The Hard Thing: probably the best book for business founders from a practical perspective. Together with Zero To One by Peter Thiel. And Dan Shapiro’s Hot Seat.

Not one of these simple concepts is much blabber la books, but it is very practical and illustrative of many aspects of being the leader in a growing startup.

The CEO is a decision-making machine, making decisions with little information against odds and diverse interests.

About hiring the right team.

Breathes humility—no blasé BS.

Ben Horowitz was the CEO of Netscape, the company that was one of the first to free us from Microsoft’s hold on the computing industry.

Someone writing new functionality for computers no longer wrote for Microsoft’s proprietary platform. Instead, they wrote to the Internet and World Wide Web’s standard interfaces. Once Microsoft lost its grip on developers, it became only a matter of time before it lost its monopoly on operating systems. Along the way, Netscape invented many of the foundational technologies of the modern Internet, including JavaScript, SSL, and cookies.

Horowitz disagrees with the idea that companies should ask customers what they want. Like Steve Jobs, he disagrees and is convinced companies are responsible. This contrasts strongly with current views in larger companies that define the customer’s input as the most valuable factor in determining the way forward with products.

But as Steve Jobs said, people don’t know what they want until you show it to them. Horowitz holds a similar opinion.

It turns out that is exactly what product strategy is all about—figuring out the right product is the innovator’s job, not the customer’s job.

…

The customer only knows what she thinks she wants based on her experience with the current product. The innovator can take into account everything that’s possible, but often must go against what she knows to be true. As a result, innovation requires a combination of knowledge, skill, and courage.

Horowitz provides practical advice, hates poorly run organizations, and has clear views on improving.

In good organizations, people can focus on their work and have confidence that if they get their work done, good things will happen for both the company and them personally. It is a true pleasure to work in an organization such as this….
In a poor organization, on the other hand, people spend much of their time fighting organizational boundaries, infighting, and broken processes. They are not even clear on what their jobs are, so there is no way to know if they are getting the job done or not.

He discusses very practical matters, such as how to hire executives and other staff, manage the sales process, and execute performance evaluations.

Often companies defer putting performance management and compensation processes in place. This doesn’t mean that they don’t evaluate employees or give pay raises; it just means they do so in an ad hoc manner that’s highly vulnerable to political machinations.

I would add cynically that in sick organisations, there is no guarantee whatsoever that this will be different when a formal process is in place. In my experience, this can still be turned into bureaucratic BS, fulfilling only the goal of ticking boxes.

Therefore, you must have a formal, visible, defensible promotion process that governs every employee promotion

Promoting people above their competency is not only a danger to watch out for – the famous Peter principle. But also, if f you unjustly promote someone to a title that is crappy person, he will become the reference – the Law of Crappy People.

… the Peter Principle holds that in a hierarchy, members are promoted so long as they work competently. Sooner or later they are promoted to a position at which they are no longer competent
“The Law of Crappy People states: For any title level in a large organization, the talent on that level will eventually converge to the crappiest person with the title.

He quotes Zuckerberg, who wants engineers at the same level as business

Next, he finds that businesspeople often carry inflated titles versus their engineering counterparts. While he recognizes that big titles help them out externally with getting meetings, he still wants to have an organization where the product people and engineers form the cultural core, so he strives to keep this in check as well.

Horowitz warns that short-term thinking may lead management to make too many business decisions too much.

While it may work to have individual employees who optimize for their own careers, counting on senior managers to do all the right things for all the wrong reasons is a dangerous idea.

…

“technical debt” is now a well-understood concept. While you may be able to borrow time by writing quick and dirty code, you will eventually have to pay it back—with interest. Often this trade-off makes sense, but you will run into serious trouble if you fail to keep the trade-off in the front of your mind. There also exists a less understood parallel concept, which I will call management debt. Like technical debt, management debt is incurred when you make an expedient, short-term management decision with an expensive, long-term consequence. Like technical debt, the trade-off sometimes makes sense, but often does not. More important, if you incur the management debt without accounting for it, then you will eventually go management bankrupt.

What to read next:
Peter Thiel – Zero To One.

What to listen to.
a16z podcast.