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The Hard Thing About Hard Things
Building a Business When There Are No Easy Answers — Ben Horowitz, 2014
The Bitfor the hardest moments there is no recipe; what saves you is radical honesty and the determination to keep searching.
"There are no silver bullets, only lead bullets."
— Ben Horowitz
Horowitz doesn't offer a manual, but the war notes of someone who was days from going under, succeeded in that business and ended up as one of the most distinguished VCs in history. He shares patterns, brutal honesty and the courage to decide without having all the answers.
The lessons on the struggle are direct:
- Big problems are solved by working, not with a brilliant trick.
- There are peacetime CEOs and wartime CEOs, and the same leader must know how to switch modes when the company is at risk.
- Tell it like it is: a culture where bad news travels fast is worth more than one of forced optimism.
- When all seems lost, there is almost always one more move; look for it before giving up.
On people, the book recommends some counterintuitive ideas:
- Hire for strengths, not for the absence of weaknesses: the candidate "without flaws" is usually the one who excels at nothing.
- Fire fast, with dignity, and deliver the message yourself; the whole company watches how you treat the person leaving.
- Training your people is among the highest-return activities there are, and the first one every busy CEO cuts.
- Watch titles and promotions: every promotion sends a signal to the whole company about what gets rewarded here.
The lessons about you as CEO are the hardest:
- Manage your own psychology: it's the battle no one sees; every CEO feels they're drowning, and the good ones keep swimming.
- Make the hard decision first, not the easy one, because postponing the hard thing only makes it worse.
- Evaluate your team against what the job demands today, not against what it demanded when you were ten people.
The concept to master is "the struggle": the period when nothing works, the money is running out, people doubt and everything depends on you. Horowitz holds that it is not an anomaly of the entrepreneurial path, but a stage that will inevitably arrive, and it is the way you confront it that defines your company's fate.
As a founder it will serve as your crisis manual: you reread it every time you're about to do a layoff, a restructuring or a decision that keeps you up at night.
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How it helped me
September 2008: less than two years after starting we had a third capital round negotiated, to close at the end of October; we had quadrupled the operation in six months and had signed term sheets to finance it. Then Lehman Brothers falls and the worst modern economic crisis breaks out: the biggest drop in Mexico's GDP, and since we played in the hardest-hit subsector, the sources of debt and capital evaporated. We couldn't finance the growth and went from 250 to 25 employees over the following months. We didn't lose much capital, but the business model with which we had convinced investors, and to which we had devoted years of effort, stopped being viable.
There I lived what Horowitz describes: deciding with little information and speaking honestly. It was not a given that we would find a new path, and that's what we told shareholders, board members and employees; what there was, was the determination to look for it. We had in front of us a business opportunity that was profitable but had ethical questions, and both the founders and the board were clear: we would lose the company before compromising our integrity. We kept searching.
We then found an opportunity in working-capital loans for small businesses: it solved a real need, it was profitable and there were sources of liquidity to scale it. It was the entry into the company's most successful product, which allowed us to take the operation to its current level of more than a billion dollars a year in loans originated, with high profitability and high social impact. To this day the original shareholders keep investing with us, citing the transparency, determination and integrity in the most difficult stage of our history.
Killer quote: "Everybody has a plan until they get punched in the mouth." — Mike Tyson
And the Mexican one: "Sin Yolanda, Maricarmen" — a pun on "sin yo, lo anda" ("without me, it keeps going"): don't let your ego get in the way.