How to Lead
by Ali Rowghani

To succeed in building a big company in the long-term, founders must become good at leading, motivating, and retaining great people. Ali Rowghani, YC Partner and CEO of the YC Continuity Fund, takes from his experience working with great leaders to share his three observations on leadership.

Watch if:

  • you want to learn from someone who worked closely with Steve Jobs and other great founders
  • you aren't sure what type of leader you are

Transcript

Good morning, everyone. My name is Ali Rowghani. I'm a partner at Y Combinator and it's a pleasure to welcome you guys to this lecture. And I understand it's one of the last ones in startup school, which in a way is really appropriate because my talk is about leadership, which is something important, but probably not top of mind for everyone in here. You've probably got more burning concerns as you're getting your startup off the ground and figuring out what to build and working through product market fit and fundraising and so on. But it's a really, really important long term question because if any of you is gonna succeed in building a big company in the long term, you've gotta really get good at leading, motivating, retaining great people. And so I just wanted to take some time this morning to share some of my experiences and hopefully help you guys develop a bit of an early mental model for how to think about leadership at your startups.

So first a quick word about me. Prior to Y Combinator I had a 15-year career as an executive at 2 companies. The first was at Pixar, the animation studio, where I spent almost 10 years and I was the CFO of Pixar for the last 4. And then I spent about five years at Twitter where I started as the CFO, and then I was the COO. And during that time I had the amazing, good fortune of getting a chance to work with and observe some really amazing leaders in action, people like the founder of Pixar, Ed Catmull, the CEO of Pixar, Steve Jobs, Twitter's founders Jack Dorsey, Ev Williams, Biz Stone and now some of the really amazing founder CEOs at YC, people like Patrick Collison and Peter Reinhart, Drew Houston and so on.

So I've had sort of a front row seat being able to observe some great leaders in action. And so what I wanted to do is to share three observations on leadership that I've learned in my career. And as I said before, you know, this may not be pertinent exactly today, if you're just a couple of people working on an idea, but hopefully for most of you, it'll be pertinent very, very soon. So three observations on leadership. The first one is that there's no single archetype for a great leader, no single archetype. Great leaders come in all shapes and sizes, all personality types and characteristics. And I say this from personal experience because it was a big lesson for me.

I used to think that there was kind of a single leadership persona, like a way you had to be, a way you had to act in order to be a great leader to be followed by people. But it turns out that all of the great leaders that I work with and got to observe, they were all really different. Some were introverts, some were extroverts, some were technologists, others were storytellers, some were diplomatic and very calm and others were emotional and a little bit hotheaded. Some were nerds and some were cool kids. So if you think about it, it's kind of a liberating idea actually, that leaders come in all shapes and sizes because it means that anyone fundamentally has the capabilities to become a great leader.

But the other implication, which I think is also really important and I'll touch on again later, is that in your quest to become a great leader, in your quest to have other people follow you, you have to be yourself. You have to be authentic to who you are. You can't try to be someone else if you wanna be a great leader. You can't try to imitate Steve Jobs and hope that people will just kind of think that you are a Steve Jobs. I remember reading a quote some years ago from Reed Hastings, the amazing CEO of Netflix, who basically said the same thing. He said for the first few years of his career as a CEO, he was just trying to imitate Steve Jobs and he realized, well, that's impossible. I have to be Reed. And it was that simple sort of realization that helped him become a much better leader. So you can only be yourself in the end because humans are very good at detecting inauthenticity. We're really good at telling when someone is being fake and we don't generally follow or trust those that we find inauthentic.

So first observation on leadership is that there's not a single archetype. Anyone can be a great leader, but in order to do so, you have to be yourself. Second, while there is no single archetype, great leaders nevertheless share three fundamental attributes and you kinda gotta be really good at these three things if you wanna be a great leader. The first is that great leaders think and communicate clearly. And this really makes all the sense in the world. If you're gonna have other people follow you, if you're gonna have other people want to do the thing you're compelling them to do, you have to be able to paint a clear and compelling vision of the future for them to be able to follow. And as a company grows, as any organization grows, your communication has to get better and better and better because you've got more and diverse...more diverse people who are hearing it. And your processes that you use to communicate can no longer be one-on-one, but they have to scale as the organization itself scales.

The biggest lesson in good, clear communications to me, the most sort of important thing is that great communication needs to be simple. And simplicity in communication is really hard. And to communicate simply takes a lot of time and preparation. There's an example here of Woodrow Wilson, President Woodrow Wilson, who was once asked how long it would take him...he was asked to give a speech and he was asked, how long would he...would he need to prepare? And he said, "Well, it depends how long you guys want me to talk. If it's a 10-minute speech, then I'm gonna need 2 weeks to prepare for it. If I can talk for half an hour, I only need a week. But if I can talk as long as I want to, then I don't need any preparation at all. I can speak right now."

So that from, you know, one of the presidents of the United States, in effect captures the point, if you wanna communicate simply, if you want to, you know, express things that are memorable and that can be repeated, it takes time to prepare. Another great example here from business for me is from Jeff Bezos. And when he was asked about Amazon's retail strategy, what is Amazon's retail strategy? And he said that the way we think about our retail strategy is that there are three things that will never change in our world. In other words, customers will always want three things from Amazon. They'll always want lower prices, they're always want bigger selection of merchandise, and they'll always want faster delivery. So lower prices, more merchandise, more selection, and faster delivery. And that he could never imagine that a consumer would ever want the opposite of any of these three things.

And that became...those three things became the pillars of Amazon's retail strategy for the last 20 years. And employees knew that anything they did to drive those three things, lower prices, faster delivery, and more selection would be in the long term strategic interest of Amazon and it was clear as day and it drove the strategy of the company for a long, long time. So that's the kind of communication that we're talking about. That's the kind of simplicity that's effective. So how do you get good at this? Obviously clear, concise communication comes more naturally to some people than others, but I do believe that practice does make you better when it comes to communication. And I believe that even in small startups, even in two to four person startups, as long as you have other people you're working with, it pays to work on communicating clearly.

So the way you get better is number one, to realize that clarity of thought precedes clarity of language. So you have to think clearly to communicate clearly. And so the first step is to free up time in your schedule to just think and try to jot down your thoughts and try to think about how do I express these thoughts in clearer and clearer ways. And plan and practice your communications. This is probably more appropriate in a slightly bigger company, but if you're standing in front of a group of employees, don't wing it. Try to prepare. Try to have it written down. If the company's big enough practice in front of a smaller audience, get some coaching, ask for feedback. All these things will help you guys become better communicators. And there's really no reason not to start now to try to work on this. It's such a fundamental skill.

Okay. So great leaders are all different, but they share three fundamental attributes. The first is clarity of thought and language. The second is that great leaders have good judgment about people. And why is this important? Why is it important for you to have good judgment about people? Well, as your organizations grow, as your startups grow, you know, before long when you get to have 20 or 30 employees, you're gonna have to either hire or promote other people to be leaders in the company, to be managers and directors, and one day vice presidents and so on. And the decisions that you make in terms of who to empower as leaders in your organization have a really profound impact on the future of the company. And if you make consistently bad decisions on the people that you're bestowing authority and power to, then your authority, your followership, the trust that people have in you will diminish.

So you have to make really good choices in terms of who you empower because in the end they become extensions of you. So how do you get good at this one? Again, you know, good judgment, good EQ is probably, you know, more natural for some people than for others. But my best advice here, especially again, this is a few steps ahead of probably where you guys are now, but when you're starting to recruit for any position in your company, you should try to meet a lot of people. You should put real time and energy into it. You should try to even meet people who you have no hope of hiring, because it's important to kind of get a sense for what really great leaders are like, what great, you know, engineering managers are like, what great sales leaders are like, etc.

And just talk to them about their jobs and their backgrounds and how they came to be where they are. Ask them about how they lead people, what they think goes well, doesn't go well. This type of kind of educational interview will really help you, will really help hone your judgment about what's good and what's bad and who's good and who's bad. And don't think that you're wasting time in doing this. You know, you guys will...many of you will be hiring senior people one day for the first time who will never have hired a CFO before. Don't cut corners. Spend time meeting people and honing your instincts.

The other thing I would say is, you know, as you guys start to grow your companies, you're obviously gonna have to hire and recruit a lot of people, and some of those people will not work out. Just make sure that you view the hiring process as something that you can learn from every single time and just be very diligent in terms of learning, you know, who you hired, why you hired that person, what went right, what went wrong in terms of their original hire, their onboarding and their career at the company. Be self-reflective about the development of people in your organization and your own choices as to who you're empowering with authority.

Okay. Last thing that great leaders have in common, great leaders have strong personal integrity and commitment. That means standing for something meaningful beyond themselves and being motivated by things outside of their narrow personal interests. It means avoiding behavior that diminishes trust, diminishes credibility in a leader like favoritism, conflicts of interests, inappropriate language, inappropriate work relationships, etc.

Commitment means making your work into a life mission in ways that inspire other people. It means giving it your all. People see this and they respect it and they follow it. So how do you get good at this? Well, my simple advice on this one is to try to hold yourself accountable to the transparency test, which means ask yourself if all of your private communications and behavior towards others, etc., if all that were to be transparent to everyone at the company, if everyone saw everything you said and did, would you be embarrassed by any of it? We obviously all make mistakes, but patterns of mistakes are bad and mistakes that sort of damage the integrity that you have or damage the perception of integrity are the worst of all. So that is I think, a very important characteristic in leaders.

Third observation about leadership... So number one, all leaders are all different. There's no single archetype. Number two, nevertheless, they have three common traits, communication, judgment about people and integrity and commitment. And the third observation about leadership is the best way to measure great leaders is in terms of the amount of trust they're able to engender in the people who work with them, for them, around them, etc. Trust is the metric, the success metric for leadership and trust in a 360 degree sense of the word.

I would say that across any organization, the job of every leader is to build trust, trust in employees, investors, customers, users, and so on. And building trust is both an art and a science. So the science of trust is fairly simple. You have to be right about the empirical questions in your business. You know, if you're predicting, hey, we should build this product or we should try to sell to this customer or, you know, we should try to market the product in this way, these things over time, like these choices get proven right or wrong. And hopefully you're right much more than you're wrong because if you're consistently wrong, then you diminish the amount of trust people will have in you. It's almost like asking someone what's two plus two, and if they consistently answer five, then they can be the most trustworthy, ethical person on the planet but you're not gonna trust them at the end of the day with anything having to do with math. So that's the science of trust.

I find that founders often get this part right. The second aspect of building trust is more of an art. This is about being able to show empathy and good judgment, having timing, good timing when you confront issues. It's about striving for something bigger than yourself and not being selfish or self-centered. And this is a more delicate, obviously, the art of trust, building the art of trust is a more delicate topic. And again, practice makes you better, but I'd always try to keep it in mind. So my parting advice for you guys, as you guys are sort of tadpoles on your way to building big companies is that as you...with every step that you take forward, try to optimize for trust as leaders.

You're gonna have lots of hard decisions to make in the coming years. You'll have to fire people. You'll have to admit mistakes to your customers. You'll have to say no to people because you disagree with them and their ideas. Try to view every challenge that comes in your way, try to view every challenge as an opportunity to increase the trust that people have in you as a leader. Try to view every challenge as a trust building opportunity. And as you evaluate one course of action versus another, ask yourself which path is gonna generate more trust in you as a leader, and always try to choose that path. That's my parting advice. I wish you guys all the luck and success in the world, and it was great talking here today. Thank you.