đź“š The Hard Thing About Hard Thing Book Review

The Hard Thing About Hard Things Book Review Building a Business When There Are No Easy Answers

Author: Ben Horowitz Who should read this book: Anybody who is or aspires to be an executive

The Hard Thing About Hard Things, written by Ben Horowitz, is an honest look into the life, and struggles, of a public-company CEO. Ben Horowitz is a Venture Capitalist at Andreesen Horowitz, and before that he was CEO of Loudcloud and Opsware. The book has two main parts: stories from his time as CEO of Loudcloud and Opsware and lessons learned as CEO. I would recommend reading both, I learned equal amounts from both.

Part 1 - Building Loudcloud

Loudcloud was one of the first Infrastructure-as-a-Service (think AWS) businesses. Loudcloud rented servers and other Internet-infrastructure to new Internet businesses and during that time, the late 1990’s, there were plenty. Loudcloud experienced crazy growth, growing from 0 employees to 600 in only eighteen months. But with the turn of the century came the Dot-Com crash and all of those new Internet companies, who were Loudcloud customers, went bankrupt. Loudcloud went from a business valued at nearly 1 billion dollars to one valued at less than 1/10th that number. It was a crisis-moment for Loudcloud, it’s customers were disappearing and it’s employees, who all dreamed of getting rich off stock options, saw their stock options become worthless. Buying and managing servers on behalf of others requires a lot of capital and is relatively low margin without scale. In the early 2000’s, Loudcloud had no opportunity to scale. Loudcloud had to get out of the business they were in and Ben had to get as much value for his employees and investors as he possibly could. Through a series of complicated financial transactions, Loudcloud sold it’s primary hardware business to EDS and became Opsware, an Internet-infrastructure management software company. Software businesses have much higher margins than hardware businesses. Opsware had its own set of challenges to overcome, namely, turning software that was specific to Loudcloud into software that could be used by anybody. They would figure that out and go on to sell to HP for nearly 2 billion dollars. Ben Horowitz and team built a billion dollar business, saw it collapse, and out of the rubble built a second business that was even bigger.

The takeaways were left for the reader to discover in these first few chapters. My biggest takeaway was that being a CEO can be incredibly lonely. The hardest decisions, the ones that affect the lives of everyone around you, and the accountability of those decisions rest alone on your shoulders.

Part 2 - Learning from mistakes

This part of the book is broken down into digestible lessons from the mistakes (and successes) of running a large business. There are quite a few. In the future, I can see myself using the book as a reference if I ever run into similar challenges. I’ll list them all here and then go into a few of my favorites.

When things fall apart

  • The Struggle
  • CEOs Should Tell It Like It Is
  • The Right Way to Lay People Off
  • Prepare to Fire an Executive
  • Demoting a Loyal Friend
  • Lies That Losers Tell
  • Lead Bullets
  • Nobody Cares

Take care of the people, the products, and the profits - in that order

  • A Good Place to Work
  • Why Startups Should Train Their People
  • Is It Okay to Hire People from Your Friend’s Company?
  • Why It’s Hard to Bring Big Company Execs into Little Companies
  • Hiring Executives: If You’ve Never Done the Job, How Do You Hire Somebody Good?
  • When Employees Misinterpret Managers
  • Management Debt
  • Management Quality Assurance

Concerning the going concern

  • How To Minimize Politics in Your Company
  • The Right Kind of Ambition
  • Titles and Promotions
  • When Smart People Are Bad Employees
  • Old People
  • One-on-One
  • Programming Your Culture
  • Taking the Mystery Out of Scaling a Company
  • The Scale Anticipation Fallacy

How to lead even when you don’t know where you are going

  • The Most Difficult CEO Skill
  • The Fine Line Between Fear and Courage
  • Ones and Twos
  • Follow the Leader
  • Peacetime CEO/Wartime CEO
  • Making Yourself a CEO
  • How to Evaluate CEOs

First rule of entrepreneurship: There are no rules

  • Solving the Accountability vs. Creativity Paradox
  • The Freaky Friday Management Technique
  • Staying Great
  • Should You Sell Your Company?

The Struggle

“Every entrepreneur starts her company with a clear vision for success. You will create an amazing environment and hire the smartest people to join you. Together you will build a beautiful product that delights customers and makes the world just a little bit better. It’s going to be absolutely awesome.

Then, after working night and day to make your vision a reality, you wake up to find that things did not go as planned. Your company did not unfold like the Jack Dorsey keynote that you listened to when you started. Your product has issues that will be very hard to fix. The market isn’t quite where it’s supposed to be. Your employees are losing confidence and some of them have quit. Some of the ones who quit were quite smart and have the remaining ones wondering if staying makes sense. You are running low on cash and your venture capitalist tells you that it will be difficult to raise money given the impending European economic catastrophe. You lose a competitive battle. You lose a loyal customer. You lose a great employee. The walls start closing in. Where did you go wrong? Why didn’t your company perform as envisioned? Are you good enough to do this? As your dreams turn into nightmares, you find yourself in the Struggle.

This chapter hit home. Who with some amount of accountability hasn’t thought “am I good enough to do this”? Ben laid out a few helpful strategies.

  • Don’t put it all on your shoulders - Although nobody else shares your burden, the more brains on the problem the better. Tell people like it is and ask for what you need.
  • This isn’t checkers; this is chess - Be creative and don’t throw out any options. What’s a wild solution to your problem? The idea you’re certain won’t help might just be what’s needed.
  • Play long enough and you might get lucky - Tomorrow has different problems and solutions than today. Stick with it long enough and your problems today will probably get easier tomorrow.
  • Don’t take it personally - You probably hold a lot of the blame for whatever predicament you’re in but everybody makes mistakes. Making mistakes is necessary. Don’t take any of them too personally.

How To Minimize Politics in Your Company

“When you are CEO, senior employees will come to you from time to time and ask for an increase in compensation. They may suggest that you are paying them far less than their current market value. They may even have a competitive offer in hand. Faced with this confrontation, if the request is reasonable, you might investigate the situation. You might even give the employee a raise. This may sound innocent, but you have just created a strong incentive for political behavior.”

That type of behavior has happened at every company I’ve ever worked at and it’s always felt wrong but I didn’t realize why until reading that passage - it’s political. Ben lays out a few ways he’s found to avoid workplace politics. The more senior the people you manage, the harder it will be. Your decisions should be based on process, not intuition.

  • Hire people with the right ambition - People who care about their own success above the success of the people around them will deliberately try to make things more political if they stand to gain from it.
  • Have a strict process for performance evaluation and compensation - Performance and compensation reviews should be well-structured and regular. Doing so is the best way to make sure employees are rewarded for their performance, not their politics. If you promote someone, make sure it’s formal, transparent, and defensible. Anything else will cause everyone else to question the true motive behind the promotion.
  • Be careful with “he said, she said” - Complaints about someone’s behavior and performance happen. If an employee is complaining about another and you agree with the complaints then you’ve already waited too long to deal with the problem. If you don’t agree, you should stop the conversation immediately and make it clear that you disagree. You don’t want the complaint to become a self-fulfilling prophecy. Later, you can privately investigate the complaint.

How to Evaluate CEOs

“No position in a company is more important than the CEO and, as a result, no job gets more scrutiny. The job is so poorly defined that you can end up doing all kinds of nutty things (especially if you listen to some people who say things like “the CEO should be the number-one salesperson”).

Here are the key questions we ask:

  1. Does the CEO know what to do?
  2. Can the CEO get the company to do what she knows?
  3. Did the CEO achieve the desired result against an appropriate set of objectives?

Everybody, including myself, always has an opinion of the CEO. After reading this book I’m probably going to start keeping my opinions to myself, but how often were those opinions fair? Not very.

  • Does the CEO know what to do? - There are two aspects to this: strategy and decision making. How well can the CEO set the strategy? Can the CEO tell the story of the company and use that story to set the context for the specific work that each employee is doing? Can employees use that story to hire new employees or bring in new customers? The CEOs primary job responsibility is making decisions, how well are they at systematically acquiring knowledge of everything that might impact any decision? How well do they understand their competitors, employees and finances?
  • Can the CEO get the company to do what she knows? - A company’s ability to execute is based on having the necessary skills and allowing employees to execute on the shared mission. Is the CEO building a world-class team? How easy is it for any individual contributor to get her job done?
  • Did the CEO achieve the desired results against an appropriate set of objectives? - Are the objectives relevant to this business? Are they so small it will require no hard work to achieve them or are they so big that they can’t get anybody to believe him?

The first two are leading indicators, they help understand how the present is going. The last is lagging which helps understand how the past went.

Final Thoughts

I took away more from this book than I have most other “business” books. Ben Horowitz doesn’t try to paint a rosy picture of his time as CEO, in fact he does the opposite. He completely avoids talking about the struggles of the non-CEO worker, but that wasn’t the point of the book. Although his vantage point is as CEO, I found the takeaways applicable in my not-a-CEO role. If you aspire to run a company, or lead people in any capacity, you should read this book.