Read On: Jan 2015
Reading Time: 9 hours
Rating: 8/10

Summary

Ben Horowitz, cofounder of Andreessen Horowitz and one of Silicon Valley’s most respected and experienced entrepreneurs, offers essential advice on building and running a startup-practical wisdom for managing the toughest problems business school doesn’t cover. He analyzes the problems that confront leaders every day, sharing the insights he’s gained developing, managing, selling, buying, investing in, and supervising technology companies. He talks about firing friends to poaching competitors, cultivating and sustaining a CEO mentality to knowing the right time to cash in.

Notes

• You need 2 kinds of friends in life. The 1st kind is someone you can call when something good happens and you need someone who will be excited for you. The second kind of friend is somebody you can call when things go horribly wrong. It’s rare to find a friend who has both of these qualities.
• Markets aren’t efficient at finding the truth. They are efficient at converging on a conclusion, often the wrong one.
• On selling a company the author built: “When it finally ended, I couldn’t believe I had sold what took 8 years and all of my life force to build. I was sick, I couldn’t sleep, had cold sweats, threw up and cried..”.
• One of the strong skills of a CEO is the ability to focus and make the best move when there are no good moves.
• The struggle is not failure. But it causes failure, especially if you are weak. Most people are not strong enough.
  • You won’t be able to share every burden, but share every burden that you can. Nobody takes the losses harder than the person most responsible.
  • Don’t take it personally. Every CEO makes thousands of mistakes. Evaluating yourself and giving yourself an ‘F’ does not help.
• CEOs should tell it like it is. Even if they accentuate the positive and ignore the negative, their team knows that the reality is more nuanced than they describe. 3 great reasons for transparency:
  • Trust: In any human interaction, the required amount of communication is inversely proportional to the level of trust. If employees trust the CEO, then communication will be vastly more efficient than if they don’t. A CEO’s ability to build trust over time is often the difference between companies that execute well and companies that are chaotic.
  • The more brains working on the hard problems, the better. A brain, no matter how big, cannot solve a problem it does not know about.
  • Bad News travels fast; Good News travels slow.
• Build a culture that rewards, not punishes, people for getting problems into the open where they can be solved.
• Laying people off:
  • Get your head right: During a time like this, it’s difficult to focus on the future, because the past overwhelms you.
  • Don’t delay: Things will only become worse if the word leaks.
  • Be clear in your own mind about why you are laying people off. In order to rebuild trust with your employees, you should come clean with the truth.
  • Train your managers: Every manager must lay off his own people. Without training, most of them will fail in this uncomfortable situation:
    • They should explain briefly what happened and that it is a company rather than a company failure.
    • They should be clear that the employee is impacted and the decision is non-negotiable.
    • They should be fully prepared with all of the details about the benefits and support the company plans to provide.
  • Address the entire company: The CEO must address the entire company. The people who stay will care deeply about how you treat their colleagues.
  • Be visible, be present. Let people know you appreciate their efforts.
• Preparing to fire an executive:
  • Root Cause Analysis: Figure out how/why you hired the wrong person for the company:
    • You didn’t know what you wanted and did a poor job defining the position in the first place.
    • You hired for lack of weaknesses rather than strengths. Especially common when you run a consensus based hiring approach.
    • 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.
  • Informing the board: The board might be alarmed if you are firing somebody they recommended, or firing multiple times, but it’s better to alarm than to rot the company.
  • Preparing for the conversation: The executive will remember the conversation for a very long time, so you need to get it right. Let him decide how to communicate the news to the company and the outside world.
  • Preparing the Company communication: Inform in order:
    • The executive’s direct reports: Because they will be most impacted.
    • The other members of your staff: Because they will need to answer questions about it.
    • The rest of the company.
• Demoting a loyal friend: If you need to build a worldwide sales organization, your buddy who did the first few deals might not be the best choice. You must first consider the good of all the other employees ad second your friend. Consider the 2 deep emotions your friend will feel:
  • Embarassment
  • Betrayal
• Lies that losers tell: When a company starts to lose its major battles, the truth often becomes the first causalty. CEOs and employees work tirelessly to develop creative narratives that help them avoid dealing with the obvious facts.
• Take care of the people, the products and the profits in that order.
• 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.
• Why train your people?
  • Productivity: Companies invest a lot in recruiting and hiring but don’t monitor how productive their employees are. Training is one of the highest leverage activities a manager can perform.
  • Performance Management: Training is a good time to point out expectations. If you don’t train your people, you establish no basis for performance management.
  • Product Quality: New untrained engineers often solve problems in non-ideal ways.
  • Employee retention: Besides economic reaons, 2 primary reasons for people quitting are:
    • Dislike manager due to lack of guidance and feedback.
    • No learning/development of new skills.
• Don’t hire people from your friend’s company unless you have cleared it with him whether it’s OK to do so. Or else, you will lose the friendship.
• It’s hard to bring big company executives into little companies. Big company execs are interrupt driven and have too many things going on to start new initiatives. A startup, on the other hand, needs a lot of new initiatives because there is no existing inertia that’s putting the company in motion.
• When hiring, the best way to know what you want is to act in the role yourself for a while.
  • Check with both frontdoor and backdoor (those who know candidate but were not referred by him) references.
• Managing strictly by numbers is for amateurs. People tend to focus on short term goals and sacrifice the future.
  • Anything you measure automatically creates a set of employee behaviors. Sometimes the side effect behaviors can be worse than the problems they are trying to fix. You must test your suggestions.
• Like technical debt, management debt is incurred when you make a short term decision with long term consequences. 3 common types:
  • Putting 2 employees with complementary skills as head of a department to make up for lack of talent. This makes it hard to keep things accountable, and their team has to run all decisions by 2 bosses now, introducing inefficiency into the system.
  • Overcompensating an employee to match another job offer. Word will definitely get out and other employees will now think that the way to get a raise is to get another job offer.
  • No performance management of employee feedback process. People rarely improve weaknesses they are unaware of.
• Nobody loves politics, yet we have plenty of it. The least political CEOs, frequently, and accidentally encourage intense political behavior. For example, if you give a raise when an employee asks for one, rather than as a result of rewarding for outstanding behavior, it’s bad because:
  • Other ambitious employees will copy this behavior.
  • The less aggressive employees will get left behind due to being apolitical.
  • Your people will conclude that the Squeaky Wheel gets the grease. And now you will get a lot of squeaky wheels.
• You can get 2 kinds of complaints about an employee:
  • About his behavior: Get the complainer and the target person in the same room and resolve ASAP.
  • About his competence: If this is news to you, immediately tell the complainer that you do not agree with his assessment. You do not want the complaint to become a self-fulfilling prophecy. Then evaluate both people. If you agree with the complaint, you should have fired the target person a long time ago.
• A company will be most successful if the senior managers optimize for the company’s success rather than their own.
• One on one meetings provide an excellent mechanism for information and ideas to flow up the organization and should be part of your design.
• If CEOs were graded on a curve, the mean on the test would be a 22/100. First time CEOs have no idea about this:
  • It’s a lonely job.
  • Great CEOs face the pain. Courage, like character, can be developed.
• 2 core skills for running an organization:
  • Knowing what to do.
  • Getting the company to do what you know.
• People want to follow a leader with 3 traits:
  • Ability to Articulate a Vision.
  • The Right kind of Ambition.
  • Ability to Achieve the Vision.
• Peacetime and Wartime require radically different management styles. Most management books describe peacetime CEOs.

Thoughts

Pretty much all information provided in the book was news to me. I don’t think I am going to be a CEO of a big company anytime soon, so I am not going to apply much lessons from the book. It did, however, help me appreciate how much goes into running company and be more empathetic towards executive management.