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, he would torture, as a board member, we torture him by making him come and speak at every single YC batch. And it's, you know, I had seen every iteration of the initial sort of selling cereal pitch. I mean, for those of. 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. So. One thing I noticed, though, post Covid, he would come in and he added a new section to it, and it was really about how much he loves this moment of Airbnb, which was not something that a lot of, I think when you're used to hearing about founders who have been out for like, 10, 15 years building something worth $100 billion, that's sort of a surprising thing. And so his second half of the speech to yc, the batch, all of which is, of course, two or three people just starting out, it was all stuff that was totally irrelevant to them, and it was all very relevant to actually the top alumni, of whom many of the people who are the top YC people are in this room and were actually present for this. So I finally got him to come up to Sonoma and he came on at 9 o'. Clock. We just, like, last minute A.D. steve Huffman was the keynote. He had just IPO'd. And then basically we were surprised that, great, Brian's 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 about. And exactly to the correct audience. Not to a room full of people who are at zero, trying to go from zero to one, but to people for whom they have. Actually, I wish that Brian were here to give you this talk right now, because I think literally that evening in Sonoma must have unlocked at least 100, maybe $200 billion worth of value for the YC companies in attendance at that moment. And 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, just give them as much room as possible to run. And at the core of that story is something that is supposed to be very empowering. And 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, instead of having a functional org, he had divisionalized and each product team had its own CTO and its own design person. And it sort of all expanded from there. He found that he was hiring executives who were really focused on their own fiefdom and their own careers over the needs of the company. And really, I mean, the uncomfortable thing is like it sounded like it got to a point where it was not someplace where the founder, the CEO had agency. And so, you know, the really crux of this, I think, 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. And what I've been realizing lately, and I've been spotting this actually in all the many companies I work with, and actually even within Y Combinator as a 20 year old brand now, it is possible for, and I'm pretty sure a lot of you may struggle with this too, it is possible to basically choose policy falling back on the codified decisions of the 10,000 decisions you made the last year, or the last five years, or the last 10 years, rather than actually giving yourself agency. Here's a new situation. And do we fall back on sort of the codified arguments that we already had for like 10 years, or do we look at it from a new perspective and say actually we have to do a different thing here. And it might mean that we're going to argue, it might mean that, guess what, someone's fiefdom is going to get reorged. It means that we're going to reopen old wounds. And that's what I think Brian Chesky realized. And that's what he did. He Covid happened and never let a great crisis go to waste. So he had the incredible bravery to actually go in and redo the org. And not only that changed the way he hired. He said you need to hire, you need to be actually in the track of both your executives and your skip levels and you need to actually meet them in that kind of the org of your own creation. I think the powerful moment for me is realizing you don't have to live that way, but it does require a lot of courage because so being able to choose agency and being able to intentionally do that may well require you to go from manager mode to founder mode. And that might mean coming in and saying, we're actually going to be willing to go from zero here. We're going to rehire, if we have to, the whole executive team, or we're going to reorg the whole org from executives all the way down. And I mean, the amazing thing is it sounds like a lot of work. It sounds like it shouldn't work, right? But I think we've seen this a bunch of times now. If you actually show up. Leadership is presence, not absence. The defining thing about going into manager mode is just saying, you know what, it's your call, and, and I'm going to let you run with this and I'm not going to check in on what happens afterwards. And I think it's a misconception that it's supposed to be hyper micromanagement. I think that one of the cool things that Brian has come back and shared with us is that by actually going into the details and the weeds, by making sure that every single person on your executive team is actually aligned with you, and then being willing to spend the 60, 70, 80 hours a week of 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 things are monthly, some things are quarterly, some things are yearly. His chief of staff staff is really amazing. It's like really an insane amount of work. But to be able to figure out who are all the people do that, 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, I think that's the big, scary thing. And he was willing to say, if you're not here for this, this is not the right place for you, and take care of them, have a great severance, don't bad mouth them, make sure that they land someplace great. Airbnb or your company should always be a great place to be from. I think he was able to manage that and land that and then build the company that he actually really wanted. And so of course, 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 and all of tech.

So since Brian gave this talk in front of a bunch of influential, important founders, have you Seen it cascade and people apply his precepts and how often is it working, et cetera. What have you observed from afar?

Well, we had a founder mode dinner and actually Max from Fair came to that dinner. And so I think that you have a front row seat. I mean Max is incredible founder. So I think that it's very easy to fall back to. We should hire the best possible people. They've done this before and we're in a rinse and repeat moment. But I would argue that this very moment, it's not a rinse and repeat moment. It's actually everything about every process can and should be changed. I think we spent a lot of time with Bob McGrew, who's Chief Research Officer at OpenAI and 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. And yet when you look at so many organizations with thousands to tens of thousands of people go down all the way to what people are doing day to day and it's like it's 2015 still, it makes no sense. This is like of all times 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 a founder mode, or is it all positive?

I think the tricky thing is Airbnb happened to be sitting on this giant gold mine. I think that the really tricky thing is you have to actually still you need to fly the plane in the middle of doing this type of transformation. You have to continue to grow and how do you do that? And so I think that there's the under discussed part of founder mode, I think is what if those executives who maybe you disagree with and you've allowed too much free reinforcement, can you rein them in and can you actually replace them? If you have a gold mine and the 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, really scary to make those types of changes to replace 3.

To 7 liters all at once unless you have traction and or a gold mine of cash. You also mentioned that one of the side effects or that you have to embrace if you go into founder mode is you're going to have a lot more conflict by definition. And maybe this is the reason why manager mode emerged is people are conflict averse generally. Oh yeah, yeah. So talk about like how you have to embrace the conflict on your team to be successful with founder mode.

I mean, I think what's interesting about it is it's easy for. I mean I can certainly speak for myself. Like earlier in my career I was, you know, I'm still kind of a people pleaser but I'm at least aware of it and so I can do something about it. I think left to your own devices, you're surrounded by people who, especially if your business is doing really, really well, it's easy to sort of, I don't know, take your foot off the accelerator and you're going to say, actually this sounds great, like hiring an executive who's done that function and they've done that function before for X, Y and Z. Like I trust that, let's see this play out. Whereas I think it takes some real courage actually. Courage is sort of in short supply there. When you. And I think the big call to action is, remember when you had nothing, Remember when you were at zero and it was do or die, the company was going to die tomorrow. You sort of have to have like sort of reconnect with that very original courage to make these other choices.

Is there a way to evaluate. Assume you have to hire some execs in founder mode at some level of scale. You have to have some external execs to do something. Is there a way to evaluate which execs from bigger places might succeed?

I mean my sense is that you can just, I mean 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, 10 minutes that you could possibly have. And then I think you can root out manager mode almost entirely by how much bullshit does that person give you in even a 30 minute meeting? And if you sit down with, you could probably picture some people maybe in your org or people that you've met and interviewed before where it's like, I don't know what that person was saying and there was no information conveyed in that moment. It just sounded good. I would start there probably. I mean the people who seem to really fit the 0 to 1 are actually the people who you would hire and want by your side from that zero to one period. And there's no difference between that moment and this moment in that respect.

So 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, kind of like a YC program. What would be the top two or three modules in the curriculum?

Oh man. I bet that we would have to.

Do.

What'S it called, like an encounter session where there's a screaming involved or something. I think that we would have, I think, I don't know, especially like post product market fit when everything's going really, really well. I think it's too comfortable, honestly. It might be too comfortable. Or maybe when the leader is not showing up. Well then I think you will actually find all of these other pretty deleterious types of cultures evolve. So, you know, how do you make a decision? Is it not clear? If it's not clear, then power loves a vacuum. Like power will rush in to fill a vacuum. And so 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 sort of the grand viziers of, I mean every company, like it or not, will have them and sooner or later they're going to destroy your company. So those are sort of the people to try to figure out who they are and root them out. And if the leader shows up, it makes it very, 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 and actually let's go back. Have you actually, since you have thousands of companies that you guys have funded over 20 years now, have you actually analytically or statistically looked at the success of companies against management style?

We really should. I mean we have a one man data science team, so I kind of 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 maybe do this mathematically, which would be cool. I, I know this is a topic that all of you talk about. I interviewed Brian on stage. There's a video online about founder mode. So for those of you who don't know as much about it as you want to, you can learn more about by watching Brian. He's pretty passionate about it, as you can probably tell from a two and a half hour dinner. But I know this is controversial in some ways, so let's ask. I want to leave more time than usual for some questions for us or mostly for Gary. So raise your hand. We have four people with likes, one right in front. If you get a microphone right here.

Hi, this is Anshu from Skyflow. We had Ali on stage just before you and he's clearly hardcore Founder Mode right now. Scary.

Why do you say scary? Actually, like, this is probably a true.

Well, it's a personal thing, but we'll talk about it separately. No, he's just powerful in the market right now. And it's scary in the sense that I used to work at Salesforce for nine years and Oracle before that. If I was still SVP there, I wouldn't know how to compete with them. And that's never true for me. Usually I'm like, I can, I know how to kill. 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 that he's competing was run by Frank Slootman. And just like Founder Mode is the story of the day, the prior three to five years, the story in Silicon Valley that all these stages had was, you know, founder should step aside. Frank Slootman will come in, Bob Moglia will come in, Satya Nadella will come in. So how much truth is in that? And like, is it really Founder Mode, manager mode, or do you think it's just Satya vs Ali? Like at some point, like if you have the smartest person in the room should really make most of the calls versus Founder Mode versus Manage Mode, I think.

Well, I mean we're trying to implement Founder Mode at YC and then I'm not the founder actually, so I'm more like Satya than I'm definitely not Paul Graham. But having Brian on my board has meant that. And some of it is like, I actually think having very, 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 then now we have quarterly board meetings again. And so I have, I'm the professional CEO, but I'm also trying to do Founder Mode by. And it actually comes from the founders, Paul and Jessica and Carolyn Levy and Brian Chesky know everything. Like I have a 50 page deck and we go through all of it, you know, every three months and they're fully abreast of everything that's going on at yc. So I mean, I fully don't want. I mean I'm trying not to do manager mode, I'm trying to do Founder mode. But like with clear governance, it's that, you know, I know where I'm taking, you know, we get super aligned on, these are our goals and this is what we're about. And then I can go to my team and I can say, I actually now take that board deck and then I show it to all of my 14 partners at YC. And we're all, basically, what we're hoping for is actually alignment. And then I think the recognition is founder mode is someone needs to actually make everyone run in the same direction and instead of fall back on policy, fall back on basically all these fights that we. If you don't have governance, what you will find is that the power vacuum will attract people who like, will just choose things out of their own ego or out of their own fiefdom. And then what you'll find is like 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 or someone who made that choice because they're accumulating power. That's not what this is about. This is about taking power from those people and then aligning them so we're actually all running in the same direction. And then it's just clear.

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

Actually the most important thing that I had to learn the hard way many times over is a lot of us might be trying to remake our families, like making our companies the ideal family situation. And you know, ohana means like never. You know, no family member is left behind or forgotten. But I had it. And you know, that caused me incredible amounts of grief, actually. Multiple crazy co founder breakups. Like I can't tell you how many of my friends who I brought into my, my workplace, like I'm now spotting this trend where I will end up like, you know, my really good friend, we work together and then we won't, like, we'll have some, you know, break up and then we won't talk for eight years. We eventually make up, which is fine, but. And that was a mistake. And that was my mistake because I mistook my business for my family. And it's like, no, this is not family. This is a sports team. Like we have to be like the championship warriors. Right? And what did the warriors do? We love.

We want to talk about the next or the Knicks.

Yeah, the Knicks. Well, I don't know. I mean, the warriors had to give up play. You know, like, we have to play. We have to find the best possible people. And, you know, just because you won championships in the past doesn't mean that you have the team to get you the next championship. And so having. That's the classic, you know, Netflix culture doc. And I think that that actually was a huge unlock for me because then I wasn't, like, fixing the outcome. I will work with anyone who is going to get us to success. And, like, that's a true meritocracy, and that's actually what will win in the market.

Another question. There's one there.

Hey, I had. 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. Right. And so it's almost like in the absence of being told what to do, they will take ownership of all the decisions they make and deal with the responsibility of having made them. But if they're used to being given advice or being told actually this is the better way to do it, they will wait for that opportunity to arise where they are told what to do instead of making it again. And I'm wondering if you and your own work and your company's work and all of this have seen that and how you deal with it.

That's a good question. I mean, I think with Brian or me, I mean, we just are such a. We're just adhd, like, extreme motor. So I think every meeting we have, it's like we're just pushing. Like, we're just trying to push as hard as possible. And then what I notice, and I think Brian's noticed this in his own teams, like, if you are pushing really, really hard and pushing the pace all of the time, the great thing is, like, after even a quarter or two, the best people, who are your people, they're just going to, like, stay at that pace. And then, I mean, I think what Brian would describe, and I can see this, too, it's like when we're doing a new initiative, we're meeting every day, every week, and then as things sort of take off, like 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 sort of, okay, we're going to meet quarterly about this or like anytime something comes up, text me. But I think that Brian is probably in his iMessage like 15, 18 hours a day. It's insane. So I think that you have to, I do think founder mode requires you to push the pace and then as things sort of continue at a pace, you can sort of back off a little bit, but never be totally gone.

One more question. You guys are all convinced this is amazing?

There's one, it's not micromanagement.

I'll be slightly controversial to double down, I guess on the undermining piece. Like you're always going to hire people who have extreme talent. They will always feel in some way undermined if you want to check every little thing that they do. So I guess the hardest piece here is like the judgment. Like if you can't look at every line of code that everybody writes anyway. So like how do you make that clear? Set the expectations that this is how you're gonna work. And it's not about, I guess it's not about them as a person, but the outcome. But like how do you communicate that I guess is my question.

I mean, I think it's a change in, I mean ultimately it's a change in vibe, right? And I guess I've reflected on this as like an Asian American. My parents use 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 that I've continued to work on. And so just because someone gets it wrong doesn't mean I think less of them or it's just that I don't agree. And then if they can convince me, great. I mean, that's the other thing about conflict that I realized. I. When I try and come into a room, I want to hear everything right. Like if someone disagrees, I make it clear. Like, hey, if you disagree, if this is the way to do it, and some of it is to actually make sure that people actually see you change. And 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. It's actually, I think kind of it's almost like syncing up actually. And one thing that I had to learn about conflict is that when I was handling conflict poorly, what I was actually trying to do was I was avoiding conflict. So I would either say I'm going to totally self abandon, like you do it entirely. And if you think about manage mode. That's what a CEO is doing. They're doing totally self abandonment. Right. Like they know best and I don't know. And we're not going to have a conversation about it. Self abandonment and that's going to build up. And you know, personally I did that and I would blow up at people later and that was much more unhealthy in my body. I would feel it, I would say like this person had, you know, it would become personal at that point and you know, I would spot that and then I would flip over to authoritarianism. I would say, you know what, like we're doing it this way and we're not even having a conversation. I don't want to hear what you have to say about it. And that doesn't feel good either. And so really I think one of the key things, it's like this is a sports team and then we want to actually be authoritative. And what does authoritative actually mean? It means, yes, I'm the CEO. Yes, you are the executive. Both of us are co creating it together. And then if I'm saying something that's wrong or you don't agree with it, I want to hear it. Right. And then you're going to have that conversation. And then 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. And so I think that's really the ideal.

Yeah. What Brian would say, channeling him a bit would be you're basically pressure testing everything, but everything. And the people who are your deputies, who are really good actually enjoy the pressure testing because they know their substance and so they can easily answer the pressure testing and say yes. I've actually considered all the five alternatives and the reason why we chose this one is these things are defective. And if you have different assumptions, please let me know what they are and then you can have a debate. And actually those people thrive and they actually enjoy the fact the CEO actually knows the details of the business and how the business actually stitches together. And so those people actually are even more happy even though you're not delegating to them.

And 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 just making sure you're being efficient while also maintaining alignment. And 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.

So 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. Right. And then even for my own calendar, I realize, like, hey, there are things I need to, like, drop everything for. There are things that are less important, like, I need to check in on that quarterly or monthly. So, you know, I think if you just have a really clear sense of priority, that becomes a really. You can't just lean back and say, okay, well, I'm just going to do monthly reviews for everything all the time. I think you actually have to have a knob. You have to dial up the things that are most live and present, like 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. And so that also answers the other question of, like, your job at Founder Mode is to set consistent standards and then people learn to emulate them all the way through the organization. And then second thing is the time allocation is. You know, 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. And, you know, literally, I actually know CEOs, very successful CEOs, who literally do this. Like Jensen told me this, like recently. He's like, literally, he goes Sunday and cancels half his meetings every single Sunday. He's like, those are not on my priority list. They're gone. So you can actually definitely do this at real scale.

Cool.

Thank you very much, Gary, for joining.

Thank you, guys.