Building a Business When There Are No Easy Answers
Ben Horowitz is the cofounder of Andreessen Horowitz (A16Z) and one of Silicon Valley’s most respected and experienced entrepreneurs. In ‘The Hard Thing about Hard Things’ he shares his experience of being a founder-CEO and the hard decisions he has had to make — offering 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.
There’s no recipe for building a high-tech company; there’s no recipe for leading a group of people out of trouble; there’s no recipe for making a series of hit songs; there’s no recipe for playing NFL quarterback; there’s no recipe for running for president; and there’s no recipe for motivating teams when your business has turned to crap. That’s the hard thing about hard things — there is no formula for dealing with them
Horowitz was exposed to a diverse perspective from a very early age; parents indoctrinated in the Communist philosophy, grandparents were card-carrying Communists and at Berkeley High School football team, he was the only player to excel academically. Looking at the world through different perspectives helped him learn how to separate facts from perceptions. This ability proved incredibly useful when he became an entrepreneur, especially in dire circumstances when looking at alternative narratives and radically different perspectives kept him informed.
Horowitz founded a company called LoudCloud in 1999, based on the emerging concept of a computing cloud
In spite of 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, not the customer’s and after the first line of code is written, decisions are no longer objective in the technology business.
Chapter 1: From Communist to Venture Capitalist
Until you make the effort to get to know someone or something, you don’t know anything.
There are no shortcuts to knowledge, especially knowledge gained from personal experience. Following conventional wisdom and relying on shortcuts can be worse than knowing nothing at all.
Learn to separate facts from perception. Especially when the “facts” seem to dictate a certain outcome, look for alternative narratives and explanations coming from radically different perspectives. Even one alternate, the plausible scenario can breathe life back into you and your workforce.
Most business relationships either become too tense to tolerate or not tense enough to be productive. Either people challenge each other to the point where they don’t like each other, or they become complacent about each other’s feedback and no longer benefit from the relationship.
Media companies focus on things like creating great stories. Tech companies focus on creating a better way of doing things.
Chapter 2: I Will Survive
The most important rule of raising money privately: look for a market of one. You only need one investor to say yes, so it’s best to ignore the other thirty who say no.
Running a startup, you only ever experience two emotions: euphoria and terror.
You need two kinds of friends in your life:
(1) one you can call when something good happens, and they’ll be excited for you.
(2) one you can call when things go horribly wrong.
If you are going to eat shit, don’t nibble.
Business in trouble + another business in trouble = double trouble upon the merger
Needs always trump wants in mergers and acquisitions.
Michael Ovitz: “I believe in artificial deadlines. I believe in playing one against the other. I believe in doing everything and anything short of illegal or immoral to get the damned deal done.”
Treat the people who leave fairly, or the people who stay will never trust you again.
Chapter 3: This Time With Feeling
Sometimes the only way to survive is to purposely go out and fall on your face, so you can learn fast and know what is needed.
Whenever a large organization attempts to do anything, it always comes down to a single person who can delay the entire project.
Figuring out the right product is the innovator’s job, not the customer’s job. The customer only knows what she thinks she wants based on her experience with the current product. The innovator can take into account everything that’s possible, often going against what she knows to be true. This requires 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
When the odds of LoudCloud’s survival were low, Ben’s friend and LoudCloud board member, Bill Campbell advised him to prepare for bankruptcy, but he never made such 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, and you cannot pay attention to the odds of finding it. You just have to find it. It matters not whether your chances are nine in ten or one in a thousand; the task is the same.
There is no secret to being a successful CEO he states; however, the ability to focus and make the best move when there seems to be no good moves is crucial. When things get unbearably difficult, and the struggle begins, there are a few things you can try.
First, do not put it all on only your shoulders. You should share every burden that you can with the maximum number of brains.
Second, CEO’s Should Tell It Like It Is and ensure informal information and ideas are flowing freely in your company, instead of adopting the old management standard: “Don’t bring me a problem without bringing me a solution.” What if the employee cannot solve an important problem?
Thirdly — and this is a tough one — 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. Then be visible and present, to boost the confidence of those who are still on board.
So, what’s the secret to being a “successful” CEO? Sadly, none, Ben says, other than making the best move when there are no good moves.
Hororwitz puts forward the idea that there is a significant difference between a Peacetime CEO vs. a Wartime CEO, which sparks great interest. Let me quote directly from the book:
Peacetime CEO knows that proper protocol leads to winning. Wartime CEO violates protocol in order to win.
Peacetime CEO focuses on the big picture and empowers her people to make detailed decisions. Wartime CEO cares about a speck of dust on a gnat’s ass if it interferes with the prime directive.
Peacetime CEO builds scalable, high-volume recruiting machines. Wartime CEO does that, but also builds HR organizations that can execute layoffs.
Peacetime CEO spends time defining the culture. Wartime CEO lets the war define the culture.
Peacetime CEO always has a contingency plan. Wartime CEO knows that sometimes you gotta roll a hard six.
Peacetime CEO knows what to do with a big advantage. Wartime CEO is paranoid.
Peacetime CEO strives not to use profanity. Wartime CEO sometimes uses profanity purposefully.
Peacetime CEO thinks of the competition as other ships in a big ocean that may never engage. Wartime CEO thinks the competition is sneaking into her house and trying to kidnap her children.
Peacetime CEO aims to expand the market. Wartime CEO aims to win the market.
Peacetime CEO strives to tolerate deviations from the plan when coupled with effort and creativity. Wartime CEO is completely intolerant.
Peacetime CEO does not raise her voice. Wartime CEO rarely speaks in a normal tone.
Peacetime CEO works to minimize conflict. Wartime CEO heightens the contradictions.
Peacetime CEO strives for broad-based buy-in. Wartime CEO neither indulges consensus building nor tolerates disagreements.
Peacetime CEO sets big, hairy, audacious goals. Wartime CEO is too busy fighting the enemy to read management books written by consultants who have never managed a fruit stand.
Peacetime CEO trains her employees to ensure satisfaction and career development. Wartime CEO trains her employees so they don’t get their asses shot off in the battle.
Peacetime CEO has rules like “We’re going to exit all businesses where we’re not number one or two.” Wartime CEO often has no businesses that are number one or two and therefore does not have the luxury of following that rule.
Chapter 5: Take Care of the People, The Products, and the Profits — in That Order
According to Horowitz, it is crucial to create a good work environment. It’s important that the people who spend most of their waking life at work have a good environment to exist in while there. Being a good company doesn’t matter when things go well, but it can be the difference between life and death when things go wrong. When things go well, there are many reasons to stay at a company —
1. Your career grows as the company grows, attractive jobs naturally open up
2. You’ll be impressing your friends and family. Your friends and family will think you a genius for choosing to work at the “it” company
3. Your résumé gets stronger by working at a blue-chip company in its heyday.
4. Oh, and you are getting rich.
However, when things go poorly, all those reasons evaporate and become reasons to leave. In fact, the only thing that keeps an employee at a company when things go horribly wrong — other than needing a job — is that she likes her job, despite the hardships
So on that note, the book advises when expanding your team, consider:
1. Hire for strength rather than lack of weakness.
2. Have clear expectations of who you are hiring with a realization that there is something seriously 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.
Especially when hiring executives, it is very important to remember that being a big company executive is very different from being a small company executive. Big company executives are driven by interruptions, while startup executives know that nothing happens unless they make it happen. A big company executive has an incredible number of incoming demands on his time, whereas in a small company without a massive push, the company will stay at rest.
Chapter 6: Concerning the Going Concern
I think Horowitz is quite correct when he states in this chapter that most workplaces are far from good. As organizations grow larger, important work can go unnoticed. The hardest workers can get passed over in favor of the best office politicians, and bureaucratic processes can choke out the creativity and true productivity.
As a company grows, Horowitz says, it is important to minimize politics within your organization. One of the biggest issues behind politics is when people advance their own careers or their personal agendas instead of merit or contribution.
Here are the four takeaways for minimizing politics in the company.
Firstly, hire people with the right kind of ambition; otherwise, your company would turn into the political equivalent of the U.S Senate. The right kind is ambition for the company’s success; with the executive’s own success coming on only as a by-product.
Secondly, maintain strict policies and processes on organizational design, performance evaluations, promotions, and compensation
Thirdly, you should promote experienced employees by measuring results against objectives, management skills, innovation, and their ability to work well with others.
Fourthly, ensure one-on-one meetings between employees and managers. These are an excellent platform for employees to discuss their as yet unheard brilliant ideas, pressing issues, and chronic frustrations.
Chapter 7: How to Lead Even When You Don’t Know Where You Are
Every CEO, Horowitz writes, of a startup 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 be able to move aggressively and decisively without acting insane. 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 for a better focus on where you are going and not what you are trying to avoid.
There is a fine Line Between Fear and Courage — People who watch you judge you on what you do, not how you feel.
Chapter 8: First Rule of Entrepreneurship: There Are No Rules
Reiterating a theme that comes up again and again in the book as a whole this chapter is devoted to the idea that there are no rules in business. Things may seem to be going well, but they can change in an instant. You need accountability and creativity to succeed in business. Accountability is the key for effort, promises and results.
The hard things will always be hard; courage and grit are the keys to success.
Chapter 9: The End of the Beginning
Continuing his personal story Horowitz recalls that after selling Opsware, he went to work for Hewlett-Packard, but he still knew 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 ; Intel, Amazon, Apple, Google and Facebook had been run by their founders and in some cases still are to this day
With this new company Horowitz wanted to imapart to founders that things are hard because there are no easy answers or recipes. They are hard because your emotions are at odds with your logic. They are hard because you don’t know the answer and you cannot ask for help without showing weakness. While his firm cannot give a founder CEO all the skills he or she needs, it can provide mentorship based on his experience and learnings.
While most start-up stories may read like a romance novel, this tome is more like watching the film “Fight Club”. The writing has a biting, sarcastic, blunt humor and uses hip-hop lyrics as intros to chapters. It’s fun and entertaining to read but most of all it’s an amazing insider look into the world of tech and how to succeed in this unique industry.
If you are leading a team of any size there is much more to be learned from “The Hard Thing About Hard Things’ and so I would strongly recommend getting and reading a copy for yourself.