Introduction to High Output Management
I first read High Output Management in 1995. In those days, there were no blogs or TED Talks teaching us about entrepreneurship. In fact, there was almost nothing of use written for people like me who aspired to build and run a company.
Against this backdrop, High Output Management had an almost legendary status. All the best managers knew about it. The top venture capitalists gave copies of it to their entrepreneurs, and aspiring leaders in Silicon Valley devoured its contents. It amazed all of us that the CEO of Intel had taken the time to teach us the essential skill of entrepreneurship: how to manage.
This was no small thing because Intel was known as the best company in the technology industry. It had pulled off the greatest transformation in the history of the business: moving from the memory business to microprocessors more than a decade after its founding. Beyond that, Intel ran with legendary precision, which gave it the ability to make multibillion-dollar investments with high confidence. If you wanted to hire a great operational manager, then Intel was the place to go -- but good luck getting one to leave the best-managed company in Silicon Valley.
Andy himself was a legendary figure. He had grown up Jewish in Hungary during a time when the country was occupied by the Nazis and, later, by the Soviet Communists. Arriving in New York, he spoke no English and had almost no money. He enrolled himself at the City College of New York, overcame his language deficiency, and went on to get a PhD from UC Berkeley. This nonnative English speaker would then write an important textbook on semiconductors in English while working at Fairchild Semiconductor. As a result, he was considered a scientific pioneer even before helping to launch Intel in 1968, building it into the seminal technology company of the era. Later, in 1997, Time magazine would recognize his nearly impossible accomplishments and name him Man of the Year.
This is in part what made High Output Management so extraordinary. Andy Grove, who built himself from nothing to run Intel, stopped what he was doing to teach us his magic. And not through some ghostwriter either -- Andy wrote this book himself. What an incredible gift.
When I finally got my hands on the book, the paperback cover took me aback. The 1995 version featured a picture of Andy Grove standing next to the Intel sign. Unlike every other CEO photo that I had ever seen, Andy was not wearing a designer suit. He did not have perfectly combed hair, and he did not strike an arms-folded power pose. No, Andy Grove was dressed for work right down to his key card hanging from his belt. I did a double take. “Was that a key card? He didn’t remove his key card for the book’s cover photo?”
In retrospect, the cover was perfect. As you will see when you read this book, Andy Grove was all substance. He did not have time for pretty photo shoots or self-promotion. He wrote the book for us, but if we had to be sold on it by how he looked in the photo, then that would be our loss. The time that he did not spend styling fancy photos, he put into writing the book. He did not just give us the lessons; he articulated them in a way that connected both logically and emotionally. We would come to understand him and feel what he meant in our core.
I immediately got a jolt of this style with the title of the very first chapter: “The Basics of Production: Delivering a Breakfast (or a College Graduate, or a Compiler, or a Convicted Criminal…).” Okay, I am interested. What does making a soft-boiled egg have to do with how many prisons we build? It turns out quite a bit. High Output Management opens by teaching us the importance of proper system design even when we are dealing with a system of human beings -- especially when we are dealing with a system of human beings.
Andy then shows us how you can use these same principles to understand how society should operate. It doesn’t accomplish anything to declare that we need more kids going to college than to jail and demand that we build more schools than jails. In fact, it’s counterproductive. Identifying complex system problems is one thing. Solving them is something else entirely, and Andy lays out the tools to do just that.
Over the years, I have come to consider High Output Management a true masterpiece, and there are at least three core aspects to its genius. First, in as little as one sentence, it lucidly explains concepts that require entire books from lesser writers. Second, it consistently uncovers brand-new management ideas or finds new insights in old standards. Finally, while most management books attempt to teach basic competency, High Output Management teaches the reader how to be great.
Andy introduces management with this classic equation:
A manager’s output = the output of his organization + the output of the neighboring organizations under his influence.
On the surface it may seem simple, but he clarifies the essential difference between a manager and an individual contributor. A manager’s skills and knowledge are only valuable if she uses them to get more leverage from her people. So, Ms. Manager, you know more about our product’s viral loop than anyone in the company? That’s worth exactly nothing unless you can effectively transfer that knowledge to the rest of the organization. That’s what being a manager is about. It’s not about how smart you are or how well you know your business; it’s about how that translates to the team’s performance and output.
As a means to obtain this leverage, a manager must understand, as Andy writes: “When a person is not doing his job, there can only be two reasons for it. The person either can’t do it or won’t do it; he is either not capable or not motivated.” This insight enables a manager to dramatically focus her efforts. All you can do to improve the output of an employee is motivate and train. There is nothing else.
As he describes the planning process, Andy sums up his essential point with this eloquent nugget of wisdom: “I have seen far too many people who upon recognizing today’s gap try very hard to determine what decision has to be made to close it. But today’s gap represents a failure of planning sometime in the past.” Hopefully, the value of this short insight is not lost on the young reader. If you only understand one thing about building products, you must understand that energy put in early in the process pays off tenfold and energy put in at the end of the program pays off negative tenfold.
The book has an entire section dedicated to an often neglected, but critically important management tool: meetings. Andy makes us see this oldest of business principles in a new light. He teaches meetings from first principles, beginning with how to conduct a one-on-one. It seems incredible that the CEO of Intel would take the time to explain how to have a one-on-one.
Why is he doing this? It turns out that the one-on-one is not only a fundamental element in the manager/employee relationship, but perhaps the best source for organizational knowledge that a manager can get. In my experience, managers who don’t have one-on-ones understand very little about what’s happening in their organizations.
It is by understanding the simple things that Andy goes deep. For example, when people visit today’s technology companies they often remark about how casual the environments are, but with very little explanation about why they are that way. In fact, many CEOs do not understand why as they simply follow the trend, but Andy explains it perfectly:
A journalist puzzled by our management style once asked me, “Mr. Grove, isn’t your company’s emphasis on visible signs of egalitarianism such as informal dress, partitions instead of offices…just so much affectation?” My answer was that this is not affectation, but a matter of survival. In our business we have to mix knowledge-power people with position-power people daily, and together they make decisions that could affect us for years to come.
In this fashion, the book quickly gets to the heart of complex issues. It raises and deals with the stickiest management issues. Andy asks the question of whether you should be friends with the people you manage:
Everyone must decide for himself what is professional and appropriate here. A test might be to imagine yourself delivering a tough performance review to your friend. Do you cringe at the thought? If so, don’t make friends at work. If your stomach remains unaffected, you are likely to be someone whose personal relationships will strengthen work relationships.
By breaking down the process, he makes hard things manageable.
Ultimately, the power of High Output Management is that it creates experts rather than merely competent managers.
A great example of this is the section on task-relevant maturity. This part of the book became very personal for me as it taught me how to formulate the most useful management question that I use in interviews: “Is it better to be a hands-on or hands-off manager?”
It seems like a simple enough question, but it sorts out the 95 percent of managers who never think deeply about their craft from the 5 percent who do. The answer, as Andy explains, is that it depends. Specifically, it depends on the employee. If the employee is immature in the task, then hands-on training is essential. If the employee is more mature, then a delegate approach is warranted. Andy presents a great example of this: “The subordinate did poor work. My associate’s reaction: ‘He has to make his own mistakes. That’s how he learns!’ The problem with this is that the subordinate’s tuition is paid by his customers. And that is absolutely wrong.”
Perhaps the chapter that best reflects Andy Grove is the last, “Why Training Is the Boss’s Job.” Often, people who manage in the so-called knowledge economy believe their employees are so smart that they need no training at all. Andy brilliantly corrects this notion by explaining why as customers we are flabbergasted when we encounter employees who are insufficiently trained at relatively simple tasks such as taking restaurant reservations. He then challenges us to imagine how furious customers of complex jobs will be if an employee isn’t properly trained. Finally, he reiterates his thesis that there are only two ways in which a manager can impact an employee’s output: motivation and training. If you are not training, then you are basically neglecting half the job.
Throughout the chapter, the reader feels Andy’s intense passion toward training and teaching, because in the end -- more than anything else -- he is a teacher…in the very best sense of the word.
Many years after reading High Output Management, I met Andy for the first time. Upon seeing him, I was so excited that I immediately blurted out how much I loved the book. In classic Andy Grove style, he shot back: “Why?” I did not expect that. I thought that he would say, “Thank you” or “I appreciate that,” but not “Why?” But that was Andy. He was always teaching and always expecting more from every student.
Caught completely off guard, I scrambled for the reason and came across a good one: “Every other management book that I’ve read explains the trivial, but yours gets to the real issues.” Upon hearing that, the master teacher softened and replied with a priceless story:
It’s funny that you say that about management books. I recently ran out of space on my bookshelf at home, so I was faced with a choice. I either had to throw away some books or buy a bigger house. Well, that was an easy decision, but which books to throw out? Then I thought, the management books! But I had a problem. Nearly every management book that I’d received was sent to me by the author and was autographed with a kind inscription. I felt badly about throwing away all those nice notes. So, I went through each book and tore out the inscription page then threw away the book. So now I have a large stack of pages of nice notes to me and plenty of space for good books.
I have never met anyone other than Andy Grove who would have a story like that. He uniquely balances the highest standards for clear thinking and performance with an undying belief in the underlying person. Who else would require so high a bar for writing that you had to be good enough to fit on his one bookshelf and still be so touched by the fact that you wanted him to read your work that he would save the page that you inscribed?
Later, in 2001, I met with Andy again and I asked him about a recent run of CEOs missing their numbers despite having told investors that their businesses were strong. The bubble had burst for the first wave of Internet companies nearly a year prior, so it surprised me that so many many of them had not seen this coming. Andy replied with an answer that I did not expect: “CEOs always act on leading indicators of good news, but only act on lagging indicators of bad news.”
“Why?” I asked him. He answered in the style resonant of his entire book: “In order to build anything great, you have to be an optimist, because by definition you are trying to do something that most people would consider impossible. Optimists most certainly do not listen to leading indicators of bad news.”
But this insight won’t be in any book. When I suggested he write something on the topic, his response was: “Why would I do that? It would be a waste of time to write about how to not follow human nature. It would be like trying to stop the Peter Principle*. CEOs must be optimists and all in all that’s a good thing.” This is classic Andy Grove. He is amazingly perceptive and can see every flaw in every person, yet despite that he believes in human potential more than anyone. Maybe that’s why he has spent so much time teaching us to be better.
It has been an honor for me to learn from Andy Grove through the years and I am excited for everyone who is new to High Output Management to join me in this experience. I know that you will enjoy this marvelous book written by the best teacher that I have ever known.
--Ben Horowitz, 2015
* The Peter Principle is a concept in management theory in which the selection of a candidate for a position is based on the candidate’s performance in their current role, rather than on abilities related to the intended role. Thus, “managers rise to the level of their incompetence.”
Foreword copyright © 2015 by Ben Horowitz. Reprinted by permission of Vintage Books, an imprint of the Knopf Doubleday Publishing Group, a division of Penguin Random House, LLC. All rights reserved.Share
Gettin' It | Listen for free at bop.fm"Now let me holler at ya partner, spit this gameIn you ear for a minute, quit complainingBout how you can't spend it cause you ain't got itYou got what it takes but not enough to get started"—Too $hort, "Gettin' It"
Five years ago, I thought that I might have something to say about how companies should be built and run, so I decided to start writing. Living in the age of the web, I was super excited that I didn’t have to write a book or get a job at the New York Times to get my point of view out there. I couldn’t wait to get started.
But in 2010 the blogosphere felt a lot less modern than I had imagined. Older blogging software were clunkier, harder-to-use versions of the ancient, bloated desktop software that preceded them. While it was possible to get beyond the poor tools, once you did there was no easy way to find your audience. If I had not had a super sophisticated marketing team and big brand behind me, my blog would have been a tree falling in the forest. Mercifully, I didn’t need to make money from my writing, because there was definitely no way to do that. It seemed like there had to be a better way.
So when Ev Williams, co-founder of Blogger and Twitter, began developing a new platform, I followed it closely. Could Ev somehow combine his expertise in blogging and social networking to create a platform that really worked for new authors?
To answer this question, I ran two experiments. First, I simply grabbed a blog post that I’d written a couple of years earlier called "When Smart People Are Bad Employees" and reposted it on Medium with no other promotion. No tweets, no email blasts, no Facebook posts, no nothing. If I’d done that on a new Wordpress blog, I would probably get no more than a hundred views. Let’s see if Ev’s platform could really find an audience. The post generated 20,000 views.
But that was for a well-known writer. How would Medium do with a brand new author? And what if that person had zero technical skills? My wife Felicia had never published anything in any form in her life, but wanted to post a piece that she’d written entitled "Somewhere In-Between". I suggested that she try writing and distributing it on Medium. She had no trouble quickly writing down her thoughts and adding relevant photos in Medium and the post received 29,000 views. One thing is for sure, we know who the best author in the family is.
After spending time with the platform, I believe that there are 3 things that make Medium special:
- Medium is modern software with basic features you expect but other tools don't support: drag and drop, WYSIWYG, autosave, responsive design etc. This probably sounds trivial to non-bloggers, but if you blog it sounds miraculous.
- Blogging on Medium feels like a new media format native to the web and that could only come post social. The best Medium posts are a combination of collaging and blogging. You include tweets, gifs, pull quotes, graphics, and videos along with your text. The social era fragmented the networks by media type. Medium gives you a way to pull it back together.
- Starting out blogging today is very intimidating because you have no audience. You can write something great and literally no one will read it. Basically there are incumbent bloggers with an audience and then everyone else. Medium gives those newbies a change to reach an audience since it it is a blogging tool + fairly meritocratic distribution.
Perhaps more importantly than any of this, Ev and the team have a vision to make Medium a medium where independent authors can not only work with great tools and find their audience, but also earn a living thus finally fulfilling the true promise of blogging. That’s why I am excited to announce Andreessen Horowitz has invested in Medium.Share
A foreword to “The Internet Is My Religion” by Jim Gilliam
When I read the first draft of The Internet Is My Religion, the new book by NationBuilder founder and CEO Jim Gilliam, I was blown away by its honesty and what it revealed. I had known Jim for quite some time—but I did not really know him. The book (available July 22) tells Jim’s story through his eyes, beginning with his upbringing as a Christian Fundamentalist. It takes us through his harrowing battle with cancer and the comprehensive collapse of his belief system. Jim shares the most intimate moments of his personal struggle, which lead to his emergence as an important leader of a new movement.
Through this journey, we learn new secrets about ourselves. For me, I found the answer to an old and important question: Are great leaders born or made? Because I invest in and advise CEOs, it’s a question which I care deeply about. Do great leaders come out of the womb with the charisma, grit, and courage to move men and women to do great things? Or are they forged from intense experience and great training? There are many seemingly “natural” leaders, but almost none of those would say that they were born that way. But if leaders are made, then why is true leadership nearly impossible to teach?
I never really became comfortable with my answer to this question until I fully understood Jim’s story. I first met Jim when he came to pitch my venture capital firm, Andreessen Horowitz, to invest in his company. NationBuilder, Jim explained, sold software meant to help leaders communicate with and organize their followers. It was a breakthrough concept, made possible by a series of technological breakthroughs including the Internet and social networking.
Essentially the software helps a leader build a database of his or her followers, then grow and encourage that base through a variety of techniques. It connects with all of the modern social networks as well as email to enable the leader to communicate with his or her followers where they are. It then provides tools for building sub-leaders, incentivizing followers and generally helping a leader accomplish his or her goals.
As interesting as NationBuilder was, it still had what we affectionately refer to in technology as “a bootstrapping problem.” Bootstrapping, a term derived from a 19th century phrase, refers to starting a self-sustaining process. For example, how do you start a computer before loading the operating system into memory? You need a process before the process. Leadership software was great, but where would the leaders come from?
To understand the solution to NationBuilder’s bootstrapping problem, I first had to understand Jim.
Exceptionally tall, impossibly thin and white as ghost, Jim does not look like a storybook leader. His shy personality and awkward manner reinforce this perception. On top of that, Jim has not worked for great leaders in his career and lacks formal management training.
But Jim is a real leader. He has a clear, compelling vision. He inspires people to greatness. He leads with a focus so intense that if you get in his way, he’ll burn a hole in you with his eyes. He has accomplished amazing things in life, from turning obscure documentary films into blockbusters to rallying a community that he created to help get a new pair of lungs after chemotherapy burned out his original pair. Now, with no background and no connections, he has built this very promising new company—one, I should note, in which my firm invests and on whose board of directors I sit.
If Jim the leader was neither born nor made, where did this come from? How did this gangly, awkward man learn to lead? What was the source?
After reading The Internet Is My Religion, I learned the answer this question and to my larger question as well. Leaders are neither born nor made; they are found. This book is about Jim’s journey to find his inner leader. It’s a journey that all leaders must go through, but one that almost nobody ever talks about. It’s about learning to think for yourself and sharing what you know in the best and most impactful way possible. I hope that as you read this book, you will find your inner leader and lead the world to great things.
This post originally appeared in Fortune.Share
Who Do You Trust?
I’m into distribution, I’m like Atlantic
I got them mutherf**ers flying across the Atlantic
—Rick Ross, “Hustlin’”
Can we talk about hair for a minute? Yes, hair. And I don’t mean your own hair, I mean the market for buying and selling hair. It turns out that in the U.S. alone, it’s a $5B/year market. The way that it functions is truly bizarre. Basically, women in India sell their hair to buyers from China, who treat and package it, then sell it to primarily Korean distributors who sell to Korean-owned beauty supply shops in the U.S., who then sell it to primarily African American women. The result, as you might expect, is one of the worst customer experiences in the world today.
A customer must first book an appointment with her stylist. Then she has to go to one of these beauty supply stores, which are typically poorly lit, dirty, and barely organized. Once she finds the hair product section, she has to determine which product to buy with almost zero information and nobody in the store who has any clue as to what might be right for her. Next, she must take that hair to her appointment and hope that it’s the right product or repeat the entire process. And, oh by the way, there are no refunds under any circumstances for the hair, so you are also out anywhere from $100 to $800. You might wonder why these customers cannot simply get the hair from their hairstylist. Well, it turns out that 95% of African American hair salons have no retail capability due to minimal credit and cash balances. Basically, they cannot afford to keep inventory.
Enter Diishan Imira and his company, Mayvenn. Diishan aptly named the company after the Yiddish word meaning “trusted expert”. After studying the hair market and its byzantine supply chain for years, Diishan figured out how to radically improve the hair buying experience by empowering the trusted experts in the delivery chain—the hairdressers—to recommend, offer, and deliver the right products to their customers in the most convenient way possible. They do this by ingeniously creating individual mobile e-commerce sites for each hairdresser where they can sell goods without any inventory cost or risk. Mayvenn supplies each stylist with a broad variety of excellent hair products, so they can provide an excellent service to their customers to greatly expand their businesses.
The early results have been spectacular. In less than two years, Mayvenn has signed up over 26,000 hair stylists. The most successful of these have more than doubled their income via Mayvenn while dramatically improving life for their customers. Even more exciting, Mayvenn’s methods and platform can easily be extended to trusted experts in many fields, enabling gifted craftspeople to become economically empowered.
Capitalism is the best system in the world, but also extremely frustrating. The gifts that you are born with go a very long way in determining your economic status. The best hair stylist in the world makes far less than a mediocre venture capitalist. A nurse, whose dedication to her craft saves lives and brings hope to the hopeless, will make a fraction of what a crappy banker, who brings misery to everyone she encounters, earns. Mayvenn cannot correct that entirely, but it does give truly great craftspeople a way to improve their own lives and the lives of their customers. That’s why I am delighted to announce that Andreessen Horowitz is leading a $10M investment in Mayvenn, the platform for trusted experts.Share
“I have seen far too many people who upon recognizing today’s gap try very hard to determine what decision has to be made to close it. But today’s gap represents a failure of planning some time in the past.”- Andy Grove
When you run a company, big things stay on your mind. Will we make the quarter? Did we hire the right engineers? Will the release be on time? Do we have a quality problem? Do we have enough money in the bank?
The Catch 22 is that if you attempt to act on those “big things,” you will usually do big damage. In order to move big things in a positive direction, it’s generally best to focus on little things.
If you are worried about the quarter, you might think that it’s a good idea to call your head of sales twice a day to get the status. By doing so, you might think you are creating the appropriate sense of urgency. In reality, you are just distracting her from closing the quarter twice a day. In fact, by radically overemphasizing the quarter, you will likely cause your sales leader to begin focusing on the cover up — the byzantine set of excuses that she will deploy in the case that she actually misses her number.
These excuses will then cause a new set of problems. She might say, "Why did we miss the quarter? We really did not get the right support from the product organization." So now you go over to the head of products to harass her. She’s responds: “What? If the VP of Sales wasn’t getting enough support, then why didn’t she say something to me?” Do you see what you did there? Not only did you fail to make progress on the sales issue, but you created a new political issue which will contribute to you missing the next quarter.
While it’s correct to worry about the big issues, you must resist the urge to act on them directly. Before acting, you should first translate the big thing into a related set of little things. For example, if you are worried about making the quarter, then you should go on a few sales calls and see if you are selling your product in the most effective way possible. Are your sales people properly trained? Do they run a process that puts your product in the very best light and sets appropriate traps for your competitors? Are you selling at the right level in the organization? Is your product truly competitive? As you get the answers to these questions, you will develop more constructive little things to take action on. These little things might not help you make this quarter, but they will certainly help you make next quarter.
Similarly, if you are deeply worried about engineering throughput, lamenting that your engineers don’t work as hard as other companies that you’ve heard about will achieve very little other than making your engineers think they are the “B” team. On the other hand, spending time going through their day and really understanding what’s slowing them down in the code base, where their build environment is working against them and how the communication overhead between groups slows them down might help a great deal.
This is true for almost anything in your company. You should set high-level goals, but those goals will or will not be achieved by the organization that you assigned them to. If you want to help them reach their goals, do so by focusing on the little things.
My old boss Jim Barksdale used to say that all of the knowledge was with the individual contributors and the customers. As CEO, you need to hire the right people and set a clear direction. Once you do that, you should fly low and fast rather than high and slow. Focus on the little things and the big things will take care of themselves.Share
Coco | Listen for free at bop.fm
The truth is hard to swallow, and hard to say, too
But I graduated from that bullshit, now I hate school
—Lil Wayne, "CoCo"
My greatest disappointment as CEO was the day I realized that helping my executives develop their skill sets was a bad idea. Up to that point in my career, I prided myself on my ability to develop people and get the most out of them. In my jobs running product management, product marketing and engineering, developing young talent was the most rewarding part of the job. Helping them learn to manage, improve their judgment and be more effective in their domains made my organizations better, and people genuinely appreciated the effort.
How could a great practice for a functional manager be a destructive one for a CEO? Let me count the ways.
You don’t have the skills. The first question that you must ask yourself is how are you going to develop a poor performing head of sales into a good one if you have never run sales? What exactly are you going to teach them? Would a sales VP who became a CEO be able to develop you into a better engineering manager?
You don’t have the time. A company depends entirely on the CEO for an important set of functions, which includes timely and high-quality decisions, clear direction, hiring a great team, and architecting and implementing a super-high-functioning communication architecture. Any time wasted trying to develop executives when you don’t even have the skills to do it takes away from the essential CEO functions.
They don’t have the time. A leader’s effectiveness is largely a function of how much confidence her followers have in her. If someone is running a large organization and doesn’t show competence immediately, her people will quickly write her off, and she will never recover. Executives have no time to be developed before they become useless.
Your results will suck while you work on a task that you cannot complete. It’s bad enough that you will work on something that you will add zero value to, but as you are doing that, the organization in question will continue to be awful. You will lose time and ground in the marketplace while you try and fail to figure it out. Meanwhile, everyone who works for that executive will be working in a crappy organization, doing crappy work and developing a crappy reputation for being part of it.
Executives are compensated for their existing ability, and therefore should not be evaluated on their potential. While it’s common practice and a good idea to take potential into account with regular employees, this methodology does not work well for executives. When you hire an executive, he will demand around 1 percent of the company. How do you explain to a great engineer with less than one-fifth that amount of stock that you are waiting for the executive’s potential to kick in?
Trying to help can make things far worse. If an executive is failing and you keep him around, thinking that you will develop him, things will get ugly quickly. You know he’s incompetent, so you will likely discount everything he says. When he raises a point in a meeting that contradicts a high-performing executive, you will take the high-performer’s side 100 percent of the time.
This will make your failing executive feel badly, but more importantly, it will completely destroy the credibility of the function that he is running. If the exec is, for example, the head of marketing, everyone in the rest of the organization will draw the conclusion that marketing is unimportant in your company. That conclusion will be surprisingly long-lasting.
While you cannot develop an underpowered executive into a high-performing one, there are several things that you can do in your role as his manager that will help all of your executives succeed.
Provide the proper context. When you hire an executive, she may know her function, but she does not know your company. She does not know your management philosophy, the top performers, the history of the decisions that were made, how product flaws were created and fixed, etc. This information will be invaluable to her success and you should invest heavily to make sure that she quickly gets all the context she will need.
Be very clear about the rules of the game. You should be extremely clear up front that you expect your executives to be world-class in their functions. If they are not, they will not keep their jobs. Furthermore, you will not be able to make them world-class, because you are not world-class in their areas.
Know what you want, and be clear about it. Tell them what you think world-class performance is. If you don’t know, go find out by interviewing some world-class CEOs and world-class executives, and then tell them.
Be clear about relative performance. If you think your marketing is not as good as other companies in your sector, then let your head of marketing know. If you know that other companies generate five times the number of qualified leads than you do and you don’t understand why, then say something. This will make it much easier for you to make a swift decision if your executive does not know what he is doing.
In the end, a CEO has got to know her limitations.
This post first appeared in Re/code.
My Nigga | Listen for free at bop.fm
“I said that I’mma ride for my motherf*ckin' n***as
Most likely I’mma die with my finger on the trigger
I’ve been grindin outside all day with my n***as
And I ain’t goin' in unless I’m with my n***as
My n***as, my n***as
My n***as, my n***as (My muthaf*cking n***as!)
My n***as, my n***as (My n***as, my n***as)
My n***as, my n***as"
—YG, “My N***a”
Ten years ago I had a big problem. I was CEO of Opsware, a systems management software company, and we were losing a lot of deals to our major competitor, BladeLogic. We were losing, because they had a better product. There were many reasons for that, starting with the fact that we never designed Opsware for broad based usage, but in a desperate move, had yanked it out of our cloud computing business, Loudcloud, and began to offer it as a commercial product. As a result, Opsware worked okay for some, but was not ready to go up against an excellent competitor. Naturally, nobody cared about our excuses and our business was spiraling down the drain.
When I fully realized what was happening, I went to see my chief architect, Phil Liu to tell him the bad news. He and I meticulously went through the details of why customers thought BladeLogic's product was better and why they were probably right. It was a come to Jesus moment, but Jesus wasn’t there, so it was up to Phil and me.
As Phil thought through the implications of re-architecting the product and how little time he had to do so, his face told the story. It said: “Oh fuck, this is going to be hard if not impossible and the company is going to die if we don’t figure it out. But we will figure it out or die trying.” When I saw that look, I thought: “My guy."
After nine months of grueling effort by Phil and the team, we released our new product code named Darwin. As soon as it hit the market, our win rate went from sub 50% to 80%. We had done it. It was a new day and we weren’t going to squander it. I will never forget that moment with Phil. When things go perfectly in a company, it’s sometimes difficult to differentiate amongst good employees as everyone consistently beats their objectives. However, when things go horribly wrong, the greatest people distinguish themselves. Phil could have made many excuses and blamed many people — most of all me. But, he would have none of that. Instead, he simply found his greatness.
Years later, HP acquired Opsware and Phil went on to design a system for monitoring and managing a leading, massive, billion-user application called Facebook. Because Phil intimately knew the traditional systems management market, he quickly realized that the traditional systems would not work for modern, massive, cloud-based architectures. In fact, they would not work properly for cloud-based architectures of any scale. A new system had to be developed. The reasons were several:
Traditional systems are server centric — Even relatively modern systems management products like New Relic treat servers as sacred resources which must be kept alive, but Facebook loses servers every day and it doesn’t matter. Facebook doesn’t care about servers; they care about services. Knowing when a cluster of services that provides, for example, an identity service is out of capacity is critical, but getting paged in the middle of the night because you lost one server in a cluster of 20 is asinine.
Developers are central to the business — Developers are now playing a much more critical role in the business and need an application intelligence solution the same way marketers need business intelligence. Developers need to answer questions like: Which APIs are being used the most frequently by which customers? Is a sudden spike in latency for my top customers the result of an increase in load or some upstream service using my APIs inefficiently? Which customers are taxing my infrastructure in the most expensive way? How should I think about scaling my systems if my user base were to double?
Monitoring is now an analytics problem — How many milliseconds should a packet take to travel from the database to the application server for the photo app? Don’t feel badly if you can’t answer that because it would be a silly thing to know, yet monitoring systems have wanted people to know such things for years. How about a system that reports the moving average and anomalies such as 3 standard deviation variances from it?
Applications are now a collection of micro-services — These micro services are often managed by separate teams with all sorts of upstream and downstream dependencies. Having a solution that tracks all the relevant metrics across all the services fosters a much more collaborative environment where teams can communicate with one another (versus logs, where only the developer who wrote the app can really understand what's going on).
Time is money — Facebook is now a $10 billion company. That means that if the site is down for an hour, that’s roughly $11.5 million. So, logged data and dashboards that aren’t real-time won’t cut it. Every second counts and a proper system must enable you to see all of the data in real-time.
After building a system, which solves the above and serves Facebook amazingly well, Phil co-founded SignalFx with another stellar ex-Loudcloud employee and legendary VMware executive, Karthik Rau. Together, they have built the systems management product of the future. The current product is amazing, but more importantly, Phil and Karthik will make sure that it remains the best product for a very long time.
I am so pleased to announce that Andreessen Horowitz is an investor in SignalFx.Share
Swiss Francs | Listen for free at bop.fm
"The campaign is global - the dollar ain't what it used to be
Switch a franc for a dollar, you get like 1.3"
—Ryan Leslie, Swiss Francs
Three years ago I made an investment decision that I have regretted ever since.
My friend Sten Tamkivi told me about a great new company founded by his old Skype colleague, Taavet Hinrikus. Naturally, I reached out to Taavet to hear his pitch.
The basic idea for the business came from a personal need.
Taavet had worked for Skype in Estonia, so was paid in euros, but lived in London. Kristo, his co-founder, worked in London, but had a mortgage in euros back in Estonia. Simply getting money from their paychecks cost them 5%. They thought that was outrageous. Since Taavet and Kristo were friends, they devised a simple scheme to solve their expensive problem. Each month the pair checked that day’s mid-market rate on Reuters to find a fair exchange rate. Kristo put pounds into Taavet’s UK bank account, and Taavet topped up his friend’s euro account with euros. Both got the currency they needed, and neither paid a cent in hidden bank fees. That became the core idea for TransferWise.
Kristo’s background in financial services and Taavet’s background building a very large scale, peer-to-peer software system gave them the perfect backgrounds to tackle the problem. On the one hand, TransferWise was exactly the kind of thing that we like to invest in: two great founders who had discovered an important problem that they were eminently qualified to solve. On the other hand, they were based in London and I could not see how I would have the time to help them start a company from half way across the world, so I passed on the investment. I chose the wrong hand.
After I passed, Taavet and Kristo went straight to work. They built a peer-to-peer foreign currency exchange in the same way that the original Skype was a peer-to-peer phone system. Like the original Skype, Kristo and Taavet built in enough central components to make the network work seamlessly and flawlessly for consumers. Kristo's banking industry expertise enabled them to complement their peer-to-peer network with an impressive international banking network, which made every currency exchange work and work quickly. Once they got it up and running, the business worked beautifully.
When funding new products, a good rule of thumb is that the new product must be at least 10 times better than the old way of doing the same thing or customers will stay with what they have. It’s an easy concept to understand, but sometimes a difficult one to quantify. Not so with TransferWise: A typical FX transaction costs a consumer 5% and TransferWise profitably charges 10 times less for the exact same transaction. Ten times better indeed. In addition, the customer experience is amazing, yielding an 80% NPS score, which is unheard of in financial services.
From a macro perspective, such innovation could not come at a better time. Due to the financial system nearly destroying the global economy in 2008, traditional banks have been under incredible pressure from regulators to reduce their leverage from highs of close to 40:1 to less than 10:1, forcing them to dramatically cut costs to fit into their safer cost structures. As a result, we see little to no innovation from the traditional banking sector, which creates a massive opportunity for new financial institutions like TransferWise.
It should not be a surprise that TransferWise’s resulting performance has been spectacular and makes my original decision to pass look worse and worse every day. Since launching in early 2011, TransferWise has grown to a team of 250 providing 292 currency routes. They continue to grow 15-20% per month and have helped customers transfer £3 billion, saving users over £135 million.
For all these reasons, I am absolutely thrilled to announce that I am correcting my mistake and a16z is leading TransferWise's $58 million round, the money transfer platform of the future.Share
One Management Concept Share