## The Hard Thing About Hard Things ### The Hard Thing About Hard Things ![rw-book-cover](https://is1-ssl.mzstatic.com/image/thumb/Publication5/v4/2e/c3/8f/2ec38f0f-192d-9439-f466-cf1759cc6540/cover.jpg/1400x0w.jpg) #### Metadata * Author: [[Ben Horowitz]] * Full Title: The Hard Thing About Hard Things * Category: #books #### Highlights * Former secretary of state Colin Powell says that leadership is the ability to get someone to follow you even if only out of curiosity. I was certainly curious to see what Coach Mendoza would say next. (Location 138) * I called a friend who worked at Netscape and asked if he could get me an interview with the company. He obliged and I was on my way. (Location 207) * By the time Netscape went public in August 1995, we had grown the Web server team to about nine engineers. The Netscape initial public offering (IPO) was both spectacular and historic. The stock initially priced at $14 per share, but a last-minute decision doubled the initial offering to $28 per share. It spiked to $75—nearly a record for a first-day gain—and closed at $58, giving Netscape a market value of nearly $3 billion on the day of the IPO. More than that, the IPO was an earthquake in the business world. As my friend and investment banker Frank Quattrone said at the time, "No one wanted to tell their grandchildren that they missed out on this one." (Location 244) * partners ever since. People often ask me how we've managed to work effectively across three companies over eighteen years. 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. With Marc and me, even after eighteen years, he upsets me almost every day by finding something wrong in my thinking, and I do the same for him. It works. (Location 288) * In the short term, this was a big victory for Microsoft since it had driven its biggest threat into the arms of a far less threatening competitor. In the long term, however, Netscape inflicted irreparable damage on Microsoft's stronghold on the computing industry: our work moved developers from Win32 API, Microsoft's proprietary platform, to the Internet. Someone writing new functionality for computers no longer wrote for Microsoft's proprietary platform. Instead, they wrote to the Internet and World Wide Web's standard interfaces. Once Microsoft lost its grip on developers, it became only a matter of time before it lost its monopoly on operating systems. Along the way, Netscape invented many of the foundational technologies of the modern Internet, including JavaScript, SSL, and cookies. (Location 294) * Two months later, we would raise an additional $45 million from Morgan Stanley in debt with no covenants and no payments for three years, so Andy's question was more reality-based than you might think. Nonetheless, "What would you do if capital were free?" is a dangerous question to ask an entrepreneur. It's kind of like asking a fat person, "What would you do if ice cream had the exact same nutritional value as broccoli?" The thinking this question leads to can be extremely dangerous. (Location 333) * In the next quarter, we booked $27 million worth of new contracts, and we were less than nine months old. It seemed like we were building the greatest business of all time. Then came the great dot-com crash. The NASDAQ peaked at 5,048.62 on March 10, 2000—more than double its value from the year before—and then fell by 10 percent ten days later. A Barron's cover story titled "Burning Up" predicted what was to come. By April, after the government declared Microsoft a monopoly, the index plummeted even further. Startups lost massive value, investors lost massive wealth, and dot-coms, once heralded as the harbinger of a new economy, went out of business almost overnight and became known as dot-bombs. (Location 351) * Thinking about what might happen if we ran completely out of money—laying off all the employees that I'd so carefully selected and hired, losing all my investors' money, jeopardizing all the customers who trusted us with their business—made it difficult to concentrate on the possibilities. Marc Andreessen attempted to cheer me up with a not-so-funny-at-the-time joke: 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." (Location 377) * At the time, Bill was in his sixties, with gray hair and a gruff voice, yet he had the energy of a twenty-year-old. He began his career as a college football coach and did not enter the business world until he was forty. Despite the late start, Bill eventually became the chairman and CEO of Intuit. Following that, he became a legend in high tech, mentoring great CEOs such as Steve Jobs of Apple, Jeff Bezos of Amazon, and Eric Schmidt of Google. (Location 389) * People offer many complex reasons for why Bill rates so highly. In my experience it's pretty simple. 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. (Location 395) * My wife, Felicia, came to the all-company meeting as she always did. This time her parents were in town, so they came, too. The meeting did not go well. People did not realize how close to the edge we were, so the news of the IPO didn't make anyone happy. The news of the reverse split made them even less happy—in fact, it infuriated them. I had literally cut their fantasy number in half, and they were not pleased about it. Nobody said harsh things directly to me. My in-laws, however, heard everything. And, as my father-in-law put it, "it wasn't nothin' nice." (Location 448) * At this point, our business was still a cloud business, and I gave no indication to the rest of the staff that I might have other ideas. Doing so would have instantly doomed the only business we were in, as everyone would want to work on the future and not the past. I said that Oxide was simply another product line. This statement deeply worried two of my employees who had graduated from Stanford Business School. They scheduled an appointment and presented me with a slide deck detailing why my decision to start Oxide was quixotic, misguided, and downright stupid. They argued that it would steal precious resources from our core business while pursuing a product that would surely fail. I let them present all forty-five slides without my asking them a single question. When they finished I said, "Did I ask for this presentation?" Those were the first words I spoke as I made the transition from a peacetime CEO to a wartime CEO. (Location 551) * In order to do so, we needed more cash. We carefully analyzed our financial plan and decided that we needed another $50 million to get to cash flow breakeven—the point at which we would no longer need to raise money. Given our momentum in the market, raising money was now barely possible and the only way to do it was in the form of a seldom-used construct called a private investment in public equity (PIPE). We worked with Morgan Stanley to line up investors with the goal of raising $50 million. (Location 569) * I took Bill through my logic: The only way out of the cloud business without going bankrupt was through higher sales, because even if we laid off 100 percent of the employees, the infrastructure costs would still kill us without a sharper sales ramp. I further explained that the dwindling cash balance decreased customer confidence, which in turn hurt sales, which in turn caused the cash balance to decline further. He simply said "spiral." And I knew that he understood. (Location 594) * Sure enough, Jeff was interested. Now with two potential bidders, we put things in motion. John and I worked hard to create urgency with both IBM and EDS, because time was against us. We hosted both companies in our facilities, sometimes with them passing each other in the hallway as part of John's well-orchestrated sales technique. The final step was to set the timeline for the endgame. (Location 607) * "Gentlemen, I've done many deals in my lifetime and through that process, I've developed a methodology, a way of doing things, a philosophy if you will. Within that philosophy, I have certain beliefs. I believe in artificial deadlines. I believe in playing one against the other. I believe in doing everything and anything short of illegal or immoral to get the damned deal done." (Location 617) * would complete the process over the next eight weeks and sell the Loudcloud business to someone. If they wanted to play, they had to move on that schedule or withdraw immediately. The Michael Ovitz artificial deadline was in full effect. We knew that we might have to go past it, but Michael gave us confidence that going past the deadline was a better move than not having one. (Location 621) * Anthony Wright grew up in the tough part of Pittsburgh, the son of legendary street fighter Joe Wright, and had earned a black belt in several martial arts himself. Self-made, super-determined, and unwilling to fail, Anthony had an uncanny ability to quickly gain deep insight into people's character and motivations—"able to charm dogs off a meat truck," is how another guy on the team described it. Anthony was the relationship manager for EDS. (Location 677) * Anthony remained calm, looked him in the eye, and said, "Frank, I will do exactly as you say. I've heard you loud and clear. This is a terrible moment for you and for us. Allow me to use your phone, and I will call Ben Horowitz and give him your instructions. But before I do, can I ask you one thing? If my company made the commitment to fix these issues, how much time would you give us to do that?" He responded, "Sixty days." Anthony told him the clock had just started ticking and left his office immediately. It was good news: We had exactly sixty days to fix all the problems and make the deployment work. If we did not, we were done. We had sixty days to live. (Location 701) * 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. (Location 706) * Tangram was run by Norm Phelps, an interim CEO, which was a great sign that they'd be willing to sell the company, because most boards would much rather sell a company than roll the dice by hiring a new CEO. (Location 739) * "I've given the speech that I gave to you guys at the beginning of this process to at least a dozen other vendors. They all promised things, but none ever delivered. You guys really delivered and I am shocked. You are the best vendor that I have and I am happy to be working with you." (Location 749) * During acquisition talks, both sides had agreed that Tangram's CFO, John Nelli, would not become part of Opsware. But during the time between signing and close, John began to get severe headaches. His doctors discovered that he had brain cancer. Because he would not be an Opsware employee and it was a preexisting condition, he would not be eligible for health insurance under our plan. The cost of the treatment without health insurance would likely bankrupt his family. I asked my head of HR what it would cost to keep him on the payroll long enough to qualify for COBRA and what COBRA would cost. It wasn't cheap—about $200,000. This was a significant amount of money for a company in our situation. On top of that, we barely knew John and technically we didn't "owe" him anything. This wasn't our problem. We were fighting for our lives. We were fighting for our lives, but he was about to lose his. I decided to pay for his health costs and find the money elsewhere in the budget. I never expected to hear anything else about that decision, but fifteen months later I received a handwritten letter from John's wife letting me know that John had died. She wrote that she was absolutely shocked that I would help a total stranger and his family and that I had saved her from total despair. She went on for several paragraphs saying that she didn't know why I did it, but it enabled her to continue living and she was eternally grateful. I guess I did it because I knew what desperation felt like. (Location 757) * 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. The customer only knows what she thinks she wants based on her experience with the current product. (Location 801) * Now that we'd improved our competitive position, we went on the offensive. In my weekly staff meeting, I inserted an agenda item titled "What Are We Not Doing?" Ordinarily in a staff meeting, you spend lots of time reviewing, evaluating, and improving all of the things that you do: build products, sell products, support customers, hire employees, and the like. (Location 819) * Note to self: It's a good idea to ask, "What am I not doing?" (Location 839) * "There are several different frameworks one could use to get a handle on the indeterminate vs. determinate question. The math version is calculus vs. statistics. In a determinate world, calculus dominates. You can calculate specific things precisely and deterministically. When you send a rocket to the moon, you have to calculate precisely where it is at all times. It's not like some iterative startup where you launch the rocket and figure things out step by step. Do you make it to the moon? To Jupiter? Do you just get lost in space? There were lots of companies in the '90s that had launch parties but no landing parties. (Location 895) * "But the indeterminate future is somehow one in which probability and statistics are the dominant modality for making sense of the world. Bell curves and random walks define what the future is going to look like. The standard pedagogical argument is that high schools should get rid of calculus and replace it with statistics, which is really important and actually useful. There has been a powerful shift toward the idea that statistical ways of thinking are going to drive the future." —PETER THIEL (Location 900) * I never built that contingency plan. Through the seemingly impossible Loudcloud series C and IPO processes, I learned one important lesson: 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. In the end, I did find the answer, we completed the deal with EDS, and the company did not go bankrupt. I was not mad at Bill. To this day, I sincerely appreciate his telling me the truth about the odds. But I don't believe in statistics. I believe in calculus. (Location 921) * I put this section first even though it deals with some serious endgame issues such as how to fire an executive and how to lay people off. In doing so, I follow the first principle of the Bushido—the way of the warrior: keep death in mind at all times. If a warrior keeps death in mind at all times and lives as though each day might be his last, he will conduct himself properly in all his actions. Similarly, if a CEO keeps the following lessons in mind, she will maintain the proper focus when hiring, training, and building her culture. (Location 932) * realized my error during a conversation with my brother in-law, Cartheu. At the time, Cartheu worked for AT&T as a telephone lineman (he is one of those guys who climb the poles). I had just met a senior executive at AT&T, whom I'll call Fred, and I was excited to find out if Cartheu knew him. Cartheu said, "Yeah, I know Fred. He comes by about once a quarter to blow a little sunshine up my ass." At that moment, I knew that I'd been screwing up my company by being too positive. (Location 993) * A good culture is like the old RIP routing protocol: Bad news travels fast; good news travels slow. If you investigate companies that have failed, you will find that many employees knew about the fatal issues long before those issues killed the company. If the employees knew about the deadly problems, why didn't they say something? Too often the answer is that the company culture discouraged the spread of bad news, so the knowledge lay dormant until it was too late to act. A healthy company culture encourages people to share bad news. A (Location 1024) * As a corollary, beware of management maxims that stop information from flowing freely in your company. For example, consider the old management standard: "Don't bring me a problem without bringing me a solution." What if the employee cannot solve an important problem? For example, what if an engineer identifies a serious flaw in the way the product is being marketed? Do you really want him to bury that information? Management truisms like these may be good for employees to aspire to in the abstract, but they can also be the enemy of free-flowing information—which may be critical for the health of the company. (Location 1030) * Building a highly valuable business, he added, after three consecutive giant layoffs accompanied by horrible prominent press coverage (we got taken apart with cover stories in both the Wall Street Journal and BusinessWeek), was a complete violation of the laws of venture capital physics. (Location 1047) * STEP 2: DON'T DELAY Once you decide that you will have to lay people off, the time elapsed between making that decision and executing that decision should be as short as possible. If word leaks (which it will inevitably if you delay), then you will be faced with an additional set of issues. Employees will question managers and ask whether a layoff is coming. If the managers don't know, they will look stupid. If the managers do know, they will either have to lie to their employees, contribute to the leak, or remain silent, which will create additional agitation. At Loudcloud/Opsware, we badly mismanaged this dynamic with our first round of layoffs, but sharply corrected things on the next two. (Location 1057) * Why so strict? Why can't the more confrontational managers just handle this task for everyone? Because people won't remember every day they worked for your company, but they will surely remember the day you laid them off. They will remember every last detail about that day and the details will matter greatly. The reputations of your company and your managers depend on you standing tall, facing the employees who trusted you and worked hard for you. If you hired me and I busted my ass working for you, I expect you to have the courage to lay me off yourself. (Location 1075) * 1. They should explain briefly what happened and that it is a company rather than a personal failure. 2. They should be clear that the employee is impacted and that the decision is nonnegotiable. 3. They should be fully prepared with all of the details about the benefits and support the company plans to provide. (Location 1080) * In other words, the wrong way to view an executive firing is as an executive failure; the correct way to view an executive firing is as an interview/integration process system failure. Therefore, the first step to properly firing an executive is figuring out why you hired the wrong person for your company. (Location 1106) * The special case of scaling A fairly common reason for firing an executive is that when the company quadruples in size, the executive no longer does the job effectively at the new size. The reason is that when a company multiplies in size, the management jobs become brand-new jobs. (Location 1135) * Running a two-hundred-person global sales organization is not the same job as running a twenty-five-person local sales team. (Location 1138) * Finally, the executive will be keenly interested in how the news will be communicated to the company and to the outside world. It is best to let her decide. Bill Campbell once gave me a critical bit of advice when I was preparing to fire an executive. He said, "Ben, you cannot let him keep his job, but you absolutely can let him keep his respect." (Location 1181) * When I started Loudcloud, I hired the best people I knew—people whom I respected, trusted, and liked. Like me, many of them did not have deep experience in the jobs that I gave them, but they worked night and day to learn, and they made great contributions to the company. Nevertheless, the day came when I needed to hire someone else, someone with more experience, to run the function that I had previously entrusted to my loyal friend. Damn. How do you do that? (Location 1200) * Acknowledge the contributions. If you want him to stay in the company, you should say that and make it crystal clear that you want to help him develop his career and contribute to the company. Let him know that you appreciate what he's done and that your decision results from a forward-looking examination of what the company needs, not a review of his past performance. The best way to do this, if appropriate, is to couple the demotion with an increase in compensation. Doing so will let him know that he's both appreciated and valued going forward. (Location 1240) * When a company starts to lose its major battles, the truth often becomes the first casualty. (Location 1248) * There may be nothing scarier in business than facing an existential threat. So scary that many in the organization will do anything to avoid facing it. They will look for any alternative, any way out, any excuse not to live or die in a single battle. I see this often in startup pitches. The conversations go something like this: Entrepreneur: "We have the best product in the market by far. All the customers love it and prefer it to competitor X." (Location 1309) * Me: "Why does competitor X have five times your revenue?" Entrepreneur: "We are using partners and OEMs, because we can't build a direct channel like competitor X." Me: "Why not? If you have the better product, why not knuckle up and go to war?" Entrepreneur: "Ummm." Me: "Stop looking for the silver bullet." There comes a time in every company's life where it must fight for its life. If you find yourself running when you should be fighting, you need to ask yourself, "If our company isn't good enough to win, then do we need to exist at all?" (Location 1313) * Once we pushed the Opsware stock price back above $1, the next problem was to rebuild the executive team. We had cloud services executives, but now we were a software company and needed software executives. In enterprise software companies, the two most important positions tend to be VP of sales and VP of engineering. (Location 1343) * forecast calls, and was the one person responsible for (Location 1349) # The Hard Thing About Hard Things ![rw-book-cover](https://is1-ssl.mzstatic.com/image/thumb/Publication5/v4/2e/c3/8f/2ec38f0f-192d-9439-f466-cf1759cc6540/cover.jpg/1400x0w.jpg) ## Metadata - Author: [[Ben Horowitz]] - Full Title: The Hard Thing About Hard Things - Category: #books ## Highlights - Former secretary of state Colin Powell says that leadership is the ability to get someone to follow you even if only out of curiosity. I was certainly curious to see what Coach Mendoza would say next. (Location 138) - I called a friend who worked at Netscape and asked if he could get me an interview with the company. He obliged and I was on my way. (Location 207) - By the time Netscape went public in August 1995, we had grown the Web server team to about nine engineers. The Netscape initial public offering (IPO) was both spectacular and historic. The stock initially priced at $14 per share, but a last-minute decision doubled the initial offering to $28 per share. It spiked to $75—nearly a record for a first-day gain—and closed at $58, giving Netscape a market value of nearly $3 billion on the day of the IPO. More than that, the IPO was an earthquake in the business world. As my friend and investment banker Frank Quattrone said at the time, “No one wanted to tell their grandchildren that they missed out on this one.” (Location 244) - partners ever since. People often ask me how we’ve managed to work effectively across three companies over eighteen years. 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. With Marc and me, even after eighteen years, he upsets me almost every day by finding something wrong in my thinking, and I do the same for him. It works. (Location 288) - In the short term, this was a big victory for Microsoft since it had driven its biggest threat into the arms of a far less threatening competitor. In the long term, however, Netscape inflicted irreparable damage on Microsoft’s stronghold on the computing industry: our work moved developers from Win32 API, Microsoft’s proprietary platform, to the Internet. Someone writing new functionality for computers no longer wrote for Microsoft’s proprietary platform. Instead, they wrote to the Internet and World Wide Web’s standard interfaces. Once Microsoft lost its grip on developers, it became only a matter of time before it lost its monopoly on operating systems. Along the way, Netscape invented many of the foundational technologies of the modern Internet, including JavaScript, SSL, and cookies. (Location 294) - Two months later, we would raise an additional $45 million from Morgan Stanley in debt with no covenants and no payments for three years, so Andy’s question was more reality-based than you might think. Nonetheless, “What would you do if capital were free?” is a dangerous question to ask an entrepreneur. It’s kind of like asking a fat person, “What would you do if ice cream had the exact same nutritional value as broccoli?” The thinking this question leads to can be extremely dangerous. (Location 333) - In the next quarter, we booked $27 million worth of new contracts, and we were less than nine months old. It seemed like we were building the greatest business of all time. Then came the great dot-com crash. The NASDAQ peaked at 5,048.62 on March 10, 2000—more than double its value from the year before—and then fell by 10 percent ten days later. A Barron’s cover story titled “Burning Up” predicted what was to come. By April, after the government declared Microsoft a monopoly, the index plummeted even further. Startups lost massive value, investors lost massive wealth, and dot-coms, once heralded as the harbinger of a new economy, went out of business almost overnight and became known as dot-bombs. (Location 351) - Thinking about what might happen if we ran completely out of money—laying off all the employees that I’d so carefully selected and hired, losing all my investors’ money, jeopardizing all the customers who trusted us with their business—made it difficult to concentrate on the possibilities. Marc Andreessen attempted to cheer me up with a not-so-funny-at-the-time joke: 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.” (Location 377) - At the time, Bill was in his sixties, with gray hair and a gruff voice, yet he had the energy of a twenty-year-old. He began his career as a college football coach and did not enter the business world until he was forty. Despite the late start, Bill eventually became the chairman and CEO of Intuit. Following that, he became a legend in high tech, mentoring great CEOs such as Steve Jobs of Apple, Jeff Bezos of Amazon, and Eric Schmidt of Google. (Location 389) - People offer many complex reasons for why Bill rates so highly. In my experience it’s pretty simple. 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. (Location 395) - My wife, Felicia, came to the all-company meeting as she always did. This time her parents were in town, so they came, too. The meeting did not go well. People did not realize how close to the edge we were, so the news of the IPO didn’t make anyone happy. The news of the reverse split made them even less happy—in fact, it infuriated them. I had literally cut their fantasy number in half, and they were not pleased about it. Nobody said harsh things directly to me. My in-laws, however, heard everything. And, as my father-in-law put it, “it wasn’t nothin’ nice.” (Location 448) - At this point, our business was still a cloud business, and I gave no indication to the rest of the staff that I might have other ideas. Doing so would have instantly doomed the only business we were in, as everyone would want to work on the future and not the past. I said that Oxide was simply another product line. This statement deeply worried two of my employees who had graduated from Stanford Business School. They scheduled an appointment and presented me with a slide deck detailing why my decision to start Oxide was quixotic, misguided, and downright stupid. They argued that it would steal precious resources from our core business while pursuing a product that would surely fail. I let them present all forty-five slides without my asking them a single question. When they finished I said, “Did I ask for this presentation?” Those were the first words I spoke as I made the transition from a peacetime CEO to a wartime CEO. (Location 551) - In order to do so, we needed more cash. We carefully analyzed our financial plan and decided that we needed another $50 million to get to cash flow breakeven—the point at which we would no longer need to raise money. Given our momentum in the market, raising money was now barely possible and the only way to do it was in the form of a seldom-used construct called a private investment in public equity (PIPE). We worked with Morgan Stanley to line up investors with the goal of raising $50 million. (Location 569) - I took Bill through my logic: The only way out of the cloud business without going bankrupt was through higher sales, because even if we laid off 100 percent of the employees, the infrastructure costs would still kill us without a sharper sales ramp. I further explained that the dwindling cash balance decreased customer confidence, which in turn hurt sales, which in turn caused the cash balance to decline further. He simply said “spiral.” And I knew that he understood. (Location 594) - Sure enough, Jeff was interested. Now with two potential bidders, we put things in motion. John and I worked hard to create urgency with both IBM and EDS, because time was against us. We hosted both companies in our facilities, sometimes with them passing each other in the hallway as part of John’s well-orchestrated sales technique. The final step was to set the timeline for the endgame. (Location 607) - “Gentlemen, I’ve done many deals in my lifetime and through that process, I’ve developed a methodology, a way of doing things, a philosophy if you will. Within that philosophy, I have certain beliefs. I believe in artificial deadlines. I believe in playing one against the other. I believe in doing everything and anything short of illegal or immoral to get the damned deal done.” (Location 617) - would complete the process over the next eight weeks and sell the Loudcloud business to someone. If they wanted to play, they had to move on that schedule or withdraw immediately. The Michael Ovitz artificial deadline was in full effect. We knew that we might have to go past it, but Michael gave us confidence that going past the deadline was a better move than not having one. (Location 621) - Anthony Wright grew up in the tough part of Pittsburgh, the son of legendary street fighter Joe Wright, and had earned a black belt in several martial arts himself. Self-made, super-determined, and unwilling to fail, Anthony had an uncanny ability to quickly gain deep insight into people’s character and motivations—“able to charm dogs off a meat truck,” is how another guy on the team described it. Anthony was the relationship manager for EDS. (Location 677) - Anthony remained calm, looked him in the eye, and said, “Frank, I will do exactly as you say. I’ve heard you loud and clear. This is a terrible moment for you and for us. Allow me to use your phone, and I will call Ben Horowitz and give him your instructions. But before I do, can I ask you one thing? If my company made the commitment to fix these issues, how much time would you give us to do that?” He responded, “Sixty days.” Anthony told him the clock had just started ticking and left his office immediately. It was good news: We had exactly sixty days to fix all the problems and make the deployment work. If we did not, we were done. We had sixty days to live. (Location 701) - 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. (Location 706) - Tangram was run by Norm Phelps, an interim CEO, which was a great sign that they’d be willing to sell the company, because most boards would much rather sell a company than roll the dice by hiring a new CEO. (Location 739) - “I’ve given the speech that I gave to you guys at the beginning of this process to at least a dozen other vendors. They all promised things, but none ever delivered. You guys really delivered and I am shocked. You are the best vendor that I have and I am happy to be working with you.” (Location 749) - During acquisition talks, both sides had agreed that Tangram’s CFO, John Nelli, would not become part of Opsware. But during the time between signing and close, John began to get severe headaches. His doctors discovered that he had brain cancer. Because he would not be an Opsware employee and it was a preexisting condition, he would not be eligible for health insurance under our plan. The cost of the treatment without health insurance would likely bankrupt his family. I asked my head of HR what it would cost to keep him on the payroll long enough to qualify for COBRA and what COBRA would cost. It wasn’t cheap—about $200,000. This was a significant amount of money for a company in our situation. On top of that, we barely knew John and technically we didn’t “owe” him anything. This wasn’t our problem. We were fighting for our lives. We were fighting for our lives, but he was about to lose his. I decided to pay for his health costs and find the money elsewhere in the budget. I never expected to hear anything else about that decision, but fifteen months later I received a handwritten letter from John’s wife letting me know that John had died. She wrote that she was absolutely shocked that I would help a total stranger and his family and that I had saved her from total despair. She went on for several paragraphs saying that she didn’t know why I did it, but it enabled her to continue living and she was eternally grateful. I guess I did it because I knew what desperation felt like. (Location 757) - 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. The customer only knows what she thinks she wants based on her experience with the current product. (Location 801) - Now that we’d improved our competitive position, we went on the offensive. In my weekly staff meeting, I inserted an agenda item titled “What Are We Not Doing?” Ordinarily in a staff meeting, you spend lots of time reviewing, evaluating, and improving all of the things that you do: build products, sell products, support customers, hire employees, and the like. (Location 819) - Note to self: It’s a good idea to ask, “What am I not doing?” (Location 839) - “There are several different frameworks one could use to get a handle on the indeterminate vs. determinate question. The math version is calculus vs. statistics. In a determinate world, calculus dominates. You can calculate specific things precisely and deterministically. When you send a rocket to the moon, you have to calculate precisely where it is at all times. It’s not like some iterative startup where you launch the rocket and figure things out step by step. Do you make it to the moon? To Jupiter? Do you just get lost in space? There were lots of companies in the ’90s that had launch parties but no landing parties. (Location 895) - “But the indeterminate future is somehow one in which probability and statistics are the dominant modality for making sense of the world. Bell curves and random walks define what the future is going to look like. The standard pedagogical argument is that high schools should get rid of calculus and replace it with statistics, which is really important and actually useful. There has been a powerful shift toward the idea that statistical ways of thinking are going to drive the future.” —PETER THIEL (Location 900) - I never built that contingency plan. Through the seemingly impossible Loudcloud series C and IPO processes, I learned one important lesson: 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. In the end, I did find the answer, we completed the deal with EDS, and the company did not go bankrupt. I was not mad at Bill. To this day, I sincerely appreciate his telling me the truth about the odds. But I don’t believe in statistics. I believe in calculus. (Location 921) - I put this section first even though it deals with some serious endgame issues such as how to fire an executive and how to lay people off. In doing so, I follow the first principle of the Bushido—the way of the warrior: keep death in mind at all times. If a warrior keeps death in mind at all times and lives as though each day might be his last, he will conduct himself properly in all his actions. Similarly, if a CEO keeps the following lessons in mind, she will maintain the proper focus when hiring, training, and building her culture. (Location 932) - realized my error during a conversation with my brother in-law, Cartheu. At the time, Cartheu worked for AT&T as a telephone lineman (he is one of those guys who climb the poles). I had just met a senior executive at AT&T, whom I’ll call Fred, and I was excited to find out if Cartheu knew him. Cartheu said, “Yeah, I know Fred. He comes by about once a quarter to blow a little sunshine up my ass.” At that moment, I knew that I’d been screwing up my company by being too positive. (Location 993) - A good culture is like the old RIP routing protocol: Bad news travels fast; good news travels slow. If you investigate companies that have failed, you will find that many employees knew about the fatal issues long before those issues killed the company. If the employees knew about the deadly problems, why didn’t they say something? Too often the answer is that the company culture discouraged the spread of bad news, so the knowledge lay dormant until it was too late to act. A healthy company culture encourages people to share bad news. A (Location 1024) - As a corollary, beware of management maxims that stop information from flowing freely in your company. For example, consider the old management standard: “Don’t bring me a problem without bringing me a solution.” What if the employee cannot solve an important problem? For example, what if an engineer identifies a serious flaw in the way the product is being marketed? Do you really want him to bury that information? Management truisms like these may be good for employees to aspire to in the abstract, but they can also be the enemy of free-flowing information—which may be critical for the health of the company. (Location 1030) - Building a highly valuable business, he added, after three consecutive giant layoffs accompanied by horrible prominent press coverage (we got taken apart with cover stories in both the Wall Street Journal and BusinessWeek), was a complete violation of the laws of venture capital physics. (Location 1047) - STEP 2: DON’T DELAY Once you decide that you will have to lay people off, the time elapsed between making that decision and executing that decision should be as short as possible. If word leaks (which it will inevitably if you delay), then you will be faced with an additional set of issues. Employees will question managers and ask whether a layoff is coming. If the managers don’t know, they will look stupid. If the managers do know, they will either have to lie to their employees, contribute to the leak, or remain silent, which will create additional agitation. At Loudcloud/Opsware, we badly mismanaged this dynamic with our first round of layoffs, but sharply corrected things on the next two. (Location 1057) - Why so strict? Why can’t the more confrontational managers just handle this task for everyone? Because people won’t remember every day they worked for your company, but they will surely remember the day you laid them off. They will remember every last detail about that day and the details will matter greatly. The reputations of your company and your managers depend on you standing tall, facing the employees who trusted you and worked hard for you. If you hired me and I busted my ass working for you, I expect you to have the courage to lay me off yourself. (Location 1075) - 1. They should explain briefly what happened and that it is a company rather than a personal failure. 2. They should be clear that the employee is impacted and that the decision is nonnegotiable. 3. They should be fully prepared with all of the details about the benefits and support the company plans to provide. (Location 1080) - In other words, the wrong way to view an executive firing is as an executive failure; the correct way to view an executive firing is as an interview/integration process system failure. Therefore, the first step to properly firing an executive is figuring out why you hired the wrong person for your company. (Location 1106) - The special case of scaling A fairly common reason for firing an executive is that when the company quadruples in size, the executive no longer does the job effectively at the new size. The reason is that when a company multiplies in size, the management jobs become brand-new jobs. (Location 1135) - Running a two-hundred-person global sales organization is not the same job as running a twenty-five-person local sales team. (Location 1138) - Finally, the executive will be keenly interested in how the news will be communicated to the company and to the outside world. It is best to let her decide. Bill Campbell once gave me a critical bit of advice when I was preparing to fire an executive. He said, “Ben, you cannot let him keep his job, but you absolutely can let him keep his respect.” (Location 1181) - When I started Loudcloud, I hired the best people I knew—people whom I respected, trusted, and liked. Like me, many of them did not have deep experience in the jobs that I gave them, but they worked night and day to learn, and they made great contributions to the company. Nevertheless, the day came when I needed to hire someone else, someone with more experience, to run the function that I had previously entrusted to my loyal friend. Damn. How do you do that? (Location 1200) - Acknowledge the contributions. If you want him to stay in the company, you should say that and make it crystal clear that you want to help him develop his career and contribute to the company. Let him know that you appreciate what he’s done and that your decision results from a forward-looking examination of what the company needs, not a review of his past performance. The best way to do this, if appropriate, is to couple the demotion with an increase in compensation. Doing so will let him know that he’s both appreciated and valued going forward. (Location 1240) - When a company starts to lose its major battles, the truth often becomes the first casualty. (Location 1248) - There may be nothing scarier in business than facing an existential threat. So scary that many in the organization will do anything to avoid facing it. They will look for any alternative, any way out, any excuse not to live or die in a single battle. I see this often in startup pitches. The conversations go something like this: Entrepreneur: “We have the best product in the market by far. All the customers love it and prefer it to competitor X.” (Location 1309) - Me: “Why does competitor X have five times your revenue?” Entrepreneur: “We are using partners and OEMs, because we can’t build a direct channel like competitor X.” Me: “Why not? If you have the better product, why not knuckle up and go to war?” Entrepreneur: “Ummm.” Me: “Stop looking for the silver bullet.” There comes a time in every company’s life where it must fight for its life. If you find yourself running when you should be fighting, you need to ask yourself, “If our company isn’t good enough to win, then do we need to exist at all?” (Location 1313) - Once we pushed the Opsware stock price back above $1, the next problem was to rebuild the executive team. We had cloud services executives, but now we were a software company and needed software executives. In enterprise software companies, the two most important positions tend to be VP of sales and VP of engineering. (Location 1343) - forecast calls, and was the one person responsible for (Location 1349)