Reed Hoffman: About Leadership and Managers

Stanford course CS183B: How to start a startup . Started in 2012 under the leadership of Peter Thiel. In the fall of 2014, a new series of lectures by leading entrepreneurs and Y Combinator experts took place:



Reed Hoffman: I looked at the schedule of the lecture course and wondered how you see yourself as founders, and what skills might be useful to you? What do you think is included in this set? In what situations should I ask myself the question: “Am I ready?”, And if not, then: “How can I prepare?”.
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Let's start by trying to understand who is such an outstanding founder?

Classical examples are Steve Jobs, Bill Gates, Ilon Musk, Mark Zuckerberg, Jeff Bezos - these are the images of the superman founders who have a panopticum of skills. I can use the word “panopticon” because I'm at Stanford now. Among the abilities that a manager should possess, one can highlight the ability to create a quality product that is in demand in the market, as well as strategic and management skills.

The ability to seek cash is also important. If we consider a startup manager as a superman, then he should perfectly cope with all these tasks, which are comprehensive, diverse, and require full commitment.



I focus on these things, because I remember how even at the beginning of my own business travel I read an article that said Bill Gates is smarter than Einstein. And I immediately had a thought:

“Bill Gates is a really intelligent and educated person, but I’m not sure that even Bill himself would like to be related to the phrase“ smarter than Einstein. ”

Such thoughts arise from the fact that the entrepreneur appears in the image of a superman, because an outstanding head of a company can do anything, for example, jump over a skyscraper in one jump. In fact, the founder is the person who copes with all sorts of problems, and not the one who has supernatural powers.



Generally speaking, you would get a couple of superpowers. Any unique skills suitable for solving the problem in order to gain an advantage over competitors. Competitive differences and competitiveness are very important, but not related to genius.

It is often very difficult to tell where the boundary between genius and madness lies, since, as a rule, the end result serves as an indicator. Sometimes, when dealing with an uncertain situation, you can be a genius, but a little later you will be considered a completely surviving person. Or you may be crazy, but you are lucky and you will be considered a genius. How to treat this when we, mere mortals, enter into a similar battle?



I think that all these skills [slide] are super important for an outstanding founder. It is very important to have them and be able to apply them correctly in practice, but the set of such skills is quite large, and mastering them looks like an inhuman task.

I decided to base the advanced set of these skills and dwell in more detail on some of them, which are interesting and worth our attention. What skills really determine an outstanding founder? To become an Olympian among entrepreneurs, you need not only to be able to do everything on the list, but to do it better than anyone.



Let's start with the team.

Dispel the myth of the super-founder is capable of the fact that, as a rule, it is better to have two or three people in a team than to be alone. This does not mean that the lone founders are not able to achieve success - they are capable, and loud enough, just more often two or three people can work much better.

I say this as an investor - teams are more likely to succeed [compared to loners]. The reasons contributing to this we have just discussed - this is a very wide range of skills needed to resolve a whole set of problems related to the development and success of a company. If the co-founders are two or three, then their advantages and disadvantages will balance each other, and you will be able to fight with various dangers.

I highly recommend you to create a team in which a high level of trust reigns, otherwise you can spend a whole year together in one direction, and then some unpleasant thing will happen, and you will scatter in different directions, which will lead to the collapse of business activities. Such situations are not always, but very often turn out to be fatal.



The next point of our discussion is your location.

I am often told that Silicon Valley has absorbed all the super-talented people, they say, the reason for the success of all Valley start-ups lies in the immigration of talents that are very important for the founders of companies coming there. Now, if you look at the situation from the point of view of simple mathematics, you will see that not all software development companies are moving to the Valley, although the number of software specialists has been extremely high in the past 20 years. Not all startups can move there, and many of them operate in different parts of the world.

Why did I raise a question about the location of the company? Because you have to think about this, regardless of whether you are an outstanding founder or not. To become a successful company, you need to move a startup closer to numerous communities that are suitable for solving certain problems. The leader must understand that he is not akin to a superman and will not be able to do his project anywhere, certainly not in Antarctica. By the way, Silicon Valley is incredibly good for solving some types of problems, but not all. Let me give you a couple of examples.

The first example is Groupon. I do not think it was even possible to establish it here. Although Groupon is a software product, it has become the foundation of the community. Obviously, there are many excellent communities in Silicon Valley using Internet technology and all that. Many qualified professionals are here in Silicon Valley, and the communities are great for solving their problems. At the start of Groupon, it was important to hire a lot of sales agents, and the sales staff at the same time strengthens and weakens the team.

Silicon Valley is a rather unfavorable place for ideas that require renting a twenty-five-story building, twenty floors of which are reserved for sales. Here, such a plan is usually very few people who are interested and receive a lot of criticism - not many people want to participate in a project of this kind, where financiers discuss capitalization growth and network effects - it is not at all surprising that Groupon had to stay in Chicago. This, in turn, shows the best possible way that software-related startups can function in other places, and not only in the Valley . If you think about it, it is easy to determine which startups are better not to translate here.

Imagine, someone creates a startup associated with a fashion that is not like Poshmark, that is, it is not a mobile marketplace. Many companies like Poshmark feel good in Silicon Valley, but for a new company connected with fashion, this is not the best place to start. Perhaps the idea of ​​such a company is excellent in itself, but you need communities that support it. Part of testing for an outstanding manager is the ability to answer the question: “Where should I place my startup?”, Which rises every time you create a company. The answer to it: "Where it will become successful."

I often compare business to jumping off a cliff when you have to build an airplane on the fly. The idea of ​​the analogy is that it is difficult and you are a priori dead, but grab for every chance and try to get out of the situation as a winner. Great entrepreneurs are moving businesses closer to a favorable community, and Silicon Valley offers a great community for technical startups, mobile projects, marketplaces, but for other ideas you need to find another place.



Now let's talk about what has become fashionable. Nowadays, it is absolutely normal to call yourself “the white crows”.

Let's talk a little about how to “do not like others.”

And in this there is nothing difficult, it is much more difficult at such moments to be right. Considering how unusual your idea is, and whether it looks like this at all, ask yourself: “How can an intelligent person disagree with me?” If you cannot imagine a person (not an illiterate, not crazy, but an expert in any field) who is able to say what problems your idea will face, then it is no different from others. Unusual ideas depend on the views of the audience.

Take, for example, the consumer sector on the Internet: from the point of view of the audience, in this area, everyone has come up with others, and there are no good ideas left. Evaluating your idea, you need to estimate: “Yeah, but what do I know that, what others do not know?”, And it's not that you are so amazing, so your idea is excellent - this is a very bad way to evaluate ideas, which gives a positive result with the likelihood of you getting lightning in the field.

For example, back in the early days of LinkedIn, I did what I now advise other company executives: to communicate with any intelligent person who wants to talk and comment, so I personally went and described the idea of ​​LinkedIn, asking people what they thought.

More than two thirds of my network of contacts, including some very smart people, said that I was crazy.

I said that LinkedIn is a network product, that is, it only makes sense when it is used by many people. The first person is of no value until someone else joins the service. When the second joins, the service also does not make sense, because users are already familiar with each other.

When I started to paint the usage scenario, it turned out that the audience of service users would be from half a million to a million people, and their number would never grow again. But I knew something that the critics didn’t guess. I could come up with several ways to attract people to the project so that they would say: “Hey, I believe in this idea, I think it’s interesting, such products should exist, and I would like to try” and direct this enthusiasm to the growth of the community, so that you can start implementing valuable projects offered by LinkedIn.

When you think about moving in a non-standard direction, you need to think about why other smart people disagree with you, and is there any common sense in this? What will bring the idea to life? I must say, the head of the company is useful to think outside the box.

In addition to the topic of thinking outside the box, I will say that it can manifest itself in different ways. For example, the most common situation is when people think that you have a small idea, but in fact it is huge. Here is another example associated with LinkedIn: while non-business Internet startups want to achieve rapid success, the income curve of gradually developing projects can be very, very promising. LinkedIn was built gradually, year after year, and this model is atypical today.



As your project progresses, you begin to face a bunch of problems, which are mainly faced by all company founders.

Should I do the work myself or hire people by distributing powers?

The classic answer to this question is: you must do this and that. In fact, it turns out that you do not just need to do both, but sometimes you do one thing 100%, sometimes another thing even 100%, and even do both things at the same time, although it doesn’t fit in with the mathematics.

Thinking about what makes you an outstanding leader, you come across obvious paradoxes, and that's fine.

I often give one more paradoxical advice, which sounds like this: one must be persistent, but be able to make concessions. Entrepreneurs are often advised to possess their vision and stand firmly in their unfavorable surroundings. Knowing that your vision is contrary to what others believe, you need to continue to follow your path, overcome all adversity and achieve the goal.

On the other hand, according to this advice, you need to be equally able to analyze data and listen to customers. Do not be afraid to change the business model, be flexible. An eminent entrepreneur always understands when to persevere, and when to give in. I always say that implementing a project, investing in a project, creating a company, you need to formulate an “investment declaration” for yourself, which would answer the question why your idea, which many do not agree with, will be good in the future: you need to fix it what you know, but others do not know.

Then, entering the battlefield, you start asking yourself questions: “Am I still confident in my investment declaration? What makes us think that this is a good idea? ” If my confidence only grows, then I hope to stay in the game and continue on my route.



Be persistent, overcoming trials, with this you only reinforce your faith in the idea.

If your faith fades, then this is not the end. A huge number of startups, for example, PayPal, LinkedIn, Airbnb, of which I was a part, had periods when we had the thought: “Oh God, why did we even decide that this was a good idea?”. At such moments, all the horrors that lurk in the darkness seem real.

For example, in August 2000, PayPal earned 12 million, and the spending curve grew exponentially: we had no income, and the belief in the idea was fading. However, we asked ourselves what can we do? How do we fix things? This made it possible to develop a plan and begin to act immediately.



Another question: should I believe or fear?

Should I follow my vision of the world and ignore everything else? Being an outstanding entrepreneur means believing in your idea, thinking about what you want to do and where you want to do it, but being smart enough to accept negative feedback, follow the work of competitors and listen to criticism.

Is your direction or plans changing? If this is the case, then this does not mean that your faith in the idea weakens, it means that you need to be patient. How to combine all this?

Should I concentrate only on my product? Should I be involved in the project, ignoring everyone, including competitors? Or should I direct my efforts to foreign policy and hire people to work? Meet people? Should I collect information from communities? And again the answer: you must do everything at once, because the ability to adapt to any situation determines an outstanding founder.



Sometimes you have to direct 90% of efforts in one direction, and sometimes 80% in another. To take action, you need to understand what your immediate problem looks like.

To do this, I wonder what we should do and how to divide the work? Often people simply rely on customer data from user groups. Many entrepreneurs do not quite correctly believe that you need to constantly collect data and rely on them in everything. In fact, the data exists only within the limits of your vision, that is, the direction in which you are moving, but estimates of important indicators for you may be negative, which may cause you to change your mind about a particular issue. If you have your only and unique vision, it is not at all necessary that it will not change during the movement to the end point.



For example, everyone knows that PayPal has become a new global currency. I know that Peter was here, and one of the jokes I told him was: “We have a new world currency, which we exchange for dollars, maybe you heard about them, they existed for a while”. In fact, we have become currency traders, and now something similar is happening with Bitcoin, but this is a separate topic for conversation. Be that as it may, our idea was to organize a global community that would allow to make deals, trade, and bring e-commerce to every existing business.

Our vision remained unchanged, but first we wanted to create a banking model, then we thought about a credit model, but ended up with a mass trading model. How did it happen? You always enclose the data in the frame of the vision, but what you learn as you move forward changes it.