Ben Horowitz: The Hard Thing About Hard Things

Writes Ben Horowitz of Andreeson Horowitz in the aptly titled 'The Hard Thing About Hard Things," in which he articulates ideas that many CEO may only sense at a gut level or express as an aphorism:

Bill Campbell, (Founder/CEO Intuit,) used to say to me, "Ben, you're the best CEO that I work with." This always seemed crazy to me, because he was working with Steve Jobs, Jeff Bezos (Amazon) and Eric Schmidt (Google) at that time while my company (Opsware, much later sold to EDS for $ 1.6 billion, a x50 multiple, but then floundering in the Dot Com crash) was going straight into the wall. One day I called him on it and said, "Bill, why would you say that? Do results not count?" He said, "There are a lot of good peacetime CEOs (Schmidt, Bezos) and lots of good wartime CEOs, (Jobs, Larry Paige) but almost no CEOs that can function in both peacetime and in war time. You're a peacetime/wartime CEO."

My greatest management discovery was that peacetime and wartime require radically different management styles, but most management books describe peacetime CEO techniques, very few wartime. In peacetime, leaders must maximize and broaden the current opportunity, employing techniques to encourage broad-based creativity and advance across a diverse set of possible objectives. In wartime, the company typically has a single bullet in the chamber and must, at all costs, hit the target. The company's survival in wartime depends upon strict adherence to the mission. Peacetime CEO focuses on the big picture and empowers her people to make the detailed decisions. Wartime CEO cares about a speck of dust on a gnat's ass if it interferes with the prime directive. 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. And they always go wrong."

Writes Ben Horowitz of Andreeson Horowitz in the aptly titled 'The Hard Thing About Hard Things," in which he articulates ideas that many CEO may only sense at a gut level or express as an aphorism:

Bill Campbell, (Founder/CEO Intuit,) used to say to me, "Ben, you're the best CEO that I work with." This always seemed crazy to me, because he was working with Steve Jobs, Jeff Bezos (Amazon) and Eric Schmidt (Google) at that time while my company (Opsware, much later sold to EDS for $ 1.6 billion, a x50 multiple, but then floundering in the Dot Com crash) was going straight into the wall. One day I called him on it and said, "Bill, why would you say that? Do results not count?" He said, "There are a lot of good peacetime CEOs (Schmidt, Bezos) and lots of good wartime CEOs, (Jobs, Larry Paige) but almost no CEOs that can function in both peacetime and in war time. You're a peacetime/wartime CEO."

My greatest management discovery was that peacetime and wartime require radically different management styles, but most management books describe peacetime CEO techniques, very few wartime. In peacetime, leaders must maximize and broaden the current opportunity, employing techniques to encourage broad-based creativity and advance across a diverse set of possible objectives. In wartime, the company typically has a single bullet in the chamber and must, at all costs, hit the target. The company's survival in wartime depends upon strict adherence to the mission. A Peacetime CEO focuses on the big picture and empowers her people to make the detailed decisions. A Wartime CEO cares about a speck of dust on a gnat's ass if it interferes with the prime directive. 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. And they always go wrong."

He describes the biggest challenge as managing your psychology, particularly when making unpopular decisions based on patchy information (10% of a business school case study is the norm) and while being ultimately alone. His recipe: Focus on the road not the wall, describe decision points in writing, make friends -- particularly the kind you can turn to for advise when things go horribly wrong. When on the backfoot, give ground grudgingly, like an offensive lineman in American Football. Like Peter Theil, he extols authenticity, fairness and caring, and seeks courage and brilliance in Founders. Unlike Theil or Elon Musk, he believes in the iteration of Steve Blank and Eric Ries; perfectionist product managers are disastrous, or as Bill Gates would say: "Let not the perfect be the enemy of the good." Continually gathering information from multiple channels in making important decisions is essential. Like when you hire for roles that you don't know much about, interview a leading candidate first to learn. Or if you don't know a function, take it on yourself to learn.

He highlights the importance of hiring great people because employees at any level gravitate to the level of the lowest performer at that level. Of hiring people with ambition, rather than ambitious people. Of hiring people for their strengths rather than being discouraged by their weaknesses, and for the job at hand rather than, say, for a year down the road when the company scales or diversifies. Of making sure new hires integrate into the company. Of continuously providing feedback, else when it is only provided when pressing and critical, it curbs creativity. Build organizations, he says, that align with major outputs sought, and use white spaces, to manage other outputs; engineer accountability and communication flows into the system. Big company executives are reactive, things come to them; small company executives must be proactive and run after things. Managers themselves should train their team because training is so critical, but the big company CEO has no time to train. Clear expectations should be set; promotion from within is mostly preferable. Be wary if you fail, for the politics of an Executive is quite different from that of any other disgruntled employee -- its like taking on a professional boxer compared to a man on the street.

Ben dilates on the importance of timing, on playing off suitors using "rabbits" like in a dog race and artificial deadlines, and on how a single man can grind a large organization's process to a halt. The CEO has to balance creativity with accountability, leaders with managers, disclosure with circumspection, odds with just making it happen, and making it personal with stoicism. How does one achieve this balance? Well, there are limits to prescription: "The first rule of entrepreneurship is that there are no rules. Everybody learns to be a CEO by being a CEO." But perhaps there is one rule, or rather pledge: "Life is a struggle, but I will survive. There is always a move."

Peter Thiel: From Zero to One

About 1 in a 100 startups in the USA get funded by VC. Out of those that obtain Venture Capital funding, 1 in a 1000 go on to become Unicorns i.e. attain a valuation of over 1 billion dollars. Peter Thiel and the team he put together at PayPal have gone on to create no less than 8 Unicorns: Elon Musk founded SpaceX and Tesla Motors, Reid Hoffman, LinkedIn, Steve Chen, Chad Hurley, and Jawed Karim, YouTube, Jeremy Stoppelman and Russel Simmons, Yelp, David Sacks, Yammer, and Peter Thiel himself, PayPal and Palantir. Thiel was also the first outside investor in Facebook.

What was the magic juice? In Peter Thiel's words ...

"From the start, I wanted PayPal to be tightly knit instead of transactional. I thought stronger relationships would make us not just happier and better at work but also more successful in our careers even beyond PayPal. So we set out to hire people who would actually enjoy working together. They had to be talented, but even more than that they had to be excited about working specifically with us."

"Startups have limited resources and small teams. They must work quickly and efficiently in order to survive, and that's easier to do when everyone shares an understanding of the world. Internal peace is what enables a startup to survive at all."

"This is why it's crucial to choose wisely; every single member of your board matters. Even one problem director will cause you pain, and may even jeopardise your company's future."

Thiel goes on to stress the absolute necessity of discovering a secret, of identifying a unique opportunity that others don't see, the absolute necessity of starting by dominating a small market, the absolute necessity of sales and having one distribution channel that works.

And of building proprietary technology that is an order of magnitude better than its nearest rival, of the network effect, economies of scale and branding; of durability, of not disrupting or competing but collaborating, of creating genuine monopolies that innovate rather than being commodatised by competition, of risking boldness rather than triviality, of aligning not only energies but also financial incentives.