take on risks. And by the way, when HubSpot started SMB, it was literally a hundred times harder to succeed in SMB. And we could not raise capital. It was so hard because the common argument was there literally is exactly one company in the history of software that's made a global brand, billions of dollars of market that was into it. No one else had ever created SMB-focused software company before.

(00:48:37):
And we're like, "Yeah." It's like, "We know." But the nice thing about it is once you figure the physics of it out, because it's so hard to do, you end up, and this has played out, now there's lots more proof points. There's Shopify, there's a bunch of companies that have succeeded in SMB. But one of the things about SMB is that in the software market... By the way, all I know is software. That's the scope of my experience, is that in software, there's what I call reverse gravity. That over time, the market will always pull you up. Because what ends up happening is that smart founders and smart management teams will look at the numbers and say, "Oh, well, as it turns out, our bigger customers stay with us longer, pay us more, often have higher NP, all these things."

(00:49:27):
And so if you allow yourself to be led by that, which seems like a reasonable, smart thing to do, you will get pulled up in the market. And because of this reverse gravity, almost every company winds up being, every successful software company, ends up being an enterprise software company over the full list of time. That's what you see. The byproduct of that reverse gravity is that every software company ends up being an enterprise software company, so you end up competing with literally everyone. In the SMB world, you're only competing with the people stupid enough to stay focused on SMB, or try to do that. It's a harder thing to accomplish, but once you figure out the physics of it and make it work, it's a much more sustainable, much more fun model. So I encourage, particularly startups, and maybe you fight reverse gravity for some period of time, and maybe... But at least start there, try to make it work, until it gets really, really, really painful, and then try some more. It's like there's just so much value in SMB. It's that idea.

Lenny (00:50:29):
Okay, so this theme has come up a bunch already in our conversation. I asked Chris Miller, previous podcast guest, what you're amazing at and what I should talk to you about. And he said that you're very good at zigging when other people are zagging, and zagging when other people are zigging. And I think that's already come across in our conversation. I guess, is there anything else along those lines that you think might be helpful to people, in terms of how you think about that, or examples of that in action?

Dharmesh Shah (00:50:52):
So this comes down to high-conviction, low-consensus bets. And so we had like three things that we were zigging... And by the way, it's not just me. My co-founder and I both have that zig versus zag. And we ask ourselves this to this day, it's like, "Okay, well we understand this is the way the world moves, this is the way it's normally done, but have we considered this completely? And I'm not saying we should do it, but have we considered this alternate path?" So I would encourage you, at any stage of the company, you don't necessarily have to do the zig versus zag, but you should at least know what the zig would've been and have talked it through. So that's thing number one.

(00:51:29):
Some of the best startup advice I've heard and I've ever given is, "Startups should focus on one thing and be really, really exceptionally world-class better than anyone else at that one thing." And one of our early zigs is, "We are going to do exactly the opposite of that." So from year one, HubSpot decided to build an SEO tool, web analytics, blogging tool, content management, all of it. And every one of those categories that we were building a product in, literally this is year one, had great products with great companies behind them. And so it's like, "Okay, well, why would you do that?" And-

Dharmesh Shah (00:52:00):
And so it's like, okay, well why would you do that? And the reason is that the one thing we wanted to be good at was solving for the actual customer problem that existed, and the customer problem that existed was not a dearth of tools, lots of great SEO blogging, everything, all the tools existed, but SMB specifically did not have the wherewithal to put all those pieces together. So you and I, it's like, "Oh, I can throw a website up. I can put Google Analytics on it. I can put a Wufoo Typeform format. I can do all these things. I can wire doc. No big deal. Why is this so hard?" But for most people, most SMBs, that's a science project, and so we said, okay, in order for us to solve the actual customer problem, we have to solve the actual customer problem, even if it's uncomfortable, even though it's contrarian and every instinct and every advice we've heard or given says we should not do this. We should not go that broad.

(00:52:53):
But once we make that decision so that the other lesson learned, it's like, and we said this in the early years and it's gotten better since, let's say you do this, and this is the all-in-one approach, we're going to have this broad-based product. It's like, "Okay, we're going to be many miles wide and only so inches deep." One of these, and this goes back to our very systematic thinking, is like, "Okay, we're going to measure each of those individual product categories that we're now playing in. Are we in the top three in the market in that category? If the answer is yes, that means we invested too much in that category." We should not be in the top three because our value proposition is not that we are the top three blogging tools or one of the top three web analytics tools. We have the top three, whatever, our value proposition is that everything works so well together that that being in the top three and having those right features or whatever doesn't matter.

(00:53:41):
Doesn't matter as much as the all-in-one. And that means we over-index on one individual category by virtue. That was one of our heuristics for being able to tell that we were over-indexed on one particular aspect of it.

Lenny (00:53:51):
That is hilarious. Rarely do I hear we're in the top three and we're doing the wrong thing. We are too good at this.

Dharmesh Shah (00:54:00):
And by the way, and we changed that over time in the startup world, and now I would argue that most of the categories we play in, we are, as the surveys would tell you that we're in the top three in each of those categories now, but at the time when we are very, very resource constrained, we were trying to be disciplined and focused.

Lenny (00:54:17):
We're just racking up all these very contrarian approaches to company building. I imagine people listening to this might feel like, "Okay, cool, I'm just going to build a bunch of stuff. This is great. I worked for HubSpot." Do you have any heuristics for when it makes sense to go wide and not deep that you share with founders? When do you think it makes sense versus now you should actually follow the common advice here?

Dharmesh Shah (00:54:37):
Yeah, so it comes down to what problem you're solving. So I think one of the mistakes I think founders make is that, especially product oriented founders, is that we fall in love with the solution instead of falling in love with the actual problem, and you need to fall in love with the problem and putting that constraint on yourself forces you to understand and at least label and define what problem you're solving because oftentimes we can describe our product or whatever, but we struggle sometimes as founders to describe the actual problem. So if you can make the case, which HubSpot did, it's like, okay, it's not like we immediately jump to that like, "Oh, we have this epiphany. We're going to build the all-in-one, do all the things kind of thing." We're like, "Oh, in actually talking to customers", we considered doing it like, "Oh, we'll just do this marketing piece."

(00:55:27):
We'll just do this or whatever. It's like, no, that's not their issue, their issues it's not that these things don't exist, so if you, as a result of talking to customers and understanding the problem deeply, you come to the conclusion that you need to do more than just one thing, but then you should force yourself to have a discipline that we did, which is, here's why we're going to go a little bit broad, and here's how we're going to make sure that that broadness doesn't kill us. You have to have the self-imposed constraint. You can't have the best of both worlds. You can't say, " We're going to be all in one, and oh, by the way, we're going to be the best." No, you can't be the best. You can say, we solve this particular problem the best, but we're not going to have the best product along any of those dimensions.

Lenny (00:56:11):
Amazing. I love this advice.

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Lenny (00:57:33):
Okay, I'm going to go in a totally different direction for now and see where this takes us. I want to talk about flash tags.

Dharmesh Shah (00:57:38):
Sure.

Lenny (00:57:38):
So this is something that you came up with that came from a problem of you're founder, people come to you for feedback, you give them some random thought, and they treat that as gospel and they go do it and spending months fixing something that you're like, oh, it's just a thought. Talk about flash tags.

Dharmesh Shah (00:57:55):
And this is exactly the problem. It's not just, once again, most things exist at every level of abstraction. So anyone that manages people, anyone that leaves has this exact same issue. It's the megaphone issue. Someone will pass you in the hall when we had offices in halls, they'll ask you a question, and as it turns out, this is particularly true of founders. I have an opinion on everything, literally everything. So if you ask me a question I will have, it won't be thought out, it won't be right, but I will have one, right? And so the challenge is people will take that and over-index on what was an opinion, and because it's inefficient to qualify every time someone asks you something, every time you put an email out there and say, "Oh, by the way", this is just my opinion, you can put IMHO or something like that every now and then, but then people say, "Oh, that's just politeness", or something like that, right?

(00:58:43):
Okay, so here's what flash tags are literally, and I live most of my life through email, but I do this in other media as well. It's like the hashtag that we all know, but it's a discrete set of them, an escalating set of what I call the dying on the hill spectrum. So here's how it goes. The bottom hashtag is hashtag FYI, and the definition of the FYI is, "I came across this interesting blog post", or "I found this news, or whatever, just letting you know, no response expected", fine, go on with your life. Next level up is hashtag suggestion. "I have this thought that came into my head because I listened to the episode on Lenny's podcast with Sam from Microsoft or whatever, and this feels like it'd be a good thing to explore, but hashtag suggestion means I still don't expect a response."

(00:59:36):
"You don't have to do the thing I'm asking, but it is something that I would do if I were you, or at least I would consider if I were you." Okay, next level up is hashtag recommendation. Hashtag recommendation is, "I've thought about this a lot. I've done some research, I've done some digging, I've done some soul-searching. I would do this." It's still not a, "You have to do this, but if you decide not to do this, I would appreciate a response in terms of why you don't want to do this, what you learned in the process of exploring this particular thing, other alternatives or something." So it's like a response expected, but still not a mandate. And then the last one is hashtag plea. "I beg of you, we don't have mandates at HubSpot. I have thought about this so much to my core, in my soul, I believe this is the thing we should be doing. I'm going to plea with you to please just do this."

(01:00:34):
Still not a mandate, by the way, and so now it's commonly accepted. It's on the Wiki, and I use this multiple times every day. Other people at HubSpot use it. It is remarkably effective because self-descriptive hashtags are searchable, but you can go back, and it's like, "Oh, I want to know the last five hashtag recommendations that I made, how those turn out?" There's just so much goodness that comes out of it. It's not hard to understand or describe.

Lenny (01:01:04):
It's really interesting that none of them are just do it. You say that there's no concept of there's no mandates, essentially. Why is that? And do you feel like people just treat plea as, "Okay, I actually just really have to do this?"

Dharmesh Shah (01:01:16):
So we've always had, as part of early manifestation of HubSpot culture, we believe in autonomy. Lots of companies believe in autonomy, and we try to carry that idea as far as we can, and for the most part we do that and that, and we hashtag plea as part of that. This is like we trust our people. We try to hire the best. We expect them to learn, and we still want them to have the discretion to be able to make hard decisions, and we call them DRIs. We didn't invent that term directly responsible individual. And we'll talk more about, we should talk about more about decisions and how decisions get made but the reason I do hashtag plea is that it's a soft way of a mandate without being a mandate. It's like, okay, and by the way, the number of times that happens is I can count on the fingers of one hand and still have fingers left over.

(01:02:09):
That almost never gets to that because either I talk myself out of it. It's like, okay, and this goes to the, is this a hill I'm willing to die on? Right? It's like, okay, I get it. I may disagree. Is it the end of the world? Is it really going to do that much harm? And is the cost of imposing that founder card go do this? It does happen just not that often.

Lenny (01:02:34):
Awesome. And we'll link to that. There's a post you wrote about how to use these.

Dharmesh Shah (01:02:37):
It's flashtag.org If you want a quick way just to get to that blog post. I believe in domain names and shortcuts because I believe in simplicity.

Lenny (01:02:44):
You mentioned decision making. There's something interesting there. Talk about how you make decisions at HubSpot.

Dharmesh Shah (01:02:49):
Like most organizations, HubSpot historically has made decisions poorly. It is just all a spectrum. I think decisions that were the hardest things because it's hard to strike the balance, and we've evolved it over. I think we're much better than we were in our earlier years. The things we get wrong, most people get wrong, and so I'll tell you the things we get right now is that, so we're very data oriented. We like to make data informed decisions, but data doesn't make decisions, people do. So that's like thing number one. It's like you have lots of geeky founding companies or whatever. It's like, "Oh, we have a chart that says this, so we should go do that". That doesn't work, doesn't work outside, data's awesome, and we also have one position that we designate to make the decision, and that is not necessarily the executive over that team.

(01:03:41):
It's like, okay, well, and they literally own that. And we didn't invent this idea either. This existed long before HubSpot, but it actually works. It's like you have to decide who's going to make a decision, and that is almost the number one decision to make, and it's like, okay, don't pick people you don't trust to make the decision, and so that's kind of thing number two. And the biggest mistake, and we used to make this much more than we make now, is, and Amazon has stated this really well, theirs is called disagree and commit. We have a slight twist on, I'll tell you why we twist it a little bit. Ours is debate, decide, unite. That's our kind of phrase that we use in HubSpot culture, but the idea here, the core premise of it is that once you make a decision, getting alignment around that decision, because there will always be at any amount of scale, people that disagree with that decision because they were debating the other side, they would of picked option A and we ended up picking option B.

(01:04:42):
But it's extremely important that even when a decision gets made and we decided to do something that's contrary to the thing that you believe and would've debated for and did debate for, you lost on that particular one, fine. Hard to do, but so important, so valuable, and I'll tell you why we tweaked the Amazon one. So the disagree and commit sounds a little bit harsher than we like, which is out. It's fine for you, disagree, but then F and commit, right? It's like, okay, I get that. I'm biased. So the debate is, okay, so let's have open debate. Let's get all the options on the table. Let's actually make the decision, and then it's unite around that decision, not just, it's like, okay, let's come together around that, and that sounds more Hubspotty so anyway.

Lenny (01:05:33):
It is a lot more friendly. I was thinking that as you were talking, debate, decide, unite versus disagree and commit, and then there's have backbone in that one.

Dharmesh Shah (01:05:42):
The other thing I'll tell you, this is partly HubSpot thing with partly a me thing, and this will not surprise you at all, is I like to think systematically around decisions, and so I'll give you an example. The question I ask myself when faced with a decision or a thing that I'm trying to do is, "Okay, if I could write Python code of Python function to come up with an answer to this, what would be variables or the coefficients", okay, let's say you're not, if you were making Excel spreadsheet to make this decision, what would the columns be? All right, you don't have to decide the weights, but at least decide the factors. Then the next step is like, okay, here are the factors that I think matter in the making of this decision. I'm going to decide between these seven options. Here are the things I'm going to look at.

(01:06:33):
You would do this for picking a school to go to, or it works and you don't have to take it to the nth degree, but the exercise of going through it's like, "Okay, well step one, if I can just identify the factors that I think should impact this decision, that's an 80% win right there." Not because it's just in head. If the team works collectively to say, "Okay, here are all the factors that I think should contribute to the making of this decision." Then number two is, okay, we can't assign exact weights, so we can't write the Excel formula just yet or the Python code, but can we at least stack-rate the factors? This factor is more important than that factor. Now you get a closer sense of approximation. You're still not going to use the spreadsheet to make the decision, but the human making a decision has much better information they had than pre-going through that exercise.

(01:07:21):
One of the mistakes people make around decisions, and Amazon has written about this, I'll give you my take on it, is that the calories you spend on a decision should be proportional to the consequences of that decision, pure and simple. He calls them one-way doors versus two-way doors, which is a binary heuristic, which is, I love the elegance and simplicity of that. I'm taking it one level further, which is, it literally should be proportional. It's like, okay, if you have a really, really big decision that's going to be expensive to change, really, really, but a lot of calories making that decision, you may still get it wrong, but it's worth it. And it's not just around decisions, around activities and bests and things that you're going to do is that the calories you spend should be proportional to the outcomes and what you're seeking and the value of it.

(01:08:06):
And that's one of the things I try to apply to my life. It's like, okay, my geeky nature wants me to go nine miles deep and start writing code and do this thing or whatever, but I found that that one simple thing is like, okay, is this a first-order approximation where I can just identify the factors or it can, and the other thing that helps by the way is, and we'll talk about this. So one is my default position on most things, and I don't mean this in a negative way, is, no. It's like, "Oh, shiny object. Should I go do this?" "No." And then I have to force myself like, "Okay, I need reasons to say yes." I have to force myself because it's easy to say I love new things, I love new people, I love all of that. So I have a, sorry, but no post on my blog that life-changing for me.

(01:08:57):
And so the idea there is that this goes back to other first principles is time is with a few constants. So every time you say yes to something, by definition you're saying no to something else, and so this goes back to the product heuristic we were using in the earlier years of our class. Like, oh, when you put something in, you have to take something out because we want to keep the complexity roughly constant if we can. Same thing, so it's okay to say yes to things, but then you have to force yourself, based on the calories that you're committing to say, "Okay, well, what am I going to take out of my schedule, out of my life, in order for me to be able to make room for this thing?" Because as it turns out time, I have not been able to, despite my best attempts, bend the laws of space and time. So how do I make room for this new thing that I want to say yes to?

Lenny (01:09:44):
I love the way your mind works. I'm excited to talk about culture and how this connects and the way you think about culture and through all these frameworks and lenses. Before we do that, you hinted at this idea of how you pick what to work on. And I know you have kind of an interesting framework for how to decide what ideas are good and what ideas are worth investing in. I think both as a founder and a product leader, how do you think about deciding what is worth investing in?

Dharmesh Shah (01:10:08):
So imagine the Excel spreadsheet again. So let's say you're a value and idea for a startup, for a new product, a new feature, whatever happens to be, I think this applies. So the first thing you should look at is, and I measure things on a scale of zero to 10 because I like quantifiable things. I like to be able to multiply X by Y. I don't like letter grades, pet peeve of mine, but anyway, so put a number on it. It's like, okay, if this thing were successful, so let's say we're just picking a new startup idea. I'm considering starting this new business. If it were successful, what could it be? What's the magnet to the outcome? However you decide, it could be impact, it could be revenue, it could be market cap, it could be portfolio, whatever it is, it doesn't matter. I mean, it matters, but not relevant for this discussion.

(01:10:48):
So that's the potential. Thing number two is probability of success. And now I'm going to pause here and tell you the most common mistake people make is they think through the probability first without actually forcing themselves to think through the potential, and here's what happens is if they apply a filter that says, "Oh, I only have a one in 10 chance to pull this off, there's only a 10% success rate or whatever", not going to do that. Well, if it's a one in 10%, one in 10 chance at 10 billion, it might be worth it. It might be maybe not. Sometimes it's based on stage of life and things like that in terms of risks you can afford, but for instance, so by the way, and when I say probability, that's the biggie side. I mean, you can do it multiple ways. You can say, "Oh, here's the X percent chance you can do in statistics as an event entry."

(01:11:37):
It's like, oh, here's path A, there's a Y percent chance that happens, and here's what the outcome would be, Z percent chance or X. Anyway, here are the popular things, and you come up with what's called the expected value. Anyway, so let's say we just look at two branches like, "Oh, there's a fifty-fifty chance that I'm going to make 10 million." It won't tickle one branch just to keep this shorter. So the expected value of that is $5 million. That's literally the expected value. It's like, oh, you got a fifty-fifty chance at a 10 million outcome, and let's say you have a 10% chance at a hundred million dollar outcome or 500, whatever it is. So mathematically, it's like, okay, well, you should at least consider that other one, even though the chances are lower because the expected value is higher. Okay? So that's thing number one. Anyway, we'll get through the rest.

(01:12:22):
So start with the potential outcome, then look at probability not the other way around because then you're going to apply that mental filter and throw out ideas that may not have been worth throwing out. The third thing is what I think of is either passion or proximity. Do you care about this actual thing that you can actually bring to bear? And then the fourth is, since I need a P word, it's like prowess. Do you have some assets? Something that makes you uniquely positioned? Either if you're building a new product, you have existing lines of code that you can reuse, you have a market that you already have access to, there's something about this particular idea that you have an unfair advantage pursuing, and that impacts your probability of success, and this is the other reason. You need to look at all those things, and once again, no one thing is the deciding factor.

(01:13:15):
You're not going to just pick the thing that has the high expected value to take the potential times, whatever. It's like you have to sort of look at all of them and look at your own situation, but it helps to think through that, to have the discipline to say, "Oh, how big could it be? What are the chances? How much do I care about solving this problem? Is this something I can work on for two years, 10 years, 20 years?" And finally, "Why me? Why me? Why my company? Why would we succeed at this? Why it's our chance of success, even low, higher than the rest of the world?" Like why?

Lenny (01:13:48):
Okay, so I'm already picturing the spreadsheet here. For every idea you have, you basically have a column, potential probability of success.

Dharmesh Shah (01:13:55):
Yes.

Lenny (01:13:56):
Proximity, you said? Just like how...

Dharmesh Shah (01:13:57):
Particular passion.

Lenny (01:13:58):
Okay, passion.

Dharmesh Shah (01:14:00):
Yeah. I started with passion, and I have an issue with passion as a word because it's ambiguous, because we talk within startup circles. It's like, "Oh, pursue your passion." Sure, but it's like, you know what? Most of the companies that exist today that are even successful ones with awesome founders, they didn't necessarily pursue their passion. It's like they maybe are baffled in their scenario, particular problem, or a market segment or something like that, but it's like it's okay to become passionate about something as you dig into it or whatever. That's fine too.

Lenny (01:14:38):
Yeah, one of my favorite startups that I've invested in, it's called Zip. It's a procurement platform. The founders were not passionate about procurement when they got into the space, they just saw a huge opportunity. They thought they could build a much better product, and they got passionate about it once they started working on it and finding products.

Dharmesh Shah (01:14:54):
This is the thing. So yes, if you can find your true calling and this is what you were meant to do in the world, and you have the opportunity to do it, great. That's a tiny, small fraction of people. It doesn't happen. You may not even know what your passion be, especially if you're a first time founder. It's like, okay, well, I haven't seen the world. I don't know.

Lenny (01:15:15):
Okay. So just for people, if they're creating a spreadsheet for all their ideas, for startups, it's potential, probability of success, passion, prowess.

Dharmesh Shah (01:15:24):
Yes.

Lenny (01:15:25):
Okay. Amazing. Okay, let's talk about culture. I know you spent a lot of your time on helping build HubSpot's culture, create the original culture. You created this epic culture code deck. I think it's 128 pages. So maybe just to dive into it, what was that process like to define the culture of a company and maintain the culture over time?

Dharmesh Shah (01:15:48):
I'll say awful. No, the beginning of it. Okay, so I'll give you the very quick story because my co-founder and I, having one of our founders meetings or founders dinners as we do, and he had been meeting with this CEO group, and he said, "Oh, Dharmesh, I hear this culture thing is really important." By the way, the word culture had never been mentioned prior to this conversation, the halls of HubSpot ever. And this was how many years in? This is, I want to say three or four years in. I can check the records because by the way, even Brian and I, even back when people work on offices, most of our communication was over email and Async. We've always been big believers in that written form, but anyway, so I can tell you whether you know where cultural was used or not, and it was not.

(01:16:36):
And he's like, "Oh, I've heard", because talking to us, "Culture is super important. Dharmesh, can you go do that?" I'm like, "Okay, Brian, all the people in all the companies, I am literally the bottom decile, if not the worst possible person. It's not that I don't like people, I just don't like being around them a whole lot, and from what little I know of culture, it sort of involves people. I don't know, but it seems like I'd be the wrong person." But anyway, I'm a team player. I'm like, okay, it does feel like it would be important, and so I took on the task and I didn't really know because when he said, "Dharmesh, can you go do that?" What does that mean? And so when I took it to mean, it's like, okay, well culture actually already exists. We have a culture. It's like whatever it is, and it's working pretty well, companies doing well, people seem happy.

(01:17:32):
And so I said, "Okay, well, what I'm really trying to do is kind of describe the culture that's there." So it's not creating culture, it's articulating the culture, so we know what it is, and so then this is the side of me showing up again. So the question I asked myself is I literally asked myself this question, which is, "If I could write a Python function that would measure the probability of success of a new person coming into HubSpot, what would the factors be?" What are the things that if I could measure, if I knew I had a true function that says, "Oh, on a scale of zero to 10..."

Dharmesh Shah (01:18:00):
If I knew, if I had a truth function that says, "Oh, on a scale of 0 to 10, here's how they rank on this, and this, and this, and this, and this, and this," I could approximate how successful and how good they're going to be for HubSpot. That's my exercise.

(01:18:13):
Okay. So I did an internal survey, and I'll tell you why this was such an awful experience in the beginning, because this is also a good story. So once I took on this task, I sent an email to the company. It's like, "Hey, everyone. I'm just going to be digging into culture, so I'm going to send this survey out. I just want to get an understanding so I can..." Great. And the negativity and the visceral response to that one email was literally up until that point, it still ranks in top three, worst things I've ever...

(01:18:47):
People felt so negatively and so strongly, and I was not expecting it, right? And I'll tell you, the one line that really just was gut-wrenching was like, "Dharmesh, here we're talking about culture. Next, we're going to have like posters up on the wall about excellence. HubSpot is not the company that I thought I joined." Like oh. It is just like the deep part of me is like I just did not know how overloaded that idea of culture was, right? And so then when you dig into it, it's like, oh, because so many companies had done it so poorly and just didn't walk the walk or whatever, this is why. There was a reason why there was this kind of negative response.

(01:19:30):
So anyway. So I went back to my thing. It's like, "I get it. So I'm going to try to describe what we have, and I'm going to write this truth function." So I wrote the slide deck, which had exactly 16 slides, and that answered this one question, which is, if I could write a Python code, what are the factors, so what are the attributes that we would look for in humans. And the reason I came up with that particular question is that when I did the survey, I did the NPS survey, which everyone knows that you would send to customers. It's like, "Oh, on a field of 0 to 10, how likely are you to recommend HubSpot as a place to work?" and the other NPS question is like, "Why did you give that answer?"

(01:20:12):
As it turns out, here's the thing that I've learned which was troubling, everyone was happy, and the reason they were happy is because of the other people at HubSpot. That was the number one reason, which is both good and bad. It's like okay, well, that's awesome, but that doesn't tell me anything, right? It's like, okay, well, that's a self-reinforcing kind of recursive loop. And so that's when I was like, "Okay, well, what makes the people at HubSpot the people that are at HubSpot? Let's come up with the attributes that define what it means to be one of these people that makes other people happy."

(01:20:44):
And so we came up with the original set of things that were embodied in that slide deck, and I called that slide deck the Culture Code deck, and the reason I called it the Culture Code deck is not because it was a code of conduct, or a moral code, or, "This is how companies should be run." It was because if I could write code to kind of define the culture of HubSpot, this is what the code would look like. And since that point, it's like the question I keep asking myself is, if we could have an operating system that ran the company, just the geeky part of me, not that you could do that, but what would that look like, right?

(01:21:17):
There are very few original ideas I've had that are any good. One of them is this thing that culture is a product, period, and that every company builds two products, one is the product they build for their customers, and the other is a product they build for their team. That's what culture is, it's the product you build for your team. And let's say we stipulate that that just happens to be true. Just humor me for a minute. If you assume that's true, then a bunch of things kind of follow from that postulate, that hypothesis, which is, "Oh, well, just like we would never build a product without talking to customers, we would never build a culture without talking to the customers of the product," which are the people. So we do a repeat of that original NPS survey we've been doing every quarter now forever to figure out what the NPS of that product is, our culture product.

(01:22:15):
The other thing is like, okay, well there's no product person in the history of humankind that would've said, "Oh, I built this product. It's awesome. I'm done." No one would ever say that, and this is the number one mistake, I think, I'm biased, I think founders make, is that they say, "Oh, we have an awesome culture, and my job is to preserve the culture." That is not the job because the needs of your customers change, the needs of the employees change, right? The culture exists to help the great people do great things for the company. That's why the culture is there, and the things they need later as the company scales are different. And so just like you would never freeze the lines of code of a product, you would never freeze the lines of code of a culture. Culture should be iterated on just like you iterate on product.

(01:23:07):
And there's so many other things that kind of fall. So just like in a product, you will get feedback from the customers like, "Oh, here are the bugs," and we actually call them bugs. It's like, "Oh, here are the bugs in the culture." At the all-hands meeting, so we have this survey that comes back. Once again, transparency notion. Every single survey response, it's anonymous in terms of who submitted it, we publish it, right? The quant score of the subjective thing, everything, then we will categorize it, and then at the next all-hands meeting, we call them all-minds... Anyway, a little-

Lenny (01:23:37):
I love that, all-minds.

Dharmesh Shah (01:23:39):
All-minds.

(01:23:41):
And it's like, "Okay, so here are the things that we heard." Just like we would do for a product meeting, it's like, "Oh, the customers, here's what we're hearing back." It's like, "Here's the bug that you've identified. Here's the ones we're going to fix." And when we're going to fix some, we're going to commit like, "Oh, you said this was broken. Okay, we're going to do something about that." Here are the things that like, "Yeah, I know you don't like it that way, but it works as design," which we do in product all the time, right? And you should have the right to do that. It's like, yep, some people are going to disagree, and there may be any number of reasons why we think that needs to stay the way, we're not saying necessarily forever, but as it stands, we are not prioritizing this, we are not fixing that thing that you think needs fixing for whatever reason.

(01:24:21):
So the one lesson here is, very few things I've learned that I think are universally applicable, that one, I think, is right, and just so much greatness and goodness falls out of that, is if you think of the people as customers and if you think of the culture as product, it takes away this kind of abstract nature of working on culture and then takes away this thing that I heard this back in the early commentary from the HubSpot team, is like, oh, well, culture is not something you really build because that seems fake, that seems inauthentic that you just go, it's like, "Oh, we're going to craft this culture." No, we craft in the same way. I'm not saying we're going to impose it, like we're going to do this often in isolation, but we're going to work on it, and it's something you actually do manifest, and it's not just up to the founders.

Lenny (01:25:07):
Wow, what an amazing story. You're definitely getting laughs per minute for me, and I think there's at least one laugh per minute so far in this podcast. That's amazing. And I think this point you just made about your job is not to preserve the culture as a leader, I think that's really profound, because I think most people don't think that. They think their job is, "We need to maintain our culture as we grow." It's all fading away, our culture's changing, but your point is that that's good and that's great.

Dharmesh Shah (01:25:31):
Bringing it back to product, I think this is an important thing. This is the second order lesson learned after you start with the culture is product, is that one of the challenges almost everyone will deal with is that you have these things... And so by the way, just because culture is product does not mean there's not a sense of having what some might label as core values, right? Because we have this in product as well. There are core values that the product believes in, like we believe in our product, that we're going to hold constant through it, right? Like, "Oh, we're building for SMB. Want it to be easy to use." There's constraints that we put on ourselves that are intentional that even though we iterate, we're not going to iterate away from these things, kind of that high conviction bet thing again.

(01:26:10):
But not everything that's part of your product is a core value, right? So not everything that was part of your culture in the early years. So transparency is one that has endured over a long time, right? It's part of our core value, and we preserved it even though it was troublesome through the IPO. I shared that story. And then there are things that we changed that were part of like, oh, we believe this meritocracy thing in a flat organization, but the manifestation of that was a bud with lack of titles, right? And so we changed that. It's like, "Okay, well, there are things..."

(01:26:38):
And here's the other thing. It's a mixed metaphor problem because I haven't been able to come up with a good metaphor yet, but there'll be things that you have that are kind of core... And the way I describe it right now, I'm just going to put it out there, I'm kicking myself for not coming up with a better metaphor, is like federal versus state law. So there are federal laws we have here in the United States that says, "Okay, here are the things, and these are the inalienable rights of all citizens of the United States. These are the things that are core." But then we have state things, right? It's like, "Oh, for this particular state on these particular aspects, they can optimize for their particular state." It's like, "Yes, we understand this is the corollary, but for our state, we're going to do this."

(01:27:21):
So we have something similar at HubSpot. We have a core set of things that are part of the culture, part of the thing that's like, "Okay, here's what we believe," and then there are things that the individual groups, so our head of engineering could come back, it's like, "Yeah, I know our overall, like the founder's leaning is X, but for my particular group, that doesn't really make sense. We're going to do this."

(01:27:40):
So I'll give you an example. So one of the core things from the early years of HubSpot is like we don't care about what hours you work, like from what time to what time. It's like it doesn't matter, like literally does not matter. We didn't track it, we don't care. But then over time, it's like, "Well, we have a support organization," and that organization, as it turns out, does matter to our customers, right? Like we need to have coverage and things like that. It's like, "Okay, well, that sort of makes sense," right?

(01:28:04):
But then you sort of have to, A, pick your battles, but then fight back. For instance, transparency, there have been times where individual org leader's like, "Okay, Dharmesh, I know you believe in this transparency thing and Brian believes in this transparency thing, but it's inefficient for someone that is a SDR in the sales organization to have access to the high-order financials. It's a waste of time. It's a distraction." That was the argument. It's like, "You may be right, but the binary decision, the fact that we value transparency so much, we're going to..." Yes, maybe it is a distraction, fine. And the other one is like, "Oh, I don't want my team to have it because I just don't..." You know, we were hiring so fast and it's like, once again, that's a lot of trust to put into people or whatever. It's like yeah, but then one of the other lessons is cultures over time become self-fulfilling prophecies.

(01:28:57):
So in the early setup, big lesson learned. So when I put the first version, the public-facing version of the Culture Code out there, and I got feedback from the team and like, "Dharmesh, you say this in the Culture Code deck, and it's just not true." It was not true enough for us to kind of state that as a thing. And so the thing that I did is in the deck, I have what I call these little liner notes. It's like stuff going on. It's like, "Oh, this is not really true yet, so it's more of an aspiration. This is how we want it to be, but we're not walking the walk yet on this thing."

(01:29:32):
So I didn't take it out because I wanted it to be an aspiration, and here's the thing that I had not thought it through. I cannot take credit for it. What happened over the fullness of time is that those things that were aspirations became increasingly true by virtue of being in the deck because as people join, it's like, "Oh, that's something we aspire to, so I'm going to pretend that's actually the culture of HubSpot," which is exactly what we want. So it's okay to say things that are aspirational. Just call them out. Don't present things that are not true, but they'll back off of the things that you would like to be true.

Lenny (01:30:04):
Wow. There's so many lessons there. It reminds me of Airbnb, actually. I was there when they created the original, there's these six core values of Airbnb. One of them was simplify, it turns out. And then, I don't know, some number of years later, the founders realized, "We're not actually good at this," and values should reflect who you are not aspire to be, and I like this middle ground you found of like, "I'm going to put in here, but I'll note this isn't necessarily who we are." We didn't do that. That would've been a smart move. So they removed that core value. They're like, "We're not actually this," and going from six to four. There's another one they removed. So I was really impressed because we're like, "Okay, wait." Because it comes up in meetings. They're like, "Simplify. No, this is actually really complicated."

(01:30:46):
Okay, so what I'm going to do, I have one more question about AI, and to make this work timing-wise, I'm going to cut the lightning round, so hope that's okay.

Dharmesh Shah (01:30:55):
Totally fine.

Lenny (01:30:56):
Okay. I know AI is very top of mind for you.

Dharmesh Shah (01:30:58):
By the way, this is my diabolical plan to have to skip the lightning round because that's the thing I'm not good at, like I'm not [inaudible 01:31:05]. Anyway, you know I was dreading the most.

Lenny (01:31:07):
Playing 4D chess here. You knew exactly the timing and you're like, "I will take this long for all these answers so it'll perfectly play out."

(01:31:16):
So I know you're spending a lot of time on AI. It's on many people's minds these days. You built this product called ChatSpot. Is it still called ChatSpot? Is that the product you changed the name for or that's still ChatSpot?

Dharmesh Shah (01:31:26):
It's still ChatSpot.

Lenny (01:31:28):
Still ChatSpot. And I know that you've handed that off now to a team actually that's working on this.

Dharmesh Shah (01:31:28):
Yep.

Lenny (01:31:31):
It's not like just the entire mesh project anymore.

Dharmesh Shah (01:31:33):
Yep.

Lenny (01:31:34):
So I don't know exactly where to go with this, but just why is AI so top of mind? And where do you think people should be spending time? Where do you think things are heading? What comes to mind around AI?

Dharmesh Shah (01:31:46):
Yeah. Obviously, I'm not alone in my excitement, but I will say this. So I'm about to hit the 30-year anniversary of my working in commercial software, right? So I've been at this for a long, long time, and that's all I've ever known, that's all I've ever done. And the last time I was this excited was when the web first came along in the mid to late-'90s, and I'm like, "Oh, this literally changed everything," right? It's like relevant to everything. It's like literally everything is going to be impacted by this thing called the internet. And I was in my early twenties, right?

(01:32:27):
I've been here for mobile, I've been here for social, I've seen lots of things that people got really excited about, but nothing to me has hit the Richter scale to the degree that AI does, and the reason is, okay, so if you think about early computers, PCs, that kind of gave us compute at scale, which was awesome. The internet effectively gave us distribution at scale. It allowed us to take information, products, whatever, and get them out at scale because everything was now connected, where before it was not. What AI gives us now is cognition at scale, the ability to literally amplify the human brain, right? That's never been done before. Look, not that we haven't been trying, but now we have demonstrable evidence and products that actually work. We've used ChatGPT and products like it. And so it's life-changing, right? And so for the product people out there, which is a lot of you, AI...

(01:33:28):
By the way, the internet unlocked a massive opportunity because, especially for startups, it's like, "Oh, we can just reimagine the world with this new thing called the internet that was not possible a year ago and now is. What can we now unlock?" and lots of great companies were created. I think something similar will happen here.

(01:33:45):
And there's a couple of things just tactically that I think are possible vectors that can satisfy my spreadsheet of if I were going to choose ideas, and these apply across industries, is that, so as software companies and product builders, most of us have always called our products like, "Oh, we build intuitive products." We say that, right? As it turns out, it's just not true because as a user of X product, whatever it happens to be, it's like, okay, I've got this mental model, the thing I'm trying to accomplish, and then I have to translate that into a series of clicks, drags, touches, and swipes in order to accomplish the thing that I want in the software product that I'm using, and what varies is the degree to which that translation needs to occur.

(01:34:31):
But there is this impedance mismatch, right? There's a translation that has to happen from what's in my head, like, "I want to remove this background in Photoshop," "I want to create this report in HubSpot." And so the opportunity now is that we're going from what was an imperative model, this is what engineers would call like a step-by-step, you give instructions to the computer like, "Do this, do this, do this, do this," and then hopefully you get the output you're looking for, to what engineers would call a declarative model. A declarative model is you describe the outcome you want, not the steps to get there, and the closest analogy that most people are familiar with is SQL, the querying language, right?

(01:35:08):
So before SQL, if you wanted to get data out of a system, you wrote code that says, "Okay, loop over all my customer records, then filter out the ones that have less than a million dollars in revenue, and then give me the result," and SQL said, "No, just put a where clause on it. Describe the data you want, and what columns you want, and how you want to order it, and what filters you want to apply," and it figures out if the database figures out how to get you the thing that you're looking for.

(01:35:31):
Now we have the ability to do that for interfaces for software, right? So instead of saying, "Click here, drag here," it's like, "I want you to generate a report that's all my customers in Europe that we signed up last quarter that were more than 100K in ARR." And you just literally take the thing that's in your head and express it in whatever medium you choose, text, voice, doesn't matter, and the software now can actually... So now the technology exists to pull that off. Did not exist before, and now it exists.

(01:35:59):
I know it didn't exist before because six and a half years ago, I built this product called GrowthBot. That was a chatbot for HubSpot software and business software generally for marketing and salespeople. It's essentially what ChatSpot is now. Amazing product, GrowthBot, and it had just one teeny tiny small problem, which is it didn't work. Really well-conceived, really brilliant idea. It just didn't work and the technology wasn't there. You just couldn't do it with any degree of fidelity because AI hadn't... And now you can. And that's what caused me to go prove out my theory, is like I had a chip on my shoulder, particularly with that idea, right? But I think, and I'm not suggesting that web and mobile interfaces are going to go away, but there are a class of use cases across pretty much all software where we can make things easier for the human by not forcing that translation layer and just make it truly intuitive. Yeah.

(01:36:58):
So thank you for coming to my TED Talk or my [inaudible 01:37:01] podcast.

Lenny (01:37:03):
So what's great about watching you, because you kind of build in public with this AI stuff, that you're doing it, like your approach to learning about this is building and doing. When you launch ChatSpot, you tweeted that it took you many, many late nights of work.

(01:37:17):
For people that want to understand what's going on, get ahead of where things are going, build the skills to be relevant in the future, do you have any advice? Is it just build stuff and do it, or is there anything else you'd recommend for people that want to understand what the hell is going on?

Dharmesh Shah (01:37:34):
Yeah, and this is very simple practical advice, and this is the same thing for engineers in software as well, is don't try to go learn something because you think it's worth learning. Find an actual problem that you care about and go try to solve it with that new thing, right? If you have something tangible that you're trying to do, so for instance, going back to the talk around public speaking, it's like, okay, if I had said, "Oh, I want to learn about humor and stand-up comedy," I don't think I would've accomplished a thing. But I had a goal in mind, which is like, "Hey, I need to be able to get up on a stage and a hold of a thing and I have this measurable thing."

(01:38:13):
So whatever it is, whatever line of business you're in, whatever you do as a professional, I guarantee you there are ways AI can help you, even with the tools that we have out there right now. So either use the tools, build tools on top of the APIs that exist, very easily accessible right now, very cheap to start. Yeah, just do it and iterate. And I'm a big believer also in learning in public as well. That's why the Culture Code is out there. It's like, okay, well, if you accept the fact that culture is a product, we're going to learn about things much better, like instead of just getting feedback from the employees at HubSpot, why don't we put it out to the world? Because the internet is exceptionally good at telling you why you're an idiot, right? It's like it's one of its core strengths. So I would recommend, have a goal in mind, write about it. I'm a big believer in writing generally, but yeah, do it in public.

Lenny (01:39:07):
I love that advice.

(01:39:09):
Is there anything else that you wanted to share, or touch on, or leave listeners with before we wrap up?

Dharmesh Shah (01:39:17):
We covered a lot of territory.

Lenny (01:39:19):
Yeah, we did. Yeah, we did.

Dharmesh Shah (01:39:20):
I might do the quit while I'm ahead thing. I'll leave it with this. So I have my definition of success I came up with years ago that I kind of still stand by and that HubSpot actually stands by, is success is making the people who believed in you look brilliant. That's it. What I like about that is it's not like an inward-facing thing. This is the kind of, like customer folks, like all the employees that join your company when you're a founder that were kind of silly enough to, "Could I join you on this thing?" whatever, like customers that believed in the early product that completely sucked, investors that believed, like all of that, do what you can to like when they reflect back on it, it's like, "Oh, boy was I smart to having believed in Lenny and what he's doing." So yeah, I think...

Lenny (01:40:07):
That is really beautiful. Dharmesh, you are wonderful. Thank you so much for doing this.

Dharmesh Shah (01:40:14):
This has been a lot of fun. I'm glad we were able to put it together.

Lenny (01:40:16):
Same. We covered so much ground. We got through everything that I was hoping to get through and more. Where can folks find you online if they want to follow what you're up to and maybe reach out if they have questions? And then how can listeners be useful to you?

Dharmesh Shah (01:40:27):
Sure. So I'm Dharmesh, D-H-A- R-M-E-S-H, everywhere. I'm not only findable, I'm unavoidable on the internet as it turns out. And follow me on social media. Tell me where I'm being an idiot and what I can learn. Here's the thing, leave a YouTube comment and tell me which Lenny episodes were your favorite so I can go back, because I've been binge-watching anyway. I'd love to know.

Lenny (01:40:54):
And then speaking of that view, I know you have websites of your content, you have your YouTube channel. Where can folks find those things?

Dharmesh Shah (01:41:02):
Yeah, if you just go to dharmesh.com, that'll have links to the other places. I'm probably most often on LinkedIn as it turns out, which is a whole topic for a whole other day, but...

Lenny (01:41:13):
Yeah. Awesome. All right. I'll let you go. Dharmesh, thank you so much for being here.

Dharmesh Shah (01:41:17):
Thank you. Bye, everyone.

Lenny (01:41:21):
Thank you so much for listening. If you found this valuable, you can subscribe to the show on Apple Podcasts, Spotify, or your favorite podcast app. Also, please consider giving us a rating or leaving a review as that really helps other listeners find the podcast. You can find all past episodes or learn more about the show at LennysPodcast.com. See you in the next episode.