Jan 11, 2013 · 3 minutes

It took two hours of working through pleasantries, but tonight’s PandoMonthly fireside chat ended with Airbnb co-founder Brian Chesky and PandoMonthly host Sarah Lacy talking about meth. The context of the conversation was an ugly incident in which a host on the company’s short-term rental network saw her apartment ransacked by drug-fiending renters.

Lacy didn’t pull any punches, saying, “The question I kept getting from people I talked to in the Valley was, ‘Why didn’t they just go to the woman’s door and write her a fucking check?’”

Chesky’s response was to take responsibility for everything. “Our communication with the victim was horrible. We went dark for a little while. ... The buck has to stop somewhere, and ultimately, it all comes back to me.”

Despite its billion dollar-plus valuation at the time, the company was just nine months removed from being a team of twelve working out of an apartment living room. Despite the increase in outward prestige and notional value, the company had skipped a lot of necessary steps along the way, like putting in communication and crisis management policies.

“We had grown way beyond ourselves,” says Chesky. “We had no protocol for anything. We were just trying to keep everything going.”

The CEO made the mistake of writing a public letter – based on bad information and bad internal communications – declaring the situation resolved. In the mind of the victim, the situation was anything but resolved. People were extremely upset by Airbnb's apparent thoughtless response. The common thinking might be summarized as, “This is a billion dollar company, how don’t they have their shit together?”

“I was told that we were going to take care of her and then we didn’t fulfill that promise,” Chesky said. “And then, I go on TechCrunch, and I write this blog post that was incredibly ignorant – I felt like we were in this airplane and then suddenly it got shot down. ... The other thing that was happening was, our lawyers, for good reason, were like ‘You can’t say this, you can’t admit responsibility, because you open yourself up to liability.”

Another challenge that Chesky pointed to is that everyone was giving him advice, and it was incredibly difficult to decide who to listen to. Eventually, Chesky said to himself, “Fuck it, I don’t care what happens to Airbnb. I’m gonna do what I think is right to do.” That meant writing yet another letter to the victim apologizing to her and actually covering all her losses – regardless of what that amounted to.

“If there was a founding or birth [for the company], that was like a rebirth for us,” says Chesky.

Afterward, the company put in place a $50,000 guarantee to protect its hosts from incidents of this nature. Initially, Chesky had planned on making it $5,000, but when he sent the policy announcement to Marc Andreessen, the investor added an extra zero. Chesky went along, because Andreessen was the one writing the checks to the company. They even made the guarantee retroactive. Growing in proportion to the company’s continued success, the guarantee has since been increased to $1 million.

The takeaway from this experience, and the new company-wide policy, was that Airbnb would return to its founding ethos of putting the user first – something it had unknowingly gotten away from.

Chesky recalled a story about the best advice Amazon's Jeff Bezos says he ever got from Warren Buffett. Buffett said that the problem with most entrepreneurs and investors, and the reason they don’t follow his simple investment thesis, is that no one wants to get rich slow. Chesky took this lesson to heart.

“We don’t want to grow fast – to grow faster than we can provide great experiences,” says the founder. “Because otherwise, we end up with bad situations like the meth problem.”

[youtube http://www.youtube.com/watch?v=wI5ILNp2WLA]

To watch the interview in its entirety, click here.