September 2024At 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.
