Lecture 15 - How to Manage (Ben Horowitz)

Lecture Transcript: http://tech.genius.com/B-horowitz-lecture-15-how-to-manage-annotated You are not the only one whom your decisions impact. Ben Horowitz, founder of Andreessen Horowitz and Opsware, discusses this important management perspective that founders miss, with, of course, the gratuitous rap lyric or two sprinkled in. See the slides and readings at startupclass.samaltman.com/courses/lec15/ Discuss this lecture: https://startupclass.co/courses/how-to-start-a-startup/lectures/64044 This video is under Creative Commons license: http://creativecommons.org/licenses/by-nc-nd/2.5/

Nov 10, 201449mWatch on YouTube ↗

WHAT IT’S REALLY ABOUT

Horowitz’s core management lesson: decisions must work for everyone affected

Horowitz argues the most consistently botched CEO skill is predicting second-order cultural effects of decisions by viewing them through every stakeholder’s eyes.
A demote-versus-fire case study shows how an apparently compassionate demotion can create perceived unfairness around equity, status, and accountability standards.
A raise request example illustrates how ad-hoc rewards train the organization to optimize for lobbying rather than performance, pushing leaders toward formal compensation processes.
He critiques and partially endorses Sam Altman’s proposal to extend post-employment option exercise windows, emphasizing the tradeoffs between fairness to leavers and incentives for stayers.
Toussaint Louverture is presented as a master practitioner of multi-perspective leadership, using discipline and strategic empathy to build culture, win wars, and stabilize an economy after slavery.

IDEAS WORTH REMEMBERING

5 ideas

A ‘kind’ decision can be culturally dangerous if it looks unfair to everyone else.

Demoting an overmatched executive may preserve the individual, but it can signal that high equity is kept despite failure, undermining fairness perceptions and performance standards across the org.

Equity and title changes aren’t private; they reshape status and authority dynamics.

After a demotion, peers may discount the person’s credibility (“who are you to tell me?”), reducing effectiveness and creating friction that the CEO didn’t intend.

Ad-hoc raises reward assertiveness, not results, and they don’t stay confidential.

If employees learn that “whoever asks, gets,” you encourage constant raise requests and alienate high performers who don’t lobby, degrading trust in performance evaluation.

A formal compensation process protects culture more than ‘organic’ management does.

Periodic, structured reviews reduce bias anxiety (“golf course,” proximity to the CEO) and stop leaders from making pressured, one-off exceptions that later explode.

Option exercise policy is a cultural statement about who the company rewards.

Extending exercise windows can be fairer—especially for fired employees without cash—but it also increases the value granted to leavers and reduces the reallocation of unexercised options to stayers.

WORDS WORTH SAVING

5 quotes

When you're making a critical decision, you have to understand how it's gonna be interpreted from all points of view.

— Ben Horowitz

You may think you're dealing with one person... But what you're really doing is... what does it mean to fail on the job.

— Ben Horowitz

That is called encouraging behavior.

— Ben Horowitz

You can take somebody's job... but you don't have to take their dignity.

— Ben Horowitz

You've gotta keep your focus on what you can do, not what happened to you.

— Ben Horowitz

Seeing decisions through the company’s eyesSecond-order effects and cultural side effectsDemotion vs. termination tradeoffsEquity fairness and perceived justiceRaises, incentives, and formal processEmployee stock options and exercise windowsToussaint Louverture as leadership case study

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