#41 The Hard Thing About Hard Things Building a Business When There Are No Easy Answers

Summary Notes


In this episode of Founders, the host delves into Ben Horowitz's book "The Hard Thing About Hard Things," exploring the author's candid insights on entrepreneurship without a set formula. Ben Horowitz shares his journey from entrepreneur to CEO to venture capitalist, emphasizing that there's no recipe for success in complex, dynamic challenges like building a high-tech company or crafting hit songs. Instead, Horowitz offers his story and the lessons learned to guide and inspire a new generation of founders. The host connects these themes with the podcast's mission to learn from past company builders, highlighting Horowitz's partnership with Marc Andreessen and their evolution from Netscape to the venture capital firm Andreessen Horowitz. The episode underscores the importance of determination, embracing one's unique background, and learning from the experiences of other founders to navigate the unpredictable path of building a business.

Summary Notes

The Fallacy of One-Size-Fits-All Solutions

  • Ben Horowitz critiques the idea that complex challenges can be solved with simple, universal recipes.
  • He emphasizes the dynamic nature of problems like building a high-tech company or leading a team in distress.
  • Horowitz argues that while there are no formulas for such situations, advice and experience can still be valuable.

"There's no recipe for really complicated, dynamic situations. There's no recipe for building a high tech company. There's no recipe for leading a group of people out of trouble."

This quote underlines the core message of Horowitz's book, "The Hard Thing About Hard Things," which is that there are no easy, one-size-fits-all solutions to complex entrepreneurial challenges.

Learning from Experience and Sharing Knowledge

  • Horowitz shares his personal entrepreneurial journey to provide clues and inspiration to others.
  • His book aims to help those in the struggle of building businesses by sharing experiences rather than offering a formula.

"Instead, I present my story and the difficulties that I have faced as an entrepreneur, a CEO, and now as a venture capitalist."

Horowitz's quote explains his approach in the book, focusing on storytelling and personal challenges to guide other entrepreneurs through difficult times.

The Essence of Founders Podcast

  • The podcast aims to learn from past company builders by exploring biographies and autobiographies.
  • The host emphasizes the importance of learning from those who have already built successful companies.

"We're trying to learn from the company builders that came before us."

This quote captures the purpose of the Founders podcast, which is to extract valuable lessons from the experiences of successful entrepreneurs.

Valuable Lessons from Business School and Startups

  • Working at a startup provides more practical learning than business school.
  • Meeting successful entrepreneurs can be a pivotal and inspirational experience.
  • The speaker recalls a significant interaction with a donor who provided practical business insights.

"Of course, working at a startup. Right. But then she said the thing in business school that was most helpful was meeting entrepreneurs that had built companies."

The quote highlights the speaker's belief that real-world experience and interactions with established entrepreneurs are more educational than traditional business school curricula.

The Influence of "The Hard Thing About Hard Things"

  • The book "The Hard Thing About Hard Things" has been influential for many founders, including Matilda Collin of Front.
  • Horowitz's book is valued for its honesty about the difficulties of entrepreneurship and managing mental health.

"She said the book that helped her the most was the hard thing about hard things by Ben Horowitz."

This quote points out the impact of Horowitz's book on current entrepreneurs, emphasizing that understanding the universal difficulty of building a company can help maintain focus on progress.

The Early Internet and Netscape

  • Ben Horowitz was amazed by Mosaic, an early graphical interface for the Internet.
  • He joined Netscape, co-founded by Jim Clark and Mark Andreessen, because he saw the Internet as the future.
  • Horowitz reflects on the industry leaders' initial skepticism about the Internet's significance.

"It was so obviously the future and I was so obviously wasting my time working on anything but the Internet."

The quote expresses Horowitz's realization of the Internet's potential and his decision to pivot his career accordingly.

The Longstanding Partnership of Horowitz and Andreessen

  • Horowitz describes his first encounter with Mark Andreessen as a job interview that focused on deep technological insights.
  • The partnership between Horowitz and Andreessen has lasted over 20 years and spanned multiple companies.
  • Their ability to challenge each other's thinking is cited as a key to their successful collaboration.

"After the interview, I phoned my brother and told him that I'd just interviewed with Mark Andreessen, and I thought he might be the smartest person I'd ever met."

Horowitz's quote reflects his immediate recognition of Andreessen's intelligence, which later became a foundation for their long-term partnership.

Founding Loudcloud and Opsware

  • Horowitz and Andreessen identified a market need for scaling software to handle massive traffic loads, which led to the idea for Loudcloud.
  • Loudcloud, which later became Opsware, was founded to address the challenges of deploying scalable software for large user bases.

"There ought to be a company that does that all for them."

This quote summarizes the moment of inspiration that led to the creation of Loudcloud, recognizing a gap in the market for scaling software infrastructure.

Identification of Business Ideas

  • Business ideas often stem from personal problems that are not unique to the individual.
  • A simple and effective definition of business comes from Richard Branson: a business is an idea that will make someone's life better.
  • Viewing business through the lens of solving problems opens up infinite opportunities for creation.

"A business is just an idea that will make someone's life better."

This quote from Richard Branson encapsulates the essence of entrepreneurship as a means to improve lives by addressing problems, which is central to the identification of viable business ideas.

Loudcloud's Journey and Capital Raising

  • Ben Horowitz shares the experience of raising funds for Loudcloud before the dot-com burst.
  • Despite an initial high valuation, the market changed rapidly, forcing Loudcloud to IPO as a means of raising capital.
  • The narrative highlights the volatility of capital markets and the challenges faced by startups during that period.

"We were raising money in a weird environment. In the first nine months we were able to raise at a 700 million dollar valuation, and just a few short months later, we couldn't raise any money at all."

Ben Horowitz describes the dramatic shift in the investment climate during the early days of Loudcloud, emphasizing the unpredictable nature of startup financing.

The Importance of Frugality in Business

  • Frugality is highlighted as a key factor in the success of startups.
  • The question "What would you do if capital were free?" is considered dangerous because it can lead to imprudent spending.
  • Constraints on capital often lead to more creative and effective solutions.

"The thinking this question leads to can be extremely dangerous."

This statement reflects the potential pitfalls of imagining a scenario where capital is limitless, which can lead to reckless decision-making and a lack of financial discipline.

Focusing on the Positive Market

  • Entrepreneurs should focus on the segment of the market that appreciates their product rather than dwelling on negative feedback.
  • It is normal for more people to not use a product than to use it; success is not about universal appeal but about serving a specific audience well.
  • Negative feedback is inevitable, but it should not deter entrepreneurs from their vision.

"You only need one investor to say yes. It's best to ignore the other 30 who say no."

Ben Horowitz conveys the importance of perseverance and selective attention when seeking investment, emphasizing that a single affirmative can outweigh numerous rejections.

The Evolution of Loudcloud to Opsware

  • Loudcloud's transition from hardware to software is compared to Pixar's early pivot.
  • Ben Horowitz discusses the importance of asking different questions to find innovative solutions.
  • The narrative includes a strategic decision to merge with Data Return, and the realization that it would not work, leading to a focus on software.

"What would I do if we went bankrupt? The answer that came up with surprised me."

Ben Horowitz shares a pivotal moment where he considered the worst-case scenario, which led to a transformative idea that ultimately contributed to the success of Opsware.

Strategic Decisions and Acquisitions

  • Ben Horowitz discusses the strategic acquisition of Tangram to preserve a crucial contract with EDS.
  • The acquisition demonstrated the importance of understanding and delivering on client needs.
  • This strategic move exemplifies how a relatively small investment can secure a much larger and vital revenue stream.

"If Tangram can come free with Opsware, then Frank will love us."

This dialogue illustrates the strategic thinking behind acquisitions and the importance of aligning product offerings with client desires to secure business deals.

The Sale of Opsware and Horowitz's Reflections

  • The sale of Opsware to Hewlett-Packard marked the end of a long journey for Ben Horowitz.
  • Despite the emotional difficulty, the sale was a business success.
  • Horowitz's experiences laid the foundation for his future venture in creating a new type of venture capital firm.

"I couldn't believe that I'd sold what it took eight years and all of my life force to build."

Ben Horowitz reflects on the emotional impact of selling Opsware, conveying the personal investment and the eventual realization of its necessity and success.

Entrepreneurial Wisdom and Venture Capital

  • Ben Horowitz emphasizes the importance of persistence and belief in finding a solution when building a company.
  • He learned from Andy Grove the value of focusing on actionable feedback rather than praise.
  • The experiences and knowledge gained are passed on to future generations of entrepreneurs through books and mentorship.

"Founders should not play the odds. When you are building a company, you must believe there is an answer, and you cannot pay attention to your odds of finding it."

This quote underscores the entrepreneurial mindset of determination and focus on solutions, regardless of the perceived probability of success.

Early Warning Ignored by CEOs

  • CEOs of companies like Cisco, Siebel, and HP ignored signs of an impending slowdown after the dot-com crash.
  • Despite warnings, CEOs provided strong guidance until they missed their financial targets.
  • Andy Grove suggested CEOs were not lying to investors but to themselves.
  • Founders often only acknowledge positive indicators and dismiss negative ones.

"But despite perhaps the most massive and public early warning system ever, each CEO reiterated strong guidance right up to the point where they dramatically whiffed their quarters."

This quote highlights the CEOs' disregard for clear warnings and their continued positive outlook until their companies faced financial setbacks.

Human Bias Towards Positive Indicators

  • Humans, especially builders, tend to focus on positive leading indicators.
  • A CEO may react enthusiastically to a 25% increase in application engagement but rationalize away a 25% decrease.
  • Founders often act on positive signs while finding excuses for negative ones, which can lead to skewed decision-making.

"For example, if a CEO hears that engagement of her application increased an incremental 25% beyond the normal growth rate, one month she will be off to the races, hiring more engineers to keep up with the impending tidal wave of demand."

This quote exemplifies the tendency to overreact to positive news while underplaying negative developments.

Focus on Actionable Steps

  • Time should be spent on finding solutions rather than dwelling on past mistakes.
  • Andy Grove emphasized the importance of focusing on what one might do instead of what could have been done.

"Spend zero time on what you could have done and devote all of your time on what you might do."

This quote conveys the advice to concentrate efforts on future actions rather than past errors.

Importance of Training

  • Andy Grove stressed the high leverage of training activities by managers.
  • Even a 1% improvement in performance from training can result in significant gains for the company.

"Training is quite simply one of the highest leverage activities a manager can perform."

The quote underscores training as an effective tool for improving overall company performance.

Contrasting Big Company Executives with Founders

  • The role of a big company executive differs from that of a small company executive.
  • Big company executives are often reactive, dealing with numerous demands and limiting new initiatives.
  • Founders must proactively drive their company forward as nothing happens without their input.

"When you're a founder, nothing happens unless you make it happen."

This quote contrasts the proactive nature required of founders with the reactive nature of big company executives.

Title Strategy in Companies

  • There are differing opinions on how to use titles within a company.
  • Mark Andreessen advocates for generous titles as they are a cost-effective way to satisfy employees.
  • Mark Zuckerberg prefers lower titles to maintain fairness and emphasize the importance of product and engineering teams.

"Titles cost nothing."

This quote reflects Andreessen's perspective that titles are an inexpensive way to reward employees.

Determination vs. Intelligence

  • Paul Graham of Y Combinator believes determination is more important than intelligence for startup success.
  • A person with high determination can be successful even with average intelligence.

"Determination is greater than intelligence."

This quote summarizes the argument that determination is a stronger predictor of success than intelligence.

The Unreliability of Brilliant Individuals

  • Hiring based on intelligence alone can be problematic if the individual lacks reliability.
  • The story of Arthur at Opsware illustrates the downfall of a brilliant but unreliable employee due to personal issues.

"Some brilliant people can be totally unreliable."

This quote serves as a cautionary reminder that intelligence does not guarantee reliability or success.

Unique Company Culture

  • Establishing a unique company culture can involve shock tactics.
  • Jeff Bezos used the concept of "door desks" at Amazon to instill a culture of frugality.

"We look for every opportunity to save money so that we can deliver the best products for the lowest cost."

This quote explains the rationale behind Amazon's frugal practice, which aligns with its long-term goals.

Hiring for Strength

  • Focus on hiring for strengths rather than the absence of weaknesses.
  • The right strengths can compensate for areas where an employee may not be as strong.

"Perhaps the most important thing I learned as an entrepreneur was to focus on what I needed to get right and stop worrying about all the things that I did wrong or might do wrong."

This quote emphasizes the importance of concentrating on key strengths during the hiring process.

Learning to Be a Founder

  • Founding a company is a unique experience that cannot be fully taught.
  • Founders learn on the job, and determination is crucial to navigate the unknowns and challenges.

"The only thing that prepares you to run a company is running a company."

This quote captures the essence of the entrepreneurial learning process, which is largely experiential.

Perseverance in Entrepreneurship

  • Successful founders often attribute their success to not quitting.
  • Perseverance is a common trait among great founders, while less successful ones may rationalize quitting.

"They all say, I didn't quit."

This quote reveals the consistent message from successful founders that perseverance is key.

When Not to Sell Your Company

  • Consider market potential and the likelihood of being number one before deciding to sell.
  • If the market is large and you are poised to lead, selling may undervalue your company's potential.

"If you have a good chance of being number one in that market, then you should remain standalone."

This quote provides a guideline for when it may not be advantageous to sell a company.

Venture Capital Firm Founding

  • Ben Horowitz and Mark Andreessen considered founding a venture capital firm based on their experience.
  • They saw the need for a firm where general partners have firsthand experience in founding and running companies.

"Our motto for general partners would be some experience required."

This quote reflects the philosophy behind the venture capital firm envisioned by Horowitz and Andreessen, emphasizing the value of experience in guiding other entrepreneurs.

Evolution of Entrepreneurship and Community

  • In the mid-1990s, entrepreneurship lacked a sense of community or movement.
  • Ben Horowitz and Mark Andreessen were early entrepreneurs during the internet's infancy, pre-social media era.
  • The entrepreneurial landscape has shifted in the last decade, fostering a community where entrepreneurs socialize and learn from each other.
  • This community has facilitated word-of-mouth marketing for venture capital firms like Horowitz and Andreessen's.

When Mark and I first became entrepreneurs back in the mid 1990s, we did not know many other entrepreneurs. We just did what we did without really seeing ourselves as part of a larger movement or a community.

This quote highlights the isolation felt by early entrepreneurs like Horowitz and Andreessen due to the lack of a broader entrepreneurial community during the 1990s.

Venture Capital Firm Strategy

  • The strategy to attract entrepreneurs involved learning from other founders and applying those insights.
  • Horowitz and Andreessen aimed to systematize and professionalize their network to gain a competitive advantage.
  • They drew inspiration from Michael Ovitz, founder of CAA, who revolutionized Hollywood's talent industry by shifting power to talent through an integrated network.
  • Horowitz and Andreessen replicated CAA's model for their venture capital firm, emphasizing the importance of learning from successful founders.

We decided to copy CAA's operating model nearly exactly, and the note is just copy from great founders, which is the whole point of reading these books and then sharing the ideas with you.

This quote elucidates the strategy of emulating successful business models, specifically how Horowitz and Andreessen adopted Michael Ovitz's approach for their venture capital firm.

Embracing Individuality in Entrepreneurship

  • Horowitz encourages embracing one's unique background and instincts in entrepreneurship.
  • Individual perspectives and approaches can provide a competitive edge and contribute to the diversification of ideas.
  • The concept of adding personal uniqueness to proven ideas can lead to innovation and growth within industries.

As I got further into it, I realized that embracing the unusual parts of my background would be key to making it through. It would be those things that would give me unique perspectives and approaches to the business, the things that I would bring to the table that nobody else had.

This quote stresses the significance of leveraging one's unique experiences and qualities in business to create distinctive solutions and strategies.

Supporting Founders Podcast

  • The podcast is ad-free, independent, and relies on direct financial support from listeners.
  • There are multiple ways to support the podcast: becoming a founder member, subscribing to Founders Notes, purchasing books through affiliate links, and leaving reviews or recommending episodes on podcast platforms.
  • The podcast aims to document the history of entrepreneurship and share valuable lessons from company builders with a global audience.

So if you listen to my podcast and you like the work that I'm doing here, please directly support it.

This quote is a call to action for listeners to support the podcast financially, ensuring its continued production and the dissemination of entrepreneurial knowledge.

Gratitude to Listeners

  • The podcast host expresses gratitude to listeners for choosing and supporting the podcast amid a vast selection of other podcasts.
  • The host acknowledges the challenge of starting and sustaining a podcast without a large social following or network support.
  • The host emphasizes the importance of listener support in preventing the podcast from becoming inactive like many others in the directory.

Thank you for listening. If you listen this far, I really appreciate you.

This quote is an expression of sincere thanks to the listeners for their time and support, which is crucial for the podcast's success and longevity.

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