The Hard Thing About Hard Things by Ben Horowitz provides a raw and insightful account of the challenges faced by a CEO in the tech industry. Unlike many business books that offer formulas for success, Horowitz provides a realistic portrayal of the difficulties and complexities involved in building and leading a company. Drawing from his personal experiences, he shares practical advice and hard-earned wisdom that can benefit anyone involved in the entrepreneurial journey.
Give Ground Grudgingly
In “The Hard Thing About Hard Things,” Ben Horowitz introduces the concept of “Give Ground Grudgingly,” emphasizing maintaining growth while minimizing degradation. This principle advises leaders to make necessary sacrifices but resist unnecessary losses. It’s about finding the balance between expanding the business and preserving its core values and capabilities. Essentially, Horowitz is advocating for cautious and strategic growth, ensuring that as the company evolves, it retains its essential strengths and integrity, thus degrading as slowly as possible.
American Football Analogy
There is a great analog to this concept in American football. An offensive lineman’s job is to protect the quarterback from onrushing defensive linemen. If the offensive linemen attempt to do this by holding their ground, the defensive lineman will easily run around them and crush the quarterback. As a result, offensive linemen are taught to lose the battle slowly or to give ground grudgingly. They are taught to back up and allow the defensive lineman to advance, but just a little at a time.
When you scale an organization, you will also need to give ground grudgingly. Specialization, organizational structure, and process all complicate things, and implementing them will feel like you are moving away from common knowledge and quality communication. It is very much like the offensive lineman taking steps backward. You will lose ground, but you will prevent your company from descending into chaos.
Final Thoughts
In The Hard Thing About Hard Things, Ben Horowitz does not sugarcoat the entrepreneurial experience. Instead, he provides a genuine look into the grit required to lead a company through its toughest times. His insights are invaluable for current and aspiring leaders who seek to understand the true nature of building and sustaining a successful business. This book is a must-read for anyone looking to gain a deeper understanding of the complexities of entrepreneurship.
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"People who always give nothing are rational fools who blindly follow material self-interest." --- Richard Thaler (2016)
Inspired by Richard Thaler’s Misbehaving: The Making of Behavioral Economics, the “Rational Fool” serves as a whimsical yet thought-provoking representation of the human tendency to act against our own best interests despite possessing rational capabilities. This concept, rooted in behavioral economics, challenges the traditional economic assumption of humans as perfectly rational decision-makers.
This drawing aims to spark curiosity and discussion around the fascinating intersection of psychology and economics, highlighting the importance of understanding behavioral biases in our everyday lives.
Through this playful visual metaphor, I invite visitors to explore the intriguing complexities of human behavior and decision-making, ultimately encouraging a deeper appreciation for the nuances of our choices.
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"Success with money relies more on Psychology than Finance,and doing well with money has little to do with how smart you are, and a lot to do with how you behave. And behavior is hard to teach, even to really smart people." --- Morgan Housel (2020)
“The Psychology of Money“ by Morgan Housel is an insightful guide that puts the spotlight of financial success squarely on the shoulders of human behavior. In this world of complexity, how you behave with money is more important than what you know about money.
With a blend of research, anecdotes, and stories of personal experiences, Housel illuminates the significance of better understanding your own behavior, and how that is far more responsible for your financial outcomes than your skill.
The following one-page visual guide has been created by me to help you apply the teachings from Morgan’s book to your life. See below ?
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“There are two systems of thought: The Intuitive System 1, which does the fast thinking, and the effortful and slower System 2 which does the slow thinking, monitors System 1, and maintains control as best it can within its limited resources.”
--- Daniel Kahneman, Thinking Fast and Slow (2011)
Introduction
The fact remains whether we like to admit it or not, our minds are susceptible to systematic errors in thinking and judgment. And when we are under pressure or lacking total information, our minds are strongly biased toward causal explanations. To wrap our minds around all the ways we make mistakes in our thinking and judgment, Daniel Kahneman simplified the mind into two systems:
The Intuitive System 1 thinks VERY FAST
The effortful and controlled System 2 thinks VERY SLOWLY
The point Kahneman drives home in his book is by learning to recognize these patterns of thinking in yourself, you can minimize the mistakes when the stakes are highest.
System One … The Hare … All Gas No Brakes!
To put it quite simply: System 1 thinking is impulsive and intuitive and is designed to jump to conclusions from very little evidence. What’s worse, System 1 isn’t designed to know the size of the jumps it is making in its thinking. With System 1, WHAT YOU SEE IS ALL THERE IS (WYSIATI), and because of this, only the evidence at hand counts. In the absence of an explicit context, System 1 will generate its own context, and it really excels at constructing the best possible story … Are you scared yet? If not you should be!
System 1 is highly adept in one form of thinking … Automatic and Effortless. It identifies causal connections between events, sometimes even when the connection itself is spurious.
System Two … The Tortoise … All Brakes No Gas!
Like most things in life, there is a yin-and-yang or balance to things. Your brain’s method of thinking is no different. If System 1 is your default, fast, and reflexive method of thinking, System 2 is the opposite of this. To be specific, System 2 controls thoughts and behaviors, and it is the only system that can follow rules, compare objects on several attributes, and make deliberate choices between options.
Okay… Now What?
Here is the thing… Regardless of Systems 1 and 2, our brains are pattern-matching machines subject to a plethora of cognitive biases. Here are a couple of my favorites:
Anchoring Effect
Availability Heuristic
Halo Effect
Hindsight Bias
Representativeness Heuristic
We often ignore relevant statistical facts and we rely almost exclusively on rules of thumb. When you factor in that System 1 is our default fast way of thinking, and the deep, deliberate, and controlled System 2 way of thinking is lazy and hard to consistently deploy, it’s not surprising that we humans make a ton of decision-making errors. Often, we are inconsistent in our evaluations, and we often make errors in summary judgments. Kahneman found in his research that humans when asked to evaluate the same information twice frequently give different answers.
Reading through Daniel Kahneman’s work convinces me of a couple of solutions to human decision-making shortcomings that a lot of us humans are not going to like to hear… Humans need help to make good decisions, and there are informed and unobtrusive ways to provide this help:
Whenever we can replace human judgment with a formula, we should at least consider it.
Since machines are more likely than human judges to detect weakly valid cues, we should consider complementing or augmenting human-only judgments with human + machine judgments
Maximize predictive accuracy by using machine logic, especially in low-validity environments
Conclusion and Final Thoughts
In Thinking Fast and Slow, Daniel Kahneman set out to improve the ability in all of us to identify and understand errors of judgment, and choice in others, and ultimately in ourselves! He wanted to provide his readers with a richer and more precise language to discuss decision-making and thinking within the brain. Because our System 1 method of thinking is our default and intuitive way of thinking, it’s easy for us to ignore relevant statistical facts that don’t fit the patterns we want. By nature, our slower and more methodical way of thinking (System 2) takes more time than we want and is lazy by nature. Humans need help to make good decisions because there is overwhelming evidence that we Humans can’t think rationally 100% of the time.
What Will I Do Differently As a Result of This Book?
Learn to recognize situations in which mistakes are likely and try harder to avoid making significant decision-making mistakes when the stakes are high
Understand that even when I think that I am being rational there is a good chance my default System 1 way of thinking has quickly pattern-matched and downplayed disconfirming information.
Understand how deep the halo effect goes in clouding/painting my judgment of a person with a favorable first impression versus not.
The major source of error in forecasting is our prevalent tendency to underweight or ignore distributional information. We forecast based on information in front of us (WYSIATI).
Consequently, I will therefore make every effort to frame the forecasting problem so as to facilitate utilizing all the distributional information that is available
Here is the thing … We are pattern seekers, believers in a coherent world in which regularities appear not by accident but as a result of mechanical causality or of someone’s intention.
This fact means that we humans often misclassify random events as systematic and we are far too willing to reject the belief that much of what we see in life is random.
This means for me, as I continue to plan I MUST EMBRACE THE RANDOMNESS OF LIFE!
Lastly, beware when I am in a good mood and I have had limited sleep … My System 2 will be weaker than usual and I should pay extra attention to my default System 1.
Downloadable Content
Thinking Fast, and Slow is a must-read for anyone interested in gaining insights into the Human mind and the manner in which decisions are made. The following book notes have been created to help you with your understanding of Daniel Kahneman’s concepts within Thinking Fast, and Slow.
Human behavior is one of the hardest things to predict and understand. And the more we learn about ourselves, the more we realize that our decision making is very flawed. To put it bluntly, humans do not make decisions in a rational and truly thoughtful way. We are very flawed thinkers who have tendencies to make suboptimal decisions. Consequently, “nudges” can be used to alter our behavior towards more optimal outcomes.
Nudge was written in 2008 by the father of behavioral economics Richard Thaler with help from Cass Sunstein. As a major challenge to the concept of traditional Economic Man (Homo economicus), Nudge rejects this hyper-rational model of the individual. Instead it posits that individuals are simply Humans plagued with automatic thinking, biases, prejudices, irrationality, and uncertainty in their decision making.
The entire premise of this book lies in the fact that Humans are not Economic Man. We don’t make unbiased forecasts. We don’t choose unfailingly well. And consequently, we need help to make more rational and optimal decisions in our lives. Enter the Nudge.
The simplest definition of a nudge is any factor that significantly alters the behavior of Humans in a predictable way without forbidding any options or significantly changing their economic incentives.
The key factor in the nudge is that it’s not a coercive action. Its focus is on trying to influence choices that will make Humans better off in the short and long terms. Thaler and Sunstein really believe that people should be free to do what they like and even opt into undesirable arrangements if they really want to. As policy makers and private institutions then, it’s on us to make it easier for people to exercise this freedom in the direction that makes their lives better, which is why we use the nudge.
How We Set Up Choice Matters as Well
Because Humans are not Economic Man, the manner in which choices are presented to us can greatly influence our decisions. The best way to explain this concept (choice architecture) is to think through how food is offered in a cafeteria. By moving healthy food forward to the beginning of the line or to eye level, choice architects can greatly impact the frequency with which healthier food is chosen. It’s the same reason why retailers put impulse buy items near checkout and why they move items throughout their stores from place to place.
As a choice architect, you have the ability to influence outcomes simply by how you lay out and present options. Small yet seemingly insignificant details will have major impacts on people’s behavior.
In Closing
Humans have a tendency to move towards a state of inertia, and given this we don’t always make the decisions that are in our best interest. To quote the Guardian, “real men and women are inconsistent, ill-informed, weak-willed, and lazy. We can’t be bothered to fill out the form that would get us in the company pension plan, we forget to cancel subscriptions and we slump on the sofa eating doughnuts when we should be doing yoga. We are virtually incapable of balancing the temptations of today with the rewards of tomorrow; for some of us, even instant gratification isn’t quite quick enough.”
Nudges can save us from our inability to act rationally and the core of this book drives home this very point.
Measure What Matters is a business book by John Doerr based on the fact that ideas are easy but execution is hard. When it comes down to it the core model of execution (Objectives and Key Results – OKRs) in this book sets out to help organizations in there major ways:
·Companies that use OKRs will focus and commit their teams to better priorities
·Companies that use OKRs will align and connect their teams with better teamwork
·Companies that use OKRs will better track accountability and force their teams to stretch for amazing results
The intrinsic value in attempting to use an operational model like OKR is the fact that it will focus and align your business on the most important goals that really move the needle. As an organization, consistently creating aligned goals and measuring outcomes undoubtedly leads to more clarity and job satisfaction for employees. OKRs keep you from trying to do everything.
What’s an Objective and What’s a Key Result?
The challenge with business books like Measure What Matters is to really define in detail the principles that book is covering. And when push comes to shove, you pick up a book like this to learn something new that can be implemented in your day to day business life.
At the most basic level, Objectives are the “what” you are trying to accomplish. Objectives express goals, intentions, are aggressive, and realistic. Above all though, they are tangible and must provide clear value to your organization. At the most basic level, Key Results are the “hows.”Key Results express measurable milestones that advance forward the objectives.Together, Objectives and Key Results form the framework of Doerr’s operational model within Measure What Matters.
A Typical OKR Cycle
The typical OKR cycle for setting OKRs at the company, team, and contributor levels looks something like this:
Great. I Understand OKRs at a High Level. How Do I Actually Use Them?
The hard part with any business book that details an operational model or business process is implementation back into your own day to day business life. I am by no means an expert on any of the principles detailed within this book. But having finished reading it I will give my best attempt at detailing how to use this process in your day to day.
On page 84, Doerr gives a very simple example of how to create impactful OKRs. Using a fictional NFL team, Doerr walks the reader through the following picture:
(1) As you can see from the example the Objectives are straight forward and the Key Results are simple and measurable. (2) There is zero doubt what the organization (in this case an NFL team) is focusing on accomplishing this year. (3) Poorly defined OKRs are a waste of time. Well defined and aspirational OKRs are motivational management tools that help your company execute. (4) The very nature of the OKR process is to think big but focus and this hypothetical OKR does exactly that.
Is It Really That Simple?
The short answer is yes and no. The principles within Objectives and Key Results are easy to understand. The complexity lies in writing really good Objectives and really good Key Results. As Measure What Matters details within the appendix on Google, it can be very hard to consistently write good OKRs when you first start out. Like any new process, it takes time to get really good at it.
No operational system is perfect. But having a defined process in business is key to executing over the long-run. The Objective and Key Results model of operating will undoubtedly help focus your business on the objectives and goals that matter most to your organization.
TheAmazon Wayis a book by a former executive on the 14 leadership principles that drive their success. Above all though, it is clear the only thing that really matters is the customer. At the core of everything Amazon does from systems to the way in which they compensate their employees is this obsession over the customer. The Amazon Way is your guide into how Jeff Bezos built the Everything Store that now dominates.
14 Principles of Leadership Determine it All for Amazon
At the core of everything they do lies 14 leadership principles:
1.Obsess Over the Customer
2.Take Ownership of Results
3.Invent and Simplify
4.Leaders Are Right-A lot
5.Learn and Be Curios
6.Hire and Develop the Best
7.Insist on the Highest Standards
8.Think Big
9.Have a Bias for Action
10.Practice Frugality
11.Earn the Trust of Others
12.Deep Dive
13.Have a Backbone – Disagree and Commit
14.Deliver Results
These 14 leadership principles make up The Amazon Way. The following picture is my visual representation of what the Amazon Way represents to me.
The 14 Leadership Principles that make up the Amazon Way exist solely to put the customer first above all else. By obsessing over the customerfirst and working backwards from what they need, Amazon has built a rocket-ship of a company that is light years ahead of the competition.
Outsiders to the organization usually focus their attention on Amazon’s holy trinity of (1) pricing of products (2) selection of products and (3) availability of products. And while this trinity of competencies is formidable, Amazon’s true strength lies in the fact that they have built a frictionless, highly intuitive, and completely self-service platform that drives customer trust and loyalty.
As an owner of the business, each Amazon employee is expected to fully master their domain, and tenaciously manage every potential business-derailing dependency. And since they hire and develop the best, Amazon has created an organization of A-players that take complete ownership of their results.
In closing, the real scary proposition for anyone competing with Amazon is that fact that at its core, is an organization that has a pervasive fear of turning into a Day 2 company. As a result, no one is ever satisfied with what they have accomplished, and no one there seems to willingly rest on their laurels. At Amazon, it’salways Day 1and everyone there seems to embrace this mentality. Most organizations can’t instill this relentless desire to keep learning, and this is the real challenge when it comes to competing with them head on.
There are nine principles of management that Ken Iverson holds himself to. These nine areas of focus helped him build a strong and long-term oriented company at Nucor: 1. Establish a higher cause 2. Empower your employees to trust their instincts 3. Destroy the hierarchy 4. Employees are the engine of progress 5. Give your people a stake in the business 6. Stay small 7. Take smart risk 8. Ethics > Politics 9. Cash performance = long-term survival
Establish a higher cause within your organization that employees and managers can rally around.
Give your employees a consistent set of tools that will empower them to trust their instincts and intuition.
Destroy the hierarchy and focus on establishing an egalitarian business culture that can sustain employee motivation.
Dedicate your management career to creating an environment in which employees can stretch for higher levels of performance because they are the true engines of progress.
Give your employees a simple stake in the business. The more they produce, the more they should earn.
Small businesses allow for things to really get done. That’s the virtue of smallness.
Aversion to risk can be deadly in business. Managers who avoid risk and fear failure spend a lot of time cheating themselves, their people, and their companies from good risks and adventures.
Place ethics over politics… simple enough
What really matters in a business is bottom-line performance and long-term survival. Focus your efforts there.
