What You Do Is Who You Are: How to Create Your Business Culture

by Ben Horowitz

Revel in being discarded, or having all your energies exhausted in vain; only those who have endured hardship will be of use. Samurai who have never erred before will never have what it takes. —Hagakure

I was shocked to find out, from overhearing casual conversations, that he was taking storytelling to another level by constantly lying about everything. Thorston was soon working elsewhere, but I knew I had to deal with a much deeper problem: because it had taken me years to find out that he was a compulsive liar, during which time he’d been promoted, it had become culturally okay to lie at LoudCloud. The object lesson had been learned. It did not matter that I never endorsed it: his getting away with it made it seem okay. How could I undo that lesson and restore our culture?

How many of the following questions can be resolved by turning to your corporate goals or mission statement? Is that phone call so important I need to return it today, or can it wait till tomorrow? Can I ask for a raise before my annual review? Is the quality of this document good enough or should I keep working on it? Do I have to be on time for that meeting? Should I stay at the Four Seasons or the Red Roof Inn? When I negotiate this contract, what’s more important: the price or the partnership? Should I point out what my peers do wrong, or what they do right? Should I go home at 5 p.m. or 8 p.m.? How hard do I need to study the competition? Should we discuss the color of this new product for five minutes or thirty hours? If I know something is badly broken in the company, should I say something? Whom should I tell? Is winning more important than ethics?

The right answers for your company depend on what your company is, what it does, and what it wants to be. In fact, how your employees answer these kinds of questions is your culture. Because your culture is how your company makes decisions when you’re not there. It’s the set of assumptions your employees use to resolve the problems they face every day. It’s how they behave when no one is looking. If you don’t methodically set your culture, then two-thirds of it will end up being accidental, and the rest will be a mistake.

Identifying the culture you want is hard: you have to figure out not only where your company is trying to go, but the road it should take to get there.

There’s a saying in the military that if you see something below standard and do nothing, then you’ve set a new standard. This is also true of culture—if you see something off-culture and ignore it, you’ve created a new culture.

People often ask me why I preface much of what I write with quotes from hip-hop. In part it’s a hangover from my failed career as a rapper—true story. But mostly it’s because the majority of my ideas about entrepreneurship, business, and culture occur to me while I’m listening to hip-hop, so it’s my way of giving credit where credit is due.

Noyce didn’t hire professional managers. He said, “Coaching, and not direction, is the first quality of leadership now. Get the barriers out of the way to let people do the things they do well.” This created a new culture, a culture of empowerment: everyone was in charge and Noyce was there to help. If a researcher had an idea, he could pursue it for a year before anyone would start inquiring about results.

There was no layer of vice presidents; Noyce and Moore oversaw business segments run by middle managers who had enormous decision-making power. In meetings, the leader set the agenda, but everyone else was equal. And, crucially, Noyce gave the engineers and most of the office workers substantial stock options. He believed that in a business driven by research and products, the engineers would behave more like owners if they actually owned the company.

Andy Grove (who would go on to become the company’s CEO and a famous cultural innovator). Grove would ask, “How would you sum up the Intel approach?” Someone might answer, “At Intel you don’t wait for someone else to do it. You take the ball yourself and run with it.” Grove would reply, “Wrong. At Intel you take the ball yourself and you let the air out and you fold the ball up and put it in your pocket. Then you take another ball and run with it and when you’ve crossed the goal you take the second ball out of your pocket and reinflate it and score twelve points instead of six.”

Breakthrough ideas have traditionally been difficult to manage for two reasons: 1) innovative ideas fail far more than they succeed, and 2) innovative ideas are always controversial before they succeed. If everyone could instantly understand them, they wouldn’t be innovative.

A great engineer will only invest the time and effort to do all those things, to build a product that will grow with the company, if she has ownership in the company—literally as well as figuratively. Bob Noyce understood that, created the culture to support it, and changed the world.

Why has there been only one successful slave revolt in human history? And how did Haiti’s Toussaint Louverture reprogram slave culture to orchestrate it? How did bushido, the code of the samurai, enable the warrior class to rule Japan for seven hundred years and shape modern Japanese culture? What set of cultural virtues empowered them? The samurai called their principles “virtues” rather than “values”; virtues are what you do, while values are merely what you believe. As we’ll see, doing is what matters. (In what follows I will use “virtues” to refer to the ideal, and “values” to refer to what most companies now espouse.) How exactly did the samurai focus their culture on actions? How did Genghis Khan build the world’s largest empire? He was a total outsider, imprisoned as a youngster by his own tiny nomadic tribe. It’s easy to see how that made him want to smash existing hierarchies. But how, exactly, was he able to create an innovative and inclusive meritocracy? One that enabled him to constantly grow and improve while his foes were standing still? How did Shaka Senghor, sentenced to nineteen years in a Michigan prison for murder, make his prison gang the tightest, most ferocious group in the yard—and then transform it into something else entirely? How did culture turn him into a killer? How did he rise to dominate that culture? How did he take a group of outcasts and turn them into a cohesive team? Finally, how did he recognize what he disliked about his regime, and, b...

To avoid survivorship bias—the logical error of concentrating on companies that succeeded and falsely concluding that it was their culture that made them great—I try not to reverse engineer. Instead I look at the cultural techniques that leaders used as they tried to strengthen their culture in specific ways, and show how those efforts played out. So you won’t find any absolute “best cultures” in this book, just techniques to make your own culture do what you want it to.

Culture only works if the leader visibly participates in and vocally champions it.

Our aim here is to be better, not perfect.

Who you are is not the values you list on the wall. It’s not what you say at an all-hands. It’s not your marketing campaign. It’s not even what you believe. It’s what you do. What you do is who you are.

Keep What Works

People don’t easily adopt new cultural norms and they simply can’t absorb an entirely new system all at once.

Create Shocking Rules

This dynamic becomes problematic in an army, because trust is fundamental to running any large organization. Without trust, communication breaks. Here’s why: In any human interaction, the required amount of communication is inversely proportional to the level of trust.

If I trust you completely, then I require no explanation or communication of your actions at all, because I know that whatever you are doing is in my best interests. On the other hand, if I don’t trust you in the slightest, then no amount of talking, explaining, or reasoning will have any effect on me, because I will never believe you are telling me the truth and acting in my best interests.

And be told: “Because in this army, nothing is more important than your word. If we can’t trust you to keep your word to your wife, we definitely can’t trust you to keep your word to us.” (The matter is complicated by the fact that Louverture had illegitimate children, but no leader is perfect.)

Marriage, honesty, and loyalty were symbols of the society that Louverture aspired to lead—and he programmed them all into his culture with one simple shocking rule.

Dress for Success

When Toussaint Louverture joined the rebel army, most of its soldiers didn’t wear clothes. They had joined up straight from the fields, and were accustomed to working naked. To help transform this ragtag group into an army—to give them a sense that they were an elite fighting force—Louverture and his corevolutionaries dressed in the most elaborate military uniforms attainable. It was a constant reminder of who they were and what they might achieve.

Incorporate Outside Leadership

Building a great culture means adapting it to circumstances. And that often means bringing in outside leadership from the culture you need to penetrate or master.

Make Decisions That Demonstrate Cultural Priorities

So Louverture not only let the plantation owners live, he let them keep their land. But he insisted that they pay their laborers one-fourth of the profits. And he ordered them to live on their plantations, so they would be directly accountable for paying their workers and treating them well. If they disobeyed, their land was confiscated.

Walk the Talk

No culture can flourish without the enthusiastic participation of its leader. No matter how well designed, carefully programmed, and insistently enforced your cultural elements are, inconsistent or hypocritical behavior by the person in charge will blow the whole thing up.

For a culture to stick, it must reflect the leader’s actual values, not just those he thinks sound inspiring. Because a leader creates culture chiefly by his actions—by example.

Make Ethics Explicit

Integrity, honesty, and decency are long-term cultural investments. Their purpose is not to make the quarter, beat a competitor, or attract a new employee. Their purpose is to create a better place to work and to make the company a better one to do business with in the long run. This value does not come for free. In the short run it may cost you deals, people, and investors, which is why most companies cannot bring themselves to actually, really, enforce it. But as we’ll see, the failure to enforce good conduct often brings modern companies to their knees.

One difficulty in implementing integrity is that it’s a concept without boundaries. You can’t pat yourself on the back for treating your employees ethically if you’re simultaneously lying to your customers, because your employees will pick up on the discrepancy and start lying to each other. The behaviors must be universal; you have to live up to them in every context.

Crucially, Louverture’s ethical instruction was explicit. Often CEOs will be exceptionally explicit about goals such as shipping products, but silent on matters such as obeying the law. This can be fatal. It’s because integrity is often at odds with other goals that it must be clearly and specifically inserted into the culture. If a company expects its people to behave ethically without giving them detailed instructions on what that behavior looks like and how to pursue it, the company will fall far short no matter whom it hires.

By 1801, Louverture’s massive investment in the culture began to pay off. With blacks and mulattoes running the country, cultivation had been restored to two-thirds of its peak level under the French. Integrity proved its worth.

Sad story, but how could it happen? How could Louverture, genius of culture and human nature that he was, not perceive the brewing treachery? In a sense, he was like the Greek hero Oedipus, who solved the riddle of the Sphinx but who couldn’t clearly see those closest to him. Louverture’s optimistic view of human potential blinded him to certain home truths.

C. L. R. James put it well: “If Dessalines could see so clearly and simply, it was because the ties that bound this uneducated soldier to French civilization were of the slenderest. He saw what was right under his nose so well because he saw no further. Louverture’s failure was the failure of enlightenment, not darkness.”

After Napoleon captured Louverture, he attempted to reinstitute slavery on the island—but was beaten by the army Louverture left behind. Though he was already dead, Louverture defeated his third European superpower. Napoleon suffered more losses in Saint-Domingue than he would at Waterloo, and these reverses forced him to sell Louisiana and parts of fourteen additional states to the United States for $15 million. The French emperor later confessed that he should have ruled the island through Louverture.

The theory of PC economics held that because the industry had commoditized PC hardware—there were IBM knockoffs everywhere—the way to make money was not to be a vertically integrated provider that gave the user the machine and its operating system, but to focus on the horizontal option: selling an operating system to run on someone else’s hardware.

The industry’s other article of faith was that companies needed to maximize market share by having a presence in every link of the computer chain, from servers to printers to PCs to laptops.

Integrating hardware and software had always been Apple’s core strength. At its peak, the company had focused not on industry benchmarks like processor speeds and storage capacity, but on building products such as the MacIntosh that encouraged people’s creativity. Apple did integration better than anyone else.

Jobs narrowed the product line to ensure that the company focused on delivering great experiences to individual humans rather than an impersonal set of specs, feeds, and speeds aimed at no one in particular. Over time, he would expand to include iPods, iPads, and iPhones, but he never went “horizontal”—he kept the software and hardware integrated. To further control the customer experience, Jobs even opened Apple Stores, which would become one of the best-performing retail businesses in the world.

Create Shocking Rules Here are the rules for writing a rule so powerful it sets the culture for many years: It must be memorable. If people forget the rule, they forget the culture. It must raise the question “Why?” Your rule should be so bizarre and shocking that everybody who hears it is compelled to ask, “Are you serious?” Its cultural impact must be straightforward. The answer to the “Why?” must clearly explain the cultural concept. People must encounter the rule almost daily. If your incredibly memorable rule applies only to situations people face once a year, it’s irrelevant.

Coughlin’s response to the reporter didn’t make him seem more sympathetic, but it did solidify his rule: “Players ought to be there on time, period,” he said. “If they’re on time, they’re on time. Meetings start five minutes early.”

Ryan Nassib explained the cultural intention to the Wall Street Journal: Coughlin Time is more of a mindset, kind of a way for players to discipline themselves, making sure they’re on time, making sure they’re attentive and making sure they’re ready to work when it’s time to start meetings. It’s actually kind of nice because once you get out in the real world, you’re five minutes early to everything.

So Greene came up with a shocking rule: Partnerships should be 49/51, with VMware getting the 49. Did she just tell her team to lose? That definitely begs the question “Why?” Greene said, “I had to give our business development people permission to be good to the partners, because one-sided partnerships would not work.”

Her people wanted to create mutually beneficial partnerships, and Greene’s rule gave them permission. It was of course no easier to measure an exact 49/51 split than a 50/50 “win-win,” but Greene’s employees understood her underlying point: “If you’re negotiating something on the margin, it’s okay to give it to our partner.”