Brian Chesky and Airbnb: The $100 Billion Bad Idea

Caemin (0:10)

Morning, folks, and welcome to today's episode. It's called Brian Chesky and Airbnb, the $100 billion bad idea. And look, I'd be lying if I said that I'd always wanted to cover Chesky and Airbnb. I hadn't really read much about either of them and the business itself. It sounds pretty humdrum. People renting out rooms and apartments. Nothing really new or exciting there. Chesky himself, he's always flown under the radar. But just I supposed to give you an idea of why or how I pick every story. It really depends on what catches my fancy. And last week, for whatever reason, I thought, you know what? I know absolutely nothing about Chesky or Airbnb. So I just wanted to dig into it. And what a story. Because Chesky and his co-founders, they basically took one of the crappiest business ideas, renting out air beds on apartment floors. And then through their tenacity, and also what I found out, through their really fantastic understanding of how a product should work, they turned it into a $100 billion company. But it's really the stories behind this business that make it so good. You know, it's the story where they're selling their own cereal to clear their debts. The story of them not even knowing what a sly dick or an angel investor was. And then when they come up against the king of clones, the dreaded Samwer brothers from Germany. That is a great story. Then also losing 80% of their business when Covid hit. It all makes for just a cracking story. Enjoy. So, Brian Chesky, born 1981 and grew up in Niske Oonagh, a small town in upstate New York and both his parents were social workers. Chesky wasn't an exceptionally bright kid. He was pretty normal, really. He had two big interests, hockey and art. And it's the art part that ends up having a huge bearing on this story.

In 1999, he finished high school, goes to the Rhode Island School of Design, or RISD, to study industrial design. And this is where he meets Joe Gebbia. And the two of them, they work really well together. As Chesky said, we kept building on each other's ideas. When we get together, typically, ideas get bigger, not smaller. And at one point during their college days, Gebbia says to Chesky, one day we're going to start a company together. So very prescient. Now, after they graduate, they go on their separate ways. Chesky moves to Los Angeles, joins a product design consultancy. And interestingly, as a side note, around this time, he also gets into bodybuilding and becomes a bodybuilder. And you can Google photographs of him from this time.

So while he's working in this company, he's producing sketches and products for companies like Mattel. But pretty quickly, he starts to realise that this career is just not for him. As he said, I knew this whole thing of getting a job, health insurance, it wasn't all it was cracked up to be, because I just wasn't happy. Now, around this time, we're talking 2007, Chesky reads a biography of Walt Disney called The Triumph of the American Imagination. And Disney fascinates him, because here was an artist, a creative person, just like Chesky, who ended up building this enormous business. And Chesky would go on to treat Disney, as well as Steve Jobs, like his mentors, who would study how they ran their companies, and he would take management ideas from both of them. And he credits that book, The Biography of Disney, with helping him decide to quit his job and move to San Francisco, where Joe Gebbia is living. And the two of them decide to start a company. But the problem is, they don't really have a very good idea for their business. I mean, it is a crappy idea. So for context, there's an international design conference coming to San Francisco, and the hotels are booked out. So Chesky and Gebbia think, well, maybe we can turn our apartment into a bed and breakfast. The problem is they don't have beds. What they have instead is air mattresses. And as for breakfast, they are going to provide Pop-Tarts. And they call their business Air Bed and Breakfast. They put together a basic website, and eventually three people stay, paying about $80 per night each. Now, staying with strangers, this wasn't new. Couchsurfing and other websites were already doing it. But generally those were based on free accommodation. So the difference here was that three complete strangers had actually paid money to sleep on air mattresses.

So big deal. You've still got a pretty crappy idea. It's still not very original. But in Chesky and Gebbia's mind, they now had proof of concept. And so they bring in Nathan Blacharchik. I hope I'm pronouncing that right. He was a Harvard-educated computer scientist who had lived with Gebbia. And he comes in as the technical co-founder. And so their next big event is South by Southwest in Austin. And this looks perfect. You've got tens of thousands of people are coming into the city. Hotel rooms are scarce. Chesky goes on to Craigslist and finds people advertising spare rooms in Austin and contacts them directly. So he gets 15 hosts on to the site. But they only get two bookings. And one of those bookings is Chesky himself. So South by Southwest is complete bust, except for the fact that while in Austin, through a mutual contact, Chesky meets Michael Siebel. He is one of the founders of a website called Justin TV. It's an online streaming company which just the year before had been backed by Paul Graham's Y Combinator. He did an episode on Paul Graham and Y Combinator in June 2025, so that's well worth checking out. Anyway, Justin TV would eventually become Twitch, which Amazon bought in 2014 for $975 million.