Why Ben Horowitz doesn’t like hiring rich people

By Max Nisen @MaxNisen March 11, 2014

A lucrative partnership. Reuters/Brendan McDermid

 

Andreessen Horowitz is one of the largest and most prestigious venture capital firms in the world. With more than $2 billion in assets under management, it has invested in dozens of successful companies including Facebook, Groupon, Zynga, Twitter, and Jawbone. Its founding partners are wise enough to assess what they learned along the way to success.

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Ben Horowitz, who founded the firm with Marc Andreessen, recently wrote The Hard Thing About Hard Things, chronicling how his and Andreessen’s software company Opsware, narrowly survived the collapse of  tech bubble.

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In a recent interview with Quartz, Horowitz talked about how he hires, gives feedback and the way he mentors startup CEOs. The following conversation was condensed and edited for clarity:

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Quartz: Why does the book focus on struggle so much?

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Horowitz: I think that business book reporting, it’s all Jim Collins, it’s the story of victory, it’s success bias over and over again. When you look at a company that’s already succeeded or is at the very top of its game, it isn’t necessarily when it’s executing well. It tends to be peacetime—you’ve defeated the competition, you have the highest margins, the highest multiple. So what are you trying to do? You’re trying to get more creative, trying to invest, trying to set bigger, more audacious goals. But that’s not how you became successful. That’s as a result of your being successful. The ordering is out of place.

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I think when companies are struggling, they don’t want to talk to the press. The guys who write business books aren’t interested in it because nobody wants to learn what it’s like to be a mess, you want to learn how to be successful. That’s slanted the whole thing quite a bit.

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Quartz: Many managers default to hiring for smarts or prestige. What are some of the other things you look for?

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Horowitz: There are studies that show that the look and feel of a person is incredibly dominant in hiring decisions, which is really stupid because it only matters for the interview itself. What you really want to say is “What do I need this person to be good at?—particularly for an executive hire. If you’re hiring engineers, you’re kind of looking for very raw talent. But the bigger the company and more complicated the job is, the more you need knowledge and skill. When hiring for skill, you need to know what you need this person to be world-class at, because it’s not everything. Nobody’s world class at everything.

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And then, what are you willing to live with? If you don’t get that very, very clear in your mind and you don’t have a means of testing if they have competency in the areas you need them to be good at, then it’s very easy to get someone who’s really smart but can’t do the job or really smart but going to fail in your environment. And that’s a pretty common failure, right?

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There are basic things like, are they hungry? do they need this job? I had a terrible time hiring rich people. It sounds funny but the problem is when things go wrong they can ask, “Why am I doing this?” You don’t ever want anybody asking that question. You want them to say, “I know why I’m doing it, I need the money, let’s go” or whatever it is that draws them. I think increasingly it’s a challenge for companies to kind of look past sheer IQ.

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Quartz: How do you like to give feedback?

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Horowitz: Giving feedback is probably one of the more difficult discussions you can have because you have to be aware of personality, of timing, and of the broader situation. You have to do it very frequently or it’s not going to work. And you really have to be honest. That’s one of the biggest mistakes people make. Management books often teach you to sugar coat things.

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But some people process things differently. People who are very sensitive, perfectionists, are highly attuned to the slightest criticism. It just breaks them down, it makes them depressed. So you have to put it in a way that’s constructively negative. One of the guys who was most sensitive was my sales guy, ironically, because he wasn’t sensitive when giving feedback. I’d say, “Look, you had this incident,” and he’d respond, “Well… they were wrong and I was right.” I’d say, “Well yeah, but ask yourself this, were you effective? They wouldn’t have come to me if you were effective. You would have just gotten it done.”

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He’d still be mad when he walked out of the room but he’d work on it. Those kinds of people will never take feedback well, but they work on it. You have to adjust it for the person.

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Quartz: You’re explicit about preferring founder CEOs when investing. What’s the first thing you focus on when mentoring them?

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Horowitz: Management and management style do have to come from personal philosophy. But there are some common things in leadership that if you don’t have them, it’s going to be very unlikely that you’ll succeed. One thing is a clearly articulated vision. Can you describe where you’re going in a way that’s compelling enough to get people to join your company? That’s really a fundamental capability that leaders either have or they don’t.

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If I sit down and say “I would do it this way,” and if you can’t tell me I’m wrong and explain why, even if you’re 22 years old, you probably don’t have the sort of strength, courage, and belief in yourself to be a leader.

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The second part of it is how you think about other people. You have to be able to think for yourself, but can you see the world through other people’s eyes enough that they feel like you have their interests at heart? This is something that you see all the time in big companies—you have these managers that are totally clearly out for themselves. Without those elements, it’s unlikely that a technical founder would be able to run a company, even if they’ve got a great invention.

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