The Hard Thing About Hard Things Chapter 1

The contest for this book has ended, but check out the book contest homepage to see what books you can win this week! This here is all about My wife, my kids, the life that I live Through the night, I was his, it was right, but I did My ups, and downs, my slips, my falls My trials and tribulations, my heart, my balls. —DMX, “WHO WE BE”FROM COMMUNIST TO VENTURE CAPITALIST The other day I threw a big barbecue at my house and invited a hundred of my closest friends. These types of gatherings aren’t unusual. My brother-in-law, Cartheu, and I have been barbecuing for years, and my skills have earned me the nickname from my African American friends “the Jackie Robinson of Barbecue.” I crossed the color line. At this particular barbecue, the conversation turned to the great rapper Nas. My friend Tristan Walker, a young African American entrepreneur, commented proudly that Nas was from his home project, Queensbridge, New York—one of the largest public housing projects in the United States. My seventy-three-year-old Jewish father interjected, “I’ve been to Queensbridge.” Convinced that there was no way that my old, white father had been to Queensbridge, Tristan said, “You must mean Queens. Queensbridge is actually a housing project in an extremely rough neighborhood.” My father insisted: No, it was Queensbridge. I pointed out to Tristan that my father grew up in Queens, so he couldn’t possibly be confused. Then I asked, “Dad, what were you doing in Queensbridge?” He replied, “I was passing out communist literature when I was eleven years old. I remember it well, because my mother got very upset that the Communist Party sent me into the projects. She thought it was too dangerous for a little kid.” My grandparents were actually card-carrying Communists. As an active member in the Communist Party, my grandfather Phil Horowitz lost his job as a schoolteacher during the McCarthy era. My father was a red-diaper baby and grew up indoctrinated in the philosophy of the left. In 1968, he moved our family west to Berkeley, California, and became editor of the famed New Left magazine Ramparts. As a result, I grew up in the city affectionately known by its inhabitants as the People’s Republic of Berkeley. As a young child, I was incredibly shy and terrified of adults. When my mother dropped me off at nursery school for the first time, I began to cry. The teacher told my mother to just leave, while reassuring her that crying was common among nursery school children. But when Elissa Horowitz returned three hours later, she found me soaking wet and still crying. The teacher explained that I hadn’t stopped, and now my clothes were drenched as a result. I got kicked out of nursery school that day. If my mother hadn’t been the most patient person in the world, I might never have gone to school. When everybody around her recommended psychiatric treatment, she was patient, willing to wait until I got comfortable with the world, no matter how long it took. When I was five years old, we moved from a one-bedroom house on Glen Avenue, which had become far too small for a six-person family, to a larger one on Bonita Avenue. Bonita was middle-class Berkeley, which means something a bit different from what one finds in most middle-class neighborhoods. The block was a collection of hippies, crazy people, lower-class people working hard to move up, and upper-class people taking enough drugs to move down. One day, one of my older brother Jonathan’s friends, Roger (not his real name), was over at our house. Roger pointed to an African American kid down the block who was riding in a red wagon. Roger dared me: “Go down the street, tell that kid to give you his wagon, and if he says anything, spit in his face and call him a nigger.” A few things require clarification here. First, we were in Berkeley, so that was not common language. In fact, I had never heard the word nigger before and didn’t know what it meant, though I guessed it wasn’t a compliment. Second, Roger wasn’t racist and he wasn’t raised in a bad home. His father was a Berkeley professor and both his parents were some of the nicest people in the world, but we later found out that Roger suffered from schizophrenia, and his dark side wanted to see a fight. Roger’s command put me in a difficult situation. I was terrified of Roger. I thought that he would surely give me a severe beating if I didn’t follow his instructions. On the other hand, I was terrified of asking for the wagon. Hell, I was terrified of everything. I was much too scared of Roger to stay where I was, so I began walking down the block toward the other kid. The distance was probably thirty yards, but it felt like thirty miles. When I finally got there, I could barely move. I did not know what to say, so I just opened my mouth and started talking. “Can I ride in your wagon?” is what came out. Joel Clark Jr. said, “Sure.” When I turned to see what Roger would do, he was gone. Apparently, his light side had taken over and he’d moved on to something else. Joel and I went on to play all day that day, and we’ve been best friends ever since. Eighteen years later, he would be the best man at my wedding. Until now, I’ve never told that story to anyone, but it shaped my life. It taught me that being scared didn’t mean I was gutless. What I did mattered and would determine whether I would be a hero or a coward. I have often thought back on that day, realizing that if I’d done what Roger had told me to do, I would have never met my best friend. That experience also taught me not to judge things by their surfaces. Until you make the effort to get to know someone or something, you don’t know anything. There are no shortcuts to knowledge, especially knowledge gained from personal experience. Following conventional wisdom and relying on shortcuts can be worse than knowing nothing at all. TURN YOUR SHIT IN Over the years, I worked hard to avoid being influenced by first impressions and blindly adhering to convention. Growing up in Berkeley as an excellent student in a town that frowned upon football as being too militaristic, I wasn’t expected to join the Berkeley High School football team, but that’s what I did. This was a big step for me. I had not played in any of the peewee football leagues, so it was my first exposure to the sport. Nonetheless, those earlier lessons in dealing with fear helped me tremendously. In high school football, being able to handle fear is 75 percent of the game. I will never forget the first team meeting with head coach Chico Mendoza. Coach Mendoza was a tough old guy who had played college football at Texas Christian University, home of the mighty Horned Frogs. Coach Mendoza began his opening speech, “Some of you guys will come out here and you just won’t be serious. You’ll get here and start shooting the shit, talking shit, bullshittin’, not doing shit, and just want to look good in your football shit. If you do that, then you know what? Turn your shit in.” He went on to elaborate on what was unacceptable: “Come late to practice? Turn your shit in. Don’t want to hit? Turn your shit in. Walk on the grass? Turn your shit in. Call me Chico? Turn your shit in.” It was the most intense, hilarious, poetic speech I’d ever heard. I loved it. I couldn’t wait to get home and tell my mother. She was horrified, but I still loved it. In retrospect, it was my first lesson in leadership. Former secretary of state Colin Powell says that leadership is the ability to get someone to follow you even if only out of curiosity. I was certainly curious to see what Coach Mendoza would say next. I was the only kid on the football team who was also on the highest academic track in math, so my teammates and I didn’t see each other in many classes. As a result, I ended up moving in multiple social circles and hanging out with kids with very different outlooks on the world. It amazed me how a diverse perspective utterly changed the meaning of every significant event in the world. For instance, when Run-D.M.C.’s Hard Times album came out, with its relentless bass drum, it sent an earthquake through the football team, but not even a ripple through my calculus class. Ronald Reagan’s Strategic Defense Initiative was considered an outrage among young scientists due to its questionable technical foundation, but those aspects went unnoticed at football practice. Looking at the world through such different prisms helped me separate facts from perception. This ability would serve me incredibly well later when I became an entrepreneur and CEO. In particularly dire circumstances when the “facts” seemed to dictate a certain outcome, I learned to look for alternative narratives and explanations coming from radically different perspectives to inform my outlook. The simple existence of an alternate, plausible scenario is often all that’s needed to keep hope alive among a worried workforce. BLIND DATE In the summer of 1986, I had finished my sophomore year of college at Columbia University, and I was staying with my father, who was now living in Los Angeles. I had been set up on a blind date by my friend and high school football teammate Claude Shaw. Claude and I got ready for the double date with his girlfriend, Jackie Williams, and my date, Felicia Wiley, by preparing an elaborate dinner. We meticulously planned and cooked all day and had the entire meal, including four perfectly presented T-bone steaks, ready at 7 p.m.—date time. But there were no dates. An hour passed, but we didn’t get too worked up. Jackie was known for her tardiness, so no worries. Then two hours passed, and Claude called for a status check. I listened in shock as I looked over the now-cold gourmet meal that we’d prepared. My date, Felicia, had decided that she was “too tired” to show up for the date. Wow. How obnoxious! I told Claude to hand me the phone. I introduced myself: “Hi, this is Ben, your blind date.” Felicia: “I am sorry, but I am tired and it is late.” Me: “Well, it is late, because you are late.” Felicia: “I know, but I am just too tired to come over.” At this point I decided to appeal to her sense of empathy. Me: “Well, I understand your predicament, but the time to communicate this message would have been before we spent all day cooking dinner. At this point, anything short of getting into your car and driving here immediately would be rude and leave a permanently poor impression.” If she was totally self-centered (as she appeared to be), my plea would have no effect, and I would be better off missing the date. On the other hand, if she didn’t want to go out like that, then there might be something there. Felicia: “Okay, I’ll come over.” Ninety minutes later she arrived wearing white shorts and looking as pretty as can be. In all my focus and anticipation about the date, I had completely forgotten about the fistfight I’d been in the day before. During a pickup basketball game in the San Fernando Valley, a six-foot-two-inch, crew-cut-sporting, camouflage-pants- wearing, fraternity-boy-looking player threw the ball at my brother. Jonathan was a musician, had long hair, and probably weighed about 155 pounds at the time. On the other hand, I was used to football and fighting and was ready for action. I judged the situation on my first impression, and I rushed the frat boy. A scuffle ensued. I landed some good punches but caught a right hook under my left eye, leaving a bit of a mark. It’s possible that my target player was simply mad about a hard foul rather than trying to bully my brother, but that’s the price of not taking the time to understand. I will never know. Whatever the case, when I opened the door to greet our dates, Felicia’s award-winning green eyes immediately fixed on the welt under my eye. Her first impression (told to me years later): “This guy is a thug. Coming here was a big mistake.” Fortunately, neither of us relied on our first impressions. We have been happily married for nearly twenty-five years and have three wonderful children. SILICON VALLEY During one summer in college, I got a job as an engineer at a company called Silicon Graphics (SGI). The experience blew my mind. The company invented modern computer graphics and powered a whole new class set of applications ranging from the movie Terminator 2 to amazing flight simulators. Everybody there was so smart. The things they built were so cool. I wanted to work for Silicon Graphics for the rest of my life. After graduating from college and graduate school in computer science, I went back to work for SGI. Being there was a dream come true and I loved it. After my first year at SGI, I met a former head of marketing for the company, Roselie Buonauro, who had a new startup. Roselie had heard about me from her daughter, who also worked with me at SGI. Roselie recruited me hard. Eventually, she got me and I went to work for her at NetLabs. Joining NetLabs turned out to be a horrible decision for me. The company was run by Andre Schwager, a former Hewlett-Packard executive, and more important, Roselie’s husband. Andre and Roselie had been brought in by the venture capitalists as the “professional management team.” Unfortunately, they understood very little about the products or the technology, and they sent the company off in one crazy direction after the next. This was the first time that I started to understand the importance of founders running their companies. To make matters more complicated, my second daughter, Mariah, had been diagnosed with autism, which made working at a startup a terrible burden for our family, as I needed to spend more time at home. One very hot day my father came over for a visit. We could not afford air-conditioning, and all three children were crying as my father and I sat there sweating in the 105-degree heat. My father turned to me and said, “Son, do you know what’s cheap?” Since I had absolutely no idea what he was talking about, I replied, “No, what?” “Flowers. Flowers are really cheap. But do you know what’s expensive?” he asked. Again, I replied, “No, what?” He said, “Divorce.” Something about that joke, which was not really a joke, made me realize that I had run out of time. Up until that point, I had not really made any serious choices. I felt like I had unlimited bandwidth and could do everything in life that I wanted to do simultaneously. But his joke made it suddenly clear that by continuing on the course I was on, I might lose my family. By doing everything, I would fail at the most important thing. It was the first time that I forced myself to look at the world through priorities that were not purely my own. I thought that I could pursue my career, all my interests, and build my family. More important, I always thought about myself first. When you are part of a family or part of a group, that kind of thinking can get you into trouble, and I was in deep trouble. In my mind, I was confident that I was a good person and not selfish, but my actions said otherwise. I had to stop being a boy and become a man. I had to put first things first. I had to consider the people who I cared about most before considering myself. I decided to quit NetLabs the next day. I found a job at Lotus Development that would allow me to get my home life straightened out. I stopped thinking about myself and focused on what was best for my family. I started being the person that I wanted to be. NETSCAPE One day while working at Lotus, one of my coworkers showed me a new product called Mosaic, which was developed by some students at the University of Illinois. Mosaic was essentially a graphical interface to the Internet—a technology formerly only used by scientists and researchers. It amazed me. It was so obviously the future, and I was so obviously wasting my time working on anything but the Internet. Several months later, I read about a company called Netscape, which had been cofounded by former Silicon Graphics founder Jim Clark and Mosaic inventor Marc Andreessen. I instantly decided that I should interview for a job there. I called a friend who worked at Netscape and asked if he could get me an interview with the company. He obliged and I was on my way. During the first interviews, I met everyone on the product management team. I thought the meetings went well, but when I arrived home that evening Felicia was in tears. The Netscape recruiter had called me to give me some tips, and Felicia had answered. (This was before the days of pervasive cell phones.) The recruiter informed her that it would be unlikely I’d get the job, because the group was looking for candidates with Stanford or Harvard MBAs. Felicia suggested that maybe I could go back to school. Given that we had three children, she knew this was unrealistic, hence the tears. I explained that recruiters were not hiring managers, and that they might consider me despite my lack of proper business schooling. The next day the hiring manager called back to let me know that they wanted me to interview with cofounder and Chief Technical Officer Marc Andreessen. He was twenty-two years old at the time. In retrospect, it’s easy to think both the Web browser and the Internet were inevitable, but without Marc’s work, it is likely that we would be living in a very different world. At the time most people believed only scientists and researchers would use the Internet. The Internet was thought to be too arcane, insecure, and slow to meet real business needs. Even after the introduction of Mosaic, the world’s first browser, almost nobody thought the Internet would be significant beyond the scientific community—least of all the most important technology industry leaders, who were busy building proprietary alternatives. The overwhelming favorites to dominate the race to become the so-called Information Superhighway were competing proprietary technologies from industry powerhouses such as Oracle and Micro- soft. Their stories captured the imagination of the business press. This was not so illogical, since most companies didn’t even run TCP/IP (the software foundation for the Internet)—they ran proprietary net- working protocols such as AppleTalk, NetBIOS, and SNA. As late as November 1995, Bill Gates wrote a book titled The Road Ahead, in which he predicted that the Information Superhighway—a network connecting all businesses and consumers in a world of frictionless commerce—would be the logical successor to the Internet and would rule the future. Gates later went back and changed references from the Information Superhighway to the Internet, but that was not his original vision. The implications of this proprietary vision were not good for business or for consumers. In the minds of visionaries like Bill Gates and Larry Ellison, the corporations that owned the Information Superhigh- way would tax every transaction by charging a “vigorish,” as Microsoft’s then–chief technology officer, Nathan Myhrvold, referred to it. It’s difficult to overstate the momentum that the proprietary Information Superhighway carried. After Mosaic, even Marc and his cofounder, Jim Clark, originally planned a business for video distribution to run on top of the proprietary Information Superhighway, not the Internet. It wasn’t until deep into the planning process that they decided that by improving the browser to make it secure, more functional, and easier to use, they could make the Internet the network of the future. And that became the mission of Netscape—a mission that they would gloriously accomplish. Interviewing with Marc was like no other job interview I’d ever had. Gone were questions about my résumé, my career progression, and my work habits. He replaced them with a dizzying inquiry into the history of email, collaboration software, and what the future might hold. I was an expert in the topic, because I’d spent the last several years working on the leading products in the category, but I was shocked by how much a twenty-two-year-old kid knew about the history of the computer business. I’d met many really smart young people in my career, but never a young technology historian. Marc’s intellect and instincts took me aback, but beyond Marc’s historical knowledge, his insights about technologies such as replication were incisive and on point. After the interview, I phoned my brother and told him that I’d just interviewed with Marc Andreessen, and I thought that he might be the smartest person I’d ever met. A week later, I got the job. I was thrilled. I didn’t really care what the offer was. I knew that Marc and Netscape would change the world, and I wanted to be part of it. I could not wait to get started. Once at Netscape, I was put in charge of their Enterprise Web Server product line. The line consisted of two products: the regular Web server, which listed for $1,200, and the secure Web server (a Web server that included the then brand-new security protocol invented by Netscape called SSL, Secure Sockets Layer) for $5,000. At the time that I joined, we had two engineers working on the Web servers: Rob McCool, who had invented the NCSA Web server, and his twin brother, Mike McCool. By the time Netscape went public in August 1995, we had grown the Web server team to about nine engineers. The Netscape initial public offering (IPO) was both spectacular and historic. The stock initially priced at $14 per share, but a last-minute decision doubled the initial offering to $28 per share. It spiked to $75—nearly a record for a first-day gain—and closed at $58, giving Netscape a market value of nearly $3 billion on the day of the IPO. More than that, the IPO was an earthquake in the business world. As my friend and investment banker Frank Quattrone said at the time, “No one wanted to tell their grandchildren that they missed out on this one.” The deal changed everything. Microsoft had been in business for more than a decade before its IPO; we’d been alive for sixteen months. Companies began to get defined as “new economy” or as “old economy.” And the new economy was winning. The New York Times called the Netscape IPO “world-shaking.” But there was a crack in our armor: Microsoft announced that it would be bundling its browser, Internet Explorer, with its upcoming breakthrough operating system release, Windows 95—for free. This posed a huge problem to Netscape, because nearly all of our revenue came from browser sales, and Microsoft controlled more than 90 percent of operating systems. Our answer to investors: We would make our money on Web servers. Two months later, we got our hands on an early release of Microsoft’s upcoming Web server Internet Information Server (IIS). We deconstructed IIS and found that it had every feature that we had— including the security in our high-end product—and was five times faster. Uh-oh. I figured that we had about five months before Microsoft released IIS to solve the problem or else we would be toast. In the “old economy,” product cycles typically took eighteen months to complete, so this was an exceptionally short time frame even in the “new economy.” So I went to see our department head, Mike Homer. With the possible exception of Marc, Mike Homer was the most significant creative force behind Netscape. More important, the worse a situation became, the stronger Mike would get. During particularly brutal competitive attacks, most executives would run from the press. Mike, on the other hand, was always front and center. When Microsoft unveiled its famous “embrace and extend” strategy—a dramatic pivot to attack Netscape—Mike took every phone call, sometimes even talking to two reporters at once with a phone in each hand. He was the ultimate warrior. Mike and I spent the next several months developing a comprehensive answer to Microsoft’s threat. If they were going to give our products away, then we were going to offer a dirt-cheap, open alternative to the highly expensive and proprietary Microsoft BackOffice product line. To do so, we acquired two companies, which provided us with a competitive alternative to Microsoft Exchange. We then cut a landmark deal with the database company Informix to provide us unlimited relational database access through the Web for $50 a copy, which was literally hundreds of times less than Microsoft charged. Once we assembled the entire package, Mike named it Netscape SuiteSpot, as it would be the “suite” that displaced Microsoft’s Back-Office. We lined everything up for a major launch on March 5, 1996, in New York. Then, just two weeks before the launch, Marc, without telling Mike or me, revealed the entire strategy to the publication Computer Reseller News. I was livid. I immediately sent him a short email: To: Marc Andreessen Cc: Mike Homer From: Ben Horowitz Subject : Launch I guess we’re not going to wait until the 5th to launch the strategy. —Ben Within fifteen minutes, I received the following reply. To: Ben Horowitz Cc: Mike Homer, Jim Barksdale (CEO), Jim Clark (Chairman) From: Marc Andreessen Subject: Re: Launch Apparently you do not understand how serious the situation is. We are getting killed killed killed out there. Our current product is radically worse than the competition. We’ve had nothing to say for months. As a result, we’ve lost over $3B in market capitalization. We are now in danger of losing the entire company and it’s all server product management’s fault. Next time do the fucking interview yourself. Fuck you, Marc. I received this email the same day that Marc appeared barefoot and sitting on a throne on the cover of Time magazine. When I first saw the cover, I felt thrilled. I had never met anyone in my life who had been on the cover of Time. Then I felt sick. I brought both the magazine and the email home to Felicia to get a second opinion. I was very worried. I was twenty-nine years old, had a wife and three children, and needed my job. She looked at the email and the magazine cover and said, “You need to start looking for a job right away.” In the end, I didn’t get fired and over the next two years, SuiteSpot grew from nothing to a $400 million a year business. More shocking, Marc and I eventually became friends; we’ve been friends and business partners ever since. People often ask me how we’ve managed to work effectively across three companies over eighteen years. Most business relationships either become too tense to tolerate or not tense enough to be productive after a while. Either people challenge each other to the point where they don’t like each other or they become complacent about each other’s feedback and no longer benefit from the relationship. With Marc and me, even after eighteen years, he upsets me almost every day by finding something wrong in my thinking, and I do the same for him. It works. STARTING A COMPANY At the end of 1998 and under immense pressure from Microsoft, which used the full force of its operating system monopoly to subsidize free products in every category in which Netscape competed, we sold the company to America Online (AOL). In the short term, this was a big victory for Microsoft since it had driven its biggest threat into the arms of a far less threatening competitor. In the long term, however, Netscape inflicted irreparable damage on Microsoft’s stronghold on the computing industry: our work moved developers from Win32 API, Microsoft’s proprietary platform, to the Internet. Someone writing new functionality for computers no longer wrote for Microsoft’s proprietary platform. Instead, they wrote to the Internet and World Wide Web’s standard interfaces. Once Microsoft lost its grip on developers, it became only a matter of time before it lost its monopoly on operating systems. Along the way, Netscape invented many of the foundational technologies of the modern Internet, including JavaScript, SSL, and cookies. Once inside AOL, I was assigned to run the e-commerce platform and Marc became the chief technology officer. After a few months, it became apparent to both of us that AOL saw itself as more of a media company than a technology company. Technology enabled great new media projects, but the strategy was a media strategy and the top executive, Bob Pittman, was a genius media executive. Media companies focused on things like creating great stories whereas technology companies focused on creating a better way of doing things. We began to think about new ideas and about forming a new company. In the process, we added two other potential cofounders to the discussion. Dr. Timothy Howes was coinventor of the Lightweight Directory Access Protocol (LDAP), a masterful simplification of its byzantine X.500 predecessor. We hired Tim into Netscape in 1996 and together we successfully made LDAP the Internet directory standard. To this day, if a program is interested in information about a person, it accesses that information via LDAP. The fourth member of our team was In Sik Rhee, who had cofounded an application server company called Kiva Systems, which Netscape had acquired. He had been acting as CTO of the e-commerce division that I ran and, in particular, worked closely with the partner companies in making sure that they could handle the AOL scale. As we discussed ideas, In Sik complained that every time we tried to connect an AOL partner on the AOL e-commerce platform, the partner’s site would crash, because it couldn’t handle the traffic load. Deploying software to scale to millions of users was totally different from making it work for thousands. And it was extremely complicated. Hmm, there ought to be a company that does all that for them. As we expanded the idea, we landed on the concept of a computing cloud. The term cloud had been used previously in the telecommunications industry to describe the smart cloud that handled all the complexity of routing, billing, and the like, so that one could plug a dumb device into the smart cloud and get all the smart functionality for free. We thought the same concept was needed in computing, so that software developers wouldn’t have to worry about security, scaling, and disaster recovery. And if you are going to build a cloud, it should be big and loud, and that’s how Loudcloud was born. Interestingly, the most lasting remnant of Loudcloud is the name itself, as the word cloud hadn’t been previously used to describe a computing platform. We incorporated the company and set out to raise money. It was 1999.