Invest Like the Best with Patrick O'Shaughnessy
· Ben Horowitz
[00:00:00] S1: One of the things that I learned – so I had a mentor who's a great CEO by the name of Andy Grove. And he was the CEO of Intel, and he famously did the major pivot of them out of the memory business into the microprocessor business. Maybe the greatest tech CEO we've had. And one of the things that he said that, in a way, is very obvious, but I think is also profound is – if you're the leader in the industry, then the growth of the industry is dependent on you. It's up to you to expand the market. Nobody else is going to do it. When I think about the firm, I think of it a lot in those terms. The reason America is America, and there's many narratives on this, but the factual one is we won the Industrial Revolution. We had Henry Ford, and we had Thomas Edison. We had great entrepreneurs. They built great technology. The technology lead led to military lead, led to an economic lead, led to cultural dominance. None of that was by accident. Had we not had all those inventions, had all those companies, which led to everything from winning World War II, we'd be some other thing. We wouldn't be America. So, we're there again. Like, this is the equivalent change of the Industrial Revolution in terms of how everything works – governments, societies, businesses. And we're either going to be the leader of that technology, the provider of that technology, or we're not. And if we're not, we're not going to be the economic superpower, the military superpower, the cultural influence, the standard of the world that we are now. I think that would be bad. I think America's been good for the world and good for giving people a chance, like we talked about before. And so our role in that, from a policy standpoint, from a funding standpoint, from a helping people build standpoint – to make sure that that next set of great companies comes out of America or allied nations – the core ambition is to do our part.
· Patrick O'Shaughnessy
[00:00:00] S0: I want to ask about some of the ingredients to do that well, but just as a quick sidebar on Andy Grove, his book is incredible. Like, everyone should read High Output Management. What very specifically did you learn from him? Like, what did you see him do that impacted the way that you think or behave?
· Ben Horowitz
[00:00:00] S1: I've become so overly influenced by him, it's hard to even pin it down, but I actually wrote the new foreword for it. I actually think that's the best thing I ever wrote, was the foreword to High Output Management. But the reason I wrote that foreword was, it was my favorite book, and I wrote – The Hard Thing About Hard Things was basically intended to be the updated version of it. The thing in High Output Management that he did so well that I tried to do my own version of is – the concepts of management are easy. You'd need an eighth-grade education maybe to kind of understand management. It's not like physics. It's pretty simple. But the psychological part of it is extremely difficult, particularly for a young person, to be able to do. It's super confrontational. You're having to look through the conversation you're having to the entire organization. You really have to be Confucian at times. The good of the whole supersedes the good of the individual. And all these things are complicated to do. His big influence on me was, me trying to not only absorb that, but then tell it in a more up-to-date kind of modern way. I went to visit him. He had this award on the wall, which was Manager of the Year for the Santa Clara Facility of Intel. And it was from 1992. I'm like, "Andy, you were like the biggest CEO in the world. Why did they give you the Manager of the Year Award for the Santa Clara Facility?" And he goes, "Oh, man." He's like, "You know, Santa Clara, it was the lowest quality score. It was the lowest fucking score on everything at Intel. And so I was just like, I'm going over there to talk to them. So I go over there." And he said, "I brought a roll of toilet paper and I put it under my desk. I said, 'When are you going to get this facility up to code?' And they just started in with all this bullshit. Bullshit, bullshit, bullshit, bullshit. And I fucking reached under my chair, put out the toilet paper and I said, 'Clean up your bullshit and tell me when the fuck you're going to be up to code.' And in two months, they were up to code and they were always the highest rated facility thereafter." So they gave him Manager of the Year for that.
· Patrick O'Shaughnessy
[00:00:00] S0: When did you first experience the lessons that drove his success – this confrontational, psychologically difficult aspect of management yourself? How would you encourage other people to get a taste of it? They can't just read about it, obviously.
· Ben Horowitz
[00:00:00] S1: What happens to founders is you invent something and then you've got to build a company. You don't know what you're doing and you make mistakes. And then those mistakes really cost the company and you lose confidence. And that leads you to hesitate. That hesitation is what causes the failure mode. So then the company is indecisive or they get very open. All these guys got so open to input from their team and their executives. The team doesn't have the full context. Only the leaders got the context. So even if they're smarter than you, you still likely can have better judgment because you have all the knowledge. But, you know, they defer. And then if you defer to people who work for you, then that creates a weird political situation, because people jump into the vacuum of, "You're not making the decision, I'll make the decision." And then that feels political to everybody else. So that's the pattern people run into. You really kind of have to build up enough confidence in them to have that confrontation. The hardest version of this, by the way, is the reorg. Because reorg is basically, you're redistributing power to make the company work better, to have communication be better, to not have as much conflict. But what's going to happen is somebody who's really good, who you've had for a long time, is going to lose power. And they're going to be fucking pissed. So then if you compromise the organization so they can maintain their power, then you've just redistributed power from the people doing all the work to the executives. And that's a catastrophe. So it's always that thing where people don't want to have that confrontation. They don't want to tell that person, "Look, the organization's here. You helped us ‘til here, but you either have to be happy in this new role or it's going to be a wrap." When you're young and inexperienced, you know, it's going to hurt to tell him that. But I don't know it's going to help me to do this reorg. I'm not experienced enough to know that. I've never done that before. Or I'm going to go with the known avoid hurt to the theoretical avoid hurt. And that's when you wreck your company.
· Patrick O'Shaughnessy, Ben Horowitz
[00:00:00] S0: You were lucky that when you started Andreessen Horowitz, you and Marc had both had tons of operating experience, both together. [00:00:00] S1: Yeah, I still didn't know what I was doing as CEO, though. [00:00:00] S0: Fair enough. [00:00:00] S1: And he didn't know what he was doing either. If you ask Marc about management now, like he's so different than how he actually did it. And it actually makes him mad if you talk about it too much because he's like, "I got such bad fucking advice, man. They told me to hire all these guys, I shouldn’t have done it." [00:00:00] S0: How do you think he's most different? Like, what would he say is, or what do you observe to him to be the most different? [00:00:00] S1: Marc is a super emotional person. And he's just way more in control of it than he was then, in terms of just like the personality. He used to be like zero or a hundred. So he would be like, full of emotion. "What the fuck are we doing?" Or like, "I'm just not going to say anything." Nothing in between.