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

by Ben Horowitz

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.

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.

Note to self: It’s a good idea to ask, “What am I not doing?”

It was an argument to the death, and it was me against me.

handle on the indeterminate vs. determinate question. The math version is calculus vs. statistics.

Startup CEOs should not play the odds. When you are building a company, you must believe there is an answer and you cannot pay attention to your odds of finding it.

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.

the first principle of the Bushido—the way of the warrior: keep death in mind at all times. If a warrior keeps death in mind at all times and lives as though each day might be his last, he will conduct himself properly in all his actions. Similarly, if a CEO keeps the following lessons in mind, she will maintain the proper focus when hiring, training, and building her culture.

One of the most important management lessons for a founder/CEO is totally unintuitive. My single biggest personal improvement as CEO occurred on the day when I stopped being too positive.

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

A good culture is like the old RIP routing protocol: 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.

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.

Every manager must lay off his own people.

Once you make it clear that managers must lay off their own people, be sure to prepare them for the task: 1. They should explain briefly what happened and that it is a company rather than a personal failure. 2. They should be clear that the employee is impacted and that the decision is nonnegotiable. 3. They should be fully prepared with all of the details about the benefits and support the company plans to provide.

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.

“We take care of the people, the products, and the profits—in that order.” It’s

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.

of Andy Grove’s management classic, High Output Management, titled “Why Training Is the Boss’s Job,”

Therefore, being too busy to train is the moral equivalent of being too hungry to eat.

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

Every really good, really experienced CEO I know shares one important characteristic: They tend to opt for the hard answer to organizational issues.

When hiring a management team, most startups focus almost exclusively on IQ, but a bunch of high-IQ people with the wrong kind of ambition won’t work.

They will tend to be far more interested in how your company will win than in how they will be compensated or what their career path will

WHY DO TITLES MATTER? Two important factors drive all companies to eventually create job titles: 1. Employees want them. While you may plan to work at your company forever, at least some of your employees need to plan for life after your company.

When your head of sales interviews for her next job, she won’t want to say that despite the fact that she ran a global sales force with hundreds of employees, her title was “Dude.” 2. Eventually, people need to know who is who. As companies grow, everybody won’t know everybody else. Importantly, employees won’t know what each person does and whom they should work with to get their jobs done. Job titles provide an excellent shorthand for describing roles in the company. In addition, customers and business partners can also make use of this shorthand to figure out how to best work with your company.

Beyond these core reasons, employees will use titles to calibrate their value and compensatio...

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. As Andy Grove points out in his management classic High Output Management, the Peter Principle is unavoidable, because there is no way to know a priori at what level in the hierarchy a manager will be incompetent. Another challenge

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.

The rationale behind the law is that the other employees in the company with lower titles will naturally benchmark themselves against the crappiest person at the next level. For example, if Jasper is the worst vice president in the company, then all of the directors will benchmark themselves against ...

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?

With this in mind, here are the basic steps to organizational design:

“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.” That’s how Herb Allen does business.

By far the most difficult skill I learned as CEO was the ability to manage my own psychology.

When founders come in to pitch our firm—one as the CEO and the other as president—the conversation often goes like this: “Who is running the company?” “We are,” they both say. “Who makes the final decision?” “We do.” “How long do you expect to run that way?” “Forever.” “So you’ve decided to make it more difficult for every employee to get work done so that you don’t have to decide who is in charge, is that right?”

COURAGE, LIKE CHARACTER, CAN BE DEVELOPED

evaluating people’s performances and constantly giving feedback is precisely what a CEO must do.

Here are the key questions we ask: 1. Does the CEO know what to do? 2. Can the CEO get the company to do what she knows? 3. Did the CEO achieve the desired results against an appropriate set of objectives?

The CEO doesn’t have to be the creator of the vision. Nor does she have to be the creator of the story. But she must be the keeper of the vision and the story.

Reference Guide on Our Freedom and Responsibility Culture.

networks: Large companies Every new company needs to either sell something to or partner with a larger company. Executives If you succeed, at some point you need to hire executives. Engineers In the technology business, you can never know enough great engineers.

Press and analysts We have a saying around the firm: Show it, sell it; hide it, keep it. Investors and acquirers Being venture capitalists, providing access to money was obvious.