The Hard Thing About Hard Things: Building a Business When There Are No Easy Answers
Tags: #business #entrepreneurship #leadership #management #startups #technology #culture
Authors: Ben Horowitz
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Overview
In ‘The Hard Thing About Hard Things,’ I offer a raw and honest account of the struggles and challenges that come with building and running a technology company. This book isn’t about setting goals or dreaming big; it’s about what to do when those goals are missed, when those dreams turn into nightmares, when there are no easy answers or readily available formulas for success. I share my personal experiences as a founder and CEO of Loudcloud and Opsware, from the highs of a successful IPO to the lows of near-bankruptcy, layoffs, and intense competitive battles, providing practical advice and hard-won lessons on navigating difficult situations, making tough decisions, and leading a team through uncertainty. I delve into the importance of building a strong company culture, hiring the right people, managing one’s own psychology, and facing the brutal realities of entrepreneurship head-on. This book is for anyone who wants to understand the true nature of building and leading a company – the struggles, the setbacks, and the moments where everything is on the line. Through real-world examples and unfiltered insights, I aim to shed light on the less glamorous but equally important aspects of entrepreneurship, providing guidance and inspiration for those who find themselves facing the hard things.
Book Outline
1. From Communist to Venture Capitalist
This chapter recounts my upbringing and experiences that helped shape my approach to leadership and decision-making, starting with a story from my childhood in Berkeley, California, where defying conventional wisdom and facing my fears led me to a lifelong friendship. This experience taught me the value of personal experience over conventional wisdom and shortcuts, especially in complicated situations.
Key concept: “This is the real world, homie, school finished They done stole your dreams, you dunno who did it.”
2. “I Will Survive”
This chapter chronicles the early days of Loudcloud, marked by the exuberance of the dot-com boom and the subsequent crash. It details how my experience at Netscape shaped my views on the internet’s potential and how, despite a highly successful IPO, we had to navigate the challenges of a rapidly changing market and intense competition from Microsoft.
Key concept: “What would you do if capital were free?” is a dangerous question to ask an entrepreneur.
3. This Time with Feeling
This chapter dives into the period of intense struggle and near-death experiences at Loudcloud as the dot-com bubble burst. It emphasizes the importance of facing harsh realities, even when they seem insurmountable, and illustrates the need for resilience, mental toughness, and finding a way to survive when all odds are stacked against you. It details the process of taking the company public amidst a brutal market downturn, making difficult decisions like layoffs, and ultimately finding a path to survival through the sale of Loudcloud’s services business to EDS.
Key concept: “Ben, it’s not the money.” Then Bill spoke again, “It’s the fucking money.”
4. When Things Fall Apart
This chapter focuses on the period after selling the Loudcloud services business, when the remaining company, Opsware, faced skepticism and a dwindling stock price. I detail the importance of transparency with employees, even when delivering bad news, and how to navigate seemingly impossible situations. I introduce the concept of wartime CEO versus peacetime CEO, arguing that in difficult times, the CEO must be clear, direct, and focused on survival, even if it means making tough and unpopular decisions.
Key concept: Startup CEOs should not play the odds.
5. Take Care of the People, the Products, and the Profits—in That Order
This chapter explores the crucial role of people in building a successful company. It highlights the importance of hiring for strength rather than lack of weakness and recounts the story of hiring a seemingly unconventional but brilliant head of sales, Mark Cranney. It underscores the philosophy of prioritizing people, followed by products, and then profits, as a key to long-term success.
Key concept: “We take care of the people, the products, and the profits—in that order.”
6. Concerning the Going Concern
This chapter delves into the complexities of building and maintaining a healthy company culture while minimizing office politics. It argues that political behavior often stems from the CEO, even unintentionally, and provides techniques for minimizing such behavior by establishing clear performance evaluation systems, organizational design, and promotion processes. I share an anecdote about navigating employee complaints about profanity in the workplace, highlighting the need for clarity and alignment with company values.
Key concept: “Minimal profanity’ cannot be enforced.
7. How to Lead Even When You Don’t Know Where You Are Going
This chapter addresses the challenges of leadership, especially when navigating uncertainty and making tough decisions. I describe the most difficult CEO skill as the ability to manage one’s own psychology amidst constant pressure and setbacks. Drawing on my experience and insights from individuals like Herb Allen, I highlight the importance of courage in making critical decisions, even when faced with incomplete information and opposition from others. It also explores the difference between Ones and Twos – leaders who are better at setting direction versus those who excel at execution.
Key concept: “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.”
8. First Rule of Entrepreneurship: There Are No Rules
This chapter focuses on two common challenges CEOs face as their companies grow: scaling the organization and hiring executives for roles they’ve never done themselves. It cautions against the scale anticipation fallacy – prematurely judging an executive’s ability to scale before they’ve had the opportunity to learn and grow. I also provide a framework for hiring executives effectively, emphasizing the importance of knowing what you want, running a structured process, and making a decision based on strength rather than lack of weakness.
Key concept: “If you don’t know what you want, the chances that you’ll get it are extremely low.”
9. The End of the Beginning
This chapter reflects on my journey after selling Opsware, leading to the founding of Andreessen Horowitz. Drawing upon past challenges and frustrations with the venture capital industry, Marc Andreessen and I set out to create a different kind of firm – one that would be uniquely equipped to help technical founders succeed. I detail our strategy of building a firm with
Key concept: “We ought to start a venture capital firm. Our motto for general partners would be ‘some experience required’ as in some experience in founding and running companies is required to advise people who are founding and running companies.”
Essential Questions
1. How can a CEO maintain their mental and emotional well-being while navigating the intense pressures of leading a company through difficult times?
In the face of seemingly insurmountable challenges, how can a CEO manage their own psychology and avoid succumbing to despair or making rash decisions? Horowitz emphasizes the importance of self-awareness, acknowledging the tendency for CEOs to either take things too personally or not personally enough. He suggests finding a balance between urgency and sanity, separating the importance of issues from personal feelings, and seeking support from trusted friends and advisors who have experienced similar challenges. He advocates for focusing on the road ahead, rather than dwelling on potential disasters, and underscores the importance of courage and resilience in navigating difficult situations.
2. How can a company build a culture that fosters resilience, problem-solving, and open communication, especially during times of crisis?
Horowitz argues that building a strong company culture is crucial for navigating difficult times. He highlights the importance of transparency, even when delivering bad news, arguing that this builds trust and encourages employees to share problems openly. He advocates for building a culture that rewards, rather than punishes, employees for surfacing problems and encourages CEOs to be clear and direct in their communication, avoiding sugarcoating or obfuscation. This transparency allows for more brains to be focused on solving problems and fosters a culture of accountability and shared responsibility.
3. What are the key differences between a peacetime CEO and a wartime CEO, and how can a CEO develop the skills to be effective in both scenarios?
According to Horowitz, the best CEOs are those who can effectively manage both in peacetime and wartime. Peacetime CEOs excel at maximizing and broadening existing opportunities, encouraging creativity and diverse contributions. Wartime CEOs, on the other hand, focus on survival and execution, demanding strict adherence to the core mission and making tough, often unpopular decisions. He argues that mastering both skillsets is crucial for long-term success, as companies inevitably face both periods of growth and periods of crisis.
4. What are the most important principles for building and managing a high-performing team, and how can a CEO ensure that they are hiring and retaining the best talent?
This question gets to the heart of Horowitz’s approach to building and managing a company. He emphasizes the importance of hiring for strength rather than lack of weakness, even if that means going against conventional wisdom or the preferences of investors and board members. He argues that a company is only as good as its people, and that a CEO’s primary responsibility is to build a world-class team and create an environment where they can thrive and get things done. He stresses the importance of clearly defining roles and responsibilities, providing ongoing feedback and mentorship, and holding people accountable for their performance.
5. When should a CEO consider selling their company, and what are the key factors to consider when making this decision, both logically and emotionally?
Horowitz acknowledges that this is one of the most emotionally charged decisions a CEO will ever make. He provides a framework for making the decision, based on factors such as market size, competitive position, and the company’s long-term potential. He also discusses the emotional complexities of selling a company, especially for founders who have poured their heart and soul into building it, and offers advice on how to mute the emotions and make a rational decision that is in the best interests of the company and its employees.
Key Takeaways
1. Nobody Cares
The ‘Nobody Cares’ principle emphasizes that dwelling on problems or seeking sympathy won’t solve anything. It’s a call to action to focus on what you can control – finding solutions and moving forward. The media, investors, your board – they care about results, not excuses. So, as a leader, you must take ownership of the situation and focus on what you can do to improve it.
Practical Application:
An AI product engineer could apply the concept of ‘Nobody Cares’ when facing setbacks or delays in a project. Instead of dwelling on the problem or seeking sympathy, focus on finding solutions and moving forward. For example, if a complex algorithm isn’t performing as expected, avoid blaming external factors or getting bogged down in self-criticism. Instead, analyze the data, identify potential issues, and iterate on the design to improve its performance. This proactive approach demonstrates resilience and a focus on results, ultimately leading to a better product.
2. Explain the ‘Why’
Simply telling people what to do without explaining the reasons behind it will lead to confusion, frustration, and ultimately, poor execution. People are more likely to be engaged and motivated when they understand the bigger picture and how their individual contributions fit into the overall strategy. This clear communication also empowers employees to make independent decisions that align with the company’s goals.
Practical Application:
When leading a team of AI engineers developing a new product, clearly articulate the vision and the ‘why’ behind the work. Explain how their contributions will impact the company, the industry, and the world. This will not only motivate the team but also provide them with the context they need to make independent decisions that align with the overall vision. This shared understanding will foster a sense of ownership and purpose, ultimately leading to a more cohesive and effective team.
3. Use Lead Bullets, Not Silver Bullets
When facing seemingly insurmountable challenges, there’s a temptation to look for a quick fix or a magical solution. However, often the only way to overcome these challenges is through consistent, focused effort – using ‘lead bullets’ rather than seeking a ‘silver bullet’. This means breaking down complex problems into smaller steps and relentlessly executing on those steps, even if it feels slow or tedious.
Practical Application:
An AI product engineer faced with a complex technical challenge should avoid seeking a ‘silver bullet’ or a quick fix. Instead, break down the problem into smaller, manageable steps and focus on making incremental progress using ‘lead bullets’ – consistent, focused effort. For example, instead of trying to build a perfect AI model in one go, focus on building a simpler version first, then iterate and improve it based on real-world data and feedback. This iterative approach, while requiring more effort upfront, is more likely to lead to a robust and scalable solution.
4. Hire for Strength
Hiring for strength means identifying the specific areas where your company needs to excel and finding individuals who possess world-class talent in those areas. This requires a deep understanding of the role, the market, and the company’s needs. It also means being willing to overlook minor weaknesses in favor of exceptional strengths. In many cases, the candidate’s passion for the work and alignment with the company’s mission will outweigh any perceived shortcomings.
Practical Application:
When building an AI product, involve domain experts early in the process. Interview experienced AI practitioners and researchers to understand the nuances of the field, the latest advancements, and the potential pitfalls. Their insights can inform product design, feature prioritization, and the overall development process. This collaboration ensures that the product is built with a deep understanding of the field and addresses real-world needs, increasing its chances of success.
5. Balance Accountability and Creativity
The Accountability vs. Creativity Paradox arises because holding people too tightly accountable for results can stifle innovation and risk-taking, while not holding them accountable at all can lead to a lack of focus and poor execution. The key is to strike a balance between the two, rewarding creativity and courage while maintaining high standards for performance and delivery.
Practical Application:
In building an AI-powered product, it’s crucial to strike a balance between accountability for results and fostering creativity and innovation. When an AI engineer misses a deadline but uncovers a critical flaw in the architecture, acknowledge their courage in raising the issue and the value of their insight. However, also work with them to improve their scoping and estimation skills to prevent similar delays in the future. This balanced approach encourages risk-taking while maintaining a culture of accountability.
Suggested Deep Dive
Chapter: When Things Fall Apart
This chapter offers valuable insights into how to manage your own psychology as a leader when facing existential threats. The concepts of ‘wartime CEO’ and ‘peacetime CEO’ are particularly relevant for AI product engineers, as they often work on cutting-edge projects with high uncertainty and rapidly changing landscapes.
Memorable Quotes
Introduction. 7
That’s the hard thing about hard things—there is no formula for dealing with them.
“I Will Survive”. 24
“What would you do if capital were free?” is a dangerous question to ask an entrepreneur.
“I Will Survive”. 33
If you are going to eat shit, don’t nibble.
When Things Fall Apart. 57
Startup CEOs should not play the odds.
Nobody Cares. 85
Because, you see, nobody cares.
Comparative Analysis
“The Hard Thing About Hard Things” stands out for its raw honesty and focus on the psychological and emotional challenges of entrepreneurship, a perspective often missing from more traditional business books like “Good to Great” by Jim Collins or “The Lean Startup” by Eric Ries. While those books offer valuable frameworks and methodologies, Horowitz delves into the messy, unpredictable reality of building a company, acknowledging the lack of easy answers and the constant pressure to make high-stakes decisions with incomplete information. Unlike “Zero to One” by Peter Thiel, which emphasizes grand visions and future predictions, Horowitz focuses on the day-to-day grind of execution, the importance of building a strong team and culture, and the need for relentless resourcefulness and resilience in the face of adversity. His book complements these works by providing a more personal and experiential perspective, offering practical advice and hard-won lessons for navigating the complexities of leading a company through uncertainty.
Reflection
“The Hard Thing About Hard Things” is a powerful and insightful read, but it’s not without its limitations. The book is heavily based on the author’s personal experiences and, while these provide valuable lessons, they might not always be generalizable to all companies and situations. The tech industry has evolved significantly since the book’s publication in 2014, and some of the advice might need to be adapted to the current landscape. For instance, the rise of remote work and distributed teams presents new challenges for building company culture and communication that weren’t as prominent during Horowitz’s time as CEO. Additionally, the book’s emphasis on ‘wartime CEO’ mentality might not be suitable for all situations, and could potentially lead to a toxic work environment if applied too rigidly. Despite these limitations, the book’s core message about embracing the struggle, building a strong team, and making tough decisions remains highly relevant. Its raw honesty and focus on the emotional and psychological aspects of entrepreneurship make it a valuable resource for anyone navigating the complexities of building and leading a company.
Flashcards
What is management debt?
Incurred when you make an expedient, short-term management decision with an expensive, long-term consequence.
What are three common types of management debt?
Putting two outstanding employees in the same role, overcompensating an employee due to a competing job offer, and neglecting to implement a performance management process.
What’s the best thing about startups?
You only ever experience two emotions: euphoria and terror.
What’s the most important rule of raising money privately?
Look for a market of one. You only need one investor to say yes.
What is the relationship between company management and product/market fit?
No matter how well managed a company is, it will fail without product/market fit.
What’s the golden rule of layoffs?
Managers must lay off their own people. They cannot pass the task to HR.
What should you keep in mind when addressing the company about layoffs?
The message is for the people who are staying.
What is the right kind of ambition in an executive?
Ambition for the company’s success with the executive’s own success only coming as a by-product of the company’s victory.
What did Mark Cranney say about company ambition?
Two percent of zero is zero.