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Academic CEOs, Junior v. Senior Engineers, and High Growth Mistakes | Boss Talk Ben Horowitz and Ali Ghodsi

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Key Takeaways

  • Being a CEO is “the worst job that you’ll ever love”
  • As a CEO you’re always selling
    • You’re selling to investors, employees, the press, and customers
  • The best legal protection for a CEO is to take important legal decisions with the Board
  • “In a startup, if you don’t have 10 new initiatives a day, as an executive, your whole company is standing still, nothing is happening” Ben Horowitz
  • How too much money screws up a company
    • Entrepreneurs usually have many different ideas
      • Constrained by money, they only pursue their best two
      • With plenty of money, they pursue many more and stretch too thin
  • There are two processes that you want to put in place early on: hiring and promotions 
    • It’s critical to have consistent, transparent, and fair processes for avoiding internal conflicts
    • If you don’t have clear processes, there will be hundreds of difficult decisions to be made
  • Common mistakes of early-stage startups
    • Expanding to other countries
    • Hiring many executives
    • Working on different products

Key Books Mentioned

Intro

  • Ben Horowitz (@bhorowitz) is the co-founder and general partner at the venture capital firm, Andreessen Horowitz
  • Ali Ghodsi (@alighodsi) is a Professor of Computer science at UC Berkley and the Founder/CEO of Databricks
  • In this chat, Ali Ghodsi, and Ben Horowitz talk about being a CEO, leadership, hiring, and other CEO-related questions

Is Going Through Academia Useful to Become a CEO?

  • There are a lot of people who come out of academia and start companies
    • Not many of them continue their journey as their companies grow
  • In academia, you learn some things that are helpful for CEOs
    • Identifying problems that are difficult and important
    • Going to the core of the problem to find a solution
      • You learn to overcome biases and to only be concerned with the truth
    • Communicating your findings and convincing other people
      • The research community is very difficult to convince
      • This skill turns to be useful for marketing
  • Ali transferred his truth-seeking nature to his company culture
    • But too much of a good thing becomes detrimental
    • As a CEO, you don’t need to learn and understand every little detail of the finance department
      • It will be hard to build trust with employees
      • It will slow things down
  • What you don’t learn in academia
    • Putting a team together
    • Getting your team to trust you and execute effectively

Legal Protection for CEOs Who Leave Office

  • There’s a pattern of CEOs being legally attacked after they leave
  • When a CEO leaves a company, his legal protection changes dramatically
    • The CEO loses a lot of protection after stepping down
    • Anybody who has stock in the company can sue him/her
  • The best legal protection for a CEO is to take important legal decisions with the Board
    • This shows that decisions are made with consideration to the stakeholders
    • Greg Reyes, ex-CEO of Brocade was convicted for fraudulent backdating of corporate stock options because he approved stock options without the approval of his Board
  • Many founders like to be informal and take stock-options decisions by themselves, not knowing that they run huge risks
  • It is advisable for CEOs to have a personal lawyer advising them, even on matters of the company
    • The company’s legal team is not representing the CEO

Get The Right Person for The Right Stage

  • There are three kinds of employees
  • You don’t want to get the wrong person for the stage of your company
  • 1. Startup people
    • The ones good at bringing you from zero to one
  • 2. Midsize Company People
    • Those who are good at growing a company
  • 3. Big company people
    • Those good at optimizing
  • “In a startup, if you don’t have 10 new initiatives a day, as an executive, your whole company is standing still, nothing is happening” Ben Horowitz
  • Executives used to large companies have a hard time adapting to startups
    • You can run a playbook, but can you write one?
  • The hardest problem is getting product-market fit for a new product
    • It would be a disaster to assign that job to junior engineers
    • Many companies make this mistake
      • They employ their senior engineers to maintain the products that are already successful and assign junior engineers to new projects
    • The best engineers should be working on developing new products
      • If you don’t have enough senior engineers for a new project maybe you should not start it

How Money Screws Up a Company

  • Entrepreneurs usually have many different ideas
    • Constrained by money, they only pursue their best two
    • With plenty of money, they pursue many more and spread too thin
      • This approach usually fails

Growth by Acquisition?

  • You should only consider acquisitions if you have a strong foundation
    • A great business, product, and company culture
  • Would the acquisition strategically help the company in a major way?
    • If it doesn’t do that, it is probably not worth it
  • Money should not be the main constraint on acquisitions
    • People tend to underestimate the complexity and time-cost of acquisitions
  • Integrating an acquired company with a different culture takes a huge effort
    • Acquisitions often involve many layoffs of “duplicate employees”
    • If you hire too many people from other companies, they will inevitably affect your culture
    • Ross Perot famously said that he only wants to hire one person from each company because “eagles don’t flock”

Common Mistakes of Early Stage Startups

  • Expanding to other countries
    • It initially seems easy and cheap to expand
      • You might assume you only need a few salespeople
    • As you do, unexpected costs and problems start popping up
      • You often need more people than you’d think
      • Culture clashes and different regulations make things more difficult
    • Some times you do need to expand, even if it’s costly, to be the first to capture a market
  • Working on many different products too early
    • Get one product working, making sales, and growing before moving to new products
    • (Working on different products too early) “Is such a dilution of focus it’s almost suicide” Ben Horowitz
    • Ali’s rule of thumb is to get to $100M of revenues before moving to new products
  • Hiring many executives too early
    • Most executives are good at moving you from 1 to n
    • If you hire them when you need to go from 0 to 1, they’re going to destroy the company
      • It would be your fault not theirs

Thoughts on Compensation

  • There are two processes that you want to put in place early on: hiring and promotions 
    • It’s critical to have consistent, transparent, and fair processes for avoiding internal conflicts
    • If you don’t have clear processes, there will be hundreds of difficult decisions to be made
      • You don’t want to reward pushy people who constantly ask for a raise
    • There’s room for exceptions: you don’t want to lose a super talented engineer who could create the next great product
      • Overoptimizing for saving money is a common mistake
  • You have to assume that every decision you make on compensation will be known by other employees
  • An underperforming person that makes a ton of money must be dealt with swiftly

Additional Notes

  • Being a CEO is “the worst job that you’ll ever love”
  • As a CEO you’re always selling
    • You’re selling to investors, employees, the press, and customers
A16z Podcast : , ,
Notes By Giorgio Parlato

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