Ben Horowitz: The Hard Thing About Hard Things - Building a Business When There Are No Easy Answers

The best thing about startups? You only ever experience two emotions: euphoria and terror. And the lack of sleep that comes with the job seems to enhance them both. 

It turns out that is exactly what product strategy is all about - 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. 

Note to self: its a good idea to ask, "What am I not doing?"

When you are building a company, you must believe that 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, your task is the same. 

Don't put it all on your shoulders. Get the maximum number of brains on the problem. 

This is not checkers, this is motherfuckin' chess. Business tends to be extremely complex. The underlying technology moves, the competition moves, the market moves, the people move. As a result, like playing 3-dimensional chess on Star Trek, there is always a move. 

Play long enough and you might get lucky. In the technology game,  tomorrow looks nothing like today. If you survive long enough to see tomorrow, it may bring you the answer that seems so impossible today.

Remember that this is what separates the women from the girls. This is the challenge if you don't want to be great, then you should have never started a company. 

If you run a company, you will experience overwhelming psychological pressure to be overly positive. Stand up to the pressure, face your fear, and tell it like it is. 

Layoffs -

Step 1. Get your head right. Focus on the future not the past. 

Step 2. Don't delay. Once you decide you will have to lay people off, the time elapsed between making that decision and  executing that decision should be as short as possible. 

Step 3. Be clear in your own mind about why you are laying people off. You are laying people off because the company has failed its plan. Not individual performance, but company performance failed. A layoff breaks the trust you have to build as a CEO, it is important that you are transparent and come clean so you can rebuild that trust. 

Step 4. Train your managers. If you send managers to a super-uncomfortable situation without training, most of them will fail. Managers must lay off their own people. If you hired me and I busted my ass for you, I expect you to have to courage to lay me off yourself. Managers must clearly explain that it is a company failure rather than a personal shortcoming, that the decision is non-negotiable, and that they will be provided all of the details about the benefits and support the company will provide. 

Step 5. Address the entire company. Prior to executing the layoff, the CEO must address the company and provide the correct context and air cover for the managers. Remember, the message is for people who are staying. The people who will care deeply about how you treat your outgoing colleagues are the ones that are staying. 

Step 6. Be visible, be present. People want to see you, be engaging. Help them carry their things to their cars, let them know you appreciate their efforts. 

Because, you see, nobody cares. 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 even your mama doesn't care. And they are right not to care. A great reason for failing won't preserve a single dollar for your investors, won't save a single employee's job, or get you one new customer. All the mental energy you use to elaborate your misery would be far better used trying to find the one seemingly impossible way out of your current mess. Spend zero time on what you could have done, and devote all your time on what you might do. Because at the end, nobody cares; just run your company. 

Being a good company (well-managed + effective environment) doesn't matter when things go well, but it can be the difference between life and death when things go wrong. And things always go wrong. 

When things go well, people stay at your company because: their career path is wide open due to company growth, their friends and family think they are a genius for choosing the "it" company before anyone else knew it was "it", their resume is getting stronger by working at a blue-chip company in its heyday, and they are getting rich. 

When things go poorly, all those reasons become reasons to leave. The only thing that keeps an employee at a company when things go horribly wrong, besides needing a job, is that he/she likes their job. 

Why startups should train their people:

People are the most important asset. Properly run startups place a great deal of emphasis on recruiting and the interview process in order to build their talent base. Too often the investment stops there. 

The best place to start is with training employees on the topic that is most relevant to their job - aka functional training. Functional training can be as simple as training a new employee on your expectations for them, or as complex as a multi-week engineering boot camp to bring new recruits up to speed on the historical architectural nuances of your product. 

No startup has time to do optional things. Training must be mandatory. Keep in mind that there is no investment that you can make that will do more to improve productivity in your company. Therefore, being too busy to train is like being too hungry to eat. 

Management debt is incurred when you make an expedient, short-term management decision with an expensive, long-term consequence. Like technical debt, the trade-off sometimes makes sense, but often does not. More important, if you incur the management debt without accounting for it, then you will eventually go management bankrupt. Two common examples of management debt include: overcompensating a key employee when they get another job offer, and having no performance management or employee feedback process. 

How to minimize politics in your company:

Political behavior almost always starts with the ceo. Often, the least political ceo's run the most political organizations and frequently and accidentally encourage intense political behavior. By politics, Ben Horowitz means people advancing careers or agendas by means other than merits and contribution. 

One explicit action that often unintentionally promotes politics is when you give an employee who asks for a raise (and proves they're worth more) a raise. When an employee earns a raise by asking for one rather than as a reward for outstanding performance, you will be rewarding behavior that has nothing to do with advancing your business. 

When hiring a management team, most startups focus almost exclusively on IQ, but a bunch if high-IQ people with the wrong kind of ambition won't work. It is supremely important that managers have the right kind of ambition, because anything else will be exceptionally demotivating to their employees. As an employee, why would I want to work long hours for my manager? Nothing motivates a great employee more than a mission that's so important that it supersedes everyone's personal ambition (their manager cannot be more interested in their own career than in the company)

Screening for the right kind of ambition - When interviewing candidates, it's helpful to watch for small distinctions that indicate whether they view the world through the "me" prism or the "team" prism. People who view the world through the "me" prism might describe a prior company's failure as follows: "My last job was my e-commerce play. I felt that it was important to round out my resume" note the use of "my" to personalize the company in a way that it's unlikely that anyone else at the company would agree with. People who view the world through the team prism will seldom use words like "I" or "me" even when answering questions about their accomplishments. 

Peter Principle: In a hierarchy, members are promoted so long as they work competently. Sooner later they will be promoted to a position at which they are no longer competent and there they remain unable to earn further promotions. 

Ben coins the Law of Crappy People: for any title in a large organization, the talent on that level will eventually converge to the crappiest person with the title. This is because all other employees on that level naturally benchmark themselves against the crappiest member on their level. 

Ideally, the best promotion process should yield a result similar to the very best karate dojos. In top dojos, in order to achieve the next belt level you have to defeat an opponent in combat who is already at that level. Thus guarantees that a new black belt is never a worse fighter than the worst current black belt. Frustratingly, there is no exact analogue to a fistfight in business, so how can we preserve quality without actual combat? 

To begin, start with an extremely crisp definition of responsibilities and skills required for each person to perform their duties. When describing skills, avoid generic characterizations like "must be competent in managing XYZ", instead get extremely specific and even name names, like "should be a superstar recruiter, as good as Jenny Rogers"

Andreessen or Zuckerberg?

Interesting to consider, use this to explain to an employee why special treatment for someone cannot be applied to them (albeit that would be a little offensive) or to understand that you can only make a few exceptions to compensate for intellectual outliers:

1-on-1:

The key to a good one-on-one meeting is the understanding that it is the employee's meeting rather than the manager's meeting. This is the free-form meeting for all the pressing issues, brilliant ideas, and chronic frustrations that do not fit entirely into status reports, email, and other less personal and intimate mechanisms. If you're an employee, how else are you supposed to get feedback from your manager on an exciting but only 20% formed idea you're not sure is relevant, without sounding like a fool? Or how do you get help when you love your job but your personal life is melting down? These are just some reasons one-on-ones are essential.

 It should not be the manager's job to set the agenda or do the talking, but they should try to draw key issues out of the employee. 

Some questions that may be effective in one-on-ones: 

• If we could have improved in any way, how could we do it?
• What's the number one problem with our organization? Why?
• Whats not fun about working here?
• Who is really kicking ass in the company? Whom do you admire?
• If you were me, what changes would you make? 
• What don't you like about the product?
• What's the biggest opportunity we're missing out on?
• What are we not doing that we should be doing?
• Are you happy working here?

Company culture is important because it will:

• Distinguish you from your competitors
• Ensure that critical operating values persist such as delighting customers and making beautiful products
• Help you identify employees who fit with your mission

Company culture comes from mottoes or first-impressions that might deviate from the norm, and force people to stop and think. 

Remember yoga is a perk, not company culture. 

What makes a good leader?

The ability to articulate a vision: the Steve jobs attribute

Can the leader articulate a vision that's interesting, dynamic, and compelling? The vision must be compelling enough to make people stay even if the company gets to a point when it doesn't make financial sense for any employee to continue working there. 

The right kind of ambition: the Bill Campbell attribute 

 Leaders must define the company as a collective. A leader must be completely authentic, and must happily sacrifice his economics, fame, glory, and rewards for his employees. A leader must care deeply about their employees and what they have to say. And above all, all of these must be completely evident in the leaders actions and follow-through. 

The ability to achieve the vision: the Andy Grove attribute:

The final leg of our leadership stool is competence, pure and simple. Do I actually believe the leader will achieve the vision? Leaders must have a deep sense of trustworthiness that stems from their unquestionable competence. 

A peacetime CEO knows that proper protocol leads to winning. A 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 gnats ass if it interferes with the prime directive. 

Are CEOs born or made? That's like asking whether Jolly Ranchers are grown or made. CEO is an unnatural job. 

A key concept when giving feedback is the shit sandwich. The basic idea is that people open up to feedback far more if you start by complimenting them (slice of bread number one), then you give them the difficult message (the shit), then wrap up by reminding then how much you value their strengths (slice of bread number two). 

The shit sandwich also has the positive side effect of focusing feedback on the behavior rather than the person, because you establish up front that you really value the person. This is a key concept in giving feedback. 

The shit sandwich is particularly useful with beginners and junior employees who may not be open to feedback or criticism, but it has the following challenges:

• tends to be overly formal. Because you have to preplan and script the sandwich so it comes put correctly, the process can feel formal and judgmental
• After you do it a couple of times, it will lack authenticity. The employee will think, "oh gee, she's complementing me again. I know what's coming next, the shit"
• More senior executives will recognize the shit sandwich immediately and it will have an instant negative effect.