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

by Ben Horowitz

If you really want someone to succeed, then make her feel it. Make her feel you. If she feels you and you are in her corner, then she will listen to you.

Stylistically, your tone should match the employee’s personality, not your mood.

obtuse.

Annoyingly insensitive

feedback is a dialogue, not a monologue.

Your employee should know more about her function than you. She should have more data than you. You may be wrong.

your goal should be for your feedback to open up rather than close down discussion.

You should have an opinion on every forecast, every product plan, every presentation, and even every comment. Let people know what you think. If you like someone’s comment, give her the feedback.

If people get comfortable talking about what each other are doing wrong, then it will be very easy to talk about what the company is doing wrong.

(especially if you listen to some people who say things like “the CEO should be the number-one salesperson”).

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?

Strategy In good companies, the story and the strategy are the same thing. As a result, the proper output of all the strategic work is the story.

Decision making At the detailed level, the output of knowing what to do is the speed and quality of the CEO’s decisions.

Well-structured goals and objectives contribute to the context, but they do not provide the whole story.

Why should I join this company? Why should I be excited to work here? Why should I buy its product? Why should I invest in the company? Why is the world better off as a result of this company’s existence?

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.

A company without a story is usually a company without a strategy. Want to see a great company story? Read Jeff Bezos’s three-page letter he wrote to shareholders in 1997.

Therefore, a CEO can most accurately be measured by the speed and quality of those decisions.

Great decisions come from CEOs who display an elite mixture of intelligence, logic, and courage.

every decision that a CEO makes is based on incomplete information.

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).

You cannot simply stop all other activities to gather comprehensive data and do exhaustive analysis to make that single decision.

What are the competitors likely to do? What’s possible technically and in what time frame? What are the true capabilities of the organization and how can you maximize them? How much financial risk does this imply? What will the issues be, given your current product architecture? Will the employees be energized or despondent about this promotion?

Great CEOs build exceptional strategies for gathering the required information continuously. They embed their quest for intelligence into all of their daily actions from staff meetings to customer meetings to one-on-ones. Winning strategies are built on comprehensive knowledge gathered in every interaction the CEO has with an employee, a customer, a partner, or an investor.

in a poorly run organization, people spend much of their time fighting organizational boundaries and broken processes.

organizational design to performance management.

designing a system that enables employees to be maximally effective.

Reference Guide on Our Freedom and Responsibility Culture. It walks through what Netflix values in their employees, how they screen for those values during the interview process, how they reinforce those values, and how they scale this system as the number of employees grows.

CEOs who excel at board management can “succeed” by setting objectives artificially low.

the first task in accurately measuring results is setting objectives correctly.

CEOs should be evaluated against their company’s opportunity—not somebody else’s company.

needed to deliver real results that matched an expectation much,

I thought I had no choice. So I put my head down and focused on operations, focused on technology, focused on the user’s experience, and I delivered.

Once we’ve taken all of this into account, we see that the results against objectives or “black box” results are a lagging indicator.

The white-box CEO evaluation criteria—“Does the CEO know what to do?” and “Can the CEO get the company to do it?”—will do a much better job of predicting the future.

All people, including CEOs, will perform better on a test if they know the questions ahead of time.

To fight back, savvy customers started requiring all software vendors to include “the CA clause” in their contracts. The clause stated that if you released a new version of your software that contains all of the functionality of the previous version, plus some new features and a new name, then that product (despite the new name) would be covered under the existing contract with no additional fees due.

They offered it because we are the premium company, the gold standard if you will in an important market. That is the entire premise of this deal. The second that we accept a discounted offer or in any other way suggest that we are not the gold standard, this deal falls apart.” John O’Farrell nodded in agreement. The board uneasily accepted my position. I

You have failed to hold people accountable for their actions.

Seniority of the employee You should expect experienced people to be able to forecast their results more accurately than junior people.

As CEO, you know that you cannot build a world-class company unless you maintain a world-class team.

There are two kinds of cultures in this world: cultures where what you do matters and cultures where all that matters is who you are. You can be the former or you can suck.

If someone needs lots of training, she is below standard.

we will have twice as many employees next year as we have right now. Therefore, you will have a new and very different job and I will have to reevaluate you on the basis of that job.

The answer is that your loyalty must go to your employees—the people who report to your executives.

And if you are the founder, the logical part is the easy part.

The acquirer values the entire operation (product, sales, and marketing),

(a) you are very early on in a very large market and (b) you have a good chance of being number one in that market, then you should remain stand-alone.

it didn’t make sense for Google to sell to any suitor at any price that the buyer could have paid. Why? Because the market that Google was pursuing was actually bigger than the markets that all of the potential buyers owned and Google had built a nearly invincible product lead that enabled them to be number one.

(a) is this market really much bigger (more than an order of magnitude) than has been exploited to date? and (b) are we going to be number one? If the answer to either (a) or (b) is no, then you should consider selling.

“What is the market, really, and who are the competitors going to be?”