Founder Mode – What an Epiphany!
You may have come across Paul Graham's famous note about a presentation by Bryan Chesky, the Co-Founder and CEO of Airbnb. In it, Chesky shared his experiences with professional managers and how their approaches were sometimes detrimental to the company. Upon hearing this, Paul
Graham had an "epiphany," which he dubbed Founder Mode. He spoke of this discovery as the world's eighth wonder.
But really, Paul? I feel that what Bryan explained is well-known and has already been addressed. Ben Horowitz's excellent "Peacetime CEO/Wartime CEO" and, even earlier, Andrew Grove's renowned "High Output Management" have covered these concepts. There's nothing new here! While it might resonate more when one of the most brilliant CEOs of our generation discusses it, founders and professional managers are two different breeds, and they need each other to succeed. The challenge lies in using both effectively to create a successful outcome.
I wasn't in the room that day, so I can't speak to Chesky's exact insights. However, after spending my life as an entrepreneur and an operator, I'd like to share my perspective on how founders differ from professional managers when one approach is better than the other and how blending the two can lead to greatness.
Founders vs. Professional Managers: The Core Differences
Founders rely heavily on intuition. When there's no clear path in the early stages of a business, they follow their gut instincts, shaped by a deep personal connection to the product and vision. Quick, intuitive decision-making is critical for survival in a fast-paced, unpredictable environment.
Professional managers, on the other hand, excel at collaboration. They gather input from various stakeholders to ensure all voices are heard before making decisions. While this inclusive approach can lead to well-rounded solutions, it can also slow things down—something founders typically resist.
Founders tend to be more assertive. When building something from the ground up, there's often no time for consensus. They make bold decisions and move quickly, driven by urgency and a personal vision.
Professional managers often strive for consensus and inclusivity. They aim to avoid conflict and ensure alignment across teams, which is valuable in larger organizations but can reduce speed and boldness in decision-making.
Founders thrive on resourcefulness. They maximize limited resources, solving problems with creativity and grit. This scrappy mentality is essential in a startup's early days, where every dollar counts, and every hour is crucial.
Professional managers bring structure. As a company grows, systems, processes, and clear roles are needed to scale efficiently. Managers ensure the company runs smoothly and predictably, which is critical for long-term stability but can clash with a startup's improvisational energy.
Founders are owners. They embody the company, and their identity is often tied to its success. Because they're financially and emotionally invested, they drive their decisions based on a long-term vision.
Professional managers are typically on a career path. While they care about the company's success, their decisions are often influenced by personal growth and future opportunities within the business world.
Founders are curious. They constantly learn, explore new ideas, and challenge the status quo. This curiosity leads to innovation and breakthroughs because conventional thinking does not constrain them.
Professional managers are often hired for finance, operations, or marketing expertise. Their deep domain knowledge is invaluable for optimizing and scaling the company but can sometimes limit their willingness to explore untested ideas.
Founders are generally more open to taking risks. They experiment and push boundaries, which is crucial for innovation. Being deeply connected to the company's future, they will take more risks to achieve their vision.
Professional managers are typically more risk-averse. They protect the company, ensure stability, and avoid costly mistakes. While essential for scaling and long-term success, this mindset can stifle the bold risk-taking that led to the company's initial breakthroughs.
Professional Managers and the Issue of Bureaucracy
A significant challenge with professional management is the potential for bureaucracy to take root. Companies naturally introduce more systems, processes, and hierarchical layers to manage complexity as they grow. While these structures aim to streamline operations, they can inadvertently stifle innovation. Andrew Chen's last article goes deeper into the topic.
Bureaucracy often leads to slower decision-making due to excessive red tape and approval chains. Managers may focus more on maintaining order and adhering to established protocols than fostering creativity and agility. This risk-averse culture can discourage employees from proposing bold ideas, fearing failure or reprimand.
Moreover, incentives in larger organizations frequently reward compliance and incremental improvements over innovation. Charlie Munger famously said, “Show me the incentive, and I will show you the outcome.” When managers are incentivized to avoid mistakes rather than pursue breakthroughs, the company may lose its entrepreneurial spirit.
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Balancing the need for structure with the need for innovation is crucial. Without careful management, bureaucracy can hinder a company's ability to adapt and compete in fast-moving markets.
How to Grow and Keep the Founder Mentality
Growth requires both stability and innovation. Companies like Amazon have mastered operating at "two speeds." Their core business runs efficiently with tight processes, while other areas, such as AWS or experimental products, move fast and break new ground.
In my career, I've embraced a slower pace for critical areas like platforms while testing new things rapidly on the front end.
One needs to be careful when using two speeds: the founder mentality might cut corners to ship everything quickly but will also build technical debt. Eventually, the company may need to halt progress to rebuild its platform for future growth. Conversely, starting with a professional manager may delay product launches, risking the company's survival. Therefore, you need both speeds: fast at the beginning and more deliberate as you scale.
To inspire founder-like behavior, remain actively involved in product development and decision-making. Steve Jobs was hands-on in product reviews and design decisions. By engaging directly with your team, you show that innovation and creativity remain priorities as the company grows.
In medium-sized companies with a C-suite around the founders, create forums where founders interact with ICs. I use "product jams," where the CEO/Founders and product managers brainstorm ideas and discuss past decisions and future plans. In larger companies, identify projects needing stability and those that are more exploratory. Delegate the former to managers and focus on the latter by participating in product reviews and design sessions.
Acting like a chef in a kitchen—tasting dishes, observing the team, offering tips—allows your team to learn from you and absorb your knowledge eagerly. Additionally, spending time with ICs helps you identify managers who manage up effectively but struggle to manage down. You will be surprised!
Because you'll stay connected with ICs, hire managers secure in their roles who won't feel threatened by your involvement. Elon Musk's companies, Tesla and SpaceX, allow direct communication between him and individual engineers. His managers understand that this approach fosters problem-solving rather than undermining their authority.
I once worked with a self-made billionaire in France who was our lead investor. You could email him anytime and receive a prompt response, even at night. Employees at his 5,000-person company did the same, resulting in one of the most efficient organizations I've seen. Managers felt this method improved speed and empowered ICs without threatening their positions. Employees loved him and were dedicated to their work.
Be explicit about the behaviors you value and reward. If speed and risk-taking are essential, make that clear. Netflix's culture deck sets a prime example, outlining the importance of independence and accountability and encouraging employees to take risks.
Write operating principles carefully, as they'll be taken literally. If collaboration is key, don't be surprised if decision-making slows and consensus becomes the norm. If you encourage assertiveness, set clear boundaries to prevent a toxic environment.
My approach is to set principles reflecting my expectations and constantly assess my team accordingly. As you grow, these principles can become generic. It's acceptable to break them down by function or have managers translate them for their teams, ensuring alignment.
For example, different departments might interpret a principle like "We strive for quality but focus on getting signals fast in the short term" differently: the engineering department may interpret it as “measure ten times and cut once,” while the product department might see it as “open door for experimentation”. Aligning these interpretations is crucial.
When rewarding or promoting someone, be clear about the reasons. If you consistently promote those working on large projects requiring big teams, your team will aim for big projects and more hires. If you reward resourcefulness, your team will become scrappier. You need both types.
By following point #2, you'll likely find some projects overstaffed and inefficient. Your input will help managers and ICs understand how you want the company to operate. Remember, a manager who doesn't set clear expectations may be seen as ineffective by their ICs.
Feedback is essential but can create unintended incentives if not handled carefully. If feedback suggests an employee is "too assertive" or "moving too fast," it might be exactly what you want. Investigate further.
Determine whether they embody the founder mentality or are causing genuine disruption. At Facebook, Mark Zuckerberg questioned feedback criticizing aggressive decision-making because it reflected the company's "move fast and break things" ethos.
I believe people don't intentionally harm a company; if they act a certain way, there's a reason. Give them the benefit of the doubt and listen. Negative feedback often signals underlying issues. Poor managers take feedback at face value without understanding it, leading to political environments where mutual positive reviews are exchanged for personal advancement. I've experienced such situations and advise caution.
Conclusion
Founders are a unique breed, driven by intuition, resourcefulness, and curiosity. As a company grows, professional managers bring essential skills for efficient and sustainable operations. The key isn't choosing one over the other but balancing the two.
The biggest mistake I've seen isn't hiring professional managers—it's assuming that once they're hired, founders can step back and everything will run smoothly. Managers can amplify your success, but only if they're aligned with your vision and empowered to act like owners. Maintain a connection with your ICs to guide managers and employees toward innovation and risk-taking. Become a coach for the entire organization!
The most successful companies blend the energy and boldness of founders with the expertise and structure of professional managers. The magic happens when founders stay involved, guiding managers and fostering a culture embracing both stability and innovation. By doing so, you can scale your company without losing the entrepreneurial spirit that started it all.