so I'm going to talk about how to
operate so I've watched some of the
prior classes and I'm going to assume
that you've already sort of hired a
bunch of relentlessly resourceful people
that you built a product that at least
some people love that you probably
raised some capital and now you're
trying to build a company so you're
you've been forging a product and now
you got to forge a company and it
actually argue forging a company is much
more difficult than forging a product
basic reason is people are irrational so
you probably all know this either your
parents your significant other your
brother or sister your teacher somebody
in your life is irrational building a
company is basically taking all the
irrational people you know putting them
in one building and then living with
them 12 hours a day at least so it's
very challenging now there's techniques
for coping with that and some people get
good at it and some people don't but
that's where really what operating is
about so basically what you're doing
when you build a company is you're
building an engine and at first you have
a drawing literally on a whiteboard and
you're architecting it and it looks very
conceptually clean and beautiful and
pretty but when you start actually
translating to practice you actually it
looks more like this and you're holding
it together with duct tape and it takes
takes a lot of heroic efforts of people
to actually hold it together that's why
people work 80 100 hours a week is that
heroic efforts is actually necessary to
keep this thing together because you
don't actually yet have polished metal
in place eventually you want to
construct a high performance machine a
machine that actually almost nobody
really has to worry about every hour
every minute and you know as we used to
joke about eBay that if martians took
over eBay it would take like six months
for the world to notice that's what
eventually what you want to get to or as
Warren Buffett says you know build a
company that idiots can run because
eventually they
will so this is what you want uh
basically a performance machine that
idiots can run now as a leader what is
your real job what's your role strictly
speaking there's only one book ever
written that actually explains how to do
this it's a little old it's written in
1982 by Andy Grove he quite famous and
quite successful and his definition of
what your job is is to maximize the
output of an organization your
organization that you're responsible for
CEOs everything and a VP would be a part
of the organization and the
organizations around you so if you're a
vpe you actually are responsible for the
performance of the product team too or
the marketing team because you have
influence there so this is how you
measure people and you want to focus on
the output not the input U the old
outage about measuring not measuring
motion and confusing that with progress
you're measuring only progress and this
is going to sound like a fancy and
glamorous thing to do um maybe people
get excited about managing a whole large
organization and being responsible for
the output but in practice what you're
going to learn today hopefully is that
it's more about things like ordering
smoothies teaching your receptionist how
to answer the phone properly and serving
as a $10 an hour task rabbit for your
employees so let's talk about that so at
first when you start a company
everything's going to feel like a mess
and it really should if you have too
much process too much predictability
you're probably not innovating fast
enough and creatively enough so it
should feel like every day there's a new
problem and what you're doing is
fundamentally triaging so some things
will look like a problem and they're
actually a cold they're just going to go
away so somebody's annoyed about this or
that that may be a cold and you
shouldn't stress about it and you
certainly shouldn't allocate a lot of
your time to it and some things are
going to present themselves as colds but
just like in the emergency room if
they're not diagnosed properly they
actually can become fatal so what I'm
going to try to do is help give you
Frameworks for thinking about which
things are colds and which things are
potentially
fatal so one of the most important
things I learned at square is actually a
concept of editing and this is I think
the best metaphor I've ever seen in like
14 years of running stuff of how to
think about your jobs
it's natural it's a natural metaphor so
it's easy to take with you every day and
actually it's easy to transmit to each
of your employees so that they can
figure out whether they're editing or
writing it's a natural construct you
generally know when someone asks you to
do something am I more writing or am I
more editing so an editor is is the best
metaphor for your job and we're going to
talk about the specific things you're
doing in editing the first thing an
editor does and you probably all had
this experience in school is you submit
a paper to a ta a draft to your friend
the first thing an editor does is is
they take out a red pen or nowadays you
know online and they start striking
things basically eliminating things the
most important task of an editor is to
simplify simplify simplify and that
usually means omitting things so that's
your job too is to clarify and simplify
for everybody on your team the more you
simplify the better people will perform
people cannot understand and keep track
of a complicated set of initiatives so
you've got to distill it down to one two
or three things and use a framework that
they can repeat they can repeat without
thinking about they can repeat to their
friends they repeat at
night don't accept the excuse of
complexity a lot of people will tell you
that well this is too challenging this
is too complicated well yeah I know
other people simplify but that's not for
me this is a complicated business
they're wrong you can change the world
in 140
characters you can build the most
important companies in history in a very
simple to describe concept you can
market products in less than about 50
characters there's no reason why you
can't build your company the same way so
force yourself to simplify every
initiative every product every marketing
every everything you do and and
basically take out that red and start
eliminating stuff second thing is what
editors do is they ask you clarifying
questions so when you present a paper to
somebody what do they usually do they
they find some ambiguity somewhere and
they say well do you really mean this do
you mean that do you have an example of
this that's what your job is so you're
in a meeting and people are going to
look to you and the real thing you do is
you actually ask a lot of questions and
they can be simple basic questions like
should we try this seven days a week um
or six days they can be fundamental
questions like where's our competitive
Advantage here we try to do this
actually as investors too um some
investors will ask you uh a billion
questions about a billion things and
they'll have you due diligence forever
we try to narrow down to what are the
one two or three four things that
actually matter for this company and
only focus on those things so it allows
us to be more decisive and we can make
decisions rapidly it allows us not to
distract you from your day job which is
actually building a company and yet I
think we still get to the higher Fidel
highest Fidelity answer because we don't
have all these extra extraneous pieces
of details and data now it's hard it's
something you have to practice but when
you good good at it every step you
eliminate Andy Grove estimated that you
can improve performance by 30 to
50% the next thing you do is allocate
resources so in the editing construct
this is what editors do all the time
they take editors from the mid East and
covering the mid East and they move move
them to silica Valley because silica
Valley is now now more interesting or
they move them to a sports section
because they want to compete on the
basis of sports with other journals and
other Publications so that can be top
down where I take a bunch of alloc
resources and people and say we're now
going over here we're going to compete
on this basis and then next month next
quarter next year I'm like well that
Middle East coverage is getting boring
and Bland we don't want to do that
anymore let's go chase out for something
else or can be bottom up just like
journalists mostly come up with their
own Stories the people who work with you
generally should be coming up with their
own initiatives so a reporter will
generally who covers Google come up with
the interesting stories that they're
hearing in The Ether and propose one or
two to their editor for approval but
it's not like the editor saying Go cover
Google and this is the angle I want once
in a while they do that but that's not
the day the day the meet and potatoes of
what a journalist does every day your
goal over time is to actually use less
red ink every day so one way of
measuring how well you're doing and
communicating to your colleagues about
what's important and what's not what why
some things are important some things
are not is how much red ink you're
pulling out every day it's okay if you
have a bad day and the red Ink's all
over the place but it's not okay if the
red ink next month is more than it was
last month and next quarter is more than
this so measure yourself of how much red
ink you're creating the other thing
that's very important that actually
isn't as intuitive to a lot of people is
the job of an editor is to ensure a
consistent voice so if any of you read
The Economist you can tell that there's
one consistent voice you can pick up any
article any post in The Economist and it
feels like it was written by the same
person ideally your company should
should feel like on your website in your
PR release on your packaging if it's a
physical product anywhere on your
recruiting pages should feel like it was
written by one person that's extremely
difficult to do and at first you're
going to be tempted to do that yourself
which is okay for a Founder to do that
him or herself initially over time you
do not want to be doing all of the
consistent voice editing by yourself you
want to train people so they can
recognize the differences in voice so if
you see this website page it looks very
different than the recruiting page you
start asking questions why is that is
the reporting messed up is one of the
leaders over here not really
understanding the voice of the company
so you got to you have to fix that over
time but you want to start with the
objective of everything should feel
exactly the same it's quite quite
difficult in practice almost every
company has at least one piece of the
organization that isn't exactly on the
same voice at Apple which is not you
know under even under Steve's regime
which was Notorious for getting this
right if you ask someone who worked at
Apple talk ask them about the internal
tools about recruiting do they really
feel like Apple products all of them
will tell you no so you never 100% but
you defitely want to get as close to
that as you can the next complicated
topic is delegating so just like the
other thing I like about the metaphor of
editing is writers do most of the work
in the world editors are not actually
writing most of the content in any
publication so that's actually true of
your company you are not going to do
most of the work you shouldn't be doing
most of the work and the way you get out
of doing most of the work is you
actually delegate now the problem with
delegating is that actually you're
responsible for everything so as CEO
founder there is no excuse there's no
like that's that department over there
this person over there screwed up you're
always responsible for every single
thing especially when things go wrong so
how do you both delegate but not
abdicate it's a pretty tricky Challenge
and both are sins like if you overd
delegate or and you abdicate or you
micromanage those are both sins so I'm
going to give you a couple techniques
for solving
this first this actually comes from high
output Management in Andy Grove is
what's known as task relevant maturity
it's kind of a fancy phrase for
basically how this person ever done this
before it's really simple like how
mature is this person in doing something
and the more they've done the exact same
task before the more sort of rope you're
going to give them and the less and the
more they're trying something new the
more you're going to actually instruct
them and consistently constantly
regularly monitor so that's kind of a
basic concept but it's worth keeping in
the back of your brain the interesting
implication and this is pretty radical
is that any executive any CEO should not
have one management style your
management style actually needs to be
dictated by your employee so with one
particular person you may be very much a
micromanager because they're quite low
on this scale and with another person
you may be delegating a lot because
they're actually quite mature on this
scale so it's actually a good thing if
you do reference checks on somebody and
half the people you call say they're a
micromanager and the other half say they
actually give me a lot of responsibility
that's actually not a that's a that's a
feature not a bug I didn't understand
that at first at all like I used to be
befuddled when people would do reference
checks on me and come back with this
like complicated uh Mosaic and I
basically finally figured out that maybe
I was actually doing my job correctly so
then of course taught other people that
this is the way to do it um a more
nuanced answer though um that I've sort
of came up with is how how do you make
decisions and delegating versus doing it
yourself you don't want to do it
yourself too often so what I've
basically borrowed from Peter it's my
first 2 by two uh Matrix ever in my life
um but he taught me something at least
um is you basically sort your your level
of conviction about a decision on a grid
you know extremely high extremely low
there's times when you know something's
a mistake and there's times where you
wouldn't do it that way but you have no
real idea what the whe whether it's the
right or wrong answer and then there's a
consequence to mention there are things
that if you make the wrong decision are
actually catastrophic to your company
and you will fail there are things that
are pretty low impact that really at the
end of the day aren't going to make a
big difference at least initially so
what I basically believe is that where
there's low consequences and you have
very low confidence in your own opinion
you should absolutely delegate and
delegate completely let people make
mistakes and learn on the other side
obviously where the consequences are
extremely dramatic and you have
extremely high conviction that you're
right you actually can't let your Junior
colleague like make a mistake you're
ultimately responsible for that mistake
and if it's really important you just
can't allow that to happen now the best
way to do that is to actually explain
your thinking the why um it's easy to
shortcut when you get busy explaining
wise of the world but it's very
important to try um when I was at
LinkedIn um I had a colleague uh who's
quite quite talented um but occasionally
would get annoyed if if I didn't exactly
agree with his opinion on something and
so I'd spent a lot of time trying to
persuade him uh why I was making a
decision a certain way and his Wild Card
the card he would ultimately call out if
I didn't quite persuade him was he's
like okay you're the boss and that meant
to me like I was burning a lot of Social
Capital every time he said that I knew I
was like really creating a thin line and
that ultimately that was going to
backfire if I did that too often so you
want to track the times that you're
doing that an example of this at square
is one of my favorite people in the
world and my second hire first marketing
hire had this program he wanted to run
called inner Square which basically
allowed people uh to give out uh Square
Merchants to give out 10 other squares
to their uh col it's imagine a food
truck outside put like 10 squares on the
counter and people could just grab them
and Kyle had this great idea this would
be an awesome marketing program squares
would spread squares to other people
um and you know to some extent the it
was on brand so it didn't have
catastrophic consequences each of these
10 squares didn't cost that much money
so financially we could afford to do it
but at that time my 10 years of
experience said there's just no way this
is going to work in a meaningful enough
um scale to move our metrics enough and
I actually would prefer we don't not do
this but Kyle was so excited about this
that I decided to just let him do it um
he learned that actually when you
measure this thing it's not massive it
doesn't create like massive value for
the company it did require a fair amount
of operational complexity to ship all
these squares to people and figure out
how to get them Squares Etc but it
allowed him to be excited about his job
and to learn how to filter future ideas
so it's totally worth letting him make
the quote unquote
mistake the next and most uh possibly
most important thing you do is actually
edit the team so these are the people
that you work with and nobody's going to
have a perfect team and you're certainly
not going to start that way so what I'm
going to try to do is maximize the
probability for success in editing the
team so I like this idea of barrels and
ammunition so most companies once they
get into hiring mode as Sam pointed out
you should defer that for a while but
once you do they just hire a lot of
people and they're like expect and you
expect that as you add people your
throughput your horsepower your velocity
of shipping things is going to increase
turns out it doesn't work that way
usually when you hire more Engineers you
actually don't get that much more done
you actually sometimes get less done you
hire more designers you definitely don't
get more done you get less done per day
uh we talk about why um but uh so the
reason why is that most people most
great people even are actually
ammunition but what you need in your
company are barrels and you can only
shoot through the number of unique
barrels you have so that's how the
velocity of your company improves is by
adding barrels and then you stock them
with ammunition and then you can do a
lot so if you go from one barrel company
which is mostly how you start to a two
barrel company suddenly you get twice as
many things done per day per week per
quarter if you go to three Barrel is
great if you go to Barrel is awesome
barrels are incredibly difficult to find
but when you have them like give them
lots of equity promote them take them to
dinner every week because they're
virtually like uh Irreplaceable because
they're also very culturally specific so
a barrel at one company may not be a
barrel at another company because one of
the ways and the definition of a barrel
is they can take an idea from conception
all the way through shipping and bring
people with them and that's a very
culturally specific opportunity uh
specific skill set rather so uh two
questions probably are occurring to you
is how do you figure out who's a barrel
and who's not one is you start actually
with a very small set of
responsibilities it can be fairly
trivial it can be something like I want
to reward the engineers they're in my
office at 9:00 at night every night with
a nice cold Fresh Smoothie this is
actually a real example I was frustrated
um our Engineers were working really
hard at square and you know maybe 20% to
30% would stay very late into the
evening and I wanted to sort we already
had serve them dinner but I wanted to
give them something cool to reward them
you could think about alcohol but that's
a little complicated so smoothies were
probably a little bit better than the
pizza which drains you of energy uh but
nobody could get smoothies in my office
to show up at 9:00 sharp that were cold
that tasted good and delivered in the
right place for the engineers would find
them You' think this is simple but in
fact it like took months to get this
right so then we had an we had an intern
start and I think on a second day as was
explaining this problem and he he said
well I'll do it I was like looking at
him like there's no way I've seen my
office man manager fail my assistant fa
all who were actually pretty good um
this just isn't going to happen and then
lo and behold that night they show up on
time cold delivered the right place and
my first instinct was great not not
nothing about the smoothies but okay now
I can actually give him something more
important and consequential and
complicated to do and that's what you
actually want to do with every single
employee every single day is expand the
scope of the responsibilities until it
breaks and it will break everybody like
I couldn't run the world like everybody
has like some level of complexity that
they can handle and what you want to do
is keep expanding it until you see where
it breaks and that's the role that they
should stay in that level of
sophistication but some people will
surprise you there will be people who
you don't expect without with different
backgrounds without a lot of experience
that just can handle enormously
complicated tasks and so keep testing
that and pushing the envelope the other
signal to look for is once you've hired
someone is with an open Office just
watch you goes up to other people's
desks particularly people that they
don't report to if people start going to
your desks someone individual employees
desk and they don't report to them it's
a sign that they believe that that
person can help them so if you see that
consistently those are your barrels just
promote them give them more opportunity
as fast as you
can the other question everybody asks
about people is when do you hire
somebody above somebody and when do you
sort of mentor somebody or when do you
need to replace somebody and the way the
way to think about this is every company
has its own growth rate and every
individual has their own growth rate so
some companies that are very successful
let's say LinkedIn LinkedIn was always a
very linear company it never went like
this so for example I joined LinkedIn 18
months after we launched and we had only
1.5 million users which in the social
product is a very small number and when
I joined I was the 27th employee when I
left two and a half years L later we
only had 57 employees in contrast when I
joined Square as the 20th
employee two and a half years later we
had like 25300 employees so each company
has its own velocity on this curve and
if the company's going like this you can
only keep people in the roles that their
own personal learning curve is going
like this on the other hand if the
company's growing like this anybody
whose learning curve is faster than that
you can keep giving them the same role
to do so always track like the
individual slope of an employee and the
company's growth
rate now that you have your barrels
identified so you're going to pick out
the people that can really take an idea
that you have in the back of your head
uh scope it out run with it make it
happen ship it and it's perfect um where
do you aim these barrels so I'm going to
argue that you really need to spend a
lot of time focusing people uh this is
something I've learned from Peter teal
actually he used to insist at PayPal
that every single person could only do
exactly one thing and we all rebelled
every single person in the company
rebelled with this idea because it's so
unnatural it's so different than every
other company where people want to do
multiple things and especially as you
get more senior you want to definitely
want to do multiple things and you're
you're like you feel it's like insulting
to be asked to do just one thing and
Peter would enforce this pretty strictly
he'd basically say I will not talk to
you about anything else except this one
thing I've assigned to you I don't want
to hear about how great you're doing
over here like just shut up computer
would run away um and then um focus
until you conquer this one problem and
the Insight behind this is that most
people will solve problems that they
understand how to solve roughly speaking
they will solve B+ problems instead of
A+ problems A+ problems are high impact
problems for your company but they're
difficult you don't wake up in the
morning with a solution so you tend to
procrastinate them so imagine you wake
up in the morning you create a list of
things to do today there's usually the
a+1 on the top of the list but you never
get around to it and so you solve the
second and third and have over an entire
company of hundreds of people that just
Cascades so you have a company that's
always solving B+ things which does mean
you grow and does mean you add value but
you never really create that
breakthrough idea because no one is
spending 100% of their time banging
their head against the wall every day
until they solve it so I highly
recommend some version of that you can
be less stringent you could be like you
can get three things to work on but
there I would still track at least the
concept of what would happen if you only
gave everybody one thing to
prioritize now because you can't make
decisions you don't want to be making
all these decisions yourself you have to
create tools that enable people to make
decisions at the same level ideally of
fidelity that you would make them
yourself so how do you create scale and
leverage first thing I'd recommend is
building a dashboard this is an old
Square Dashboard it actually looks
pretty presentable even today um the the
construct of a dashboard first of all
should be drafted by the founder you
need to basically simplify the value
proposition in the company's metrics for
Success on a whiteboard you can have
other people build a dashboard I don't
actually care about that but you need to
draw it out like what does business
success look look to us and what are the
key inputs to those and then have
someone create something that is very
intuitive for every single person in the
company including customer support to
use and then the key metric of whether
you've succeeded is what fraction of
your employees use that dashboard every
day if it's actually useful it should be
close to 100% it's not going to be
probably 100% but you want to measure
that just like you have quality scores
for all your other kpis with users the
dashboard needs to be as intuitive as it
is as your product is for
users other things uh wait hold on uh
yeah let's go back one second another
concept is transparency and people will
uh often that's weird we'll fix it okay
transparency people talk a lot about um
it's kind of a a goal that everybody
ascribes to but when push comes to shove
very few people actually adhere to it so
let me let me walk through a little bit
of transparency and different stages of
transparency metrics are the first step
so everybody in your company absolutely
should have access to every single thing
that's going on other things that I like
to do are take your board decks and as
you get more formal the board decks will
get more complicated and actually review
every single slide with every single
employee after the board meeting you can
strip out the compensation information
if you really want to but every other
slide you should go through with the
entire employee base and explain it and
if you can remember some of the feedback
you got from your board that's really
cool to pass on another thing we did at
Square as your company scales
everybody's not going to get invited to
every meeting but they're going to want
to go to Every meeting the way you scale
that is you create notes for every
meeting and you send it to the entire
company so we created a notes at Ellas
for every single meeting involving more
than two people someone would write
notes and send it to the entire company
so people felt like as the company added
employees they can continue to Monitor
and track what was interesting what was
going on and they never felt excluded
hopefully the other thing is like even
like details around conference rooms
every conference room at square has
glass walls because as soon as you have
regular walls people wonder what's going
on it's amazing like if they can see
who's actually in the meeting and who's
meeting with who when they don't start
they don't worry nearly as much as
what's going on behind those closed
doors stripe you may have seen a blog
post by I think Patrick wrote it um
about email transparency about actually
allowing everybody to have access to
email that's pretty far out there but
it's actually got interesting you know
certain merits to it I would all call
the tactics that you read about here
about is sort of minimal viable
transparency I actually think you could
push the envelope a lot more Steve Jobs
tried this at next he actually tried
transparent compensation I actually
think although NEX didn't do extremely
well it wasn't the the real reason
wasn't because of the experiment around
compensation transparency and that
there's a lot of Merit to that and you
know the critique of like compensation
transparency is often well we want
people to be te teates and work together
and collaborate and if you look in the
Sports World though where people are
actually teammates and they do have to
collaborate all of their compensation is
completely public in fact each of us can
look up anybody's compensation in the
Sports World and get it exactly accurate
and somehow it seems to work so I'm not
totally bought into the idea that you
need to keep transport uh compensation
non-transparent then finally metrics so
you want to measure things um you want
to measure outputs not inputs and again
you should dictate this yourself you
should draft the dash board to tie this
all together one important concept or
what are known as pairing metrics or
pairing indicators which is if you
measure one thing and only one thing the
company tends to optimize to that and
often at the expense of something else
that's important a classic example in
payments and financial services is
around risk it's really easy to give the
risk team the objective and say we want
to lower our fraud rate it sounds great
until toal they start treating every
single user in this audience as a
suspect user because they want to lower
their fraud rate so they require each of
you to call them up on the phone and
give them more supplemental information
and in things and you have the lowest
fraud rate in the world you also have
the worst you know sort of customer
satisfaction score so what you want to
measure at the same time as your fraud
rate is your false positive rate that
forces the team to actually innovate
similarly you can give recruiters
metrics around hiring and guess what
you'll have a lot of people coming
through interviews but if you're not
tracking the quality of hires you may be
very unhappy with the quality of people
you're interviewing or the people you're
giving offers to so you always want to
create the opposite as an indication and
measure both and the people who are
responsible for that team need to be
measured on both
finally around metrics um one Insight
I've had over my career is what you you
kind of want to look for the anomalies
you don't actually want to look for the
expected Behavior so the a famous
example was at PayPal none of the top 10
markets that the company was planning to
go after included eBay but one day
someone noticed that 54 power sellers
had actually handwritten into their eBay
listings please pay me with
PayPal and brought to the attention of
the executive team at the time the first
reaction of the executive team was what
the hell's going on let's kick them out
of the system that's not our Focus
fortunately I I think David saxs came
back the next day and said I think we
found our Market let's actually build
tools for these power sellers instead of
forcing them to write into their listing
pay me with PayPal why don't we have an
HTML button that they can just insert
well that started to work and then he
said well actually why do we make them
inserted why why should we make them
inserted all the time why don't we just
automatically insert it for them so they
can insert it once and then everying
single listing they they have forever
it'll just automatically appear there so
that became the success for PayPal
similarly I was at LinkedIn and I saw
this stat that made no sense to me the
UI of the site was a little bit
different back then but 25% of all
clicks maybe 30% of all clicks from the
homepage were people going to their own
profile and that made no sense
whatsoever I mean like the it was a
settings like you had to literally go to
the right margin find a link and it was
25 to 30% of every single click at scale
I mean so this is like statistically
valid Stu
and it made no sense whatsoever never
never have seen like a UI perform that
way and I I I I kind of went around for
weeks trying to figure this out and then
someone very smart actually Max Levin
said something to me and I was like he's
like it's vanity and I'm like aha people
were looking at themselves in the mirror
that's a pretty good answer so because
they weren't editing their profil nobody
has like something to edit every day in
their profile but they actually were
just looking at themselves in the mirror
every day because it made them feel good
and then you could actually test that
hypothesis and say well if I have more
content do I look at myself in the
mirror more often turns out you did if
you had more endorsements did you look
at yourself in the mirror more often
turns out you did so we actually figured
out like what was actually underneath
the utilitarian product that the product
team thought they were building was
actually a lot of emotional vanity they
didn't exactly translate it to the best
possible feature like the PayPal example
which you couldn't easily put a button
said be more vain today you know on the
homepage that would probably not work
perfectly so it never really like took
off the way the PayPal example did but
it really clarified what the user what
users of the product really wanted and
we wouldn't have found that without
looking for anomalous data the final
topic I want to talk about is
details um and there's uh in my assigned
reading there's a great book I really
like by Bill Walsh um called the score
takes care of itself and the basic Point
um of the book is that if you get all
the details right you don't worry about
how to build a billion dollar business
how to have $100 million in Revenue how
to have a billion users that's a
byproduct of getting all the details of
what you do every day to be excellent so
the example he talks about in the book
that really resonated with me was he
took over the 49ers in 1979 they were
the worst team in football I believe
they were two and 14 the year before
which is really bad for those of you who
don't know football in the next 10 years
he managed to transform the team into
the NFL's best w three Super Bowls and
what's the first thing he did to start
going from a terrible team to the best
team ever in many ways he actually
taught the receptionists how to answer
the phone properly he wrote a three-page
memo about how to actually answer the
phone now that may sound absurd but his
point was if the organization as a whole
does everything exactly the right way
then receivers for example will start
running their routes at seven and a half
yards not seven yards not eight yards
and that actually will matter and if
everybody on the team executes exactly
up to the same standard of performance
you'll have a organization that is
performing at the highest possible level
and then with enough random variation
the highest possible performance team
will do the high the best so the way you
translate this to to a company are to a
lot of details that may not matter they
may not seem that they matter
superficially most people would agree
about Details Matter when it when it uh
faces the user but where the real debate
is on things that don't face the user so
Steve Jobs famously in the Mac insisted
upon an Immaculate circuit design board
you can read about this in various books
the Mac for those of you who don't
remember the Mac probably everybody here
but some of you may have seen it
actually couldn't be opened so the
circuit board design couldn't be seen by
any single person in the world there was
no way to open the Mac except the people
who worked at Apple and insisted that
it'd be absolutely perfect and beautiful
that's the kind of detail Obsession that
this sort of philosophy of building a
company requires examples that may be
more practical for you instead of
circuit boards are things like what food
do you serve people this actually
matters more than you might guess when
people don't like the food you serve
them what do they do they go gossip they
go complain to their friends they go
walk over to someone's desk and all of a
sudden at lunch what they're complaining
about is they're mostly spending time
gossiping and complaining instead of
brainstorming so you don't have this
serendipitous like idea matching another
serendipitous idea that creates a spark
instead they're all wandering and
willowing around so the best thing you
can do is actually give people the food
they want or food that's good for them
that makes them more productive so it
may seem a lot like this glorious job
you thought you have is actually more
like running around being a task rabbit
for people but it's to to take the
things off their plate that are a
distraction so that they can be high
performance machines and if you take
enough things away from people that
distract them and give them the tools to
be successful all of a sudden your
organization produces a lot more
similarly another example that's often
got wrong is office space so one natural
instinct is when you need an office have
an office manager or someone on your
team go out and find offices and they'll
go on tours with agents and they'll come
back with photos and ideas you need to
do that yourself the office environment
that people live in and work in every
day dictates your culture and how people
make decisions it dictates how hard
people work there's almost no important
more decision other than what company
you're going to be than what's the
office environment
you're actually in and most people don't
do that and then the final thing and
then I'll take some questions is around
effort ultimately I don't believe that
you can build a company without a lot of
effort and that you need to lead by
example so Bill Walsh the first chapter
of his book is get gets asked this
question of how do you know whether
you're doing your job and this is the
answer he gives coaches that used to ask
him that
question so if this is what you feel
like every day you're probably on the
right track and if that doesn't sound
appetizing you probably shouldn't start
a company truthfully all right with that
I'm done with the prepared part um let
me see if anybody has questions I can
try to be helpful with any questions yes
so you talked about making compensation
transparent how would you do that
especially when people um equate
themselves to the value you know of how
much the salary is um I would I would do
it in probably bands you could do it
either just everybody in the company
gets paid the same or you could have
like all discipline all Engineers or you
could do it by experience like extreme
the way Steve did it actually at next
was there's a high band and a low ban
and you either had a lot of experience
or low experience and that was it so low
ban back then you know now would
probably be like $85,000 kind of
everybody just flatly gets paid $85,000
and if you're super experienced
everybody gets paid like 130,000 and
that's just it like it's sort of the
next translated for
inflation like inste of food what's like
top three details
that you'd be
amazed well yeah so the question was
besides food what other kind of details
do people care about um the laptops they
use I mean this is Now the default that
everybody has but five years ago it was
a benefit to give people high quality
machines as opposed to optimizing our
cost and having Dell machines and ugly
monitors just as an example so if you
think about all these people that are
relentlessly resourceful incredibly
talented in a massively competitive uh
ecosystem competing for talent you want
to give the people the best possible
tools to do the best possible job and so
rigorously thinking through how do I
make people more successful what things
do they not need to be working on that
are distracting and what things can I
actually give them that make them more
valuable per day and then just break
that down every day and solve that stuff
yourself so when you're in a startup
environment how do you optimize for
those things because you know resources
are scarce and it's a good it's a good
question I actually think that you
should start first of all you must have
your own office I don't believe ever in
shared office spaces Peter talks a
little bit about this that every startup
every good startup is a cult and it's
really hard to creit cult if you're
sharing space with people because a cult
means that you think you're better than
everybody else in the world and you have
a special way of doing things that's
different than everybody else in the
world and if you're sharing physical
space with people it's very hard to
inculcate that so I I would start there
but it is a prioritization question when
we have every every company has scarce
resource just a question of magnitude
like how many zeros uh are you paying
attention to you know probably not $10
expenditures but $100 then $1,000 then
10,000 then a million then 10 million
starts being around in ER so what I
would do is figure out like what's most
important and a highquality office that
creates a good vibe that allows you to
recruit people because recruits are very
Savvy about this they walk into your
office and they can tell a lot about the
culture instantly I I walk in a company
office and I can tell often whether I'm
going to invest as soon as I walk in
like I can absolutely rule things out
that I just don't want to invest in as
soon as I walk in and there's times walk
in the office like wow this is really
impressive you can tell how people work
together how hard they're working how
distracted they are uh roll off B sequa
made a point to me about YouTube um so
when I invested in YouTube at very very
beginning um it wasn't obviously going
to be successful and then Roff uh LED
this series a investment for SE on
YouTube and we were at a board meeting
together and he said you know I think
YouTube's really going to work and I
said why and he said well every time I
go to one of my portfolio companies half
the office is watching YouTube at lunch
and I was like pretty good sign um so
like you pick up on these little things
and you can predict a lot thank you yeah
uh what do you think is the best way to
gain Street credit for a new manager oh
boy um yeah so the question is how's the
best way to G gain street cred for a new
manager almost all good managers in
Silicon Valley are promoted because of
their individual performance um in
cultures that are meritocratic you know
the percentage is even higher so we
tried at PayPal to only promote people
that were basically kicking ass at their
discipline so Peter didn't believe in uh
general managers um in fact I remember
going for a jog around campus within my
first week at PayPal and he was asking
me you know how things going usual kind
of CEO questions and then we got this
debate about whether the company needed
any managers and he's like nope no
managers we're only going to promote
people so the VP of engineering is going
to be the single best engineer the VP of
design is going to be a single best
designer the VP of product going to be
single best product person and they're
going to learn to manage later and the
advantage of that is you don't have you
don't demoralize people because
everybody knows that their boss actually
is better at their job than they are and
they can learn stuff and you can learn a
little bit of the management techniques
later as opposed to promoting people who
are just good people managers that don't
actually have the discipline and skill
and that does demoralize people so I
think just being excellent at something
and then getting excellent at getting a
bunch of people to do something is the
next task but people people you just
have to learn some things you have to
learn by doing you can't learn to play
the guitar by reading a book you've
actually got to try to manage a bit and
you won't do it well I have another sort
of set of tactics and classes on what
you actually do when you transition from
a manager a individual contributor to
manager and it's hard one of the first
things people don't get right is their
time allocation and so actually I would
recommend doing what I call a calendar a
audit and tracking for a month what do
you spend your time on and how much is
managing and editing how much is writing
Etc and then optimize that over time you
can get a mentor um find somebody who's
been a manager before um that will work
with you not your boss because your boss
has a set of complicated uh objectives
including how much are we shipping um a
mentor can just focus on you and making
you more
successful could you give some more
examples of things you can do to ensure
consistent voice of the company
especially when the company is growing
yeah um
so I would look at every piece of Copy
in every department so like another area
that almost never is done so look at
your recruiting website almost never
done to the same quality as your
conversion funnel i' look at customer
support another classic area that isn't
up to the same quality and treat
customer support like a product uh so
that you actually have an engineering
team and a design team over time that
actually focuses on making that world
class um usually where you have
different Executives at a scaled company
most Executives were trained differently
at different companies and they bring
some of that with them so you've got to
cross Trin that so if you've hired a VP
of engineering from Google it's very
different than a design leader came from
Apple they don't actually learn how to
do anything the same way um so you're
going to have to stitch that together
somehow either one or the other is going
to have to learn in the other style or
you're going to have to create your own
style and really teach that to your
Executives so it shows up all the time
but all you do all you need to do is
just pick up the company's products and
look for things that have a different
voice and you can see it Visual Voice
word choice all over the
map Sam could you talk a little about
the tactics of how you manage people
like how often do you me that how you
give them goals how often do you talk to
email so the canonical advice and this
now sounds obvious but it actually was
pretty radical in 1982 when Andy Gro
vote his book is you should have a
one-on-one roughly every two weeks some
people will say every week and uh I
don't think you want to go longer than
two weeks one week can be ideal actually
in many companies the reason why in fact
there's another adage which is you
should only have five to seven direct
reports that actually deres from the
concept of a one-on-one every week um so
that the direct reports so you can fit
enough one- ones in your calendar and
still get other things done so I think
101s per week are a good idea the agenda
should be crafted by the employee who
reports to the manager not the manager
the oneon-one is mostly for the benefit
of the employee so they should walk in
with here's the three or four things I
want to talk about ideally they
circulate that it can be even bullet
points in advance by email but in
advance you have time to chew on it and
you're not on the Fly uh winging your
responses but that's probably the best
structure now if someone's really good
and really talented and has been doing
something for a long time with a lot of
internal credibility you might push out
the one every week and relax that to one
every two weeks possibly once a month I
don't know that I would go beyond once a
month
ever uh when is it acceptable to
compromise and hire someone who's a
ammunition rather than a barrel yeah so
the question is when when do you
compromise and hire more ammunition
instead of a barrel truthfully you're
going to hire more ammunitions by by
definition than you are barrels so
there's a ratio between the two the
question is the ratio so at some point
the ratio is going to get out of whack
so if you're the only Barrel in the
company and you have 50 Engineers you
might as well only have 10 Engineers
because you're not going to get any more
done so you're just wasting resources
you're going to frustrate Engineers
because everybody's going to need your
approval your sign off you're editing
it's just going to stack and frustrate
people so it's really now different
disciplines engineering like I actually
think like
roughly 1 to 10 to 20 is probably about
the right range um like you don't you
don't need you don't need more Engineers
until you have more barrels um designer
a little different but it it do I it's
always going to be hiring more
ammunitions and a good leader a good uh
Barrel will kind of have a feel for that
so one way to uh one way to correct for
this natural tendency is to increase the
your headcount on your team like sort of
an Empire Building tendency like oh so I
manage 20 people and Sam only manages 10
and you manage three so I'm more
important than Sam you're more important
than you one way to do that is you put
an X here of the number of people that
the output sorry specify how how many
things they've done successfully then
divide by the number of people on their
team and tell them that this is going to
be their grade and their performance
review shockingly this why doesn't start
increasing on that team um it's amazing
how this works and be really explicit
about
it as a reg your capitalist uh how often
you intervene with your portolio company
and uh what's your fos behind that so
how often do I meet with yeah so the
question is as a vure capitalist how
often do I interact with my companies
meet with them um generally when we
invest and we do do some seed
Investments where we invest less money
but when we invest a fair amount of
money in lead round like a series a a
series B round uh We join the board and
roughly I meet with a Founder CEO every
two weeks that's the default now there
can be obviously there's inflection
moments and things go right go well or
wrong and that you know that's on an ad
hoc basis um these days actually
surprisingly I do a lot by text message
I even have one CEO who Snapchats me all
the time um which I'd actually rather
not but that so the world the world has
changed a lot um but I try inperson
meetings every two weeks but you don't
inter with the operation um no I mean
really it's like being a venture
capitalist is more to me like being a
psychologist so if you come to my office
you'll see actually we have two chairs
kind of AR raid like this with a little
table in the middle and we sit down and
I'm basically like so tell me your
problems you know and then it's like a
question it's like so have you and then
and then my response is usually well
have you thought about this have you
talked to this person have you tried
this Etc and it's just asking a lot of
questions and going back that way but
that's 90% of what I
do so as CEO when you you got these
arrows right let's say you're a start
company you've got two really good
engineers and you're working on this
product
uh I've heard that you should always
need yes how do you how do you balance
that well it depends on where your
prioritizations are so you know Sam
talked a little bit about this in his
lecture but every company will move
recruiting you know first second or
third somewhere in that you know sort of
spectrum if it's your number one
priority then about 25% is probably a
pretty good allocation um actually I
like the calendar audit for CEOs even
more so than for new managers so when I
work with CEOs sometimes who aren't uh
thriving in that role for the first time
I actually forced them to show me their
calendar and before I do that and now
I'm going to ruin this trick because I'm
going to tell it to you I actually asked
them to rank their priorities write them
down on a piece of paper and just just
specify whatever they are then we go
pull up their calendar and see if it
matches and it never matches like never
like recruiting is the one that's most
often arai so you know let's say half
the CEOs you meet with will say
recruiting is the number one priority
it's almost never the biggest block of
time on anybody's calendar and so that's
what you're trying to do is match
resources and inputs against priorities
and a calendar audit unfortunately
there's no software that does this
really well um it' be great like
actually we literally pull up someone's
Google Calendar and kind of manually add
up the hours um which is somewhat insane
but that's that's the best way is just
what are your priorities if your
priorities are raising money you don't
want to allocate 100% of time to
recruiting you want to allocate a fair
amount of time to raising money for that
block of time until you're successful at
it how about one more question one more
question anybody okay go ahead on the
surface some of this advice seems
contradictory because you emphasized
focusing on A+ tasks and delegating less
important things but then you've said
it's good to write like a three page
script for your receptionist and focus
on all the details how do you harmonize
those goals it's a good question I think
the way to harmonize the question is
really how do you harmonize things like
where details can really matter but you
only get one thing you know to do and
you've got to allocate to the top one
two or three things how do you how do
you put those two things together and
actually there is some tension and even
in a healthy organization there's some
tension of why are we actually focused
on you know writing the script um as
opposed to something a user may see I
think the underlying philosophy of
getting the details right is pretty
important to install in the very very
very beginning of a company because
people will start acting that way and
making decisions that way themselves so
you won't have to actually literally do
that and if you have to do that it
actually shows that you the foundation
isn't actually that that solid so if
when you first start the company it's
about getting the details right that
everybody is precise everybody on every
task is always thinking that way and
then that scales and then the people you
bring in it's a little self-fulfilling
people who can think that way will tend
to get hired people who can't won't get
hired each team and each leader will
tend to enforce that themselves so CEO
is almost never doing it so it's
partially like how do you start and then
cultures like that I mean that the key
to culture is it's a rule it's a
framework for making decisions and if
you ever cultures baked people learn how
to make decisions across that culture
and you're never saying anything you
never have to really do anything except
just you watch and uh know and promote
and move people around cool well I guess
that's it thank
you
thanks