This insane growth strategy was adopted by Sam Altman for OpenAI

In this interview, Chris Yeh, co-author of Blitzscaling, explains how companies change shape at every order of magnitude of growth, from family-sized teams to tribe, village, city, and nation stages, and the key transitions founders must navigate at each one. He uses PayPal's early hypergrowth, Twitter's failure to pull back after hitting its ceiling, and Meta's metaverse push to show both what blitzscaling looks like when it works and what happens when a company keeps scaling past the point a market will bear. He closes with why blitzscaling still works in a bear market, and why human learning matters even as AI gets more powerful.

Hi, I'm Chris Yeh and I'm best known as the coauthor of Blitzscaling. That's a book that I wrote with my friend Reid Hoffman, the co-founder of LinkedIn, which is all about how companies can grow enormous, multi-billion dollar businesses by prioritizing speed over efficiency to win a winner take most market.

One of the things that Reid and I observed is that at every order of magnitude of growth, your company is essentially a different company. So we actually named these after units of human organization. So the smallest, which is less than ten people, we call a family. It's like a family. You're probably under one roof and you see each other all the time.

It's very informal. The next level up, which is about 10 to 99, that's what we call the tribe stage. And there you're not under one roof. You may be in different homes and you don't necessarily see every single person on a daily basis, but you still know everyone in the organization. It's still pretty informal. The next stage, which is about 100 to 9999, is what we call the village stage.

That's when you have to bring in specialists who are really good at one thing, as opposed to having generalists who can adapt to just about anything. It's not about the personal relationships. You have to start building a culture that allows people to relate to each other even if they don't see each other on a daily basis.

The next stages up from there are from 1,000 to 9,999. That's the city stage. Now you have different departments that you're working with, right? It's not just something where you have a bunch of generalists. You're going to have specialists in different areas. And then the final level of scale is 10,000 plus. That's what we call the nation. And at the national level, all of a sudden you're really thinking about foreign policy as well. How does my giant company interrelate with these other giant companies?

You can't just focus internally. You have to look externally and figure out how do you find your place within a broader ecosystem. And the thing about these stages, you as a founder need to recognize that the things that you did to get you from one stage to the next won't necessarily work when you get to that next stage.

And as a founder, you have to evolve with your company as it grows.

When you find a product that really fits the market and you have the growth engine of virality or distribution, you can grow at rates that seem utterly impossible. A great example of this is the early days of PayPal. It took them a while to find the product-market fit, and once they found that product-market fit, things happened very quickly, and the company began growing at the rate of about 1 to 5% a day, 1 to 5% a day.

It's growing like 10x per year. And that introduces a whole bunch of stresses into the equation. It's very hard to deal with. And so we always tell the entrepreneurs they need to anticipate, they need to understand what are the key transitions that you're going to go through. One of the biggest transitions that entrepreneurs face is when they go from being a tribe to a village.

And the reason is you're going from an informal organization to a formal organization. That's where so many of these key transitions come in, and you as a founder, need to be ready for it. Now there's a whole bunch of them, but I'll mention a couple of the most important ones. The first is the transition between individual contributors to managers, to executives.

Now, the reason this one is very important is because as your company grows, you're going to have to build out a management hierarchy. There's no way to have a thousand person company where everyone just sort of reports to you, the founder. And so you need to start building out these layers. But there's a big transition when you start bringing in executives.

When you have executives, they're actually managing managers. They're not working directly with the work. So how do you actually find executives who are effective? So understanding the nature of executive work and being able to successfully bring them in from outside the organization becomes one of the key lessons that Blitzscaling founders have to learn. Second major transition is the transition between dialog to broadcasting.

What this means is when you are in a small company very early on, you can just dialog with your other employees. You have the personal touch and you can really convey your vision to everyone one on one. But when you have a thousand employees, that's impossible. So you need to think about how you can broadcast your ideas.

Somebody like Brian Chesky over at Airbnb, for example, writes an email every Sunday night to the entire company, explaining what are some of the major issues he's thinking about, and that is a way to broadcast his vision, broadcast his ideas and make sure everyone's on the same page. The final one that I always like to mention is the transition between pirate to navy.

So when we think about pirates like in Pirates of the Caribbean, and they're these wacky, that's kind of what a company is like early on in its history. It doesn't have anything to lose. So it can take a lot of chances. But as the company gets bigger and more successful, you have something to lose. It becomes important to go from being a pirate who is just risk taking and making decisions on your own to becoming a navy where you actually have an admiral, you have captains, you have a whole structure because you need to transition from being somebody who acts on impulse to somebody who carefully plans and figures out a strategy that other people can carry out.

So it's very important to know that Blitzscaling is not something that you do forever on a given product. Blitzscaling is a specific phase, which is to say a product starts off with low adoption, then it really ramps up, but eventually it taps out, right? When Facebook gets to 2 or 3 billion users, it can't keep growing at the same rate.

There just aren't enough human beings in the world. We'd have to discover alien civilizations. And so Blitzscaling is necessarily temporary for any given product. What is interesting is that a company may always be Blitzscaling somewhere. A company like Apple that has many different products may be Blitzscaling different products at different times. As the Macintosh begins to tap out, here comes the iPod.

As the iPod taps out, here comes the iPhone. Who knows what might be coming next. But one of the things to know is when you achieve the natural domination in the marketplace, you have to be willing to start pulling back. And there is a classic cautionary tale here, which is Twitter. So Twitter, interestingly enough, essentially hit its limit on the number of active users in the year 2013.

But the company didn't stop hiring. And the correct response at Twitter at that point would be to say, we have tapped out this market and we should use the profits from our more efficient operations to then develop new products. So that's a great example of how as a founder or as a leadership team, you should recognize when Blitzscaling has come to an end, begin to operate for profitability and use those profits to invest in new Blitzscaling S-curves.

So let's talk about Facebook and Meta, and this is a fascinating example of, I think, appropriate focus on an interesting area, but poor execution. So when Facebook rebranded to Meta, it was part of an overall effort to say let's make the metaverse happen. Now, this is an error that a lot of big companies sometimes fall into, which is to believe that they can create the market.

Ultimately, the decisions are made by individual consumers. If we think about other products, Google put an enormous amount of effort into something called Google+. That was their big Facebook killer. Guess what? It didn't matter that Google pushed it to every single Google user. People still didn't choose to use it. And Mark Zuckerberg made the classic mistake of believing that he could make the market.

None of us can necessarily make the market. We can just put something out there and see if the market picks it up. If we look at OpenAI, OpenAI didn't launch ChatGPT first, they launched Dall-E 2 first, which was the image creation software, and that got a lot of attention. But it was ChatGPT that really brought the breakthrough.

And do they necessarily know that ChatGPT was going to be the absolute thing? Maybe. But they had GPT three and GPT 3.5 before that accessible via API and nobody picked up on it. So you have to try things, see if the consumers will adopt and if they do, as in the case of ChatGPT, you've got to aggressively hone in on that and leverage that opportunity that the consumer adoption has brought you.

So one of the things that I always have to emphasize to people is that Blitzscaling is relative and contextual. It's relative because it's about your relative speed and it's contextual because it has to take into account the reality around us. We were in an incredible boom during 2020 and 2021, but we've seen a remarkable economic cooling. There are all sorts of macroeconomic issues that we are worried about the US debt ceiling, the war in Ukraine.

All of these things are affecting investor psychology, which necessarily affects the abilities of startups and other companies to raise financing for growth. You have to blitzscale differently when you're in a bear market because of the fact that you can't just assume that you can raise more money. But it is still the case that Blitzscaling will work. In fact, in some ways it will work even better because the rest of your competition is subject to the same forces, so they may be retrenching.

And in fact, you can do a lot of things easier now than you could during the boom. For example, many entrepreneurs tell me, it's really hard to hire great talent. They used to say, Google is going to hire and pay people so much. Facebook is going to pay people so much. How can I compete? Now, Google and Facebook aren't hiring people.

This is a perfect opportunity for you to improve your talent or get the kind of people in that you really want. If other people don't have money to reach the marketplace and you do, you have a huge advantage. It's cheaper to buy market share during a recession. So absolutely you can still blitzscale. You'll have to do it differently.

But keep in mind the overall principles. Am I moving faster than my competition? Am I achieving competitive advantage through scale? So as you've heard today, Blitzscaling is a strategy that involves prioritizing speed over efficiency in the face of uncertainty. You blitzscale because you have an opportunity to win a valuable winner take most market, and if you do so, you will ultimately keep that market for decades and print money along the way.

The reason you should want to blitzscale is not just the financial gain, though of course that's important. It's because Blitzscaling is the best way for your startup to maximize its lasting impact. So the final tip I would give to founders is the following: Always be learning. And that means you need to be constantly taking in new information, but also spend time with human beings.

We are in an era where everyone's like, oh, AI will do everything. I'm like, AI is incredibly powerful, but what's really powerful is the ability for human beings to connect one on one, for you to learn from people who are out there doing new things. All of us are out there trying to understand new technologies and it's too difficult to understand it on our own.

We need to build a whole team of learners that can learn together and ultimately figure out how to best build businesses to tackle this new world.