“Building a Business to Consumer Business: The Twitter Learnings”, an interview with Dick Costolo, Former CEO, Twitter, Managing Partner, 01 Advisors

An Interview from Vintage Annual CEO Summit 2020

Asaf Horesh interviewing Dick Costolo, Former CEO, Twitter, Managing Partner, 01 Advisors, about “Building a Business to Consumer Business: The Twitter Learnings”.

Dick Costolo’s Bio:

Dick Costolo works with startup CEOs helping them scale from product to mature company as a Managing Partner at 01 Advisors. Costolo was CEO of Twitter from 2010 to 2015, building the business from zero to over two billion in revenue. Dick has been founder and CEO of multiple startups, including FeedBurner, which was acquired by Google in 2007. The former improv comedian has been a consultant on HBO’s “Silicon Valley” and holds a B.S. in Computer Science from the University of Michigan.

 

Interview Transcript:

Asaf Horesh :

Thanks very much. I’m super pleased to have you with us, Dick Costolo. For those of you who are not familiar with Dick, he’s the co-founder and managing partner of 01 Advisor. 01 is a venture capital fund that is focused on companies’ post-product-market fit where the fund can help with scaling giving you guys operational experience. Before that, Dick was the former CEO of Twitter, which we will get to in a bit. But I actually want to start the conversation with the fact that I think not many people know that you started your career as a comedian.

Dick Costolo :

Yup.

Asaf Horesh :

This part was hilarious for me. So, I read that when you joined Twitter in 2009 in September as actually the COO, the first thing you uploaded to Twitter was, “First full day as Twitter COO tomorrow. Task #1: undermine CEO, consolidate power.”.” So this is, by itself was hilarious, but what was actually funny is that- but it was actually funny.

Dick Costolo :

Yeah.

Asaf Horesh :

Sorry?

Dick Costolo :

Yeah, it ended up coming through in a way. What was funny in 2009 ended up being, I had regretted it deeply when I became CEO a year later.

Asaf Horesh :

Yeah, that was what my next say was, exactly a year later you became the CEO, actually ousting the founder Evan Williams, who was the CEO then and brought you in. Yeah, I want to ask you about that with how it impacted your work obviously. Then, in general, this comedian skillset, was it that positive during your career, or yeah, how do you view that?

Dick Costolo :

Yeah. I started off when I graduated from the University of Michigan with a computer science degree, I decided at the end of my senior year that I didn’t want to be a computer scientist. I wanted to go into comedy and get on Saturday Night Live. The way you got on Saturday Night Live in the middle 80s, the late 80s when I was graduating was, you had to basically be on Second City in Chicago. That was the place that pulled most of, still pull a lot of people from there, but that was the place they pulled everyone from. So I went to Second City in Chicago and started improvising there and working my way on stage and trying to work my way up to Second City and eventually did get an audition.

Dick Costolo :

I auditioned twice for Saturday Night Live, and I didn’t get hired either time. I didn’t even get called back to New York either time. But, in my defense, Tina Fey and Steve Carell auditioned the same year I auditioned the second time, and neither of them got hired either.

Asaf Horesh :

You had a chance. Yeah.

Dick Costolo :

You find yourself saying, “Wait, Tina Fey was on Saturday Night Live, what are you talking about?” But Adam McKay did get hired as a writer, he became head writer the next year and he hired Tina as a writer, and then she wrote herself into the show a couple of years later. That’s the way it goes. They were like, didn’t need a bald guy with glasses I guess. It worked out. I think it worked out. In fact, I’ll tell you a funny story because Steve Carell and I were at Second City at the exact same time in 2014, right after the Twitter IPO, and Twitter was really, we were flying high at the beginning of the year of 2014.

Dick Costolo :

I saw Steve Carell at a fundraiser for a children’s hospital at Stanford, Lucile Packard Children’s Hospital at Stanford. He came up to me and he said, he put his arm around me and said, “Sorry, it didn’t work out for you.” So it was cool. He’s funny even off stage.

Asaf Horesh :

Yeah.

Dick Costolo :

That was a good thing.

Asaf Horesh :

Cool.

Dick Costolo :

I use the lessons I learned in improv all the time as a leader. The first thing you learn in improv is you have to listen for the scene to work. If you’re not listening to what other people are saying on stage improv when you’re improvising it’s not going to be funny and it’s not going to work. You’re not going to be able to build off what they said. I used to tell my manager, “It’s 70% of what …” This is not my statement, it’s in management books right and left. 70% of what new managers need to do is listen.

Asaf Horesh :

Listen. Yeah.

Dick Costolo :

Then secondly, I would always say yes and person. In improv they say, “When someone declares something to be true for themselves, don’t deny it’s true. It’s true for them.” When people would come up to me and say, “Hey, my situation is messed up. I don’t understand. My manager says the priority is X, Y, Z, you say they’re ABC, what’s going?” The worst thing management can do in a company is, when someone works up the courage to come to the CEO and tell you there’s a problem is deny their perspective and ignore it and say, “That’s not true.” And move on. It’s true for them, and they worked up the courage to tell you, there are probably a lot of other people who think that so you better accept it as the truth and build on it. Anyway. That was a long way of answering it. But [crosstalk 00:05:25].

Asaf Horesh :

No, this is super. All right, let’s dive a little bit into your position and role at Twitter. Again, before Twitter, you started three different companies. The last one was acquired by Google in 2007. Then I think the main reason for Twitter to bring you in was to take the company to the next level, right. To monetization. So just interesting to understand, from your perspective, why do you think you were the profile that, and how did that fit into the role that you were expected to do at Twitter?

Dick Costolo :

Yeah. Well, it’s a good question. I knew Ev and the team from when they were in Web 1.0 Actually, way back then for Ev did Blogger, which we did before and he sold it to Google, and then he went and did Podio on Twitter. Before that he had had some little company, I can’t even remember what it turned into, but we knew each other way back when and Web 1.0 and meet each other at conferences and so forth. So in 2007, when we sold FeedBurner to Google, it closed in 2007, but it actually started, the process started like a year earlier they started talking to us. So we were talking to them when Ev was there at Google, and he was one of the people that the Google folks brought in to like, “Hey, look at what these guys are doing with FeedBurner and tell us what you think and whether it’s interesting and would be something we could use with Blogger.” Et cetera. So we got reacquainted.

Dick Costolo :

When he went off and did Twitter, while I was doing my time at Google, after selling the company to them, he and I kept in touch. When I left in 2009, he was having a baby and said, “Hey, we actually need somebody to come in.” It started out, he just sent me a DM on Twitter and said, “Hey, we need someone to come in and help out whenever I have the baby and go on paternity leave for three weeks. Could you do that?” I said, “Sure.” Then a couple of days later it was like, “Actually, what if you were the COO? We need someone on in here to run monetization and think about operationalizing stuff at a scale that I haven’t done before and not particularly interested in.” So I don’t know why he picked me other than I was fortunate enough to run back into him a couple of years earlier at Google. If that hadn’t happened, if we hadn’t sold FeedBurner to Google or they hadn’t been looking at it, I wouldn’t have wound up at Twitter because Evan and I weren’t that close until we got reacquainted when he was at Google.

Asaf Horesh :

Got it. Okay, fair. We’ll get to your success in a bit during this. But before that, I think for managers running a B2C company, or I think there is the constant debate between value creation and then value capturing, right. Where are you on the scale between this and that? Just interesting to know if, how do you think of that? Is there a time when you move from value creation to value capturing and is it either-or, or can you do both at the same time?

Dick Costolo :

No, I think you, especially if you’re not the incumbent, or the leader, or the 900 pound gorilla, and we weren’t. We were the fourth fastest consumer internet company to a billion dollars in revenue. But the other three were Amazon, Facebook, and Google who are the number one product in their market. We were always second to Facebook and social media, the broad category of social media. So we had to overly focus on value creation initially. Before we were public, I was like, we’re so far behind Facebook that we can’t worry about profitability right now. We have to try things and experiment with things and just try to catch up to them and do whatever we can to create more value and make acquisitions.

Dick Costolo :

We were super inquisitive. We required two products, prelaunch, Vine, and Periscope that both went to number one in the app store, which is great. But then Facebook was just big enough to, we thought we had carved out a beachhead and they crushed us. We tried to acquire sort of famously, or maybe sort of famously some people know the story. We tried to acquire Instagram the month before Facebook did, but we just didn’t have the currency that Facebook had. If I had known that they were going to get them for a billion dollars I would have gone and … I think we offered like 600 million, I would have gone and borrowed 400 million from Goldman or JP Morgan or something and given it to giving it to Kevin and Mike at Instagram because we knew it was going to be huge. It was really once they got Instagram they were able to outflank us on Vine and Periscope and other things.

Asaf Horesh :

Yep. So, I think you already touched on that in the sense that you were the fourth fastest company to go from zero when you joined to $2 billion. The other three were like respectively the biggest in their spaces.

Dick Costolo :

Yeah. Right.

Asaf Horesh :

You had Facebook, right?

Dick Costolo :

Yup.

Asaf Horesh :

Your kind of situation is probably similar to pretty much every other company, other than Facebook, Google, and Amazon. They need to fight like the incumbents. What made you so successful? As you said, you were very aggressive in acquiring, but is that like … What else?

Dick Costolo :

I think it was when we were a private company and early on in our public company life, I was a leader that always just was honest and forthright with people. I used to tell people, “In a great company, everyone knows what the priorities are and they know how their work maps to the priorities, so they can be successful in their work. And they know that if they’re successful in the work, they know what it means for both the company and themselves.” That’s an amazing thing if you can get that working correctly. In lots of companies, unfortunately, people don’t know what they’re working on maps to the, what the company is trying to accomplish. In the off chance they do something that’s helpful to the company because they don’t know what the company’s priorities are, they don’t know what it means for themselves or their careers.Then they work up the courage to tell management how messed up their situation is, management either denies there’s a problem or defends the status quo and then ignores them. We’ve all been in those companies.

Asaf Horesh :

Yeah, can I [inaudible 00:12:18], like can I take this question to the next level?

Dick Costolo :

Yeah. Go for it.

Asaf Horesh :

I think it’s really clear what you’re saying. It’s really hard to do, but I think-

Dick Costolo :

It’s really hard to do.

Asaf Horesh :

… it’s even harder to do when you’re scaling that fast. Right?

Dick Costolo :

Yeah.

Asaf Horesh :

That’s kind of like, how did you manage that?

Dick Costolo :

I’ve made it a point to get to know people at all levels of the company. I didn’t hide on the executive floor or anything like that. I would have skip-level meetings once a week with any random teams. It might be the user interface team, it might be the graphic design team, it might be the West region account executives on the sales team with no managers, directors, or VPs in the room. I would just ask them, I would only … I stole this from Steve Jobs. He used to do this at Pixar when he was running Pixar and Apple and he had to go back to Apple. He was at Apple four days a week but he was still the CEO of Pixar. He would go to Pixar on Fridays and needed to come up to speed quickly on what was going on in the company. So he’d just go around the room and go, “Tell me something that’s not working at Pixar.” He would just listen to the team for talking about that for 10 minutes. Then he’d say, “Tell me something [inaudible 00:13:30] at Pixar.”

Dick Costolo :

I did that with teams, with these functional teams. It was so easy to tell which teams were in sync with the priorities with the company and what we’d communicated at management team meetings, and which teams were on their own islands doing [inaudible 00:13:47] because the manager or the director hadn’t communicated clearly what needed to happen. That helped me address those things with my team. I would tell these functions like, “I’m going to go back to my leadership team meeting on Monday and tell the team what I heard. I heard you say this, and this, and this.” I’m not going to say you’re right, or I agree with you here because then they leave the meeting and go, “Dick agrees with us and we should go tell our director he’s getting fired Monday.” I would just say, “I’m going to go work on this with my executives on Monday and we’ll get these things addressed and you’ll hear from the execs about it.”

Asaf Horesh :

Perfect.

Dick Costolo :

If you make yourself available, and I always made it clear that anyone could tell me anything. If someone asked me a really hard, or even nasty question in an all-hands meeting, I would go right to that person after the meeting and put my arm around them and make jokes with them. People knew they could tell me if something was messed up and not … You want people to tell you the bad news.

Asaf Horesh :

Yeah, for sure.

Dick Costolo :

The bad news gets swept on the rug so often [crosstalk 00:14:49].

Asaf Horesh :

Sorry for interrupting, but-

Dick Costolo :

So you can fix it.

Asaf Horesh :

Yup. So we have like five minutes left and I think there are two topics that will really be interesting to our audience. One is very timely and it’s like on fake news. I want to also ask you about Israel. So let’s try to do two minutes per.

Dick Costolo :

Great. I’ll say one kind of quick thing about the last topic really fast is, it’s not the job of leadership to prevent mistakes from happening. It’s the job of leadership to correct mistakes when they happen. Okay, I’m done, go ahead.

Asaf Horesh :

This is great. So I think one of your most famous tweets is, “We are the free speech wing of this free-speech party.” Right?

Dick Costolo :

Yeah.

Asaf Horesh :

Then I look at Twitter and I see the president Tweeting, and then it’s all erased. Right? So we’re in a different world than what we were in like a few years ago. How do you view that?

Dick Costolo :

Yeah. We were idealists and pretty probably naive about how the platform could be used to spread misinformation. The free speech wing of the free-speech party is great if everyone’s a good actor, or a noble actor and not trying to-

Asaf Horesh :

Misuse.

Dick Costolo :

… cause trouble, or make people miserable, or abuse people, or bring down a democracy. That was a naive statement, and I agree with everything the company has done so far, and there were a couple of times where I’ve felt like they should’ve gone further on things. I would never have gone as far as to delete Trump’s account. People always ask me, “If you were still president or still CEO of Twitter, would you delete Trump’s account?” You can’t delete the President of the United States’ account. He’s the President of the United States. The person’s going to have a platform to speak on. It’s not Twitter’s fault he’s the president.

Asaf Horesh :

Yeah.

Dick Costolo :

You got to leave his account up I think. I would have gone further on some other stuff.

Asaf Horesh :

Got it. Cool. Last question, which again most of the audience here has some connection, or lives in Israel. A lot of entrepreneurs trying to build companies in this country. It was predominantly an open deal like a few years ago knowing that Israel is great for tech, for its talent for tech, for deep technology infrastructure, and everything related to that. Once in a while we had Waze, but suddenly, we have all these gaming companies and light rigs, and even we can talk about Fiverr and Yotpo maybe like on the SMB space. I don’t know how close you are to Israel. I know you’re investing in companies here, but we’d love to understand how do you view this? What has changed?

Dick Costolo :

I think it’s the second most innovative tech country outside of the… Well, it’s hard to know whether China is as innovative as the States because the US can’t compete there. It’s either if you think about China and the US as the two sorts of first-tier markets, I think Israel is by far and away from the number two country right now in terms of innovation and machine learning, AI fin check. I mean, we’re investors in a company that’s killing it [crosstalk 00:18:25]-

Asaf Horesh :

Yeah, but this again-

Dick Costolo :

… Israeli company.

Asaf Horesh :

I’m trying to focus specifically on B2C, right. So how come we suddenly have Weeks and we have a Lemonade? What’s the difference between hard tech and consumer-facing companies, and what do you see [crosstalk 00:18:42]?

Dick Costolo :

It’s a good question. It’s interesting, these things go in waves in the consumer. I remember a couple of years ago, maybe a year ago, people were like, “Man, there’s nothing happening in consumer now.” I’m like, “Yeah, it goes like that, and then there are six things in a year that come out.” It just is one of those, the consumer is so different than everything else. It’s just you’ll come up with something that catches fire and it’s hard to … Why did Spotify come out of Sweden? The one music thing that worked that could compete with what Apple was doing and worked when everything else didn’t work or got crushed by the labels? I don’t know, it’s weird. You can’t predict where it’s going to come from or who the best new ideas are going to come from. I mean, I know a million people who passed on this series A of Snapchat, because they’re like, “Ah, it’s all teens sending nudes. It’s never going to be anything.” It’s a huge company now, it’s twice as big as Twitter. It’s a $50 billion company.

Asaf Horesh :

All right. This was wonderful and super interesting and insightful. Hopefully I learned a lot, hopefully the audience and the executives in the audience and the founders learned so much from your experience as well. So I want to thank you again for taking the time and thank you for the partnership and looking forward to doing much more together. Thanks very much.

Dick Costolo :

Yeah. Thank you. Same to you. I can’t wait to get over there when all this, when there’s a vaccine and we can hang out together and I can see Israel for the first time in person, never been.

Asaf Horesh :

Would love that.

Dick Costolo :

My partners have all been but I haven’t, so got to get over there.

Asaf Horesh :

Would love to have you.

Dick Costolo :

All right.

Asaf Horesh :

All right. Thanks Dick.

Dick Costolo :

Yup. Fantastic.

Asaf Horesh :

[crosstalk 00:20:25] Bye-bye.

Dick Costolo :

Good, thanks for the time. See you soon.

 

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