The right decision is often obvious, but the pressure to make the wrong decision can be overwhelming. It starts with small things.

When founders come in to pitch our firm — one as the CEO and the other as President – the conversation often goes like this:

“Who is running the company?”
“We are,” they both say.
“Who makes the final decision?”
“We do.”
“How long do you expect to run that way?”
“Forever.”
“So you’ve decided to make it more difficult for every employee to get work done so that you don’t have to decide who is in charge, is that right?”

That usually results in silence.

Intellectually, it should be clear that it is easier for employees to go to one decision maker than two. It’s not really very complicated at all. Unfortunately, the clear and present social pressure often overwhelms the long-term benefits of organizing the company properly. Because the founders do not have the courage to decide who is in charge, every employee suffers the inconvenience of double approval.

More importantly, decisions only get scarier as a company grows. When we decided to take Loudcloud public with only $2 million in revenue, it was not a hard choice intellectually — the alternative was to go bankrupt. It was nonetheless terrifying to do something that most employees, everyone in the press, and many investors thought was nuts.

When Making the Right Choice Requires Intelligence and Courage
Sometimes the decision itself is rather complicated which makes the courage challenge even more difficult. CEOs possess a different set of data, knowledge and perspective than anybody else in the company. Frequently, some of the employees and board members are more experienced and more intelligent than the CEO. The only reason the CEO can make a better decision is her superior knowledge.

To make matters worse, when a CEO faces a particularly difficult decision, she may have only a slight preference for one choice over another — say 54% kill a product line, 46% keep it. If the really smart people on the board and on her staff take the other side, her courage will be severely tested. How can she kill the product when she is not even sure if the she is making the right decision and everyone is against her? If she’s wrong, she will have been wrong in the face of advice from her top advisors. If she is right, will anybody even know?

Recently, a large company offered to buy one of our portfolio companies. The deal was lucrative and compelling given the portfolio company’s progress to date and revenue level. The Founder/CEO (I’ll call him Hamlet – not his real name) thought that selling did not make sense due to the giant market opportunity that he was pursuing, but still wanted to make sure that he made the best possible choice for investors and employees. Hamlet wanted to reject the offer, but only marginally. To complicate matters, most of the management team and the board thought the opposite. It did not help that the board and the management team were far more experienced than Hamlet. As a result, Hamlet spent many sleepless nights worrying about whether or not he was right. To make matters worse, he realized that it was impossible to know whether or not he was right. This did not help his sleep. In the end, Hamlet made the best and most courageous decision that he could and did not sell the company. I believe that will prove to be the defining moment of his career.

Interestingly, as soon as Hamlet made the decision, the entire board and executive team immediately embraced the choice. Why? If they wanted to sell the company enough to advise the CEO to give up his dream, how could they reverse themselves so quickly? It turns out that the most important data point driving their earlier preference for selling the company was Hamlet’s initial ambivalence – the team supported the decision they thought the CEO wanted. Hamlet did not realize this and interpreted their desire to sell to be the result of a thorough analysis. Luckily for everybody involved, he had the courage to make the right decision.

The general problem can be seen in the social credit matrix described below. The expected social rewards for making the crowd-influenced decision appear better than those for making the decision that you think is right:

On the surface, it appears that if the decision is a close call, it’s much safer to go with the crowd. In reality, if you fall into this trap, the crowd will influence your thinking and make a 70/30 decision seem like a 51/49 decision. This is why courage is critical.

Courage, Like Character, Can Be Developed

“Every fighter that ever lived had fear. A boy comes to me and tells me that he’s not afraid, if I believed him I’d say he’s a liar or there’s something wrong with him. I’d send him to a doctor to find out what the hell’s the matter with him, because this is not a normal reaction. The fighter that’s gone into the ring and hasn’t experienced fear is either a liar or a psychopath…”
-Cus D’Amato

In all the difficult decisions that I made through the course of running Loudcloud and Opsware, I never once felt brave. In fact, I often felt scared to death. I never lost those feelings, but after much practice, I learned to ignore them. That learning process might also be called the courage development process.

In life, everybody faces choices between doing what’s popular, easy, and wrong vs. doing what’s lonely, difficult, and right. These decisions intensify when you run a company, because the consequences get magnified 1,000 fold. As in life, the excuses for CEO’s making the wrong choice are always plentiful.

Every time you make the hard, correct decision you become a bit more courageous and every time you make the easy, wrong decision you become a bit more cowardly. If you are CEO, these choices will lead to a courageous or cowardly company.

One Last Thought
Over the past 10 years, technological advances dramatically lowered the financial bar for starting a new company, but the courage bar for building a great company remains as high as it has ever been.

— Ben Horowitz is co-founder and general partner of Andreessen Horowitz, a venture capital firm created to support the needs of today’s technology-focused entrepreneurs through angel investments to large-scale funding. Ben currently serves on the board of Okta, Nicira, Proferi and Skype.