The Hard Thing About Hard Things

What are the big ideas?

1. Honesty and Transparency in Difficult Decisions: The book emphasizes the importance of being honest and clear when making difficult decisions, such as laying off employees or acknowledging a product's loss of market share. It advises against using creative narratives or lies to avoid dealing with harsh realities and instead focuses on improving performance issues (Chapter 4).
2. Paying Off Management Debt: The concept of management debt is introduced, which refers to the long-term consequences of short-term decisions. The book suggests that paying off management debt involves making difficult decisions like cutting projects or providing proper compensation, and creating effective HR processes (Chapter 5).
3. Leading Without a Clear Direction: The book provides insights on how CEOs can lead even when they don't know where they are going. It emphasizes the importance of setting a clear context for the organization and making fast decisions based on incomplete information (Chapter 7).
4. Unique Approach to Scaling Companies: The book presents a unique perspective on scaling companies, focusing on specialization, organizational design, and process optimization (Chapter 6). It also advises against making prejudgments about team members based on their current performance and avoiding the scale anticipation fallacy.
5. Networks and Access to Opportunities: The book discusses Andreessen Horowitz's unique approach to providing access to a wide network of opportunities for entrepreneurs and companies, filling out the firm with key hires who would be great at their jobs, and influencing the mission to make Silicon Valley a better place for building companies (Chapter 9).

Summary

Introduction

Takeaways

• Setting big goals is not the hard part; dealing with the consequences when those goals aren't met is.
• Letting go of employees, communicating within an organization, and managing entitled personnel are challenging aspects of leadership.
• There is no easy solution for complex and dynamic situations like building a company or leading a team through adversity.
• Personal stories and experiences, as well as advice from others, can provide valuable insights and inspiration during difficult times.
• Hip-hop music offers relatable themes and insights into the challenges of competing, making money, and being misunderstood.

Quotes

“Every time I read a management or self-help book, I find myself saying, “That’s fine, but that wasn’t really the hard thing about the situation.” The hard thing isn’t setting a big, hairy, audacious goal. The hard thing is laying people off when you miss the big goal. The hard thing isn’t hiring great people. The hard thing is when those “great people” develop a sense of entitlement and start demanding unreasonable things. The hard thing isn’t setting up an organizational chart. The hard thing is getting people to communicate within the organization that you just designed. The hard thing isn’t dreaming big. The hard thing is waking up in the middle of the night in a cold sweat when the dream turns into a nightmare.”

“That’s the hard thing about hard things—there is no formula for dealing with them.”

Chapter 1: From Communist to Venture Capitalist

Takeaways

• Marc Andreessen played a crucial role in popularizing the World Wide Web through his creation of Mosaic web browser and co-founding of Netscape Communications.
• Netscape went public in 1995, causing a paradigm shift in the business world as it was considered one of the first "new economy" companies.
• Microsoft responded by bundling its Internet Explorer browser with Windows operating systems, posing a threat to Netscape's revenue stream.
• To counteract Microsoft's move, Netscape developed a low-cost alternative called Netscape SuiteSpot, which was successful in gaining market share.
• After the sale of Netscape to America Online (AOL) in 1998, Marc and Ben Horowitz, along with Tim Howes and In Sik Rhee, founded Loudcloud (later renamed Opsware) to provide a computing cloud for businesses.

Quotes

“Until you make the effort to get to know someone or something, you don’t know anything.”

“There are no shortcuts to knowledge, especially knowledge gained from personal experience. Following conventional wisdom and relying on shortcuts can be worse than knowing nothing at all.”

“leadership is the ability to get someone to follow you even if only out of curiosity.”

“Most business relationships either become too tense to tolerate or not tense enough to be productive after a while. Either people challenge each other to the point where they don’t like each other or they become complacent about each other’s feedback and no longer benefit from the relationship.”

Chapter 2: “I Will Survive”

Takeaways

• In 2001, Loudcloud was a cloud computing company facing financial difficulties and potential bankruptcy
• The CEO, Ben Horowitz, considered a "Plan B" to exit the cloud business and focus on their Opsware software instead
• Ben kept this idea hidden from employees and focused on reducing cash burn in the cloud business
• They lost their largest customer, Atriax, and could no longer raise funds through a Private Investment in Public Equity (PIPE)
• The CEO decided to sell the Loudcloud business to EDS and retain the Opsware intellectual property, creating a software company instead
• This decision required laying off 140 employees and selling another 150 to EDS
• Bill Campbell advised the CEO to be transparent with employees about their job status, preventing mistrust and ensuring focus on the task at hand.

Quotes

“Marc: “Do you know the best thing about startups?” Ben: “What?” Marc: “You only ever experience two emotions: euphoria and terror. And I find that lack of sleep enhances them both.”

“No matter who you are, you need two kinds of friends in your life. The first kind is one you can call when something good happens, and you need someone who will be excited for you. Not a fake excitement veiling envy, but a real excitement. You need someone who will actually be more excited for you than he would be if it had happened to him. The second kind of friend is somebody you can call when things go horribly wrong—when your life is on the line and you only have one phone call. Who is it going to be? Bill Campbell is both of those friends.”

“IF YOU ARE GOING TO EAT SHIT, DON’T NIBBLE”

“If you are going to eat shit, don’t nibble.”

Chapter 3: This Time with Feeling

Takeaways

• The importance of having a clear vision and being able to articulate it effectively to your team and stakeholders
• The need for persistence and determination in the face of challenges and setbacks
• The value of assembling a talented team and empowering them to do their best work
• The importance of staying focused on the long-term goals and not getting distracted by short-term pressures or setbacks
• The importance of being open to learning from failures and using that knowledge to improve future efforts
• The importance of being adaptable and willing to pivot when necessary in response to changing market conditions or customer needs
• The value of building strong relationships with key partners and customers
• The importance of maintaining a strong financial position and managing cash flow carefully
• The need for effective communication and transparency with stakeholders, especially in times of crisis or uncertainty
• The importance of staying humble and being open to feedback from employees and customers
• The value of taking calculated risks and being willing to experiment and innovate
• The importance of maintaining a strong work-life balance and taking care of yourself and your team's wellbeing.

Quotes

“An early lesson I learned in my career was that whenever a large organization attempts to do anything, it always comes down to a single person who can delay the entire project.”

“How can we walk away from requirements that we know to be true to pursue something that we think will help?” It turns out that is exactly what product strategy is all about—figuring out the right product is the innovator’s job, not the customer’s job.”

“Early in my career as an engineer, I’d learned that all decisions were objective until the first line of code was written. After that, all decisions were emotional.”

“Note to self: It’s a good idea to ask, “What am I not doing?”

Chapter 4: When Things Fall Apart

Takeaways

• Be honest and clear when making difficult decisions, such as demoting a loyal friend or acknowledging that a product is losing market share.
• Don't use creative narratives or lies to avoid dealing with harsh realities.
• Focus on improving performance issues instead of looking for silver bullets or quick fixes.
• Accept that nobody cares about your excuses or reasons for failure; put all energy into finding a solution.

Quotes

“Startup CEOs should not play the odds. When you are building a company, you must believe there is an answer and you cannot pay attention to your odds of finding it. You just have to find it. It matters not whether your chances are nine in ten or one in a thousand; your task is the same.”

“I don’t believe in statistics. I believe in calculus.”

“People always ask me, “What’s the secret to being a successful CEO?” Sadly, there is no secret, but if there is one skill that stands out, it’s the ability to focus and make the best move when there are no good moves.”

“It’s the moments where you feel most like hiding or dying that you can make the biggest difference as a CEO.”

“The Struggle is when you wonder why you started the company in the first place. The Struggle is when people ask you why you don’t quit and you don’t know the answer. The Struggle is when your employees think you are lying and you think they may be right. The Struggle is when food loses its taste.”

“This is not checkers; this is motherfuckin’ chess. Technology businesses tend to be extremely complex. The underlying technology moves, the competition moves, the market moves, the people move. As a result, like playing three-dimensional chess on Star Trek, there is always a move. You think you have no moves? How about taking your company public with $2 million in trailing revenue and 340 employees, with a plan to do $75 million in revenue the next year? I made that move. I made it in 2001, widely regarded as the worst time ever for a technology company to go public. I made it with six weeks of cash left. There is always a move.”

“One of the most important management lessons for a founder/CEO is totally unintuitive. My single biggest personal improvement as CEO occurred on the day when I stopped being too positive.”

“In any human interaction, the required amount of communication is inversely proportional to the level of trust.”

“A healthy company culture encourages people to share bad news. A company that discusses its problems freely and openly can quickly solve them. A company that covers up its problems frustrates everyone involved.”

“Build a culture that rewards—not punishes—people for getting problems into the open where they can be solved.”

“Trust me.” That’s what a CEO says every day to her employees. Trust me: This will be a good company. Trust me: This will be good for your career. Trust me: This will be good for your life. A layoff breaks that trust. In order to rebuild trust, you have to come clean.”

“We have a very high churn rate, but as soon as we turn on email marketing to our user base, people will come back.” Yes, of course. The reason that people leave our service and don’t come back is that we have not been sending them enough spam. That makes total sense to me, too.”

“If our company isn’t good enough to win, then do we need to exist at all?”

“Spend zero time on what you could have done, and devote all of your time on what you might do.”

Chapter 5: Take Care of the People, the Products, and the Profits—in That Order

Takeaways

• Management debt occurs when short-term decisions have long-term negative consequences.
• Examples of management debt include putting two people in one role, overcompensating an employee to stay, and lacking a performance management or feedback process.
• Paying off management debt involves making difficult decisions, such as cutting projects, providing proper compensation, and implementing effective HR processes.
• A great HR organization cannot create a well-managed company with a great culture, but it can identify when and where management is falling short.
• The employee life cycle encompasses recruiting, hiring, training and integration, performance management, motivation, and retirement.
• A world-class HR organization supports managers in recruiting and hiring, provides compensation that makes sense for the company demographics, designs effective feedback processes, and creates a motivated workforce.
• To be great at running HR, look for someone with world-class process design skills, diplomacy, industry knowledge, and intellectual heft to serve as your CEO's trusted adviser.

Quotes

“TAKE CARE OF THE PEOPLE, THE PRODUCTS, AND THE PROFITS—IN THAT ORDER”

“I’d learned the hard way that when hiring executives, one should follow Colin Powell’s instructions and hire for strength rather than lack of weakness.”

“We take care of the people, the products, and the profits—in that order.”

“I learned about why startups should train their people when I worked at Netscape. People at McDonald’s get trained for their positions, but people with far more complicated jobs don’t. It makes no sense.”

“People at McDonald’s get trained for their positions, but people with far more complicated jobs don’t. It makes no sense. Would you want to stand on the line of the untrained person at McDonald’s? Would you want to use the software written by the engineer who was never told how the rest of the code worked? A lot of companies think their employees are so smart that they require no training. That’s silly. When I first became a manager,”

“After putting economics aside, I found that there were two primary reasons why people quit:   They hated their manager; generally the employees were appalled by the lack of guidance, career development, and feedback they were receiving.   They weren’t learning anything: The company wasn’t investing resources in helping employees develop new skills.”

“One of the great things about building a tech company is the amazing people that you can hire.”

“there are only two ways for a manager to improve the output of an employee: motivation and training.”

“Ironically, the biggest obstacle to putting a training program in place is the perception that it will take too much time. Keep in mind that there is no investment that you can make that will do more to improve productivity in your company. Therefore, being too busy to train is the moral equivalent of being too hungry to eat. Furthermore, it’s not that hard to create basic training courses.”

“The most important thing to understand is that the job of a big company executive is very different from the job of a small company executive. When I was managing thousands of people at Hewlett-Packard after the sale of Opsware, there was an incredible number of incoming demands on my time. Everyone wanted a piece of me. Little companies wanted to partner with me or sell themselves to me, people in my organization needed approvals, other business units needed my help, customers wanted my attention, and so forth. As a result, I spent most of my time optimizing and tuning the existing business. Most of the work that I did was “incoming.” In fact, most skilled big company executives will tell you that if you have more than three new initiatives in a quarter, you are trying to do too much. As a result, big company executives tend to be interrupt-driven. In contrast, when you are a startup executive, nothing happens unless you make it happen. In the early days of a company, you have to take eight to ten new initiatives a day or the company will stand still. There is no inertia that’s putting the company in motion. Without massive input from you, the company will stay at rest.”

“If you don’t know what you want, the chances that you’ll get it are extremely low.”

“I often see teams that maniacally focus on their metrics around customer acquisition and retention. This usually works well for customer acquisition, but not so well for retention. Why? For many products, metrics often describe the customer acquisition goal in enough detail to provide sufficient management guidance. In contrast, the metrics for customer retention do not provide enough color to be a complete management tool. As a result, many young companies overemphasize retention metrics and do not spend enough time going deep enough on the actual user experience. This generally results in a frantic numbers chase that does not end in a great product.”

“MANAGING STRICTLY BY NUMBERS IS LIKE PAINTING BY NUMBERS Some things that you want to encourage will be quantifiable, and some will not. If you report on the quantitative goals and ignore the qualitative ones, you won’t get the qualitative goals, which may be the most important ones. Management purely by numbers is sort of like painting by numbers—it’s strictly for amateurs. At HP, the company wanted high earnings now and in the future. By focusing entirely on the numbers, HP got them now by sacrificing the future.”

“Like technical debt, management debt is incurred when you make an expedient, short-term management decision with an expensive, long-term consequence. Like technical debt, the trade-off sometimes makes sense, but often does not. More important, if you incur the management debt without accounting for it, then you will eventually go management bankrupt. Like technical debt, management debt comes in too many different forms to elaborate entirely, but a few salient examples will help explain the concept. Here are three of the more popular types among startups: 1. Putting two in the box 2. Overcompensating a key employee, because she gets another job offer 3. No performance management or employee feedback process”

Chapter 6: Concerning the Going Concern

Takeaways

• Scaling a company requires giving ground grudgingly in areas like specialization, organizational design, and process.
• Specialization allows for efficient division of labor but creates complexity and potential communication challenges.
• Organizational design involves prioritizing communication paths and identifying unoptimized ones, with the goal of optimizing for the people doing the work.
• Processes facilitate communication across organizational boundaries and ensure high-quality transactions.
• Scaling a company is a learned skill rather than a natural ability, and it's essential to evaluate team members based on their current performance instead of making prejudgments about their future abilities.
• Avoid the scale anticipation fallacy by focusing on evaluating team members holistically at the current scale and making judgments relatively rather than absolutely.

Quotes

“Sometimes an organization doesn’t need a solution; it just needs clarity.”

“As I developed as a CEO, I found two key techniques to be useful in minimizing politics. 1. Hire people with the right kind of ambition. The cases that I described above might involve people who are ambitious but not necessarily inherently political. All cases are not like this. The surest way to turn your company into the political equivalent of the U.S. Senate is to hire people with the wrong kind of ambition. As defined by Andy Grove, the right kind of ambition is ambition for the company’s success with the executive’s own success only coming as a by-product of the company’s victory. The wrong kind of ambition is ambition for the executive’s personal success regardless of the company’s outcome. 2. Build strict processes for potentially political issues and do not deviate. Certain activities attract political behavior. These activities include:   Performance evaluation and compensation   Organizational design and territory   Promotions Let’s examine each case and how you might build and execute a process that insulates the company from bad behavior and politically motivated outcomes.”

“The Law of Crappy People states: For any title level in a large organization, the talent on that level will eventually converge to the crappiest person with the title.”

“As a technology startup, from the day you start until your last breath, you will be in a furious race against time. No technology startup has a long shelf life. Even the best ideas become terrible ideas after a certain age.”

“Specifically, the following things that cause no trouble when you are small become big challenges as you grow:   Communication   Common knowledge   Decision making”

“The purpose of process is communication. If there are five people in your company, you don’t need process, because you can just talk to each other.”

Chapter 7: How to Lead Even When You Don’t Know Where You Are Going

Takeaways

• A CEO's primary role is to set the context for the entire organization, articulating a clear and compelling company story that aligns interests and motivates employees, customers, investors, and the press.
• Strategy and decision-making skills are crucial for a CEO. They must make fast and high-quality decisions based on incomplete information and have the courage to bet the company on a direction despite uncertainty.
• A well-run organization allows every employee to focus on their work without distractions from politics or bureaucracy, ensuring clear communication, motivation, and a strong incentive structure.
• Evaluating CEOs should begin by setting correct objectives based on their company's unique opportunity, considering the size and nature of the industry they operate in.
• Results against objectives are a lagging indicator, while white-box evaluation criteria like "Does the CEO know what to do?" and "Can the CEO get the company to do it?" provide better predictive value for future performance.

Quotes

“Great CEOs face the pain. They deal with the sleepless nights, the cold sweats, and what my friend the great Alfred Chuang (legendary cofounder and CEO of BEA Systems) calls “the torture.” Whenever I meet a successful CEO, I ask them how they did it. Mediocre CEOs point to their brilliant strategic moves or their intuitive business sense or a variety of other self-congratulatory explanations. The great CEOs tend to be remarkably consistent in their answers. They all say, “I didn’t quit.”

“what is the difference between a hero and a coward? What is the difference between being yellow and being brave? No difference. Only what you do. They both feel the same. They both fear dying and getting hurt. The man who is yellow refuses to face up to what he’s got to face. The hero is more disciplined and he fights those feelings off and he does what he has to do. But they both feel the same, the hero and the coward. People who watch you judge you on what you do, not how you feel.”

“PEACETIME CEO/WARTIME CEO Peacetime CEO knows that proper protocol leads to winning. Wartime CEO violates protocol in order to win. Peacetime CEO focuses on the big picture and empowers her people to make detailed decisions. Wartime CEO cares about a speck of dust on a gnat’s ass if it interferes with the prime directive. Peacetime CEO builds scalable, high-volume recruiting machines. Wartime CEO does that, but also builds HR organizations that can execute layoffs. Peacetime CEO spends time defining the culture. Wartime CEO lets the war define the culture. Peacetime CEO always has a contingency plan. Wartime CEO knows that sometimes you gotta roll a hard six. Peacetime CEO knows what to do with a big advantage. Wartime CEO is paranoid. Peacetime CEO strives not to use profanity. Wartime CEO sometimes uses profanity purposefully. Peacetime CEO thinks of the competition as other ships in a big ocean that may never engage. Wartime CEO thinks the competition is sneaking into her house and trying to kidnap her children. Peacetime CEO aims to expand the market. Wartime CEO aims to win the market. Peacetime CEO strives to tolerate deviations from the plan when coupled with effort and creativity. Wartime CEO is completely intolerant. Peacetime CEO does not raise her voice. Wartime CEO rarely speaks in a normal tone. Peacetime CEO works to minimize conflict. Wartime CEO heightens the contradictions. Peacetime CEO strives for broad-based buy-in. Wartime CEO neither indulges consensus building nor tolerates disagreements. Peacetime CEO sets big, hairy, audacious goals. Wartime CEO is too busy fighting the enemy to read management books written by consultants who have never managed a fruit stand. Peacetime CEO trains her employees to ensure satisfaction and career development. Wartime CEO trains her employees so they don’t get their asses shot off in the battle. Peacetime CEO has rules like “We’re going to exit all businesses where we’re not number one or two.” Wartime CEO often has no businesses that are number one or two and therefore does not have the luxury of following that rule.”

“As CEO, you should have an opinion on absolutely everything. You should have an opinion on every forecast, every product plan, every presentation, and even every comment. Let people know what you think. If you like someone’s comment, give her the feedback. If you disagree, give her the feedback. Say what you think. Express yourself. This will have two critically important positive effects:   Feedback won’t be personal in your company. If the CEO constantly gives feedback, then everyone she interacts with will just get used to it. Nobody will think, “Gee, what did she really mean by that comment? Does she not like me?” Everybody will naturally focus on the issues, not an implicit random performance evaluation.   People will become comfortable discussing bad news. If people get comfortable talking about what each other are doing wrong, then it will be very easy to talk about what the company is doing wrong. High-quality company cultures get their cue from data networking routing protocols: Bad news travels fast and good news travels slowly. Low-quality company cultures take on the personality of the Wicked Witch of the West in The Wiz: “Don’t nobody bring me no bad news.”

Chapter 8: First Rule of Entrepreneurship: There Are No Rules

Takeaways

• Evaluate executives based on their current performance in the context of your company's current stage and market conditions.
• Set clear expectations for executive performance, but recognize that standards can change as the company grows and markets evolve.
• Being loyal to your team means prioritizing the development of your employees over individual executives.
• Selling a company is a complex decision that involves both logical and emotional considerations.
• The logic of selling depends on the size and potential growth of the market, your competitive position, and the likelihood of achieving significant financial returns as a stand-alone company.
• Emotional factors include personal attachment to the business, financial security for yourself and your employees, and the impact on employee morale and motivation.
• To prepare for the emotional aspect of selling, ensure that you have a clear understanding of the market dynamics, communicate openly with your team, and consider paying yourself a market salary to reduce the influence of personal financial concerns.

Quotes

“The difference between being mediocre and magical is often the difference between letting people take creative risk and holding them too tightly accountable. Accountability is important, but it’s not the only thing that’s important.”

Chapter 9: The End of the Beginning

Takeaways

• Andreessen Horowitz was founded on the model of Creative Artists Agency (CAA), an integrated talent agency, aiming to provide access to a wide network of opportunities for entrepreneurs and companies
• The firm's networks include large companies, executives, engineers, press and analysts, investors and acquirers
• Andreessen Horowitz was launched with great fanfare against the conventional venture capital theory of no PR
• The team was filled out by hiring people in key areas who would be great at their jobs, like Scott Kupor (COO) and Mark Cranney (head of sales)
• Marc Andreessen's background and experiences, including his time as CEO of Opsware and Loudcloud, influenced the firm's mission to make Silicon Valley a better place for building companies.

Quotes

“Hard things are hard because there are no easy answers or recipes. They are hard because your emotions are at odds with your logic. They are hard because you don’t know the answer and you cannot ask for help without showing weakness.”

“Life is struggle.” I believe that within that quote lies the most important lesson in entrepreneurship: Embrace the struggle.”

Appendix: Questions for Head of Enterprise Sales Force

Takeaways

• Evaluate a potential Head of Enterprise Sales Force's intelligence, pitching ability, and market understanding.
• Assess her hiring skills for salespeople and sales managers, interview process, and retention rate.
• Understand her approach to the sales process, business acumen, and technical skills.
• Inspect her sales training program's effectiveness and its balance between process and product training.
• Evaluate her understanding of compensation plans, large deals, marketing, and channels.
• Assess her management style: interviewing, evaluating direct reports, decision-making processes, and organizational design.

Discussion

What do you think of "The Hard Thing About Hard Things"? Share your thoughts with the community below.