Placeholder Image

Subtitles section Play video

  • So I'm going to talk about how to operate.

  • So I've watched some of the prior classes, and

  • I'm going to assume that you've already sort of

  • hired a bunch of horrendously resourceful people.

  • That you've built a product that at

  • least some people love.

  • And you're probably raised some capital.

  • And now you're trying to build a company.

  • So you're, you're enforging a product and

  • now you have to forge a company.

  • And it actually argue for

  • GM company is much more difficult than for

  • a GM product.

  • Basic reason is people are irrational.

  • So you probably all know this either your parents,

  • your significant other or your brother or sister, or

  • your teacher, somebody in your life is irrational.

  • Building a company is basically taking all

  • the irrational people you know, putting them in one

  • building and then living with them 12 hours a day at least.

  • So, it's very challenging.

  • Now, there's techniques for coping with that and

  • some people get good at it and small people don't but

  • that's where really what operating is about.

  • So basically what you're doing when you build a company is

  • you're building an engine.

  • And at first you have a drawing literally on a white

  • board, and you're architecting it, and it

  • looks very conceptually clean, and beautiful, and pretty.

  • But when you start actually translating to

  • practice actually it looks more like this, and

  • you're holding it together with duct tape.

  • And it takes a lot of heroic effort to people to

  • actually hold it together.

  • That's why people work 80, 100 hours a week,

  • is that heroic effort is actually necessary to keep

  • this thing together.

  • Because you don't actually yet have polished metal in place.

  • Eventually you

  • want to construct a high performance machine.

  • A machine that actually almost nobody really has to

  • worry about every hour.

  • Every minute and you know as we

  • used to joke about Ebay that if Martians took over Ebay it

  • would take like six months for the world to notice.

  • That's what eventually what you want to get to.

  • Or as Warren Buffet says, you know, build a company that

  • idiots could run because eventually they will.

  • So this is what you want basically a performance

  • machine that idiots can run.

  • Now, as a leader, what is your real job?

  • What's your role?

  • Strictly speaking there's only one book that's ever written

  • that actually explains how to do this, it's a little old.

  • It was written in 1992 by Andy Grove,

  • who's quite famous, quite successful, and

  • his definition of what your job is,

  • is to maximize the output of an organization,

  • your organization that you're responsible for, CEOs,

  • everything and a VP would be part of the organization.

  • And the organizations around you, so if you're VPE,

  • you're actually are responsible for

  • the performance of the product team too, or

  • the marketing team, because you have influence there.

  • So this is how measure people and you want to focus on

  • the output not the input the old adage about measuring,

  • not measuring motion and confusing that will progress,

  • you're measuring only progress.

  • And this is going to sound like a fancy and

  • glamorous thing to do.

  • Maybe people get excited about managing a whole

  • large organization, and being responsible for the output.

  • But in practice, what you're going to learn today hopefully

  • is that it's more about things like ordering smoothies,

  • teaching your receptionist how to answer the phone properly,

  • and serving as a $10 an hour task rabbit for

  • your employees.

  • So let's talk about that.

  • So at first when you

  • start a company everything's going to feel like a mess.

  • And it really should if you have too much process,

  • too much predictability you're probably not

  • innovating fast enough and creatively enough.

  • So it should feel like everyday there's a new

  • problem and what you're doing is fundamentally triaging.

  • So some things will look like a problem, and

  • they're actually a colds, they're just going to go away.

  • So, somebody's annoyed about this or that.

  • That may be a cold, and you shouldn't stress about it,

  • and you certainly shouldn't allocated a lot of

  • your time to it.

  • And some things are going to present themselves as colds.

  • But just like in the emergency room, if they're not

  • diagnosed properly they actually can become fatal.

  • So what I'm going to try to do is help give you

  • frameworks for thinking about which things are colds and

  • which things are potentially fatal.

  • So one of the most important things I've learned at

  • Square is actually a concept of editing.

  • And this is the,

  • I think the best metaphor I've ever seen in like 14 years of

  • running stuff of how to think about your job.

  • It's natural, it's a natural metaphor so

  • it's easy to take with you every day.

  • And actually it's easy to transmit to each of

  • your employees so that they can figure out

  • wether they are editing or writing.

  • It's a natural construct.

  • You generally know when someone asks you to

  • do something.

  • Am I more writing or am I more editing?

  • So an editor, as, is the best metaphor for your job,

  • and we're talking about the specific things you're doing

  • in editing.

  • The first thing an editor does, and

  • you probably all had this experience in school,

  • is you submit a paper to a TA, a draft to your friend.

  • And the first thing an editor does is

  • they take out a red pen or nowadays, you know online, and

  • they start striking things.

  • Basically eliminating things.

  • The most important task as an editor is to simplify,

  • simplify, and that usually means omitting things.

  • So that's your job too, is to clarify and simplify for

  • everybody on your team,

  • the more you simplify the better people will perform.

  • People cannot understand and

  • keep track of a complicated set of initiatives.

  • So you've got to distill it down to one, two, or

  • three things.

  • And use a framework that they can repeat,

  • they can repeat without thinking about,

  • they can repeat to their friends,

  • they can repeat at night.

  • Don't except the excuse of complexity.

  • A lot of people will tell you that well this is

  • too challenging, this is too complicated.

  • Well yeah, I know other people simplify but

  • that's not for me.

  • This is a complicated business.

  • They're wrong.

  • You can change the world, in 140 characters.

  • You can build the most important companies in

  • history in a very simple to describe concept.

  • You can market products in less than about 50 characters.

  • There's no reason why you

  • can't build your company the same way.

  • So force yourself to simplify every initiative,

  • every product, every marketing, every,

  • everything you do.

  • And, and basically take out that red,

  • and start eliminating stuff.

  • Second thing is, what editors do,

  • is they ask you clarifying questions.

  • So when you present a paper to somebody,

  • what do they usually do?

  • Do they, find some ambiguity somewhere and

  • they say, well did you really mean this, do you mean that,

  • do you have an example of this?

  • That's what your job is, so you're in a meeting and

  • people are going to look to you, and the real thing you

  • do is you actually ask a lot of questions.

  • And they can be simple, basic questions like,

  • should we try this seven days a week or six days?

  • They can be fundamental questions like,

  • where's our competitive advantage here?

  • We try to this actually as investors too

  • some investors will ask you a billion questions about

  • a billion things and they'll have you do diligence forever.

  • We try to narrow it down to what are one, two or

  • three four things that actually matter for

  • this company and only focus on those things.

  • So it allows us to be more decisive, and

  • we can make decisions rapidly.

  • It allows us not to distract you from your day job,

  • which is actually building a company.

  • And yet, I think we still get to the higher fide,

  • highest fidelity answers.

  • We don't have all these extra,

  • extraneous details, pieces of data.

  • Now it's hard, it's something you have to practice, but

  • when you're good at it, every step you eliminate, Andy Grove

  • estimated that you can improve performance by 30-50%.

  • The next thing you do is allocate resources.

  • So the editing construct,

  • this is what editors do all the time.

  • They take editors from the mid-East and

  • covering the mid-East and they move them to Silicon Valley,

  • because Silicon Valley is now, now more interesting.

  • Or they move them to a sports section because they want to

  • compete on the basis of sports with other journals and

  • other publications.

  • So that can be top down where I take a bunch of,

  • allocate resources and

  • people would say, we're now going over here,

  • we're going to compete on this basis.

  • And then next month, next quarter, next year,

  • I'm like well,

  • that Middle East coverage is getting boring and bland.

  • We don't want to do that anymore.

  • Let's go chase after something else, or it can be bottom up,

  • just like journalists mostly come up

  • with their own stories, the people who work with you.

  • Generally should be coming up with their own initiatives.

  • So, a reporter will generally, who covers Google, come up

  • with the interesting stories that they're hearing in

  • aether, and propose one or two to their editor for approval.

  • But it's not like the editor is saying, go cover Google,

  • and this is the angle I want.

  • Once in a while they do that, but

  • that's not the date, the day, the meat and

  • potatoes of what a journalist does every day.

  • Your goal over time is to actually use less red

  • ink every day.

  • So one way of measuring how well you're doing in

  • communicating to

  • your colleagues about what's important and what's not.

  • What, why some things are important,

  • some things are not,

  • is how much red ink you're pulling out every day.

  • It's okay if you have a bad day and

  • the red inks all over the place.

  • But it's not okay if the red ink next month is

  • more is more than it was last month,

  • if the next quarter is more than this.

  • So measure yourself of how much red ink you're creating.

  • The other thing that's very important that actually isn't

  • as intuitive to a lot of people is,

  • the job of an editor is to ensure consistent voice.

  • So if any of you read The Economist,

  • you can tell that there's one consistent voice.

  • You can pick up any article, any post in The Economist, and

  • if feels like it's written by the same person.

  • Ideally your company should feel like,

  • on your website and your PR release,

  • on your packaging, if it's a physical product.

  • Anywhere on your recruiting pages to feel like it

  • was written by one person.

  • That's extremely difficult to do,

  • and first you're going to be tempted to do

  • that yourself which is okay for a founder to that.

  • Him or herself initially.

  • Over time you do not want to be doing all of

  • the consistent voice editing by yourself.

  • You are a trained people so

  • that they can recognize the differences in voice.

  • So if you see this website page it

  • looks very different than the recruiting page.

  • You start by asking questions why is that?

  • Is the reporting messed up?

  • Is the leaders over here not

  • really understanding the voice of the company?

  • So, you've gotta, you have to fix that over time.

  • But you want to start with the objective of