“Build” by Tony Fadell – Book notes

I really adore this book. It’s now in my top 3 favorite business books. I figured I’d share the bits that stood out to me while reading this book below:

Learning

  • Humans learn through productive struggle, by trying it themselves and screwing up and doing it differently next time.

Work

  • You should never kill yourself for your job, and no job should ever expect that of you.
  • Too many people throw themselves blindly at hot trends, anticipating a gold rush, and end up falling off a cliff.
  • Getting a job is your opportunity to make a dent in the world. To put your focus and energy and your precious, precious time toward something meaningful.
  • The only thing that can make a job truly amazing or a complete waste of time is the people.

Startups

  • General Magic was making incredible technology but wasn’t making a product that would solve real peoples problems. We started from the technology—focusing on what we could create, what would impress the geniuses at our company—not the reason why real, non-technical people would need it.
  • If you’re not solving a real problem, you can’t start a revolution.
  • Take Uber. The founders started with a customer problem—a problem they experienced in their daily lives—then applied technology.

Entrepreneurship

  • The choice to stay or go, to collect a paycheck or save your sanity, to stick with the big company or jump ship to your own venture—it’s difficult for everyone.

Management

  • A great deal of management comes down to how you manage your own fears and anxieties.
  • A lot of people shouldn’t be forced into management—if you’re not really a people person, or you only want to focus on the work, or you thrive on having regular day-to-day successes and accomplishments and the murky maybe-your-team-will-succeed-one-day style of management is less motivating to you.
  • I wanted to understand the squishy stuff and the geeky stuff. And I liked all of it. I could also translate back-and-forth—explain the squish to engineers, translate the ones and zeros to the creatives. I could synthesize all the pieces and keep the whole company in my head. For me, that was thrilling, exciting, inspiring.
  • As a manager, you should be focused on making sure the team is producing the best possible product.
  • One of the hardest parts of management is letting go. Not doing the work yourself. You have to temper your fear that becoming more hands-off will cause the product to suffer or the project to fail. You have to trust your team—give them breathing room to be creative and opportunities to shine.
  • But you can’t create so much space that you lose track of what’s going on or are surprised by what the product becomes.
  • Examining the product in great detail and caring deeply about the quality of what your team is producing is not micromanagement. That is exactly what you should be doing.
  • Just be honest with your team. Even if things aren’t going well, don’t avoid telling them the hard truth. Tear off the Band-Aid.

Process

  • It helps to agree on the process early. To define it up front—here’s our product development process, here’s our design process, our marketing process, our sales process. Here’s our schedule and how we work and how we work together. Everyone—manager and team—signs off on it and then the manager has to let go. They let the team work.
  • Then make sure everything is headed in the right direction in regular team meetings. These meetings should be structured to get you and the team as much clarity as possible.
  • You should have a notes document that helps you keep your priorities and the questions you need to ask top of mind. Write down a list of what you’re worried about for each project and person so you can immediately see when the list is getting too long and you need to either dive deeper or back off.
  • Give formal written performance reviews every six months. But those formal reviews should simply be an exercise in writing down the things you’re already talking about every week. The team should be getting your feedback—good and bad—in the moment rather than waiting to be surprised by it a few months down the road.

Decisions

  • You can’t wait for perfect data. It doesn’t exist.
  • most decisions we make are data-informed, but not data-made.
  • You make hundreds of tiny decisions every day, but then there are the critical ones, the ones where you’re trying to predict the future, the ones that will put a lot of resources on the line. In those instances, it’s important to realize what kind of decision you’re faced with.
  • Data driven decisions are where you can acquire, study, and debate facts and numbers that will allow you to be fairly confident in your choice.
  • Opinion driven decisions are those in which you have to follow your gut and your vision for what you want to do, without the benefit of sufficient data to guide you or back you up.
  • Most people don’t even want to acknowledge that there are opinion-driven decisions or that they have to make them. Because if you follow your gut and your gut is wrong, then there’s nowhere else to cast blame.
  • Trusting your gut is incredibly scary. Many people don’t have either a good gut instinct to follow or the faith in themselves to follow it.
  • It’s your responsibility as a manager or leader to explain that this isn’t a democracy, but this is an opinion–driven decision and you’re not going to reach the right choice by consensus. But this also isn’t a dictatorship. You can’t give orders without explaining yourself.
  • Tell the team your thought process. Walked through all the data you looked at, all the insights you gathered, and why you ultimately made the choice. Take peoples input. Listen, don’t react.

Design

  • Customer panels can’t design for crap. People just can’t articulate what they want clearly enough to definitely point in one direction or another. Customers will always be more comfortable with what exists already, even if it’s terrible.
  • A/B and user testing is not product design. It’s a tool. A test. At best, a diagnosis. It can tell you somethings not working, but it won’t tell you how to fix it.
  • Speaking about designing nest: every minute, from opening the box to reading the instructions to getting it on their wall to turning on the heat for the first time, had to be incredibly smooth. A buttery, warm, joyful experience.

Storytelling

  • Storytelling is how you get people to take a leap of faith to do something new.
  • Creating a believable narrative that everyone can latch onto is critical to moving forward and making hard choices.
  • The story of your products, your company, and your vision should drive everything you do.
  • The story doesn’t just exist to sell your product. It’s there to help you define it, understand it, and understand your customers.
  • It all starts with Why. Why does this thing need to exist? Why does it matter? Why will people need it? Why would they love it?
  • You have to find an opportunity to craft stories that stick with customers and keep them talking about you.
  • Tell stories people can connect with. A good story is an act of empathy. It blends facts and feelings.
  • There’s an art to telling a compelling story. But there’s also a science.
  • Great analogies allow customers to instantly grasp a difficult feature and then describe that feature to others. That’s why “1000 songs in your pocket” was so powerful. We cheated. We didn’t try to explain everything. We just used an analogy.
  • You should always be striving to tell a story so good then it stops being yours—so your customer learns it, loves it, internalizes it, owns it. And tells it to everyone they know.

A-holes

  • A-holes come in different flavors of selfish or deceitful or cruel, but have one unifying characteristic: you cannot trust them.
  • They can and will screw you and your team over, either to get something for themselves or just to push you down and make themselves look like the hero.
  • Political a-holes master the art of corporate politics, but then do nothing but take credit for everyone else’s work.
  • Controlling a-holes are micromanagers who systematically strangled the creativity and joy out of their team.
  • Natural a-holes suck at work and everything else. They’re mean, jealous, insecure jerks.
  • Mission driven a-holes are crazy passionate and a little crazy. They speak most frankly, trampling the politics of the modern office, and steam roll right over the delicate social order of “how things are done around here”. A mission driven a-hole might tear apart your work, but they won’t attack you personally. They won’t call you names or fire you for disagreeing with them.
  • There’s a world a difference between being emphatic and passionate to benefit the customer versus bullying someone to appease your own ego.
  • Real a-holes always make it personal. Their motivation is their ego, not the work.
  • When an alliance of a holes start spreading lies, or stealing ideas, or taking over projects they have no business touching, they will pair each other’s words to leader ship. They will make sure they all have the same narrative.
  • Most people aren’t a-holes. And even if they are, they’re also human. So don’t walk into a job trying to get anyone fired. Start with kindness. Try to make peace. Assume the best.

Quitting

  • Sometimes it’s just time to go. And when that moment comes, you’ll probably know. Quit and go do something you’ll love.

Customer Experience

  • Your product isn’t only your product. It’s the whole user experience.
  • The actual thing your building is only one tiny part of a vast, intangible, overlooked user journey that starts long before a customer ever gets their hands on your product and ends long after.
  • Don’t just make a prototype of your product and think you’re done. Prototype as much of the full customer experience as possible.
  • Make the intangible tangible so you can’t overlook the less showy but incredibly important parts of the journey.
  • Map out and visualize exactly how a customer discovers, considers, installs, uses, fixes, and even returns your product. It all matters.
  • Your customer doesn’t differentiate between your advertising and your app and your customer support agents—all of it is your company. Your brand. All of it is one thing.
  • You have to prototype the whole experience—give every part the weight and reality of a physical object. Draw pictures. Make models. Pin mood boards. Sketch out the bones of the process in rough wire frames. Write imaginary press releases. Create detailed mock ups.
  • Make it visible. Physical. Get it out of your head and onto something you can touch. And don’t wait until your product is done to get started—map out the whole journey as you map out what your product will do.
  • A vital part of the customer experience is post-sale. How do you stay connected to your customer in a way that’s actually useful? How do you keep on delighting people instead of just marketing to them, and selling and selling until they’re sick of you?

Disruption

  • Your V1 product should be disruptive, not revolutionary.
  • Refine what you made in the V1 using data and insights from actual customers and double down on your original disruption.
  • Always seek out new ways to disrupt yourself.
  • If you’ve truly made something disruptive, you’re competition probably won’t be able to replicate it quickly.
  • If you under shoot, there’ll be an almost audible fizz.
  • You need some thing that will make people stop in their tracks and say, “Wow. Tell me more.”
  • If you’re disrupting big, entrenched industries, your competition will almost certainly dismiss you in the beginning. They’ll flat out laugh in your face.
  • Soon as your disruptive product, process, or business model begins to gain steam with customers, your competitors will start to get worried.
  • When they realize you might steal their market share, they’ll get pissed. Really pissed. When people hit the anger stage of grief, they lash out, punching something.
  • And they might sue you. If they can’t innovate, they’ll litigate. The good news is that a lawsuit means you have officially arrived.
  • If your company is disruptive, you have to be prepared for strong reactions and stronger emotions. Some people will absolutely love what you’ve made. Some people will violently, relentlessly hate it.
  • Disruption makes enemies.
  • Even starting something new in a big company won’t protect you. You’ll have to deal with politics, jealousy, and fear. You’re trying to change things, and change is scary, especially the people who think they’ve mastered their domain and who are completely unprepared for the ground to shift under their feet.
  • Just don’t overshoot. Don’t try and disrupt everything at once.
  • When you can see the competition nipping at your heels, you have to do something new. You have to fundamentally change who you are as a business.
  • Companies that become too big, too comfortable, too obsessed with preserving and protecting what first big innovation they put them on the map—they topple. They unravel. They die.

Time

  • You need constraints to make good decisions in the best constraint in the world is time. When you’re handcuffed to a hard deadline, you can’t keep trying this and that, changing your mind, putting the finishing touches on some thing that will never be finished.
  • The joke is that it takes 20 years to make an overnight success. In business, it’s more like 6 to 10. It always takes longer than you think to find product/market fit, to get your customers’ attention, to build a complete solution, and then to make money.
  • Customers need time to fill you out. The vast majority of people aren’t early adopters—they won’t try new things right away. They need time to get used to the idea, time to read some reviews, time to ask their friends, and then time to wait until the next version comes out because that’ll probably be even cooler.
  • No matter what your building, reaching profitability will take longer than you think. The iPod took three generations—and three years—before it reached profitable unit economics.
  • Google wasn’t remotely profitable for a long time. They only started making real money when they figured out AdWords. Facebook decided to capture eyeballs, then figure out the business model later. So did Pinterest and Twitter. They created a V1 product, scaled it for V2, then optimized the business in V3.

Managing Complexity

  • I needed to calm down. I needed to find space. I needed to prioritize.
  • I took several sheets of paper with me everywhere. They had all the top milestones in front of us for each of the disciplines—engineering, HR, finance, legal, marketing, facilities, etc.—and everything we needed to do to reach those milestones.
  • When I was in a meeting or talking to someone, I could quickly scan it. What are my top issues? What issues do our customers have? What’s the current roadblock for this persons team? What are the next major milestones? What date commitments did our teams make?
  • Whenever someone had a great idea, and write it down on this paper.
  • The only way for me to capture all of it—good ideas, priorities, roadblocks, the dates that people promise to deliver, and the major internal and external heartbeats ahead—was to take notes in every meeting. Long hand. Not on a computer.
  • The act of using a pen, then re-typing and editing later, forced me to process information differently.
  • Every Sunday evening, I would go through my notes, reassess and re-prioritize all my tasks, rifle through the good ideas, then update those papers on a computer and print out a new version for the week.
  • Then Sunday night I’d email the whole list out to my management team. Each item had a name attached to it. Everyone could look at the top of the list to see what I’d be focused on that week, what they were accountable for, and what the next major milestones were.
  • And every Monday, we have a meeting about it. Everyone hated it. It wasn’t micromanagement. It was holding people accountable. It was labor-intensive. Arcane. Never-ending. But it worked.
  • It kept me relatively calm. It helped me focus. And nobody ever had to wonder where my head was at. Everyone always knew what mattered to me—they had my priorities in writing, updated, every week.
  • Sometimes the pressure and the stress and never-ending list and never-ending meetings will become too much. In those moments get the hell out. Take a walk.
  • Don’t make a bad decision because you’re frustrated and overworked—get your head on straight and come in fresh the next day.

Healthy Practices

  • Once you have a way to prioritize your tasks, you need to prioritize your physical and mental well-being.
  • For the love of all that’s holy, keep your phone away from your bed. You’re an addict. We all are.
  • Look at your calendar. Engineer it. Design it.
  • Re-engineer your day, your week, and your monthly schedule with time dedicated to feeling human.
  • 2 to 3 times a week block out parts of your schedule during your workday so you have time to think and reflect. Give your brain a second to catch up.
  • 4 to 6 times a week—exercise. Get up. Go biking or running or weightlifting or cross-training or just take a walk.
  • Eat well—you are an extreme athlete, but your sport is work. Don’t eat too much, don’t eat too late, cut down on refined sugars, smoking, alcohol. Just try to keep yourself from physically feeling like garbage.

Crisis

  • Keep your focus on how to fix the problem, not who to blame.
  • As a leader, you’ll have to get into the weeds. As the crisis unfolds your job is to tell people what to do and how to do it.
  • Get advice. From mentors, investors, your board, or anyone else you know who’s gone through something similar.
  • Your job once people get over the initial shock will be constant communication.
  • Accept responsibility for how it has affected customers and apologize.
  • Schedule check-ins in the morning and at the end of the day.
  • Start going to their daily meetings. You have to be there, listening, asking questions, and getting necessary information in real time.
  • Clear your calendar of nonessential meetings. Focus entirely on fixing the problem.
  • Reiterate that we’ll get through this. We’ve done it before. Here’s the plan.
  • Tell customers exactly what happened. No cover-up. Mea culpa and here’s a refund if you want one.
  • If something is your fault, tell them what you did. Tell them what you’ve learned from it. And tell them how you’ll prevent it from ever happening again. No evading, blaming, or making excuses. Just accept responsibility and be a grown-up.
  • Get advice. Take deep breaths. Make a plan.
  • But after it’s all over you should celebrate. You should have a party. And you should tell the story. The most valuable thing you’ll take out of any crisis is the tale of how you were almost swept away, but the team pulled together and saved the day. That story needs to enter into the DNA of your company.

Team

  • The key to our success—was the human beings we hired, the culture they created, the way they thought and organized and work together. The team was everything.
  • Forming that team and shepherding it through its many transitions is always the hardest and most rewarding part of building anything.
  • A near-perfect team is made up of smart, passionate, imperfect people who complement one another.
  • Different people think differently and every new perspective, background, and experience you bring into the business improves the business. It deepens your understanding of your customers. It illuminates part of the world that you were blind to before.
  • We expected candidates to be mission driven and good on their feet, the right fit for the culture, and passionate about the customer. We also had a “no a-holes” policy.
  • People first. Always.

PMs

  • The reason for it is simple: the customer needs a voice on the team. Engineers like to build products using the coolest new technology. Sales wants to build products that will make them a lot of money. But the product managers sole focus and responsibility is to build the right products for their customers. That’s the job.
  • Look for places where the customer is unhappy.
  • Do whatever is necessary to move the project forward.
  • The superpower of every truly great product manager is empathy.
  • Product management has to own the messaging. The messaging predicts peoples concerns and finds ways to mitigate them.
  • A spec and messaging aren’t instructions that are set in stone. They flex and change, shifting as new ideas are introduced.
  • Building a product is like making a song. The band is composed of marketing, sales, design, engineering, support, PR, legal. And the product manager is the producer making sure everyone knows the melody, that nobody is out of tune and everyone is doing their part.
  • Sometimes they’ll have the final opinion, sometimes they’ll have to say “no”, sometimes they’ll have to direct from the front. But that should be rare. Mostly they empower the team.
  • If a product manager is making all the decisions, then they are not a good product manager.
  • They have to tell the story of the customer, make sure everyone feels it. And that’s how they move the needle.
  • The thread that ties all these people and teams and pains and desires together is product management.

Sales

  • Sales people are traditionally paid on commission. People—especially salespeople—will tell you that this is the way it’s always been done, that it’s the only way to do it and it’s the only path to hiring a decent sales team. These people are wrong.
  • Rather than focusing on rewarding sales people immediately after a transaction, that’s the commission overtime so your sales team is incentivized to not only bring in new customers, but also work with existing customers to ensure they’re happy and stay happy.
  • Offer sales people a competitive salary and sales performance bonuses of additional stock options that vest over time.
  • If the customer leaves, the sales person loses the remainder of their commission.
  • Sales and customer success should be under 1 L, in the same silo, being compensated in the same way.
  • The best salespeople are the ones who maintain relationships even if it means not making money that day.
  • The danger with traditional commission based sales models is that they create two different cultures: a company culture and a sales culture. The bigger your company, the further these two cultures will drift apart.
  • Nobody ever works a sale alone. During the sales process the sales person has back up from support or whoever will be working closely with the customer post-sale. And then those teams sign off on the deal. There are never any surprises.
  • Once the deal is closed, the sales person doesn’t disappear. They stay on as a point of contact for the customer, and if there’s any kind of issue, they step in to resell them.
  • Once commissions are vested on a schedule that prioritizes customer relationships, a lot of the ugliness that usually defined sales cultures disappears.

CEO

  • There’s nothing exactly like being a CEO, and nothing to prepare you for it.
  • This job will suck you dry if you let it.
  • The best CEOs push the team to strive for greatness, then take care of them to make sure they can achieve it.
  • If a leader gets distracted from the customer the whole organization can easily forget what’s most important.
  • If you want to build a great company, you should expect excellence from every part of it.
  • There can’t be any functions that you dismiss a secondary—where you casually accept mediocrity because it doesn’t really matter. Everything matters.
  • Most people are happy with 90% good. Most leaders will take pity on their teams and just let it slide.
  • After a while, they’ll work incredibly hard not just to make you happy, but because they know how much pride they feel when they do world-class work.
  • If you don’t give a crap about marketing, you’ll get crappy marketing. Same for any other function in your company.
  • Avoiding or ignoring any part of your company only comes back to haunt you sooner or later.
  • You don’t have to be an expert in everything. You just have to care about it.
  • In this job, respect is always more important than being liked. You can’t please everyone.
  • There’s always some new crisis, some new people problem, someone quitting, someone complaining, someone falling apart.
  • It’s a cliché to say “it’s lonely at the top”, but it’s also true.
  • Most people assume being CEO is a hard job—stressful, busy, high pressure but the stress is one thing; the isolation is another.
  • When you’re a CEO, you dream that maybe, 10 years down the road, some people will think you did a good job. But you can never tell how you’re doing in the moment. You can never sit back and look at a job well done.

Boards

  • Good CEOs walk in with a presentation of where the company was, where is now, and where it’s headed this quarter and in the years to come. They tell the board what’s working but they’re also transparent about what isn’t and how they’re addressing it. They present a fully formed plan the board can question, object to, or try to modify.
  • Watching Steve Jobs in an apple board meeting was like watching a master conductor direct in orchestra. There was no confusion, no conflict.
  • Bill Campbell would always say that if there was any potential surprising or controversial topic, the CEO should go to every board member, one on one, to walk them through it before the meeting. That allowed them to ask questions, offer different perspectives, and then the CEO had time to take those thoughts back to the team and revise their thinking, presentation, and plan.
  • There should only be good surprises in a board meeting.
  • It’s best not to debate new discussion items in the board room—there’s just never enough time to cover them in detail and get to a resolution. It always goes nowhere.
  • The best thing about private boards is that you can keep them small—3 to 5 board members is best.
  • When you were presenting numbers, it becomes more important to craft an arrogant. You have to tell a story.
  • Even the most incredible CEOs in the world still need a board.
  • Even the best CEO cannot stand alone, untouchable, unchallengeable, accountable to no one. Everyone needs to report to someone.
  • Show a redacted version of the board presentation to the whole company as soon as possible after the meeting. Here’s what we talked about, here’s what I’m concerned about, here’s what the board had questions about, here are actions will take.

This Is Me

I guess I’m not your typical CEO.

I probably don’t talk like a CEO. 

You won’t often find me dressing like a CEO. 

Frankly, I don’t particularly care what title I have at work. I’m less concerned with titles and more interested in impact.

The things that motivate me most are working alongside smart people, solving challenging problems, constantly learning new things, and having the greatest impact possible.

I have simple tastes. If given the choice between a meal at an expensive three star restaurant and a kids meal at McDonalds, I’ll take the kids meal (6 piece nuggets with sweet and sour sauce FTW). 

I don’t want/need credit for anything.

I’m not here to power trip or micromanage. 

I believe in the inverted org. When I’m in a leadership position, I’m at the bottom of the pyramid. Individual team members are at the top. I’m here to serve you. 

I believe in establishing agreements around clear responsibilities and then holding people accountable for the things they’ve committed to.

I value principles, people, product, and profits (always in that order). I believe that profit maximization in any company only occurs after you get the first 3 priorities right. 

I have a strong internal north star. I am grounded in my beliefs and my self worth. 

I believe that the original Pete’s Dragon is hands down the best movie ever made.

I believe that having fun is important and that we shouldn’t take ourselves too seriously.

I have very little patience for internal politics. 

I will tend to challenge statements like “we’ve tried that before”, or “that won’t work here” when they are based on untested assumptions or older data.

I’m a big fan of rapid iteration. Let’s try a bunch of stuff, keep the stuff that works, and then iterate on or ditch the stuff that doesn’t. 

I refuse to work with toxic people (No matter how long you’ve been at the company, or what role you have, or how impactful you’ve historically been).

I value diversity. Diversity in people, roles and experiences all leads to better decisions, better products, better work environments, and better companies.

I value ownership. When you make a mistake, own it.

I value clarity. If something is unclear, ask questions until you have all of the context you need to do your best work.

I value alignment. Let’s be united in our cause. We will rise and fall collectively together and find valuable learning opportunities in both our successes and our failures.

I will no doubt make mistakes. When I do, call me out on them. I will gladly apologize and own my shortcomings.

For those of you on my team:

If you ever feel unheard, frustrated or hurt, I am here to listen. 

If you’ve hit a roadblock, I will help you get unblocked. 

If you have questions or concerns, my door is always open. 

Most of all, know that I genuinely care. I care about you. I care about our customers. I care about the product we are building. I care about the company that we work for.

Oh, and I love musicals. 💖

“Powerful” notes

I highly recommend “Powerful” by Patty McCord as a very worthwhile read for anyone in leadership. Here are my notes from the book:

Leadership

  • Be ready at any moment to cast aside your plans, admit mistakes, and embrace a new course.
  • People have power; Don’t take it away. A companies job isn’t to empower people; it’s to remind people that they walk in the door with power and to create the conditions for them to exercise it.
  • The Netflix culture wasn’t built by developing an elaborate new system for managing people; we did the opposite. We kept stripping away policies and procedures.
  • Most companies are clinging to the established command-and-control system of top-down decision making which is in enormously costly, time-consuming, and generally unproductive.
  • This older approach to leadership clings to false assumptions about human beings: that most people must be incentivized in order to really throw them selves into work, and that they need to be told what to do.

Management

  • I’m going to challenge all of the basic premises of management today: that is about building loyalty and retention and career progression and implementing structures to ensure employee engagement and happiness. None of that is true. None of this is the job of management.
  • A business leaders job is to create great teams that do amazing work on time. That is it. That is the job of management.
  • If I could pick one course to teach everybody in the company, whether they’re in management or not, it would be on the fundamentals of how the business works and serving customers.

Transparency

  • We wanted all of our people to challenge us, and one another, vigorously.
  • We wanted them to speak up about ideas and problems; to freely pushback, in front of one another and in front of us.
  • We didn’t want anyone, at any level, keeping vital insights and concerns to themselves.
  • We (as an executive team) made ourselves accessible, and we encouraged questions.
  • We engaged in open, intense debate and made sure all of our managers knew we wanted them to do the same.
  • If people have a problem with an employee or with the way another department was doing something, they were expected to talk about it openly with that person, ideally face-to-face.
  • It was unacceptable to talk about people behind their back’s or to come to then to complain about a colleague.

Communication

  • We communicated honestly and continuously about challenges the company was facing and how we were going to tackle them.
  • People need to see the view from the C suite in order to feel truly connected to the problem-solving that must be done at all levels and on all teams.
  • If you stop any employee, at any level of the company, in the break room or the elevator and ask what are the five most important things the company is working on for the next six months, that person should be able to tell you, rapid fire, one, two, three, four, five, ideally using the same words you’ve used in your communications and in the same order.

Performance

  • We wanted everyone to understand the change would be a constant and we would make whatever changes of plan, and of personnel, we thought necessary to forge a head at high-speed
  • We wanted people to embrace the need for change and be thrilled to drive it.
  • We wanted people to feel excited to come to work each day, not despite the challenges but because of them.
  • It’s not cruel to tell people the truth respectfully and honestly.
  • The most important thing about giving feedback is that it must be about behavior, it also must be actionable.
  • Proactively letting people go was one of the hardest, probably the single hardest, component of the Netflix culture for managers to become comfortable with. But most of them did.

Behaviors

  • We did away with virtually all policies and procedures. We didn’t do it in one fell swoop. We did experimentally, step-by-step, over the course of years.
  • As we stripped away bureaucracy, we coached all of our people, at all levels and on all teams, to be disciplined about a fundamental set of behaviors.
  • It isn’t a matter of simply professing a set of values and operating principles. It’s a matter of identifying the behaviors that you would like to see become consistent practices and then instilling the discipline of actually doing them.
  • We fully and consistently communicated to everyone at Netflix the behaviors we expected them to be disciplined about and that started with the executive team and every manager.
  • We experimented with every way we could think of to liberate teams from unnecessary rules and approvals.

Culture

  • The company was like a sports team, not a family.
  • Creating a culture is an evolutionary process. Think of it as an experimental journey of discovery.
  • The best thing you can do for employees is hire only high performers to work alongside them. it’s a perk far better than Foos ball or free sushi or even a big signing bonus or the holy Grail of stock options. Excellent colleagues, a clear purpose, and well understood deliverables: that’s the powerful combination.
  • When we were interviewing people, we told them straight out that we were not a career management company, that we believed people’s careers were theirs to manage, and that while there might be lots of opportunities for them to advance at the company, we wouldn’t be designing opportunities for them.

Teams

  • Great teams are made when every single member knows where they’re going and will do anything to get there.
  • Great teams are not created with incentives, procedures, and perks.
  • Great teams are created by 1) hiring talented people 2) who are adults and want nothing more than to tackle a challenge, and then 3) communicating to then, clearly and continuously, about what the challenge is.
  • There is no better reward for team members than making a significant contribution towards meeting a challenge.
  • Great teams are made when things are hard.

Hiring

  • You’ve got to hire now the team you wish to have in the future.
  • finding the right people is not primarily about “culture fit”. People can have all sorts of different personalities and be great fit for the job you need done.
  • When you hire someone and it turns out that they can’t do the job, the problem is with the hiring process, not the individual.
  • I decided to throw out the traditional recruiting practice and create a headhunting firm with in the company.
  • We focused on finding the best creative talent with the skills to execute, and then giving those creators the freedom to realize that vision.
  • We developed “new employee college”. For one whole day each quarter every head of every department would make an hour long presentation on the important issues and developments in their part of the business to an audience of our new hires.
  • At Netflix we had three fundamental tenants to our talent management philosophy. First, the responsibility for hiring great people. Second, for every job we try to hire a person who would be a great fit, not just adequate. Finally, we would be willing to say goodbye to even very good people if their skills no longer matched the work we needed done.
  • If you focus intently on hiring the best people you can find and pay top dollar, you will almost always find that they make a much more in business growth than the difference in compensation.

Caution: Work fills the space you give it

For most of my career I’ve prided myself on being able to restrict my work schedule to just 40 hour per week. Most of my career I’ve been able to stick to this. I even co-wrote a blog post about it at one point.

I took this past Monday off to have an extended weekend with my family. When Monday came, instead of enjoying time with my family, I was stressing about all of the stuff that was likely piling up at work.

Upon reflection, I’ve come to the realization that I’ve been consistently working too many hours each week and that it’s probably not long-term healthy for myself or my family. After coming to this realization, I started taking some steps to help me get back to a more manageable work schedule, which include:

  • Removing the Slack app from my phone – My principle for some time has been to only have the app on my phone when I travel for work, and yet somehow the app found it’s way back to my phone and I found myself checking in during non-work hours.
  • Establishing a clear work schedule – I’ll try and start consistently each day at 8am and wrap up at 5pm (with a 1 hour break for lunch).
  • Stop working weekends – Unless there is a fire (which there rarely is) I’m going to try and avoid working on my weekends.
  • I blocked off two days as no meeting days – I blocked off Wednesday and Friday on my calendar as days where I can just catch up on work without having any meetings to break up my day.
  • Meeting audit – I realized that I’ve been over-committing myself to too many regularly scheduled meetings. I’m going to be scaling back the number of meetings that I attend each week.
  • Backing out of design discussions – For now (while I’m the acting Manage Group lead) I will be staying out of most design discussions and leaving them in the capable hands of our Manage Group designers.

The thing is, none of this happened suddenly. It just sort of crept up on me slowly. With time, I just stopped regulating each of these areas and eventually it added up.

I share this openly here for three reasons:

  1. To call myself out.
  2. To support anyone else who notices similar patterns in their own work routines and wants to take steps to correct them.
  3. To remind my future self that without self-regulation, work fills the space you give it.

COMMENTS

I don’t do comments on this site, but if you have thoughts, I’d love to hear them. You can email me at its@davemart.in.

Tiny House Inspiration

Over the years I’ve collected the following list of tiny houses that inspire me – in no particular order:

Photo by Mariko Reed – Topanga Cabin
Photo by Shigeo Ogawa – Near House
Photo by Sol Haus Design – Vina’s Tiny House
Photo by Beppe Giardino – Tre Livelli
Photo by Tiny Home Builders – Tiny Studio
Photo by David Patterson – Vail Treehouse
Photo via Foster Huntington – The Cinder Cone
Photos via Carla Rodriguez – Beacon Cabin
Photo via Getaway House, Inc. – Clara
Photo by Tiny Living Homes – Tiny Living
Photo by Dan Hoffman – Nest
Photo via Greenleaf Tiny Homes – Kootenay
Photos by Garett and Carrie Buell – Alpha

Coach Bill Campbell

I never met Bill Campbell. To be honest, I had never even heard about him until I heard Eric Schmidt speak his praises on the the Tim Ferris Podcast.

I picked up a copy of Trillion Dollar Coach and I’m so very glad I did. This book is easily in the top 5 books I’ve ever read. It’s right up there with Creativity Inc.

I don’t share book reports very often. Probably only 1 out of every 100-150 books I read. But this is one book that I felt compelled to share.

I’ll do my best to theme selected highlights vs. presenting things linearly.

Great coaches:

  • Listen intently.
  • Look for patterns.
  • Assess strengths and weaknesses.
  • Ask questions instead of offering advice.
  • Hold a mirror up so we can see our blind spots.
  • Hold us accountable for working through our sore spots.
  • Take responsibility for making us better without taking credit for our accomplishments.
  • Notice body language and side conversations in addition to listening.
  • Act as a sounding board.
  • Relate stories that help us gain perspective, draw insight, or make a decision without telling us what to do.
  • Keep opinions about product and strategy to themselves.
  • Make sure the team is communicating.
  • Bring disagreements and tensions to the surface.
  • Connect the dots with various stakeholders behind the scenes so that when big decisions come up everyone is on board—whether they agree or not.
  • Don’t voice opinions about which way a decision should go—Just push for the decisions be made.
  • Listen, observe, and feel the communication gaps between people.
  • Lie awake at night thinking about how to make us better.

On coaching

  • The best coach for any team is the manager who leads that team.
  • I’ve come to believe that coaching might be even more essential than mentoring to our careers and our teams.
  • It’s up to all of us to coach our employees, our colleagues, and even sometimes our bosses.
  • Mentors dole out words of wisdom, coaches roll up their sleeves and get their hands dirty.
  • Purpose, pride, ambition, love, family, money, attention, power, meaning, and ego are all primary motivations to consider when coaching someone else.
  • It’s often the highest performing people who feel the most alone.

Excellence in teams comes from

  • Psychological safety
  • Clear goals
  • Meaningful roles
  • Reliable teammates
  • Confidence that the teams mission will make a difference

On trust

  • Perhaps the most important currency in relationship—friendship, romantic, familial, or professional—is trust.
  • Trust means people feel safe to be vulnerable.
  • Trust means loyalty.
  • Trust means integrity.

Wisdom for leaders

  • Leaders lead. You can’t have 1 foot in and 1 foot out. If you aren’t fully committed then the people around you won’t be either.
  • In business there is growing evidence that compassion is a key factor to success.
  • Go to extraordinary lengths to build safety, clarity, meaning, dependability, and impact into each team you lead.
  • Create a climate of communication, respect, feedback, and trust.
  • Listen. Pay attention. This is what great managers do.
  • Managers authority emerges only as the manager establishes credibility with subordinates, peers, and superiors.
  • Your title makes you a manager. You’re people make you a leader.
  • “Get the one on one right” and “get the staff meeting right” were top on Bill’s list of the most important management principles.
  • Failure to make a decision can be as damaging as a wrong decision.
  • Never put up with people who cross ethical lines: Lying, lapses of integrity or ethics, harassing or mistreating colleagues.
  • Letting people go is a failure of management, not one of any of the people who are being let go.
  • It’s a manager’s job to push this team to be more courageous.
  • Don’t just be a dictator assigning tasks, pair people up!

On Teams

  • Coaching is the best way to mold effective people into powerful teams.
  • Start treating teams, not individuals, as the fundamental building block of the organization.
  • Teams need to act as communities, integrating interests and putting aside differences to be individually and collectively obsessed with what’s best for the company.
  • When internal conflict arises the trick is to corral rivals into a community and get them aligned, marching toward a common goal.
  • When team members can’t break the tie themselves, it falls on you to make that decision.
  • When faced with an issue, his first question wasn’t about the issue itself, it was about the team tasked with tackling the issue. Get the team right and you’ll get the issue right.

On meetings

  • He’d start by asking what people did for the weekend.
  • Before decisions were made everyone weighed in, regardless of whether the issue touched on their functional area or not.
  • Bill would often meet with multiple people before an important meeting to find out what they were thinking. This gave members of the team the chance to come into the room prepared to talk about their point of view.
  • When labelled a debate rather than a disagreement, participants are more likely to share information.
  • Having a well-run process to get to a decision is just as important as the decision itself, because it gives the team confidence and keeps everyone moving.

On 1:1’s

  • Bill would always start with a hug.
  • Next he’d ask about your personal life, family, and non-work stuff.
  • Bill would write five words on a white board indicating the topics to discuss that day. The words might be about a person, a product, an operational issue, a prospective customer, or an upcoming meeting.
  • Bill took great care in preparing for one-on-one meetings.
  • Bill typically discussed performance, peer relationships, teams, and innovation.
  • Deliver tough messages with respect, warmth, and candor.

Coach Campbell

  • Was tremendously respected and loved.
  • Lit up the room whenever he walked in.
  • Was a straight shooter.
  • Was a hugger.
  • Was generous.
  • Like to help people.
  • Cursed like a sailor.
  • Treated everyone with respect.
  • Believed in diversity on teams.
  • Preferred operating behind the scenes.
  • Saw through the title to who a person was.
  • Always strived for a politics-free environment.
  • Always gave you a call back when you left voicemail.
  • Demanded commitment, passion, and loyalty.
  • Cared about his people fiercely and genuinely.
  • Was always there for you when you needed him, no matter what.
  • Had a way of making you feel better, even if he was sharing bad news.
  • Is sorely missed by many.

As I said, I never met Coach Bill Campbell, but after reading this book I wish I had.

Comments

I don’t do comments on this site, but if you have thoughts, I’d love to hear them. You can email me at its@davemart.in.

Japan, April 2019

Two weeks ago I travelled to Japan for the first time. I was there for 7 days. It was everything that I had hoped for. Below I’ll share a few select memories.

Shibuya Crossing

So crazy…

Roppongi Hills Mori Tower & Museum

Akira in the Streets

Vending Machines

Capsule Hotel

First Meal

Cherry Blossoms

Hie Shrine

Pachinko

Shopping

Good Food

Toilets 😳

Kamakura

TeamLab Borderless

Buildings

Meiji Shrine

Street Ads

This ad/song played literally every 120 seconds on the streets of Shibuya where I stayed.

Ueno

Ueno Zoo

Everything I Wish I knew About Stock Options 15 Years Ago

Stock Options
Photo by Suzy Hazelwood

Disclaimer: I’m a designer. I’m not an accountant or a lawyer. When it comes to stock options, if you’re not careful you can end up in a mess tax-wise. Be sure to consult with an accountant and a lawyer before considering any of the scenarios below.

Slow your roll…

You just received a job offer from a startup that includes a $120/yr salary and 20k options that vest over 4 years (with a one year cliff). How do you ensure that those options don’t just slip through your fingers?

Before you start browsing brochures for your Scrooge McDuck sized money vault, here are some practical tips that you should consider:

Don’t be like most startup employees

Most startup employees have no idea how stock options work. They blindly sign agreements, have no idea what liquidation strategies are available to them, and often times forfeit all of their options by leaving the company without exercising anything.

Learn the terminology

Here’s a quick primer:

a. Stock Option
It’s called an “option” for a reason. A stock option is not the same thing as “stock”. With stock options, you are not given stock, you’re giving the option to purchase stock once your shares have vested. Once you leave your company, you typically only have 3 months to execute your options, before it disappears.

b. Strike/Grant/Exercise Price
The fixed price you’re allowed to purchase stock at. This price stays the same during the life of your options grant. If the company that you’re working at is growing, the delta between your strike price and the 409A price and market price will continue to grow.

c. 409A Price
Private companies that issue stock options are required to periodically perform an evaluation of the companies value. Technically this should happen after any event that materially affects the value of the company. Typically though this process happens once per year. From this evaluation, a price per share is estimated. The 409A price is typically lower than the market price.

d. Market price
The per share price the market is willing to pay for your companies stock.

e. ISO vs. NSO
There’s quite a bit of nuance here. Instead of listing everything out, I’ll just link to this article. The biggest thing to keep in mind are the tax implications of the type of options you have.

f. Grant
The amount of stock options you’re given. In the scenario above this would be 20,000 options.

g. Issue/Grant Date
The date you were issued your grant.

h. Vesting Schedule
The schedule by which your stock options become exercisable. Having a 4 year vesting schedule with a one year cliff is super common. In our example above, that would mean that 5000 shares would become exercisable after one year at the company and approximately 416 shares would become exercisable to you each month thereafter for the next 3 years.

i. Cliff

The period of time before your first chunk of options becomes exercisable. After the cliff, a smaller pool of your options generally start becoming executable on a monthly basis

j. Exercisable

The point at which you can purchase some portion of your options.

k. Exercise Date

The date you purchase your options.

l. Expiration Window

The date at which your options expire. Typically this is either:

  • 3 months after you leave the company
  • 10 years after your issue date
  • The date you were fired (if that applies)

m. Cap Table

The list of people who already own stock in your company. This may include founders, investors, advisors, other employees who have already exercised their options.

n. Options Pool

Stock options are granted from an options pool. From a company ownership standpoint, an options pool is necessary in order to prevent constant churn or dilution as options are granted and then expire.

o. Liquidation Preferences

Depending on the round and the state of your company when it raises money, liquidation preferences can be added as bargaining chips that can have an impact on your options when it comes to a sale or acquisition. Essentially this means that some investors will be able to get more money for each share they hold, and likely will be able to sell their shares in the event of the sale of your company before you can.

p. Dilution

Any time additional shares are added (typically as a result of fund raising rounds) there is going to be dilution of the stock value for all stock owners across the board. Basically this means that (at least temporarily) your individual stocks, or options will be worth less money.

q. Equity Investment Plan Document

This formal document outlines the bylaws of a companies stock option program. You’ll need a copy of this if you ever wish to sell your shares.

r. Option Agreement Document

This legal document outlines everything about your particular stock grant. This document will also be needed if you ever go to sell your shares.

s. Exercise Agreement Document

Once you exercise stock options, it is done through an exercise agreement. You’ll also want to hang onto this document.

t. Right of First Refusal

If you have a contract to sell your private stock to a third party, the company typically has a clause that they can purchase your shares at the same price that the third party. This ensures that the company has control over who is added to their cap table.

Know the Tax Implications

I can only speak from my experience. Again, if you’re considering purchasing options, you’ll want to consult with an accountant and a lawyer.

Long-term vs. short-term capital gains tax

In the U.S. if you purchase options and hang on to them for a year before you resell them, you will pay long-term cap gains taxes which as of 2018 is a flat 15% rate. If you purchase your options and sell them before a year passes, you’ll pay short-term cap gains tax which is effectively your personal tax rate 25-35%.

ISO vs. NSO

With ISO options you wait to pay the taxes on the sale of your stock until April 15th of the following year. When you sell NSO options, you pay the taxes immediately upon purchase.

AMT tax rate

This is a tricky bugger to figure out and plan for. 🙂 Basically, if you exercise your options and hold on to them for a year (in order to qualify for long-term capital gains tax) come April 15 you’ll still need to report the purchase of your options and likely pay AMT taxes on them. Talk to your accountant. They should be able to help estimate this for you.

Warning: If the delta between your strike price and the current 409A price is large, the AMT taxes that you’ll be required to pay (prior to selling your stock and recouping any of the money you spent to purchase your stock) may be high (depending a number of variables, like your household income level). You’re absolutely going to want to factor this into your decision to exercise and hold stock.

Get the big picture

Mapping everything out will help you get a better picture of what sort of return you could see from your options.

I created a sheet to help you plan out your liquidation options:

Stock Options Planner

If you’d like to use this sheet, just go to “File” and select “Make a copy” within this Google Sheet.

Liquidation options

Finally, since the company you work for is not a publicly traded company, how do you go about actually selling your private stock? You actually have quite a few options.

1) Forward/accelerated vesting

First, going into a new role it’s helpful to be aware of the option of forward vesting shares. If you’ve got the cash, and the company is open to it, this is your best option, as it avoids all tax hassles down the road.

Here’s how it works:

Taking our example above. Let’s say you’re in the process of joining a new company. They’ve extend a grant of 20,000 options at a strike price of $0.10/share. Chances are the 409A price is also at or near $0.10/share as well.

With forward vesting you purchase all of your options ahead of time. Since there is no delta between your strike price and the 409A price, you don’t pay any taxes. So in this scenario, you’d still have a 4 year vesting schedule with a 1 year cliff. You’d pay $1500 up front, but once you pass your cliff, you start vesting stock instead of options.

There’s a decent chance that the company you’re joining has never heard of this. They may need to consult their lawyer.

But what happens if you leave the company before all of your stock has vested you might be wondering? Not to worry. There is a clause in the agreement that the company can purchase back any unvested stock from the employee at the price the employee paid if the employee leaves the company before they are fully vested.

It requires a little bit of extra paperwork on the company, but can be a win, win situation (assuming you have the cash up front to pre-purchase all of your options).

2) Your company goes public

This is an easy one. Typically there will be a window of time post IPO where you cannot liquidate any of your shares, but after that you can sell your stock at any time at the current market value.

3) Your company is acquired

This is another easy scenario. But again, be mindful of liquidation preferences. Chances are that if you received employee stock options that you have common stock which receives it’s distribution last, and often at multiples less than preferred stock.

4) Sell to someone already on the cap table

If your company isn’t planning on going for an IPO and there’s no sign that they are planning on selling in the near future, a next best step is to reach out to them to see if anyone on the existing cap table is interested in picking up some additional shares. This is in their best interest because it means that no new investors are added to the cap table. It’s in your best interest because it saves you from having to hunt for someone else to buy your stock, and prevents you from having to pay a commission fee.

5) Piggy back off primary rounds

If your company is raising money, it’s almost guaranteed that some people in the company are taking some money off the table. If you can get in on that, this is an easy was to liquidate some of your holdings.

6) Secondary rounds

It’s becoming more and more common for privately held companies to do secondary rounds where employees and early investors have the option of cashing out.

7) Buying yourself 103 days

If you have ISO stock, one handy trick you might try and leverage is to purchase your stock on January 1st. Since you don’t owe taxes until April 15 of the following year, this buys you 3+ months the following year to find a buyer for your stock, thus qualifying you for long-term capital gains tax AND preventing you from having to pay taxes before a sale.

Note: I’ve not actually tried this. You’ll have to let me know if you ever do.

8) Private stock marketplaces

If you work for an exciting startup—one that investors are eager to get a piece of—there are multiple private stock marketplaces where you can list your stock:

https://equityzen.com
https://sharespost.com
https://www.sharebid.com

Just be aware that just because you list your stock doesn’t mean that you will sell it. There is also typically a commission fee that you’ll pay when you sell your shares (5% is typical but you may pay more or less depending on how popular the company is that you work for).

9) Extending your window

Finally it’s worth noting that if you’re leaving your company on good terms and you don’t have the resources to purchase your vested shares (and pay the corresponding taxes) you should definitely check with your company to see if they’ll extend your expiration window. This is becoming increasing popular. More and more tech companies are extending their expiration window out as much as 10 years.

Just know that by law, 3 months after you leave your company your ISO stock options will convert into NSO options.

I hope that was helpful

If you have any thoughts or feedback I’d love to hear it. You can email me at its@davemart.in.

If you’re interested in receiving additional posts like this on a weekly basis, just toss your email in the form at the top of this page. 🤘

Hold Regular Negativity Audits

Negative influences
Photo by Tim Gouw

What’s a negativity audit?

It’s a simple self-evaluation that when held on a regular basis can highlight negative influences in your life.

How does the audit work?

It’s simple. Just ask yourself these 3 questions:

  1. What 3 people leave me feeling the most negative after I spend time with them?
  2. What 3 songs leave me feeling the most negative after I listen to them?
  3. What three things that I’ve watched or read recently leave me feeling the most negative?

Try and answer each of these questions completely and honestly every time. The most is intentionally bolded in each of these. You may not hang around net-negative people at all, but who are “the most” negative 3 people you hang around.

I’ve found it handy to record my answers in the same place every time (either in a journal or in dropbox paper or Google Docs). That way I can look for patterns.

What are the benefits?

I’ve been able to identify and eliminate quite a few things from my life which I believe have had an outsized impact on the quality of my everyday life. One simple example was when I realized how much of a negative influence consuming the news has on me. 3 years ago I stopped watching the news altogether and I can attest to the fact that my life is better for it!

How do I know if something is negative or not?

Common negative behavior includes:

  • abuse (verbal, physical, emotional)
  • gossip
  • fault finding
  • insults
  • discrimination
  • lying
  • sabotage
  • theft

In general, negative interactions can leave you feeling:

  • fearful
  • guilty
  • sad
  • superior
  • shameful
  • depressed
  • inadequate
  • vulnerable
  • jealous
  • fat/ugly

How Often is “Regular”?

That is up to you. I generally do this once a quarter.

Handy Tip for Creating Full Length Screenshots

There are a number of tools out there that specialize in creating full-length screenshots of a website, but did you know that you can also use Chrome’s Developer Tool to accomplish the same thing?

Check it out, first pull up any website:

Website Example

Next, right click and select “Inspect”:

Chrome Dev Tool Inspect

Once the dev console is showing hold down command + shift + p and you should see the following menu:

Type “screen” in the top search box and select the “Capture full size screenshot” option:

Chrome capture screenshot

Then sit back and let Chrome do it’s thing. Within a few seconds you should see a full-length screenshot pop into your downloads folder:

🙌

Updated November 28, 2018.