Lenny's Podcast: Product | Career | Growth
00:35:36 · Eric Ries
So harder is easier is a principle that says, if you're willing to do the work upfront to commit to quality, to design, to ethics, to integrity, to safety, whatever the thing, I don't want to tell you what your values are, you tell me what they are. If you're willing to be principled in your decision making, you will get these unexpected rewards. Now, you can't do it for the reward or it doesn't work. You have to do it for the thing itself. Trustworthiness is the most underrated asset in all of business. And the things that create trustworthiness, by definition, stack rank to the bottom if we do it by ROI. Because doing the right thing has intangible rewards, but tangible costs. So let me give you another story. Because now we've been talking about lofty stuff, and I want to talk about something super practical. And I mentioned Cloudflare before. So let me actually tell the Cloudflare story. I like Cloudflare because Matthew Prince and his co-founders, they were really anti-consulting BS talk. In the early days, they came out of Harvard Business School and so they were traumatized. They were just like, "No, I don't want to hear about mission statement. I don't want to hear about values. We are making a firewall and putting it in the cloud. It's not that complicated. We don't want to hear it." So for years, they had no mission statement. And this is a critical point. As leaders, we get so focused on value statement, mission statements. We forget the mission statement is not the mission. The map is not the territory. Mission is an emergent property of the living superorganism of the thing we're birthing. Okay? It's not something you can slap on with a label. You have to build it in. You want to have a company that stands for quality, you got to build quality in from the inside. Deming taught this in the 40s. This is not some new idea. This is a critical idea. This is what craftsmanship really means. Okay. So we know that Cloudflare had a mission because quite often they would do this harder is easier stuff. And without even really knowing why. There's a very famous example in their history where pro-democracy protesters, I want to say ... I forget what nation state they were pissing off. I better not say, in case I get it wrong.
00:37:35 · Eric Ries
Pissing off some nation state, were having state-sponsored hackers trying to take their websites down so they couldn't coordinate their pro-democracy protests. They were going around Silicon Valley begging big tech companies to help them defend their websites. No one would do it. All these big mega companies, even Google were just like, "I'm too scared." And so Cloudflare, the tiny startup is like, "We'll do it." These were free tier customers. They weren't even paying any money. And they're like, "Yes, we will incur the wrath of nation state level hackers to protect you because it's the right thing to do for no reward whatsoever." That was just the kind of company they were. So anyway, a couple years in, they're having lunch and one of the engineers says, "You know why I like working at this company? I just feel like it's the first place I've worked where we're trying to make a better internet." And everyone on the table's like, "Yeah, make a better internet." Someone asked Matthew, "Oh, is that our mission statement?" Smack. "No, we don't have a mission statement. I know what you're talking about? No." But it actually was. Over time, the engineers, people who worked there kept saying, "Make a better internet." That was how we talk about it. And eventually the founders had to be convinced, "Okay, let's adopt this as our mission statement," which they did. That's their mission statement to this day. They had to eventually adopt formal values. As you get bigger, these things really matter. It matters that you document those emergent properties, otherwise how are people supposed to know what they are? Their number one value, by the way, is be principled, which is the ultimate harder is easier move. So this all sounds great. It's fun to have values. It's fun to have a mission statement when it doesn't cost you anything. But sometimes it can be very expensive. It can make your life a lot harder. That's why we call the principle harder is easier. One day, a junior engineer, not like some senior executive or anything, walks into Matthew Prince's office and he says, "Boss, isn't our mission statement to make a better internet?" When you're a CEO, any conversation that starts this way is definitely going to be extra work for you.
00:39:34 · Eric Ries
So you're like, "What is it now?" It's like, "Well, you were saying at the board meeting that our number one driver of revenue, the thing that causes people to upgrade from our free to premium plans," this is a few years ago now, "Is web encryption, SSL encryption. You said that makes sense because SSL encryption is expensive to offer, we can't offer it for free. We have to get the certificates and pay for them. We have to do all this extra cryptographic stuff as compute ... We have scarce compute, da-da-da-da-da." "Sure." "But boss, wouldn't a better internet be an encrypted internet?" And he's like, "Yes. So what's your point?" So if it would be better, why are we giving it away for free? And so many people have heard this story. If you've ever been a middle manager in a company, okay, you know this, you're just like, "Oh my God. Every day someone walks into your office that's like, here you boss, let's give our product away for free for no reason." Your job as a middle manager is to be like, "No, we have a strategy. Get back on the strategy. Redirect. Thank you for your buy-in and your input, but we have a job to do." So everyone's expecting Matthew to react that way and would be the most normal thing in the world. This is our most profitable product and you're saying we should give it away for free, get lost. No. Matthew told me once I saw it, I couldn't unsee it. And he uttered the three keywords, he said, "Let's figure it out." Figure it out. This is the leadership principle I think is so powerful, the figure it out principle. If you're committed to something, you stand for quality or whatever, it's going to make life harder. The best leaders, the ones I really admire, they revel in it. They love the difficulty. Because every time you have one of these impossible dilemmas, it's a chance to teach what you really stand for. So Matthew insisted the whole team rally to figure out how to give encryption away for free. Now they couldn't just give it away for free. He's like, "Bankrupting the company won't achieve the mission." We had to find a way to make it sustainable. And I won't go through all the technical details of how they managed to get the cost. They had to hand roll their own software and assembly language. They had to do these complicated biz dev deals with certificate authorities.
00:41:37 · Eric Ries
They figured out how to do it and they drove their own cost down. Now, keep in mind that at any time ... First of all, I could have used the difficulty as an excuse, "Oh, it's too hard. We can't do it." Give up. Once they did it, they could have said, "Wait a minute, this is just free margin. We can make our costs lower and then we just get free money." When they shipped it, they had to report to their board on what happened. The conversion rates for premium product went down. So they could easily have bailed out at that point, but they didn't. They stuck with it because this is what we stand for. Now, of course, it's a happy ending story. The top of funnel increased by an order of magnitude. In fact, to this day, people still talk about how Cloudflare is like the reason you take for granted we have an encrypted internet. The trust that they gained is the reason why they're a $70 billion company today. But most leaders, when asked to defend their principles, can't do it. Because they've been taught ROI-based thinking, they've been taught shareholder primacy, they've been taught that that's the path of maximum profitability. To give you an easy contrast, Andrew Mason, the founder of Groupon once told me this story. Everyone remember Groupon? Maybe not now. It's kind of fallen out of public consciousness, but there was this time where Groupon was one of the fastest growing private companies in America. It was powered by a daily email with a cool deal. And the whole thing was you got one email a day from Groupon. They went public on the one email a day, that's how successful it was. And I remember he told me this story one day, his executives and employees started coming into his office and they'd be like, "You know, boss, we need to make the quarter. We need to make more money. We're a public company now. We don't want to be better than one email. Have you considered two emails?" And he was like, "No. One email a day," he's like, "That's our whole thing." But he said, over time, they ground him down and they kept saying, they were using language that sounds kind of lean start-upy. Shouldn't we do an experiment? Shouldn't we look at the data? What about the IR ... it's just like, what about the ROI? And so he's like, "All right, fine. We'll run the experiment." He ran the experiment. Two emails a day makes more money. So he couldn't say no.
00:43:42 · Eric Ries, Lenny Rachitsky
And everything was fine for several months until someone came to his office and said, "You know, boss, you know what'd be better than two email? We should send three emails." And next thing you know, they're sending eight emails. And this is not just Groupon. I have had so many CEOs tell me this exact story about email frequency. Email frequency is like, for some reason, the tip of the spear where it's like, we don't really have any way to defend doing the right thing here. So we did the wrong thing. That destroyed the whole company. But in the short term, we made a bunch of money. So if you can stick to the harder is easier principle, that is the first line of defense against losing whatever it is that makes a company special. [00:44:21] S1: Eric, you're such a wonderful storyteller. I'm just sitting here just compelled. [00:44:27] S0: Well, thank you.
00:44:27 · Eric Ries, Lenny Rachitsky
[00:44:27] S0: Well, thank you. [00:44:28] S1: Oh, man. I am so excited to tell you about this season's supporting sponsor, Vanta. Vanta helps over 15,000 companies like Cursor, Ramp, Duolingo, Snowflake, and Atlassian earn and prove trust with their customers. Teams are building and shipping products faster than ever thanks to AI. But as a result, the amount of risk being introduced into your product and your business is higher than it's ever been. Every security leader that I talk to is feeling the increasing weight of protecting their organization, their business, and not to mention, their customer data. Because things are moving so fast, they are constantly reacting, having to guess at priorities, and having to make do with outdated solutions. Vanta automates compliance and risk management with over 35 security and privacy frameworks, including SOC 2, ISO 27001, and HIPAA. This helps companies get compliant fast and stay compliant. More than ever before, trust has the power to make or break your business. Learn more at vanta.com/lenny. And as a listener of this podcast, you get $1,000 off Vanta. That's vanta.com/lenny. I want to talk through just like, what do you do? So there's write a mission statement. Values, is that a part of this? Just define your values. Talk about the bullet points.