Oh boy. Ben Horowitz and Marc Andreessen joined Sonal Chokshi on their home turf, the a16z podcast to talk about the future of the world. It was good.
After this podcast I wanted to work for Andreessen and Horowitz. It feels like they want to change the world for the better. Listen to this episode and read Kevin Kelly’s The Inevitable if you need convincing.
If reading isn’t your thing, I have a podcast, https://soundcloud.com/mikesnotes.
Okay, onto the notes.
1/ Founders must understand deeply. “It’s a real common characteristic in great founders that they want to know absolutely everything about the company and how it works. They want to know every knob and every button. They have a strong desire to do every job in the company themselves.” – Horowitz
But they can’t. Founders have to be able to do all the jobs but can’t actually do them.
Milton Hershey epitomized this. He started at a confectionery in Philadelphia. Then in Denver, and New York City. He returned to Pennsylvania and started his own caramel company based on his own recipes.
That company grew and he successfully exited. Hershey created a chocolate company with the proceeds from the sale. He began the same recipe and process discovery with chocolate as he had with caramel.
Hershey never stopped tinkering with chocolate recipes (he worked in his lab even after he retired) but he gave control and management to the people. Hershey could do all the jobs, but turned them over to others.
Phil Knight had a similar experience with Nike. Knight began by importing shoes from Japan at night and on weekends while auditing companies during the day. This was combined with Knight’s experience running cross country and track in college. He built up a deep understanding:
- Of business; from auditing companies and seeing their mistakes.
- Of shoe design; from Bill Bowerman who was always messing around with the shoes.
- Of the Japanese business culture; from importing Tiger shoes.
As his first company – Blue Ribbon Sports – grew, Knight was able to give up control to other people. Knight could do all the jobs, but turned them over to others.
Andy Weissman said when he looks to make an investment, he considers how well the business and the person will scale. Founders have to understand things deeply, so deeply that they understand they can’t and shouldn’t do everything.
2/ Double down on strengths and punt your weaknesses. “We had this great advantage when we started the firm that we ourselves were founders. We probably got more risk tolerant with our view of founders over time. We’re much more interested in the magnitude of the strength than the number of the weaknesses.” – Horowitz
Before Teddy Roosevelt went off to Cuba he was asked to lead a group of men. That’s probably not the best idea Roosevelt wrote:
“Fortunately, I was wise enough to tell the Secretary (Alger) that while I believed I could learn to command the regiment in a month, that it was just this very month which I could not afford to spare, and that there-fore I would be quite content to go as Lt. Colonel if he would make (Leonard) Wood Colonel.”
Roosevelt understood that he could learn to lead the soldier, just not quickly enough, and that his strength was to be second in command.
Horowitz wrote about how companies should approach hiring:
“You hired for lack of weakness rather than for strengths. This is especially common when you run a consensus-based hiring process. The group will often find the candidate’s weaknesses, but they won’t place a high enough value on the areas where you need the executive to be a world-class performer. As a result, you hire an executive with no sharp weaknesses, but who is mediocre where you need her to be great. If you don’t have world-class strengths where you need them, you won’t be a world-class company.”
If you don’t know what your strengths are then you need to invert the problem. “One easier way to figure out what your strengths are is to figure out what they aren’t,” suggested Auren Hoffman. Terry Gross gave similar advice, “you find out who you are by finding out who you’re not.”
3/ Silicon Valley is simple, but not easy to create. “Economic delegations come in and ask ‘what can we do to have our own Silicon Valley?’ Then we go; you want rule of law, ease of migration, ease of trade, deep investments in scientific research, no non-competes, fluid labor laws, the ability to start companies quickly. At some point the visitors get this stricken look on their face and they’re like, but what if we want Silicon Valley but can’t do any of those things?” – Andreessen
It’s simple but not easy to create Silicon Valley.
Good leadership, said Jocko Willink, is simple but not easy.
Gary Vaynerchuk wrote, “one of the hardest things about making your dream, or your small business, or your blog, or whatever is just doing it.”
Charlie Munger said “plain vanilla stock picking is hard enough.”
4/ Be there for network effects. “There are real network effects, geographical network effects and Silicon Valley has the biggest one in technology and you always have to keep in mind – and this is something that gets lost – that there are no local technology companies.” – Horowitz
Why do you have to be in Silicon Valley? To work with the best people.
Why do you need to work with the best people? Because technology is a winner take all.
“There’s nobody who sells internet search to Wyoming,” Horowitz explained. The product of internet search is available to everyone, everywhere, and so you need to create the best version of that. For technology it’s in Silicon Valley. For movies it’s Hollywood. For finance it’s New York (as far as the United States goes).
Often people say you have to be there to get a deep understanding. Percy Fawcett for exploration, Wesley Gray for military interventions, Samuel Zemurray for running an import business.
Other times you have to be there to connect with the people. That’s that Horowitz proposes. Austin Kleon and Nicholas Megalis said the same thing, only about connecting on the internet.
If you can get the right people running something, you get a lollapalooza effect. Taylor Pearson wrote about the value of product-market-founder effect. Replace founder with team and you’ll have something much greater than the sum of its parts.
5/ Too much inertia and you’ll pay the strategy tax. “In a way they (Amazon) have an interesting advantage in that they’re not tied to the last generation of user interfaces so that they don’t have to pay the strategy task for shoehorning in their A.I. into say the iPhone.” – Horowitz
Amazon doesn’t have a device to built an interface on, but that’s good because they can think of new interfaces (and devices) to build.
“In the beginner’s mind there are many possibilities, but in the expert’s mind there are few.” Shunryu Suzuki
“Strategy tax” articulates the weakness (tax) that accompanies the strength (strategy).
The Chicago Black Soxs were unorganized in their fix of the 1919 World Series and because of that failed to get paid by the gamblers who profited. But that disorganizing turned out to be helpful because they didn’t get convicted in the court of law.
Tony Hawk couldn’t skate the same way as other kids, so he had to make up a style that fit him. Later on that style would become popular and Hawk was the best at those tricks.
Imagine if the Apple Watch switched to only voice commands, or the television tracked your eye movement to make selections. Whatever you call it; inertia, fences, tax, it’s a force that acts on your business to provide an advantage but also creates a disadvantage.
Thanks for reading, I’m @mikedariano on Twitter.
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