Business & Economics
March 4, 2014
A lot of people talk about how great it is to start a business, but only Ben Horowitz is brutally honest about how hard it is to run one.
Being a CEO is incredibly hard (or so I’ve heard!), and you often have to make a decision when there are no good options. Some of the keys to being great at the role are: transparency and respect, creativity, and understanding that you can only learn to be a CEO by being a CEO. Ben compares it to being an NFL quarterback. Even if you’re coached by Peyton Manning in the classroom, you’ll get squashed the second you step on to the field if you have no experience. Mentors are great and necessary, but information only goes so far.
Ben’s history, meeting Marc and running Netscape, selling to AOL, founding Loudcloud…
Loudcloud was the first ever “cloud” implementation as we know it today. incorporated in 1999.
Loudcloud’s rapid growth, then catastrophic fall during the dotcom failure. Exploring ways to ultimately save the ship. Final maneuver was to sell Loudcloud to EDS and retain “Opsware” and become a software company. This was legitimately a win-win.
“Marc: Do you know the best thing about startups?Ben: What?Marc: You only ever experience two emotions: euphoria and terror. And I find that lack of sleep enhances them both.”
Ben had to replace the whole management team (who were a cloud team, not a software team) and sell software that they knew wasn’t ready yet to learn what real customers needed in the software.
How to deal with hard situations when things fall apart.
- Don’t put it all on your shoulders
- This is not checkers; this is 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.
- “Cartheu said, ‘Yeah, I know Fred. He comes by once a quarter to blow a little sunshine up my ass!’”
- People know that reality is more nuanced than you’re describing and accentuating the positive while skirting the negative isn’t fooling anyone but makes you seem less than trustworthy.
- Telling like it is has 3 major benefits:
- The more brains working on the problem, the better.
- Build a culture where bad news is embraced; knowing about a problem sooner can buy you time to save you from death.
Laying people off
- Get your head right
- Don’t delay
- Additional issues arise quickly if news leaks early
- Be clear in your own mind about why
- No positive spin. The company has failed to execute it’s plan. This isn’t an ‘opportunity.’
- Train your managers
- Managers MUST lay off their own employees. Not HR or peers.
- Explain briefly what happened and why
- Be clear and that the decision is nonnegotiable
- Be fully prepared with details of benefits and support plans the company will provide.
- Address the entire company
- This message is for people who are staying
- “The people who stay will care deeply about how you treat their colleagues in this time.”
- Be visible, be present
Firing an Executive
- At the executive level, it’s rarely the executive’s fault. It’s a hiring/integration problem. So do a RCA to find out why you hired the wrong person.
- Position was poorly defined
- Hired for ‘lack of weakness’ rather than for strengths
- Scaled too fast
- Hired for a generic position
- Exec has the “wrong kind of ambition”
- You failed to integrate the exec
- Inform the board
- Get their support and understanding
- Get their approval for the severance package
- Preserve the reputation of the fired executive.
- Preparing for the conversation:
- Be clear on why
- Use decisive language – “I have decided” rather than “I think”
- Have the severance package already approved and ready.
- Communicating with the company
- In this order – 1) the exec’s direct reports, 2) other members of your exec staff 3) the rest of the company
Demoting a loyal friend
- Be very, very clear about why
- Use appropriate language (decisive, final)
- Admit reality
- Acknowledge their contributions
There is no secret to being a successful CEO. But on of the skills that stands out is the ability to focus and make the best move when there are no good moves. “It’s the moment where you feel like hiding or dying that you can make the biggest difference as a CEO.”
Bushido principle: Keep death in mind at all times.
The Struggle is where greatness comes from.
“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.”
The proper strategy when things get tough isn’t usually a silver bullet; it’s lead bullets. Meaning it’s not an easy answer or one thing that fixes everything; it’s war, and it’s a hard grind to get back on top.
There comes a time in every company’s life where it must fight for its life. If you find yourself running when you should be fighting, you need to ask yourself, “If our company isn’t good enough to win, then do we need to exist at all?”
“Nobody cares” – A great reason for failing won’t preserve one dollar for your investors, won’t save one employee’s job, or get you one new customer. Spend zero time on what you could have done and devote all your time to what you might do. Because in the end, nobody cares; just run your company.
Take care of the people, products, and profit, in that order.
- Performance management
- Product quality
- Employee retention
- Rhythm mismatch
- Skill set mismatch
- Know what you want
- Run a process that figures out the right match
- Make the decision alone as a CEO
Advice on scaling
How to lead even when you don’t know where you’re going
- The ability to articulate the vision
- The right kind of ambition
- The ability to achieve the vision
Review of some unique management challenges, discussion on when to sell or not
The conclusion and story of founding a16z