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

by Ben Horowitz

That’s the hard thing about hard things—there is no formula for dealing with them. Nonetheless, there are many bits of advice and experience that can help with the hard things.

Following conventional wisdom and relying on shortcuts can be worse than knowing nothing at all.

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.

Most business relationships either become too tense to tolerate or not tense enough to be productive after a while. Either people challenge each other to the point where they don’t like each other or they become complacent about each other’s feedback and no longer benefit from the relationship.

the most important rule of raising money privately: Look for a market of one. You only need one investor to say yes, so it’s best to ignore the other thirty who say “no.”

No matter who you are, you need two kinds of friends in your life. The first kind is one you can call when something good happens, and you need someone who will be excited for you. Not a fake excitement veiling envy, but a real excitement. You need someone who will actually be more excited for you than he would be if it had happened to him. The second kind of friend is somebody you can call when things go horribly wrong—when your life is on the line and you only have one phone call. Who is it going to be? Bill Campbell is both of those friends.

raised his hand with what would be the definitive advice: “No matter what we say, we’re going to get killed. As soon as we reset guidance, we’ll have no credibility with investors, so we might as well take all the pain now, because nobody will believe any positivity in the forecast anyway. If you are going to eat shit, don’t nibble.”

“What’s the worst thing that could happen?”

“What would I do if we went bankrupt?”

“Is there a way to do that without going bankrupt?”

I let them present all forty-five slides without my asking them a single question. When they finished I said, “Did I ask for this presentation?” Those were the first words I spoke as I made the transition from a peacetime CEO to a wartime CEO. By virtue of my position and the fact that we were a public company, nobody besides me had the complete picture. I knew we were in deep, deep trouble. Nobody besides me could get us out of the trouble, and I was through listening to advice about what we should do from people who did not understand all the pieces. I wanted all the data and information I could get, but I didn’t need any recommendations about the future direction of the company. This was wartime. The company would live or die by the quality of my decisions, and there was no way to hedge or soften the responsibility. If everybody I had hired—and who gave their lives to the company—could be sent home with little to show for it, then there were no excuses that would help. There would be no: “It was a horrible economic environment”; “I got bad advice”; “Things changed so quickly.” The only choices were survival or total destruction. Yes, most things could still be delegated and most managers would be empowered to make decisions in their areas of expertise, but the fundamental question of whether—and how—Loudcloud could survive was mine and mine alone to answer.

“Gentlemen, I’ve done many deals in my lifetime and through that process, I’ve developed a methodology, a way of doing things, a philosophy if you will. Within that philosophy, I have certain beliefs. I believe in artificial deadlines. I believe in playing one against the other. I believe in doing everything and anything short of illegal or immoral to get the damned deal done.”

“Frank, I will do exactly as you say. I’ve heard you loud and clear. This is a terrible moment for you and for us. Allow me to use your phone, and I will call Ben Horowitz and give him your instructions. But before I do, can I ask you one thing? If my company made the commitment to fix these issues, how much time would you give us to do that?” He responded, “Sixty days.” Anthony told him the clock had just started ticking and left his office immediately.

whenever a large organization attempts to do anything, it always comes down to a single person who can delay the entire project.

In my weekly staff meeting, I inserted an agenda item titled “What Are We Not Doing?” Ordinarily in a staff meeting, you spend lots of time reviewing, evaluating, and improving all of the things that you do: build products, sell products, support customers, hire employees, and the like. Sometimes, however, the things you’re not doing are the things you should actually be focused on.

Don’t put it all on your shoulders. It is easy to think that the things that bother you will upset your people more. That’s not true. The opposite is true. Nobody takes the losses harder than the person most responsible. Nobody feels it more than you. You won’t be able to share every burden, but share every burden that you can. Get the maximum number of brains on the problems even if the problems represent existential threats.

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.

There are three key reasons why being transparent about your company’s problems makes sense: 1. Trust. Without trust, communication breaks. More specifically: In any human interaction, the required amount of communication is inversely proportional to the level of trust. Consider the following: If I trust you completely, then I require no explanation or communication of your actions whatsoever, because I know that whatever you are doing is in my best interests. On the other hand, if I don’t trust you at all, then no amount of talking, explaining, or reasoning will have any effect on me, because I do not trust that you are telling me the truth.

2. The more brains working on the hard problems, the better.

A brain, no matter how big, cannot solve a problem it doesn’t know about.

3. A good culture is like the old RIP routing protocol: Bad news travels fast; good news travels slow.

If you investigate companies that have failed, you will find that many employees knew about the fatal issues long before those issues killed the company. If the employees knew about the deadly problems, why didn’t they say something? Too often the answer is that the company culture discouraged the spread of bad news, so the knowledge lay dormant until it was too late to act.

As a corollary, beware of management maxims that stop information from flowing freely in your company. For example, 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? For example, what if an engineer identifies a serious flaw in the way the product is being marketed? Do you really want him to bury that information? Management truisms like these may be good for employees to aspire to in the abstract, but they can also be the enemy of free-flowing information—which may be critical for the health of the 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.

it is difficult to focus on the future, because the past overwhelms you—but that’s exactly what you must do.

Once you decide that you will have to lay people off, the time elapsed between making that decision and executing that decision should be as short as possible. If word leaks (which it will inevitably if you delay), then you will be faced with an additional set of issues. Employees will question managers and ask whether a layoff is coming. If the managers don’t know, they will look stupid. If the managers do know, they will either have to lie to their employees, contribute to the leak, or remain silent, which will create additional agitation.

The message must be “The company failed and in order to move forward, we will have to lose some excellent people.”

A layoff breaks that trust. In order to rebuild trust, you have to come clean.

Training starts with a golden rule: Managers must lay off their own people.

people won’t remember every day they worked for your company, but they will surely remember the day you laid them off.

The people who stay will care deeply about how you treat their colleagues.

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. Therefore, the first step to properly firing an executive is figuring out why you hired the wrong person for your company.

You hired for lack of weakness rather than for strengths. This is especially common when you run a consensus-based hiring process. The group will often find the candidate’s weaknesses, but they won’t place a high enough value on the areas where you need the executive to be a world-class performer. As a result, you hire an executive with no sharp weaknesses, but who is mediocre where you need her to be great. If you don’t have world-class strengths where you need them, you won’t be a world-class company.

If you hire someone who will be great in eighteen months but will be poor for the next eighteen months, the company will reject her before she ever gets a chance to show her stuff.

Use decisive language. Do not leave the discussion open-ended. This is not a performance review; it’s a firing. Use words and phrases like “I have decided” rather than “I think.”

Bill Campbell once gave me a critical bit of advice when I was preparing to fire an executive. He said, “Ben, you cannot let him keep his job, but you absolutely can let him keep his respect.”

your decision results from a forward-looking examination of what the company needs, not a review of his past performance.

Bill Turpin, who looked at me as though I were a little kid who had much to learn. Bill was a longtime veteran of battling Microsoft from his time at Borland and understood what I was trying to do, but he was not persuaded. He said, “Ben, those silver bullets that you and Mike are looking for are fine and good, but our Web server is five times slower. There is no silver bullet that’s going to fix that. No, we are going to have to use a lot of lead bullets.” Oh snap.

In good organizations, people can focus on their work and have confidence that if they get their work done, good things will happen for both the company and them personally. It is a true pleasure to work in an organization such as this. Every person can wake up knowing that the work they do will be efficient, effective, and make a difference for the organization and themselves. These things make their jobs both motivating and fulfilling. “In a poor organization, on the other hand, people spend much of their time fighting organizational boundaries, infighting, and broken processes. They are not even clear on what their jobs are, so there is no way to know if they are getting the job done or not. In the miracle case that they work ridiculous hours and get the job done, they have no idea what it means for the company or their careers. To make it all much worse and rub salt in the wound, when they finally work up the courage to tell management how fucked-up their situation is, management denies there is a problem, then defends the status quo, then ignores the problem.”

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.

Enforce functional training by withholding new employee requisitions. As Andy Grove writes, there are only two ways for a manager to improve the output of an employee: motivation and training. Therefore, training should be the most basic requirement for all managers in your organization. An effective way to enforce this requirement is by withholding new employee requisitions from managers until they’ve developed a training program for the TBH, “To Be Hired.”

First, you must realize how ignorant you are and resist the temptation to educate yourself simply by interviewing candidates.

Write down the strengths you want and the weaknesses that you are willing to tolerate.

Like technical debt, management debt is incurred when you make an expedient, short-term management decision with an expensive, long-term consequence.

three of the more popular types among startups: 1. Putting two in the box 2. Overcompensating a key employee, because she gets another job offer 3. No performance management or employee feedback process

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. People rarely improve weakness they are unaware of. The ultimate price you will pay for not giving feedback: systematically crappy company performance.

Sometimes an organization doesn’t need a solution; it just needs clarity.

As defined by Andy Grove, the right kind of ambition is ambition for the company’s success with the executive’s own success only coming as a by-product of the company’s victory. The wrong kind of ambition is ambition for the executive’s personal success regardless of the company’s outcome.

Every time 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: 1. They sulk and feel undervalued. 2. They outwardly disagree, campaign against the person, and undermine them in their new position. 3. They attempt to copy the political behavior that generated the unwarranted promotion.

Clearly, you don’t want any of these behaviors in your company. Therefore, you must have a formal, visible, defensible promotion process that governs every employee promotion.