Ben Horowitz. The Hard Thing About Hard Things: Building a Business When There Are No Easy Answers. HarperCollins, 2014. (289)
Reviews: TechCrunch, Inc., WSJ, Forbes, SXSW Session, Stanford Technology Ventures Program,
Introduction
The problem with these books is that they attempt to provide a recipe for challenges that have no recipes. There’s no recipe for really complicated, dynamic situations. (ix)
Chapter 1: From Communist to Venture Capitalist
…being scared didn’t mean I was gutless. What I did mattered and would determine whether I would be a hero or a coward. (3)
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. (4)
…leadership is the ability to get someone to follow you even if only out of curiosity. (5)
Looking at the world through such different prisms helped me separate facts from perception. … In particularly dire circumstances when the “facts” seemed to dictate a certain outcome, I learned to look for alternative narratives and explanations coming from radically different perspectives to inform my outlook. The simple existence of an alternate, plausible scenario is often all that’s needed to keep hope alive among a worried workforce. (5)
My father turned to me and said, “Son, do you know what’s cheap?”
Since I had absolutely no idea what he was talking about, I replied, “No, what?”
“Flowers. Flowers are really cheap. But do you know what’s expensive?” he asked.
Again, I replied, “No, what?”
He said, “Divorce.”
…his joke made it suddenly clear that by continuing on the course I was on, I might lose my family. By doing everything, I would fail at the most important thing. (8)
Chapter 2: “I Will Survive”
“What would you do if capital were free?” is a dangerous question to ask an entrepreneur. (18)
Chapter 3: This Time With Feeling
…whenever a large organization attempts to do anything, it always comes down to a single person who can delay the entire project. (43)
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. (49)
…all decisions were objective until the first line of code was written. After that, all decisions were emotional. (51)
Chapter 4: When Things Fall Apart
When you are building a company, you must believe there is an answer and you cannot pay attention to your 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. (59)
I don’t believe in statistics. I believe in calculus. (59)
People always ask me, “What’s the secret to being a successful CEO?” Sadly, there is no secret, but if there is one skill that stands out, it’s the ability to focus and make the best move when there are no good moves. It’s the moments where you feel most like hiding or dying that you can make the biggest difference as a CEO. (59)
I follow the first principle of the Bushido–the way of the warrior: keep death in mind at all times. (59)
The Struggle
ABOUT THE STRUGGLE
“Life is struggle.” – Karl Marx
The Struggle is when you wonder why you started the company in the first place.
The Struggle is when people ask you why you don’t quit and you don’t know the answer.
The Struggle is when your employees think you are lying and you think they may be right.
The Struggle is when food loses its taste.
The Struggle is when you don’t believe you should be CEO of your company. The Struggle is when you know that you are in over your head and you know that you cannot be replaced. The Struggle is when everybody thinks you are an idiot, but nobody will fire you. The Struggle is where self-doubt becomes self-hatred.
The Struggle is when you are having a conversation with someone and you can’t hear a word that they are saying because all you can hear is the Struggle.
The Struggle is when you want the pain to stop. The Struggle is unhappiness.
The Struggle is when you go on vacation to feel better and you feel worse.
The struggle is when you are surrounded by people and you are all alone. The Struggle has no mercy.
The Struggle is the land of broken promises and crushed dreams. The Struggle is a cold sweat. The Struggle is where you guts boil so much that you feel like you are going to spit blood.
The Struggle is not failure, but it causes failure. Especially if you are weak. Always if you are weak.
Most people are not strong enough.
Every great entrepreneur from Steve Jobs to Mark Zuckerberg went through the Struggle and struggle they did, so you are not alone. But that does not mean that you will make it. You may not make it. That is why it is the Struggle.
The Struggle is where greatness comes from. (61-62)
There is no answer to the Struggle, but here are some things that helped me:
Don’t put it all on your shoulders.
This is not checkers; this is motherfuckin’ chess.
Play long enough and you might get lucky.
Don’t take it personally.
Remember that this is what separates the women from the girls. If you want to be great, this is the challenge. If you don’t want to be great, then you never should have started a company. (62-63)
CEO’s Should Tell It Like It Is
A CEO’s ability to build this trust over time is often the difference between companies that execute well and companies that are chaotic. (66)
A healthy company culture encourages people to share bad news. A company that discusses its problems freely and openly can quickly solve them. A company that covers up its problems frustrates everyone involved. The resulting action item for CEOs: Build a culture that rewards–not punishes–people for getting problems into the open where they can be solved.
…consider the old management standard: “Don’t bring me a problem without bringing me a solution.” What if the employee cannot solve an important problem? (67)
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. (67)
The Right Way to Lay People Off
During a time like this, it is difficult to focus on the future, because the past overwhelms you–but that’s exactly what you must do. (69)
Company performance failed. This distinction is critical, because the message to the company and the laid-off individuals should not be “This is great, we are cleaning up performance.” The message must be “The company failed and in order to move forward, we will have to lose some excellent people.” (70)
…people won’t remember every day they worked for your company, but they will surely remember the day you laid them off. (71)
The reputations of your company and your managers depend on you standing tall, facing the employees who trusted you and worked hard for you. If you hired me and I busted my ass working for you, I expect you to have the courage to lay me off yourself. (71)
[via: And the people you don’t lay off will also be watching and learning what your attitude and demeanor is for their future.]
Preparing to Fire an Executive
In other words, the wrong way to view an executive firing is as an executive failure; the correct way to view an executive firing is as an interview/integration process system failure. … You may have blown it for a variety of reasons:
You did a poor job defining the position in the first place.
You hired for lack of weakness rather than for strengths.
You hired for scale too soon.
You hired for the generic position.
The executive had the wrong kind of ambition
You failed to integrate the executive. (77)
Three keys to getting it right:
Be clear on the reasons.
Use decisive language.
Have the severance package approved and ready. Once the executive hears the news, she will stop caring about the company and its issues; she will be highly focused on herself and her family. Be ready to provide specific details of the severance package. (79)
When you expect your employees to act like adults, they generally do. If you treat them like children, then get ready for your company to turn into one big Barney episode. (80)
IN THE END
Every CEO likes to say she runs a great company. It’s hard to tell whether the claim is true until the company or the CEO has to do something really difficult. Firing an executive is a good test. (80)
Demoting a Loyal Friend
Use appropriate language.
Admit reality.
Your goal should not to be to take the sting out of it, but to be honest, clear, and effective. (84)
Lies That Losers Tell
…humans, particularly those who build things, only listen to leading indicators of good news. (87)
…only took action on the positive indicator and only looked for alternative explanations on the negative leading indicator. (87)
Lead Bullets
“If our company isn’t good enough to win, then do we need to exist at all?” (90)
Nobody Cares
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 of your time on what you might do. Because in the end, nobody cares; just run your company. (92)
Chapter 5: Take Care of the People, The Products, and the Profits–In That Order
“Taking care of the people” is the most difficult of the three by far and if you don’t do it, the other two won’t matter. Taking care of the people means that your company is a good place to work. Most workplaces are far from good. (98)
A Good Place to Work
…while I had told the team “what” to do, I had not been clear about “why” I wanted them to do it. (100)
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.
Things always go wrong.
Being a good company is an end in itself. (102)
Why Startups Should Train Their People
A lot of companies think their employees are so smart that they require no training. That’s silly. (105)
1 . Productivity. How many fully productive employees have they added?
Training is, quite simply, one of the highest-leverage activities a manager can perform. Consider for a moment the possibility of your putting on a series of four lectures for members of your department. Let’s count on three hours preparation fro each hour of course time–twelve hours of work in total. Say that you have ten students in your class.
Next year they will work a total of about twenty thousand hours for your organization. If your training efforts result in a 1 percent improvement in your subordinates’ performance, your company will gain the equivalent of two hundred hours of work as the result of the expenditure of your twelve hours. (107)
2. Performance management. When you fired the person how did you know with certainty that the employee both understood the expectations of the job and was still missing them? … If you don’t train your people, you establish no basis for performance management. As a result, performance management in your company will be sloppy and inconsistent. (107)
3. Product quality.
4. Employee retention. I found that there were two primary reasons why people quit:
They hated their manager; generally the employees were appalled by the lack of guidance, career development, and feedback they were receiving.
They weren’t learning anything: The company wasn’t investing resources in helping employees develop new skills.
An outstanding training program can address both issues head-on. (108)
The best place to start is with the topic that is most relevant to your employees: the knowledge and skill that they need to do their job. I call this functional training. (108)
The other essential…management training. (109)
…no start up has time to do optional things. (11)
…being too busy to train is the moral equivalent of being too hungry to eat. (11)
Is It Okay to Hire People from Your Friend’s Company?
In the end, social pressure will trump all your brilliant countervailing logic. (116)
Why It’s Hard to Bring Big Company Execs into Little Companies
The most important difference between big and small companies is the amount of time running versus creating. A desire to do more creating is the right reason to want to join your company. (122)
Hiring Executives: If You’ve Never Done the Job, How Do You Hire Somebody Good?
The biggest difference between being a great functional manager and being a great general manager–and particularly a great CEO–is that as a general manager, you must hire and manage people who are far more competent at their jobs than you would be at their jobs. (124)
First, you must realize how ignorant you are and resist the temptation to educate yourself simply by interviewing candidates. (124)
…you are not hiring an abstract executive to work at an arbitrary company. You must hire the right person for yoru company at this particular point in time. (125)
…your imaginary model is almost certainly wrong. What is your basis for creating this model? (125)
The more experience you have, the more you realize that there is something seriously wrong with every employee in your company (including you). Nobody is perfect. (125)
Often CEOs resist acting in functional roles, because they worry that they lack the appropriate knowledge. This worry is precisely why you should act–to get the appropriate knowledge. Indeed, acting is really the only way to get all the knowledge that you need to make the hire, because you are looking for the right executive for your company today, not a generic executive. (126)
Assemble the interview team.
Who will best help you figure out whether the candidate meets the criteria?
Who do you need to support the decision once the executive is on board?
…you are not looking for positive or negative with them. You are looking for fit with your criteria. (129)
STEP 3: MAKE A LONELY DECISION
When Employees Misinterpret Managers
Management Debt
Companies execute well when everybody is on the same page and everybody is constantly improving. In a vacuum of feedback, there is almost no chance that your company will perform optimally across either dimension Directions with no corrections will seem fuzzy and obtuse. (137)
Every really good, really experienced CEO I know shares one important characteristic: They tend to opt for the hard answer to organizational issues. (137)
Management Quality Assurance
Everyone in the technology industry seems to agree that people are paramount, yet nobody seems to be on the same page with what the people organization–human resources–should look like. (139)
…a high quality human resources organization cannot make you a well-managed company with a great culture, but it can tell you when you and your managers are not getting the job done. (139)
When management quality starts to break down in a company, nobody says anything about it, but super-perceptive people can tell that the company is slipping. You need one of those. (142)
Chapter 6: Concerning the Going Concern
Sometimes an organization doesn’t need a solution; it just needs clarity. (145)
How to Minimize Politics in Your Company
Political behavior almost always starts with the CEO. … Sadly, you needn’t be political to create extreme political behavior in your organization. In fact, it’s often the least political CEOs who run the most ferociously political organizations. Apolitical CEOs frequently–and accidentally–encourage intense political behavior.
| What do I mean by politics? I mean people advancing their careers or agenda by means other than merit and contribution. (147)
HOW IT HAPPENS
A CEO creates politics by encouraging and sometimes incentivizing political behavior–often unintentionally. (147)
Every tie your company gives someone a promotion, everyone else at that person’s organizational level evaluates the promotion and judges whether merit or political favors yielded it. If the latter, then the other employees generally react in one of three ways:
They sulk and feel undervalued.
They outwardly disagree, campaign against the person, and undermine them in their new position.
They attempt to copy the political behavior that generated the unwarranted promotion. (152)
As a CEO, you must consider the systemic incentives that result from your words and actions. (154)
The Right Kind of Ambition
Nothing motivates a great employee more than a mission that’s so important that it supersedes everyone’s personal ambition. (156)
Titles and Promotions
Job titles provide an excellent shorthand for describing roles in the company. (160)
…the Peter Principle holds that in a hierarchy, 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”), and there they remain being unable to earn further promotions. (160)
…there is no way to know a priori at what level in the hierarchy a manger will be incompetent. (160-161)
The Law of Crappy People states: For any title level in a large organization, the talent on that level will eventually converge to the crappiest person with the title. (161)
…start with an extremely crisp definition not only of the responsibilities at each level but also of the skill required to perform the duties. (161)
In addition to ensuring fairness and level quality, this process will serve to educate your entire management team on the skills and accomplishments of the employees being submitted for promotion. (162)
Titles cost nothing. (163)
FINAL THOUGHT. You might think that so much time spent on promotions and titles places too much importance and focus on silly formalisms. The opposite is true. Without a well thought out, disciplined process for titles and promotions, your employees will become obsessed with the resulting inequities. If you structure things properly, nobody other than you will spend much time thinking about titles other than Employee of the Month. (164)
When Smart People Are Bad Employees
Rather than identifying weaknesses so that he can fix them, he looks for faults to build his case. (166)
Some brilliant people can be totally unreliable. (167)
If one of your big dogs destroys communication on your staff, you need to send her to the pound. (168)
Old People
A weak definition of what you are looking for will lead to a bad outcome. (171)
If you want to expand your culture to incorporate some of the new thinking, that’s fine, but do so explicitly–do not drift. (173)
World-class PR people can turn chicken shit into chicken salad. Turning chicken shit into chicken salad requires long-term, trusted relationships, deep know-how, and the confidence to make use of both appropriately. (173)
Bill Campbell developed an excellent methodology for measuring executives in a balanced way that will help you achieve this. He breaks performance down into four distinct areas:
Results against objectives Once you’ve set a high standard, it will be straightforward to measure your executive against that standard.
Management Even if an executive does a superb job achieving her goals, that doesn’t mean she is building a strong and loyal team. It’s important to understand how well she is managing, even if she is hitting her goals.
Innovation It’s quite possible for an executive to hit her goal for the quarter by ignoring the future. For example, a great way for an engineering manager to hit her goals for features and dates is by building a horrible architecture, which won’t even support the next release. This is why you must look beyond the black-box results and into the sausage factory to see how things get made.
Working with peers This may not be intuitive at first, but executives must be effective at communicating, supporting, and getting what they need from the other people on your staff. Evaluate them along this dimension.
One-on-One
Perhaps the CEO’s most important operational responsibility is designing and implementing the communication architecture for her company. (176)
Programming Your Culture
Taking the Mystery Out of Scaling a Company
The Scale Anticipation Fallacy
Chapter 7: How to Lead Even When You Don’t Know Where You Are Going
The Most Difficult CEO Skill
The Fine Line Between Fear and Courage
Ones and Twos
The primary purpose of the organizational hierarchy in a company is decision-making efficiency. (216)
If you bring people in from the outside, you lower your chances for success. If you promote from within, you must deal with the One-Two phenomenon. (218)
Follow the Leader
Perhaps the most important attribute required to be a successful CEO is leadership. So what is leadership and how do we think about it in the context of the CEO job? (219)
The ability to articulate the vision
The right kind of ambition
The ability to achieve the vision
Truly great leaders create an environment where the employees feel that the CEO cares more abut the employees than she cares about herself. In this kind of environment, an amazing thing happens: A huge number of employees believe it’s their company and behave accordingly. (221)
Peacetime CEO/Wartime CEO
Peacetime in business means those times when a company has a large advantage over the competition in its core market, and its market is growing. In times of peace, the company can focus on expanding the market and reinforcing the company’s strengths. | In wartime, a company is fending off an imminent existential threat. (225)
In peacetime, leaders must maximize and broaden the current opportunity. As a result, peacetime leaders employ techniques to encourage broad-based creativity and contribution across a diverse set of possible objectives. In wartime, by contrast, the company typically has a single bullet in the chamber and must, at all costs, hit the target. (226)
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 the 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. (227)
Making Yourself a CEO
The other day, a friend of mine asked me whether CEOs were born or made. I said, “That’s kind of like asking if Jolly Ranchers are grown or made. CEO is an unnatural job.” (229)
The shit sandwich (compliment, difficult message/criticism, communicate you value them) can work well with junior employees but has the following challenges:
It tends to be overly formal.
After you do it a couple of times, it will lack authenticity.
More senior executives will recognize the shit sandwich immediately and it will have an instant negative effect. (231)
THE KEYS
Be authentic.
Come from the right place.
Don’t get personal.
Don’t clown people in front of their peers.
Feedback is not one-size-fits-all.
Be direct, but not mean. Watered-down feedback can be worse than no feedback at all because it’s deceptive and confusing to the recipient. (232)
FEEDBACK IS A DIALOGUE, NOT A MONOLOGUE
Your employee should know more about her function than you. She should have more data than you. You may be wrong. | As a result, your goal should be for your feedback to open up rather than close down discussion. (233)
You should have an opinion on every forecast, every product plan, every presentation, and even every comment. … Say what you think. Express yourself. | This will have two critically important positive effects:
Feedback won’t be personal in your company.
People will become comfortable discussing bad news.
How to Evaluate CEOs
By describing how I evaluate CEOs, I am at the same time describing what I think the job of the CEO is. Here are the key questions we ask.
1. DOES THE CEO KNOW WHAT TO DO?
The CEO must set the context within which every employee operates. … Well-structured goals and objectives contribute to the context, but they do not provide the whole story. More to the point, they are not the story. The story of the company goes beyond quarterly or annual goals and gets to the hard-core question of why. Why should I join this company? Why should I be excited to work here? Why should I buy its product? Why should I invest in the company? Why is the world better off as a result of this company’s existence? (236)
The CEO doesn’t have to be the creator of the vision. Nor dos she have to be the creator of the story. But she must be the keeper of the vision and the story. As such, the CEO ensures that the company story is clear and compelling. (237)
Some employees make products, some make sales; the CEO makes decisions. Therefore, a CEO can most accurately be measured by the speed and quality of those decisions. (237)
Great CEOs build exceptional strategies for gathering the required information continuously. They embed their quest for intelligence into all of their daily actions from staff meetings (239)
2. Can the CEO get the company to do what she knows?
“How easy is it for any given individual contributor to get her job done?” (240)
…in a poorly run organization, people spend much of their time fighting organizational boundaries and broken processes. (240)
3. Did the CEO achieve the desired results against an appropriate set of objectives?
Therefore, the first task in accurately measuring results is setting objectives correctly. (241)
CEO evaluation need not be a byzantine, unarticulated art. All people, including CEOs, will perform better on a test if they know the questions ahead of time. (242)
CHAPTER 8: FIRST RULE OF ENTREPRENEURSHIP: THERE ARE NO RULES
I am telling this story today because just when you think there are things you can count on in business, you quickly find that the sky is purple. When this happens, it usually does no good to keep arguing that the sky is blue. You just have to get on and deal with the fact that it’s going to look like Barney for a while. (247)
Solving the Accountability vs. Creativity Paradox
Do you assume that your employees are by and large creative, intelligent, and motivated? Or do you assume that they are lazy, conniving, and counting the minutes to quitting time? If you believe the latter, then you might as well just give up on creativity and innovation in your organization, because you will not get it. It’s better to believe the former and assume that people have good intentions unless they prove otherwise. (249)
The Freaky Friday Management Technique
Staying Great
There are two kinds of cultures in this world: cultures where what you do matters and cultures where all that matters is who you are. You can be the former or you can suck. (256)
…the number-one way that executives fail is by continuing to do their old job rather than moving on to their new job. (256)
…your loyalty must go to your employees–the people who report to your executives. Your engineers, marketing people, salespeople, and finance and HR people who are doing the work. You owe them a world-class management team. That’s the priority. (256)
Should You Sell Your Company?
…selling your company is always emotional and deeply personal. (257)
…a good basic rule of thumb is if (a) you are very early on in a very large market and (b) you have a good chance of being number one in that market, then you should remain stand-alone. (258)
So, the judgment that you have to make is (a) is this market really much bigger (more than an order of magnitude) than has been exploited to date? and (b) are we going to be number one? If the answer to either (a) or (b) is no, then you should consider selling. If the answers to both are yes, then selling would mean selling yourself and your employees short. (259)
In order to get the answer right, you have to answer the question “What is the market, really, and who are the competitors going to be?” (259)
THE EMOTIONAL
The funny thing about the emotional part of the decision is that it’s so schizophrenic.
| How can you ever sell your company after you’ve personally recruited every employee and sold them on your spectacular vision of a thriving, stand-alone business? How can you ever sell out your dream?
| How can you walk away from total financial independence for yourself and every member of your close and distant family? Aren’t you in business to make money? How much money does one person need?
| How can you reconcile Dr. Stay-the Course and Mr. Sell-the Thing? Clearly they are irreconcilable, but the key is to mute them both. (261)
CHAPTER 9: THE END OF THE BEGINNING
…two key deficits that a founder CEO had when compared with a professional CEO:
The CEO skill set Managing executives, organizational design, running sales organizations and the like were all important skills that technical founders lacked.
The CEO network Professional CEOs knew lots of executives, potential customers and partners, people in the press, investors, and other important business connections. Technical founders, on the other hand, knew some good engineers and how to program. (268)
“How might a venture capital firm help founder CEOs close those gaps?” (268)
Hard 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. (274)
On my grandfather’s tombstone, you will find his favorite Marx quote: “Life is struggle.” I believe that within that quote lies the most important lesson in entrepreneurship: Embrace the struggle. (275)
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