by Y Combinator4/13/2018
Craig Cannon [00:00] – Hey, how’s it going? This is Craig Cannon, and you’re listening to Y Combinator’s podcast. Today’s episode is with Anne Wojcicki and Sam Altman. Anne’s the co-founder and CEO of 23andMe, and they provide direct-to-consumer genetic testing. Sam’s the president of YC Group. He interviewed Anne for a series called, How to Build the Future, and you can check it out on our YouTube channel. Alright, here we go.
Sam Altman [00:24] – Today we’re here with Anne Wojcicki, co-founder and CEO of 23andMe, thank you very much.
Anne Wojcicki [00:28] – Hi, thank you.
Sam Altman [00:29] – We always like to start with how you came up with the idea, and sort of the founding story of the company.
Anne Wojcicki [00:33] – I was working on Wall Street, and–
Sam Altman [00:35] – That doesn’t sound very fun.
Anne Wojcicki [00:36] – It was, actually.
Sam Altman [00:38] – It was fun?
Anne Wojcicki [00:39] – I loved it. I grew up in academia, I always thought I’d end up being an academic. I went to a job fair right out of college, my parents made me go, and I got this job offer to go on Wall Street. And it’s one thing I always tell young people, you never really know what’s going to come your way, just take every opportunity. I very randomly got this job on Wall Street, I had no idea what it was, but I kind of figured, I actually only took the interview cause they gave me free frequent flyer miles. I won the flight, I won the frequent flyer miles.
Sam Altman [01:08] – Oh, you had to fly there, but you got to keep the frequent flyer miles.
Anne Wojcicki [01:11] – Yeah, no, I was just excited. I was like, it’s a free trip, it’ll be 5,000 miles, that’s pretty awesome. I was on Wall Street for 10 years and I loved it. For me it was, because it wasn’t just about trading and making money and doing these things, but it was I got to learn about companies. The one thing that is amazing on Wall Street is that you get to go deep on certain companies when you’re really interested in them, and then really broad, knowing a whole sector. I got to know small cap bio-techs and pharma companies and hospital systems and insurance companies. I got to have a really broad landscape of health care. In the beginning I had this eternal optimism, like, “Health care’s going to totally change, there’s antibodies, there’s all this new, there’s technology, there’s all these new discoveries coming, it’s going to be so different.” And then when the bubble burst in 2000, a lot of innovation dried up and I started to see more what health care really is. And at the end of the day, health care is an amazing business that really effectively monetizes illness. I used to always say, “If I successfully get you to never be diabetic, no one makes money. But if you do become diabetic, there’s all kinds of ways I can make money.” At the end of the day when I think about what I care about, what’s in the best interest of me, I’d rather just never be diabetic. I’d rather never be sick. There’s no one in the system today that really thinks about how to keep me healthy. After 10 years of investing,
Anne Wojcicki [02:40] – I felt like I really understood the system and I also understood that you had all these people with the right intentions who really care but the ship’s just pointing in the wrong direction, and that no one’s actually focused on keeping people healthy and that I wanted to have a company that was, frankly, somewhat rebellious and was going to inspire people to try to really be healthier. I felt it was, you know, again, it had sort of that, a little bit of a Robin Hood kind of mentality in the beginning of, you can’t change the system from within, so we got to do something more radical from outside.
Sam Altman [03:17] – One of my favorite Charlie Munger quotes is, “Incentives are a superpower.” I always believe this and this is the clear problem you just identified. How do you think about how you design a system or a company that is incented to keep people healthy?
Anne Wojcicki [03:30] – Well, I realized the main thing in health care is that you don’t actually ever have a voice. Because you’re not the payer in health care, you the individual, you don’t actually make decisions, it’s your insurance company, your doctor, the pharmacy benefit manager, there’s all kinds of people in the back who actually make decisions and there’s all this data now about… You go into surgery and there’s doctors coming into the surgery that you’ve never even met. For me what was transformative, what we did to change the incentives, is to put you in the power seat. You make retail decisions that are in your best interest because you’re actually the one paying the bill. For us, what we decided to do that was frankly seen as disruptive is we are direct to consumer.
Sam Altman [04:15] – I remember when you launched, doctors, or just health care professionals in general, were saying, “Patients, this is irresponsible. You need a medical professional to do this.” I remember one quote that really stuck with me, something like, “We can’t have people making their own health care decisions, they don’t know how to interpret the data.”
Anne Wojcicki [04:33] – There were all kinds of interesting things. Cause people would publish stuff on Facebook and then doctor would say like, “Do you have the right?” And we’d remind people, “Yeah, it’s their own information.” There’s always been, I’d say, a tension a little bit with the medical system. The medical system historically there’s tests like the pregnancy test. The pregnancy test when it came out was seen as radical. How could women ever possibly learn, at home, that they’re pregnant? If you look at the literature of that era, we look at that today and we’d say it’s crazy. One of my favorite papers is there’s this JAMA paper, the Journal of American Medical Association, from 1969 I think, where they ask doctors, “Would you tell your patients that they have cancer if they had a cancer diagnosis?” Over 90% of them said no. I always put that in context, it helps people understand. Physicians were trained in such a way, and so I don’t blame the system or the individuals, it’s just that that was the culture. That was thought of what was actually in your best interest. What we do is as we empower consumers, we are showing that people actually can be, people want to be in charge of their health, they want the information, and they actually want to be in control.
Sam Altman [05:50] – I always like the model of thinking about the world 50 or 100 years from now and looking back, what will we think was just totally ridiculous, and this sure seems like–
Anne Wojcicki [05:59] – Health care that type, because health care’s really, as much as it’s science and it’s data-driven, it’s also not. Part of what people don’t necessarily always understand is that the practice of medicine is an art. The reason why you can go to five different physicians and get five different ways of treating cancer is because there’s the practice of medicine, you can get different opinions. One of the things that we’re specifically trying to change is exactly that, is exactly to say that we’re trying to get data so that it’s no longer a question of like, “Hey Sam, what’s in your best interest?” There’s actually data to say exactly what you should be doing.
Sam Altman [06:38] – How do you think the medical system, the health care system overall, will eventually get to a place where we don’t have this misalignment of incentives you talked about and we have data and we have people in control of their own health care? If you could wave a magic wand and say, “I’m going to fix the health care system,” what needs to happen?
Anne Wojcicki [06:55] – The reality is what needs to happen is never going to happen, which is like you have a universal payment system. Single-coverage, like the reality is, who cares about keeping you healthy today? Because you could be overweight and you could eat poorly and you could never exercise, and you won’t see the consequences of that for the next, let’s say, 20 years. The reality is, who’s going to benefit from that? The reality is, it’s society, and it’s you personally, and it’s somebody who’s willing to invest in you in the long run, and for a single-payer health care system or like a country, they care about actually trying to keep you healthy for as long as possible. Second, people, we don’t want, we saw that communism doesn’t support the system that we all want. People have to be willing to spend money and they have to step up. The same way you see people stepping up with yoga and vitamins and weight loss studies and all kinds of different alternative care, people at some point have to stop and say, “Your health is also your responsibility.” The more that we can give people personalized information about themselves, the more that they are going to be willing to execute on taking care of themselves.
Sam Altman [08:15] – Speaking of that, you could have started so many different companies in the health care space. How did you decide this was, this was not an obvious choice at the time.
Anne Wojcicki [08:23] – For me it was totally obvious. For me there’s a couple things that were happening. One, I always loved genetics. It was my first investment in 1996. In some ways it was my first and it was my last. The genetic revolution was happening. Right when I started investing there was the race of getting the cost of the genome down. It was super exciting, and I started looking at those investments again and realizing that you’re going to be able to buy essentially a scan of your entire genome pretty inexpensively. That was the first nugget of, okay wow, you can actually start to get huge amounts of genetic information. And second was seeing this world of social networking. That social networking was happening and you don’t actually need the old guard to get things to happen, I could crowdsource. It gave me this idea that wow, if I just empowered everyone with their genetic information and I crowdsourced all this information. If I have the world’s health information, what could I do? And people were like, “Well, you could cure, you could save, you’d know a lot.” The idea really was, well, we should do that. Instead of relying on Stanford or Harvard or Pfizer to go and solve a disease or how to be healthy, we the people, we can do it. In some ways, having grown up in this Google environment and knowing the social networking world that was coming up, it was piecing those things together that was like combine the technology and science with the platform that is really emerging.
Sam Altman [09:51] – I’ve noticed that many of the most transformative companies come because the founder sees an intersection of two pretty different but really important trends a few years before everybody else does. This is clearly one of those. It’s the fact that crowdsourcing works is still amazing to me.
Anne Wojcicki [10:07] – Totally, well, it’s also when a founder really wants something personally.
Sam Altman [10:11] – Did you really want this personally?
Anne Wojcicki [10:12] – Oh yeah, to me it was like the whole beauty for me of genes, of genetics is like gene by environment. And I will always love people debating, “But is it your genes or your environment?” I’m like, “No, the whole beauty of it, is that it’s both!” You might be genetically high risk for diabetes, but there’s your environment.
Sam Altman [10:28] – You can do things about it.
Anne Wojcicki [10:29] – What can I do? So very few genetic ailments are a 100% deterministic, meaning 100% liklihood that you’re going to get it. That means there’s an environmental component where you can potentially do something. So let’s go figure out what you can do and then tell people.
Sam Altman [10:45] – What was the reaction when you first announced that you were going to do this? What was it like inside the building?
Anne Wojcicki [10:52] – Startups are so fun because you get a bunch of people who are really passionate and people were excited and people knew that there would be controversy. In some ways, we attract people who have all experienced the health care system in their own way and realize it has its limitations. There’s people who are excited about 23andme because of the mission and they’re looking to contribute in some way, to helping change the system. There was enthusiasm. We had like videos. We were also.. We were super excited to launch and we thought there was going to be this big coming, like everyone and we had tons. We had spit parties. We were on the cover of–
Sam Altman [11:37] – I went to one!
Anne Wojcicki [11:38] – I know! We had the cover of the style section. We had the spit party in the building. But I have to say, we sold a lot the first day. And then it was slow.
Sam Altman [11:48] – That happens.
Anne Wojcicki [11:51] – We were probably selling 15 to 25 kits a day. Which is not a lot.
Sam Altman [11:58] – How do you, well I guess two questions. One, how did you eventually fix that? And how do you as a leader keep momentum in the building when you have this great launch, the first day is always awesome, and then you have a week called the trough of sorrow and people get pretty demotivated.
Anne Wojcicki [12:15] – There’s always a trough of sorrow and it’s important to not let people be totally… hoping for immediate success and then to be overly distracted by the trough of sorrow. That actually happens, not just in launches but every time you come up with a product. You have no idea how well it’s going to go. I remember when my sister first launched AdSense, and she’s like, “I don’t know, we’ll see how it goes. It’s kind of, it’s an experiment, we have no idea.” And then clearly it went on, but part of it is cause you work hard at it. I feel like for us, and that trough of sorrow, we recognized more, we focused on the long term. What do we need to do to get to this point. As a leader, for me one of the most important things is not to wallow on today, but to wallow on like, okay in two years, this is what it’s going to look like and these are the steps I need to do to get there. People love a vision and people love a plan. You just need to outline, this is where we’re going. When we saw that sales were slow, we’re like, “People don’t understand genetics.” Some basic market research could have told us that, but people don’t know why they want their genetics. And that was like, “Okay, great. Now we actually need to educate the population about why you would want your genetic information.”
Sam Altman [13:31] – And how did you do that?
Anne Wojcicki [13:33] – I started changing my talks. I would speak a ton. In the early days, you gave me a conference invite, and I took it.
Sam Altman [13:42] – I remember that. I remember that for myself too.
Anne Wojcicki [13:44] – Yeah, exactly. Any talk, part of it is constant feedback. Again, for the people who want to be entrepreneurs, you’re constantly learning something in the feedback. I would change my talks. I never gave the same talk twice. When I look at my inventory of all my talks, it’s like, there’s like 500 of them because each one was slightly different. I remember, specifically, getting the feedback. People questioned what is the value proposition in what you’re doing and I was like, “Great, I can answer that question.” Over 50% of my customers get a medically meaningful result. And then I started shifting the conversion. Part of it was getting real time feedback and part of it was helping us define what is it that we have to do to show the value. It was clear people need to understand genetics. They didn’t understand the basics. They need to know what is the medical utility of this. Then also, people need to know that they’re not the only one, that’s not weird. Like, “Oh this is weird I did it.” We need to drive social acceptance and part of it also was medical acceptance. We did a ton… It’s one thing I always advise science companies, is you can’t speak, I can’t just tell you, “Oh we’re great, we have great science.” No one believes that. What you need to do is you need to publish. I never even argue with scientists, I just hand over my publications. Like, here you go. Because that’s the reality, you speak with your data. I can make all kinds of claims, but here’s my data to actually support it.
Sam Altman [15:11] – Can you talk about the best decisions you made in the early days? People always ask about the worst, which we can talk about if you want. But I’m curious if you look back, things like that where you learn, “I need to interact with the scientific community in this way.” Are there a few decisions you made, that looking back, had been critical to success?
Anne Wojcicki [15:27] – Fhe first two hires, the two founding scientists, Just like, Brian and Serge were amazing. In some ways, hiring the right, for me it was such a critical part of the company was the scientific integrity of what we were going to do and it set a bar of the talent that we were going to hire going forward. In some ways, having the right people.
Sam Altman [15:50] – We’ve noticed that it is almost impossible to, you can make a lot of mistakes as a company, but if you screw up the first five, seven hires, it’s almost impossible to get through that.
Anne Wojcicki [16:01] – There’s a good number of, when I look at the first 15 people, there’s a good, a number of them are still here. The others who have left, we’re still very close to.
Sam Altman [16:14] – How did you find those first two scientists?
Anne Wojcicki [16:16] – We found them through a friend of a friend of a friend. They had a similar idea so it was a good, it worked as a partnership. It’s hard, I would say hiring is one of the hardest things. One of the things that we’ve tried really hard here in the company. There are a lot of smart people who have humility and there’s a lot of smart people who want to tell you how smart they are. And we have opted for the humility. It’s really important to have people who are constantly open to feedback and constantly open to constructive criticism and learning about other areas. That’s actually one of the things that did make us successful. Which allowed us to grow and attract other people because it’s a group of people who are really eager to learn from others and to keep learning.
Sam Altman [17:07] – I’ve noticed, looking back at my own career that the big hire mistakes I’ve made are people who are really smart, but just awful to work with because they want to tell you how smart they are. The framework that I’ve finally figured out, is you have to look at the net output that has a person has on the organization as a whole.
Anne Wojcicki [17:25] – Correct.
Sam Altman [17:26] – Even if they do a lot themselves, if they make everybody else miserable.
Anne Wojcicki [17:29] – It’s one of the things, hiring is always really hard. And I think especially in leadership roles, if you have the wrong person, I just recently watched one of the old documentaries about Steve Jobs and Bill Gates. Jobs’ talking about how disastrous it was when Scully came. I kind of forgotten about some of these stories and I realized, I was like yeah, if you hire the wrong senior leadership–
Sam Altman [17:52] – And you don’t fix it very quickly, it can sink you.
Anne Wojcicki [17:53] – It can sink you.
Sam Altman [17:55] – Yeah. What’s it like being in a regulated industry? One thing that a lot of people say when they think about, they want to do this really ambitious startup, like genetic testing, but they are afraid because it’s regulated.
Anne Wojcicki [18:09] – Regulation, in some ways there’s pros and cons. In some ways, when you’re regulated, it means there’s rules. There’s guidelines and you can figure out exactly what that means. In some ways, there’s more of a path about actually how you have to execute. It definitely also means that it’s more expensive. There’s rules. If you don’t always agree with all those rules, and when we went from an unregulated company to a regulated company, there was definitely a pretty major transition for us because we were used to, you hire smart people. What do smart people like to do? They like to question and they like to argue! We would question all the time like, “Ugh, well why do you need that test? Or why do you need this study? Why did you need that number of samples?” We would question all the time. One of the things, I think, in a regulated environment, again, it’s like the DMV, there’s rules and you follow. There’s a level of obedience. I’d like to encourage people, it’s not so overwhelming to be regulated. That said, it requires a lot of communication. And in some ways it requires a communication style that’s not prevalent in Silicon Valley.
Sam Altman [19:19] – Right, yes that is hard. There is an opinions mismatch there.
Anne Wojcicki [19:26] – We always said… I’d look at some of my old communication and I’m like, “Oh wow, that’s embarrassing now.” The way we thought we were communicating appropriately and how it really wasn’t. There’s a style and there’s a form and there’s ways. There is actually, there is a path and there’s rule. It’s not terribly clear. The regulatory world can do a better job of helping outline. One thing I do appreciate from, now having been regulated for a number of years, is that there is a bigger picture that they see. People who work at the FDA or people who work in government, it’s a public servant job. They care, they care about public safety. At the FDA, they care about public safety. There’s so many companies, we can all see them. There are so many companies trying to dupe the consumer and their job, they are there to keep us safe. I have a lot of respect for what they do. The onus is on us as the startup and the new company. All these people want to do things in a new way, the onus is on us a little bit to explain how we’re doing it, how that works, and the way they speak, just like I mentioned about scientists, they speak in data. You can’t just say, “Oh no, no no. Trust me, I’m the good guy.” You have to show the data and you have to show the data in lots of ways. In that capacity, I don’t really mind because they do know, they know a bigger picture story. Some of the people we worked with there have been there for 20 years and were amazing. They have a depth, a breadth of knowledge that I’m never going to have.
Anne Wojcicki [21:10] – So learning, there’s input to genuinely take.
Sam Altman [21:14] – As you look back, your vision on the day you signed the incorporation paperwork to now, how much has this all played out like you thought it would?
Anne Wojcicki [21:25] – It was remarkable. I have this picture of the day we signed and I always look at it and I’m like, one, I really dressed in a very different way than I do today. But two, our series A documents… and our OKRs from 2007 are remarkably similar to what they are today.
Sam Altman [21:47] – That’s always–
Anne Wojcicki [21:48] – We’re unusual. One of our investors, he has said, “What’s amazing, I look back on everything, you’re a broken record.” In some ways that’s also why it’s so easy to do speaking engagements cause I’ve said the same thing now for a decade. We have a mission. We have a drive. I know where we’re going. We’ve been continuously executing on it.
Sam Altman [22:12] – The best companies are remarkably steadfast in that. It’s hard to do cause entrepreneurs sort of by definition like to start doing new things.
Anne Wojcicki [22:18] – Right, so one of the hardest things for entrepreneurs, and again going back to the era, I forget what you called it, the era of sorrow.
Sam Altman [22:25] – The trough of sorrow.
Anne Wojcicki [22:26] – The trough of sorrow! It’s important to stick with it. One of the most important things I’ve learned at doing this now is the importance of persistence. You have to stick with it. And when you stick with it, you really see a benefit. There’s things that I see, now that I’ve done it for over a decade. One of our missions is to tell people anyone can be a scientist. Anyone, any age level, it’s part of the reason we’re direct to consumer. I believe anyone, you can be eighth grade level, and you have the ability. I love it now when kids come to me and they’re like, “Oh I saw you speak, and because of you, I really. Even though I had, my parents didn’t know anything and I didn’t really have that degree, I’m now in a PhD program at MIT.” I get amazing stories and you never in some ways, it takes a long time to see the consequences of your actions. It’s one of the things I emphasize to people. If you really care about something, if you’re really passionate, it takes a decade to really see the impact.
Sam Altman [23:27] – It’s like compound growth. It’s always misunderstood. It always takes longer and then the magnitude and the out years is always bigger than you think.
Anne Wojcicki [23:35] – Right, and I think what happens is that people hear the WhatsApp story, they hear other stories, and the real stories, the companies that continue to persist even if there’s challenges. The WhatsApps are the rare, but you can be super consistent and that’s one thing, when I see the press about us now, it’s overwhelming, we’ve just persisted.
Sam Altman [23:57] – Yeah, that’s it.
Anne Wojcicki [23:59] – We don’t go away.
Sam Altman [24:00] – That is the secret to overnight success is ten years of persistence.
Anne Wojcicki [24:02] – Yes, the overnight success is that ten years of persistence.
Sam Altman [24:06] – You’ve done all the remarkable things as a company and the one that is most remarkable, or sort of most important to the future of the world, is that I think in the last 11 years, genetic testing, because of you has gone from something people are afraid of, to something that is now accepted as a really important part of putting people in charge of their lives and their health. But I’d love to hear what the next 11 years look like and if we had this conversion in 2029, what would we be talking about and then your proudest accomplishments then?
Anne Wojcicki [24:37] – I said my original mission, if you think back to my Wall Street days, I think the system is broken, how am I going to be healthy. Success for me is I would like to be healthy at 100. I now know, I have my genetic information. I can learn about things. I have set up this research machine where I can collect data from all my customers. We can make discoveries. We give those discoveries back to our customers. I have this amazing machine for discovery. Now I want to execute on the vision of I would like to be healthy at 100. So success for me, is how do I now, I just empowered you. I have five million people empowered to learn about themselves and they could keep coming back. We collectively as a five million person community and growing–
Sam Altman [25:25] – Is that the biggest genetic dataset in the world?
Anne Wojcicki [25:27] – By far, yeah.
Sam Altman [25:29] – That’s awesome.
Anne Wojcicki [25:29] – With health information. To me, that’s where there’s a power in what we an do now to make discoveries about prevention. We have the drug discovery arm. To me, I look at it as, we have two aspects. You’re healthy today, you want to keep staying healthy. You have a condition, you just have this. We want to have drug discovery for that. Now we’d like to keep you healthy. I think about who, what are the partnerships I can do. What’s the community I can form to actually help you make behavior changes. One thing I see all the time when I meet people, again, all economic levels, all socioeconomic groups, people want to be healthier. They don’t necessarily know how. I see this, people don’t necessarily know. Like, “Oh are the Doritos really bad? Is soda really bad?” It’s remarkable how much there’s a disconnect between, you hear things, but you don’t really know what are the ways that we’re going to be able to help people be healthier.
Sam Altman [26:26] – Have you discovered anything that is, I mean obviously the whole point of this is it’s personalized, but general trends that you’ve discovered that apply to a lot of people they might not already be aware of? Most people know they probably shouldn’t drink so much soda.
Anne Wojcicki [26:40] – No, but there’s probably people who could absorb more sugar than others. Those are the types of things. We’re all pretty different. The beauty of humanity is that you’re meant to survive. You can look at it from the perception of viruses. You have the 1918 flu, lots of people died. Some people survived, some people are immune. The same thing, foods, some people can just eat a lot of sugar. Some people can’t. That’s why we are still around on the planet today. The main thing that I would say take away is that there’s a lot of variability. 100% you shouldn’t smoke, you should exercise more, you should eat better, but the reality is there’s some people who can smoke and never get cancer. There’s some people who can eat a lot and never get overweight. Some people, exercise doesn’t really matter.
Sam Altman [27:25] – How far away are we from someone being able to spit in a tube and you tell them, here’s what you need to do to have a good shot at living to 100?
Anne Wojcicki [27:32] – That’s one of the things that’s most exciting. What we can do by having a community of people who are all engaged. We’re starting to do what we call these intervention studies. We did our first one on weight loss. We had 70,000 people doing a six arm weight loss study. That’s the first time we’re doing it in that kind of scale, specifically to see based on your DNA, are there differences in weight loss? I’m also, I’m personally motivated in Parkinson’s space. So people who are genetically high risk. Are there behaviors that can lower your risk? And how much then can you lower your risk? We’re starting to do those types of studies specifically because that’s what our customers want. Our customers specifically want to know exactly what you just asked.
Sam Altman [28:18] – Tell me what to do.
Anne Wojcicki [28:19] – Tell me what to do. When you say, again, success for me, is at the end of this decade, I will tell you what to do.
Sam Altman [28:24] – At the end of, by 2020?
Anne Wojcicki [28:27] – Well I look at it as–
Sam Altman [28:28] – 2030?
Anne Wojcicki [28:30] – The next ten years of the company. I’m already 10 and 12 years in, so give me another eight years.
Sam Altman [28:36] – That’s pretty exciting.
Anne Wojcicki [28:37] – I’m on it, I’m on it, Sam.
Sam Altman [28:39] – I will follow the instructions to the letter. Thank you very much for taking the time.
Anne Wojcicki [28:42] – Oh you’re welcome. Any time.
Sam Altman [28:43] – This was really fun.
Anne Wojcicki [28:44] – Super fun.
Craig Cannon [28:45] – Alright, thanks for listening. As always, you can find the transcript and video at blog.ycombinator.com and if you have a second, it would be awesome to give us a rating and review wherever you find your podcast. See ya next time.
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