What Is Founder Mode

We held a YC event a couple of months ago where Brian Chesky from Airbnb gave a passionate talk about his experience running Airbnb over the last 17 years. He believed that as Airbnb hired more professional managers, he lost a close connection with the details of the end product and the company suffered as a result.

It clearly touched a nerve with a lot of people present. It was uncomfortable to realize that I made many of the same mistakes when I ran my startup, yet somehow comforting to know I was in good company.

Paul Graham wrote an essay about a few weeks later, the now-famous Founder Mode, which I want to explore today.

Leaders in “manager mode” will “treat subtrees of the org chart as black boxes. You tell your direct reports what to do, and it’s up to them to figure out how. But you don’t get involved in the details of what they do.”

On the other hand “there are things founders can do that managers can't” - this is “founder mode” - and it’s left largely undefined. PG’s essay is perhaps best read as an invitation to founders to compare notes to discover a better way of running companies at scale.

But the essay left me questioning whether “founder mode” and “manager mode” are useful labels. They certainly generated a lot of controversy online, but if you hire bad executives and let them run your company with minimal intervention or oversight, you’re in for a bad time whether you’re a founder or not. 

And, empirically, we can point to numerous examples of both founders and hired CEOs who have either been extremely successful or totally useless. Whether someone is a founder seems largely orthogonal to whether they’re a competent leader. 

Maybe my quibble is just a semantic one - these labels distract from the debate. I do believe there is a really interesting question here - how do good leaders stay in the detail and run great companies at scale? Are there areas where founders really do have a persisting advantage?  And that’s what I want to explore in more detail here.

I think the general pattern that Brian was identifying was the following. A young, inexperienced founder with limited management experience is running a rapidly scaling company. Famous VCs invest a lot of money and join the board. Headcount passes 100 and quickly grows beyond 1000. The VCs (who often have never run anything themselves) encourage the founder to hire “executives” with “scaling experience”.

The founder is told to “empower” these executives, who typically then implement techniques that worked for them at previous companies. But, too often, these techniques fail in the new company. The founder is too nervous to intervene - these people are supposed to be “experts” - or is rebuffed by the experienced executives for “micromanaging”. Things don’t go well, and the company slowly stagnates. The founder gets sad and eventually quits or is pushed out.

Now, it’s very common to hire executives who are ineffective. Every CEO has that experience. But it’s not sensible to give those executives unverified trust and free reign from day one. I don’t think any competent CEO should treat “subtrees of the org chart as black boxes”. 

As a leader, of course you constantly need to do skip-level meetings with people further down in the organization. You need to have your finger on the pulse of the company and be able drill down into each area when necessary.

The process of building and maintaining trust between a CEO and an exec involves the CEO repeatedly going incredibly deep on niche subjects, verifying that the exec really knows what’s going on in their department, and has a good grasp on the problems. As the exec builds trust, these deep-dives can become less frequent, but they never totally disappear. If the exec repeatedly doesn’t have a good grasp of the details as you dive deep into their domain, you quickly realize that you need to replace them.

To do this, leaders need an extremely detailed and nuanced understanding of their business. There’s a cliched idea of clueless MBAs jumping from company to company, treating them as black boxes that might as well be making widgets. They clearly don’t have the domain expertise to dive into any kind of detail. This is not a successful way to run a company.

Over time, and without constant pruning, companies do seem to accumulate layers of management who do very little. These managers spend their time coordinating people, trying to establish consensus, and padding out their promotion packets to ascend to the next rung of the corporate ladder. Instead, I believe that great leaders have to be able to dig into the details, have an incredibly high bar for quality, and ultimately do great IC work themselves. Great managers have to manage the work - they should primarily be responsible for quality and speed of output. Managing people must be secondary to managing the product.

At Monzo, we experimented with some pretty wacky management structures at times. There was a period when our middle managers were basically just responsible for “pastoral care” of each employee. They were not connected at all with the output that the ICs were producing. It was totally insane and overlapped with our period of lowest productivity by far.

As you scale a company, you do have to figure out which executives you can trust with what kind of work, and delegate decisions to them appropriately. The limiting factor in any scaling company is usually management bandwidth. I believe one of the best articulations of this idea is Keith Rabois’s Barrels vs Ammunition (at 14:32, but the whole video is excellent)

If you think about people, there are two categories of high-quality people: there is the ammunition, and then there are the barrels. You can add all the ammunition you want, but if you have only five barrels in your company, you can literally do only five things simultaneously.

Finding those barrels that you can shoot through — someone who can take an idea from conception to live and it’s almost perfect — are incredibly difficult to find. This kind of person can pull people with them. They can charge up the hill. They can motivate their team, and they can edit themselves autonomously.

Once someone demonstrates “barrel-like” ability, you should quickly put more on their plate. Often, the best leaders at your company will have been promoted from within, over a period of several years. They’ve established huge amounts of trust and have deep domain knowledge. Constantly micromanaging these people is a waste of your time and will actually limit the great work your company can do. You must empower them.

On the other hand, trying to hire in senior executives from outside the company is fraught with difficulty. Sadly, many really are just “professional fakers”. These people have run hundreds of job interviews in their career and are experts at “managing up” to a CEO. This makes standard interviews almost entirely useless. Instead, I would try to pick previous projects they’ve run and dig into as much detail as you can. See how granular they can go on the problems they encountered, the decisions they made and the results they achieved. I would do a very large number of reference checks - try to find bosses, peers and subordinates and talk to them in detail about the person you are about to hire. Every time I failed to do detailed reference checks on an executive hire, I deeply regretted it. Spend significant time with the person before hiring them. I spent about a year meeting TS Anil (the now-CEO) before hiring him at Monzo, and 9 months meeting with Sujata, the COO. They are two of the best executive hires I ever made, and I’m sad I didn’t get to work with them for longer. 

Once you’ve hired someone, you need to ensure they’re doing a good job before giving them free-reign in your company. Are they really a “barrel”? Sadly, at least 50% of executive hires don’t work out. It’s essential that you identify these people early and weed them out. And the way you do this is dive deep with them into their domain and see if they can keep up. When a CEO takes their eye off the details, the career politicians and bureaucrats thrive.

I’ve heard from many founders that their senior managers - C levels and VPs - react badly when young founders want to dig into the details. They seem to say “You hired us to be the experts here. Now you need to get out of the way while we run the company.” As PG’s essay says, “Founders feel like they’re being gaslit from both sides — by the [VCs] telling them they have to run their companies like managers, and by the [execs] working for them when they do.” They “hire professional fakers and let them drive the company into the ground.” This is also the pattern that Brian identified in his talk, and I think it’s absolutely destructive. 

I have to say that this generally wasn’t my experience - I had access to all metrics from across the company, on dozens of pages of real time dashboards. I’d frequently roam the office and sit next to a random employee and start talking to them about their work. Teams would often have their dashboards up on walls and I loved digging into what the data was showing. I had an obsession with extremely granular metrics - it cost us £4.40 to onboard a single customer, split between KYC cost, debit card manufacturing, postage and packaging. Our CAC varied between £10.50 and £14.00 depending on channel. Our NPS started at +78 and declined to +71 (and we spent a really long time trying to figure out why). The average customer transacted on their Monzo card 7.4 times a week, with an average spend of £14.10 per transaction. They deposited £600 month (which grew to £950 after 18 months of using Monzo) and they opened the app 22 times per week. I could go on and on - I was obsessed with these metrics. 

We insisted that everyone at Monzo - including the entire senior management team - do customer service for one day a month. This was a great way to make sure everyone stayed closely connected to the issues customers really cared about. We stopped doing this in about year 4 or 5, and it seemed to coincide with a sharp reduction in the pace of execution.

Sadly, I hired a number of bad executives, but the techniques above generally allowed me to identify them pretty quickly, and we ended up firing a lot of senior people. There were certainly times when I was too busy and didn’t have the time, or I didn’t feel like I had the expertise to really dive in. Certain teams’ work was so alien to me that I couldn’t effectively go deep. In retrospect, they were also the lowest performing teams when I was there.

I think that the final part of successful leadership is the ability to make hard decisions in the absence of complete information. At some point or another, companies will encounter these bet-the-company moments, and maybe this is one area that founders do have an advantage over professional managers. Having the moral authority to take a really hard decision comes with the founder title. Zuckerberg’s decision to go all-in on mobile 2012 is an example of this. Professional managers inevitably have a level of risk aversion due to the insecurity of their job position - if it goes wrong, the founder is less likely to lose their job. Zuckerberg’s bet on the Metaverse would probably have gotten a professional CEO fired.

But there are relatively few of these bet-the-company decisions. Everything slows to a crawl if the CEO needs to be consulted every time a decision needs to be made. You want your (competent) execs and your top ICs to be making great decisions every day - and you as the CEO should dive in only occasionally to spot-check these decisions. This is how you scale leadership. 

I’ve worked at a startup where the founder CEO came in every Monday with a new idea. He seemed to spend every weekend talking to investors and then turned up with heaps of enthusiasm for a new initiative. But we never had time to actually make progress on the idea before he’d change his mind again. This kind of leadership thrash is depressingly common with inexperienced founder-CEOs. 

I encountered a similar thing at my own company - I learned that I had to be really careful about sharing half-formed opinions and ideas, especially with less experienced team members (and as the company grew past 1000 people). I would sometimes get enthusiastic about a new half-formed product idea, or make an off-the-cuff remark about something I found interesting. Without intending to, I’d derail an entire team for weeks. You need to be deliberate and intentional about CEO-level interventions when you’re running a company of thousands.

I learned that if I wanted the company to focus, I had to have a singular message that I repeated endlessly. I would write a 3-4 page letter to the entire company about every 6 months, outlining the one or two things we needed to focus on. At our weekly all-hands, I would just repeat the same message in different ways. I think I said “fix unit economics” several thousand times in 2018. It became a meme at the company. But it worked.

I sat in every weekly product review meeting with my CPO and CTO, even as we got to 2000 team-members. Our main input to the teams was typically to try to cut scope and launch faster. 

I learned to save my open-ended product brainstorming for a much smaller group - VP Marketing, VP Design, CPO, CTO, and a couple of very senior engineering ICs. We’d meet every 2-3 weeks and spend a couple of hours jamming on the kinds of things we could build in future. These meetings were the most fun I had at Monzo. Some of these became a core part of the product, others were just a fun way to blow off steam without distracting the company.

I’m not saying I have all the answers here - and I was far from a perfect CEO. I don’t think I really ever figured out how to balance the extremely onerous regulatory constraints of running a bank with a desire to move quickly and delight our customers. Especially as we grew past 500 people, I think we lost a lot of the early intensity and focus that I loved so much. We raised hundreds of millions of dollars, so when new employees turned up to a fancy office with catered lunches they believed they had joined a company like Google, and everything slowed down. 

Personally, I was in the detail to such an extent that I couldn’t ever really disconnect from the company. I treated every criticism of Monzo as an attack on me personally. I found it impossible to keep a sense of perspective or any balance in my life, and ultimately I burned out. I believe this is the biggest danger for founders once they’ve hit product-market-fit.

I return to the original questions - how do good leaders stay in the detail and run great companies at scale? Are there areas where founders really do have a persisting advantage?  I’ve shared some of my views here - I would insist that all CEOs stay connected to the details of their product, have an incredibly high bar for quality, manage for output, and delegate only to the extent that your leaders have earned your trust. Don’t feel embarrassed about the way you want to run your company.

I would love to hear how others run their companies, whether you’re founders or not.