Ben Horowitz has a special talent of teaching lessons through stories. From reading his book he sounds like one of those guys who could talk for hours without running out of things to say.
Worrying about how to fire somebody in the office? Great, Ben has a story about firing half the office and firing them with dignity.
Wondering what to do when the company is struggling? Ben has a story about Opsware’s stock falling to $0.35 and almost becoming a penny stock.
In his book Ben covers every facet of running a business that I wanted to know and many more things I wouldn’t have even known to ask about. The only true way to appreciate the book is to read it in its entirety, but I’ve written down a couple of the parts that stuck out to me in particular.
Joining Marc Andreesen at Netscape
One thing I’ve been wondering about the past few months is how I will ever know if I’m working in the industry that I was meant to. Most successful people ascribe their hard work to the fact that they never felt like they truly worked at all.
Coach K put it best in a talk when asked about whether he was thinking about retirement. “Why would I retire from something I love to do something I love less?”
I want to find that, but what are the signs that I have?
Ben Horowitz shared when he found it.
It doesn’t take a genius to see in retrospect that essentially founding the internet was a good idea. But that doesn’t mean it was easy to see in the moment. When Ben learned about Mosaic he said “It was so obviously the future, and I was so obviously wasting my time working on anything but the Internet.”
What do I believe is so obviously the future, and am I working on it? These are the questions that I ask myself now.
Right now there are a few things I can think of:
I believe that Augmented Reality is a foregone conclusion – one day we will all be wearing glasses with some form of a HUD (heads up display). I’m not sure what else is in store, but I know there will be some AR
I have no doubt that esports will become mainstream. The generational/environmental changes have created too much momentum to be stopped, and the market is ready to support the ecosystem
If I deeply believe in those two industries, why am I not working in them?
This is the part that makes me sad. Generally speaking, there isn’t a place in startups for non-engineers. I was listening to David Perell’s podcast with Steve Cheney today, and Steve said something to the effect that non-engineers are useless. I’m regretting my major choice in college.
But there’s no point in being defeatist. If I didn’t major in CS or EE, so what? There are other ways to add value. Currently I’m writing about esports and trying to learn all I can. I need to do more in the AR space, but in my opinion one deep dive is better than two shallow ones. I will find way to add value.
Building a Business is F*cking Hard
As many an Asian child before me, I thought I had a hard upbringing. There were high expectations, long nights, and lots of hard work. It turns out that those are baby steps.
Building a company always sounds invigorating when you read about them, because you’re usually reading about the survivors. Ben shows the reader the less-talked about portions of building a business. Despite having a great team and many contacts, his second company Loudcloud struggled.
There were multiple periods of struggle. They were three weeks from bankruptcy when they filed for IPO in the midst of the dot com crash. His wife had an allergic reaction to medicine and stopped breathing in the middle of the road show. When they finally sold to EDS 150 employees would continue to EDS, and 140 would be laid off.
A recurring theme of the book was the feeling of responsibility and respect. It’s one thing to struggle on your own, but another when the lives of many depends on your/your company’s respect. Each employee has their own family they need to take care of, and you as the CEO recruited them because you thought they were the best and you sold them your vision of the future.
When things aren’t going it’s on you.
I know that I slack off more than I should, and that I fall prey to procrastination more than I’d like to admit. But I also thought that I’ve worked hard. I learned from reading Ben’s book that I don’t truly know the feeling of working hard under desperate conditions with the weight of a company on my shoulders.
I will never complain about working hard again.
Laying Off People
Layoffs and firings sound like the worst parts of the job, but Ben and others he talked about in the book had some great advice for the tough time:
If you don’t trust the people who are leaving fairly, the people who stay will never trust you again
When Opsware purchased Tangram because it was essential for one of their customers, they had decided that they would not take on their CFO as part of the acquisition. As the negotiations closed, the CFO John began to get severe headaches. He had brain cancer. It would cost Opsware $200,000 to cover it and they didn’t owe John anything. They ended up covering it, and later on Ben found out through a handwritten letter from John’s wife that he had died. She wrote that by helping them with payments they saved the family from total despair. She didn’t know why he did it. Ben had an amazing line, “I guess I did it because I knew what desperation felt like.”
Don’t delay – word will leak in layoff situations, and you don’t want people spending their time wondering if they will get laid off
Be clear why you are laying people off – it’s easy to say that you’re cleaning up employee performance, but you’re not. Company performance failed. Ben says the messaging should be, “The company failed and in order to move forward, we will have to lose some excellent people.” Every day the CEO says to trust them, and laying off people breaks the trust. The only way to rebuild trust is to come clean
Train your managers – managers must lay off their own people. Why? People won’t remember every day at the company, but they will remember their last. They will remember every detail and these details matter, you must treat people with the respect they deserve
Address the entire company – the message is for the people who are staying. The CEO must address the company before the layoffs. The people who stay will care deeply about how you treat their colleagues.
Be visible, be present – this is similar to something I note later. There are plenty of times you want to hide, but you can’t do that. You have to be visible and engaging because people want to see that you care.
How to Get The Most Out of Everyone
This section does not refer to a specific chapter of the book, but a recurring theme. Ben spoke consistently about asking his team to trust him and to push beyond their limits. Time and time again they delivered. I believe this is a testament to his team, but even more to him as a leader. Here are some of the things he talked about.
Opsware was getting destroyed in the market by Blade-Logic because their product was superior. Ben held an all engineering meeting and told them that they were getting their asses kicked, and if it continued he’d have to sell the company for cheap. In order for them to survive, he needed everyone there to tell their families that Ben needed them for the next six months.
They were in it together but they had one bullet left in the gun and they had to hit the target. Later, he heard from one of his employees in an interview that it was one of the most fun but challenging periods he ever had at work. But he loved it. Ben cried because he thought he had asked them for too much, and nobody was ready for another do-or-die mission.
With honesty and true conviction, you can lead people to war.
Tell it Like it is
To Ben, this was a trait of great leaders. There were a few reasons to not hide things from the team:
Trust – without trust, communication breaks. If you trust someone completely you don’t need them to explain why they did something. If the reverse is true, no amount of talking can convince you.
The more brains working on the hard problems, the better – you hire the best people you can so they can solve the hard problems. You want them to be working on the hardest things
Bad news travels fast, good news travel slows – Ben says that if you looked at failed companies, many employees knew of fatal issues long before they killed the company. Why didn’t they fix it? Because the company probably discouraged the spread of bad news
How to Lead
CEOs are under a lot of psychological pressure because as the leader, essentially every problem is your fault. It’s also lonely because talking to your employees could have obvious problems, and your board isn’t always useful.
CEOs often lean on either taking things too personally, or not personally enough. Ben says that the ideal CEO will be urgent yet not insane. They will be aggressive and decisive without feeling emotionally culpable. If the CEO can separate the importance of issues from their feelings on them, they will avoid demonizing their employees and themselves.
Techniques for CEOs to calm their nerves (207):
Make some friends – you won’t necessarily get the advice you need, but it’s psychologically useful to talk to people who have been through similarly challenging decisions
Get it out of your head and onto paper – writing down a detailed explanation of your logic can be useful for separating you from your own psychology, which could enable you to make your decision swiftly
Focus on the road, not the wall – when driving a racecar at 200 mph, when you’re going around the curve you have to focus on the road. If you focus on the wall you’ll drive right into it. If you focus on what can sink your boat it’ll stymie you. Focus on where you’re going rather than on what you hope to avoid.
Sometimes you have to make the right choice, but it will take intelligence and courage
You are right
You are wrong
You decide against the crowd
Few remember that you made the decision, but the company succeeds
Everybody remembers the decision and you are downgraded, ostracized, or fired
You decide with the crowd
Everyone who advised you remembers the decision and the company succeeds
You receive the minimum blame possible for getting it wrong, but the company suffers
He says, “on the surface, it appears that if the decision is a close call, it’s much safer to go with the crowd. In reality, if you fall into this trap, the crowd will influence your thinking and make a 70-30 decision seem like a 51-49 decision. This is why courage is critical.
Ones and Twos (page 214)
This was a pretty interesting discussion because Ben says there are two (ok three, but two archetypes) types of leaders.
Ones: they prefer to gather information from a broad variety of sources and then make a decision. They are comfortable making a decision with very little information. They are strategic, and enjoy eight-dimensional chess against their best competitors.
Ones, however, sometimes get bored with many of the important execution details required such as process design, goal setting, structured accountability, training, and performance management.
Twos: they thoroughly enjoy the process of making the company run well. They have super-clear goals and prefer not to change goals or direction unless absolutely necessary. They enjoy strategic discussions but have difficulty with the strategic process itself. Where a One would be comfortable spending a day a week reading, studying, and thinking, a Two would be nervous because it didn’t feel like work to them.
Ones are comfortable with insufficient data, but Twos might become highly agitated about the decision and overcomplicate the decision-making process to provide a false feeling of thoroughness.
Ben says you need both characteristics to be a good CEO. He does say, however, that most CEOs tend to be Ones. That felt good to read because I identify far more with being a One. While I like to be thorough about my decisions, I rarely worry about a lack of information.
I do struggle sometimes with the nitty gritty details and maintaining process. I will work on it.
As with any great book there are nuggets of wisdom in every chapter. Sometimes they don’t fit within a certain theme, but I find it valuable to write them down anyways. Hopefully you gain some value from this section as well.
“Markets weren’t ‘efficient’ at finding the truth; they were just very efficient at converging on a conclusion – often the wrong conclusion” – Sometimes it’s good to listen what others have to say, but even if they’re all in agreement it doesn’t mean they’re right. Trust your gut instincts and work towards a goal whether or not others agree with it.
“Note to self: It’s a good idea to ask, ‘What am I not doing?’”
“There is no secret [to being a successful CEO]. It’s the moments where you feel most like hiding or dying that you can make the biggest difference as a CEO.” This is something I need to work on until one day I’m in that position.
It’s easy to feel like there’s so much to do that I end up doing nothing at all. It takes courage to dive into something difficult and tackle it. However, just like with going to the gym, it gets easier once you get there. Overcoming the inertia and fear of hard work is difficult, but necessary.
Hiring For Scale
A potential pitfall is hiring for scale too soon. Lots of times people will tell you to think about how the company will look in three to five years and you hire for that position. But to get there, you need to hire someone who can get your company there.
I experienced this at one of our portfolio companies. We hired an executive who had experience running a larger organization, and as a result they were very used to delegating responsibilities. As a smaller organization, we couldn’t afford to have our executives delegating everything. We needed them to dig into the weeds and bust their ass to get us results.
When firing an executive, it’s important to keep this in mind: “You cannot let him keep his job, but you can absolutely let him keep his respect.”
Where do lies come from?
When Ben asked a great investor why CEOs of successful companies like Cisco, Siebel, and HP would refuse to acknowledge impending slowdowns Andy said they were not lying to investors, but rather, they were lying to themselves.
Andy said that humans, particularly those who build things, only listen to leading indicators of good news. Most of the time people only take action on positive indicators and look for alternative explanations for negative indicators.
If you wonder why honest employees are lying to you, the answer is they are not. They are lying to themselves. And if you believe them, you are lying to yourself.
Nobody cares about your excuses. When things go wrong in your company, nobody cares. The media don’t care, your investors don’t care, your board doesn’t care, and your employees don’t care. And they are right not to care.
Great reasons for failure won’t save a single dollar for investors, or save one employee’s job. In the end, nobody cares; just run your company.
Good and Bad Organizations
“In good organizations, people can focus on their work and have confidence that if they get their work done, good things will happen both for the company and them personally. It is a true pleasure to work in an organization such as this. Every person can wake up knowing that the work they do will be efficient, effective, and make a difference for the organization and themselves. These things make their jobs both motivating and fulfilling. (101)”
“In a poor organization, on the other hand, people spend much of their time fighting organizational boundaries, infighting, and broken processes. They are not even clear on what their jobs are, so there is no way to know if they are getting the job done or not. In the miracle case they work ridiculous hours and get the job done, they have no idea what it means for the company or their careers. To make it worse, when they finally work up the courage to tell management how fucked-up their situation is, management denies there is a problem, then defends the status quo, then ignores the problem.”
The Peter Principle and the Law of Crappy People
The Peter Principle: if members are promoted so long as they work competently, sooner or later they are promoted to a position at which they are no longer competent (their “level of incompetence”).
The Law of Crappy People: For any title level in a large organization, the talent on that level will eventually converge to the crappiest person with the title. The rationale is other employees in the company with lower titles will naturally benchmark themselves against the crappiest person at the next level.
In a one-on-one it’s the employees meeting, not the managers. During the meeting, since it’s the employee’s meeting, the manger should do 10 percent of the talking and 90 percent of the listening.
How to be good at giving feedback (231)
You need to be authentic and come from the right place. You are giving them feedback because you want them to succeed. If they feel like you are in their corner, they will listen to you.
Leaders that are good at giving feedback don’t get personal. If you’re going to fire someone, fire them. Don’t prepare them to get fired, prepare them to succeed.
Effective leaders realize feedback is not one-size-fits-all. Your tone should match the employee’s personality, not their mood.
Because of this, effective feedback is direct, but not mean. While it might be easier to say that you just one them to take one more pass to tighten the conclusion up, it’s better to say you don’t follow it at all and give them the reasons why. Watered-down feedback is worse than no feedback at all because it’s deceptive and confuses them.
Once you master giving feedback, you should give it frequently. This will have two effects:
Feedback won’t be personal in your company – if the CEO constantly gives feedback, everyone will get used to it. Everyone will focus on the issues, not an implicit random performance evaluation
People will become comfortable discussing bad news. If people get comfortable talking about what each other are doing wrong, it becomes easy to talk about what the company is doing wrong.
If you’ve made it to the end of my summary/review/thoughts on Ben Horowitz’s book, thank you. This was a very long read but it wouldn’t do the book any justice to cut out what I think are essential pieces for the sake of brevity.
If you want, I’ve included links to my other reviews below, or you could just click them from my reading list. Thanks!