How to Manage with Ben Horowitz (How to Start a Startup 2014: Lecture 15)

So in Sam's originally sent me an email to do this course he said, "Ben, can you teach a 50-minute course on management?" I immediately thought to myself, "Wow, I just wrote a 300-page book on management." So that book was entirely too long, and I didn't actually have time to condense all the 300 pages into 50 minutes. So, like Mark Twain, I didn't have time to write a good short letter, so I'm going to write a long letter. But in this case, I'm going to teach exactly one management concept—one long thing.

This management concept, though, is the thing that I see CEOs mess up more consistently than anything else—from when they're very, very early to when they're very, very big as a company. It's the easiest thing to say and the most difficult to master, and the concept, in musical form, looks hard. Me, very sensitive, the musical form: This is from Sly and the Family Stone—sometimes I'm right and I can be wrong. Believes are in my song, so the difference 'bout a group I'm in. So that's the musical version.

Today's lesson, for those of you who are musical, you can leave now. In management concept form, basically, it's this: When you're making a critical decision, you have to understand how it's going to be interpreted from all points of view—not just your point of view and not just the person you're talking to, but the people who aren't in the room. Everybody else. In other words, you really have to be able, when making critical decisions, to see the decision through the eyes of the company and the company as a whole, which means you've got to kind of add up every employee's view and then incorporate that into your own view. Otherwise, your management decisions are going to have very weird side effects and potentially very dangerous consequences.

It's a really hard thing to do because at the point when you're making a decision, you're often under a great deal of pressure. So let's get into the agenda. I'm going to cover kind of four cases. First, I'm going to cover demotions, which is a very emotional thing. Then, raises, which is also an emotional thing. Then, we're going to evaluate one of Sam's blog posts, which is news to Sam, so I figured I'd tease him since he invited me to do a 50-minute management class after I wrote a 300-page book. Finally, I'm going to talk about history's greatest practitioner at this, and I'm wearing a shirt with him on it, and kind of how he used it to do something that nobody has ever done before in human history and has never done since in human history but basically complete mastery of the technique I'm going to talk about.

So first business example: You've got an executive, and you demote or do you fire him? This comes from an actual conversation, an actual real-life situation that I was working on with the CEO. The basic situation was this: He had a great executive—like an executive who just a great effort—like he hired him, he was working harder than anybody else in the company, doing, you know, like everything it was supposed to. Everybody liked him because he worked so hard and was, like, a generally smart person, but he was just in over his head knowledge-wise. He did not have the knowledge and the skills to basically do what the company needed him to do or like really compete against the competition.

So he could actually keep him in the job, but he's a great guy. So the question is, "Well, should I fire this person? Or can I just move them into a lower role and bring in a person above him?" Then, like, you know, that would be real cool. So let’s look at how you kind of make that decision.

In this case, this is the CEO. So, you as a CEO, look, it's really hard if somebody comes to work every day, like, you know, at 6:00 a.m. and is working till 10 p.m. and, like, doing it, like, harder than anybody in the company, it's really hard to just say, "Well, sorry, like, nice effort, but you don’t get me for an effort; you get NIF because I fired you." Nobody wants to have that conversation.

A demotion is kind of neat because from the CEO's point of view, and this is, he's like, "Look, we can keep him in the company. He worked so hard; he's a great example of somebody who gives great effort." Then he's got a lot of friends in the company, and they're— you know, from a cultural standpoint—like, it's a win-win because, like, he gets to stay and, you know, like, and then I can bring in somebody else and I can solve my problem, but I don't have to create another problem.

And if you think about it from the executive's perspective and what they would think, it's like, "Well, I want to be demoted but I really don’t want to be fired because if I get fired, that's a way harder, more complicated thing to explain to my next employer than I got demoted." Like, the demotion is like, "Well I really get demoted. I got a new job, smaller title." And then, you know, the last thing is it enables, you know, like theoretically, like, you know, the company, you know, we value all our employees; we brought you in, we made a commitment to you as an employee, and like, we value everybody. It kind of will enable you to keep growing with the company.

This is the kind of initial conversation I had with a CEO, and I said, "Well wait a minute, I said, let me ask you this: what is the equity package that this exec has?" Because, "Well, what do you mean?" I was like, "Well, like, this, you have like a director-level compensation? Is he getting like a vice president-level compensation? Does he have a point and a half? Does he have point four percent or what?" And you know that kind of gave the CEO pause. He's like, "Well he does have a point and a half." And I was like, "Okay, so you're an engineer in your company. How do you feel about somebody who used to be the head of sales who got brought in with a point and a half?"

Now mind you, you're an engineer. What do your engineers get? Like, what, 0.14% or 7.2%? What are they getting at this point? So how are they going to feel about somebody who's now the head of sales with 1.5% of the company? He was like, "Oh." And I was like, "Yeah, oh! Because like, how fair is that? So are you going to take the equity away? Are you up for doing that? Or are you up for going back and taking back his compensation? And how productive do you think he'll be if you take away his compensation?"

Secondly, will people give him the same respect now that you've demoted him? Because they knew him as this and now he's this. Like, "I knew you when you were head of sales, now you're the regional manager, and you're telling me what to do? You're telling me I need to make that call? Like, seems to me you got demoted. You know who are you to talk to me? I'm the up-and-comer—I'll be the next VP of sales at the next company."

So all these things come into play. And so when you look at it, at the end, you may think you're dealing with one person. You may think that this is a demotion or a firing of one person and what it means according to that one person, but what you're really doing is saying, "Look, what does it mean to fail on the job, particularly at a very—like the highest-paid, highest-compensated job in the company from an equity standpoint?" Then, like, what's required to maintain your equity? Is it good enough to put in effort, where you have to get a result?

In different situations at different levels, like these answers will come out differently. If this had been a person that was not that was an executive brought in from the outside, but was somebody who maybe you promoted past where they should have been and didn’t ever get that equity, like maybe you make a different decision. But you've got to understand what it's going to mean to everybody—not just the person you're talking to.

Example two: An excellent employee asks for a raise. Good employee—this isn't like the last employee; this is a really good employee. So an excellent employee asks for a raise. So, look, your first thing is like, they're really good; they ask me for a raise. They didn’t ask me for no reason; they asked me because they think they deserve it. I want to retain them; like, I want to be fair. They've done a great job; I want to be fair. And like, you know, I know that if I give them the raise, it's going to be all love coming my way. It's going to be a dragging your raise; we're good, you know, like we're boys and you've got a raise—it's awesome.

So, like, you know, from your perspective, you know what you want to do when somebody asks you for a raise. Then, if you look at it, okay, for what about from their perspective? How would they, like, take it if you gave them the raise? Now, you have to remember from the employee's side: for them to get to the point where they've asked you for a raise, this is not something they just like woke up one morning and said, "I'm going in and asking for a raise," right? Like, this is something where they've thought about it a lot. They've, you know, compared their other options; they may have an offer from another company; you know, it's something their spouse probably has been talking to them about, and so it's a serious thing.

And so if you give it to them, they're very likely to feel very good about it. Like, they may be like paranoid about "Why did you give me a raise?" But very unlikely, much more they’ll feel like [Music] [Music] I'm sorry, I have to displace all things and that's for those who don’t know— that's Bobby Shmurda and Rowdy Rebel doing the shmoney dance. But that’s likely the reaction you’ll get.

So there's a lot of momentum to say yes. Look, you know they read Sheryl's book, they leaned in, and I'm going to reward them for doing all that—which is, you know, and by the way, that book is very good advice. So I'm not knocking Sheryl on that. Don't—why should be misinterpreting me? However, you know, there's going to be—however, what about you have to think about it through the point of view of the employee who did not ask for the raise?

So the employees who didn’t ask for the raise— they may be doing a better job than the employee who did ask for the raise and in their mind, they're going okay, so I didn’t ask for a raise and I didn’t get a raise, and they ask for a raise, then they got a raise. And so what does that mean? That means one, like, you're not really evaluating people's performance; you're just going, "Well, whoever asked gets." So that means like, I either need to be that guy who asked for the raise, and you know, like, that’s not how I feel. I do my work and I don’t necessarily want to ask for a raise. Or I just need to quit and go to a company that like actually evaluates performance.

And then, you know, you could really make the person who doesn’t get the raise feel pretty pissy about it. And don't think that when somebody is walking down your company doing the shmoney dance that other people aren’t going to notice, because they're going to be fired up about that raise. You can say, "Oh, this is highly confidential that I'm giving you this raise." It's not confidential! And then the cultural conclusion is going to be everybody in your company is going to feel that they now have a fiduciary responsibility to their family to ask for a raise all the time because if they don’t, then they may be missing out on a raise that they would have otherwise got.

Talk to any experienced CEO and they will tell you this is true. Like, if you give out raises when people just ask you for them, like that you will have a lot of people asking you for raises. That is called encouraging behavior. So what do you do? And really the right answer on raises is you have to be formal, and you have to be formal to save your own culture.

I know this is always—this is the thing that causes people running startups fits, because it's like, "Well, I don't want like a lot of formalities. I don't want a lot of process. I want it to be organic. We want to do yoga. We want only smoke organic weed!" Sorry that's like a Peter—Peter got very focused on who was smoking weed a little while ago. But like the process actually protects—it protects the culture because what it does is it says, "Look, we're going to look at all the inputs; we're going to have a formal way of saying anybody who wants a raise come talk to me. Like I'm not going to give you a raise, but I'm happy to hear your story. I'm going to talk to all the people you work with so I get like an understanding but I'm going to evaluate all the work that you've done so I know like where I actually write you and what my actual opinion is on though I'm going to do that periodically.

I'm not going to do it daily, but like maybe if I work fast-moving, I'll do it every six months or even maybe once a quarter, and at the end of that process, I will tell you what your raise is, and I will tell you if you're getting one or if you're not getting one. But I'm not going to do things off-cycle; I'm not going to do things when asked. There’s like one process, and that’s—and you know, when I used to be CEO and I had like executives—it’s the bigger you get, the harder this gets. Because the more aggressive the people working for you are, because to get to be an executive, it turns out, you often have to be pretty aggressive in this world. Most companies, like that's how you get to that level.

You know, I would go, "Look, you can lobby me all you want after the process is done and I give you your raise, but you know what? I'm not hearing it!" Because I already went through my process. I got your input going in; I got everybody else's input. I've got so many people; I've got so much money, and you got what, like, I believe is right? Having a process like that basically gets people to be actually more comfortable. They're more comfortable because they don't have to always be on edge about like am I asking for what I deserve or am I getting like a stout because of who I am, what I look like? I'm not buddy-buddy; I'm not at the golf course with you or I'm not doing whatever you like to do, or you know, I don't have to worry about any of that because I know your process; I know your process is like you’re going to evaluate everybody and then you're going to give them what's fair. And so that's a much better way to handle that, and it means that you're actually understanding what everybody thinks—not just the people you're talking to at the moment.

Okay, so now we're going to get into some fun stuff. We're going to evaluate Sam's blog post now, which is actually—there are some very good things in it, and then there's some things I'm going to discuss.

So this is the excerpt: "Most employees have only 90 days after they leave a job to exercise their options. Unfortunately, this requires money to cover the strike price and the tax bill, and I'll explain this a little more later. But I want to read it first. For the year of exercise, blah blah blah, this is often more costly than an employee has." This is the key. So the employee often has to choose between like leaving the job and walking away from the vested options, i.e. the money that she has because she can't afford to exercise or being, like, locked in to staying at the company basically for all the wrong reasons.

It's a particularly bad situation when an employee gets terminated, and I'll get into that, and that's a really key point. This doesn't seem fair. The best solution I’ve heard is from Adam D'Angelo, a very, very smart guy at Quora. The idea is to grant options that are exercisable for 10 years from the grant date, which should cover nearly all the cases, you know, whatever happens with the company. There are some tricky issues to this, blah blah blah, but it's still far better than just losing the assets. I think this is a policy that all startups should adopt.

So our question is, well, like, what did Sam write? And is this a policy that all startups should adopt? So let me first explain again what the policy is. So currently, the way almost every stock option package in Silicon Valley works and in the whole startup world is this: that your stock vests—you get stock that vests over a period of time. But if you leave the company, when you leave, it depends on the company, but I think it's 90 days to exercise.

So yeah, so 90 days! And if you do not buy your stock in that period, it's not yours anymore, which depending on when you entered the company could be a big problem. So a lot of companies today that are valued a lot, like if you take like a really valuable startup like, say, an Airbnb or an Uber or something like that, when they bring you in, they go, "Wow! You know, like, if you look at your 409A price and the preferred price like the stock we’re giving you right now, the options are already worth like 10 million dollars—your life, low 10 million dollars from rich."

But what they don’t necessarily tell you is, in order for you to get that money, because they—where the preferred is worth 10 million dollars, your options probably are going to cost you like two and a half million dollars when you leave. And if you don’t have the two and a half million dollars in 90 days, it’s gone! Like, you just lost all your money.

And so Sam is like, "Wow, that’s up!" And so he wrote a blog post, and he said everybody should change it. So the first question that you have to ask yourself on something like this is, well, why is that even like this? This has kind of been around since like the '80s, so why is the rule like this around for 30 years? It turned out, Sam—and I don’t know whether he, like, figured this out or just intuitive—but he was right. Like, something actually had changed.

So up until 2004, there used to be this law called APB Opinion Number 25. That law was the old way to account for stock options, and you know, it's also the laws that all the guys went to jail on. So I had a lot of people who caught a case on APB 25, so I'm glad it's gone because it was a very confusing law, and a lot of people did not understand it, and they literally went to jail.

But when that was the law, if you gave somebody 10 years to exercise their options, you would never have been able to go public and you would never have been able to be acquired. Because you basically were taking an expense that was tied to your stock price. Basically, the more your stock went up, the more compensation expense you’d have to take.

The worst thing about it would be is you wouldn’t know what it was going to be, so be totally unpredictable. So you could never forecast earnings, ever, because your earnings would be a function of all of your stock price. And so the more your stock price went up, the more money you would lose. In those days, people did not look through stock option expenses. So like it just wasn't doable, and that's why everybody's agreement was written at 90 days.

So that's why it's there. So absolutely, it's the right thing to question it. Now are you guys following? You get this? This is like more complicated than the first two examples, but a very important one. Okay then, so your perspective on this: If you've got employees, you want to be fair. Like nobody wants like, "Hey, you get all the stock in four years, psyche!" Right?

Especially like when you fire someone, hey, you're fired. "I feel real bad about it, but you know guess what? I'm also going to take all your money too. Must not feel that bad!" So like, that's kind of like a problem. But you also—and this is the thing that you've got to keep in mind—you also have to think about the people who are staying, and you want to reward the people who are staying.

Now the employee—the perspective of the employee leaves—and this is really critical because this is your reputation, right? Like, "I worked like, you know, a year's work. Where's my year's pay?" And then, "Okay, so now you're telling me about this 90-day exercise? And I know it was in like the fine print of my stock option agreement, but my hiring manager never told me about that. They never told me I was going to need like two million dollars to get my stock, which I don’t have. Like, so if I was rich, I'd get my stock. Like that's not fair!"

And so now I'm fired and I'm screwed. And guess what? You know, I'm going to tell everybody how you like screwed me over. And so that's a real reputational problem. So that's something that you've got to consider in selling this policy. But then you also have to consider the employee's state. One thing that they're going to ask themselves is, "Look, they're leaving."

Every time anybody leaves, this is like, "Was that smart?" Like that’s something—you—because these are people who—your employees know each other better than they know you in any company. I don't care what company you are. But, like, often, like, the person they're really working with is going to be the person they know more, and so if that person leaves, they're going to go, "Well, like, should I have left too? Like what did they get, and how does that compare to my deal?"

If we look at the situation and we try and analyze it, there's a lot of components to it. So first, it’s like companies tread a lot of people around here, and I think like really the average is somewhere around 10%. It's probably getting higher, particularly if you’re in San Francisco; it's getting higher just because of the nature of the culture there.

Then Silicon Valley companies dilute like six, eight, or even ten percent a year for employee options. You have to keep in mind that as mean as it may be, if that employee leaves and can exercise their options, then those options come back to the pool where you can potentially give them to people who are already there. So you’re actually taking less dilution.

So that's something that you have to think about. I'm not saying you have to act on it, but it's something that you have to think about it. Then secondly, look, losing all your stock is a very big incentive to stay. And that can be good news or bad news, right? It can be good news in that like you get to keep somebody you might have lost, it can be bad news and that you kept them for the exact wrong reason, right?

Because they have handcuffs on them. You may get like the exact place where I'm not having it in play. But on the other hand, a 10-year option on a highly volatile security—for those of you who have taken that class—anybody taking that class, that's valuable, right? Ten-year options are volatility in length. That's the value of an option. Well, 10 years on a startup stock? That's a big, valuable thing.

And remember, the employee stays and doesn’t get that. Employees’ days just get the stock they get that, but they don’t get the new job and the new stock. So they get one thing but they don’t get both things. And so you've got to weigh that in. So this is a hard one. I think that it should be re-evaluated by every company. I wouldn’t go as far as Sam that it should be adopted by every company. I think you have to think about what you want, and I would just offer kind of two alternative cultural statements.

One is, "Look, we treat employees with the utmost straightforwardness. We're going to be fair, and therefore like you get 10 years to exercise your stock and like, when we said we’re going to give you, you’re going to get regardless of how rich or poor Yorick. Like that's just a done deal."

The second way to handle it—which is, no companies do this, which is why I actually really like this post that he wrote—look, you can say up front "You're guaranteed to get your salary, but for your stock to be meaningful, like these are the things that have to happen when you've got a vest: you have to stay until like we get to an exit, like the company makes it. And or like you’ve got out of money, and like, finally, like the company's actually got to be worth something. Because 10% and nothing is nothing!

Look, the reason that we set the policy this way is like we really value people who stay. So don't join this company like if you're going to join another one in 18 months because like you're going to get screwed and like our policy guarantees you're going to get screwed on that." So like those are two ways to handle it.

It really depends on like you and how you want to run your culture. But again, with all these things, it's just critical to think it through from everybody's perspective because when push comes to shove, that's going to matter. It's going to change the outcome of your company.

Let's hear it! I think I need to be more than today, right? So you put at it. Look at how to say incentive. It's all me! Fire, nestled in, a screwed—oh well! The other thing that's really important that Sam pointed out is like the distinction now is how much money you have, right? If you've got the money, you don’t get screwed; you walk away with all—you can buy your stock. You do take some risk, but you can buy your stock. If you don’t have the money, you don’t have the money!

Okay, so now we’re getting to the person on my shirt, Toussaint. He was the best at this, and I want to take you through some examples because they're very powerful. Okay, so first of all about Toussaint: He was born the same time, and the thing about him is he was born a slave. But he wasn't a foreign slave; he was born a slave in the most brutal place to be a slave, which was in kind of the then-colony of Santo Domingo. You know now referred to as Haiti, but this was actually a much more severe form of slavery, as were kind of all the sugar-growing areas, then even U.S. slavery, which is historically a very brutal form of slavery.

Just to give you some numbers on it, basically over the course of slavery, the sum of 400 years—a million slaves were brought to the U.S., and at the end of slavery there were four million slaves in the U.S. In that same period, to the sugar-growing countries in the Caribbean, two million slaves were brought over, and at the end of slavery, there were 700,000. So from just a quantitative perspective like nearly ten times more brutal!

I'm going to read this to you. I don't know if I quite have time, but I don't care. But just to give you an idea, this isn't just like a quantitative thing. I'll read you sort of a description of slavery in Toussaint's area: "Whipping was interrupted in order to pass a piece of hot wood on the buttocks of the victim. Salt, pepper, citron, cinders, aloes, and hot ashes were poured into bleeding wounds—not to heal them, just to make it worse. Mutilations were common: limbs, ears, and sometimes private parts to deprive them of the pleasures would say could indulge without expense."

Their masters poured burning wax on their arms, hands, and shoulders, emptied the boiling cane sugar over their heads burning them alive, roasted them on slow fires, filled them with gunpowder and blew them up with a match, buried them up to their necks and smeared their heads with sugar that the flies might devour them, fastened them to the nests of ants or wasps, and made them eat their excrement, drink their urine, lick saliva of other slaves. One colonist was known, in moments of anger, to throw himself on his slaves and stick his teeth into their flesh.

So that's the slavery that he grew up in. And it's really important to understand this because to get out of that perspective was not easy. But he had a vision, and his vision was kind of threefold. One, he wanted to end slavery. Two, he wanted to actually take control of the country and run the country. And thirdly, he wanted it to be a first-class, world-class country—not just like something where he had freed the slaves but something that could compete on a worldwide basis. And so that was his mindset going in, but that was the background that he came from.

So example management example one: conquering the enemy. So the kind of sequence of battles that occurred in Haiti were first, you know, he has to kind of defeat the locals. But then once he defeated the locals—which there were several countries that were very, very interested in taking control of Haiti, principally Spain, England, and France—he had to defeat those armies as well. When he conquered them, he had to decide what to do with the kind of conquered soldiers and the leaders on the other side.

To do this, he really took into perspective kind of three different points of view: one, his soldiers' point of view; two, the enemy's point of view; and finally, the point of view of the resulting culture—like what kind of country was he building? Because the army was going to be the seed corn for the culture of the whole country.

From the soldiers' perspective, and I get this: Soldiers like to pillage—they get stuff! It's something for their work. The second thing is they're trying to kill us, so we should kill them. Like that’s a basic perspective of the people who are fighting for him. So the most important people to think about now. I put pillaging up there and a couple of things to know. When I put rape up there, very interestingly, like, not only did he not allow rape among his army, but he didn’t even allow his officers to cheat on their wives, and if they did, he'd get rid of them.

Because he was so concerned about the resulting culture! What was it going to be? Was it going to be productive? Was it going to be best in the world, or was it going to be something less than that? And so that was his mindset going in. His army was actually famous for not pillaging, so they were actually already used to that. They were famous for not pillaging. This was one of the most surprising things to the conquered people to the point where in Haiti he had a reputation where even the white people were like very impressed with him just because he would go in and go into their city and not pillage, even though he would win.

But again, this is because he took a long view of the culture. So, and this is a kind of important subtle point which gets into his conclusion. But he believed that the culture of Haiti—because it was a slave culture, sugar plantation culture—was just pretty low-grade to what he had experienced in Europe when he dealt with the Europeans.

Then he thought that slave culture was even more broken than Haitian culture because if you think about slave culture, it's like the kind of culture where, oh, you don’t do what I’m going to beat you to death, I’m going to blow you up with gunpowder. If you think the kind of behavior that ensues from that, that was the culture he knew he needed to replace. He knew he needed to upgrade.

So his solution was when he conquered the British, or he conquered the Spanish, or he conquered the French, he would take the very best people from there, and he would make them generals in his army. So we probably didn't expect that—like here the guy's trying to kill him, he's leading a slave revolution, and when he conquered the enemy, he actually incorporates them into his army and makes them part of that because he wanted the expertise, and he wanted the culture to be at a much higher level.

So the second question he had was more complicated: What do you do with the slave owners? So you're leading a slave revolution, you take control of the country—what do you do with the slave owners? Three perspectives, again. So for the slaves, like, come on! If you're a slave, and you win the war against the slave owners, like you want to kill them! There is no question Emily does—you want to kill them! But like that’s your land now!

Like we won! Like fu! From Toussaint's perspective, it was more complicated because he wanted Haiti to be a first-world country, and sugar was really important. The whole slave economy was the sugar economy then, right? Like on the other hand, he was a slave, and he's got to be pretty upset particularly, given the type of slavery then he had. But he had to consider, like, he didn’t know how to run a sugar plantation and then, like, he didn’t have any business relationships on who to trade the sugar with. But on the other hand, like, like war: you win the war; you get the land. Like that’s a pretty, like, basic rule.

So what to do? If you look at the slave owner, it's pretty interesting because they're coming at it from—and this is a point of view that he actually had the discipline to understand—they were coming from a cost structure that was predicated on slave labor. So like their business didn’t work without slave labor. Like literally if they had to pay people, like their cash flow wouldn’t work; they paid a lot of money for the slaves up front, and they paid a lot of money for the land.

So in their mind, like to run it, like that was like—that's how business works. Like you can’t just—you can't just like change the economics and have it still work. And then they knew they had like some power because of the position they were in. So what was the answer for the slave owners?

So one, so the solution was like one: "I'm going to end slavery." Two: "I'm going to let the slave owners keep their land." Three: "I'm going to make them pay their workers." So there’s no more slave labor—you have to have paid workers! But in order to fund that, I'm going to lower their taxes. You guys ought to be kind of impressed with that. Like, lower the taxes of the slave owners after you defeat the slave owners and like end slavery. But he had a bigger goal; he wanted a stronger culture. The way he treated those slave owners to keep the economy going was important.

Then let's look at the results. So, first of all, Toussaint’s revolution is the only successful slave revolution in the history of mankind. There has never been another one! There may never—hopefully we won't have slavery in a big way and there won’t be another one. So, like, he succeeded. To give the plantation owners kept their land. Three: He defeated Napoleon. He had a booming economy in a world-class culture. Under Toussaint, Haiti had more exports, export revenue than the United States.

So that's not successful! He was—he led the revolution! This is the power of looking at a situation not just from your point of view but from the point of view of all the constituents—even the people you hate, which is hard to do when you're CEO and harder to do when you're leading a revolution.

So just like in conclusion, the most important thing you can learn as CEO—the one of the hardest things to do—is you have to discipline yourself to see your company through the eyes of the people that you're working through. Through the eyes of the employees, through the eyes of your partners, through the eyes of the people who you're not talking to and who are not in the room.

Thank you!

Thomas: "How to communicate alleged selected employees for the map because of the accessibility phase."

Right, right, this is a great question. Yes, so the question is—so if you've got to fire or demote an executive, one, how do you have the conversation? And then two, like, how do you explain it to everyone else? Because like it's clearly some kind of failure: you failed on hiring, you failed on integrating, they failed at their job, like some—like it's failure!

And so I’d say, look, the first thing is when firing the person, you have to really try to be honest, and you know you're feeling like you failed, and I think a common reaction is—there's a couple of common reactions. One is like, "You just suck. And like, so I’m firing you—screw off!" That’s not good because it’s not really true. It may be like, you know, you're feeling that way.

Then another kind of common mistake is just to be like, "You know, too mushy—it's not you, it's me!" and it feels like some kind of weird breakup with an ex-boyfriend that you really didn't like. But generally, like when you hire people, like you try to hire the very best and you hire people who are qualified to do the job. Generally, the reason that they fail in the job is you made some mistake in the hiring process in that you didn't match them to the needs of your company accurately enough. That's the number one reason why this fails.

And so that's generally a good place to start to say, "Look, here’s how we are, and here’s what I didn’t recognize about us and about you when I made the decision. And now, like, it is what it is, so we're going to have to move on!" And then when you talk to the employees about it—like this is—and this gets different—which is, look, you can take somebody’s job; you have to take their job. This is something Bill Campbell taught me. But you don’t have to take their dignity! And so it's not necessary to get up in front of the company and say, "I blew that out; I capped his ass!"

In fact, it's not good because somebody feels good about that. Like, you know, you might feel like proud of yourself, but like nobody else feels good about that. You know, the right thing to do is just look, thank them for their work, like let people know that they're moving on, and you don't really have to explain all their personal details.

It's more important to leave them with their dignity and, like, let them go on to live another day because, look, what you say at that meeting—that's their reputation. Because everybody in your company is going to get a call on that person when they try and get their next job. If you start saying like a bunch of BS about them, like that’s not going to be good, and it’s not going to get interpreted as like "we screwed up."

It's going to get interpreted as, "You know he screwed up!" So there are kind of two different things. You have to be very honest with them, but you have to make sure you preserve their dignity when you talk to the company.

Yes, sir! I am sorry about that bit. Yeah, we will not spell it elsewhere!

The one person I think, when was how do you—is the teachers that were bold and stressed like meditating? The question was, "How did I deal with all the stress of being CEO?" And the answer is, I used to be six foot four and good-looking. So clearly not very well! I could ask that a lot, and I really don't have a great answer for it. I mean, I think that, for one, I have a wonderful wife who's sitting right here, so I say that: if you're married to somebody, if you're married to somebody who's supportive, that makes it like a thousand times easier!

If I did not—if I wasn't—I would definitely probably be dead! But the one thing with stress is you've got to keep your focus on what you can do, not what happened to you. And that’s a—it's a really hard thing to do because it's constantly—kind of people are always asking you about it: "What the—are we going to do? We're going to die? We're running out of cash, gonna be over soon."

But you can't focus on that; you have to focus on "Okay, like what are my options? What can I do? And where can I go?" And the better that you are at that, the kind of higher your chances for success.

August, can I get the same dinners? So this is a great question! How did Toussaint get the French generals to work for him? The reason was they were so shocked that he didn't kill them because he was—like, were their perspective? "We're fighting the slave army; we're fighting the savage army. They're going to kill us!"

So when he said, "Look, we're not going to kill you," that was such a shock to their system that it completely reoriented their whole way of thinking. They actually became much more loyal to him than they ever were to France.

He actually borrowed that technique, interestingly, from Julius Caesar, whom he had studied. He was a very unusual slave in the sense that his owner recognized how smart he was and put him in the library because he wanted Toussaint to eventually run the plantation for him. So the person that he studied most of all in that mouth's library was Julius Caesar, and so he borrowed that technique from him, but applied it in a much kind of more dramatic context.

And so his army was kind of—he had British, French, Spanish, slaves, and mulatos, who most of the mulatos in Haiti at that time were pro-slavery, so that was another issue. But his leadership was so great; everybody wanted to join!

Yes, how do you incorporate that same ideology? Who were feeding on your side? Yeah, so you know, and it's different in different ways, but a lot of it, you know, his whole strategy—and I'm sorry, the question was how do you get people—how do you incorporate Toussaint's ideology and get people who are previously against you on your side?

I would just say like what he did in general is the right thing, which is to basically—you have to show them a better way! You know, as a leader, if somebody's your enemy and you need to convert them over—and this happens in business too where, like, somebody's like a competitor or something, and you want to bring them over, but you want to bring them over. You know, you don’t want to bring all the unethical people who will switch competitor to competitor over, and it really is like your culture has to be elevated. Your mission has to be elevated; your way of doing things has to be just better.

And that was the thing that was so compelling for the other rest of the army. Yes, great! This is sort of like a tradition of always, like, be seeing and how people with a culture of people no longer being with that sort of differentiate you in the market from laws.

Probably not the best question for me; I could ask them that. I don't know. So the question is, you know, how we build a culture at Andreessen Horowitz that has differentiated us from all of their VPs? I feel like, you know, that's certainly the goal, and you know, we've been around for five years now, and you know, the attempt that we made at it and, you know, for the rest of the world to judge if we succeeded was basically this: fad, you know, in the old days of VC when I was an entrepreneur, the basic idea was like you’d have an entrepreneur, an inventor, and they’d get a company to a point, and then at that point, they’d either be like ready to be CEO or you would go find a CEO to replace them and build quote-unquote the company.

Our kind of cultural philosophy was look, the founder/inventor is special, so we're going to design the firm and the culture of the firm to help the founder develop into a CEO! And so we do a lot of systematic things. The two biggest are one, all our partners are kind of founder CEOs. So that you get somebody who were the original model with some experience required, it’s a joke if you advise the CEO you have to have kind of been a CEO—imagine that!

That's why, like, Sam used to be a CEO. He doesn't talk about it that much, but he was a CEO, and he was good at it! And then the second part is that a professional CEO would bring in, in the old days, a network of just tons of people that he would know from like all kinds of you know, guys who bought technology at big corporations to like important partners in the field—like guys like Google and Facebook, to, you know, people in the press that he or she might know and so forth and so we try to basically build that Network on your behalf of the firm, and we probably—I think we do a better job of that than anybody else.

So that those are the way that we try to be different. Yes, one more question? Yes, the front row is why are we here talking? Others will shoot very hard. See maximum—so can you give us belts?

It's too late in life. Yeah, yeah! So putting yourself in other people's shoes is difficult in management. Can you think about how to do it in daily life? It's hard! It's hard in daily life; it’s even harder in management because it's the stress of the moment, right? Like a great employee is asking you for a raise. It is very hard not to respond; it's very—because you do not want to lose them.

And like, they're not asking you for a raise randomly. They're asking you for a raise for a reason. And so to say, "Okay, you know, pretty good" if you don't have a process in place to go, stop, step back. Yeah, I would just say—yeah! And it's a key thing in being a leader is you've got to pause yourself. Like if somebody comes to you with something that you know is important, but you want to feel like—you know, when you're a leader, you want to feel like you have all the answers.

Like right now, you guys are asking me questions; if I don't know the answer, I’ll make something up because I want you to think I’m real smart. It’s important. I say, the most important thing is to pause!

So if you know something is really important and you haven't thought it through, just to say, "You know, look, I'm taking this really seriously. But I have to pause because I have to think it through from all perspectives, and I’m going to come back." And I’ve ended up doing that a lot just because there are a lot of things that you run into that you haven't seen before.

I’ll tell you, you know, most CEOs—including myself—learn this the hard way. You walk in, you kind of step in it like three or four times, and you go, "Okay, I'm going to sneak away with this. Nobody's going to see me giving the raise; I'm going to do it and this could be all under the cover is confidentiality, baby!"

Then like it comes up and blows up in your face three weeks later, and you're like, "Oh my God, like what have I done?" Or three months later, or even a year later! And then you know what? It’s a year later; it's a huge problem. Like, so you’ve taken what’s a little emotional problem and you’ve turned it into a forest fire!

You know, we call it like the kimchi problem: the deeper you bury it, the hotter it gets. The Korean Jo! But you know, it takes practice; it takes practice! It's very difficult to do! And I say, you know, like some of my friends, Bill Campbell—this is his big skill; like this is what he's so great at. People always try and describe him to me and I’m like, "That’s not him at all! That’s not what he’s good at! Like, he’s not good at that or that! He’s good at this! He’s good at seeing the company through the eyes of the employees!"

And it's like I said, if you—if you’re good at that, you’ll be a very likely elite leader. So thank you! Thank you! [Applause]