“Starting a company is like jumping off a cliff and assembling a plane on the way down” – Reid Hoffman, 2018

Yesterday evening I had the pleasure of seeing Reid Hoffman discuss entrepreneurship in a talk organised by Entrepreneur First. I’ve been lucky enough to visit a few of these events and I thought this one was exceptionally good. The videos have been made available on line here. If you don’t have time to see the whole talk, below is a summary of some of my favourite bits of advice given. Most of the advice is aimed at entrepreneurs but much of it should transfer over to anyone ambitious, trying to maximise their impact.

1) Be sure you’re learning

This piece of advice came up in a few different places throughout the talk. People often discuss the value of failure because of its potential for learning but how can you be sure you’re actually learning from your experiences? The suggested tip here is to imagine a relatively recent slice of time - a few weeks or months - and ask yourself what advice you would give your younger self. If you cant think of any advice or what you would do differently, then you’re probably not learning.

2) It’s hard to overstate the importance of grit

When asked about some of the reasons for Silicon Valley’s success, Reid suggested that a big component was attitudes to failure. By not demonising failure and allowing people multiple chances, Silicon Valley de-risks starting a business and allows the most gritty individuals to shine.

Roughly speaking, grit is a measure of an individual’s ability to stay focused on a given project, persevere through difficulties and maintain enthusiasm for their goal. Gritty individuals tend to connect their purpose to other people, put in hours of deliberate practice and view failure as an opportunity for learning. You can self assess your own grit by calculating your grit score here. Many believe that grit itself can be developed and improved.

Another interesting data point that came up with regards to grit is that amongst the Entrepreneur First cohorts, some of the most successful companies were started by people who went through the program, failed and then started again. One possible reason for the greater success amongst the subset of failure is a demonstration of exceptional grit.

3) The best technical founders are also business model geeks

When considering some of the tech behemoths like Google, Facebook or Microsoft; it’s easy for engineering-types to over emphasise the technical skills of the founders. Sergei, Larry, Gates and Zuckerberg all have serious technical credentials but one thing that remains super important is that they were also business model geeks.

That doesn’t mean they’d absorbed the business school knowledge of an MBA but rather that they were willing to think creatively about how to monetise their products.

Some example strategies that Reid implicitly mentioned:

• Freemium models - providing a core product for free and charging for extra services. Examples here might be LinkedIn or Spotify.
• Trojan horse - provide a lower quality and cheaper version of a product than competitors to gain access to some other valuable commodity like a user base, data or network. Examples here might be Facebook or Onfido.

Leading directly from this point is the idea that you shouldn’t be too restricted by conventional norms or rules:

4) Find where you can break traditional rules

One of things that the most successful founders do, is to think carefully about where they may be able to ignore conventional wisdom and give themselves greater bandwidth for their most important problems. Most of us, but entrepreneurs to a greater degree, are usually fighting battles on numerous fronts and need to ruthlessly prioritise. Sometimes its easy to feel like you have to do something because “thats the way that its done”, so its important to question that feeling.

A concrete example Reid gave was the role of unit economics in start-ups. Traditional business wisdom would say that you should start calculating unit economics very early, you should know the life-time-value of your customers etc. However for software businesses in Silicon Valley it’s fairly common to see series-A or even series-B start-ups that still haven’t answered this question because it’s not yet a priority. Their founders have realised their efforts are better spent else where. That isn’t to say that knowing your unit economics isn’t important, a hardware business would die if they didn’t know this, but you shouldn’t be bound into this rule just because its conventional.

5) Engage in ABZ planning

It’s pretty typical for people to have a Plan A, and a Plan B, and maybe a Plan C. Reid Hoffman suggested this was the wrong way to go about this. Rather you should have a plan A, many Plans B and then if all else fails a plan Z. The key idea here is that if plan A doesn’t work, it might not work in lots of different ways and you should have multiple strategies for still achieving your goal depending on the outcome of plan A. Then if all of these fail, you should have a backup: your plan Z. Plan Z is your parachute, it should give you a floor to how bad things can get and therefore allow you to take more risk.

6) The best businesses and teams have short OODA loops

OODA loop is a term from the United States Airforce that stands for Observe, Orient, Decide, Act. When asked for unifying traits of the most successful teams, fast OODA loop was amongst the first things that Reid mentioned.

As far as I can tell OODA loop is akin to the “scientific method”* but with an extra O for orientation. Orientation is the process by which we filter our observations through the various lenses of our past experience, knowledge and culture.

I can’t claim a deep understanding of the concepts behind OODA-loop but I think the main point that Reid was making, was that the best teams are decisive but also data-driven.

7) Be very intentional about culture

When reflecting on his own experience as an entrepreneur and of LinkedIn, one of the things Reid said he would have done differently is culture. He suggested that trying to be explicit about culture from very early on and taking an active hand in shaping it were super important.

He gave two concrete examples:

1) The Netflix culture document

2) The founder of Workday, Aneel Bhusri, interviewed the first 500 employees and on every rejection advised senior management on why he had rejected that candidate. In this way he both demonstrated the importance of culture and was explicitly able to communicate what we wanted to other senior management.

8) References are more important than interviews

When it comes to choosing who to hire, you can only learn so much through interviews and ultimately the interview can be gamed.

Reid suggested going through the following loop when hiring for key roles:

1) First reach out to your network and ask people who is the best person they know at a given job, not the best person available but the best person full stop.

2) Approach this person and try to learn as much about the job from them as is possible. Then ask them to recommend somebody.

3) Once you have a candidate in mind, get 5-7 different people to provide references. People tend not to want to say negative things in references so ask for ratings on a scale of 1-10. Mostly 7’s is a rejection but mostly 8-9’s is very interesting.

9) Correct your mistakes early - “if there is a question, there is no question”

This was brought up specifically in the context of hiring but is probably applicable to any decision with large long term consequences. Its very important to correct mistakes early and if you have significant doubts about a hire, than you should probably fire them. As the title says, “if there is a question, there is no question”.

10) Rely very strongly on your network

The concept of having a good network of friends and contacts that can help you came up numerous times across the evening and in lots of different contexts:

• How to validate an early business model?:

“take your hypothesis to the smartest people you know and seek critical feedback”

• How can a large company stay innovative?:

“maintain a connection to the start-up community”

• How to find good employees?:

“Ask your network to recommend the best person they can?”

• How to overcome market scepticism?

“Leverage outside brand, such as a strong VC”

Summary

Ultimately, if you want to get the full value of the evening, you’ll have to watch the original video as there were lots of little nuggets distributed throughout the talk. I’ve inevitably filtered the advice through my own lens but hopefully the above list gives you a taste of what was said and will prove helpful.

Footnotes

*I’m not sure I subscribe to the convential view of the scientific method but that will have to wait for a later post.