I am one of the founders and CEO of Airbnb.View the profile
Sorkin is an award-winning journalist and author. He is a financial columnist for The New York Times and a co-anchor of "Squawk Box," CNBC's signature morning program. Sorkin is also the editor-at-large of DealBook, a news site he founded in 2001 that is published by The Times.Sorkin is the author of the best selling book, Too Big to Fail: The Inside Story of How Wall Street and Washington Fought to Save the Financial System—and Themselves, which chronicled the events of the 2008 financial crisis. The book was adapted as a movie by HBO Films in 2011. Sorkin was a co-producer of the film, which was nominated for 11 Emmy Awards.Sorkin began writing for The New York Times in 1995 under unusual circumstances: he hadn’t yet graduated from high school.View the profile
About the talk
Co-Founder, Head of Community and C.E.O. Airbnb Brian Chesky talked to Andrew Ross Sorkin at the New York Times DealBook Conference on November 6, 2019.
Having just spoken with Dara khosrowshahi which was of course the IPO of this year and I know there's lots of speculation about a public lifting next year. We're going to talk about that in a minute, but there is some news that's happening with his company not planned. You just send out an email. I believe to your staff until the entire Airbnb team. I think it's happening literally as we speak for those who don't know there was five people were killed last the Thursday night at an Airbnb. There's a house party there. I know that you would probably not slept these last five days
thinking about how you wanted to change the company fundamentally and I just got a draft of what is going on here. So why don't you just tell everybody hey what the past five days has been liking be what you decided to do about it. Yeah, so there was a tragedy on Halloween night. Somebody threw it on authorized house party house party. Beyond out of hand. That would be an understatement. I'm somebody brought a gun. There was an altercation with the mass shooting in five. People were killed. It was a huge tragedy in the wake of this. Let me let me back up
for a second so Air B&B is founded really on the premise of trust when we started Airbnb. I remember telling people about the idea and people said you're crazy and I said why am I crazy besides strangers will never trust another one another to stay and homes in over the course of last 10 years. I think will be created will be invented wasn't really a way to book a home. I think what we invented was a way for strangers to trust one another to stand homes. And for the most part it's reinforced this basic belief that we've had may be naive that pee Are fundamentally
good. It's a statistically speaking. It's true about 2 million people night stay in airbnb's in most without incident. But you know, very often there are moments in your company's history and it was the moment in our past that defined us and this is another one of those moments where a tragedy happens and we say enough is enough. We galvanized and we are making the most significant change to our platform to increase the amount of trust in our platform until we're rolling out for different things. The first thing we're going to do is have 100%
verified. We will make sure that 100% of host and 100% of listings will be reviewed by the end of next year it with the intention of having a hundred percent of the things on your beef being verified it will be A combination of the company and the community. So we're going to use technology were you use guest when I basically get a coffin and score but we're going to make sure that we can stand behind every single listing every single hose to make sure that every single listing is accurate the information
packet. The photos are what you say. They are the addresses are accurate. They meet minimum standard the basic safety protocol and the host is who they say they are you know, who the what the identity is. We think this is a really really credible step for our industry because I think ultimately the internet really can only function on a premise of trust. There's an old saying things moving Speed Of Trust will how could you possibly try something on platform? If you don't even know if it's true and I think many of us in this industry over the last 10 years are going from a hands-off
model where the internet's and immune system to realizing that's not really enough that we have to take more responsibility for the stuff on a platform. And I think this has been a gradual maybe to gradual transition for industry. The first thing the second thing is we're watching a gas guarantee and the guests guarantee basically means that we want to give peace of mind against knowing that if you check into an Airbnb and it's not as described that we will give you that we will first try to make sure that we find a new Air B&B equal or greater value. If we don't have it will give
you 100% refund guaranteed. The third thing is we're creating an Uber hotline. This has been a big requested feature. We had a hotline to pass but we need to go much further. Do we have a 24/7 neighbor hotline with any neighbor in any town in any part of the world could call us if we stop by real people not automated and will be a rapid response team Train by police chief's to make sure that we can deal in a timely manner with complaints. And the last thing is hopefully something that could have helped, you know, it's hard to prevent every bad thing happening in 2 million, you know homes
every night, but we're going to do extra and manual reviews. Every single high-risk reservation. So for example, if a single person book a 10-room home for that night in the city they live in that is a very high risk reservation. Well, that's the most extreme version but there are less extreme version and we have a lot of Technology protocols that can Elevate thing but I think they ultimately technology has its limits at least technology today. So you have to put a lot more human behind it in the review. I think I hope to all of this takes what is already been a pretty significant step
for the company and that's what I think is the most significant step forward in the truss design of her platform, since we started the company Leon pack a lot of this cuz if you just talked about a lot of things here, but what I'm hearing underneath, this is Maybe I'm Wrong there's a bit of a map of shift. This may be a pending a little bit of the model because for so very long your service was based on trust into trust that all their customers could do the review and could do the Verifying that the company could not write we just talk to Dara. We all see the
stars on on on on the drivers and that's all I can about trust and Aunt it is crowdsourcing of trust as opposed to a single entity. That's that's actually even verifying what's going on. That's been a business business model. Typically I imagined to do the things you're talking about to verify every single property. And you said this is going to happen now literally next 12 months has reviewed with the intention that 100% of things on Airbnb are verified
on in there will be a day where there hope will be nothing that has ever not verified. Now what you want I will say is I think we're going to do is in collaboration with a community 70% of gas to book on Airbnb do leave reviews, but they leave a 5-star review. We actually are going to now start working towards asking him supposed to Questions, what does address correct what this true? Would that true and they're going to use that with our team and our technology and try to triangulate information. And this is a big step forward a much larger and I have I have never put my apartment on
Airbnb. It was not yet. Let's first-time first-time customer and respect on the other end of it. Would you verify me on the first time that you're going to be seen whether my apartment is really my apartment. So this is something I've literally been holding the company together been on calls day and night try to get us to design this. So we're going to be coming back with more detail to team is working on these details now, but will probably happen is in the near-term. We're going to demarcate the difference between a listing that is verified in one
that we don't know enough information about and we're going to be it's going to be very very explicit. But this is a new listing without enough data over time with enough technology. Hopefully upon publisher. Division would be eventually you can verify pain publishing now some other businesses like Airbnb experiences are candy plus everybody locked we manually review in vet every single thing that is valid but this isn't the model that we started with on Airbnb, but I think this is the model that it's going towards I think ultimately mostly technology popcorn to the can have to be a
collaboration between the company and the community participating together. But what happened previously they weren't talking enough. It wasn't active enough incentives with a community in the company's maybe weren't hands on them. Okay. So what is the cost of all of this going to be because having a manual human beings Ready 24/7 around the world to answer phone calls is expensive having having individuals verifying all this is expensive this company as you is as you've indicated earlier this year playing some kind of a public we can get into that in a
minute. But in this conversation was having with Darren how investors looking at growth versus profit margins. I assume that you've been doing some modeling over the weekend. Just on how to do this but yet what is going to cost to do it? Yes. I mean it is a significant investment but I'll say this Airbnb we raised 3.2 billion dollars of capital from the doctors. We have more money in the bank. Then we've raised the time is now to make these Investments and I ultimately think we are investing for the long-term. This is inherently a mostly capitalist business
and I think it makes complete sense and ultimately we're in the business of trust. So we have to make these Investments protector uses change any of your planning in terms of timing. I think this is the very best possible outcome for our community With The Changes were making I think it'll actually be a great outcome. I think we'll provide a lot more piece of Mind speak to this idea of a public listing next year because you were public you you put out a sentence
necessarily, you know, put the flag in the back in the ground that way we were going to be entering a quiet. We're making a handful filing and we want to just make clear to are thousands of employees to our ambassador and others. We just wanted to kind of put the rumors to rest in the Army and the go public any month and just be very very clear about what are General timeline is now we don't want to pin down the exact moment, but we just wanted to lay to rest
any questions about something being a minute before the holidays. What is your take by the way on what does seem like a remarkable shift in the way investors are thinking about you? Like like yourself and the reason I ask is because I wished I believe right now by 31 billion dollars that's in the private markets. There's a lot of people don't know whether the private market number is a real number anymore. Well, I think that historically what happened was. Investors used to Value companies like a one or a zero either. It's a tech company or it's not a tech company and if
it's a tech company is that they're growing fast or not running fast, if you're growing fast and your tech company you get acute multiple of Revenue. It will be maybe didn't ask ourselves is maybe there's a Continuum a tech company. There's really high margin tech companies that low marginal cost as they produce more things and there are companies that are used technology that they have lower marginal cost. And I think what you're seeing is that this in this world were software is eating the world. We can't see it all tech companies the same I think that is the reason the reason the
revaluation than the Baxters are doing a little bit of Silicon Valley in there around tech companies and social media and how they do with Society. You've been dealing with society and Regulators from the very beginning. Boutiques in criticism again from the very beginning you mentioned 2011 even earlier. So most tech companies did not have any scrutiny. They didn't have to have a policy team until they were in the scrutiny occurred because they were large starting scrutiny when we were ten people working
in a three-bedroom apartment with no staff in the moment. We like basically it was in our DNA in my initial instinct when people used to fight us or people is to challenge us what to avoid people who don't like you that was being completely reasonable and I like they don't like me I'm going to avoid them and that was my instinct and now he want to stay out of trouble. I don't want conflict and then I hired my first executive a woman named Belinda Johnson. She's now a chief operating officer and she said if people don't like you you should meet them. I thought seriously if
she says yes I said it could end very badly. She said If you meet them and you listen to them and you educate them. Who you are 99 times out of a hundred things will end better. Then when you enter the building I was very skeptical of this, but we tried it and it went we went from a Secretary of War do a secretary of state approach and we started meeting people literally at one point said that became a very very long tour but I think people started realizing that we do have the best of intentions that the outcome of that became training agreement with 500 different cities
where we collaborated with them to update their laws in a way that work for the city and work for the company. We started quite romantic hotel tabs. We've collectively collected 1.6 billion dollars of Hotel occupancy tax will probably soon be the largest cluster of hotel tax in the world. And you know, this has been a really really big lesson for us. I think it's kind of like your culture is whatever happened to the early days. It gets baked into your DNA and I think this has been very important. You know, when we start the Airbnb people
said this thing will never work and there were saying just wait till somebody's home gets trashed in the whole the whole house will come crashing down with this waiting for something to happen on Airbnb in July 2011. That thing happened there was a woman named AJ and she had her apartment trashed and we were completely ill prepared and we bungled the response we weren't fast enough and suddenly there was like outraged that why I got to experience the whole Twitter mob thing. It's not pleasant and there was a Twitter in the middle of a crisis and it was
hashtag RIT Airbnb. That is how near-death it felt at the time. And I first I tried to run a public blog post saying like we're doing the best we can it's not really ours fall and it was pan and if he's got even angrier and it seemed like everything I did and where I did the more angry people. And probably five or six days into the crisis end. I thought to myself the hell with it. However happened I don't even know if there will be an Airbnb at the end of this. So how do I want to be remembered and I went from what I described
as a business decision to a principal decision a business decision is you make the best decision hoping for a specific outcome. A principal decision is irrespective of what the outcome is. What do you think the right thing to do is and I felt like the right thing to do was. Unconditional open apology to this woman and then we instituted three other things. We created a Airbnb host guarantee, which is like an insurance lien basically offered $50,000 each and every home. It's now a million dollars you were going to offer $500,000
letter. He says this is perfect. But I want to make one change in the additive zero at the end and I thought to myself completely run out of money. The only thing that gave me courage was he was the one that gave us the money so I thought well if we're out of money you better write another check. And he said fine and so but that was a bold move and I think the audacity of doing that in the early days meant that people actually oddly enough trusted us more after the crisis than before the crisis. It's also I believe the first day I went from being a Founder to
a CEO and a different, you know, you're a Founder your company with your friends typically in a garage and apartment a little office one day. You have to be a CEO you have to be decisive not everyone can agree. You have to have courage you have to be bold and you know, that's a big growing up experience with somebody who started the company when your 26 minutes from me valuate the way you think you're thinking about these issues give him that you've now lived it. How you how you how you think about big Tech and end in the culture that you've grown up in?
When I came to Silicon Valley 10 years ago the word technology may as well been a dictionary definition for the word good. We all believed it technology equals good because technology progress and every piece of progress of the stuff board for Humanity. So therefore if you're in the technology business, you're making the world a better place and I think the problem with that culture is it made us not ask really thoughtful questions about what is the impact of the our technology on society. We are here living in the 21st century, but the way we run companies seems very
rooted in the last century a lot of big companies still quarter-to-quarter and they serve primarily one stakeholder. Let's be honest and that's our shareholders. We staying over the last five years are the public screening you have more than one stakeholder. You have your customers give your employer, but you also have the society. We thought about making products that weren't just good for shareholders, which is good for customers that we're healthy for society. And this is something we had to learn and what if you measure your impact on society and those metrics
are as important as Financial metrics, we identified by stakeholders are guests are hosts with our partners are employees are shareholders and as important as all stakeholders the communities we operate in we wrote principles for each two or three principles for stakeholder. So, for example, we will cheater host his Partners or will strengthen the communities we operate in these were please begin apple pencil is a metric metric could be in a what is the highest satisfaction. It could be humming friends with her crate and cremation. Not just how much revenue
it could be one of the carbon offsets of the cumulative Travelers on our platform. It could be Witt impact are we having on local communities in without having those metrics? Kind of anecdote. And so you really want to make sure that the day that you have is very very consistent and then you can start to make sure I do believe that the most the majority people I've met in Silicon Valley want to do the right thing. The problem is they focus so narrowly. I'm just a few metrics that it's very easy to handle things until it's too late and it's like driving in a car in miles an hour and
you're only looking at the road in front of you you can run over something and not know cuz you can't even see in the rearview mirror a business question for you is like a listing next year. There's a lot of speculation that the company is profitable or cash flow positive. Can you can you speak about in the reason I ask is that there are so many companies that have a positive and then I can't talk about this year's this year Financial Financial results. We were profitable last year and the year
before I'm allowed to talk about that. And I can say that two middle-aged. We have more money in the bank then we've raised so we raced 3.2 billion dollars. We have more money in the bank to be fraid. So I hope we are view it as a maybe, you know, what kind of unique story and that way for our Penthouse Spotify on slacker mothers who've approached it that way where they don't need to raise new money. So I really don't need news to make except to say that we also don't need to
raise new money. So we'll be seeing a direct listing this case up there at one point. I want to see if we can get you in and others as well. But you want to go hotels, it feels like the hotel Universe which was going up against you for so long is now trying to be you and you are trying to be in the hotel business itself. You bought a hotel tonight. And by the way, the hotel companies are also going to experience has your experience is what they are starting to converge. I think there's first they kind of ignored Airbnb kind of laughed at us fought us and now they're
creating. Kind of very similar businesses to ours. And so what's happening is I think this looks like in 10 years. I think that there will be a convergent. I think that hotel companies. I think the idea of a chain hotel 10 years now will be unrecognizable to today. I think even the Big Chain Hotel companies the rooms will be more personal more local the feel more like you're in a home because I think people ultimately customers have come to the conclusion. We have 600 million data points that people love homes. That's why they live in them. So what did
you could just live in a mobile home anywhere around the world travel? And I think what people also want though is that they know where they're going to get and they can have some basic services. And so we're doing more verification, you know, we have our community helping with so that we are offering more services in hotels are trying to feel more local and so in that way, I think I'm going to see a major convergence this idea that these the two extremely separate Industries. I think it's going to kind of start to blur together. You think I don't know how much of this audience goes
about its oil company that is on track to becoming bigger frankly than Marriott in two or three years morning number by room numbers back by SoftBank Austin there a company based out of India. They created a model where they took really low average daily room rentals and they basically modernize the whole hotels renovated then put them on a technology staff and basically are making a spread and it's working. They brought it to China seems like I might be working in China as well. These are extremely razor thin margins
so I can speak to the kind of financial Outlook at a company. I do think that it is really really Innovative what they're doing and I think that there are a very important player in the you like ultra-budget High Point. 15 hours tonight. Can I ask you a different question, which was you had a you had one? I believe if you still have it with wework a handful of years ago be allowed or maybe business travelers to get access to weworks when they traveled. So what do you think? Wow.
I think two things happen. I think the first thing that happened is what I talked about before I think that people used to believe that every company was attacked company and if your tent company it mean it's like a one or a zero, I think we now realize it's not they're not exactly just checking on a Continuum and the best that they simply the best Windhurst and the Continuum is your gross margin or what is your gross profit and some things like Microsoft in these really big, really really no margin and I think that's the first lesson of we were I think the second is just like, you know, I
really thought about the actions you have I used to get advice from somebody said imagine if everything you do will be on the cover of the New York Times because one day at very well could be and I think that you know, young Founders sometimes forget that they are going to one day have a huge amount of scrutiny and I think it's also easy to underestimate the amount of responsibility. We have most people never I have an idea you build something you launch it and then everything one day have all this adulation. People say all these incredible things about you. And of course
somebody wants told me you're never as good as you say you are and you're not as bad as they say you are so kind of find the average between the two things. I think that we're all realizing. We have a significant amount more responsibility and I think that you know, it's a growing up experience for a lot of Founders and in all we hope we can be an example and not in a good kind of example for the world. We're going to lunch in just a second. You put your own
home up up on Airbnb available. And you also still stay at Airbnb. What's the what's the craze? What's the craziest? What's the craziest Airbnb experience now that used to be advertising those but What is that all sorts of pretty weird ones? I'll give like one or two one time. I book a woman's home and had the novelty of having a parrot in the listing and I thought that was really cool until I got the listing and I realized it was a studio apartment that she would be in the space with me with the parents and that she
slept on the couch. I slept in the bed in the parent join me in the bad and it wasn't really wanted but you know, I I didn't fight it and it but we also have some really weird things like, you know, we get we get milk everyday and we get them some of the most bizarre called one day a customer calls us instead. They want a full refund what they want. You want a full refund. They said because the house is haunted and there's a ghost in the house and we're like, okay, so we call the host and all the hoes have to do is deny it unfortunately.
the house confirms the ghost says that it's a friendly ghost named Stanley and it says go Stanley is in the listing description reread. The listing description Stanley is mentioned. So we go back to the gas and they guessed it. Yes, we knew about Stanley Stanley has been harassing us all night. How do you attach a that? So I guess the point is in this new economy built on truck. You can only imagine the kind of issues to deal with there is no play before the stuff. Okay. We're going to speak only one question right there. Sam to attend us from UK. I'm living
in a big chain for last 4 years. And now that I come here in New York and $20 for the bar and $10 for some other kitchen $20, but I don't like the idea. Why you forcing me to pay the $30 everyday model where if you basically add on certain fees at the end. They basically are pure profit that goes to the bottom line. And so that's obviously why when you book an airline, you'll pay for an extra baggage and hotel so but no we aren't going to do that. I think one of the big Powers is to try to fly on the cough model, please join me.
And I know we have a fabulous groundbreakers here. You answered my first question about the fact that you broke your own home. My second question is why made you decide to go in the policy of buying hotels? Buying Hotel. You said that you both knew one who didn't know what the funny story because when we launched Airbnb actually the original name was and I'll try to fix quickly air bed and breakfast with the short version was 2007 and I was totally broke living at my roommate in San Francisco. We couldn't afford to pay rent. There was a design Converse come to
San Francisco. All the hotels are sold out the idea. Let's create a bed-and-breakfast how many beds but Joe had three are beds made and played them. We call the air bed and breakfast.com original air bed and breakfast a cheap affordable alternative to hotel and we never ever imagined we would ever have hotel and 10 years later. We we were starting to realize that the number with people go to Airbnb and they abandon Airbnb. Go to the website the websites are going to her hotel and that there were a whole bunch of people that will only booked Airbnb
hotel. We thought it was just completely crazy to make you go to a different website when we already have the customer, but we didn't want to add a bunch of Sand hotel, but I think the founder hotel tonight. He was very simple, but very consistent with our methodology focus on Boutique Hotel small business owners with any of our partnership Francesca everybody. Please join me in thanking him.
Buy this talk
Access to all the recordings of the event
Buy this video
With ConferenceCast.tv, you get access to our library of the world's best conference talks.