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Founder Mode
September 2024
At a YC event last week Brian Chesky gave a talk that everyone
who was there will remember. Most founders I talked to
afterward said it was the best they'd ever heard. Ron Conway,
for the first time in his life, forgot to take notes. I'm not
going to try to reproduce it here. Instead I want to talk
about a question it raised.
The theme of Brian's talk was that the conventional wisdom
about how to run larger companies is mistaken. As Airbnb grew,
well-meaning people advised him that he had to run the company
in a certain way for it to scale. Their advice could be
optimistically summarized as "hire good people and give them
room to do their jobs." He followed this advice and the
results were disastrous. So he had to figure out a better way
on his own, which he did partly by studying how Steve Jobs ran
Apple. So far it seems to be working. Airbnb's free cash flow
margin is now among the best in Silicon Valley.
The audience at this event included a lot of the most
successful founders we've funded, and one after another said
that the same thing had happened to them. They'd been given
the same advice about how to run their companies as they grew,
but instead of helping their companies, it had damaged them.
Why was everyone telling these founders the wrong thing? That
was the big mystery to me. And after mulling it over for a bit
I figured out the answer: what they were being told was how to
run a company you hadn't founded -- how to run a company if
you're merely a professional manager. But this m.o. is so much
less effective that to founders it feels broken. There are
things founders can do that managers can't, and not doing them
feels wrong to founders, because it is.
In effect there are two different ways to run a company:
founder mode and manager mode. Till now most people even in
Silicon Valley have implicitly assumed that scaling a startup
meant switching to manager mode. But we can infer the
existence of another mode from the dismay of founders who've
tried it, and the success of their attempts to escape from it.
There are as far as I know no books specifically about founder
mode. Business schools don't know it exists. All we have so
far are the experiments of individual founders who've been
figuring it out for themselves. But now that we know what
we're looking for, we can search for it. I hope in a few years
founder mode will be as well understood as manager mode. We
can already guess at some of the ways it will differ.
The way managers are taught to run companies seems to be like
modular design in the sense that you treat subtrees of the org
chart as black boxes. You tell your direct reports what to do,
and it's up to them to figure out how. But you don't get
involved in the details of what they do. That would be
micromanaging them, which is bad.
Hire good people and give them room to do their jobs. Sounds
great when it's described that way, doesn't it? Except in
practice, judging from the report of founder after founder,
what this often turns out to mean is: hire professional fakers
and let them drive the company into the ground.
One theme I noticed both in Brian's talk and when talking to
founders afterward was the idea of being gaslit. Founders feel
like they're being gaslit from both sides -- by the people
telling them they have to run their companies like managers,
and by the people working for them when they do. Usually when
everyone around you disagrees with you, your default
assumption should be that you're mistaken. But this is one of
the rare exceptions. VCs who haven't been founders themselves
don't know how founders should run companies, and C-level
execs, as a class, include some of the most skillful liars in
the world. [1]
Whatever founder mode consists of, it's pretty clear that it's
going to break the principle that the CEO should engage with
the company only via his or her direct reports. "Skip-level"
meetings will become the norm instead of a practice so unusual
that there's a name for it. And once you abandon that
constraint there are a huge number of permutations to choose
from.
For example, Steve Jobs used to run an annual retreat for what
he considered the 100 most important people at Apple, and
these were not the 100 people highest on the org chart. Can
you imagine the force of will it would take to do this at the
average company? And yet imagine how useful such a thing could
be. It could make a big company feel like a startup. Steve
presumably wouldn't have kept having these retreats if they
didn't work. But I've never heard of another company doing
this. So is it a good idea, or a bad one? We still don't know.
That's how little we know about founder mode. [2]
Obviously founders can't keep running a 2000 person company
the way they ran it when it had 20. There's going to have to
be some amount of delegation. Where the borders of autonomy
end up, and how sharp they are, will probably vary from
company to company. They'll even vary from time to time within
the same company, as managers earn trust. So founder mode will
be more complicated than manager mode. But it will also work
better. We already know that from the examples of individual
founders groping their way toward it.
Indeed, another prediction I'll make about founder mode is
that once we figure out what it is, we'll find that a number
of individual founders were already most of the way there --
except that in doing what they did they were regarded by many
as eccentric or worse. [3]
Curiously enough it's an encouraging thought that we still
know so little about founder mode. Look at what founders have
achieved already, and yet they've achieved this against a
headwind of bad advice. Imagine what they'll do once we can
tell them how to run their companies like Steve Jobs instead
of John Sculley.
Notes
[1] The more diplomatic way of phrasing this statement would
be to say that experienced C-level execs are often very
skilled at managing up. And I don't think anyone with
knowledge of this world would dispute that.
[2] If the practice of having such retreats became so
widespread that even mature companies dominated by politics
started to do it, we could quantify the senescence of
companies by the average depth on the org chart of those
invited.
[3] I also have another less optimistic prediction: as soon as
the concept of founder mode becomes established, people will
start misusing it. Founders who are unable to delegate even
things they should will use founder mode as the excuse. Or
managers who aren't founders will decide they should try to
act like founders. That may even work, to some extent, but the
results will be messy when it doesn't; the modular approach
does at least limit the damage a bad CEO can do.
Thanks to Brian Chesky, Patrick Collison, Ron Conway, Jessica
Livingston, Elon Musk, Ryan Petersen, Harj Taggar, and Garry
Tan for reading drafts of this.
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