Wartime vs Peacetime: Ben Horowitz on Leadership

0:01Culture is not a set of beliefs. This is OK. It's a set of actions. And Ben says, you owe $20. OK? So I reach into my wallet. And you know, the norm was you put the cash on the table. So I reach into my wallet and I pull out and I unfortunately only had $100. And I kind of pull it out and Ben sees it and he's like, we don't make change, motherfucker. fucker. If you show up five minutes late, 10 minutes late, then you can say you have respect for what it means to build a company, but you don't really have respect for what it means to build a company. Because you wouldn't do that if you did. You know what?

0:41It's better to be right than consistent. Hello everyone and welcome back to the A16Z podcast. This is your host Steph Smith and today we've got quite the treat for you. You'll get to hear some exclusive audio from our Bio and Health build conference, and you'll hear directly from A16Z Co -founder Ben Horowitz in conversation with Bio and Health GP Jorge Conte. They'll talk about everything from the inspiration behind Ben's book, the hard thing about hard things, which by the way includes a wonderful story about how the open internet was secured and how that wasn't always a given. They'll also get to hear about some surprising leaders from history, the differences between more time and peacetime CEOs, what building culture really means, and since this was run by our bio and health team, you'll also get to hear what the differences are between bio and healthcare innovation versus other kinds of technology.

1:36I think you're really going to enjoy this episode. As a reminder, the content here is for informational purposes only. Should not be taken as legal, business, tax, or investment advice, or be used to evaluate any investment or security, and is not directed at any investors or potential investors in any A16Z fund. Please note that A16Z and its affiliates may also maintain investments in the company's discussed in this podcast. For more details including a link to our investments, please see A16Z .com slash Disclosures.

2:12Yeah. So, obviously, Ben really doesn't need much of an introduction. But I will... Yeah, they have Google. But you've done everything, right? You've been the founder of companies. You've been a CEO, venture capitalist. That's selling author. You know, one of the things that to me is incredible is as I go and visit founders, companies is that we're fortunate to be investors in. More often than not, I see a copy of the hard thing about hard things or... Yeah, when things go bad, it's my time. And I will tell you, on a personal note, I picked up the hard thing about hard things when I was a founder, when I was a CEO, I was about seven years into the struggle.

2:57It was the capital -less struggle, you call it. Yeah, it started looking last a long time. Yeah, man, it was painful. For me, it was a hard read. You know, I will say like that book, it wasn't even a book for me, it was like an intervention. Like I needed it, you said the things that I was feeling that I couldn't articulate. So thank you, thank you for writing it. Yeah, that was a lot of the book was the things that everybody was feeling and nobody was willing to talk about. Was it hard to write? Was it hard to write or does it sort of flow out of you at some point? No, no, no, no. I was just like so mad about how building a company was being described that it was easy to write.

3:30You know, when you write in a fit of rage, it's easy.

3:37It's inspired writing. Yes, it's inspired writing. So let's talk a little bit about, you know, sort of the underlying fire behind writing that book. What would you say are some of the biggest or most important lessons that you learned along the way in terms of being a founder, a CEO, a leader? Yes, so it's interesting. I was thinking about this. The biggest lesson is actually, and I'll I'll spend some time on this because it's a counter lesson to, I think, today's conventional wisdom. So, you know, like one of the things that most people no longer agree with that kind of once is this whole, like, great person of history theory, where, like, history is moved by certain people doing certain things and it's kind of been replaced with these, you know, there are these big cultural forces that move it.

4:21And then there was a speech Obama gave a few years back, or maybe ten years back now, where he said, you know, it's like, you didn't build that. And there's truth in both of them, which is, well, yeah, you can't build a company by yourself. And yeah, like there are cultural forces. But I think that neither is quite true in that if you've kind of built companies, which you realize is there's a lot of people who you can replace. And then there's a few people who, if they go, that's it. It's game over, that's end of the company. And that's quite often the founder. And let me give you kind of like a couple of stories on how an individual effort in a moment in time kind of changes the outcome for the world.

5:06So when we were at Netscape and a lot of people don't remember this anymore, but The internet was not a feta -complete. Like the internet wasn't like automatic. It was gonna happen regardless. That's not true at all. In fact, if you go back and if you can get your hands on the first edition of Bill Gates's book, The Road ahead, which was published in 1995, right? Many years after, like the Mosaic browser and all that, it's a book about the future and it doesn't mention the word internet, not one time. He refers to something else, which was called the information superhighway, which was something that he was trying to build, Larry Ellison was trying to build in a proprietary way.

5:46And it was very competitive kind of at the time, and you know, early 95. And most people and most of the press and most of the kind of people in the world thought the internet wouldn't make it because It was a weird academic network. You know, it was a bunch of professors on it and most of all it had no security And everybody knew then that you couldn't put security into a protocol after the fact particularly if it was widely deployed What are you talking about? It's never gonna work and so you know Bill Gates was gonna own the internet in a proprietary way much the way like Facebook owned social network or that kind of thing.

6:22And I remember it clearly because we had this guy at Netscape by the name of Kip Hickman. And there was this legend behind him, which I knew very well because I was at Silicon Graphics with him years before. And Jim Clark, who was our kind of like very excitable founder, we couldn't get the kind of operating system to work on the SGI machine, on the new multi -processor machine. And Jim kept hiring and firing engineers, including like Steve Bourne who invented the Bourne shell, you know, for those of you who are Unix heads, and he fired Steve Bourne. He's like, nah, he couldn't get it to work, and the Kip Hickman got it to work.

6:58And so Kip Hickman's at Silicon Graphics, and Jim Clark says to him, Kip, you have to secure the internet, just like that. Like that, that was a, you have to secure the internet. And Kip came back in three months with SSL, like, spec'd, implemented in the product. And that changed it. And that was like basically the start of the internet, beating the Microsoft proprietary network. If Microsoft had one, Nathan Mervald had already said, we're going to take a vigorous, which is a kind of mafia term, basically a cut of every transaction on the internet. And you go, well, that would have been a very different world.

7:35And we've actually seen that play out, right, like the smartphone could have been open. But like nobody stepped up to that degree on the open thing, and we do pay a 30 % tax on every single application we get on the smartphone. You mean through the Apple Store? Yeah, through the Apple Store. So things can really change. And so, yeah, Elon Musk, he didn't start Tesla and he couldn't build up with all those people. But if he hadn't been so crazy and raised all that money and so forth and taken on Ford and GM, which was the most psycho thing you could ever do, like how much longer for electric cars would have been 10 years, 20 years.

8:12And so, you know, a lot of the biggest lesson that I have is if in that moment the founder, the person doesn't step up, then the world is different. And look, for everybody here who's a founder, if you don't fix the healthcare system, if you don't kind of produce that drug, like maybe somebody will do it in the future, but how many people are going to die in the meanwhile? And, you know, the world really does change on individual efforts. And that's probably the biggest reason, you know, I wanted to start the firm was just to get that message out. That's remarkable. And it is incredible that you can pick sort of specific examples of where a founder did change the world.

8:52Yeah. That's a great lesson. Speaking of great founders, you make a lot of historical references in your work. You know, who's a surprising leader in history that you would highlight to folks here? and are there any sort of unique lessons that we can draw from an unsuspecting figure, if you will? Yes, so the one that I've probably written the most about is a two -sant -lover chair who was the founder of the Haitian Revolution, which is the only successful slave revolt in human history. I don't know if there's other species that have slaves.

9:27But he was really remarkable in that he was born a slave, but the kind of very special thing that he figured out, and he was very like a super smart guy. I mean, part of the reason he got into that position is he was so smart that the guy running the plantation was like, well, you're smarter than everybody else here. I'm just going to let you run it. You know, you kind of take over and he became the guy's driver. and so he would go into town and meet all the various Europeans who were kind of fighting over the island at the time and he basically learned European culture. And by understanding all the things in European culture and then all the things in slave culture he was able to take, you know, a culture that nobody had been able to create a military out of because slave culture is very difficult military culture because it's a very low -trust environment.

10:20And in a military, of course, you have to be able to trust the order as an order to get anything done. And so Tussant was able to merge the two and by doing that, he ended up building with this massive army and defeating the British and the French and the Spanish on the island and taking the whole thing. And it ended up actually being his downfall very ironically in that because he incorporated, you know, in doing it, he would incorporate Europeans into his army to kind of create this hybrid culture and that's how his enemies unhook to met the end and turned him over to Napoleon and that was the end of Tucson.

10:58And they kind of ended that culture which was a very advanced culture. So when Tucson was running Haiti they actually had more export income than the United States. So he had built like a pretty amazing economy and so forth but oh well. It didn't work out in the end but like it was that unbelievable story of how you build an organization out of you know kind of elements that people might not think would work. So I want to of course come back and touch on culture because one of the things that's been remarkable is over the course of this event, the importance of culture has come up on various panels.

11:30So I want to make sure we get back to that. But before we shift to culture, you're talking about the army and Haiti. So you've written a lot about wartime and peacetime. The wartime CEO and the peacetime CEO. So number one, for folks that may have not seen your words on that, you define what you mean by that. And then of course the obvious follow -up question is are we in wartime now or are we which I assume the answer is probably and if so You know how should CEOs founders be thinking about that? Yeah, I had a rap code on that post which I think describes it well Which is you're lucky that I ain't the president because I'd push the fucking button get it over with fuck all that waiting and Procrastinating and all that goddamn Negotiating and that's kind of like the mentality of the wartime see We're just going, we're done talking.

12:19Kind of the best way to think about it is, imagine like you're building like a peacetime army to fight the cold war against the Soviet Union. And you've got a profile for what a soldier should look like and who should be a general. And you've got OKRs and KPIs and a strategy for fighting the cold war and all the kinds of things, the kinds of weapons you need to build and all this stuff. And then one day you wake up and you're fighting ISIS. And like how much of that old stuff is right? Maybe none of it. How much of those old people are going to be the people who can actually fight ISIS, not all.

12:58But you know that and nobody else knows that. And so how do you get the army from there to here? And that's a little bit kind of what happens in these big macroeconomic turns, right? you set up this whole thing for this high growth environment, and then all of a sudden it's not a high growth environment. But the team is still on the old strategy, the old KPIs, the old OKR, the old organizational design, and how do you get them over there fast? And so a lot of what wartime is is like, how do you get the team very fast from the old plan to the new plan?

13:41And be like, no, we're not doing that, we're doing this. Well, but you said last week, you know what? It's better to be right than consistent. So whatever I said last week, don't believe it. It's no longer true, it's over. And you have to be willing to do that, to be kind of wartime. And at a time like this, it becomes very essential because every day you delay could cause you the company. But to make that shift into like a wartime footing, two things have to be true, right? You have to recognize that you're at war, and then you have to be able to make the tough decisions. So I think that most people, like in my experience, most people recognize it and they freeze.

14:18And they freeze. Because they don't do the same part. There's two things that people don't want to do that are necessary in wartime. One, they don't want to be inconsistent. And that's very dangerous. And then the second thing they don't want to do is not listen to their team. And I know that sounds funny. Well, what do you mean Ben? You're saying we shuntless into our teams? Yes, you can't listen to your team because they're on the old plan in the old structure with the old idea And so you have to for that period until they reset You've got to dictate and go no, no, we're not doing that and then they'll start using your cultural ideas Against you.

14:54So let's talk about culture. Let's talk about your words. Yeah, how do you define culture? You know, I think people have like a feeling of what culture is, but it's a hard thing to define So help us define culture when you mean by it Yeah, so I love the samurai from a cultural design standpoint, a cultural implementation standpoint. It's an amazing thing in that if you go to Japan today, like it's late in with samurai culture, like how did they build a culture that lasted so long. And one of their core ideas is a culture is not a set of beliefs. This is okay. It's a set of actions. And I think when you talk about culture, that's like where you have to start.

15:31Culture is all the behaviors that you have, of how you treat each other, like somebody sends you an email, do you get back to them in an hour, in a day, in a week, in a month, in three months. But that's a cultural idea. Do you stay at the four seasons or at the Red Roof Inn when you travel? All these things are cultural. When you work with partners, do you actually care about their outcome or not? Like all these things are part of your culture. And your culture ends up defining finding a lot more of how the organization works than your mission statement or your KPIs or any of that other stuff, because it's like daily, how you're behaving.

16:15Every micro decision that everybody makes is kind of a reflection of the culture. Do you come to a meeting on time? Like does that matter? Companies that are in on time to meetings, like meetings start like 20, 30 minutes, like consistently. And whoever shows up on time is just like sitting there and they're laptop, whatever. But that's all like behavioral. It's not a belief. And people are trying to find things in terms of these beliefs, but they don't mean anything. It's like integrity. We're a culture of integrity. Well, OK, so let's get specific. So if it comes down to the integrity with your investors promising to make your plan or the integrity with the employee promising that it's going to be a great outcome, or the integrity with your customer on the deal.

17:00Well, like which one gets compromised if they come into conflict? That's the real thing. Integrity, like it's pie in the sky. Most companies define their culture and this pie in the sky concepts that can be interpreted however you want. But it's not the idea, it's the behaviors. And so you really have to define things in terms of like how are we gonna behave in a certain situation? And so like we have many things like this. So like you're late for meeting with an entrepreneur, that's a real fucking problem. Like that's the behavior. It's that you know, and it's underneath the guys of first class business first class boy But what does it mean?

17:37And so you know one of the things we believe in we believe in like we're not dream killers. We're dream supporters What does that mean? Well if you get on Twitter and Say an entrepreneur's idea stupid You're fired like that's what it means and doesn't have to be like any entrepreneur because we're like dream builders We believe anybody who has a dream we're for that. I don't care if we think it's a good idea or not, we're for that. And that's our culture. But there's got to be a behavior that goes with it. You see what I'm saying? Otherwise, people will misinterpret it. They'll reinterpret it.

18:10They'll weaponize it against you. When you talk about culture, you're talking about, how are we going to behave? How do we show up every day? How do we treat each other? What is it like to interact with us? Are people better off or worse off for doing business with us? These are the things you have to ask yourself. and that's what it ends up meaning. And it's really important, but people, because it's so weird and abstract, people don't pay enough attention to it often. Yeah, and I think that focus on the what you do is what defines the culture. Yeah, what you do is who you are. And what you do is who you are.

18:39People misinterpreted that title a lot. I'm not a salesman, it's like, nah, just funny men. They're being haazes. Yeah. Well, you know, the firm famously in the early days would charge if you were late to meeting with an entrepreneur, right, as a reflection of it. Yeah, $10 a minute. $10 a minute and there was a I got like $3 ,000 off Andreessen on that Well, I remember I was once late by a series of very unfortunate and unforeseen circumstances I was two minutes late to an entrepreneur meeting and I walk in and Ben says you owe 20 bucks Okay, so I reached into my wallet and you know the norm was you put the cash on the table Yeah, so I reached into my wallet and I pull out and I unfortunately only had a hundred dollars and I kind of pull it out Ben sees it and he's like, we don't make change motherfucker.

19:28You know? So those two minutes cost me a hundred bucks. Never laid again. You learned your lesson, you know? Yeah, it was never laid again. Also I carry small bills. Which is it? Very good. But that's really important in that putting like your cultural values in your like annual review, it's got to be something you hit daily. Right? Like you have to be reminded of it constantly. And look, that one, why aren't you late? The big thing is, why can't you be late? Well, because it's really hard to build a company. And if you show up five minutes late, 10 minutes late, then you can say you have respect for what it means to build a company, but you don't really have respect for what it means to build a company.

20:12Because you wouldn't do that if you did. And so everybody has to know that. And if everybody in a venture capital firm doesn't know that on a daily basis, then they'll lose that because the other behavior is, I have the money, you need the money, you show up to me to get the money, I decide if you want the money, I feel like the big person, you know, you're the small person, like that can seep into a venture capital firm, really easy. So you need a daily behavior to go, no, we're not doing that, no, we're not doing that, we're gonna be on time, we're gonna get back to people, we're gonna, if we don't invest, we're gonna let them know why.

20:46Like all those things, all those behaviors, counterprogram this natural kind of dynamic that can make you somebody you don't want to be. And so when you talk about culture, that's what you really talk about. You said something to me a long time ago that stuck with me and it was around communication for as companies scale. Yeah. I think you told me that after 50 people, the systems that you had to communicate with 50 break down. Yeah. And you got to have a new system. Does culture scale? It's hard to scale, right? So, look, you don't even have to write it down or say anything if it's, you know, the first ten of you, because, you know, like, you get along, you do stuff, somebody does something like, they'll feel bad, because they're not part of the group, you know, you want to be part of the group all that.

21:31But like, if you're a thousand people, like there are many subgroups, and then, we're just yet, you hire people from another company, so you, you know, you could hire people from Novartis, come with that culture. And you know, like, oh, we got into this vein of Google engineers who can do AI stuff, and we hired eight of them. Well, those eight people, by default, are going to behave exactly the way they did at Google, unless you force them to assimilate into your culture. And so a really important thing is, like, mandatory cultural assimilation and a company is very important. And not to say there won't be kind of sub -culture variations within, you know, like sales might be different than engineering in many ways and that kind of thing.

22:19But there are certain things, certain tenets, certain parts of the culture that you can't compromise on. And again, if you do, it'll slip away very fast. And so that's why, like, you need the daily reminders. You need something that people go, oh, I can't do that. All right, I'm going to, you know, play it your way. Can you change culture? Absolutely. And so we talked about two sound before. To me, his greatest accomplishment was changing the low -trust culture that he had into like a super high -trust culture. And he did a number of things to do it. And it really paid off. So like one of the things he did is he made a rule.

23:01Like if you're an officer in the army, you can't cheat on your wife. And you go like, okay, that's like weird. Why have you made that a rule? It was a very mercenary war in Haiti at the time, or what's now called Haiti. And so it was almost like salary was like pillaging and rape and all these kinds of things. And he was like, no, any commitment you make, like I got to trust that you're gonna keep the commitment. And so you may think that's okay, but you made a commitment to your wife, you have to keep that, or I can't trust you. And like that started the culture. And it's really interesting and how it helped him win the war because what happened was they were famous actually.

23:40So like I said, you had four armies, the slave army, the British, the Spanish, the French. And two sats army was known for, they didn't even have clothes, have they done. Right? So these other guys are like, they're in their badges, they're running through pillaging, raping. The slave army didn't do any of that because of that behavior, they actually got the support of the white women on the island protected the slave army, hit them, did stuff like that, over the European armies, which is just like a remarkable thing to pull off culturally. And there's a great story, and you can't quite verify that it's true, but I believe it's true.

24:17So Napoleon hated Tucson and wanted to get him. And in fact, assigned his brother -in -law to kind of run the operation in Haiti, because he was just so furious about it. And one of the things that he said, and remember to sat and lovature. Slaves didn't have last names. So like where did lovature come from? You know, he was born to sat. Like where did the last name come from? And the story goes, Napoleon's yelling at his generals, he's going, how in the hell can you not defeat this slave? And one of the generals says, look, we back him up, we have him cornered. And just when we think think we're going to get him, there's an opening.

24:57So he became too sat, low of a church, too sat, the opening. I think that's a product of the culture. He could always get away because he had so much support because he was culture first. He wasn't, we're going to win and be as destructive as these guys were to us. We're going to win and be a different kind of army. We're going to be the kind that you can trust. And you know that had all kinds of side effects so it shows you the power not only can you change culture But how powerful it is when you do so when we look at these at potential investments, you know We debate competitive advantage we debate modes, you know Is data a mode is technology a mode etc etc is culture a mode?

25:40Is it like the ultimate mode to beat competitors? Yeah, so I think in a business context if you build a culture that doesn't Create competitive advantage image, it's kind of a little bit of a waste, right? Because cultural ideas aren't for every company. Like different companies have different cultural ideas than I give you an example. So Amazon is very famous for being cheap. Frugality is a big thing there. And in fact, instead of giving you a desk from wherever I key out, they'd give you an old door that they got on 2x4s to just show you we're cheap. We don't waste any money. That's where it is.