Founder Mode | Garry Tan & Keith Rabois

Welcome back. All right, we've got a very exciting topic to talk about which I'm sure will intrigue all of you. It's called founder mode, but we're going to retitle it founder mode versus manager mode. With me is Gary Tan, who runs Y Combinator, who actually maybe accidentally started founder mode. So you can talk about the origin story of this thing called founder mode, which has become a meme. We're going to dive into it, but I think you actually triggered this.

Yeah, absolutely. Brian Chesky, obviously a friend, on the board at YC. We torture him as a board member by making him come and speak at every single YC batch. I had seen every iteration of the initial selling serial pitch. I mean, it's part of startup lore now. I'm pretty sure everyone knows that story and I'm pretty sure Brian is pretty sick of telling that story, but we still make him say it every time. One thing I noticed though, post-COVID, he would come in and he added a new section to it. It was really about how much he loves this moment of Airbnb, which was not something that a lot of founders who have been out for like 10, 15 years building something worth a hundred billion dollars would say. That's a surprising thing. His second half of the speech to the YC batch, all of which is totally irrelevant to two or three people just starting out, was all very relevant to the top alumni, many of whom are in this room. I finally got him to come up to Soma. He came on at 9:00. We just last minute added him. Steve Huffman was the keynote. He had just IPOed. We were surprised that Brian was going to come in. Brian thought he was only going to speak for 20 minutes. He proceeded to speak for about two and a half hours to exactly the correct audience. Not to a room full of people at zero trying to go from zero to one, but to people who have actually built companies. I think that evening in Soma must have unlocked at least a hundred, maybe two hundred billion dollars worth of value for the YC companies in attendance. What he said was that it is entirely possible for you to start your company and then take the classic advice: hire the best possible people you can and give them as much room. Get out of their way. Give them as much room as possible to run. At the core of that story is something that is supposed to be very empowering. What Brian found was that at the end of maybe nine years of taking the conventional wisdom, he did not recognize the company that he started. He had division heads who had divisionalized. Each product team had its own CTO and its own design person. It all expanded from there. He found that he was hiring executives who were really focused on their own fiefdoms and their own careers over the needs of the company. The uncomfortable thing is it sounded like it got to a point where the founder CEO did not have agency. The crux of this is that it is entirely possible to have a place where both the CEO and the executives have locked themselves into a cage match where there is absolutely no agency. What I've been realizing lately, and I've been spotting this in all the many companies I work with and even within Y Combinator as a 20-year-old brand now, it is possible to basically fall back on the codified decisions of the 10,000 decisions you made the last year or the last 5 years or the last 10 years rather than actually giving yourself agency. Here's a new situation. Do we fall back on the codified arguments that we already had for 10 years, or do we look at it from a new perspective and say we have to do a different thing here? It might mean that we're going to argue. It might mean that someone's fiefdom is going to get reorged. It means that we're going to reopen old wounds. That's what Brian Chesky realized. COVID happened and never let a great crisis go to waste. He had the incredible bravery to go in and redo the org. Not only that, he changed the way he hired. He said you need to be actually in the track of both your executives and your skip levels. You need to actually meet them in the org of your own creation. The powerful moment for me is realizing you don't have to live that way, but it does require a lot of courage. Being able to choose agency and being able to intentionally do that may well require you to go from manager mode to founder mode. That might mean coming in and saying we're going to be willing to go from zero here. We're going to rehire the whole executive team if we have to, or we're going to reorg the whole org from executives all the way down. The amazing thing is it sounds like a lot of work. It sounds like it shouldn't work, but we've seen this a bunch of times now. If you actually show up, presence is leadership. The defining thing about going into manager mode is just saying, you know what, it's your call and I'm going to let you run with this and I'm not going to check in on what happens afterwards. It's a misconception that founder mode is supposed to be hyper micromanagement. One of the cool things that Brian has come back and shared with us is that by actually going into the details, by making sure that every single person on your executive team is aligned with you, and then being willing to spend the 60, 70, 80 hours a week going down to work with the directly responsible person on anything that's key and important to you, and doing those reviews—some things are weekly, some monthly, some quarterly, some yearly. His chief of staff is really amazing. It's an insane amount of work. But to be able to figure out who are all the people, put that in your calendar, and then actually make sure everything that happens at your company comes from your vision and from what you want. That's the big scary thing. He was willing to say if you're not here for this, this is not the right place for you. Take care of them, have a great severance, don't badmouth them, make sure they land someplace great. Airbnb or your company should always be a great place to be from. He was able to manage that and then build the company that he actually really wanted. The happy ending is that upon IPO he was shocked at what ended up happening, and even today Airbnb remains one of the most profitable companies in all of tech.

Since Brian gave this talk in front of a bunch of influential important founders, have you seen it cascade and people apply his precepts? How often is it working? What have you observed from afar?

Well, we had a founder mode dinner and actually Max from Fair came to that dinner. I think you have a front row seat. Max is an incredible founder. It's very easy to fall back to hiring the best possible people who have done this before and be in a rinse and repeat moment. But I would argue that this very moment is not a rinse and repeat moment. Actually, everything about every process can and should be changed. We spent a lot of time with Bob McGrew, who's chief research officer at OpenAI. His refrain to me is always wild. The OpenAI teams have spent so much time building things that can reason. This is truly the age of intelligence. Yet when you look at so many organizations with thousands to tens of thousands of people, go down to what people are doing day to day, it's like it's 2015 still. It makes no sense. So of all times, you actually going to ground means you will have 10 or 100 times the amount of impact than you would before because we have large language models now.

Have you seen companies have negative experiences in inverting from manager mode, which was the default, to founder mode, or is it all positive?

I think the tricky thing is Airbnb happened to be sitting on a giant gold mine. The really tricky thing is you have to actually still fly the plane. In the middle of doing this type of transformation, you have to continue to grow. How do you do that? The underdiscussed part of founder mode is what if those executives who maybe you disagree with and you've allowed too much free reign, can you rein them in and can you actually replace them? If you have a gold mine and things are all the way up and to the right, great. If you have cash, great, you can do it. But there are a lot of scenarios where it's really scary to make those types of changes to replace three to seven leaders all at once unless you have traction or a gold mine of cash.

You also mentioned that one of the side effects of founder mode is you're going to have a lot more conflict by definition. Maybe this is the reason why manager mode emerged—people are conflict averse. Talk about how you have to embrace the conflict on your team to be successful with founder mode.

I think what's interesting about it is it's easy for me to speak for myself. Earlier in my career, I was still kind of a people pleaser, but I'm at least aware of it and so I can do something about it. Left to your own devices, you're surrounded by people who, especially if your business is doing really well, it's easy to take your foot off the accelerator. You're going to say, this sounds great, hiring an executive who has done that function before, I trust that, let's see this play out. Whereas I think it takes some real courage. The courage is in short supply when you act. The big call to action is remember when you had nothing, when you were at zero and it was do or die. The company was going to die tomorrow. You have to reconnect with that original courage to make these other choices.

Is there a way to evaluate which execs from bigger places might succeed in founder mode?

Maybe the YC angle for it is if you're sitting down with an exec and it's 10 minutes, that better be the highest bandwidth conversation you could possibly have. You can root out manager mode almost entirely by how much that person gives you in even a 30-minute meeting. If you sit down with someone and you don't know what that person was saying, no information was conveyed, it just sounded good. I would start there. The people who seem to really fit the zero to one are the people you would hire and want by your side from that zero to one period. There's no difference between that moment and this moment in that respect.

Preserving the sense of urgency and the ownership mentality all through the levels of scale. Let's say you were going to put on a boot camp for teaching founder mode, like a YC program. What would be the top two or three modules in the curriculum?

I bet we would have to do an encounter session where there's screaming involved or something. I think especially post-product market fit when everything's going really well, it's too comfortable. When the leader is not showing up well, you will find all of these other deleterious types of cultures evolve. How do you make a decision? If it's not clear, power loves a vacuum. Power will rush in to fill a vacuum. When you talk about executives who are building their careers, they're lying to each other and themselves. They will say or do anything to get power. These are the grand viziers. Every company, like it or not, will have them, and sooner or later they're going to destroy your company. Those are the people to try to figure out who they are and root them out. If the leader shows up, it makes it very hard for them to get their way and exert their power.

Vacuum is the worst enemy. I agree with that. Okay, so now let's say we start a company from scratch. Have you actually, since you have thousands of companies that you've funded over 20 years, analytically or statistically looked at the success of companies against management style?

We really should. I have a one-man data science team, so I need to hire a few. This would be awesome because you have the only pool that's probably large enough over a long enough trajectory to actually do this mathematically.

Let's actually take a topic that all of you talk about. I interviewed Brian on stage. There's a video online about founder mode. For those of you who don't know as much about it as you want to, you can learn more by watching Brian. He's pretty passionate about it as you can probably tell from a two and a half hour dinner. Let's leave more time than usual for some questions for Gary. Raise your hand. We have four people with mics. One right in front.

Hi, this is Anu from Scaffold. We had Ali on stage just before you and he's clearly hardcore founder mode right now. Scary.

Why do you say scary?

It's a personal thing, but we'll talk about it separately. He's just powerful in the market right now. It's scary in the sense that I used to work at Salesforce for nine years and Oracle before that. If I was still an SVP there, I wouldn't know how to compete with them. That's never true for me. Usually I know how to kill, but I don't know how to stop him. He's unstoppable right now. But the founder mode question is the inverse of that. Prior three years when he was hurting, the company he was competing with was run by Frank Slootman. Just like founder mode is the story of the day, the prior three to five years the story in Silicon Valley was that founders should step aside. Frank Slootman will come in, Bob Muglia will come in, Satya Nadella will come in. How much truth is in that? Is it really founder mode versus manager mode, or do you think it's just Satya versus Ali? At some point, if you have the smartest person in the room, should they make most of the calls versus founder mode versus management?

I think we're trying to implement founder mode at YC, and I'm not the founder actually. So I'm more like Satya. I'm definitely not Paul Graham. Having Brian on my board has meant that having very clear governance and leadership was what YC needed for maybe a 10-year period after Paul handed over the reins. The board of YC never met actually, and now we have quarterly board meetings again. I'm the professional CEO, but I'm also trying to do founder mode by act. It actually comes from the founders like Paul, Jessica, Carolyn Levy, and Brian Chesky. They know everything. I have a 50-page deck and we go through all of it every three months. They are fully abreast of everything that's going on at YC. I'm trying not to do manager mode. I'm trying to do founder mode but with clear governance. I know where I'm taking the company. We get super aligned on these are our goals and this is what we're about. Then I can go to my team and I can say, I take that board deck and I show it to all of my 14 partners at YC. We're all hoping for alignment. The recognition is that founder mode means someone needs to actually make everyone run in the same direction instead of fall back on policy, fall back on all these fights. If you don't have governance, the power vacuum will attract people who will choose things out of their own ego or their own fiefdom. In your organization, there are a bunch of things that don't quite make sense for you or the business or the customer, but sure do make sense for some executive who is accumulating power. This is about taking power from those people and aligning them so we're all running in the same direction. Then it's just clear.

Yeah. For those of you here last year, you mentioned Microsoft. Bill mentioned that he spent the first five years of Microsoft reviewing every single line of code that ever left the building. That's a good illustration of founder mode for Microsoft. You actually did talk about the personal side, which is this is intense. Being founder mode means reviewing every single thing and it's very draining. What are the best techniques for founders dealing with their own personal roller coaster rides?

Actually, the most important thing that I had to learn the hard way many times over is that a lot of us might be trying to remake our families by making our companies like the ideal family situation. No family member is left behind or forgotten. That caused me incredible amounts of grief, actually multiple crazy co-founder breakups. I can't tell you how many of my friends who I brought into my workplace. I'm now spotting this trend where I will end up with a really good friend, we work together, and then we'll have some breakup and we won't talk for eight years. We eventually make up, which is fine. That was a mistake. That was my mistake because I mistook my business for my family. This is not family. This is a sports team. We have to be like the championship Warriors. What did the Warriors do? They had to give up players. We have to find the best possible people. Just because you won championships in the past doesn't mean you have the team to get you the next championship. That's the classic Netflix culture doc. That was a huge unlock for me because then I wasn't fixing the outcome. I will work with anyone who is going to get us to success. That's a true meritocracy and that's what will win in the market.

Hey, I feel like in implementing founder mode, there's a really weird undermining of the ownership that some of our execs have had on some of the details of the products. In the absence of being told what to do, they will take ownership of all the decisions they make and deal with the responsibility. But if they're used to being given advice or being told this is the better way to do it, they will wait for that opportunity instead of making it again. I'm wondering if you have seen that and how you deal with it.

That's a good question. With Brian or me, we are just ADHD, extreme motor. Every meeting we have, we're just pushing as hard as possible. What I noticed, and I think Brian has noticed this in his own teams, is that if you are pushing really hard and pushing the pace all the time, after even a quarter or two, the best people who are your people are just going to stay at that pace. When we're doing a new initiative, we're there, we're meeting every day, every week. As things take off, the metrics are working, everything's feeling great, we're filling out that team with the right people. You as the founder don't have to be all the way in the weeds. You can just meet quarterly or anytime something comes up, text me. Brian is probably in his iMessage 15, 18 hours a day. It's insane. I think founder mode requires you to push the pace. As things continue at a pace, you can back off a little bit, but never be totally gone.

You guys are all convinced this is amazing. It's not micromanagement. I'll be slightly controversial. To double down on the undermining piece, you're always going to hire people who have extreme talent. They will always feel undermined if you want to check every little thing that they do. The hardest piece here is the judgment. If you can't look at every line of code that everybody writes anyway, how do you make that clear? Set the expectations that this is how you're going to work and it's not about them as a person but the outcome. How do you communicate that?

Ultimately, it's a change in vibe. I've reflected on this as an Asian-American. My parents used shame a lot. I see some knowing nods in the audience. I actually had to work really hard to separate that. As a parent even, this is something I've continued to work on. Just because someone gets it wrong doesn't mean I think less of them. It's just that I don't agree. If they can convince me, great. That's the other thing about conflict that I realize. When I try to come into a room, I want to hear everything. If someone disagrees, I make it clear, hey, if you disagree, if this is the way to do it. Some of it is to actually make sure that people actually see you change. I've seen Brian do this as well. The point is not that you're the founder and you're the dictator and everything must be done the way you want. It's almost like syncing up. One thing I had to learn about conflict is that when I was handling conflict poorly, what I was actually trying to do was avoid conflict. I would either totally self-abandon. You do it entirely. If you think about management mode, that's what a CEO is doing. They're doing total self-abandonment. They know best and I don't know and we're not going to have a conversation about it. That's going to build up. I did that and I would blow up at people later. That was much more unhealthy. I would feel it. I would say this person has... it would become personal. Then I would flip over to authoritarianism. I would say we're doing it this way and we're not even having a conversation. I don't even want to hear what you have to say. That doesn't feel good either. One of the key things is this is a sports team and we want to actually be authoritative. What does authoritative mean? It means yes, I'm the CEO. Yes, you are the executive. Both of us are co-creating it together. If I'm saying something that's wrong or you don't agree with it, I want to hear it. Then you're going to have that conversation. Because you respect that there is that authority and it comes from the board to the CEO and then to your executives and then to the whole org, then you have alignment. That's really the ideal.

What Brian would say, channeling him a bit, would be you're basically pressure testing everything. The people who are your deputies who are really good actually enjoy the pressure testing because they know their substance. They can easily answer and say yes, I've considered all five alternatives and the reason why we chose this one is these things are defective. If you have different assumptions, please let me know and then you can have a debate. Those people thrive and they actually enjoy the fact that the CEO knows the details of the business and how it stitches together. Those people are even more happy even though you're not delegating to them. You'll have a closer relationship with that person after that conflict than a farther apart one.

Cool. We'll take one more question.

How do you maintain making sure you're being efficient while also maintaining alignment? If we are a sports team, it's not like Steve Kerr can call a timeout every time Steph Curry gets the ball to make sure he's going to do the right play. How do you make sure that the alignment is maintained in the most efficient way possible?

I don't really have a good answer for that other than just presence. Even for my own calendar, I realized there are things I need to drop everything for. There are things that are less important that I need to check in on quarterly or monthly. If you have a really clear sense of priority, you can't just lean back and say I'm going to do monthly reviews for everything all the time. You have to have a knob. You have to dial up the things that are most live and present, the things that are on fire for you, and dial down the things that are just maintenance.

At some risk, I'll editorialize a bit. Eric mentioned this morning about setting standards is the key. That also answers the other question. Your job in founder mode is to set consistent standards and then people learn to emulate them all the way through the organization. Secondly, the time allocation. Vinod used to teach that you want your calendar to be half empty on a Sunday night because then you can be proactive, allocate your time to things that are real priorities versus reactive. Someone owning your calendar for you. I know CEOs who literally do this. Jensen told me this recently. He goes Sunday and cancels half his meetings every single Sunday. He says those are not on my priority list, they're gone. You can definitely do this at real scale. Cool. Thank you very much, Gary, for joining. Thank you, guys.