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 horrendously
resourceful people. That you've built a product
that at least some people love. And you're probably raised
some capital. And now you're trying to build
a company. So you're, you're enforging a
product and now you have to forge a
company. And it actually argue for GM company is much more
difficult than for a GM product. Basic reason is people are
irrational. So you probably all know this
either your parents, your significant other or your
brother or sister, or your teacher, somebody in your
life is irrational. Building a company is
basically taking all the irrational people you
know, putting them 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 it and
small 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 white board, and you're architecting
it, and it looks very conceptually clean,
and beautiful, and pretty. But when you start actually
translating to practice actually it looks
more like this, and you're holding it together
with duct tape. And it takes a lot of heroic
effort to people to actually hold it together. That's why people work 80, 100
hours a week, is that heroic effort is
actually necessary to keep this thing together. Because you don't actually yet
have polished 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 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 as Warren Buffet says, you
know, build a company that idiots could 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 that's ever written that actually explains how to
do this, it's a little old. It was written in 1992 by Andy
Grove, who's quite famous, 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 would be
part of the organization. And the organizations around
you, so if you're VPE, you're actually are
responsible for the performance of the product
team too, or the marketing team, because
you have influence there. So this is how measure people
and you want to focus on the output not the input the
old adage about measuring, not measuring motion and
confusing that will progress, you're measuring only
progress. And this is going to 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
going to 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
task rabbit for your employees. So let's talk about that. So at first when you start a company everything's
going to 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
everyday 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 colds,
they're just going to go away. So, somebody's annoyed about
this or that. That may be a cold, and you
shouldn't stress about it, and you certainly shouldn't
allocated a lot of your time to it. And some things are going to
present themselves as colds. But just like in the emergency
room, if they're not diagnosed properly they
actually can become fatal. So what I'm going to try to do
is help give you frameworks for thinking about
which things are colds and which things are potentially
fatal. So one of the most important
things I've learned at Square is actually a concept
of editing. And this is the, I think the best metaphor I've
ever seen in like 14 years of running 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 wether they are 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 an editor, as, 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 probably all had this
experience in school, is you submit a paper to a TA,
a draft to your friend. And the first thing an editor
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 as an
editor is to simplify, simplify, and that usually
means omitting things. So that's your job too, 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 can repeat without
thinking about, they can repeat to their
friends, they can repeat at night. Don't except 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? Do they, find some ambiguity
somewhere and they say, well did you really
mean this, do you mean that, do 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 this actually as
investors too some investors will ask you a
billion questions about a billion things and they'll
have you do diligence forever. We try to narrow it down to
what are 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 yet, I think we still get
to the higher fide, highest fidelity answers. We don't have all these extra, extraneous details, pieces of
data. Now it's hard, it's something
you have to practice, but when you're good at it, every
step you eliminate, Andy Grove estimated that you can improve
performance by 30-50%. 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
mid-East and covering the mid-East and they
move them to Silicon Valley, because Silicon Valley is now,
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 resources and people would say, we're now
going over here, we're going to compete on this
basis. And then next month, next
quarter, next year, I'm like well, that Middle East coverage is
getting boring and bland. We don't want to do that
anymore. Let's go chase after something
else, or it 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 aether, 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 date, the day,
the meat and potatoes of 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 in communicating to your colleagues about what's
important and what's not. What, why some things are
important, some things are not, is how much red ink you're
pulling out every day. It's okay if you have a bad
day and the red inks all over the
place. But it's not okay if the red
ink next month is more is more than it was last
month, if the next quarter is more
than this. So measure yourself of 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 is to
ensure 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 if feels like it's written by
the same person. Ideally your company should
feel like, on your website and your PR
release, on your packaging, if 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 first you're going to be
tempted to do that yourself which is okay
for a founder to that. Him or herself initially. Over time you do not want to
be doing all of the consistent voice editing
by yourself. You are a trained people so that they can recognize the
differences in voice. So if you see this website
page it looks very different than the
recruiting page. You start by asking questions
why is that? Is the reporting messed up? Is the leaders over here not really understanding the voice
of the company? So, you've 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 notorious,
you know, even under Steve's regime,
which was notorious for getting this right. If you asked someone who
worked at Apple, talk, asked them about the internal
tools about recruiting. Do they really feel like Apple
products? All of them will tell you no. So you're never 100%, but you definitely want to get
a close to that as you can. 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 as 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 pretty tricky challenge
and both are sins, like if you
over delegate. Or, and you advocate, or you micro-manage, those are
both sins. So I'm going to give you a
couple techniques for solving this. First, this actually comes
from high output management and to grow, is what's known
as task-relevant maturity. It's kind of a fancy phrase
for basically, has this person
ever done this before? It's really simple. And how mature is this person
in doing something/ And the more they've done the
exact same task before. The more sort of rope you're
going to give them. And the less, 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 micro manager 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 say they're a micro manager, 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
dereference checks on me, and come back with this like,
complicated mosaic. And that basically, finally
figured out that maybe I was actually doing my job
correctly, and so then of course, thought other people that this
was the way to do it. A more nuanced answer though,
that I've sort of came up with, is how, how do you make
decisions? And delegating versus doing it
yourself. You don't want to do it
yourself too often. So what I've basically
borrowed from Peter, this is my first two by two
matrix ever in my life but he taught me something at least
is you basically sort you, your own level 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 a low confidence
in your own opinion, you should absolutely delegate,
and delegate completely like 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 why's of the world,
but it's very important to try when I was at LinkedIn I had a
colleague who's quite, quite talented. Both occasion we get annoyed
if, if I didn't exactly agree with his opinion on something,
and so I'd spent a lot of time trying to
persuade him why I was making a decision a certain way. And his wildcard, the card he
would ultimately call out if I didn't quite persuade him, 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 going to backfire if I did
that too often, so you want to track the times
that you're doing that. Example of 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. Just imagine a food truck
outside, put like ten squares on the
counter and people could just grab them,
and Kyle had this great idea, this would be this awesome
marketing program. Squares would spread squares
to other people and, you know, to some extent it was on
brand, so it 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 ten years
of experience said there's just no way this is
going to work in a meaningful enough scale, to
move our metrics enough and I actually would prefer we
don't, not do this. But Kyle, 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 a 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 to
be 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 you 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 going to try to
do is maximize the probability for
success in editing the team. So I like this idea of Barrels
and Ammunition. Most companies once they get
into hiring mode as Sam pointed out you should
defer that for awhile, but once you do they just hire a
lot of people. And they're like, you expect,
and you expected as you add people
your throughput, your horsepower, or 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
could 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 a one barrel
company, which is mostly how you start. To two barrel companies
suddenly you get twice as many things done per day, per week,
per quarter, and if you go to three barrels, great, if you
go to four barrels, awesome. Barrels are incredibly
difficult to find, but when you have them, like
give them lots of equity, promote them, take them to
dinner every week because it, it, they're virtually it like
irreplaceable. Because they're also very
culturally specific. So a barrel at one company may
not be a barrel at another company because one of
the ways in the definition of a barrel is they can take an
idea from inception all the way through shipping
and bring people with them. And that's a very culturally
specific opportunity specific skill set, 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 an ice
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 evening, and I wanted to serve, we were
ready to serve them dinner but I wanted to give them
something cool to reward them, and 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'd think this is simple,
but in fact, it like, took months
to get this right. So then we had an in, we had
an intern start, and I think on his second day, I was explaining this problem
and he, he said, well, I'll do it,
and I was like looking at and I'm like there's no way. I've seen my office manager
fail, my assistant fail, all who are actually pretty
good. This just isn't going to
happen, and then long and behold that night they show up
on time, cold, delivered to the right place, and my first
instinct was great not, not, nothing about the
smoothies. But okay, now I can actually
give you something more important and inconsequential
and complicated to do, and that's what you actually want
to do with every single employee every single
day is expand the scope of their 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
enormously complicated tasks, and so keep testing that and
pushing the envelope. The other signal to look for is once you've hired someone
is this, 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 employee's
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 its 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 a social product is very small
in number and when I joined I was the 27th
employee. When I left two and a half years later we only had
57 employees. In contrast when I joined
Square as a 20th employee, two and a half years later, we
had like 250,300 employees. So each company has it's own
velocity on this curve, and if the company's going like
this, you can only keep people in
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, of an employee, and the
company's growth rate. Now you have your barrels
identified, so you're pick out the people
that can really take an idea that you have in the back of
your head scope it out, run with it, make it happen,
ship it, and it's perfect, where do you
aim these barrels? So I'm going to argue that you
really need to spend a lot of time focusing people. This is something I've learned
from Peter Thiel, actually. He used to insist the PayPal,
that every single person could only do exactly one thing and
we all rebelled. Every single person in the
company rebelled to this idea. Because it's so unnatural,
it's so different than every other company where people
want to do multiple things, and especially as you get more
senior you want to definitely want to do multiple things,
and you're, you're like, you feel like insulting to be
asked to do just one thing, and Peter would enforce this
pretty strictly. He'd 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 just shut up, and peer
would run away and then focus 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 A plus 1
at the top of the list but you never get around to it,
and so you solve the second and
third, and 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
does mean you add value. But you never really create
that breakthrough idea because no one is spending 100% 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 be making all these decisions
yourself, you have to create tools that enable
people to make decisions. At the same level ideally of
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 construct of a dashboard,
first of all, should be drafted by a
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've succeeded is what fraction of your employees use
that dashboard every day. If it's actually useful it
should be close to 100%. It's not going to be probably
100%, 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 walk through a
little bit of transparency and 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 remember some
of the feedback you got from your board that's
really cool to pass on. Another thing we did at
Square, as your company skills, everybody's not going to get
invited to every meeting, but they 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 alias
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 could continue to monitor
and track what was interesting,
what was going on, and they never felt excluded,
hopefully. The other thing is like even the 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 and when. 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, certain merits to it. I would all call the tactics
that you read about here about as 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, the real reason wasn't because
of the experiment around compensation transparency and then there's a lot of error to
that. The critique of 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 compensation is
completely public. In fact, each of us can look
up anybody's compensation in the sports world and get it exactly accurate, and
somehow it seems to work. So I'm not totally bought in to the idea that you need to
keep transpar-, compensation non transparent. Then 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 are what
are known as 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 costly example in payments
and financial service is around
risk. It's really easy to give the
risk team an 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 fog rate. So they require each of you to
call them up on the phone and give them more supplemental
information and fax in things and you have 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 or the people
you're giving offers to. So, you always want to create
the opposite as an indication and measure
both, and the people that are responsible for that team,
need to be measured for 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 54 Power Sellers had actually handwritten 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
Sacks came back the next day said, I think we found our
market. Let's actually build tools for
these power sellers instead of 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 to work. And then he said, well actually why do we make
them insert it. Why should we make them insert
it all the time? Why don't we just automatically insert it for
them? So they could just insert it
once and then every single listing they
have forever. It'll just automagically
appear there. So that became the success for
PayPal. Similarly, I was at LinkedIn, and I saw this stat that made
no sense to me. The UI for the site was a
little bit different back then, but 25% of all clicks,
maybe 30% of all clicks from the home page were people
going to their own profile. And that made no sense
whatsoever. I mean like, the set, it was a
settings, like you had to literally go
to the right margin. Final a link and it was 25 to
30% of every single click at scale I mean so this is like
statistically novel stuff. And it made no sense
whatsoever, never seen like the UI perform
that way. And, I kind of went around for
weeks trying to figure this out and then
someone very smart. Actually, it's Max Letchin
said something to me and I was like, he's like it's
vanity. And I'm like ha people are looking at themselves in
the mirror. That's pretty good answer. So cause they weren't editing
their profile. Nobody has like something to
edit everyday in their profile. But they actually were just
looking in themselves in the mirror everyday because it
made them feel good. And then you can actually test
that hypothesis and say, well, if I had more
content. Do I look at myself in the
mirror more often? 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 that, said be more vain today, you
know, on the homepage. >> That would probably not
work perfectly, so it never really like took off the
way the PayPal example did. But it 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, in my assigned
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 $100 million of
revenue, how to have a billion users. That's a byproduct of getting
all the details of what you do everyday to be excellent. 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 2 and 14
the year before, which is really bad for this,
if you don't know football. In the next ten years, he
managed to transform the team into the NFL's best, 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
receptionists 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 then everybody on the team
executes exactly up to the same standard of
performance. You will have an organization
that is performing at the highest possible level,
and then with enough random
variation, the highest possible performance team will
do the best. So the way you translate this
to a company are to a lotta details that may not
matter. They may not seem that they
matter superficially. Most people would agree about
the details matter 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 on an immaculate
circuit design board. You can read about this in
various books. The Mac, for those of you who
don't remember the Mac, probably everybody here but some of you may have seen it,
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 the 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 maybe more
practical for you instead of circuit boards are things like
what food do you serve people. This 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, their mostly spending time
gossiping and complaining instead of
brainstorming. So you don't have this
serendipitous idea. Not saying other serendipitous
idea that creates a spark, instead they're all wandering
and wallowing around. So the best thing you could do
is actually give people the food they want or
food that's good for them. That makes them more
productive. So it may seem a lot like this
glorious job that you thought you had is
actually more like running around being a task
rabbit for people. But it's to take the things off the plate
that are a distraction. So that 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 is to have an office manager or someone on your team go out
and find offices. And they'll go on tours with
agents and they'll come back with photos
and ideas. You need to do that yourself. The office environment that
people live in and work in everyday dictates your
culture and how people make decisions, it
dictates how hard people work. There's almost no important
more decision other than what company you're going to
be, than 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 Wallace, the first chapter of his books
is, get's asked this question of how did you know whether
you're doing your job? And this is the answer he
gives coaches that used to ask him 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 doing
with the prepared part. Let me see if anybody has
questions I can try to be helpful with. Any questions? Yes? >> So you talked about making
compensation transparent. How would you do this,
especially when people equate themselves to value, you know,
of how much their salary is? >> I would, I would do it in,
probably, bands. because you could do it, either just everybody in the
company gets paid the same, or you could have, like, all
discipline, all engineers, or you could do it by experience
like extreme exp. The way Steve did it actually
at Next was, there was a high band and a
low band. And you either had a lot of
experience or low experience, and that was
it, so low band back then, you know, now it would probably be
like $85,000 kind of everybody just flatly gets paid $85,000,
and if your super experienced everybody gets paid like
$130,000, and that's just it like this sort of the Next
translated for inflation. >> Instead of what's the how
many details >> You'd be amazed. >> Well, yeah, so the question
was besides food what other 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 given them that make
them more valuable per day? And then just break that down
every day and solve that stuff yourself. >> So, when you're in a
start-up environment, how you you optimize for those
things? because, you know, resources
are scarce and. >> It's a good, 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 start-up, every
good start-up is a cult. It's really hard to create a cult if you're
sharing space with people. Because a cult means that you think that you're better than
everybody else in the world, that 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. When you have, everybody is going to have scarce
resources, just a question of magnitude like how many zeros
are you paying attention to? You know, probably not $10. Expenditures, put $100, then
$1,000, then 10,000, then a million,
and then 10 million. Starts being a rounding error. So, what I would do is figure
out like, what's most important? And 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 sometimes, I walk into a
company office and I can tell, often, whether I'm going to
invest, as soon as I walk in. Like, I can absolutely rule
things out that I just don't want to invest in
as soon as I walk in. And there's times walking into
the office is like, wow, this is very impressive. You can tell how people worked
together, how hard they're working, how
distracted they are. Roelof Botha at Sequoia made a
point to me about YouTube. So, when I invested in
YouTube, in the very, very beginning, it wasn't obviously going to
be successful. And then, Roelof led this
series A investment for Sequoia in YouTube. And we were at a board meeting
together and he said, you know, I think YouTube's
really going to work. And I said, why? And he said well, every time I go to one of my
portfolio companies, half the office is watching
YouTube at lunch. >> And I was like, pretty good
sign. So like, if you pick up on
these little things you can predict a lot. Yeah? >> What do you think is the
best way to gain street cred for a new manager? >> Oh boy yeah so the question
is how's the best way to grain, gain street cred for a
new manager? Almost all good managers in
Silicon Valley are promoted because of their individual
performance in cultures that are meritocratic, you know,
the percentage is even higher. So we tried at PayPal to only
promote people that were basically kicking **** 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 are things going, the
usual kind of CEO questions. And then we got into 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 Design's going to be
the single best designer. The VP of Product's going to
be the single best product person and they're going to
learn to manage later. And the advantage of that is
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 is the next task. But people, you just have to
learn, some things you have to learn
by doing. You can't learn to play the
guitar by reading a book. You've actually gotta try to
manage a bit, and you won't do it well. I had another sort of set of
tactics and classes on what you actually
do when you transition from an individual contributor to a
manager. 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 audit and
tracking for a month what you spend your time on and how
much is managing and editing, and how much is
writing, et cetera, and then optimize it 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
complicated objectives, including how much are we
shipping? A mentor can just focus on
you, and making you more successful. >> Can you give some more
examples of things you can do which show a consistent
voice of the company, especially with the company
growing? >> Yeah. so, I would look at every
piece of copy in every department. So like another area that
almost never is a done. So look at your recruiting
website. Almost never done to the same quality as your
conversion funnel. I look at customer support, another classic area that
isn't up to the same quality, and treat customer support
like a product. So that you actually have an
engineering team and a design team over time, that actually focuses on
making that world-class. Usually, where you have
different executives at a scaled company, most
executives were trained differently at
different companies, and they bring some of that with
them. So you've got to cross train
that. So, if you've hired a VP of
Engineering from Google. It's very different than a
design leader who came from Apple, they don't actually learn how
to do anything the same way. So you're going to have to
stitch that together somehow, either one or the other is
going to have to learn in the other style or you're
going to have to create your own style and really teach
that to your executives. So it shows up all the time
but all you do, 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, all over the map. Sam? >> Could you talk a little bit
about the tactics of how you manage people? Like how you
>> So the canonical advice in this now sounds obvious but
actually was pretty radical in 1982 when
Andy wrote his first 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
ano, 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
you can fit enough one on ones in your calendar and still get
other things done. So I think one on one's per
week are 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. It 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 has 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. >> When is it acceptable to
compromise and hire someone who is ammunition
rather than a barrel? >> Yeah, so the question is
when, when do you compromise and hire more ammunition instead
of a barrel? Truthfully, you're going to
hire more ammunitions by definition than you are
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 wack. So if you're the only barrel
in the company and you have 50 engineers, you
might as well only have ten engineers because you're not
going to get anymore done. So you're just wasting
resources. You're going to have
frustrated engineers, because everybody's going to
need your approval, your sign off, your editing. It's just going to stack and
frustrate people. So, it's really, now different
disciplines, engineering, like I actually think like
roughly one to ten to 20 is probably about the right
range. Like you don't need more
engineers until you have more barrels. Designers a little different, but it's always going to be
hiring more ammunitions. And a good leader, a good barrel will kind of
have a feel for that. So one way to, one way to
correct for this. Natural tendency is to
increase that your headcount on your team, like sort of an
empire building tendency. Like, oh so I manage 20
people, and Sam only manages ten, 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,
the output, sorry, specify how many things they've done
successfully 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 y doesn't
start increasing on that team. It's amazing how this works. And be really explicit about
it. >> As, venture capitalist, how often you intervene this
and, what's. >> So how often do I meet
with? >> Yeah.
How you. [CROSS-TALK].
>> So the question is, as a venture capitalist, how often do I interact with
my companies, meet with them. Generally when we invest and
we do, do some seed investments where
we invest less money but when we invest a fair amount
of money and lead a round like a series a a
series b round we join 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 well or wrong. And, 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. Which I'd actually rather not,
but, That, so. The world, the world has
changed a lot. But I try in-person meetings
every two weeks. >> Are you the 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 arrayed 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?
[LAUGHTER] Then, it's like a question. It's like, so have you. And then the, and then my
response is usually, well have you thought about
this? Have you talked to this
person? Have you tried this? Et cetera.
And it's just asking a lot of questions and going back that
way. But that's 90% of what I do. So I see when you, when you've
got these barrels, you say your starter company
is up doing really good, you know, and you're working
on this project. I've heard that you should
always be recruiting. >> Yes.
>> How do you, how do you balance that. Well it 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 in
that sort of spectrum. If it's your number one
priority then about 25% is probably a pretty good
allocation. Actually I like the calendar
audit for CEO's even more, so than for
new managers. So when I work with CEO's
sometimes who aren't. Thriving in that role for the
first time. Actually forced them to show
me their calendar. And before I do that, and now
I'm going to ruin this trick because if I tell it to you,
actually asked them to write their priorities, write
them down on a piece of paper. And, you know, discuss
whatever they are. Then we go pull up their
calendar, and see if it matches. And it never matches. They, never. They, recruiting is the one
that's most often. Awry so you know, let's say
half the CEO's you meet with will say recruiting's the
number one priority. 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 audit unfortunately there's no software that does
this really well. It would be great. Like actually the, we literally pull up someone's
Google calendar and kind of manually add up the
hours. Which in, somewhat insane. But that's, that's the best
way is just, well what are your priorities. If your priorities are raising
money, you don't want to allocate 100% of
your time for recruiting. You want to allocate a fair
amount of time to raising money for that block of time
until you're successful at it. >> One more question. >> One more question anybody,
okay, go ahead. >> On the surface some of the
advice students contradictory because you emphasized
focusing on a plus pass, and delegating less important
things, but then you said it's good to write like few page
script for your receptors. Focus on all the details. How do you harmonize those
goals? >> It's a 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 gotta 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 in, 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 and 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 you that the foundation isn't
actually that, that solid. So eh, 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 scales, 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 who can't won't get
hired. Each team, and each leader, will tend to
enforce that themselves, to see whose almost never
doing it. So, it's partially, like, how do you start, and at
cultures like that, I mean, the, key to culture is
it's a rule. It's a frame work for making
decisions. And if you have a cultured
people learn how to make decisions across that
culture and you're never day anything,
except just yeah watch. And you know and promote and
move people around. Cool, well I guess that's it,
thank you.
I included this lecture in my eighth newsletter, but I originally got this video from a great twitter thread.