Summary of A16z Podcast Episode: CEOs, Engineers, and Growth Mistakes: Boss Talk with Ben Horowitz and Ali Ghodsi
Podcast: A16z
7 min. read
— Description —
Discover the challenges and rewards of being a CEO in this insightful content Learn about the importance of selling, legal protection, managing money, hiring, promotions, and avoiding common mistakes Gain valuable insights from industry experts and avoid the pitfalls that can hinder early-stage startups.
CEOs, Engineers, and Growth Mistakes: Boss Talk with Ben Horowitz and Ali Ghodsi
Table of contents
Key Takeaways
Key Books Mentioned
Intro
Is Going Through Academia Useful to Become a CEO?
Legal Protection for CEOs Who Leave Office
Get The Right Person for The Right Stage
How Money Screws Up a Company
Growth by Acquisition?
Common Mistakes of Early Stage Startups
Thoughts on Compensation
Additional Notes
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
- Entrepreneurs usually have many different ideas
-
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
-
On hiring
- Who: The A Method for Hiring by Geoff Smart
- Ali adopted the hiring process outlined in this book
- If you want to learn about a sophisticated recruiting process, Citizen Perot: His Life and Times by Gerald Posner
- Who: The A Method for Hiring by Geoff Smart
-
Books on fast-growing startups
- Inside the Tornado: Strategies for Developing, Leveraging, and Surviving Hypergrowth Markets by Geoff Moore
- Blitzscaling: The Lightning-Fast Path to Building Massively Valuable Companies by Reid Hoffman
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
- Books like Blitzscaling and Inside the Tornado encourage those kinds of “mistakes”
- It initially seems easy and cheap to expand
-
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
- If not, it will upset everyone else
- Ben wrote an essay on this topic called Titles and Promotions
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