Why A Players Change a Company's Ceiling — Transcript

Full transcript

1. 0:00How important in this game of building
2. 0:01and starting is people?
3. 0:04>> Oh,
4. 0:05very
5. 0:06>> the hiring question. And I'll tell you
6. 0:08why I asked this question because when I
7. 0:10look at my portfolio, early stage first
8. 0:12founders never seem to understand the
9. 0:14importance of hiring in people.
10. 0:16>> Yeah.
11. 0:17>> And I bang my head against the wall
12. 0:18trying to convince them that actually
13. 0:20the game they're playing is in the word
14. 0:22company, group of people.
15. 0:24>> Yeah. So I I would I'll start with one
16. 0:26thing and then I'll answer the question.
17. 0:27So, I was talking to um a mentor of mine
18. 0:30and he said, "When I was in my 20s, it
19. 0:31was all about the destination." He said,
20. 0:33"When I got to my 30s, I realized it was
21. 0:35all about the journey." He said, "When I
22. 0:36was in my 40s, I realized it was about
23. 0:38the company."
24. 0:39>> And I was like, "I can't wait till
25. 0:40you're in your 50s." [laughter]
26. 0:41I was like, "What's the next one?"
27. 0:42Right? But I thought that was such a
28. 0:44great like such a profound shift in
29. 0:45terms of how he thought about his
30. 0:47business success because he was like, "I
31. 0:48don't need to be a, you know, a decad
32. 0:49billionaire." He's like, "I'm I'm cool
33. 0:51where I'm at. Um, and now I just want to
34. 0:54do it with people that I like." And so
35. 0:56to the question about um people overall,
36. 1:02I believe that the potential of an
37. 1:05organization is directly correlated with
38. 1:08the aggregate intellectual horsepower of
39. 1:11everyone contained within it. And so if
40. 1:15you are the smartest person in the
41. 1:18business then and you can do everyone's
42. 1:20job better than everyone in your company
43. 1:22then it means that the limit of the
44. 1:24business is purely based on one person's
45. 1:26horsepower and one person's life
46. 1:27experiences
47. 1:30and that will be the cap. And basically
48. 1:32it doesn't matter how smart you are you
49. 1:34can't live a 100 lifetimes. Like you can
50. 1:36learn quickly sure there's some people
51. 1:37who can learn faster than others but
52. 1:38you're not going to be able to live a
53. 1:39thousand lifetimes. And so
54. 1:43as a business grows, more expertise is
55. 1:46required. And I think the easiest
56. 1:47litmouth test for this is if you look at
57. 1:49the richest people in the world, almost
58. 1:51none of them own 100% of their business.
59. 1:53So number one, most of them don't even
60. 1:55own 50. Like most of them are small
61. 1:57percentages. Jensen Wang's at 4% for
62. 1:59Nvidia. Basos is at 7 or 9% for for
63. 2:02Amazon. Uh I think Elon's at 20 for
64. 2:04Tesla. Like small percentages. And it's
65. 2:07because it takes a lot of horses to take
66. 2:10a chariot to the moon, right? And so
67. 2:13basically, as you put in more
68. 2:15intellectual horsepower, the potential
69. 2:18peak of the business goes so much so
70. 2:21much higher, so much faster. Keith
71. 2:23Rabois from um he was one of the
72. 2:25original PayPal mafia guys has a really
73. 2:26good analogy for this and he talks about
74. 2:28it in terms of barrels and ammunition.
75. 2:30And he says, "So as soon as you get some
76. 2:33product market fit, the business starts
77. 2:34to grow and you say, okay, we need to
78. 2:36start shipping things faster." And this
79. 2:38works the same with a services business,
80. 2:39a physical products business, software
81. 2:41business, the concepts the same. And so
82. 2:43what happens is you then hire a lot of
83. 2:44people and you assume that your
84. 2:46throughput is going to increase
85. 2:48proportionally. So we have 10 people, we
86. 2:49hire 50, we should 5x our output. And
87. 2:51then you quickly realize that that is
88. 2:52not the case. And so what happens is uh
89. 2:55there are people who are rate limiters
90. 2:57for organ or an organization and those
91. 2:59are the barrels. So think of like a
92. 3:01civil war barrel, you know, old cannon
93. 3:02and you've got these cannonballs next to
94. 3:04it. He said most people are ammunition
95. 3:06and so you bring more ammunition but
96. 3:08you're still going to be limited by the
97. 3:09one barrel capacity of how how many
98. 3:11shots can get taken by the barrel. And
99. 3:14so you need to find more barrels. So you
100. 3:16have to go from one barrel to two
101. 3:17barrels, two barrels to three barrels.
102. 3:18And that becomes an increase in capacity
103. 3:20or throughput for the organization. And
104. 3:22there are very few of those in a
105. 3:25different um I can't remember the law
106. 3:26but it's some organizational uh law but
107. 3:29uh the square root of the number of
108. 3:30people in a company generate 50% of the
109. 3:33work. So you have 100 people in
110. 3:35organization 10 people are responsible
111. 3:36for 50% of the value that's created.
112. 3:38facts,
113. 3:38>> right? Anybody who's been in a like
114. 3:40you're like of preach, right? [laughter]
115. 3:43And so the thing is is I think the real
116. 3:46game of entrepreneurship is that your
117. 3:48standards rise over time. And it's
118. 3:50unfortunate because we we hear things
119. 3:53that other entrepreneurs tell us it's
120. 3:54all about the people, stupid. And then
121. 3:55you're like, "Sure, but look at my" and
122. 3:57it's like, "No, you're not hearing it."
123. 3:59And I don't know, there are some I think
124. 4:00Williamson talks about this how there's
125. 4:02like some lessons that for some reason
126. 4:04it's like we have to learn for
127. 4:06ourselves. I still believe that that
128. 4:08it's like we can operationalize this at
129. 4:09a lower level so that we don't have to
130. 4:10learn it for ourselves. Like I'm
131. 4:12convinced. I haven't figured it out yet.
132. 4:14But um so every entrepreneur can can can
133. 4:17can resonate with this which is every
134. 4:20business that I've started I've gotten
135. 4:22to the success of the business prior way
136. 4:24faster.
137. 4:26And I kind of liken it to a video game
138. 4:29where it's like you beat level one and
139. 4:31then you know you you get to level two
140. 4:33and it's like you spend months trying to
141. 4:34beat this boss and you finally figure
142. 4:35out how to beat the boss and it's like
143. 4:36great and you spend another three months
144. 4:38getting beating boss three and let's say
145. 4:40you start the game over with a new
146. 4:41character. It's like you just zoom
147. 4:42through level one, two, and three and
148. 4:44then you get to level four and you're
149. 4:45like shoot now I got to spend time. It's
150. 4:46like virgin land like I don't know how
151. 4:47to beat this yet. And so I think that
152. 4:49that happens for archetype finding for
153. 4:52skill and talent within an organization.
154. 4:54And so
155. 4:55>> say that again.
156. 4:56>> So if you have functions across an
157. 4:59organization, there are people who are
158. 5:00going to drive results within that
159. 5:02function. And the first time you hire a
160. 5:04salesperson for example, you don't know
161. 5:06what you're looking for. And so you just
162. 5:08hire a human who says they can sell. And
163. 5:10maybe they can, maybe they can't. And
164. 5:12then you cycle, you try to train them,
165. 5:14it doesn't work, does work, whatever.
166. 5:15And then finally you, let's say you
167. 5:17cycle through three sales guys, and
168. 5:18finally you find a killer. And then you
169. 5:19have this pattern recognition. You're
170. 5:20like, "Okay, that's what I'm looking
171. 5:22for." And then all of a sudden you try
172. 5:23and approximate that person or that
173. 5:25archetype as as much as you can. And so
174. 5:28when you start your second company,
175. 5:29you're like, "Oh, I can quickly staff up
176. 5:31sales because I know what I'm looking
177. 5:32for." But then you're like, "Shoot, I've
178. 5:34never really nailed sales manager yet."
179. 5:35And so then you cycle through. You start
180. 5:37you start whacking away at the boss and
181. 5:39then you have to end up firing the boss
182. 5:41at the level because you're like, "Oh
183. 5:42god, this didn't work." And then six
184. 5:43months are gone because you had to find
185. 5:45them, recruit them, hire them, train
186. 5:46them, and then find out they sucked and
187. 5:47then start over again. And maybe it
188. 5:48takes 18 months to really find the right
189. 5:50sales manager. And then you're like,
190. 5:52okay, I know what that looks like, but I
191. 5:54still don't have a director of
192. 5:55marketing. What does that look like? And
193. 5:56so it's basically developing this
194. 5:59pattern recognition across all functions
195. 6:01of the business so you know what
196. 6:02exceptional looks like. And then over
197. 6:05time, what happens is as a business
198. 6:07grows, your ability to attract talent
199. 6:09increases. And so then your standards
200. 6:11also grow. And then you find out that
201. 6:13there's even more nuance to this, which
202. 6:15is that there's a director of sales at
203. 6:17a1 to10 million level, which is a
204. 6:19different looking person from 10 to
205. 6:20hundred million level. And it continues
206. 6:22to go all the way up. And so it's
207. 6:25basically building this repertoire of
208. 6:28identifying patterns. And what if you
209. 6:31talk to I would say more experienced
210. 6:32entrepreneurs now, they don't talk about
211. 6:34building businesses. It's like
212. 6:36assembling them. You just assemble the
213. 6:38pieces and you just know that this is
214. 6:39how it's all going to flow together. And
215. 6:42that fundamentally is basically what I
216. 6:44try and decode within the content that I
217. 6:46have. So that it's like here's a pattern
218. 6:48for how you can recognize this. Here's a
219. 6:49pattern for how you recognize this. So
220. 6:51that you can just move faster through
221. 6:52the levels um to get to where you want
222. 6:54to go. And so to loop back to the
223. 6:57original question, which is how
224. 6:58important are people in an organization,
225. 7:00people are the organization. And so if
226. 7:02you ever want to build enterprise value,
227. 7:04it's building the collective
228. 7:06consciousness of the organization, the
229. 7:07skills and how they collaborate together
230. 7:09towards a specific outcome. And so
231. 7:12knowing how to staff that up is the job.
232. 7:16I think the reason why first-time
233. 7:17founders feel like they have to learn
234. 7:19this lesson themselves is because
235. 7:20everything you've just said is an
236. 7:21unknown unknown. Like they don't even
237. 7:23know that they don't know it. So they
238. 7:24stumble. They hire the sales guy because
239. 7:26they were their friend from high school
240. 7:27and then [ __ ] and then they
241. 7:29[laughter] go through the pain. And I
242. 7:30say this because I'm so unbelievably
243. 7:32passionate about it. I went through the
244. 7:33same BS. I hired my friend who worked at
245. 7:35Prada to be our account. I hired a guy I
246. 7:37met at Rap Battle to be my marketing
247. 7:40director who who was literally playing
248. 7:41video games for a living at 30 years
249. 7:43old. Um, and I went through this whole
250. 7:45thing. And then at maybe three, four
251. 7:47years into my first business, I
252. 7:48accidentally hired someone great,
253. 7:50[laughter]
254. 7:52>> like through no intention of myself
255. 7:53accidentally. And I saw the net impact
256. 7:55they had. And I thought, "Oh my god,
257. 7:57over the coming years, I learned that
258. 7:58the game, the fundamental game here was,
259. 8:00as you said, assembling the best group
260. 8:01of people. How, if I'm a first-time
261. 8:05founder,
262. 8:06>> can I put a system in place
263. 8:09>> to to make sure that even though I don't
264. 8:12know what a good salesperson looks like?
265. 8:13>> Yeah.
266. 8:13>> Even though I don't know what an ex good
267. 8:16person looks like, I still attract them
268. 8:18to my company.
269. 8:20the simplest way of doing it. So, the
270. 8:23simplest way of attracting somebody to
271. 8:26your business when you don't know how to
272. 8:28do the job or know who to look for is to
273. 8:31unfortunately do the job yourself. And
274. 8:34then once you can break down the job, we
275. 8:36follow the 3Ds, which is um document,
276. 8:38demonstrate, duplicate. That's how we
277. 8:40train anybody. So, first you have to
278. 8:42document everything that you do to
279. 8:44successfully do the job and that's step
280. 8:46by step into a checklist. Then you
281. 8:48demonstrate. So, you do this checklist
282. 8:50in front of the person that you're
283. 8:51trying to bring on. Then they duplicate,
284. 8:54they do the checklist in front of you.
285. 8:56What's interesting about that three-step
286. 8:57process is that you'll often find when
287. 8:59you try to demonstrate following the
288. 9:01checklist, you don't follow your
289. 9:02checklist. [laughter] And so then you
290. 9:03have to adjust the checklist until you
291. 9:05actually follow the checklist. And then
292. 9:06when you can consistently follow that
293. 9:08checklist and get the output, then you
294. 9:09can have them do that checklist. And so
295. 9:11I think this is why bootstrap founders
296. 9:14uh I think oftentimes will find they
297. 9:17they tend to know more about more things
298. 9:19because they had to learn them in order
299. 9:21to teach them. Now what's really
300. 9:23interesting about what you said about
301. 9:24accidentally finding that that star at
302. 9:27three or four years in is that I think
303. 9:28that happens to almost everyone. Well
304. 9:30hopefully it happen the people who end
305. 9:31up making it. It happens to almost
306. 9:32everyone. Um because then you realize oh
307. 9:34my god like if I had four of these
308. 9:36people like we could change the world.
309. 9:38>> Can I say something as well? The other
310. 9:40epiphany revelation I had was the star
311. 9:44hired stars.
312. 9:45>> Yeah.
313. 9:46>> And so I think her name's Katy Leon. Of
314. 9:48the 10 people she then hired, nine of
315. 9:49them became the best people in my
316. 9:50company. And also I'm not going to say
317. 9:52his name, but someone else in my
318. 9:54business,
319. 9:55>> a C player, of the 10 people he hired,
320. 9:57>> yeah,
321. 9:58>> he and everyone he hired was fired.
322. 10:01>> So one of the it's so as you go up in
323. 10:03the organization with hires, the risk
324. 10:05and reward goes up. And so that's
325. 10:07something that a lot of people don't
326. 10:08like talking about.
327. 10:09But I will um which is if you hire
328. 10:13somebody and let's say that they're not
329. 10:14a cultural fit. Maybe they have the
330. 10:15skills uh or they are a cultural fit and
331. 10:17they don't have the skill fit and
332. 10:19they're a leader. What you find often
333. 10:21and it sucks is that everyone it's
334. 10:24almost like it's like a tree that has an
335. 10:25entirely rotten branch. It's like you
336. 10:27end up having to scoop out three
337. 10:30quarters of what was underneath because
338. 10:32you realize that they were ineffective
339. 10:33or they just were against the actual
340. 10:35mission of the business. And it's it's
341. 10:37harrowing and it's horrible. But I try
342. 10:41to give this analogy um to my team
343. 10:43because we've had to do it in every
344. 10:44business. We like it happens. It's just
345. 10:46part of business is
346. 10:48if somebody goes to the bar and you're
347. 10:52at the club and somebody racks up, you
348. 10:55know, just ordering shots for everybody,
349. 10:56shots, shots, shots, shots, shots, and
350. 10:58then that guy dips, that guy leaves.
351. 11:01We all have to pay the bill. In the
352. 11:04moment when we pay the bill, when we
353. 11:05scoop out the deadwood, when we scoop
354. 11:07out the rot from the organization, it
355. 11:09feels horrible. But that pain isn't
356. 11:13because the scooping out the rot is bad.
357. 11:15It's because we planted it on bad ground
358. 11:17or because that guy ordered all these
359. 11:19shots but couldn't afford it. And I have
360. 11:21a different analogy because I really
361. 11:22want to drive this home because I think
362. 11:23it's important is that in the in the
363. 11:25relationship world, if one spouse tells
364. 11:29the other spouse, "Hey, I cheated on
365. 11:32you. I had an affair. That moment is
366. 11:34incredibly painful for both parties. And
367. 11:37so what it makes you think is, oh, this
368. 11:39was wrong to tell the truth, but it's
369. 11:42not wrong to tell the truth. What's
370. 11:44wrong with cheating when you tell the
371. 11:46truth is when you make it right. And so
372. 11:48the pain that you often have to
373. 11:49encounter in the organization feels
374. 11:52wrong but is right because that was
375. 11:55you're you're writing a wrong and that's
376. 11:57where the pain occurs. And that's why so
377. 11:59many businesses stay stuck is because
378. 12:00they have this affair, they have this
379. 12:03person, and they're unwilling to have
380. 12:04that hard conversation or multiple in
381. 12:06order to make it right. And they stay
382. 12:08stuck for years.
383. 12:09>> I can't give you every single SOP. That
384. 12:10would be ridiculous. It would be like
385. 12:12this [music] long. But these are the top
386. 12:13five SOPs that we have used to scale
387. 12:15that Leila actually put together [music]
388. 12:17for us cuz she's really been the one who
389. 12:18operates the business. And so yeah, I
390. 12:20don't know what's inside of it, but
391. 12:21[music] um it's good. So you should
392. 12:23check it out cuz Laya made it and she
393. 12:24makes good stuff. It's free.