How to Operate with Keith Rabois (How to Start a Startup 2014: Lecture 14)

um so I'm going to talk about how to operate so I've watched some of the prior classes and I'm going to assume that you've already sort of hired a bunch of relentlessly resourceful people that you built a product at least some people love that you probably raised some capital and now you're trying to build a company so you're been forging a product and now you've got a foreword to a company and it actually argue forging a company is much more difficult than forging a product basic reason is people are irrational so you probably all know this either your parents your significant other your brother or sister your teacher somebody in your life is irrational though their company's basically taking all the irrational people you know put him in one building and then living with them 12 hours a day at least so it's very challenging now there's techniques for coping with that and some people get good at and some people don't but that's where really what operating is about so basically what you're doing when you build a company is you're building an engine and at first you have a drawing literally on a whiteboard and you're architecting it and it looks very conceptually clean and beautiful and pretty but when you start actually translating it to practice you actually it looks more like this and you're holding it together with duct tape and it takes a lot of heroic efforts of people to actually hold it together that's why people work 80 100 hours a week is that heroic efforts is actually necessary to keep this thing together because you don't actually yet how polish metal in place eventually you want to construct a high performance machine a machine that actually almost nobody really has to worry about every hour every minute and you know as we we used to joke about eBay that if Martians took over eBay it would take like six months for the world to notice that's what eventually what you want to get to or is Warren Buffett says you know build a company that idiots can run because eventually they will so this is what you want basically a performance machine that idiots can run now as a leader what is your real job what's your role strictly speaking there's only one book ever written that actually explains how to do this it's a little old it's written in 1982 by Andy Grove it's quite famous and quite successful and his definition of what your job is is to maximize the output of an organization your organization that you're responsible for CEOs everything and a VP you would be a part of the organization and the organizations around you so if you're a VP e you actually are responsible for the performance of the product team two or the marketing team because you have influence there so this is how you measure people and you want to focus on the output not the input the old adage about measuring not during motion and confusing it out with progress you're measuring only progress and this is gonna sound like a fancy and glamorous thing to do maybe people get excited about managing a whole large organization and being responsible for the output but in practice what you're gonna learn today hopefully is that it's more about things like ordering smoothies teaching your receptionist how to answer the phone properly and serving as a $10 an hour TaskRabbit for your employees so let's talk about that so at first when you start a company everything is gonna feel like a mess and it really should if you have too much process too much predictability you're probably not innovating fast enough and creatively enough so it should feel like every day there's a new problem and what you're doing is fundamentally triaging so some things will look like a problem and they're actually a cold they're just gonna go away so somebody's annoyed about this or that that may be a cold and you shouldn't stress about it you certainly shouldn't allocate a lot of your time to it and some things are gonna present themselves as colds but just like in the emergency room if they're not diagnosed properly they actually can become fatal so I'm gonna try to do is help give you a framework for thinking about which things are colds and which things are potentially fatal so one of the most important things I learned at square is actually a concept of editing and this is I think the best metaphor I've ever seen in like 14 years of running the stuff of how to think about your job it's natural it's a natural metaphor so it's easy to take with you every day and actually it's easy to transmit to each of your employees so that they can figure out whether they're editing or writing it's a natural construct you generally know when someone asks you to do something am i more writing or am I more editing so in editor is the best metaphor for your job and we're talking about the specific things you're doing in editing the first thing an editor does and you've probably all had this experience in school is you submit a paper or to a TA a draft to your friend the first thing in etre does is they take out a red pen or nowadays you know online and they start striking things basically eliminating things the most important task of an editor is to simplify simplify simplify and that usually means omitting things so that's your job to is to clarify and simplify for everybody on your team the more you simplify the better people will perform people cannot understand and keep track of a complicated set of initiatives so you've got to distill it down to one two or three things and use a framework that they can repeat they carry Pete without thinking about the graffiti to their friends they can repeat that night don't accept the excuse of complexity a lot of people will tell you that well this is too challenging this is too complicated well yeah I know other people simplify but that's not for me this is a complicated business they're wrong you can change the world in 140 characters you can build the most important companies in history in a very simple to describe concept you can market products in less than about 50 characters there's no reason why you can't build your company the same way so force yourself to simplify every initiative every product every marketing every everything you do and and basically take out that red and start eliminating stuff second thing is what editors do is they ask you clarifying questions so when you present a paper to somebody what do they usually do they they find some ambiguity somewhere and they say well do you really mean this do you mean that you have an example of this that's what your job is so you're in a meeting and people are going to look to you and the real thing you do is you actually ask a lot of questions and they can be simple basic questions like should we try this seven days a week or six days they can be fundamental questions like where's our competitive advantage here we try to do this actually as investors to some investors will ask you a billion questions about a billion things and they'll have you do diligence forever we try to narrow down to one of the one two or three four things that actually matter for this company and only focus on those things so it allows us to be more decisive and we can make decisions rapidly it allows us not to distract you from your day job which is actually building a company and yeah I think we still get to the higher fidelity highest fidelity answer because we don't have all these extra extraneous pieces of details and data now it's hard it's something you have to practice but when you're good good at it every step you eliminate Andy Grove estimated that you can improve performance by 30 to 50 percent the next thing you do is allocate resources so the editing construct this is what editors do all the time they take editors from the Mideast and covering the Mideast and they move them to Silicon Valley because Silicon Valley's not now more interesting or they move them to a sports section because they want to compete on the basis of sports with other journals and other publications so that can be top-down where I take a bunch of allocate and resources in people it's we're now going over here we're gonna compete on this basis and then next month next quarter next year I'd like well that Middle East coverage is getting boring a bland we don't want to do that anymore let's go chase her for something else or can be bottom up just like journalists mostly come up with their own stories the people who work with you generally should be coming up with their own initiatives so a reporter will generally who covers Google come up with the interesting stories that they're hearing in the ether and propose one or two to their editor for approval but it's not like the editor is saying go cover Google and this is the angle I want once in a while they do that but that's not the day the day the meat and potatoes is what a journalist does every day your goal over time is to actually use less red ink every day so one way of measuring how well you're doing and communicating to your colleagues about what's important what's not what why something's are important some things are not it's how much red ink you're pulling out every day it's okay if you have a bad day and the writings all over the place but it's not okay if the reading next month is more than it was last month and that's quarters more than this to measure yourself and how much red ink you're creating the other thing that's very important that actually isn't as intuitive to a lot of people is the job of an editor's to ensure a consistent voice so if any of you read The Economist you can tell that there's one consistent voice you can pick up any article any post in the Economist and it fuels like it was written by the same person ideally your company should feel like on your website and your PR release on your packaging of it's a physical product anywhere on your recruiting pages to feel like it was written by one person that's extremely difficult to do and at first you're gonna be tempted to do that yourself which is okay for a founder to do that him or herself initially over time you do not want to be doing all of the consistent voice editing by yourself you want to train people so they can recognize the differences in voice so if you see this website page it looks very different in their recruiting page you start asking questions why is that is the reporting messed up is one of the leaders over here not really understanding the voice of the company so you gotta you have to fix that over time but you want to start with the objective of everything should feel exactly the same it's quite quite difficult in practice almost every company has at least one piece of the organization that isn't exactly on the same voice at Apple which is know under Steven under Steve's regime which was notorious for getting this right if you ask someone who worked at Apple talk ask them about the internal tool about recruiting do they really feel like apple products all of them will tell you no so you never a hundred percent but you'd only want to get as close to that as you can the next complicated topic is delegating so just like the other thing I like about the metaphor of editing is writers do most of the work in the world editors are not actually writing most of the content in any publication so that's actually true of your company you are not going to do most of the work you shouldn't be doing most of the work and the way you get out of doing most of the work is you actually delegate now the problem with delegating is that actually you're responsible for everything so a CEO founder there is no excuse there's no like that's that department over there this person over there screwed up you're always responsible for every single thing especially when things go wrong so how do you both delegate but not abdicate it's a pretty tricky challenge and both are sins like if you over delegate or and you abdicate or you micromanage those are both sins so I'm gonna give you a couple techniques for solving this first this actually comes from a high output management andy grove is what's known as task relevant maturity it's kind of a fancy phrase for basically how's this person ever done this before it's really simple how mature is this person in doing something and the more they've done the exact same tasks before the more sort of rope you're going to give them and the less and the more they're trying something new the more you're going to actually instruct them and consistently constantly regularly monitor so that's kind of a basic concept but it's worth keeping in the back of your brain the interesting implication and this is pretty radical is that any executive any CEO should not have one management style your management style actually needs to be dictated by your employee so with one particular person you may be very much a micromanager because they're quite low on this scale and with another person you may be delegating a lot because they're actually quite mature on this scale so it's actually a good thing if you do reference checks on somebody and half the people you call stay there a micromanager and the other half say they actually give me a lot of responsibility that's actually not a that's a that's a feature not a bug I didn't understand that at first at all like I used to be befuddled when people would do reference checks on me and come back with his like complicated mosaic and basically finally figured out that maybe I was actually doing my job correctly so then of course tell other people that this the way to do it a more nuanced answer though that I've sort of came up with it's how do you make decisions and delegating first doing it yourself you don't want to do it yourself too often so what elf cases we borrowed from Peter is my first two-by-two matrix ever in my life but if you taught me something at least is you basically sort your own level of conviction about a decision on a grid you know extremely high extremely low there's times when you know something's a mistake and there's times where you wouldn't do it that way but you have no real idea what the whether whether it's the right or wrong answer and then there's a consequence to mention there are things that if you make the wrong decision are actually catastrophic to your company and you will fail there are things that are pretty low impact that really at the end of the day aren't going to make a big difference at least initially so what I basically believe is that where there's low consequences and you have very low confidence in your own opinion you should absolutely delegate and delegate completely let people make mistakes and learn on the other side obviously where the consequences are extremely dramatic and you have extremely high conviction that you're right you actually can't let your junior colleague like make a mistake you're ultimately responsible for that mistake and if it's really important you just can't allow that to happen now the best way to do that is to actually explain your thinking the why it's easy to shortcut when you get busy explaining whys of the world but it's very important to try when I was at LinkedIn I had a colleague who's quite quite talented but occasionally would get annoyed if I didn't exactly agree with his opinion on something and so I spent a lot of time trying to persuade him why I was making a decision in a certain way and his wild card the card he would ultimately call out if I didn't quite persuade and was he's like okay you're the boss and that meant to me like I was burning a lot of social capital every time he said that I knew I was like really creating a thin line and that ultimately that was gonna backfire if I did that too often so you want to track the times that you're doing that an example this is squares one of my favorite people in the world and my second hire first marketing hire had this program he wanted to run called inner square which basically allowed people to give out square merchants to get out ten other squares to their call its imagine a food truck outside put like ten squares on the couch and people could just grab them and Kyle had this great idea this would be an awesome marketing program squares would spread squares to other people and you know to some extent it was on brand so didn't have catastrophic consequences each of these ten squares didn't cost that much money so financially we could afford to do it but at that time my 10 years of experience said there's just no way this is gonna work in a meaningful enough scale to move our metrics enough and I actually would prefer we don't not do this but Kyle was so excited about this that I decided to just let him do it he learned that actually when you measure this thing it's not massive it doesn't create like massive value for the company it did require a fair amount of operational complexity to ship all these squares to people and figure out how to get them squares etc but it allowed him to be excited about his job and to learn how to filter future ideas so it's totally worth letting him make the quote/unquote mistake the next and most possibly most important thing to do is actually edit the team so these are the people that you work with and nobody's going to have a perfect team and you're certainly not going to start that way so would I'm gonna try to do is maximize the probability for success in editing the team so I like this idea of barrels and ammunition so most companies once they get into hiring mode as Sam pointed out you should defer that for a while but once you do they just hire a lot of people and they're like expect and you expect that as you add people your throughput your horsepower your velocity of shipping things is going to increase it turns out it doesn't work that way usually when you hire more engineers you actually don't get that much more done you actually sometimes get less done you hire more designers you definitely don't get more done you get less done per day we're gonna talk about why but so the reason why is that most people most great people even are actually ammunition but what you need in your company are barrels and you can only shoot through the number of unique barrels you have so that's how the velocity of your company improves is by adding barrels and then you stock them with ammunition and then you can do a lot so if you go from one barrel company which is mostly how you start to a two barrel company suddenly you get twice as many things done per day per week per quarter if you're gonna three barrels great if you go to four battles awesome barrels are incredibly difficult to find but when you have them like give them lots of equity about them take them to dinner every week because they're virtually a like irreplaceable because they're also very culturally specific so a barrel one company may not be a barrel on another company because one of the ways the definition of a barrel is they can take an idea from conception all the way through shipping and bring people with them and that's a very culturally specific opportunity a specific skillset rather so two questions probably are occurring to you is how do you figure out who's a barrel and who's not one is you start actually with a very small set of responsibilities it can be fairly trivial it can be something like I want to reward the engineers that are in my office at 9 o'clock at night every night with a nice cold fresh smoothie this is actually a real example I was frustrated our engineers were working really hard at square and you know maybe 20% to 30% would stay very late into the evening and I wanted to sort we all ready to serve them dinner but I wanted to give them something cool to reward them you could think about alcohol but that's a little complicated so smoothies were probably a little bit better than the pizza which drains you of energy but nobody could get smoothies in my office to show up at 9 o'clock sharp that were cold that tasted good and delivered in the right place that engineers would find them you think this is simple but in fact it's like two months to get this right so that we had an intern start and I think on a second day I was explaining this problem and he said well I'll do it and it's like looking at him like there's no way you have seen my office manager fail my assistant fail all who are actually pretty good this isn't gonna happen and then lo and behold that night they show up on time cold delivered the right place and my first instinct was great not not nothing about the smoothies but okay now I can actually give him something more important and consequential or complicated to do and that's what you will actually want to do with every single employee every single day is expand the scope of the responsibilities until it breaks and it will break everybody like I couldn't run the world like everybody has like some level of complexity that they can handle and what you want to do is keep expanding it until you see where it breaks and that's the role that they should stay in that level of sophistication but some people will surprise you there will be people who you don't expect without with different backgrounds without a lot of experience that just can handle enormous ly complicated tasks and so keep testing that and pushing the envelope the other signal to look for once you've hired someone is with an open office just watch who goes up to other people's desks particularly people that they don't report to if people start going to your desk someone individual employees desk and they don't report to them it's a sign that they believe that that person can help them so if you see that consistently those are your barrels just promote them give them more opportunity as fast as you can the other question everybody asks about people is when do you hire somebody above somebody and when do you sort of mentor somebody or when do you need to replace somebody and the way the way to think about this is every company has its own growth rate and every individual has their own growth rate so some companies that are very successful let's say LinkedIn LinkedIn was always a very linear company it never went like this so for example I joined LinkedIn 18 months after we launched and we had only 1.5 million users which in the social product is very small number and when I joined I was the 27th employee when I left two and a half years later later we only had 57 employees in contrast when I joined square is the 20th employee two and a half years later we had like 250 300 employees so each company has its own velocity on this curve and if the company is going like this you could only keep people on the roles that their own personal learning curve is going like this on the other hand if the company's growing like this anybody whose learning curve is faster than that you can keep giving them the same role to do so always track like the individual slope of an employee and the company's growth rate now that you have your barrels identified so you're to pick out the people that can really take an idea that you have in the back your head yeah scope it out run with it make it happen ship it and it's perfect where do you aim these barrels so I'm gonna argue that you really need to spending a lot of time focusing people this is something I've learned from Peter teal actually he used to insist at PayPal that every single person could only do exactly one thing and we all rebelled every single person the company rebelled to this idea because it's so unnatural it's so different than every other company where people wanted to do multiple things and especially to get more senior you want to definitely want to do multiple things and you're like you feel it's like insulting to be asked to do just one thing and Peter would enforce this pretty strictly he basically say I will not talk to you about anything else except this one thing I've assigned to you I don't want to hear about how great you're doing over here like shut up Pierre would run away and then focused until you conquer this one problem and the insight behind this is that most people will solve problems that they understand how to solve roughly speaking they will solve B plus problems instead of a plus problems a plus problems are high-impact problems for your company but they're difficult you don't wake up in the morning with a solution so you tend to procrastinate them so imagine you wake up in the morning you create a list of things to do today there's usually the eight plus one on the top of the list but you never get around to it and so you solve the second and third and have over an entire company of hundreds of people that just Cascades so you have a company that's always solving B plus things which does mean you grow and doesn't mean you add value but you never really create that breakthrough idea because no one is spending a hundred percent of their time banging their head against the wall every day until they solve it so I highly recommend some version of that you can be less stringent you can be like you can get three things to work on but there I would still track at least the concept of what would happen if you only gave everybody one thing to prioritize now because you can't make decisions you don't want to be making all these decisions yourself you have to create tools that enable people to make decisions at the same level ideally a fidelity that you would make them yourself so how do you create scale and leverage first thing I'd recommend is building a dashboard this is an old square dashboard it actually looks pretty presentable even today the the construct of a dashboard first of all should be drafted by the founder you need to basically simplify the value proposition in the company's metrics for success on a whiteboard you can have other people build the dashboard I don't actually care about that but you need to draw it out like what does business success look look to us and what are the key inputs to those and then have someone create something that is very intuitive for every single person in the company including customer support to use and then the key metric of whether you succeeded is what fraction of your employees use that dashboard every day if it's actually useful it should be close to a hundred percent it's not going to be probably a hundred percent but you want to measure that just like you have quality scores for all your other KPIs with users the dashboard needs to be as intuitive as it is as your product is for users other things wait hold on yeah let's go back one second another concept is transparency and people will often that's weird okay transparency people talk a lot about it's kind of a goal that everybody ascribes to but when push comes to shove very few people actually adhere to it so let me let me walk through a little bit of transparency in different stages of transparency metrics are the first step so everybody in your company absolutely should have access to every single thing that's going on other things that I like to do are take your board decks and as you get more formal the board decks will get more complicated and actually review every single slide with every single employee after the board meeting you can strip out the compensation information if you really want to but every other slide you should go through with the entire employee base and explain it and if you can't remember some of the feedback you got from your board that's really cool to pass on another thing we did at square is your company's skills everybody's not going to get invited to every meeting but they're gonna want to go to every meeting the way you scale that is you create notes for every meeting and you send it to the entire company so we created a notes at Elias for every single meeting involving more than two people someone would write notes and send it to the entire company so people felt like as the company added employees they can continue to monitor and track what was interesting what was going on and he never felt excluded hopefully the other thing is like even like details around conference rooms every conference room at square has glass walls because as soon as you have regular walls people wonder what's going on it's amazing like if they can see who's actually in the meeting and who's meeting with who when they don't start they don't worry nearly as much as what's going on behind those closed doors stripe you may have seen a blog post but I think Patrick wrote it about email transparency about actually allowing everybody to have access to email that's pretty far out there but it's actually got interesting you know sort of merits to it I would all call the tactics that you've read about here about it's sort of minimal viable transparency I actually think you could push the envelope a lot more Steve Jobs tried this at next he actually tried transparent compensation I actually think although next didn't do extremely well it wasn't the real reason wasn't because of the experiment around compensation transparency and that there's a lot of merit to that and you know the critique of like compensation transparency is often well we want people to be teammates and work together and collaborate and if you look in the sports world though where people are actually teammates and they do have to collaborate all of their compensations completely public in fact each of us can look up anybody's compensation in the sports world they get it exactly accurate and somehow it seems to work so I'm not totally bought into the idea that you need to keep transfer compensation non-transparent that finally metrics so you want to measure things you want to measure outputs not inputs and again you should dictate this yourself you should draft the dashboard to tie this all together one important concept I want to note is pairing metrics or pairing indicators which is if you measure one thing and only one thing the company tends to optimize to that and often at the expense of something else that's important a classic example in payments and financial services is around risk it's really easy to give the risk team the objective and say we want to lower our fraud rate it sounds great until they start treating every single user in this audience as a suspect user because they want to lower their fraud rate so they require each of you to call them up on the phone and give them more supplemental information and facts in things and the of the lowest fraud rate in the world you also have the worst you know sort of customer satisfaction score so what you want to measure at the same time as your fraud rate is your false positive rate that forces the team to actually innovate similarly you can give recruiters metrics around hiring and guess what you'll have a lot of people come in through interviews but if you're not tracking the quality of hires you may be very unhappy with the quality of people you're interviewing are the people you're giving offers to so you always want to create the opposite as an indication and measure both and the people who are responsible for that team need to be measured on both finally around metrics one insight I've had over my career is what you you kind of want to look for the anomalies you don't actually want to look for the expected behavior so that a famous example was at PayPal none of the top ten markets that the company was planning to go after included eBay but one day someone noticed that 50 for power sellers had actually hand written into their eBay listings please pay me with PayPal and brought this to the attention of the executive team at the time the first reaction of the executive team was what the hell's going on let's kick them out of the system that's not our focus fortunately I think David Sox came back the next day and said I think we found our market let's actually build tools for these power sellers instead forcing them to write into their listing pay me with paypal why don't we have an HTML button that they can just insert well that started at work and then he said well actually why don't we make them insert it why why should we make them inserted all the time why don't we just automatically inserted for them so they can insert it once and then every single listing they have forever you know this automatically appear there so that became the success for PayPal similarly I was that LinkedIn and I saw this stat that made no sense to me the UI of the site was a little bit different back then but 25% of all clicks maybe 30% of all clicks from the homepage were people going to their own profile and that made no sense whatsoever I mean they say it was a setting that's like you have to literally go to the right margin final link and it was 25 to 30% of every single click at scale I mean so this is like statistically valid stuff and it made no sense whatsoever I never never have seen like a UI performed that way and I kind of went around for weeks trying to figure this out and then someone very smart actually as Max Levchin said something to me it was like he's like it's vanity and I'm like aha people are looking at themselves in the mirror that's a pretty good answer so because they weren't editing their profile that nobody has like something to edit every day and their profile but they actually were just looking at themselves in the mirror every day cuz it made him feel good and then you could actually test that hypothesis and say well if I have more content do I look at myself in the mirror we're off and turns out you did if you had more endorsements did you look at yourself in the mirror more often turns out you did so we actually figured out like what was actually underneath utilitarian product that the product team thought they were building was actually a lot of emotional vanity they didn't exactly translate it to the best possible feature like the PayPal example which you couldn't easily put a button said be more vain today you know on the home page that would probably not work perfectly so it never really like took off the way the PayPal example did but it really clarified what the user what users of the product really wanted and we wouldn't have found that without looking for anomalous data the final topic I want to talk about is details and there's a sign reading there's a great book I really like by Bill Walsh called the score takes care of itself and the basic point of the book is that if you get all the details right you don't worry about how to build a billion-dollar business how to have a hundred million dollars or revenue how to have a billion users that's a byproduct of getting all the details of what you do every day could be axial so the example he talks about in the book that really resonated with me was he took over the 49ers in 1979 they were the worst team in football I believe they were two and fourteen the year before which is really bad for those of you don't know football in the next ten years he managed to transform the team into the NFL's Bass won three Super Bowls and what's the first thing he did to start going from a terrible team to the best team ever in many ways he actually taught the receptionist's how to answer the phone properly he wrote a three page memo about how to actually answer the phone now that may sound absurd but his point was if the organization as a whole does everything exactly the right way then receivers for example will start running their routes at seven-and-a-half yards not seven yards not eight yards and that actually will matter and that everybody on the team execute exactly up to the same standard of performance you'll have a organization that is performing at the highest possible level and then with enough random variation the highest possible performance team will do the high the best so the way you translate this to a company are to a lot of details that may not matter they may not seem that they might are superficially most people would agree about it details matter when it when it faces the user but where the real debate is on things that don't face the user so Steve Jobs famously in the Mac insisted upon an immaculate circuit design board you can read about this in various books the Mac for those of you don't remember the Mac probably everybody here but some of you may have seen it I actually couldn't be opened so the circuit board design couldn't be seen by any single person in the world there was no way to open the Mac except that people who worked at Apple and Steve insisted that it be absolutely perfect and beautiful that's the kind of detail obsession that this sort of philosophy of building a company requires examples that may be more practical for you instead of circuit boards are things like what food do you serve people it's actually matters more than you might guess when people don't like the food you serve them what do they do they go gossip they go complain to their friends they go walk over to someone's desk and all the sudden at lunch what they're complaining about is it they're mostly spending time gossiping and complaining instead of brainstorming so you don't have this serendipitous like idea matching another serendipitous idea that creates a spark instead they're all wandering and willing around so the best thing you can do is actually give people the food they want or food that's good for them that makes them more productive so seem a lot like this glorious job you thought you have it's actually more like running around being a task rabbit for people but it's to take the things off their plate that are a distraction so they can be high-performance machines and if you take enough things away from people that distract them and give them the tools to be successful all of a sudden your organization produces a lot more similarly another example that's often got wrong is office space so one natural instinct is when you need an office you just have an office manager or someone on your team gonna find offices and they'll go on tours with a chance they'll come back with photos and ideas you need to do that yourself the office environment that people live in and work in every day dictates your culture and help you will make decisions it dictates how hard people work there's almost no important more decision other than what company you're gonna be then what's the office environment you're actually in and most people don't do that and then the final thing and then I'll take some questions is around effort ultimately I don't believe that you can build a company without a lot of effort and that you'd need to lead by example so Bill Walsh the first chapter of his book is get gets asked this question of how do you know whether you're doing her job and this is the answer he gives coaches that used to ask them that question so if this is what you feel like every day you're probably on the right track and if that doesn't sound appetizing you probably shouldn't start a company truthfully all right with that I'm done with the prepared part let me see if anybody has questions I could try to be helpful with any questions yes I would I would do in probably bands you can do it either just everybody the company gets paid the same or you can have like all discipline all engineers or you could do it by experience like extremely the way Steve did it actually at next was there's a high ban and a low ban and you've had a lot of experience or a little experience and those in solo band back then you know now would probably be like $85,000 kind of everybody just flatly gets paid eighty five thousand and if your super experience ever gets paid like one hundred thirty thousand and that's just it like this sort of the next translated for inflation you'd be amazed well yes so the question was a besides food while they're kind of details do people care about the laptops they use I mean this is now the default that everybody has but five years ago it was a benefit to give people high quality machines as opposed to optimizing our costs and having Dell machines and ugly monitors just as an example so if you think about all these people that are relentlessly resourceful incredibly talented in a massively competitive ecosystem competing for talent you want to give the people the best possible tools to do the best possible job and so right rigorously thinking through how do I make people more successful what things do they not need to be working on that are distracting and what things can I actually give them that make them more valuable per day and then just break that down every day and solve that stuff yourself it's a good question I actually think that you should start first of all you must have your own office I don't believe ever in shared office spaces Peter talks a little bit about this that every startup every good startup is a cult and it's really hard to create a cult if you're sharing space with people because that cult means that you think you're better than everybody else in the world you have a special way of doing things that's different than everybody else in the world and if you're sharing physical space with people it's very hard to inculcate that so I would start there but it is a prioritization question that when we have every every company on scare us resources just a question of magnitude like how many zeros are you paying attention to you know probably not $10 expenditures but $100 then thousand dollars and 10,000 then a million then ten million starts being a rounding error so what I would do is figure out like what's most important in a high quality office that creates a good vibe that allows you to recruit people because recruits are very savvy about this they walk into your office and they can tell a lot about the culture instantly I said I walk in a company office and I can tell often whether I'm gonna invest shoes I walk in like I could absolutely school things out that I just don't want to invest in as soon as I walk in and there's times walking the office is like wow this is really impressive you can tell how people work together how hard they're working how distracted they are roll off boat at Sequoia I made a point to me about YouTube so when I invested in YouTube but very very beginning it wasn't obviously going to be successful and then roll-off led this series a investment for Sequoia in YouTube and we were on a board meeting together and he said you know I think YouTube's really gonna work and I said why and said well every time I go to one of my portfolio companies half the office is watching YouTube at lunch and that's like a pretty good sign I'm still like you pick up on these little things you can predict a lot boy yeah so the question is how's the best way to green gain street cred for a new manager almost all good managers in Silicon Valley are promoted because of their individual performance and cultures that are meritocratic you know the percentage is even higher so we tried at PayPal to only promote people that were basically kicking ass at their discipline so Peter didn't believe in general managers in fact I remember going for a jog around campus within my first week at PayPal and he's asking me you know how things going the usual kind of CEO questions and then we got this debate about whether the company needed any managers and he's like nope no managers we're only going to promote people so the VP of engineering is going to be the single best engineer the VP of designs in a single best designer the VP approximately single best product person and they're gonna learn to manage later and the advantage of that is you don't have you don't demoralize people because everybody knows that their boss actually is better at their job than they are and they can learn stuff and you can learn a little bit of the management techniques later as opposed to promoting people who are just good people managers that don't actually have the discipline and skill and that does demoralize people so I think just being excellent at something and then getting excellent at getting a bunch of people to do something as the next task but people people you just have to learn some things you have to learn about doing you can't learn to play the guitar by reading a book you've actually got to try to manage a bit and you won't do it well I have another sort of set of tactics and classes on what you actually do when you transition from a manager individual contributor to manager and it's hard one of the first things people don't get right is their time allocation and so actually I would recommend doing what I call calendar or audit in tracking for a month what do you spend your time on and how much is managing and editing how much is writing etc and then optimize that over time you can get a mentor find somebody who's been a manager before that will work with you not your boss because your boss has a set of complicated objectives including how much are we shipping a mentor can just focus on you and making you more successful yeah so I would look at every piece of copy in every department so like another area that almost never is they've done so look at the recruiting website almost never done to the same quality is your conversion funnel let's look at customer support another classic area that isn't up to the same quality in crete customer support like a product so that you actually have an engineering team a design team over time they actually focuses on making that world-class usually where you have different executives a scaled company most executives we're trained differently at different companies and they bring some of that with them so you've got a cross train that so if you've hired a VP of engineering from Google it's very different than a design leader came from Apple they don't actually learn how to do anything the same way so you're gonna have to stitch that together somehow either one or the other is gonna have to learn and the other style or gonna have to create your own style and really teach that to your executives so it shows up all the time but you all you all you need to do is just pick up the company's products and look for things that have a different voice and you can see it visual voice word choice all over the map Sam so the canonical advice and this now sounds obvious but actually was pretty radical in 1982 when Andy wrote for his book is you should have a one-on-one roughly every two weeks some people say every week and I don't think you want to go longer than two weeks one week can be ideal actually in many companies the reason why in fact there's an old another adage which is you should only have five to seven direct reports that actually derives from the concept of a one-on-one every week so that the direct reports so that you can fit enough one-on-ones in your calendar and still get other things done so I think one-on-ones per week or a good idea the agenda should be crafted by the employee who reports to the manager not the manager the one-on-one is mostly for the benefit of the employee so they should walk in with here's the three or four things I want to talk about ideally they circulate that you can be even bullet points in advance by email but in advance you have time to chew on it and you're not on the fly winging your responses but that's probably the best structure now if someone's really good and really talented and it's been doing something for a long time with a lot of internal credibility you might push out the one every week and relax that to one every two weeks possibly once a month I don't know that I would go beyond once a month ever yeah so the question is when when do you compromise hire more ammunition and sort of a barrel truthfully you're gonna hire more ammunitions by by definition than you aren't barrels so there's a ratio between the two the question is the ratio so at some point the ratio is going to get out of but whack so if you're the only barrel on the company you have 50 engineers you might as well only have 10 engineers because you're not gonna get any more done so you're just wasting resources you got frustrated engineers because everybody's going to need your approval your sign-off your editing it's just going to stock and frustrate people so it's really no different disciplines engineering like I actually think like roughly one to ten to twenty it's probably about the right range like you know you don't need you don't need more engineers until you have more barrels designer is a little different but it doesn't it's always going to be hiring more munitions and they good leader or a good barrel will kind of have a feel for that so one way - one way to correct for this natural tendency is to increase that your head count on your team like sort of an empire building tendency like oh so I'm at just 20 people and Sam only manages 10 and you manage three so I'm more important than Sam and you're more important than you one way to do that is you put an X here of the number of people that the output sorry specify how how many things they've done successfully and then divide by the number of people on their team and tell them that this is going to be their grade in their performance review shockingly this wide doesn't start increasing on that team it's amazing how this works and be really explicit about it so this how often you intervene this or for the photo companies and what's your people so how often do I need weather yeah the question is for venture capitalists how often do I interact with my companies meet with them generally when we invest and we do do some seed investments where we a lot that's less money but when we invest a fair amount of money and lead around like a Series A Series B round we joined the board and roughly I meet with the founder CEO every two weeks that's the default now there can be obviously there's inflection moments and things go right go well or wrong and that you know that's on an ad-hoc basis these days actually surprisingly I do a lot by text message I even have one CEO who snapchats me all the time like I've actually rather not but that so the world the world has changed a lot but I try in-person meetings every two weeks no I mean really it's like being a venture capitalist is more to me like being a psychologist so if you come to my office you'll see actually we have two chairs kind of a raid like this with a little table in the middle and we sit down and I'm basically like so tell me your problems you know it's like a question it's like so have you and then in there my response is usually well have you thought about this have you talked to this person have you tried this etc and it's just asking a lot of questions and going back that way but that's 90% of what I do well depends on where your prioritizations are so you know Sam talked a little bit about this in his lecture but every company will move recruiting you know first second or third somewhere and that yeah sort of spectrum it was your number one priority then about 25% is probably a pretty good allocation actually I like the calendar audit for CEOs even more so than for new managers so when I work with CEO is sometimes who aren't thriving in that role for the first time I actually force them to show me their calendar and before I do that and now I'm going to ruin this trick because I want to tell you it to you I actually asked them to rank their priorities write them down on a piece of paper and there's just specify whatever they are then we go to pull up their calendar and see if it matches and it never matches like never like recruiting is the one that's most often awry so you know let's say half the CEOs you meet with no safe recruiting are boring party it's almost never the biggest block of time on anybody's calendar and so that's what you're trying to do is match resources and inputs against priorities and a calendar on an a4 so there's no software that does this really well it'd be great like actually we literally pull up someone's Google Calendar kind of manually add up the hours which is in someone insane but that's that's the best way it's just more of your parties if your priorities and raising money you don't want to allocate a hundred percent of time to recruiting you want to allocate a fair amount of time to raising money for that block of time anybody okay good question I think the way to harmonize the question is really how do you harmonize things like where details can really matter but you only get one thing you know to do and you've got to allocate to the top one two or three things how do you how do you put those two things together and actually there is some tension and even in a healthy organization there's some tension of like why are we actually focused on you know writing the script as opposed to something a user may see I think the underlying philosophy of getting the details right is pretty important to install in the very very very beginning of a company because people will start acting that way making decisions that way themselves so you won't have to actually literally do that and if you have to do that it actually shows that yet the foundation isn't actually that that solid so if when you first start the company it's about getting the details right that everybody is precise everybody on every task is always thinking that way and then that skills and then the people you bring in it's a little self-fulfilling people who can think that way will tend to get hired people can't won't get hired each team in each leader will tend to enforce that themselves so CEO is almost never doing it so it's partially like how do you start and it cultures like that I mean that the key to culture is it's a rule it's a framework for making decisions and if you have a cultures baked people learn how to make decisions across that culture and you're never saying anything you never have to really do anything except just yeah watch and you know and promote and move people around cool well I guess that's it thank you [Applause] you

Channel: Y Combinator

Views: 11,483

Rating: 4.9242425 out of 5

Keywords: YC, Y Combinator, Startup, Lecture, Stanford, Class, Sam Altman, How to start a startup, startup school, advice, keith rabois, how to operate

Id: w19IBxDu2Y4

Length: 46min 53sec (2813 seconds)

Published: Wed Apr 19 2017