I said some version of the following statement several times in the past few weeks.
Assume aliens came down and one of your senior leaders was taken away to their home planet. Do they have a person reporting to them who could step into their role, even if it’s only temporary?
If you are the CEO, this includes you.
It’s remarkable to me, even in companies that are over 100 people, how the answer to this question is no. I get that this can feel theoretically challenging in a very small (less than 20) person company, but it should still be an aspirational goal. Once you get to 100, it should be a requirement for every leader to be able to identify this person.
This should not be viewed as a threat. If you have this conversation with your leadership team (or are on a leadership team having this conversation) and are threatening (or feel threatened), you are missing the point. Realize that things happen and people leave organizations suddenly. They die. They have a dramatic personal change. They get bored. They scale out of their role. They get stopped at the Canadian/US border by CBP agents and can’t get back into the country. The aliens show up.
Less dramatically, leaders go through stretches where they are in a doer mode. The company has a crisis in an area and a leader has to spent 100% of her time working on this area, rather than covering her entire span on control. Or, focus shifts around a product launch and a leader who covers several aspects of the company focuses all of her energy on one of the three areas she has responsibility for. Or, someone really needs a vacation and goes off the grid for two weeks.
As a CEO, a big part of your job is to work “on” the company, rather than “in” the company. At the top of this list is making sure you have the right leadership team and they are functioning in a highly effective way. Part of that is making sure everyone on the team has a backup person identified and is not afraid to have them engage at any moment.
I recently heard the line “sandpaper only works if it is rubbing against something” and loved it.
From Wikipedia: “The first recorded instance of sandpaper was in 1st-century China when crushed shells, seeds, and sand were bonded to parchment using natural gum. Shark skin (placoid scales) has also been used as an abrasive and the rough scales of the living fossil, Coelacanth are used for the same purpose by the natives of Comoros. Boiled and dried, the rough horsetail plant is used in Japan as a traditional polishing material, finer than sandpaper. Glass paper was manufactured in London in 1833 by John Oakey, whose company had developed new adhesive techniques and processes, enabling mass production. Glass frit has sharp-edged particles and cuts well whereas sand grains are smoothed down and do not work well as an abrasive. Cheap sandpaper was often passed off as glass paper; Stalker and Parker cautioned against it in A Treatise of Japaning and Varnishing published in 1688. In 1921, 3M invented a sandpaper with silicon carbide grit and a waterproof adhesive and backing, known as Wet and dry. This allowed use with water, which would serve as a lubricant to carry away particles that would otherwise clog the grit. Its first application was in automotive paint refinishing.”
Every company I’m involved in has issues. Some are minor. Some are major. Some are easy to fix. Some sneak up on you when everything feels like it’s going great. Some are existential crises. Some just feel like existential crises.
Simply put, Something new is fucked up in my world every day.
That’s just the way companies work. And, as long as the company is still around, no matter what size, or level of success, the dynamic is endless. When you think things are going great, it’s just a signal to pay attention to what is going wrong. While there are lots of issues that are exogenous to you, that you can’t control, or impact, many others are issues on the surface of your company.
Use sandpaper on your company daily. Be gentle with it, but precise.
There’s a magnificent exercise that I like to do for myself on a periodic basis. I’m sure it has a more formal name but I call it “Good Bad Like Dislike.”
I create a two by two matrix that looks like this:
I then go through my calendar for the next few months as a starting point to stimulate things to put in each box. I’m careful not to put specific items in the box, but concepts. For example, “Managing Other People” often ends up in “Bad – Dislike” box when I realize, through my forward calendar review, that I have a set of activities where I’m managing others. Or, instead of Good-Dislike: Company X Board Dinner, I end up writing “Board Dinners” in the Good-Dislike Category.
To be more specific, I deeply dislike managing others. While I might have been good at it a long time ago, and I could also likely be good at it if I worked at it, since it’s in the Dislike category, I don’t want to work on it. In contrast, I like “Leading Other People” and am good at it.
Part two is a personal reflection. Instead of being prompted by my calendar, I sit quietly and think about the things I’m doing that I dislike. I’ll often talk to Amy about this as she knows my Good Bad Like Dislike better than anyone on the planet. This is a particularly hard exercise for me because I often rationalize that I should be doing things in the Dislike category. I often overrate my ability on certain things that I feel that I should be good at, so they land in the Good category instead of the Bad category. Having a Fair Witness in one’s life helps with this.
Part three of the exercise is to take specific action around the high-level categorizations. Since I used my calendar to stimulate the review, I have my next three months in the front of my mind. I can then take specific actions. For example, I systematically decide not to do any board dinners in the future. Or, I change the management structure around the project that I’ve ended up managing so that I’m a participant in the project instead of the manager.
I just did this over the weekend as I was considering what 2018 was going to look like for me. I’m also sneaking up on v52 of myself, so it’s a good time for me to think about these kinds of things.
Mark Cuban had a great line a few weeks ago at the interview I did with him and Charlie Ergen at Denver Startup Week. He said:
“I like to invest in people who reduce stress and avoid people who increase stress.”
As I was dealing with something yesterday, this reappeared in my brain but slightly modified.
“I like to be the person who reduces stress and avoid people who increase stress.”
My world is filled with people who increase stress. It’s particularly true around negotiations, but it is also prevalent in board level interactions, relationships with founders, dynamics with leaders, and everything else that has to do with companies. And this is just in my business world. When you wander into other areas, like politics, news, and even social situations, the level of stress (which often masquerades as drama) is remarkable.
One of my meditation routines from Headspace that I like is on Anxiety. Another favorite is on Stress. In both cases, the goal is not to eliminate anxiety or stress but to acknowledge it and be more effective in interacting with it.
The word I’ve anchored on in the past few years around this is equanimity. It’s at the essence of my own personal approach to things. Given the work and larger world context I live in, I’ve accepted that I can’t eliminate stress. I also can’t avoid it. And, while I can avoid people who increase stress, they will still appear and I will need to interact with them.
So, by turning an element of this around 180 degrees, I’ve been able to change my relationship with stress. I accept that stress is everywhere. I don’t try to eliminate it. However, through my behavior, I try to be the person who reduces it. I do this through my approach to all things, carrying the notion of equanimity as a core principle.
This doesn’t mean I’m perfect. I know I generate stress for others in some situations. I know I can always get better at this. Whenever I realize I’ve created stress for someone else, I try to learn from it and improve.
A few weeks ago I was in Atlanta for Techstars Atlanta Demo Day and the Venture Atlanta Conference. I had a great time and it’s fun to see the vibrancy of the Atlanta startup community. My brother Daniel came with me and we had dinner with our cousin Kenny, who lives in Atlanta, so we got some nice, quiet, emotionally intimate family time.
My favorite keynote at Venture Atlanta was from Scott Dorsey. While our paths have intersected for more than a decade and I knew him from a distance, I’ve gotten to know Scott pretty well over the past year. I put him in the awesome category.
If you don’t know Scott, he was the co-founder and CEO of ExactTarget (2000) – one of the original SaaS companies. ExactTarget went public in 2012 and was acquired by Salesforce.com in 2013 for $2.5 billion and became the core of the current Salesforce Marketing Cloud. He was on the Salesforce.com leadership team until he left to start High Alpha in 2015.
If you are doing something SaaS related and you don’t know or follow what Scott says, you should.
At Venture Atlanta, part of his keynote was a riff on the Attributes of Great SaaS Leaders. While the web is peppered with SaaS metrics and the state of SaaS, there’s a dearth of CEO-centric qualitative information. While Scott’s attributes could be for any leader, they are particularly relevant to SaaS CEOs given the dynamic of how high-growth SaaS companies – and great leadership teams – need to work to scale.
His five attributes, which he went deeper on individually in the keynote, reflect his personality and leadership style.
1. Start with the end in mind
2. Are always learning
3. Value team and culture above everything
4. Are both optimistic and never satisfied
5. Give back!
For those of you that are Simon Sinek fans, starting with the end in mind is analogous to starting with your Why. Are always learning is the essence of being a leader in a super high growth rapidly changing world which most SaaS companies operate in. Valuing team and culture above everything is easy to say, but extremely hard to do, especially when your VCs are pressuring you to perform at a certain financial level for rational, or irrational, reasons. Are both optimistic and never satisfied is interestingly similar to Andy Grove’s “only the paranoid survive” while at the same time having a completely different tone.
If you know me, it won’t surprise you that I almost jumped out of my seat at the event and did a happy dance when Scott started talking about Give back! I know I need to train him to say “Give First”, but it’s the same concept. Scott was a leader here, with the creation of the ExactTarget Foundation (now Nextech) in 2011. Nextech works to elevate technical, critical-thinking and problem-solving skills of K-12 students, inspiring and enabling young people from all backgrounds to pursue careers in technology, so he’s been ahead of the curve on the importance of computer science and technical skills in K-12, something which is a big part of addressing many of the social and educational gaps in our country.
Indianapolis’ startup community, like Atlanta’s, is thriving. There’s no question in my mind that Scott’s leadership has contributed to this in a meaningful way.
All of this comes back to the idea that as a leader you should play a very long game. Scott does this brilliantly and it’s been hugely educational and inspiring to me to get to know him.
I had a long conversation with a friend last night that included a segment about men, sex, and power. I had just finished Ellen Pao’s book Reset: My Fight for Inclusion and Lasting Change which I thought was phenomenal (more in a separate post soon) so there was a lot in my mind about this topic.
I woke up to several articles this morning that reinforced a simple concept that so many people miss. Sexual harassment – while it includes sex – is also about power.
Let’s start with Harvey Weinstein. For a preview, read the shorter article titled Another man behaving badly in Hollywood — this time, Harvey Weinstein. What a shocker. This line about narcissism is reflected in the behavior of many prominent men.
“I have always argued that power, particularly the Hollywood strain, infantilizes. Success in Hollywood frequently reduces fully grown adults to narcissistic babies. Babies have no self-control. They scream and cry when they get mad. Their needs are uninhibited. Gratification must be instant. Weinstein may be a talented moviemaker. But he is also just another overgrown Hollywood man-baby.”
The longer article in the New York Times that kicked this off, Decades of Sexual Harassment Accusations Against Harvey Weinstein, is worth a complete read. As you put the pieces together, Weinstein’s public response is similar to many self-reflective apologies that come out of this situation when things finally become public.
Back to the first article, here is another great section from Robin Abcarian.
“Weinstein’s behavior is also an excellent example of the hypocrisy that is so rampant in Hollywood — and politics, for that matter. He is a liberal Democrat who publicly champions women’s rights and professional advancement but demeans and exploits them in private. (And yes, I do include Bill Clinton on that list.) The conservative equivalent is the anti-abortion crusader who privately urges his mistress to abort an inconvenient pregnancy or the “devout” Christian who ditches his sick wife to marry his mistress.”
Power. And that led me to the second story I woke up to, which is the anti-abortion crusader, Tim Murphy, who privately urges his mistress to abort an inconvenient pregnancy. The article Inside Tim Murphy’s reign of terror shows very clearly how power is at the root of this. The statement from Congressman Tim Murphy is another typical one, which basically says “I’m resigning, I’ll spend my time remaining working on important things, I’ve accomplished a lot, and please leave me alone.”
At least Harvey Weinstein said, “I appreciate the way I’ve behaved with colleagues in the past has caused a lot of pain, and I sincerely apologize for it.” But, this was his fourth paragraph. As my mother taught me, the way to apologize is to start with the sentence “I’m sorry.” You can write anything you want after that, but start with the apology – that’s the lead – don’t bury it.
I’m really hopeful that we are at the tipping point of sexual harassment being completely unacceptable. I have a profound appreciation for the women coming forward with their experiences. I know there are many multiples of these stories being suppressed by non-disparagement clauses that were signed and sealed with money to keep people quiet. That’s just another form of power being used in this situation.
Amy and I were at a delightful dinner with friends (new and old) last night who are deeply involved in Naropa. After a very long couple of days where I was very tired, it was nice to sit in a cozy house, eat home cooked food, and just talk about life.
Near the end of the evening, I heard a line that will stick with me for a very long time.
“Contentment used to be a virtue. Now it’s a vice.”
As with many things that need to stick with me, I repeated it out loud. We talked for a few minutes about the overall, dominant American culture of achievement. The endless striving. The need to feel busy, important, and successful. The deep cultural norms around ambition.
The word striving stuck out for me (I wasn’t the one who mentioned it first.) Recently I’ve been telling people that I’m done striving. Sure, I expect I’ll accomplish a lot more in my life, but it’s not driven from a place of needing to ego fulfillment of accomplishment. Everything about striving, including the definition (“struggle or fight vigorously”), turns me off at this point. It’s not me, how I think about myself, or how I want people to think about me (as a “striver.”)
Yesterday afternoon before dinner I gave a talk at the Catalyze CU-Boulder accelerator. I try to do this every summer as one of the things I do to support entrepreneurship at CU Boulder. As I got in my car to drive to dinner, I wondered whether the students got what they wanted from me. I spent 45 minutes answering a set of questions they’d put together in advance but gave to me when I showed up. While I answered their questions, sort of, my responses were rambling philosophical views of what I thought was actually underneath the question. It was a lot more fun for me; I hope it was useful for them.
This morning, I realized that many of my public talks, especially Q&As, have become more abstract in the past few years. While some specifics still find their way into what I say, I’m trying to help people think about the questions at a much higher level than they ordinarily do. And, in a lot of cases, I’m not trying to give an answer, but provide stimuli to generate more introspection about the question.
On my drive in today, my phone dropped three times, which is in the normal range of one to six. On the third drop, when I called the person back, I said:
“My life with Verizon can be agitated or amused. I choose amused.”
The person I was talking to, who is a high achiever in a very fast growing company, said “I choose amused also. It’s a better way to live.”
Choose amused. Think about the real issues. Embrace contentment.
I’m a huge Charlie Munger fan. I spent the weekend stewing on a few things, including why human beings do what they do.
Andrew Wilkinson sent me this animated and abridged video of a famous Charlie Munger speech called The Psychology of Human Misjudgment. It’s well worth a quiet 15 minutes of your day to sit and watch it.
Over the weekend, Mark Suster and Fred Wilson each put up awesome posts discussing the idea of profitability in startups. Mark’s is a master class about how to look at the financial characteristics of a startup and Fred’s discusses what he’s been working on with some of his more mature companies.
They are both worth reading right now. I’ll be here when you get back.
Between the spring of 2000 and the end of 2001, I had the worst, most stressful, and most painful business period of my life. While I’m sure the financial crisis of 2008 was worse for many people, for me it paled in comparison to the misery of this 21-month stretch.
A very simple thing happened that year in my world. The market shifted from rewarding (and funding) growth to rewarding (and funding) profitability. It happened over a few quarters, but with the perspective of time and age, it feels like it happened overnight. I remember the trigger point being a 3/20/2000 article in Barron’s titled Burning Up: Warning: Internet companies are running out of cash — fast. I was on the board of several companies on their list of 100 public companies that would be out of money by the end of 2000 and remember that my reaction to the article was anger, frustration with being maligned, and incredulity that Barron’s would write such an irresponsible article.
My reaction was stupid and immature. Instead, I should have paid attention to the message, thought about it, and taken appropriate action. Instead, I, like many of my colleagues (investors, board members, founders, and CEOs), operated in a state of blissful denial until everything blew up.
I learned that the markets reward growth until they don’t. Then they reward profitability. The trick is to be in a position to make the switch when you need to. Lots of CEOs and boards fantasize about this, but don’t actually have a plan in place to do this as they expect the future – where the switch from growth to profitability – will never come. Or, they hope the exit will happen before this moment.
I was too inexperienced in 2000 to understand this. Given the exuberance, many of my mentors, who had been through other financial cycles, chose to ignore this. The phrase “it’s different this time” echoed broadly throughout the land. I succumbed to the siren song of growth at any cost and paid the price – both literally and figuratively.
Now, I have zero prediction for when the markets will shift from rewarding growth to profitability. Instead, I operate under the assumption that this can happen at any time, and the best companies can grow quickly and either be profitable or be able to become profitable by making manageable modifications to the cost structure within whatever cash constraints they currently have.
Some version of this was on my mind when I wrote the post titled The Rule of 40% For a Healthy SaaS Company in 2015 and the post titled Is 2017 The Year Of Flat Headcount? earlier this year. While I think about this regularly, Mark and Fred’s posts prompted me to pile on to their point and write about it.
There’s a special bonus in Mark’s post, which is in the section titled Revenue is Not Revenue is Not Revenue. He does a nice job of discussing the importance of understanding gross margin and has a line that made me smile.
If you’re shaking your head and thinking, “duh” I promise you that even some of the most sophisticated people I know get off track on this issue of “gross revenue” versus “net revenue.”
I’d add that this includes getting confused about GMV and MRR when talking about revenue and amazingly occasionally confusing revenue with income. It keeps going, when one asks the question “does profitability mean being EBITDA positive, cash flow positive, or net income positive? Or something else?”
If you are a CEO of a company and any of this makes you nervous in any way, I encourage you to grab a few of your investors who have been investing in startups for at least 20 years, take them out to lunch, and talk through these issues with them to understand them better and figure out whether or not to care about this in the context of your company.
I’ve come to despise the phrase “culture fit.”
I don’t remember when I first heard it, but it was many years ago. Over time, it became woven into the world of entrepreneurship, as companies used it as a primary frame of reference for hiring. VCs turned it into a cliche, espousing the importance of culture fit during the entire spectrum of company creation, from the functioning of the very earliest teams through scaling a business.
For the past few years, I’ve tried to use the phrase “cultural norms” instead of culture whenever the concept of culture fit was mentioned. At first, this felt a little ponderous as I had to regularly explain what I meant by cultural norms and why I didn’t just say the word culture instead. I eventually learned that if I stated that culture meant nothing and was shorthand for saying “I don’t want to think hard about what is going on here,” I usually stimulated enough of a conversation that it ultimately became a useful one.
About a year ago, I was in a conversation (I can’t remember who it was with) and they mentioned the phrase “culture add.” I immediately loved it. Since then, I’ve used it as a direct contrast to culture fit and let it evolve to the phrase “go for culture add, not culture fit” as part of a longer rant on diversity on all dimensions (beyond just gender and race) and the evolution of culture norms in a company.
I felt confident in my understanding of this concept. I’d cite the Rooney Rule as an element of how to hire for culture add. If you aren’t familiar with the Rooney Rule, a relatively recent article in 538 titled Rethinking The NFL’s Rooney Rule For More Diversity At The Top has a short and clear description of it.
“In place since 2003 for head coaches and expanded in 2009 to include general manager jobs and equivalent front-office positions, the rule — named after Dan Rooney, Pittsburgh Steelers chairman and onetime head of the league’s diversity committee — mandates that an NFL team must interview at least one minority candidate for these jobs. The rule, however, has two fatal flaws: the temptation to substitute sham interviews in place of a search for real diversity, and coordinator-level positions, a crucial step to head-coaching jobs, are not under the umbrella.”
As with many things in life, I marched forward, spreading the gospel of the Rooney Rule once I had internalized it as part of the idea of culture add. And then, in February, I ran into a brick wall during a Boulder roundtable on diversity organized by Andrea Guendelman of BeVisible. I was sitting in a big circle in the room, listening carefully, but also feeling like I was contributing my perspective and expertise to the group (which, when I reflect on this, means I was probably feeling smug, self-important, and casually tossing around things like the Rooney Rule) when I heard something referenced from Stefanie Johnson, a CU professor that made me pull out my iPhone and type a few notes to myself.
“Stefanie Johnson just wrote an article that the Rooney Rule doesn’t work. If you have only one female candidate in the finalist pool, it doesn’t increase that probability that you’ll hire a female candidate. The same is true for a non-white candidate. If you want to increase the probability, you have to have at least two female candidates in the finalist pool.”
I may have said something like “can you say that again?” If I didn’t, I should have. Regardless, it was seared into my brain. A few days later, I got an email from Stefanie (who had heard about the conversation) with a link to her recent HBR article titled. If There’s Only One Woman in Your Candidate Pool, There’s Statistically No Chance She’ll Be Hired. The article is clear and has the appropriate statistical support for Stefanie’s assertion. If you don’t feel like reading the article, the chart below summarizes it.
There’s a lot in the article, including this gem:
“Why does being the only woman in a pool of finalists matter? For one thing, it highlights how different she is from the norm. And deviating from the norm can be risky for decision makers, as people tend to ostracize people who are different from the group. For women and minorities, having your differences made salient can also lead to inferences of incompetence.”
and this punchline:
“And the evidence simply does not support concerns surrounding the myth of reverse racism. It is difficult to find studies that show subtle preferences for women over men, and for minorities over whites. But the data does support one idea: When it is apparent that an individual is female or nonwhite, they are rated worse than when their sex or race is obscured.”
As I finish up this ramble, let’s cycle all the way back to the notion of culture add. By using this phrase, one of the things I’m trying to do is break the notion of hiring people like everyone else in the company as a default to supporting the idea of culture. Instead, you are looking for people who add to your culture. This does not invalidate the idea of adding people like you, but it doesn’t let this be the default. It’s more subtle than mechanisms like the Rooney Rule, but hopefully, it will be effective long-term.
More importantly, at a discussion earlier this year, I realized once again how little I know about something I’ve been immersed in for many years. Or, if I’m optimistic, how much I can regularly learn just by paying attention, listening, and participating in a discussion, even when I think I’m one of the experts, advocates, or some other word that makes me feel good about myself. And, most of all thank you, Andrea, for staying after me, and for creating a forum for a major new insight for me that I might have otherwise missed.