The Hard Thing About Hard Things: Building a Business When There Are No Easy Answers

“Marc [Andreessen]: ‘Do you know the best thing about startups?’ Horowitz: ‘What?’ Marc: ‘You only ever experience two emotions: euphoria and terror. And I find that lack of sleep enhances them both.’”

Marc makes this grim joke when he and Horowitz are on the verge of their first IPO. While Marc embraces the emotional rollercoaster of being a startup entrepreneur, Horowitz is less sold on the idea. By the end of the book, Horowitz is willing to embrace the struggle, but he will never revel in it in the way his partner does.

“I knew we were in deep, deep trouble. Nobody besides me could get us out of the trouble, and I was through listening to advice about what we should do from people who did not understand all the pieces.”

Horowitz frequently stresses the unique position of the CEO. Nobody else in the organization has access to the big picture in the manner a CEO does. Consequently, taking advice from someone lower in the chain of command is risky. Others can’t see the entire situation from the lonely vantage point of the person standing atop the mountain, and contrary to popular belief, the view from the top can be terrifying.

“An early lesson I learned in my career was that whenever a large organization attempts to do anything, it always comes down to a single person who can delay the entire project.”

Horowitz makes this statement as he tries to figure out the key decision maker at EDS who may decide Opsware’s fate. Ironically, his comment suggests that the larger the organization, the more vulnerable it is to decision bottlenecks. Startups rarely suffer from this problem because of their size and flexibility. Sometimes, smaller can be better.

“The innovator can take into account everything that’s possible, but often must go against what she knows to be true. As a result, innovation requires a combination of knowledge, skill, and courage. Sometimes only the founder has the courage to ignore the data.”

Here, Horowitz points out that it takes courage to be an innovator. The facts may dictate a course of action that instinct suggests is wrong. His statement implies that an effective CEO must also be an innovator at heart. As in the previous quote, taking a contrarian stance requires courage. Occasionally, the CEO is the only person who both has all the data and the courage to ignore it.

“I was sick. I couldn’t sleep, I had cold sweats, I threw up, and I cried. And then I realized that it was the smartest thing that I’d ever done in my career. We’d built something from nothing, saw it go back to nothing again, and then rebuilt it into a $1.65 billion franchise.”

Horowitz has just successfully sold Opsware for a large profit. His summary of his eight years at the company foregrounds the emotional roller coaster that he has been riding since the day he became CEO. Although he talks briefly about the experience of being a peacetime CEO, the description of his years growing the company is clearly a wartime experience.

“People always ask me, ‘What’s the secret to being a successful CEO?’ Sadly, there is no secret, but if there is one skill that stands out, it’s the ability to focus and make the best move when there are no good moves.”

This quote speaks to the theme of Embracing the Struggle. Horowitz repeatedly emphasizes that something will always go wrong; it isn’t a matter of if but a question of when. To delude oneself with the hope that nothing bad will ever happen is to hinder oneself as a business leader. At the same time, this quote also emphasizes the need to remain adaptable, as doing so is the only reasonable way to deal with impossible circumstances.

“When a company starts to lose its major battles, the truth often becomes the first casualty. CEOs and employees work tirelessly to develop creative narratives that help them avoid dealing with the obvious facts. Despite their intense creativity, many companies often end up with the same false explanations.”

Horowitz frequently emphasizes the need for clear and honest communication. Telling the truth becomes vital. In this quote, telling the truth to oneself and one’s employees is critical to the future success of the venture. Spending time making excuses for what went wrong detracts from time better spent finding solutions.

“Nobody cares. And they are right not to care. A great reason for failing won’t preserve one dollar for your investors, won’t save one employee’s job, or get you one new customer. It especially won’t make you feel one bit better when you shut down your company and declare bankruptcy.”

As in the preceding quote, Horowitz is cautioning against self-delusion. While failure may bruise the ego, spending time trying to mitigate the pain is fruitless. Nobody will care. All a CEO can do is try to run the company in spite of past failures. Future successes are still a possibility.

“Being a good company doesn’t matter when things go well, but it can be the difference between life and death when things go wrong. Things always go wrong.”

Under ideal circumstances, any company, no matter how badly run, can make money. This quote emphasizes that good and bad only matter when conditions are less than ideal. Downturns are inevitable, but the businesses best suited to weathering a bad market cycle are good companies.

“Valuing lack of weakness rather than strength: The more experience you have, the more you realize that there is something seriously wrong with every employee in your company (including you). Nobody is perfect.”

Horowitz has just told an anecdote about hiring an individual with poor people skills who was otherwise ideal for a particular job. He was a poor fit for the company culture but had the skills needed for the task at hand. This reinforces an earlier quote about not judging by appearances. Someone who looks and sounds the part may not be right for the job at all.

“It is easy to see that there are many ways for leaders to be misinterpreted. [...] Once you determine the result you want, you need to test the description of the result against the employee behaviors that the description will likely create. Otherwise, the side-effect behaviors may be worse than the situation you were trying to fix.”

In this statement, Horowitz talks about creating a mandate that may have unintended consequences. A CEO might set a goal that ends up incentivizing the wrong behavior in the workforce. The only solution is to test one’s assumptions against people’s reactions. It isn’t always possible to understand and prepare for consequences ahead of time until they’ve been tested in the real world.

“The right kind of ambition is ambition for the company’s success with the executive’s own success only coming as a by-product of the company’s victory. The wrong kind of ambition is ambition for the executive’s personal success regardless of the company’s outcome.”

Horowitz makes more than one reference to the wrong kind of ambition. Managers who are only out for themselves and their own personal gain not only damage their team but also the entire enterprise. The CEO and everybody else in the organizational chart need to prioritize the company’s success ahead of their personal ambitions.

“If you want to make something from nothing [...] this means acquiring the very best talent, knowledge, and experience even if it requires dealing with some serious age diversity.”

In this quote, Horowitz refers to the tricky process of hiring a senior executive who may know more about business than the CEO does. This can be threatening. Young employees are malleable. Older employees bring a lifetime of valuable skills and attitudes acquired from prior jobs. The quote implies that the CEO must accept the downside of hiring more experienced workers—which includes possible culture clashes in the office—in order to retain the best talent.

“As CEO, you must constantly evaluate all the members of your team. However, evaluating people against the future needs of the company based on a theoretical view of how they will perform is counterproductive.”

Startups may begin modestly, but they can grow very quickly. The CEO of such a company needs to be constantly alert to the rate of growth the company can achieve in the short term. However, this quote cautions against obsessing about an unknown future. A CEO might lose sight of the current value of a manager by focusing too heavily on whether that same manager will be a good fit for the organization next year.

“What I saw was two guys come visit me when every other public company CEO and chairman was hiding under their desk. Not only did you come see me, but you were more determined and convinced you would succeed than guys running giant businesses. Investing in courage and determination was an easy decision for me.”

Here, Horowitz recounts a conversation with an investor when Opsware stock was trading for less than $1. The quote indicates that the financier valued attitude over projected earnings. He followed his instincts and encouraged other institutional investors in his network to buy Opsware. While it has the potential to seem counterintuitive, good investment decisions are often based on instinct.

“The first problem is that everybody learns to be a CEO by being a CEO. No training as a manager, general manager, or in any other job actually prepares you to run a company.”

In most corporations, there are multiple managers and team leaders and numerous staff. Someone is always available to train new personnel. This quote points out the distinction when it comes to the CEO role. There is only one CEO, and at a startup, there is no predecessor to teach the newcomer the ropes. One can only learn by doing.

“In my experience as CEO, I found that the most important decisions tested my courage far more than my intelligence.”

This quote speaks to the preceding one in pointing out the isolated role of the CEO. Nobody else in the company can see the business from the leader’s vantage point. Frequently, that unique vision will force decisions that are at odds with the advice of everybody else. To insist on a course of action over universal objections requires courage. This is especially true if the decision harbors the potential to be disastrous.

“In all the difficult decisions that I made through the course of running LoudCloud and Opsware, I never once felt brave. In fact, I often felt scared to death. I never lost those feelings, but after much practice I learned to ignore them.”

Horowitz draws the reader’s attention to courage on multiple occasions. He is also quick to point out that courage doesn’t exist as an alternative to fear; rather, it coexists with it. He learns to ignore his fears and act on courageous impulses, but the tug of war is perennial. There are no easy answers because the struggle never ends.

“Being CEO also requires a broad set of more advanced skills, but the key to reaching the advanced level and feeling like you were born to be CEO is mastering the unnatural.”

Here, Horowitz discusses the need for the CEO to embrace the aspects of their job that do not arrive easily to them and would not arrive easily to most. For the CEO, there will be the need to judge others and communicate that judgment multiple times every day. This behavior might normally be described as antisocial, as criticism is often unwelcome. However, Horowitz is quick to point out that this vigilance is motivated by the desire to see the company succeed.

“Just when you think there are things you can count on in business, you quickly find that the sky is purple. When this happens, it usually does no good to keep arguing that the sky is blue.”

Here, Horowitz refers to a deal that goes bad at the last moment. The observation emphasizes the need for adaptability. In this instance, Horowitz and his team were able to resolve the situation before all was lost. Complacency is a luxury that no CEO can afford, even when a deal seems as good as done.

“The number-one way that executives fail is by continuing to do their old job rather than moving on to their new job.”

Adaptability to change is again emphasized in this quote. The comment can apply either to a manager who previously worked in a large corporation or an in-house manager who is having trouble with scaling their operation. Change is the only constant. In startups, this rule is even more important to remember because growth can be so rapid.

“We wondered aloud why as founders we had to prove to our investors beyond a shadow of a doubt that we could run the company, rather than our investors assuming that we would run the company we’d created.”

Horowitz recalls a meeting with the venture capital firm that financed LoudCloud. The group questioned when the company would get a real CEO instead of Horowitz, who was its founder. This question plagued Horowitz throughout his CEO career. When he had the opportunity to become a venture capitalist himself, Horowitz wanted to offer the kind of support that was never given to him when he started out. That early negative experience led to a positive result when Horowitz became a venture capitalist.

“As a venture capitalist, I have had the freedom to say what I want and what I really think without worrying what everybody else thinks. As a CEO, there is no such luxury. As CEO, I had to worry about what everybody else thought.”

This quote underscores the enormous pressure that a CEO feels when interacting with everyone in their organization. Company culture is driven by the CEO’s values and attitudes. These must align with the values of the employees in order for the company to be successful. Even though some employees will be offended over poor performance reviews or potential firings, everyone is impacted by the attitude of the CEO all the time. The burden of anticipating and counteracting negative reactions is enormous. Managing one’s own venture capital firm runs largely antithetical to this.