The Hard Thing About Hard Things

Ben Horowitz · 2014

Thesis

There is no formula for running a company through a crisis: the hardest problems a chief executive faces have no clean answers, and what carries a company through them is the leader's willingness to face reality, tell the truth, do the unglamorous work that no single fix replaces, and keep going through despair.

The main ideas

Every founder goes through the Struggle, when the vision collapses and self-doubt sets in. It is normal, and it is where great companies are made.
A company facing an existential threat needs a wartime CEO, whose methods differ sharply from those of a peacetime CEO.
When a company is losing, there is rarely a silver bullet. The fix is usually many lead bullets: hard, unglamorous work on the core problem.
Take care of the people, the products and the profits, in that order.
Nobody cares about the reasons a company is struggling. The only response is to fix it.
Bad news should be shared, layoffs done quickly and directly, and executives fired with preparation rather than avoidance.

The Loudcloud story

Ben Horowitz builds his advice on one company's survival. He co-founded Loudcloud, a provider of internet hosting and software services, with Marc Andreessen in September 1999. By the time it went public in March 2001, a year after the dot-com peak, the offering had to be cut to $6 a share. In 2002 the stock fell to 35 cents.

To survive, Horowitz sold the services business, which was most of the company, to the computer services firm EDS for $63.5 million in 2002, and renamed what remained Opsware, a seller of data-center automation software. EDS also signed a license for Opsware's software, which made it the new company's most important customer. In 2007 Hewlett-Packard bought Opsware for $14.25 a share, about $1.6 billion.

The book is a sequence of lessons from those years, many first published as essays on the website of Andreessen Horowitz, the venture capital firm he and Andreessen founded in 2009.

Implication: read the advice as lessons from one company that nearly died several times, written by the chief executive who made the calls.

The Struggle

Horowitz's central essay describes what he calls the Struggle. Every entrepreneur, he writes, starts a company with a clear vision for success, then reaches a point where the vision collapses: the product does not work, the money runs low, key people leave. "The Struggle is when you wonder why you started the company in the first place." It is also "where self-doubt becomes self-hatred."

His argument is that the Struggle is not a sign of failure but a normal stage that every great entrepreneur passes through. There is no answer to it in any book or from any adviser; what gets a leader through is to keep playing, recognizing that there may be a move that saves the company even when it cannot yet be seen. "The Struggle is where greatness comes from."

The mechanism is that the conditions that create the Struggle, isolation, responsibility for others' livelihoods and unanswerable problems, are inherent in running a company. A leader who expects them can endure them; one who sees them as personal failure is more likely to quit.

Implication: when a venture reaches its lowest point, expect despair as part of the work, and keep looking for the move that saves it rather than for permission to stop.

Wartime and peacetime CEOs

Horowitz distinguishes two modes of leadership. A peacetime CEO leads a company with a large advantage in a growing market and focuses on expanding the market and the company's strengths. A wartime CEO leads a company fending off an imminent threat to its existence, from competition, a changing market or running out of money.

The two require different behavior. In peacetime, a leader encourages broad creativity, consensus and protocol. In wartime, the leader sets a narrow goal, tolerates little deviation and may violate protocol to win.

His model of a wartime CEO is Andy Grove, who led Intel out of the memory-chip business, where Japanese competitors were destroying its position, and into microprocessors. Horowitz saw himself in the same position at Opsware, as a series of threats followed one another.

The mechanism is that the same management style cannot serve both situations. Consensus and broad delegation work when time is plentiful and wasteful when it is not; command and focus save a company in crisis and stifle it in peace.

Implication: decide which situation your organization is in and lead accordingly. Recognize when it has changed.

Lead bullets

The lead-bullets lesson comes from Opsware's competition with a rival, BladeLogic, which had begun winning large deals. Opsware's team proposed what Horowitz calls silver bullets, such as building a lighter, cheaper product for a different market. He recalls a line from the Netscape engineer Bill Turpin: there is no silver bullet that will fix this; we will have to use a lot of lead bullets.

Horowitz rejected the shortcuts. Opsware spent about nine months of engineering work making its core product better than BladeLogic's, and won back the lead.

The mechanism is that when a company is losing in its main market, the problem is usually that its product is not good enough. Strategic maneuvers, new markets or acquisitions avoid that problem without solving it, and the company keeps losing.

Implication: when a competitor is beating you, first ask whether your core product is worse. If it is, the remedy is the hard work of making it better, not a change of strategy.

People, products and profits

Horowitz takes a rule from his former boss, Netscape's chief executive Jim Barksdale: take care of the people, the products and the profits, in that order. Profits come from products, and products from people, so a company that neglects its people loses everything downstream.

Taking care of people, in Horowitz's account, is concrete. He argues that startups should train their employees, which he describes as one of the most valuable things a manager can do, rather than expecting new hires to work things out. He also warns against what he calls management debt: expedient short-term fixes, such as giving a valued employee an unusual raise to stop them leaving, that create long-term costs in fairness and morale.

The book applies the same priority to the hardest tasks: laying people off, firing an executive and demoting a loyal friend. Horowitz argues that these should be done directly and quickly, by the leaders responsible, and that chief executives should tell employees the truth about bad news, because hiding it destroys trust.

Implication: treat training, fair treatment and honest communication as the foundation of the company's products and profits, not as costs to be cut when things go badly.

Nobody cares

Horowitz's last lesson for hard times comes from American football. The Oakland Raiders owner Al Davis told the coach Bill Parcells, whose team had been hit by injuries, that nobody cares: just coach your team. Horowitz calls it the best advice a chief executive can receive.

When a company is in trouble, there are always reasons: a bad market, departing employees, an unfair competitor. Investors, employees and customers have no interest in them. The only thing that matters is whether the company finds a way through.

The mechanism is that time spent on explanations and self-pity is time not spent on the problem. Accepting that nobody will rescue the company focuses the leader on what can be changed.

Implication: when things go wrong, skip the explanation of why it is not your fault and put the energy into what you can still do.

Limits

Its lessons come from one company in one industry. Opsware was a venture-backed enterprise software company of the dot-com era, and much of the advice, such as the wartime model and the reliance on venture financing, does not transfer directly to companies of other kinds.
Its proof is the outcome. Opsware's sale to Hewlett-Packard makes the hard decisions look right in hindsight; the same decisions at companies that failed are not part of the record.
It is a collection of essays rather than a sustained argument, and many chapters first appeared as blog posts, so the advice is organized by problem rather than built into a framework.

Zero to One — what a startup should be built to achieve, from another investor of the same era.
The Lean Startup — a method for avoiding the product failures that put Horowitz's company in crisis.