Learning from My Mistakes

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"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

Swiss Francs | Listen for free at bop.fm

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.


One Management Concept

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One Management Concept

Lecture for Sam Altman's How to Start a Startup class, CS 183B at Stanford University (November 2014); the slides are available here. 


Making Any Web App Mobile: The Capriza Advantage

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"Even if it's jazz or the quiet storm
I hook a beat up and convert it into hip-hop form"
-Rakim, "I Ain't No Joke"

Rakim - I Ain't No Joke | Listen for free at bop.fm

Over the past 20 years, enterprises have spent over 3 trillion dollars building web applications, but now most of their users would rather access those applications from mobile devices as mobile is indeed eating the world. In related news, most people think that packaged enterprise web applications suck and suck worse when they move to mobile. If you run a company and need your people to have the right information and the right tools to make decisions in a timely fashion, then these are big problems. 

The conventional wisdom has been to rebuild the most important applications by hand on mobile or wait for the big vendors to provide acceptable mobile solutions. The conventional approach has several problems:

1. Workers aren't partially mobile -- Many companies have 100s of internal applications. If employees can only get to 2 or 3 of them via a mobile device, they are not actually able to be mobile and they are certainly not able to exclusively use a mobile computing device. 

2. Big enterprise applications don't fit on a phone -- SAP has 300,000 screens. I don't care how great a designer you employ, you can't make a 300,000-screen application usable on a phone. Of course, most users don't need all of SAP. They might only need to see a forecast or retrieve the number of a key supplier via their phone. There ought to be a way to do this customized for each user and use case. 

3. Security and manageability -- If you do hire people to rewrite your web apps in mobile, chances are each app will have its own security model and its own management hooks, which look nothing like any of the other mobile apps. Your mobile solution will soon turn into a mobile nightmare. 

4. Cost -- In addition to the "rewrite your apps" approach being incomplete, impossible to use, insecure, and unmanageable, it's incredibly expensive. Even using the best development tools, building a fresh mobile app to replace a web app typically costs around $250,000. Multiply that by 100 and you have one big expensive mess. 

For all these reasons, led by Yuval Scarlat, the team that revolutionized software testing at Mercury Interactive is now doing the same thing for mobile application development at their new company Capriza. Rather than re-implementing every web application by hand, Capriza simply observes you using a web app and automatically constructs a mobile app with the same functionality. You take from the web app only what you need and will find useful on mobile -- not 300,000 screens. Capriza is so robust that it can translate virtually any piece of any web app into a mobile app including the SAP colossus. Beyond that, every Capriza app comes with an integrated and consistent security and management model, so the more apps, the better. 

For any company with a big investment in web applications and a real need to mobilize its workforce, Capriza is a magical solution. That's why I am extremely excited to be an investor and board member.


The Prophets of Rage

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"You're quite hostile,
I've got a right to be hostile,
my people been persecuted."
- Public Enemy

Public Enemy - Prophets Of Rage | Listen for free at bop.fm

A while back I wrote a post called "When Smart People are Bad Employees." In that post, I wrote about employees that you think will be incredible, but turn out to be destructive. The other day, my partner Lars and I were talking about the opposite: employees who appear to be destructive, but if properly managed can be spectacular. In reference to hip hop's great prophet Chuck D., I call them "The Prophets of Rage."

If you've worked in a company for any length of time, you've probably seen one of these prophets. People refer to them as glass breakers, cowboys, toe stompers, or just plain assholes. Yet it's difficult to get rid of them, because they produce massive amounts of high-quality work. Beyond that, they have indomitable will. No obstacle is too great, no task too large, no problem is too hard and they do not care who they offend, upset, undermine, or piss off to get the job done. In fact, they are so self-righteous that it's difficult to even have a conversation about the right way to do things, because in their minds if they are doing it, it must be right. If you are not them or not on their team, you are very likely "a lazy idiot" or worse. Even if they don't call you names outright, they will deliver searing, totally impolite insights that will cause you to question your own motivations. They specialize in making people uncomfortable.

Their backgrounds are almost never consistent with the typical hiring profile. They do not come to you right from central casting. Often they grew up poor and went to the wrong schools. Or they were the “wrong” religion, sexual orientation, or skin color. In general, they believe that they grew up on the wrong side of the tracks and everybody is judging them on that all the time. They will walk through fire to prove everyone wrong. They have to succeed and are willing to do whatever it takes.

This is not to say that everyone with this background is a Prophet of Rage, just that Prophets of Rage tend to have this background.

These employees are the corporate version of W.M.D.s. The ultimate weapon in any arsenal, but their deployment can lead to highly unpredictable consequences. How can they be used as a force for good? How can you prevent them from destroying your culture and possibly your company?

When managing a Prophet of Rage, the first thing to understand is that they often dish it out much better then they take it. While they won't hesitate to viciously attack their peers and bring them to tears, even the slightest criticism from a prophet's manager may cause him or her to go into a deep funk and become incredibly depressed. Most managers will find this behavior to be totally ridiculous and give up when they see it. Most managers will forfeit greatness at that point.

Prophets of Rage are perfectionists. They work harder than anybody in the organization and expect total perfection from themselves and everyone around them. When they see others deliver sub par work or sub par thinking, the Prophets become enraged and lose all control of themselves. But it's the same dynamic that enrages them and causes them to stomp on other people's toes that makes them recoil at any criticism: they have dedicated their entire life force to doing great work; any rejection of their work is a rejection of them personally. Keep in mind that a prophet's background makes her a bit paranoid about you wanting her there in the first place, so if she doesn't become depressed, she will certainly question your motives.

In my experience, there are at least three keys to managing these super high performing, super volatile personalities.

1. Don't give them feedback on their behaviors, give them feedback on what their behaviors mean

If you tell a prophet, "It is totally unacceptable to scream at your peers in meetings," he will hear: "It's totally unacceptable for you to scream at people in meetings, but others can do it all they want, because I am out to get you." In the prophet's mind, everyone is out to get him, so this is the logical reaction.

A better approach is to focus on how the behaviors were interpreted by the other people in the room. "You have a very important mission, but when you screamed at Andy that his team was blocking you from your goal, his response wasn't to work harder to unblock you. His reaction was to get you back for embarrassing him in public. Your method was totally ineffective." He will initially bristle at the criticism, but when he thinks it through, he will realize that you were right and he will work extremely hard to fix it, because he is, after all, a perfectionist.

2. Realize that they will never be completely accepted in polite society

No matter how clearly and effectively you coach a prophet, you will be unlikely to completely transform her. She has spent her entire life getting to this point, so words from her manager won't get her to the point of corporate acceptance. The more people don't accept her, the worse the behaviors will become, because the rejection will reinforce her life narrative and increase her rage. The more effective approach will be to do your best to moderate your prophet while letting the rest of the team know that you expect them to accept her due to her incredibly high productivity. If they believe that you won't flinch, they will meet her half way. It's absolutely critical that they do this, because she will never be completely congenial.

3. Coach them on what they can do

If you keep in mind that your prophet is paranoid, then you will realize that giving entirely negative feedback will not work. Rather than focusing on what he is having trouble with or can't do, spend most of your time working with him on what he can do. This will enable his true super powers to come out and take your company's production out of the stratosphere.

Even with the best coaching, it's quite possible that a prophet has too much rage to function in an organization as it grows. At this point, they become smart people who are bad employees and there may be nothing that you can do. 

In the end, realize that a talented Prophet of Rage may be the most powerful human force in your company. Your challenge is to help that be a force for good.

This post first appeared in Billboard.


The New Foursquare

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"Damn, here we go again
People talking shit, but when shit hit the fan
Everything I'm not, made me everything I am"
—Kanye West, "Everything I Am

 Audio version of the post

Kanye West - Everything I Am | Listen for free at bop.fm

In 2000 Dennis Crowley founded a company called Dodgeball, which built an application that ran on your not-so-smart phone. The point of Dodgeball was to link up with your friends and discover new things to do. It was great fun for extremely social, high tech geeks. The founders eventually sold the Dodgeball to Google in 2005. 

In retrospect, Dennis observed something about Dodgeball that he believed would be the key to creating a magical product. Because Dodgeball captured where people really were and therefore what they actually liked to do, the data set could be the basis for the greatest local recommendation engine that the world had ever seen. Rather than finding out about local businesses via payola and advertising schemes, people could get real information based on where their friends and people with similar tastes actually went. He could build a system based on accurate data rather than perverse incentives. The product would truly make cities more usable. 
Obsessed by his observation, in 2009 Dennis co-founded Foursquare. This time, he was building on the smart phone platform, which had things like GPS making the original dodgeball functionality more powerful and the data set richer. From a feature standpoint, Foursquare started out much as Dodgeball before it, but always evolving towards the vision of being the ultimate local recommendation engine. 

Along the way the team added many features designed to make cities more usable. The cumulation of this work was a breakthrough mechanism called Pilgrim. Pilgrim enables a user to "checkin" without ever having to take her phone out of her pocket. Without ever taking action or even opening an app, a user who loves sweets instantly discovers that a local bakery has the bomb ass cupcakes.  This magical functionality was made possible through over 6 billion checkins, which enabled the Foursquare software to figure out the exact shapes of over 60 million venues. Such data exists nowhere else in the world today. 

Despite the breakthrough functionality, the application itself did not feel quite right. Combining the database building social networking features with the local recommendation service meant putting two very different sets of use cases into one app. Most problematically, this meant two separate privacy models. While you probably want every Foursquare user to see your recommendations, you definitely don't want them to all know where you are. Most users find two privacy models in one app to be quite confusing.  

For the past year, the Foursquare team has been working to solve this important problem. They recognized that although the local social networking features had been an essential part of building the data set, with Pilgrim in place, they were no longer needed for the recommendation portion of app. So they split the app into two: 1) An app to keep up with your friends: Swarm 2) An app to get the most relevant and honest recommendations imaginable: the new Foursquare. The old monolithic Foursquare is now two apps with very straight-forward, super clean privacy models and consistent use cases. 

When you try the new Foursquare, you will understand exactly why splitting the app in two makes perfect sense. The new products are straight-forward, easy to use and truly unlock the best of what cities have to offer. And, if when using the new Foursquare, you miss the features of the old monolith like checking in, just remember that everything Foursquare is not made it everything it is. 


How to Ruin Your Company with One Bad Process

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“Real quick, whole squad on that real sh*t
0 to 100, n***a, real quick”
—Drake, "0 to 100/The Catch Up"

For the audio version of this post click here.

Drake - 0 To 100 / The Catch Up | Listen for free at bop.fm

I am a giant advocate for technical founders running their own companies, but one consistent way that technical founders deeply harm their businesses is by screwing up the budgeting process. Yes, the budgeting process. How ridiculous is that? How does it happen and why is it particularly problematic for engineers?

I'll begin by describing how I screwed it up in my company. Our sales were growing so fast that the biggest problem that we faced was that we literally could not handle all the customers that wanted to sign up for Loudcloud. To combat this and enable us to grow, I worked diligently with my team to plan all the activities that we needed to accomplish to expand our capacity and capture the market before the competition. Next, I assigned sub-goals and activities to each functional head. In conjunction with my leadership team, I made sure that each goal was measurable and supported by paired metrics as well as lagging and leading indicators. I then told the team to figure out what it would take to accomplish those goals and return with their requirements for headcount and program dollars. Finally, I made adjustments to their requests based on industry benchmarks (mostly reductions) to get to a plan that I thought made sense.

Here’s the basic process:

  1. Set goals that will enable us to grow
  2. Break the goals down so that there is clear ownership and accountability for each goal by a specific team
  3. Refine goals into measurable targets
  4. Figure out how many new people are required to hit the targets
  5. Estimate the cost of the effort
  6. Benchmark against the industry
  7. Make global optimizations
  8. Execute

Unless you are an experienced manager, you may not even see what’s wrong with this process, but it very nearly led to my company's demise. In fact, the above process is completely upside-down and should only be followed if you wish to bloat your company to the brink of bankruptcy and create a culture of chaos. 

a16zsummerschool.jpgWhen I asked my managers what they needed, I unknowingly gamified the budgeting process. The game worked as follows: The objective was for each manager to build the largest organization possible and thereby expand the importance of his function. Through the transitive property of status, he could increase his own importance as well. Now you may be thinking, "That wouldn't happen in my company. Most of my staff would never play that game." Well, that's the beauty of the game. It only takes one player to opt in, because once someone starts playing, everybody is going in -- and they are going in hard. 

Gameplay quickly becomes sophisticated as managers develop clever strategies and tactics to improve their chances for winning. One common game technique is to dramatically expand the scope of the goals: "When you said that you wanted to increase our market presence, I naturally assumed that you meant globally. Surely, you wouldn’t want me to take a U.S.-centric view." To really motivate the CEO, another great technique involves claiming dire circumstances if the company fails to achieve its metrics: "If we don't increase sales by 500% and our top competitor does, we will fall behind. If we fall behind, we will no longer be No. 1. If we’re not No. 1, then we won’t be able to hire the best people, command the best prices, or build the best product, and we will spin into a death spiral." Never mind the fact that there is almost no chance that your competitor will grow 500% this year. 

Another subtle problem with this process is that when I asked my team what they needed to achieve their goals, they naturally assumed they would get it. As a result, my team deeply socialized their ideas and newly found money with their teams. This has the added gaming benefit of inextricably tying their demands to company morale. When the VP of marketing asked me for 10 headcount and $5M in program expenses, then shared that plan with his team, it changed the conversation. Now a major cutback to his plan would alarm his team because they had just spent two weeks planning for a much more positive scenario. “Wow, Ben greatly reduced the plan. Should I be looking for a job?” This kind of dynamic put pressure on me to create a more expansive expense plan than was wise. Multiply this by all my managers and I was on my way to burning up all my cash and destroying my culture. 

My core problem was that my budgeting process did not have any real constraints. We were private and did not have a specific profit target that we needed to hit and we had plenty of cash in the bank. Drawing the line on expenses seemed rather arbitrary. In the absence of a hard constraint, I had no constraint. 

An excellent constraining principle when planning your budget is the preservation of cultural cohesion. The enemy of cultural cohesion is super-fast headcount growth. Companies that grow faster than doubling their headcount annually tend to have serious cultural drift, even if they do a great job of onboarding new employees and training them. Sometimes this kind of growth is necessary and manageable in certain functions like sales, but is usually counterproductive in other areas where internal communication is critical like engineering and marketing. If you quadruple your engineering headcount in a year, you will likely have less absolute throughput than if you doubled headcount. As an added bonus, you will burn way more cash. Even worse, you will lose cultural consistency as new people with little guidance will come in with their own way of doing things that doesn’t match your way of doing things. Note that this does not apply to you if you have very small numbers. It's fine to grow engineering from one to four people or from two to eight. However, if you try to grow from 50 to 200, you will cause major issues if you are not extremely careful.

Starting with the cultural cohesion principle, a far better way to run the budgeting process is to start with the constraints. Some useful constraints are:

  • Run rate increase – Note that I say "run rate increase" and not "spend increase". You should set a limit on the amount by which you are willing to increase what you are spending in the last month of the coming year vs. the previous year. 
  • Earnings/Loss – If you have revenue, another great constraint is your targeted earnings or loss for the year. 
  • Engineering growth rate – Unless you are making an acquisition and running it separately or sub-dividing engineering in some novel way, you should strive not to more than double a monolithic engineering organization in a 12-month period.
  • Ratio of engineering to other functions – Once you have constrained engineering, then you can set ratios between engineering and other functions to constrain them as well. 

 After applying the global constraints, the following steps will provide a better process:

  1. Take the constrained number that you created and reduce it by 10-25% to give yourself room for expansion, if necessary.
  2. Divide the budget created above in the ratios that you believe are appropriate across the team.
  3. Communicate the budgets to the team.
  4. Run your goal-setting exercise and encourage your managers to demonstrate their skill by achieving great things within their budgets.
  5. If you believe that more can legitimately be achieved in a group with more money, then allocate that manager extra budget out of the slush fund you created with the 10-25%.

At this point, some readers may think that I've lost my mind. As a technologist, you know that the worst thing that you can do is over-constrain the problem before you start. You'll kill creativity and prevent yourself from getting a truly great outcome. That's precisely why I, as an engineer, struggled with this process: the human factors muck up the logic. Specifically, local incentives, if not properly managed, will sharply motivate human behavior and defeat the global goals. 

It’s critical to recognize this so that you don’t turn your agile, small company into a slow, big company before its time


Do You Feel Pressure or Do You Apply Pressure?

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"To whoever think their words affect me is too stupid
And if you can do it better than me, then you do it"
—Kanye West, "Cold"

Kanye West, DJ Khaled - Cold.1 | Listen for free at bop.fm

One obvious yet under-appreciated law of business physics is: For any given company, the larger the company becomes, the more opportunities emerge to screw it up. 

Another obvious, but not well understood law: The more screwed up your company, the more people will complain about it and blame you.

If we take these two together, it is easy to see that without intervention the larger your company becomes, the more people will complain and blame you. 

This seems simple enough, but CEOs often fail to understand the logic, become overwhelmed by the criticism, lose confidence in themselves, and decide that they are no longer capable of running their own companies. This can be tragic as I explained in “Why We Prefer Founding CEOs”

If you are a logical and open-minded person, it is difficult not to take a 10X increase in criticism seriously. More importantly, it's difficult not to take a 10X increase in criticism personally. So how can a CEO keep from getting ground into sawdust by complaints from her own people? The answer comes from a simple CEO aphorism: You either apply pressure or you feel pressure

Let's begin by looking at the overwhelming spiral. As your company grows, people start complaining about everything from your sales efforts being underwhelming to there not being enough organic snacks in your free food section. In the meanwhile, you are trying to wrestle serious product strategy questions posed by scary competitors to the ground. You don't know the answers to most of the complaints, so you defer them and focus on what you know. The problems related to the complaints fester and grow. Your employees get frustrated that the issues are not being fixed and complain louder. They begin to lose confidence in you as CEO.

The Best Defense is a Good Offense

The key to breaking the cycle is to stop feeling pressure and to start applying it. The most basic way to do this is to assign the problems to your team. This transfers the pressure from you to the organization and has the added benefit of empowering the team. 

At this point, those of you who have read my book are thinking: "Ben, that's not the hard thing about this. The hard thing isn't delegating, the hard thing is when the executive disagrees that there's a problem or there is no logical owner or the problem is cross-functional or the executive tries to give it back to you." Let's take these in order. 

The executive fundamentally disagrees that there is a problem
Imagine that your employees are complaining about the number of bugs in your product and you ask your head of engineering to improve quality. Chances are that he will not say: "Sure thing, boss." He will much more likely say: "By what definition?" He will likely have way more data than you about product quality and it will be difficult for you to win the argument. Yet you know the employees are right, which is why you didn't explain to them they were wrong in the first place. 

The reason for the stalemate is that quality in the abstract is an intractable problem. In fact, most problems in the abstract have this property. If you want it fixed, you must be specific. Doing so is tricky in this case because no software organization has ever produced bug-free software in every version. So if you don't want zero, then how many bugs are too many? The best way to start is to frame it in terms of something that you know well. Sometimes this will mean moving to a more qualitative argument. For example, pick your 3 favorite bugs and use them as examples. Describe why they are particularly damaging and try to classify them as best you can. Let your executive know that bugs like that should not ship and if they do accidentally ship then the company should not rest until they are fixed. Then ask him to do something specific: have him tell you exactly how many bugs are outstanding in the classes that you identified and report back on when they will be fixed. Then ask him to make a proposal about how he will systematically do a better job on this in the future. Finally, let him know what you are willing to give up in terms of other work (schedule, features, etc.) to make this a priority. Getting specific will help energize the team as it will give them a problem they can actually solve. It will also clearly communicate that you are super serious about the issue. 

The problem is cross-functional
Imagine that your sales people keep complaining that there aren't enough leads. You feel as though they are Jack Lemmon in Glengary Glen Ross. But then you go to your head of marketing and he demonstrates that he's generated 150% of the leads that he was supposed to generate based on his objectives. What do you do? There are many possible issues: the definition of a lead differs, the profile of the target customer differs, somebody is lying, etc. As tempting as these possible solutions may be, resist the temptation to solve this one yourself. Instead, get both executives together and let them know that you need them to agree on a common definition of a lead, a method for determining whether any given lead meets the description and an objective for the head of marketing to hit next quarter that both he and the head of sales will be happy with. Give them a firm deadline and let them know that you will take no excuses, because you have a whole field filled with demotivated sales reps and you will not stand for that. Apply pressure. 

There is no logical owner
Sometimes a problem has no owner. Customer churn has increased in the past 2 quarters. It's an important issue and left unchecked it could become mission critical. However, it's not the top priority in the company today. To further create CEO procrastination, it's not clear whether it's a customer support problem, a sales problem, a services problem, a product quality problem or some combination of all four. In reality, it's probably a CEO problem, but if it's not the top priority in the company, having the CEO personally drive it to resolution may not be the best idea. So, what do you do? You assign the problem to an illogical owner. In this case, you might assign it to the head of sales, because she has the highest incentive to fix it properly—otherwise she has to resell all those deals to make quota. You empower her to dig into each churned account, find the root cause analysis, and report back to the team on a frequent basis. Once the root cause has been determined, she should propose a cross-functional plan to fix the problem. 

This is an imperfect strategy in many ways. The problem might be entirely with sales setting poor expectations and she might cover that up. The various groups might not get along well and not want to listen to a peer. The head of sales might not have a great idea of what's possible in engineering or customer support. Imperfect yes, but far better than doing nothing, which is generally what happens when the CEO has too much on her plate and doesn't apply pressure. 

The assigned executive tries to give it back
Your company's engineering schedules are unpredictable and your engineering throughput is poor, so you ask your VP of engineering to fix the problem. She complains: "The schedule keeps slipping because the product management team keeps changing the priorities and thrashing the engineers back and forth across the various projects." You say: "Great. I will work with product management to get them to cut that out." The VP of product management replies: "I'd love to stop with the requirements, but we need certain things to close large deals and make the quarterly number." You then go to the head of sales and she says: "Do you want me to make my number or not?"

In this case, everyone is under empowered to make the right decision and get you what you want. The key to delegation is better empowerment. You could simply give the head of engineering the ability to say "no" to everything, but you may well miss all your sales forecasts and cause yourself an even bigger problem. A better approach would be to formalize the change process. You can say that once a project begins, you can alter its definition, resources, priorities, or schedule, but doing so requires a formal meeting with all the stakeholders and the CEO. At that meeting, all changes and their potential consequences will be discussed and a decision will be reached. If you implement such a process, you will find that the number of changes drops by an order of magnitude. By simply making it more difficult to make a change, you will apply pressure to the team to find another way to make the sales number. 

At this point, you haven't empowered the head of engineering to control her own destiny, but you have empowered the team to give you what you want.

Using Pressure to Evaluate Executives

Founding CEOs often find it difficult to evaluate executives. How do I know if my head of marketing is world class? I've never run marketing. Applying lots of pressure is a great way to sharpen your instincts when evaluating executives.

If you consistently apply pressure to an executive and get no results, then you very likely need to upgrade that position. The whole point of paying an executive all that money and giving her that fat stock option package is to take the pressure off of you and give you some leverage. If she can't do that, then she must go. She may be a fine executive for another CEO, but not for you. 

On the other hand, when you have a problem that you have no idea how to solve and you delegate it to an executive and she solves it, then she's extremely valuable. 

Final Thoughts

If you are feeling overwhelmed and under competent, then you are very likely not applying enough pressure.


From Rap Genius to Genius

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"They call me Jay Electronica – f*ck that
Call me Jay ElecHanukkah, Jay ElecYarmulke
Jay ElecRamadaan, Muhammad A'salaamaleikum
RasoulAllah Subhanahu wa ta'ala through your monitor"
—Jay Electronica, "Exhibit C"
Jay Electronica - Exhibit C | Listen for free at bop.fm

When we first invested in Rap Genius, many people asked us why a Silicon Valley venture capital firm would invest in a website about rap music. We patiently explained that Rap Genius was not just about rap, but was a platform for capturing the knowledge about the knowledge for rap and everything else. I then pointed to important examples in literaturepoetrylaw, and current events

Given the broad and important ambition of the company, starting with rap was ideal. This was not intuitive to most. As I have come to understand, for many rap music is either trivial or indecipherable, and “too ethnic.” In reality, rap artists delivered the greatest poetry of the past 30+ years and have given meaning, inspiration, and hope to people across ethnicities.

Why this difference between perception and reality? Because understanding rap requires deep context. To fully appreciate it, you need knowledge of the culture, knowledge of the history, and knowledge of the people. In other words, rap is the perfect category for a platform that aims to provide the knowledge about the knowledge. Rap Genius has, in fact, become the essential knowledge source for understanding rap music. 

In doing so, the team at Rap Genius developed two essential assets. First, they created a technology platform that systematically enables a group of scholars to converge on the most correct explanation of a piece of text or video. Next, because people with an interest in rap music tend to be on the cutting edge of culture, Rap Genius fostered a community of cultural experts who have already branched out into important adjacent knowledge areas such as poetry and rock and roll.

Based on these two pillars, today Rap Genius officially expands beyond rap and renames itself Genius. Genius does for everything what Rap Genius did for rap. As part of that, the company is also announcing a new $40M round of funding lead by Dan Gilbert. Rap Genius will continue, forever, as part of the Genius family. I have looked forward to this day for quite some time and welcome everyone to Genius, the explanation of everything.


The Legend of The Blind MC

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People say I’m crippled, but that’s a lie
they’re just mad ‘cause I’m so fly
being handicapped is a state of mind
I’m not disabled I’m just blind
—The Blind MC

The Legend of The Blind MC

People often ask me how Hip Hop became the inspiration for all my thinking on leadership and why I feature it so much in my blog posts. In the past, I have given short and incomplete answers, but here is the full story. It probably belongs in The Hard Thing About Hard Things, but I did not know how to tell it without Rap Genius.


Why I Will Give 100% of My Book Earnings to Women in the Struggle

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There is a woman in Somalia
Scraping for pearls on the roadside
There's a force stronger than nature
Keeps her will alive
This is how she's dying
She's dying to survive
Don't know what she's made of
I would like to be that brave.
—Sade, “Pearls”

Never believe that a few caring people can't change the world. 
For, indeed, that's all who ever have.
—Margaret Mead

Sade - Pearls | Listen for free at bop.fm

I will donate all of my proceeds from The Hard Thing About Hard Things to American Jewish World Service to support their efforts to help women fight for their basic rights throughout the world. 

Since there are many important causes, I thought that it would be worth explaining why I am supporting this one.

When I was 11 years old, I was exposed to chronic cruelty on a global scale. I watched the miniseries “Roots” based on Alex Haley's bestselling novel about slavery in the United States. I was riveted and horrified. It was my first real introduction to slavery and I could not believe what I was seeing. I saw families broken apart as they were sold to different owners. I saw slaves pleading for their lives only to be brutalized and killed. How could anybody be so cruel? How could everybody sit by and watch it happen? How was this even possible? I could not have been more shocked.

I was deeply disturbed by the whole experience and sought to find out how it happened. I studied humankind's long history with slavery. I learned that in the 1600s, 75% of the world's population was enslaved. I learned that the Caribbean form of the African slave trade was far more brutal than the U.S. version. I studied the complex economics of slavery and why it was difficult to unwind once started. I began to wonder how slavery ever ended.

Then I began to study the abolitionists. Men like former slave ship captain John Newton who later wrote the song “Amazing Grace”. People like the great Thomas Clarkson who at times seemed to be alone in taking on the world. I learned how a few unimaginably brave people took on the entire globe and its brutal institution. They did not care about the twisted history or corrupt cultures that created slavery. They just wanted it stopped. Clarkson took great personal risk in traveling by boat back and forth across the Atlantic to record and tell the story of slavery for no reason other than he wanted it ended. He dedicated his life to stopping the cruelty. His story is among the most inspirational in human history.

It had to be, because the most incredible thing about slavery was how it ended. An institution that was embedded into human culture, endorsed by the Bible, promoted by the Qur’an, pervasive in society, and embedded in the global economy was taken on and defeated by a movement started by a tiny number of people. These brave souls had no Twitter or Facebook. They had no Internet or telephones or automobiles, but they organized people across the world and largely stopped slavery globally. 

After understanding how slavery ended, I promised myself that if something like that ever happened in my time, I would be part of the group who tried to stop it. 

Sadly, something like slavery is happening in my time. It's not happening in the United States, but it is happening and the victims are women. In many parts of the world, women are literally owned by men. Women do not enjoy basic rights, are denied access to education, can be arbitrarily raped, robbed, and killed, and live in fear with no chance for self-determination. A few revealing statistics:

  • Every year 10 million girls under the age 18 enter into early and forced marriages
  • 2 million girls a year undergo genital cutting
  • Two-thirds of the world's illiterate adults are women
  • Women constitute about 70% of the world’s absolute poor (i.e., those living on less than a dollar a day) 

Meanwhile, the rhetoric deployed in resistance to women's rights is eerily reminiscent of resistance to freeing slaves. Consider this statement from the Muslim Brotherhood in resistance to a U.N. declaration calling for an end to violence against women:

This declaration, if ratified, would lead to complete disintegration of society, and would certainly be the final step in the intellectual and cultural invasion of Muslim countries, eliminating the moral specificity that helps preserve cohesion of Islamic societies.[1]

And compare it to this poem written in defense of slavery in England in 1789:

If our slave trade had gone, there's an end to our lives
Beggars all we must be, our children and wives
No ships from our ports, their proud sails e'er would spread,
And our streets grown with grass where the cows might be fed.[2]

Like Thomas Clarkson and the abolitionists, Ruth Messinger and AJWS are starting at the grass roots level, but are already making great progress.

Consider Rehana Adib. At age 12, she was raped by a group of older relatives. She bravely told her father, but he responded by arranging for her to marry a middle-aged man—a match designed to protect her security and reputation. Like many other girls her age, she was forced to drop out of school and was expected to be a subservient wife and mother. She was not free to make choices about her daily life and her own future.

But Rehana refused to be silent. She found a women’s organization in her neighborhood and began to learn about her rights. She took workshops in leadership and activism and gained the courage to speak out about her experiences. By the time Rehana was 18, she was an active member of the local women’s movement and was already helping other girls overcome the challenges they faced. Although her family and community criticized her work at first, she slowly gained their respect and is now looked to as a leader in her community. 

In 2005, Rehana founded her own organization, Astitva, in Muzzafarnagar—a rural area in Uttar Pradesh, India. With AJWS’s support, Astitva works today to stop both sexual violence and child marriage, helping give girls a chance at a brighter future.

The systematic cultural abuse of women worldwide must end. Let’s end it.  

[1] http://www.theguardian.com/world/2013/mar/15/muslim-brotherhood-backlash-un-womens-rights

[2] Bury the Chains, page 185


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