SVCO: Phil Libin — Be Epic: The Art of Bold Decision Making

Joel Usher (Oxford MBA student 2014/15): Alright, good afternoon everyone. Welcome to the second 20:20 session of Silicon Valley Comes to Oxford. I think we’re all very excited to spend this time with Phil Libin who, as you know, is the Founder and CEO of Evernote. The topic of making bold decisions is fitting for a man whose company’s vision is to replace productivity in the workplace — no small task. Let’s hear what he has to say. Please join me in welcoming Phil Libin.

Phil Libin: Thank you. Nice to be back at Oxford. Let’s start this the way that all Oxford lectures start. Everyone stand up for a minute and we’re going to play rock, paper, scissors. There’s a prize and this is highly relevant to what we’re talking about. You guys probably know the rules. It’s rock, paper, scissors. The way this is going to work is I’m going to count to three and then I’m going to throw either a rock, paper or scissors. You’ll do the same thing at the same time. No cheating. If you beat me, stay standing and if you tie or you lose, sit down. With every round, two thirds of the audience is going to be eliminated and one third will stay standing. It will very quickly lead to just a couple of winners. It’s sort of like what happens when your start up is growing exponentially but in reverse. This will be exponential shrinkage.

On three, ready? One, two, three. I threw rocks so only paper. Stay standing if you threw paper. If you threw scissors or rocks, sit down. Only paper. If you threw a rock, you have to sit, just paper. Great. Okay, maybe two more times and we’ll get down to winners. We’ll send Rosie here if you win… Speak to Rosie afterwards and we’ll send you a fabulous gift prize of Evernote stuff.

Are you ready? One, two, three. If you threw a rock, stay standing but only rock. If you’re scissors, you have to sit down. If you threw a rock, stay standing. What do we have? Last one, probably. One, two, three. Okay, I threw scissors again so rock, rock, rock. So whoever is standing, remember who you are. If you guys want to go see Rosie at the end, we’ll send you awesome stuff from Evernote. Thank you.

You guys did well in that. Well prepared. This is really how I think about start-ups, about different stages of the company and about decision-making. This game of roshambo, rock, paper, scissors, it’s a model that I think actually works pretty well in how you think about what you’re going to do if you’re going to start a company. It kind of works like this.

I think there are three stages of companies. Basically, there are scissors, there’s rocks and there’s paper. Start-ups, really raw start-ups are scissors. If you’re just starting a company, you’re very fast, you can dart in and out, you can cut away at the existing, established industries. You threaten big paper companies. You’re very quick, you’re very sharp. Your whole goal at this stage, your whole goal as a scissor is to be impressive, is to be flashy, get attention and be sharp and pointy. When you grow up, if you grow up, the scissors that are sufficiently epic and successful, if you’re lucky enough, they become rocks. I think that is the stage Evernote is entering or maybe entered a year or so ago. I think we spent most of our time as scissors but I think now if feels like we’re a pretty different company. You get into the rock phase. When you’re in the rock phase, you’re bigger, you’re not quite as fast but you’re not really slow yet. You can’t do things quite as quickly, you’re not quite as sharp but you have impact. When you move, you have quite a lot of force behind you. You have users, you have momentum, you have resources that you can really execute very well.

If and when you grow past that stage, it hasn’t happened to me yet so I don’t really know what I’m talking about at this point, I think you become the really big company. You become paper. You basically have teams of lawyers and accountants and you have partnerships and logistics and you have all of the assets that paper brings.

The threat model works in the way that you would expect it to. Little start-ups, scissors, really threaten paper. They really threaten big, established companies that have been in the industry for a long time. Paper’s kind of defenceless against them. The big companies can’t really do anything against raw start-ups. There’s basically no defence because start-ups don’t need to have a lot of customers, they just need to have a few to show momentum, to be impressive, to be flashy.

At the medium size, rocks, at the stage we’re in, we become a lot less threatened by raw start-ups because we can look at them as a source of ideas. If they do something really clever, we’re not stupid enough yet that we can’t respond. We can still respond. We can still improve upon things that we see that other scissor companies are doing but when we move, when we do something, we bring tens of millions of users to bear right away so there’s some impact, some force, but we start having to worry about the big companies all of a sudden. All of a sudden, we’re threatened by Microsoft and Google and the big established players because we’re going after the same customers. Now we all of a sudden have to care about partnerships and relationships and things we didn’t really care about before. Likewise, with paper.

The journey, in video game terms, kind of looks like this. This is your game map if you’re starting a company. You’re starting at the bottom there, you’re a bunch of scissors and you’re going to fight to advance to the next level, to the rock phase. If you’re super lucky, or not, you may become a big company of paper. You try to progress your company up the scoreboard and see if you can get the high score, which is currently held by Apple.

But how does it work specifically? Let’s talk about what it’s like at the rock phase. This is the phase that I know the most about. Evernote is my third start-up and I’ve spent quite a while in this phase. Why does that say rock? That’s totally wrong. The thing that you can do as a small company is make corrections quickly. There we go. Okay, at the scissor phase, the one that I know the most about, your job, at this phase, is to get noticed. It’s to do something that is good enough. To seem important, to seem like it has traction, to seem like it might actually change the world, you have to be flashy and you have to be impressive. There’s really no such thing as a safe decision at this stage. You have nothing to conserve, you have nothing to protect. It’s all upsides and this leads to lots of mistakes in decision-making. Lots of pretty common mistakes that we’ve made ourselves that I’ve spent a lot of time thinking about. One of the big ones is how you think about competition. This is a question that you get all the time, especially if you’re pitching to investors. If you have a business plan, they’re going to ask about competition. Who else is doing this? Isn’t the space too crowded? How many other start-ups are working in this area?

There’s a very specific way to think about competition at the scissor stage, which is basically this. If you’re a scissor, it doesn’t matter if you’re better than the other start-ups. The other start-ups are irrelevant to you. What matters is an absolute level of achievement, not a relative level of achievement. You don’t want to be the best scissor out there, you just want to be good enough to get past the point to get to the next level. It’s like the carnival ride when you have to be this tall to ride. It doesn’t matter if you’re the tallest kid, you’re not in competition with anyone else; you just have to get to a certain level of greatness.

What other start-ups are doing is actually completely irrelevant to you. You don’t have to time to respond to them, they don’t threaten you, you’re both going after the same things but it’s not a zero sum. You don’t have time to look to your competition for ideas or inspiration because you only have a limited amount of time to do something really great, to do something really impressive. When you’re thinking about being an entrepreneur, when you’re thinking of starting a company, when you’re imagining the game field, you sort of think it should look like this. This is the entire industry, that line is the line you want to cross to get to the next level. There you are and you’re by yourself. There’s no competition, you’re just kind of this one sharp, fast start-up company down there. This seems like a good situation but it’s really not, this is a weird place to be in.

If you’re literally the only person or the only company working on a problem and there’s nothing else in sight, maybe you’re just really, really brilliant and no one else has thought of this but chance are you’re working on the wrong problem, chances are this is a totally empty field because there’s just nothing to do here and you’re just hallucinating if you think that you can make a difference.

Much more frequently, the situation that you want to see is something like this, where there are a few established players. There are big companies that maybe haven’t had any innovation in ten or fifteen years. Maybe there was a bunch of innovation a generation ago. Now there is a bunch of established players, there are a couple of established players and you’re the new start-up challenging them. This is classic time to start a company and get in here but most of the time, it doesn’t look like this. Most of the time, if you’ve had the idea to start something, there’s quite a lot of others so most of the time, it kind of looks like this. The first thing to realise is as far as the individual scissors are concerned, as far as you’re concerned is that this is the same as that. It doesn’t matter how many of you there are because it’s not a race, you just have to get some number of these past this line of relevance, past this line of mattering. Any who get up there are going to wind up winning or getting to the next stage. Getting to the next stage or getting to a rock stage is a pretty good outcome. It’s certainly not the end but it’s a pretty good outcome for you, for your investors, for initial employees. You just have to get to a certain level of good enough.

What does that mean? There are lots of times when an industry starts up and you have many, many start-ups in a space and none of them really get to a level of greatness. This happened in the late nineties for example with the first generation of the on-demand economy companies like Webvan and several others that did on-demand delivery of groceries and products and movies and things like that. For all sorts of reasons, there were maybe ten of these companies. Some of them had really big valuations as start-ups, they all sprang up and they were all going to challenge the established order of large retailers and none of them really went anywhere. It wasn’t that they didn’t go anywhere because one of them won and killed the others; none of them won. They weren’t in competition with each other, it was just that the industry wasn’t actually ready. The logistics weren’t there. The industry wasn’t ready to have any of them deliver a good enough, sustainable, real experience so that whole industry died or at least, went into hibernation for ten or fifteen years until it was ready to do it again and now you’re seeing the next generation of it.

This is the situation that you ideally want to see but most of the time, the situation actually looks like this where you’ve got a bunch of scissors. You’ve got some paper but you also have rocks. The rocks are the companies that probably started a few years before you but have already been reasonably successful in innovating and creating this new space. These are the ones that really threaten you as a scissor company because they can still pay attention to what you’re doing; they can do what you’re doing better. But most of the time, when an investor thinks that this is a good field to invest in and most of the time that entrepreneurs think, “I should go and invest in this field,” is exactly the wrong time. It’s exactly a couple of years after someone has come along and built a couple of $1bn or $2bn start-ups. They are already a medium size and have proven that it can be done and now there’s rocks there and that’s exactly when most people are going, “Ah! Me too!” That’s actually probably the worst time.

When Evernote got started, our industry, productivity, was very much all scissors, all paper, no rocks. There hadn’t been any real innovation in that space for 20 or 25 years. It was stuff like Microsoft Office that hadn’t really changed in a long time. It was just us and a few other companies and was a great time to get into productivity. The industry was changing. Things like Smartphones and apps were coming out and presenting all sorts of opportunities and we didn’t have to worry about competition at all. There were a lot of other companies that started at the same time we did. Most of them are gone now but they’re not gone because of us. We had nothing to do with those companies succeeding or failing, some of them have succeeded tremendously, like Dropbox. It’s just that all of us that got started were aiming at the big players, disrupting the industry and didn’t have any rocks to worry about. Now it’s probably not a good time to start a productivity start-up because there’s Evernote, there’s Dropbox, there’s a few other companies and we’re paying attention. We’re not big enough and slow enough yet, hopefully never but certainly not yet.

The same thing happened with car sharing services. When Uber and Lift and a few of the other car sharing services and ride-on-demand services started five or six years ago, the entire industry was paper; it was the established taxi companies and limousine companies. It was slow, there had been no innovation for 15 years. There was a lot of money to be made and several companies started and became pretty successful but now is probably not a great time to start a car sharing or taxi company because you have Uber and Lift and Halo and all these others that are at the rock phase.

It’s the same thing with wearables, with fitness trackers and wearables. A whole lot of them got started about five years ago and that industry at the time was all paper. Health and wellness was dominated by horrible big insurance companies and things like that. There was really very little innovation, certainly not in the consumer space. A bunch of companies started making wearable devices and it was a pretty good time to be a scissor then, probably not so much now.

The bad news about this is as you’re sitting here thinking about, “What area should I get into?” the first ten ideas springing into your mind are probably springing into your mind exactly because they’re the wrong ideas to do. You’re thinking of them because someone else in recent memory has been successful. It’s those other companies that have been successful recently that are your biggest enemies. You need to find a field where there is a ton of money but no one has been innovative or successful in the past ten or twenty years. It’s a little bit harder to look and of course most investors will lead you in exactly the wrong direction when you talk to them about this because they’re just trying to repeat what their friends and competitors were successful at two or three years ago.

So how do we actually make decisions? Well, there are a couple of interesting ways to think about how the human brain works when it makes decisions. There is one thing that I like which is a real simplification. Is there anyone here who is a neuroscientist or knows anything about neuroscience or cognitive science? Anyone? Great. Best answer ever. I was going to ask you to leave temporarily but apparently there is no one here. This is a gross simplification but it’s a useful model. It’s a part of the brain called the amygdala. It used to be called the lizard brain but since then neuroscience actually realised it doesn’t quite work like this but it’s still useful to think about. It’s a part of your brain which is really, really, really old in evolutionary terms. It exists in most animals. It dates back hundreds of billions of years. It’s the part that handles the fight or flight reflexes. It handles fear, a lot of negative emotion and in software terms, if the brain were software, this would be super mature. You’d be at version 11 of this thing. It basically exists in almost every animal going back forever. It’s optimised for making risk-based decisions and then there’s the rest of your brain. Well, not the rest of it but there’s other portions which are much newer — the neo-cortex, which is much more uniquely human and is also found in some higher-level primates. In evolutionary terms, it’s much younger. It’s only found maybe hundreds of thousands of years old as oppose to hundreds of millions. That handles the higher level functions of strategy, or language, of beauty and art. In software terms, it’s not even of beta quality. It’s really buggy. It just hasn’t been around that long. It hasn’t been de-bugged. What happens is when both portions of the brain are working and making a decision, the amygdala dominates, the fear-based portion dominates the decision making. You think that you’re making a decision based on positive outcomes but you’re not. You’re making a decision based on fear, based on uncertainty and it kind of looks like this.

Let’s say that you’re classically making some decision and you’re comparing two different versions. Should we make product A or should we make product B? So you get a group of people together and you write down all the positive and negative attributes between version A and version B and you try to compare positive to negative and make some kind of decision but what’s really happening in this case is you’re only comparing negative to negative. You think later on that you can rationalize and that you only looked at the positives but really the lizard brain is kicking in here and you’re trying to make the decision that is the least bad, not the most good. The more people in the room, the worse this gets because then the herd instinct kicks in and the more people there are sitting around a table trying to make a decision, the more one person does something that’s based on fear and preserving the status quo and then other people pick up on the body language and before you know it, everyone has their arms crossed and looks uncomfortable. Every decisions become more and more conservative and more and more depressing and more and more made out of fear. When you compare positive to negative, what you really wind up doing is letting the negatives dominate and you wind up saying, “That guy’s the choice because he’s the least bad,” not because he’s the least good. This is a perfectly good way of making decisions for some things. The amygdala is well-evolved for making decisions that are about survival and particularly long-term survival so if you’re ever faced with a decision like, “Should I go into that tall grass? I think I may have seen a lion in that grass,” you shouldn’t make this decision based on this kind of thinking. If you need to make a decision like, “Should I eat these berries I found on the ground? I don’t know what they are, I’ve never seen them before but I’m kind of hungry. Maybe I should eat these berries I found on the ground.” That’s a good decision to make like this. If, on the other hand, you’re making long-term decisions, you’re making decisions that aren’t about survival second to second but are about what kind of product you should make? What should the name of your company be? Who do you want to get married to? Decisions that are long term and that are hopefully based on positive outcomes, you can’t make them in this style. You have to turn off the lizard brain. You have to supress the lizard brain as much as possible. The way you do that, there are lots of techniques but the basic one is you just force yourself to do it. You just basically don’t look at the negatives, you only look at the positives.

When you have two versions like this and you are at a scissor stage, when there is no such thing as a safe decision, you can’t do anything conservatively, you can’t do anything to save yourself. Your whole job is to be either oppressive or die quickly. You just look at the positive. You just compare positive to positive and ignore the negatives. In this case, you would say, “That one,” because it’s better. You force yourself explicitly. In meetings, we do this all the time. We go around the table and we hear all the complaining and then we say, “Now, I only want to hear the positive reasons for doing something, I don’t want to hear the negatives. We understand the negative reasons, we don’t need to enumerate them.” In fact, if you talk about them, you poison the decision-making process.

I’ll give you one example of how we did this in real life. It was when we were picking the logo for Evernote. Early on, we decided we needed a logo for the company. We went through several design iterations and we came up with three finalists. We had hundreds of choices but we came up with three finalists and it was these. These were the three choices for the Evernote logo. We gathered a group of people. It was early on in the company and there were maybe 15 of us and we went around the table and said, “Okay, well what do we think about these?” We decided that we were going to go with this one, the geometric shape because it was the least bad. As we went around the table, all of the comments were negative comments. It was, “Oh, we can’t really go with the elephant.” I said, “Hey, I kind of like the elephant.” “No, we can’t go with the elephant because elephants are big and heavy and clumsy, well not clumsy, but they’re big and heavy and so if we go with an elephant, people will think our company is big and heavy.” “We can’t go with an elephant because elephants are really sacred symbols in India so maybe we’ll be offending people in India.” “Oh we can’t go with an elephant because the elephant is a symbol in the US of the Republican Party and people will think we’re Republicans.” We wound up deciding after a while to go with that one because that was the one that people had the least bad things to say about. Every decision goes like this. You guys know this. You’ve been in plenty of rooms where that’s the style of decision-making. After everyone left, maybe a day later, I was talking to one of my co-founders and we said, “Yeah, we’re going with the elephant.” It had the most bad about it but it also had the most good. We did tell the designer, “We’re going to go with the elephant but please, please, please do something so that it doesn’t look like we’re Republicans.” It came out like that.

The value of making this decision was hundreds of millions of dollars of free advertising and marketing that we were able to get out of this just because it’s a nice logo but had we been making the decision based on what’s safe, we wouldn’t have done this. We made this style of decision hundreds of times based on what products to build, which countries to launch in, what kinds of investments to make. At the small level, every decision needs to be based on what has the biggest chance of getting us noticed and being impressive and being flashy? If it’s a dangerous one and it gets us killed, that’s great. That’s fine. We just go on and become scissors again somewhere else. That style has worked well for us.

When you get to rock stage, things change. You really start to threaten the smaller companies, the scissor companies. You don’t have to worry about them anymore but all of a sudden you have stuff to protect. You have resources, you have assets, you have to make decisions based on protecting what you currently have and you now start worrying about the big companies, the paper companies, which is a totally different way of thinking because all of a sudden they can hurt you. So what does that mean for decisions? Well the central thing at that phase, at the rock phase really becomes focus. You have to actually focus.

You have to go from being flashy, from throwing things against the wall to see what sticks and trying to be as impressive as possible to actually working on something that has impact. You have to take advantage of what it means to be a rock at the rock phase, which is to build something that actually can move the world forward, something that has impact. Something that isn’t necessarily bright and flashy at a single point of time but something that you can push over a sustained period of time over many years and actually shove the world along a little bit. It’s a very different way of thinking and prioritising. One way to look at it at the rock phase is you’re kind of growing up a little bit and you have all of these conflicting, tangled interests — what your users want, what your employees want, what your investors want, and media, and competition and partners. You have all of these conflicting interests and at the rock phase, you want to have many years of sustained pushing. The way to do that is to untangle these interests. It’s to try as much as possible to align these interests so that what your employees want is the same thing as what your customers want and what your investors want and what your partners want. It’s the structural conflicts of interest… if you allow them to fester, they basically prevent you from applying force in one direction, on one thing over many years which is what it takes to have impact.

There are lots of examples up here but one of the things it means for Evernote is this is the main reason why we reject all indirect revenue. Our business model says that we basically don’t make any money from advertising, from data mining, we’re not examining what you put into it, we’re not trying to sell you stuff. The reason we do that is because for us, since we’re about productivity and we’re trying to make you more productive, if we’re trying to make you more productive, except for the times that we were trying to distract you and get you to buy something, that would be a structural conflict of interest. We could get away with it for a while but it would get to the point that what customers want isn’t the same as what investors want and our partners want and it would get hard to sustain that kind of force. We try very hard, even if it means giving up short-term opportunity at the rock phase, to align these interests.

This led to a specific decision that we had to make about a year ago. Our tag line is ‘Remember Everything.’ This is a great tag line. It’s pretty genius. As far as two word tag lines go — Remember Everything — think it’s better than Just Do It. That’s three words. Remember Everything was good. I’m not just saying that because I wrote it. I’ll never write two words again that were as good as Remember Everything. It’s just nice. It’s catchy. It feels right. The problem is, it doesn’t mean anything. It doesn’t mean anything much at least. It really has a very general purpose. We still use it, just now it’s a kind of a sound but when we were inspired by this tagline, we really made Evernote about remembering everything. We went after all of these lifestyle products. We had Evernote Food for taking pictures of your food and remembering your meals. We had Evernote Hello, we had Peek, we had all of these products. One in particular was Evernote Food which was a product that I loved. I love food. I love remembering it and taking pictures of it so we basically built Evernote Food for people like me.

At the scissor stage, that’s totally appropriate — whatever you think is flash and can get you noticed. At the rock, we needed to focus and I never knew what focus mean until I heard Jony Ive quoting Steve Jobs and now you hear me, quoting Jony Ive, quoting Steve Jobs about focus. He said, Jony Ive said, Steve used to say that, “Focus isn’t saying no to things you don’t want to do, focus is saying no to things that you love. Focus is killing things that you love not things that you don’t like.” It doesn’t actually accomplish anything to just say no to things that you weren’t that excited about doing anyway. I said, “Okay, I have to kill things that I love, but how do I do that? How do I decide?” You decide by taking the decision-making framework at the scissor stage and extending it forward to impact.

We did it like this. Basically we said, “We can work on Evernote Food, we can continue working on it or we can put all of those resources into making the Evernote Workspace, the modern workspace focused on actual people at their jobs and at work. Which one should we do? Should we focus on food? I love food, or should we focus on work?” The way we make the decision is we say, “Imagine it’s great.” Don’t think, “What happens if we screw it up?” Think, “What happens if we succeed?”

Let’s imagine a world where we do an amazing job with Evernote Food, we build the world’s best, most popular product for food and it’s great and hundreds of millions of people use it. What does that world look like? It looks pretty good. Okay, now imagine a world where we do a great job building the modern work space and hundreds of millions of people use Evernote to be more productive at their job. What does that world look like? Better, more epic. We thought, “If food is great and if work is great, the work one is more epic and that’s the one we’re going to focus on. That’s the one that can have a more sustained impact over time.” Even though we love food, we exited it not because we were afraid or because we were losing, we were actually doing great in it, we exited it because we said, “What if it’s great and the other area to focus on has more good, not the least bad, and has more impact?” We went from remember everything to the modern workspace which has been fantastic.

At some point you get to the paper phase where you’re a giant company. I have no idea what happens at this phase so I’m just going to… It seems horrible but maybe it’s good, maybe the really, really… I say it seems horrible because what I imagine it’s like is that every meeting is about protecting your resources. You can’t make decisions based on this because at this point of paper, you have so much stuff that you own that protecting it must become this amazingly difficult psychologically difficult force and every meeting must be about how to preserve, how to preserve, how to preserve. I don’t know how to do that, I’ve never been in this phase. Maybe I’ll come back in a couple of years and say I was all wrong about it. Maybe the really huge companies like Apple, maybe they never go to paper, maybe they’re like an avalanche. Maybe they’re like a giant bag of rocks and not paper themselves but maybe not. At this phase, I’m out of my depth.

To wrap it up. What does it all mean? Especially if you’re thinking of starting a company, if you’re a new entrepreneur. Three tips. The first one is avoid the rocks. Don’t go into the space where two years earlier someone built a multi-billion dollar company. That’s the exact one where you’re going to find the only competition that matters. Go into the space where there hasn’t been innovation in ten or fifteen years. Find something that you do every day and that your friends and family do every day and that kind of sucks, you don’t like it. Figure out a way to make it better. That’s a much better way to think about what to start then, “Someone built something really good recently, I can build it too.”

When you get to that phase, focus, learn to say no to things that you love. Say no to things that you love by asking. When you’re comparing things say, “What if it’s great?” Not, “What if we screw it up?” Say, “What if it’s great?” Make a decision based on the best outcome of great execution. That’s it. Thank you.

Joel Usher: Alright, well we have a few minutes for questions so we’ll have microphones handed out, please raise your hand.

Male: Thank you Phil. On the theme of avoiding rocks, do you say there’s no reason to be going down that road? A company like Toyota, which chooses to optimize as oppose to innovate in the auto-manufacturing industry was world renowned for having been successful doing that, would you say there’s no case for doing that?

Phil Libin: Definitely. My experience is really limited to new start-ups and then start-ups that maybe grow into something medium size. There’s I’m sure, a huge world of important work to be done by big companies optimising and iterating and certainly the Japanese companies have been fantastically good at that. That is a whole other world of possibilities. It’s interesting whether or not that would qualify as being entrepreneurial. There’s a great definition of entrepreneurship which I like a lot. I think it’s by a Harvard Business School professor. I’m blanking on the name, maybe Stevens, which says, “Entrepreneurship is the pursuit of opportunity without regards to resources currently controlled.” It’s when you say… It’s more like what Travis did at Uber when he said, “I want to make the world’s largest car company.” He didn’t say that because he was currently the third largest car company. He said that because it was just him and a friend and they needed a ride. That’s a very different mentality to Toyota saying, “We can make something a little bit better and a little bit better.” Certainly the Toyota case is very valuable. I just don’t know whether that qualifies as entrepreneurial.

Female: Thanks Phil. Your speech is about decision making. I would like to ask you a question about decision making. I assume that on your entrepreneurship journey, there have been a couple of times when you have doubted yourself, when you were under…

Phil Libin: A couple of times.

Female: I assume, I don’t know whether I made the right or wrong assumption. How do you make the decision on whether you need to be persistent or it’s time for you to let go for the business? Thank you.

Phil Libin: I doubt myself all the time, it’s sort of my default emotional state. I think it’s a framework that I try to force myself into and I think it’s deeply unnatural, not letting the lizard brain take-over is deeply unnatural. The human brain has evolved to make decisions the wrong way. Making decisions the way that it feels like it’s right to make decisions leads to poor decisions because the human brain evolved not for the world that we’re living in. The human brain evolved for the world that existed hundreds of thousands of years ago when we were all in the Savanna somewhere and we were facing very different decisions. There’s nothing in the human brain that’s naturally optimised for deciding about starting companies, or building teams or making products. It’s just an utterly unnatural thing. Yes, I was operating in this huge cloud of uncertainty and doubt and decisions that just don’t feel right. If you’re not doing that then you’re probably doing it indirectly.

The framework that I really like is saying, “What happens if it’s great?” over and over again. I’ll be discussing some kind of decision and someone in the company will say, “Oh man but if we screw that up, it’s going to be really bad.” They don’t say that anymore. It’s usually new employees because the ones that have been around long enough know that my response of all time is, “Let’s not screw it up then, let’s do it correctly.” That’s tough because everything naturally thinks, “If we screw it up, it’s going to go bad. Let’s minimize the risk and try to do it safe.” At the start-up phase, the only thing that safe does is it prolongs how long it takes you to die and you don’t need to prolong that. You want to either die very quickly and make room for the next one or do something really successful. The feeling that I get when making a decision that I’m deeply uncomfortable with is almost like now a signpost for me internally that I may be in the right direction because it’s not supposed to feel good.

Male: My question is about the team, particularly from the scissor stage to the rock stage. Do you think the team remains relevant? ___[0:38:42].

Phil Libin: Ultimately, your team is the only important thing. The culture of the company is the only really important thing. The culture is much more important than the team or the product because the product is the current product, the culture is the next hundred years of products. The team that you have is just the embodiment of that, the culture is the team for the next hundred years. The people you have are the only thing that matters in the end.

We at the moment are going through a phase when we’re just making that transition into the rock phase and there are a lot of people who were with the company at the beginning, at the scissor stage, who have grown into very senior positions and may not be the best people in these positions anymore. Myself chiefly among them. There is no reason to think that I am the optimal CEO for Evernote as we get into the paper stage, as we become closer to IPO. As we become a bigger company, the skills that you need to operate are vastly different to what I am good at. That’s true of a lot of people in the company and finding the right people for the right positions at the right time is the most important thing. It’s also probably, at least for me psychologically, the most difficult thing. It’s the most unpleasant thing. It’s seeing that the people you’re with aren’t necessarily the best people going forward.

The way that I deal with that is to try to make is as unemotional as possible. I still get to be with the people that I want to be with, it’s just we always want the best people doing the jobs at hand. We have a combination of new people coming in and people who were here for a long time shifting to positions, some people leaving. I try to lead by example in that. My position at Evernote is never fixed. It’s like I want to be doing whatever had the highest impact and I want other people to come in and contribute as well.

That’s kind of a long answer for a way of saying, the specific thing that is the most painful about having a start-up that’s successful enough to grow up is you have to deal with what actually happens to the human beings who you’ve now become best friends for life with who aren’t going to be in these positions forever. It’s tough but it’s just one of the things you have to do transparently and enthusiastically to succeed.

Joel Usher: Alright, thank you very much Phil. To pick up on that last theme, tomorrow morning, for everyone on the MBA programme, Phil will be teaching a Masterclass on building your brand for the next 100 years so please join us for that and thank you again for coming.

Phil Libin: Thank you.