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

by Ben Horowitz

“If you hold the bus for everyone on the team, then you’ll be so late you’ll miss the game, so you can’t do that. The bus must leave on time. However, sometimes you’ll have a player that’s so good that you hold the bus for him, but only him.”

Generally, people who think one-on-one meetings are a bad idea have been victims of poorly designed ones. 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 neatly into status reports, email, and other less personal and intimate mechanisms.

During the meeting, since it’s the employee’s meeting, the manager should do 10 percent of the talking and 90 percent of the listening. Note that this is the opposite of most one-on-ones.

Some questions that I’ve found to be very effective in one-on-ones: If we could improve in any way, how would we do it? What’s the number-one problem with our organization? Why? What’s 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 that we’re missing out on? What are we not doing that we should be doing? Are you happy working here?

The world is full of bankrupt companies with world-class cultures. Culture does not make a company. So, why bother with culture at all? Three reasons: 1. It matters to the extent that it can help you achieve the above goals. 2. As your company grows, culture can help you preserve your key values, make your company a better place to work, and help it perform better in the future. 3. Perhaps most important, after you and your people go through the inhuman amount of work that it will take to build a successful company, it will be an epic tragedy if your company culture is such that even you don’t want to work there.

Your goal is to choose the least of all evils. Think of the organizational design as the communications architecture for your company. If you want people to communicate, the best way to accomplish that is to make them report to the same manager. By contrast, the further away people are in the organizational chart, the less they will communicate. The organizational design is also the architecture for how the company communicates with the outside world.

There is no such thing as a great executive. There is only a great executive for a specific company at a specific point in time. Mark Zuckerberg is a phenomenal CEO for Facebook. He would not be a good CEO for Oracle. Similarly, Larry Ellison does a terrific job at Oracle but he would not be the right person to manage Facebook.

Years later I asked Herb why he believed in our company at a time when nobody else did. I pointed out that, at the time, Allen & Company wasn’t very involved in technology, let alone data center automation. Herb replied, “I didn’t understand anything about your business and I understood very little about your industry. What I saw was two guys come visit me when every other public company CEO and chairman was hiding under their desk. Not only did you come see me, but you were more determined and convinced you would succeed than guys running giant businesses. Investing in courage and determination was an easy decision for me.”

Even if you know what you are doing, things go wrong. Things go wrong because building a multifaceted human organization to compete and win in a dynamic, highly competitive market turns out to be really hard. If CEOs were graded on a curve, the mean on the test would be 22 out of 100. This kind of mean can be psychologically challenging for a straight-A student. It is particularly challenging because nobody tells you that the mean is 22.

it’s so common that there is an acronym for it, WFIO, which stands for “We’re Fucked, It’s Over” (it’s pronounced “whiff-ee-yo”). As he describes it, every company goes through at least two and up to five of these episodes (although I’m pretty sure that I went through at least a dozen at Opsware). In all cases, WFIOs feel much worse than they are—especially for the CEO.

Get it out of your head and onto paper. When I had to explain to my board that, since we were a public company, I thought that it would be best if we sold all of our customers and all of our revenue and changed business, it was messing with my mind. In order to finalize that decision, I wrote down a detailed explanation of my logic. The process of writing that document separated me from my own psychology and enabled me to make the decision swiftly. Focus on the road, not the wall. When someone learns to drive a race car, one of the first lessons taught is that when you are going around a curve at 200 mph, do not focus on the wall; focus on the road. If you focus on the wall, you will drive right into it. If you focus on the road, you will follow the road. Running a company is like that. There are always a thousand things that can go wrong and sink the ship. If you focus too much on them, you will drive yourself nuts and likely crash your company. Focus on where you are going rather than on what you hope to avoid.

when it comes to CEO succession, internal candidates dramatically outperform external candidates. The core reason is knowledge. Knowledge of technology, prior decisions, culture, personnel, and more tends to be far more difficult to acquire than the skills required to manage a larger organization. Collins does not, however, explain why internal candidates sometimes fail as well. I will attempt to do so here. I will focus the discussion on two core skills for running an organization: First, knowing what to do. Second, getting the company to do what you know. While being a great CEO requires both skills, most CEOs tend to be more comfortable with one or the other. I call managers who are happier setting the direction of the company Ones and those who more enjoy making the company perform at the highest level Twos.

If a CEO ignores the dimension of management she doesn’t like, she generally fails. Ones end up in chaos and Twos fail to pivot when necessary.

The big conclusion will be a big disappointment for those looking for an answer. The answer is there is no easy answer. CEO transition is hard. 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. Ideally, you’ll promote a One and the rest of the executive team will be glad you did. Too bad things are rarely ideal.

So what makes people want to follow a leader? We look for three key traits: The ability to articulate the vision The right kind of ambition The ability to achieve the vision

One of the biggest misperceptions in our society is that a prerequisite for becoming a CEO is to be selfish, ruthless, and callous. In fact, the opposite is true and the reason is obvious. The first thing that any successful CEO must do is get really great people to work for her. Smart people do not want to work for people who do not have their interests in mind and in heart.

Truly great leaders create an environment where the employees feel that the CEO cares more about 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.

The shit sandwich can work well with junior employees but has the following challenges: It tends to be overly formal. Because you have to preplan and script the sandwich to make it come out correctly, the process can feel formal and judgmental to the employee. After you do it a couple of times, it will lack authenticity. The employee will think, “Oh boy, she’s complimenting 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. Early in my career, I attempted to deliver a carefully crafted shit sandwich to a senior employee and she looked at me like I was a little kid and said, “Spare me the compliment, Ben, and just tell me what I did wrong.” At that point, I thought that I was definitely not born to be a CEO.

As already noted, courage is particularly important, because every decision that a CEO makes is based on incomplete information. At the time of any given decision, the CEO will generally have less than 10 percent of the information typically present in the post hoc Harvard Business School case study. As a result, the CEO must have the courage to bet the company on a direction even though she does not know if the direction is right. The most difficult decisions (and often the most important) are difficult precisely because they will be deeply unpopular with the CEO’s most important constituencies (employees, investors, and customers).

I like to ask this question: “How easy is it for any given individual contributor to get her job done?” In well-run organizations, people can focus on their work (as opposed to politics and bureaucratic procedures) and have confidence that if they get their work done, good things will happen both for the company and for them personally. By contrast, in a poorly run organization, people spend much of their time fighting organizational boundaries and broken processes.

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.