Building a Business When There Are No Easy Answers
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Ben Horowitz’s Perspective
Ben Horowitz is the cofounder of Andreessen Horowitz, and he is one of Silicon Valley’s most respected and experienced entrepreneurs. Horowitz was exposed to a diverse perspective from a very early age. His parents were indoctrinated into the Communist philosophy and his grandparents were card-carrying Communists. Looking at the world through different perspectives helped him learn how to separate facts from perceptions. This ability proved valuable when he became an entrepreneur. Despite the challenges, Horowitz firmly believed in “Treating your employees fairly and always telling them the truth.” He understood that figuring out the right product is the innovator’s job.
In The Hard Thing About Hard Things, Horowitz shares his experience of being a founder-CEO and the hard decisions he has had to make. He offers advice on managing tough problems as a leader, which business schools do not cover. While most management books focus on doing things correctly, Ben offers insights into what you must do after you have screwed up.
Chapter 1: From Communist to Venture Capitalist
Until you make an effort to get to know someone or something, you don’t know anything.
There are no shortcuts to knowledge, and most knowledge is gained through personal experience. Following conventional wisdom and relying on shortcuts can be worse than knowing nothing at all.
You must learn to separate facts from perception. The author suggests searching for alternative narratives and explanations coming from radically different perspectives. Searching for these contrasting perspectives has the potential to breathe life back into you and your workforce. This is the same approach he adopted after being brought up in a communist family. Instead of accepting this worldview, Horowitz searched for a radically different perspective. This was the start of his journey towards becoming a venture capitalist.
Chapter 2: I Will Survive
The most important rule for privately raising money is to look into the market. You only need one investor to say yes. So, do not worry when thirty others have said no.
Running a startup is associated with two emotions: euphoria and terror. You need to have friends in your life who can help you through both of these extreme emotions. The author offers two types of friend he searches for:
- One you can call when something good happens, and they’ll be excited for you.
- One you can call when things go horribly wrong.
If you want to keep these friends, you then have to treat them well. That said, if your friends leave you, you must still treat them well. Horowitz explains that you should treat the people who leave fairly, or the people who stay will never trust you again.
Chapter 3: This Time With Feeling
Learn by Failing
Sometimes the only way to survive is to purposely go out and fall on your face. You do this so that you can learn fast and know what is needed to succeed. You must instill this in all your employees. Otherwise, you will experience delays. Horowitz argues that project delays in large organizations almost always come down to a single person. So, this rapid learning approach must be implemented throughout your organization.
Create What the Customer Needs
Customers have a limited understanding of what they want from a product. Their current wants are based on their experience of current products. So, finding the right product for your customers is your innovator’s job. Do not place this responsibility on the customers themselves. The benefit of prioritizing your innovator’s view is they can account for everything possible. That said, your innovators must adopt a combination of knowledge, skill and courage. Sometimes the things you’re not doing are the things you should actually be focused on.
Chapter 4: When Things Fall Apart
“Sometimes an organization doesn’t need a solution; it just needs clarity.” – Ben Horowitz
Horowitz offers a personal example of how to react when things fall apart by talking about his business, LoudCloud. When the odds of LoudCloud’s survival were low, a LoudCloud board member advised him to prepare for bankruptcy. Despite this, he never made a contingency plan. He believed that CEOs should not play the odds. When you are building a company, you must believe there is an answer. So, you cannot pay attention to the odds of finding the answer. Instead, you just have to find it. Crucially, there won’t be a perfect formula for dealing with the unique challenges you will face.
Focusing and making the best move when there seems to be no good moves is crucial to being a successful CEO. When things get unbearably complex and the struggle begins, there are a few things you can try.
- Do not put all the organization’s struggles on your shoulders. You should share every burden that you can with the maximum number of brains.
- CEOs should tell it like it is. They also should ensure informal information and ideas are flowing freely. Avoid adopting the old management standard: “Don’t bring me a problem without bringing me a solution.”
- You will have to lay people off at some point. Hence, get your head right by focusing on the future of the company rather than the past. Do not delay. If word leaks out before you execute the decision, a whole new set of issues will arise. Be clear about why you need to lay people off. If it is because the company failed to hit its plan, then admit that failure. Be visible and present to boost the confidence of those who are still on board.
Peacetime CEOs vs. Wartime CEOs
Hororwitz puts forward the idea that there is a significant difference between a Peacetime CEO and a Wartime CEO. Here are the two types compared across multiple domains:
- A Peacetime CEO knows that proper protocol leads to success. A Wartime CEO violates protocol to win.
- A Peacetime CEO focuses on the big picture and empowers people to make detailed decisions. A Wartime CEO cares about a speck of dust if it interferes with the prime directive.
- A Peacetime CEO builds scalable, high-volume recruiting machines. A Wartime CEO does that but also builds HR organizations that can execute layoffs.
- A Peacetime CEO spends time defining the culture. A Wartime CEO lets the war define the culture.
- A Peacetime CEO always has a contingency plan. A Wartime CEO knows that sometimes you have to risk everything.
- A Peacetime CEO knows what to do with a big advantage. A Wartime CEO is paranoid.
- A Peacetime CEO strives not to use profanity. A Wartime CEO sometimes uses profanity purposefully.
- A Peacetime CEO perceives the competition as other ships in a big ocean that may never engage. A Wartime CEO considers the competition as sneaking into their house and trying to kidnap their children.
- A Peacetime CEO aims to expand the market. A Wartime CEO aims to win the market.
- A Peacetime CEO strives to tolerate deviations from the plan when coupled with effort and creativity. A Wartime CEO is completely intolerant.
- A Peacetime CEO does not raise her voice. A Wartime CEO rarely speaks in a normal tone.
- A Peacetime CEO works to minimize conflict. A Wartime CEO heightens the contradictions.
- A Peacetime CEO strives for broad-based buy-in. A Wartime CEO neither indulges consensus-building nor tolerates disagreements.
- A Peacetime CEO sets audacious goals. A Wartime CEO is too busy fighting the enemy to read management books.
- A Peacetime CEO trains their employees to ensure satisfaction and career development. A Wartime CEO trains their employees, so they don’t fail when difficulties emerge.
- A Peacetime CEO has rules like “We’re going to exit all businesses where we’re not number one or two.” A Wartime CEO often has no businesses that are number one or two and therefore does not have the luxury of following that rule.
As a CEO, you want to be capable of embodying both types. Which type you adopt will depend on context.
Chapter 5: Take Care of the People, The Products, and the Profits — in That Order
According to Horowitz, it is crucial to create a positive work environment. People spend most of their waking life at work, which is why work environments are so important. Offering benefits like this to your employees will help you further down the line. The author explains that being a good company doesn’t matter when things go well. That said, it can be the difference between life and death when things go wrong.
When things are going well, offering a healthy working environment means your employees will experience:
1. Career growth as the company grows. Attractive jobs naturally open up.
2. They will impress their friends and family.
3. Their résumé gets stronger by working at a blue-chip company in its heyday.
4. They will become rich.
However, when things go poorly, all those reasons evaporate and become reasons for them to leave. The only thing that keeps an employee at a company when things go wrong is liking their job. Despite the hardships, they still enjoy where they work and what they do. So, the book offers the following advice for when expanding your team:
1. Hire for strength rather than lack of weakness.
2. Have clear expectations of who you are hiring to realize there is something wrong with every employee in your company (including you). Nobody is perfect.
3. Involve multiple people in brainstorming but make the final decision solo. Consensus-based decisions tend to sway the process away from strength and towards weakness.
Chapter 6: Concerning the Going Concern
As organizations grow larger, important work can go unnoticed. The hardest workers can be forgotten in favor of the best office politicians. Bureaucratic processes can choke out creativity and true productivity, as well.
As a company grows, it is crucial to minimize politics within your organization. Politics encourages people to advance their personal agendas instead of growing through merit or contribution. So, you must adopt Horowitz’s four tips for minimizing politics in a company:
- Hire people with the right type of ambition. The right type is an ambition for the company’s success. The executive’s own success should come as a by-product.
- Maintain strict policies and processes on organizational design, performance evaluations, promotions and compensation.
- Promote experienced employees by measuring results against objectives, management skills, innovation and their ability to work well with others.
- Ensure one-to-one meetings between employees and managers. These are an excellent platform for employees to discuss ideas, pressing issues, and chronic frustrations.
Chapter 7: How to Lead Even When You Don’t Know Where You Are
Every startup CEO should focus on what needs to be right rather than worrying about what is wrong. One of the most difficult challenges is keeping your mind in check. You need to move aggressively and decisively without appearing out of control. To calm your nerves, find someone you can talk to who understands what you’re going through. Put your ideas, challenges, and fears on paper to better focus on where you are going.
When the business is struggling, you should avoid lying to your employees by pretending everything is fine. Horowitz highlights that employees are not stupid and by being truthful you can create honest conversations that will help your team overcome these hard things.
Chapter 8: First Rule of Entrepreneurship: There Are No Rules
This chapter covers a theme that crops up throughout this book – there are no rules in business. Things may seem to be going well, but they can change in an instant. So, you must be willing to change your approach and avoid staying devoted to certain rules. Instead, spend your time on improving accountability and creativity within your organization. These two features are the key to a successful business. Horowitz sums up this chapter by explaining that there are no universal answers, only ‘it depends…’
Chapter 9: The End of the Beginning
“Early in my career as an engineer, I’d learned that all decisions were objective until the first line of code was written. After that, all decisions were emotional.” – Ben Horowitz
Horowitz continues his personal story by recalling that after selling Opsware, he went to work for Hewlett-Packard. This experience reinforced his belief that he wanted to do something else. He decided to set up a firm designed to help technical founders run their companies. Technical founders are the best people to run technology companies. All long-lasting technologies thrived when led by their innovator, e.g., Intel, Amazon, Apple, Google and Facebook.
With this new company, Horowitz wanted to teach the founders that things are hard because there are no easy answers. They are hard because your emotions are at odds with your logic. They are hard because you don’t know the answer and cannot ask for help without showing weakness.
While his firm cannot give a founder CEO all skills, it can provide mentorship based on his experience and knowledge. This firm can teach leaders the hard thing about hard things.
“Every time I read a management or self-help book, I find myself saying, “That’s fine, but that wasn’t really the hard thing about the situation.” The hard thing isn’t setting a big, hairy, audacious goal. The hard thing is laying people off when you miss the big goal. The hard thing isn’t hiring great people. The hard thing is when those “great people” develop a sense of entitlement and start demanding unreasonable things. The hard thing isn’t setting up an organizational chart. The hard thing is getting people to communicate within the organization that you just designed. The hard thing isn’t dreaming big. The hard thing is waking up in the middle of the night in a cold sweat when the dream turns into a nightmare.” – Ben Horowitz
The Hard Thing About Hard Things offers actionable life and leadership lessons. Being successful in life and business is all about how you prepare for the hard things in life. Ben Horowitz suggests you set up teams and workspaces that ready your organization for the hard things. Hire based on strengths rather than weaknesses, as these strengths will be crucial when things get tough. You must set expectations and trust your employees. That said, you must also create a work environment that all your employees enjoy. If you do this, they will help you make the good times better and help you fight through the hard things.
Comment below and let others know what you have learned or if you have any other thoughts.
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