Ben Horowitz isn’t afraid to pick favorites when it comes to great CEOs. Like Andy Grove, the former head of Intel. Grove didn’t put up with any nonsense, Horowitz says, because he was singularly focused on what it takes to achieve and maintain greatness. In our next show from KV’s CEO Summit, Horowitz - the co-founder of the venture capital firm Andreesen Horowitz - talks openly with KV Founding Partner David Weiden about gaining the trust of your employees, why executives often approach diversity the wrong way, and what he’s learned from coaching CEOs who are furiously scaling up their businesses.
Welcome to Instigators of Change, a Khosla Ventures podcast, where we take a look at innovative ideas, the people who come up with them and those who invest in them. I'm Kara Miller. And this week, Ben Horowitz, co-founder of the venture capital firm, Andreessen Horowitz, talks about creating a culture at work, and what we so often get wrong.
As a leader, you're always representing the people who aren't there. It's not the people who are your PR person or your HR person, or your whoever you're to your CFO. Like all those people who are giving you the advice, that's great. But what about the people who are not in the room, and what is it going to mean to them?
Horowitz, who has written bestselling books about building and maintaining a business, and has been a CEO, looks at what works and what really doesn't. In this special episode of Instigators of Change, we'll hear from Horowitz in conversation with Khosla Ventures founding partner and managing director, David Weiden, at KV's annual CEO summit. Some people have personal style icons and Ben Horowitz does too when it comes to leadership style. He was forever changed by Bill Campbell, the former CEO of Intuit and director of the board at Apple, who you're going to hear more about in a few minutes, and by Andy Grove, who spent 20 legendary years as president and then CEO of Intel. Horowitz says, it's crucial to remember that Grove did a lot more than talk a big game.
I think people get culture confused with values on the wall; oh, integrity, we have each other's back, all this kind of stuff that people put on the wall and then don't do. So when you think about culture and I thought Bushido had kind of the best definition, which is culture is not a set of beliefs, it's a set of actions. And Andy was really, really good on that front. So if you think about it, the reason it doesn't work is put in your annual review or put values on the wall and so forth is because culture's the little things. Like somebody calls you, a colleague, do you call him back in five minutes, in an hour, the next day, or do you just drop them on the floor and never call him back at all? That's culture, and that drives a lot of things.
If you do show up on time for meetings or five minutes late or 10 minutes late, is everybody late? These are the cultural things that actually end up driving what it really feels like to work there and what it's like to do business with you. And Andy really understood that at an amazing level. So he did things that seemed absurd when you hear about him. Like he would get to work at eight in the morning and then see who was there. And if they weren't there, he would write them up, and then he would check their desk to see if it was clean. And it was really important that you had a clean desk.
And you're like, well, why do you care if somebody has a clean desk? Well, it's Intel. So Intel was about precision. The cost of a miss on a tape out is extraordinary. So when you're about precision, how do you get that into the culture? Well, it starts with, when I go to work, I need my desk to be clean, because Andy cares about everything being right. And so little things like that he would do to set the whole tone. I give you my favorite story from Andy. So after he had retired and he was at the Grove foundation, I went to go see him and he had Parkinson's at that time.
So he was, he's still very sharp, but his speech was slurred and whatnot. And it's a little office; the Grove Foundation, like very kind of, as you would expect from Andy Grove, low key. And he had one picture on the wall, and it was this framed award that he got the Santa Clara Manufacturing Facility Leadership Award to Andy Grove. All right. And I go, Andy, of all the amazing... He was Time Magazine man of the year. He's like one of the greatest CEOs, maybe the greatest CEO in the history of Silicon Valley. He's got this Santa Clara Manufacturing Facility Award for Leadership. I was like, why do you have that on the wall?
Why'd they give you the award? You're the CEO. Like, why are they giving the CEO the manufacturing facility award? And he says, well, Ben, he said, they were ranked the lowest in maintenance in all of Intel. They had the worst facility under spec, terrible. So I go over there to talk to them about it, and they just start hitting me with all this bullshit about like how they don't have the right resources and how this was unfair and dah, da, da, da, da. And so I reach under my chair and I pull out a roll of toilet paper and I put it on the desk.
And I said, when you're done cleaning up your bullshit, tell me when you're going to be up to spec. And he said, within three months it was the highest rated facility at Intel. And that to me is Andy. Like he's the biggest thing he did culturally was like don't bullshit me. I escaped the communists and the Nazis. I didn't come here for you to waste my time with a bunch of stories about what's what, and excuses and this and that. Let's just get to the real thing. Tell me when it's going to be ready. And that's how he was on everything. And, yeah, what a great person. I wish, man, I miss that guy. He was amazing.
Well, let's go from him to another. I'm not sure what word to say; dominant figure. Still scares the hell out of me. Bill Campbell. And talk about what are some things that you've taken away from Bill about building culture that are useful to share with people here and include in your answer the EDS announcement story.
Yeah. So Bill was a very different guy than Andy Grove. So like when I look at Andy Grove as a CEO, I go, I don't know that I did anything better than him. He was so good at all aspects of that job, just incredible. Bill wasn't like that in that like there was things he was good at, things he wasn't that good at. But the thing that he was great at, he was better than anybody that I've ever met, which is he could, like when you met him, he would get a read on you within like three minutes, and then he would remember you, your wife's name, your kids, like where you grew up, all that stuff like forever. So I go all around. I still run into people who knew Bill Campbell and they're all like, Bill's the greatest guy in the world.
Everybody loved that guy because he was so good at the people skills. The only person I ever ran into who had that like him was Oprah. Like that's how good he was. He was Oprah-level at really understanding people. And the thing that it translated into from management standpoint was one of the hardest things to do to... and it's one of the most important things culturally is when you're talking to somebody, realize you're not talking to that person.
You're talking to everybody in the company. You have to represent the people who are not in the room. And Bill was really, really good at that. So for example, like if I'm talking to David and he goes, hey Ben, can I get a raise? I've been working really hard and so forth. I can't just go, yes, I like David, and I'm going to give him a raise, because I have to think about all the people who aren't there and what they think of him and what they think of and why aren't they getting a raise? Because they didn't ask. All that kind of thing comes into play and on every decision and every conversation you have as a leader, you have to think about like, okay, how's it going to read?
And so the thing that David had referred to is when I was running LoudCloud, we did this big deal to get out of what would've been a business that took us bankrupt by selling the services component to EDS, and then becoming a software company. And it was a big escape death deal. And we were going to announce it and we're going to announce it in New York. And I was talking to Bill on the phone saying, like we just did this big deal and it's really exciting, going to announce it. And he goes, and you're going to, but like you're selling a lot of the employees to EDS and you're laying a bunch of people off.
I was like, yeah. And I got to do that the next day. And he goes, no, no, no, no. He's like, you can't go to New York. And I was like, well, what do you mean? He said, all anybody in the company's going to want to know is where they stand as soon as that news comes out. You can't wait a minute. You have to tell them simultaneous with the announcement. And I was like, oh, of course. As soon as he said it, I knew it was right. And so I sent Andreessen to New York to do the announcement and I did the layoff and told everybody where they were.
But when I did that, we ended up recovering as a company and selling it to Hewlett Packard for $1.6 billion, which was a lot of money then. Not anymore so much. But none of that would've happened if I had gone to New York. It was that important at moment and he could see it so obviously, and I just had other things on my mind. I wasn't thinking about it, but that was Bill. He really always started there. How's everybody going to understand what happens?
Is that the takeaway you think for people to think about these other...
As a leader, you're always representing the people who aren't there. It's not the people who are your PR person or your HR person or your whoever you're to your CFO. All those people who are giving you the advice, that's great, but what about the people who are not in the room, and what is it going to mean to them? And he was so good at that. Just amazing. He was great at a lot of things, but Donna Dubinsky had a great thing. She said, which is when she was giving this speech. And she said, I'll bet all of you think that Bill is your best friend. And that's how he was. Everybody thought that Bill was their best friend. Even people he didn't like thought he was their best friend. He was great. Yeah, what a great person.
Let's talk about how CEOs go from, well, I'll call it the struggle; both struggling to be a good CEO and struggling with the company to being a great CEO. So one thing that I think happens when people come to a conference like this is they see people like you and they think, well, I'm not like that. Like how do I get to be that good? And in particular, I thought it's interesting to talk about Todd McKinnon and Okta, where we work with Todd. And I often say Todd's one... I actually call him the most improved CEO I ever worked with, and you were a CEO coach. So, what'd you do?
Well, I think you got to give more credit to Todd, but here's the thing that happens to CEOs, and I know a lot of you are CEO, so you get this. The thing that makes you good is some combination of competence and confidence. And the difficulty with boards and VCs is they're really good at identifying what you can't do. And so it's like, oh, you can't do marketing, you don't really know finance or whatever it does. And the problem with that is if you can't do it, like just hearing that you can't do, is all it does is mess up your confidence and your flow. And so that's not always like that helpful. And so with Todd, he was really good at some things and just like a zero on other things. But the phrase I always keep in mind when I'm working with somebody like that is coach them on what they can do, which is from Al Davis, the old Raiders owner.
And that's like really the case, I think, with CEOs. So Todd got himself into trouble if you recall, because they had the wrong go-to market. Okta had this bottoms up go-to market. But at the time, for a security product, it was only actually interesting one to larger companies, and because little companies don't care that much about security. They have nothing to lose. And then the other thing is that it only worked if everybody was on Okta, so they had to sell the whole company at once, so you needed a different sales motion. And he just didn't know anything about go-to market. He had been like a VP of engineering at Salesforce and, but he didn't have enough time to learn it. And so there was a couple of things that were screwed up.
And I just said, look, Todd, we don't even have time for you to learn this, so I just need you to trust me on it, and we'll work together and let me help you. And the guy he wanted to hire to run the new go-to market was the wrong guy, and I knew... But he didn't know how to hire a sales guy, but I knew he didn't know how to do that. So I said, look, Todd, you don't know how to do this. We're going to lose the company, if you get the wrong guy. I've got this other guy who is Adam Aarons, who ended up being the head of sales, who I know his whole lineage and I know all his managers his whole career. He can absolutely do this. Let's bring him in. He's 100%, like he's going to work.
And to Todd's credit, he said, okay. But then in managing Adam, he learned so much about sales that when they made the next change to Charles Race, like he made one of the best hires that I've ever seen on something like that. So it was just like, Todd, you're great at running the company, you're great on the leadership side, you just don't know how to do this. So, let me just help you do that. And then once he was got that, then he got his confidence together and then he just got better at everything. Although all the way up to the IPO, people still remembered when he was incompetent, and few of the investors really, really wanted to sell the company, but thankfully we didn't.
What do you think about the culture that he and Freddy have built there and any lessons for the CEOs here?
Yeah. So, to me, the thing that they did culturally that was the most important for them, and this is really important on culture is the thing that went with the company. So, because they were a security company, trust was always such a big thing for them. That was a big component of the culture. Like, okay, you have to be able to trust us, and actually it almost lost them the company. They were so committed to this idea of trust that we had a quarter, and I think it was right before you invested where we were going to miss the quarters. They were missing every quarter at that time.
And they had this deal, but the sales guy had promised features that they weren't going to have for two years, that would be there in a quarter. And so they had to decide whether to tell the truth or just take the order, get the round done and keep it moving. But Todd was like, no, it's so important that like if there's a story where I okay a lie, I'll never get that out of the company. And so they told the truth. They didn't get the deal. They whiffed the quarter. We almost didn't get the round done. I think David led the B round with like $7 million check. Like that's how, like it was by your fingernails they were hanging on.
But that cultural thing, right, led to, they always put reliability and security ahead of features in their development. And they were neck and neck with this company OneLogin who was actually turning out features much, much faster. But one day OneLogin got breached because they did not have that value, they didn't have that belief, and that was the end of the competition. We never saw them again. Okta just destroyed him after that. And so that's one where a cultural thing, if you commit to it and it really goes with the business strategy can have a huge payoff. And that's probably the best thing that I saw them do.
Okay. So changing gears, a topic that both of us care about is, well, what I call diversity, but I've listened to you explain this as that's the wrong way to think about it. And it's better to think about it as talent discovery or...
Well, talent. Yeah. Yeah, yeah. So look, this will be just like warning, not what you've heard before on it, if you haven't read my book. So I think diversity is like a misdiagnosed problem because it's diagnosed as racism and sexism and that's why things aren't diverse and that's not really what's going on. On diversity for the most part, what's going on is profiling. How do you hire somebody? Well, I know what I'm good at. I value it highly and I can test for it in an interview, so I'm going to hire me. That's generally how it works. And if you look at any organization, if you've got a group that's run by a Chinese person, there'll be a lot of Chinese people there. If you have a group run by a woman, there'll be a lot of women there.
It's just like, that's the way it goes. And you can look at almost any organization that works out this way. And I was trying to diagnose this actually at Andreessen Horowitz when we first started out because we had marketing, it was run by Margit Wennmachers, everybody who worked there was a woman, research was run by Frank Chen, everybody who worked for him was Asian. The whole thing was playing out that way. And I said, okay, I have to understand this better. And so I sat down with Margit, I said, “Margit, what's in your profile where no men can get the job?” And she looked at me and she said, “Helpfulness.” And I was like, “Okay, I don't know that many helpful men.” So she kind of got me on that. But the really interesting thing about that was we're a venture capital firm. We're in the services business, in what world is helpfulness not a good criteria for us?
Every job should have that in their criteria. Right? Being able to anticipate somebody's need before they know what they even need and get to it, how is that not a competitive advantage? Well, I went through every profile we had, she was the only one who had helpfulness in there. And I had never interviewed anybody on that. I didn't even know how to interview anybody on that. So I was basically talent blind. I couldn't see it, it was there, but I couldn't see it. And so that's what really got me to realize, okay, you have to change your whole processes. You have to be able to understand talent that you don't have and be able to network to people you don't know if you're going to solve diversity. You have to be able to see the talent.
That's where it starts. And it gets very dangerous if you try and not see the talent and just see the gender or color. And I'll give you a great story on that. So Steve Stoute, who spoke here a few years ago, I think, and he's an entrepreneur in our portfolio, very good friend of mine, called me up one day. And he says, “Ben, I used to be president of Sony Urban Music.” And I, of course already knew that because I'd known him for years, but he was setting me up for a story.
And I said, “Yes, Steve, I know that.” He said, “Yeah, but it wasn't urban music. It was black music, but they made me call it urban music because calling it black music would've been racist.” And I said, “Well, that's silly.” He said, “No, no, no. That wasn't the dumb part. The dumb part was because we called it urban music, I wasn't allowed to market in rural areas. Like all black people lived in the city.”
I was like, “Wow, that's crazy.” He said, “You're not even listening to me, Ben. I was president of Sony Urban Music. I had Michael Jackson, what white people don't like Michael Jackson? It wasn't black music, it was music. What are you talking about?” And then if you fast forward from that era of the urban music department and the black section in Terror Records to today, go look on Spotify, the top 100. More than 70% of the business is black music. It wasn't black music. It wasn't a niche. It was just music. And just because some executives had a diversity program to help them, they niched it into this tiny market that was much smaller than what its actual reach was.
And that's what we end up doing with, I call it urban HR where you have a diversity department run by somebody who's completely disconnected from the culture that you want for the rest of the company. And they're putting people through a side door instead of through the front door, because you can't see the talent. And so you've got to develop the ability to see talent that you don't have. And we have a whole big process for this at the firm. But I give you one last example on this, because it's so important. So we had this position years ago, which I stole from Michael Ovitz, because he used to do this thing when he was at CAA where he'd call up an actress who was at William Morris and he would say, “Hey, I've got a part for you.”
And she's like, “Well, you're not my agent. Why are you getting me a part?” “Because your agent sucks. And I'm going to… I think you'd be great for this role.” And that way, everybody would like CAA better. So I was like, well, I'm going to do that in Venture Capital. So we had this role, the mini Michael Ovitz and we're hiring for it. And the hiring manager was an investment banker. And so I see 15 investment banker candidates. And so I call them up. I'm like, “Yo, what's the criteria for this job?” And he says, “Well, they have to be really detail oriented, hard working, great at follow up,” going through all the investment banker characteristics. I was like, “That's all fine. But isn't the actual criteria for this job that you can get people to like you when there's no business reason to do so?”
And he goes, “Well, yeah.” And I said, “Well, who likes investment bankers?” And he says, “Well, what should I do?” I said, “Well, let's start with the right criteria.” And I said, “Well, what talent pool do you know? What culture do you know where relationships are at the center? Where even when you're a kid, your parents teach you how to talk to people correctly and so forth? What culture is that?” He goes, “I have no idea.” I said, “Well, look, in my experience,” I said, “in the African American community, that's the whole culture, is oriented around relationships.
So if you're looking for a relationship standpoint, maybe we also ought to look in that talent pool as well.” He says, “You want me to hire a black person?” And I said, “No, I want you to have the right criteria and look at places where you might fill that criteria, not investment banking.”
And he goes, “Okay,” da, da, da, da. So long story short, we hired a guy by the name of Chris Lyons. He had previously been in the music industry as a sound engineer for Germaine Dupri. He was a waiter at the cheesecake factory. Cheesecake factory rates every waiter on the percentage of tips they get, he was number one nationwide. That's how likable this guy was. And so why is that important? Well, we get him in, he wasn't good at financial modeling. He wasn't good at all kinds of things that we normally have in our criteria, but he was a 10 out of 10 at that. And because we knew why we hired him, he was able to develop his career and he's a general partner now, but you'd never go from an entry level job like that to general partner if I had hired him because he was black, because I would've never known what he was good at.
It doesn't work to do that kind of diversity. It's just a waste of time. It destroys your talent base. It's why you have all this employee sad issues in companies of the diverse people. And so, you know what I mention, I don't care about how many, any kind of people we have, all I care about is attrition, job satisfaction, promotion rates. Can I tell what race or gender you are? And if I can't, then I'm good, because that's what matters. If you're at a great place to work for people of all different talents and backgrounds and cultures, then you're going to be attractive to that. You have to understand that talent base to be that.
And you have to be able to evaluate it and so in my view, you have to put in the work, you have to understand talent that you don't have. You have to network to people that you don't know. And if you just try and shortcut it by going, like we're going to hire X number of this gender and this race and this orientation, then you're going to ruin your culture and your environment because everybody's going to question everybody. You can't unsee the hiring process.
Last two questions. This question is basically about how to make trade offs, where you can't optimize for everything. And I put this under the heading of Bushido. And you and I were talking about how we remember hundreds of years ago when we were at Netscape and we had a star engineer who was critical, he was quitting because he'd gotten a higher offer somewhere else. And I came to you and I said, “Well, we need to retain this person.” And it wasn't that big a deal to match the offer. We could afford it. And you said, “No, we're not doing that,” because the lesson was like, if we do that with this guy, then we got to do it with everybody else. But how do people know, when do they match offers? When do they do something? And sometimes there is a short term emergency where if you don't do it, you're dead. So how do you decide when they're to optimize for the long term or the near term and how you think about that?
Yeah. So look, I think that one thing that people care about a lot in a company and in life is fairness, like, is there some set of rules at work that, if I do my job, if I make my contribution and so forth I'm going to be treated fairly like that, that's a big thing. By the way, it's also a big thing on diversity, it's like, okay, are you just going to promote your buddies, your click, people like you, or do I have a real chance here? And so it's such an important underpinning of everything you want to do culturally, job satisfaction wise and so on. And so my management philosophy at that time and the way we were doing things is we evaluate everybody on a frequent basis and together, and then whoever is performing the best, that's who gets the raise. Not the person who quits and gets another job offer, not the person who asks for it and so forth.
And so that was the principle. So for me that was more important than any individual just at that time. And it's always easy to go to that. Now look, Reed Hastings has a whole nother philosophy, which is you have to get another offer in order to get a raise at Netflix or at least that's what he indicates in his book. And so, there are different ways to go about it, but I think that it has to be transparent, fair principled. And if we had given him the raise there, it would've been anything but that because the whole thing that we had agreed upon was we had this process. And so anybody who followed the process got screwed and to me, that's never going to happen.
I never want to penalize people for not asking for a raise, for not going to get another job and so forth. I'd much rather give people a reward for being loyal and honest and doing what we ask them to do than this other shadow way of doing things that gets reward. So I just think, and this gets back to the bill thing, you have to think about how everybody was going to perceive that, not just him, like, did he stay? It's like, well, what is that going to mean for everybody who works here?
Okay. Last question. When Opsware was acquired by HP, you made a comment about what it was like to work at HP, that it was like nobody cared. It wasn't their company. And-
Yeah, at that time. At that time, which was sad, because that's one time, that was different. Yeah.
And one thing that clearly helps a company succeed is having the whole company be resilient and having ownership and having the whole company be courageous. And for a closing thought, what advice would you give to CEOs to set a resilient culture?
A resilient culture. Look, I think that there's a thing that you're getting at that's important, which is at this point and most of you are probably at this stage in your company where it feels like, for everybody who works there, they'd only worked there if they felt like it was their company. It's a startup, we're all in this together. This is my company, whatever I contribute is going to matter because this is something that I built. And that feeling, the longer you can preserve it at the higher the scale, the better your company's going to be just in very rough terms, and then at Hewlett Packard at the end, nobody felt like it was their company, they were on their fourth professional CEO or whatever. And everybody was there for a paycheck.
And the difference in the quality of the company, the ability to do new things, everything really relies on that, whether am I working there or is it my company? And it's why one of the amazing things about Amazon that you see almost throughout Jeff's tenure, he was able to maintain that idea that people at Amazon really felt like Amazon was theirs, at giant scale. So now you lose it, it's never as good as in the very beginning. So you lose it over time, but the slower you lose it, the better off you are. So when you think about culture and management and all these kinds of things, it's really important to keep that in mind. If I do this, will everybody feel like it's their company? And which is on the RA thing, right? If I did that, then people would feel like, okay, this is not my company, because I just got screwed by Ben. And as soon as you get to there, that's the problem that keeps on giving.
Okay. Thank you very much, Ben.
Okay. Thank you everyone. Thank you.
I hope you enjoyed this special episode of Instigators Of Change featuring Khosla Ventures’ founding partner, David Weiden and Andreessen Horowitz's co-founder, Ben Horowitz. If you want more on company culture, check out our April episode, How To Beat Burnout And Master Recruiting, in which we hear from Jennifer Moss on how leaders are dealing with epic amounts of burnout among workers. And we hear from Kelly Kinnard who places executives at startups about the fierce war for talent. As we head into the dog days of summer here, we're going to be repackaging some of our favorite episodes for you, and then we will be back the Wednesday after labor day with fresh episodes. I'm Kara Miller, Instigators Of Change is produced by Matt Purdy. We'll talk to you next week.