Great ResignationDiversity and InclusionCompensationCEO DailyCFO DailyModern Board

What Ben Horowitz Learned About Creating Corporate Culture

October 25, 2019, 9:00 AM UTC
DLD Conference Munich
Investor Ben Horowitz speaks during the opening of the DLD conference in Munich, Germany in January 2015. Tobias Hase—Picture Alliance/Getty Images
Tobias Hase—Picture Alliance/Getty Images

If there’s one thing Silicon Valley entrepreneurs love to talk about, it’s culture. It eats strategy for breakfast. (Or was it lunch?) It isn’t just one aspect of the game; it is the game. It is, in a word, destiny.

Ben Horowitz, the co-founder of the Silicon Valley venture capital firm Andreessen Horowitz, isn’t one for aphorisms. Still, his 2014 book of management advice, The Hard Thing About Hard Things, is perhaps the single most-cited source of inspiration (if not affirmation) for practicing CEOs this side of The Art of War.

His latest book, What You Do Is Who You Are (Oct. 29; HarperCollins) draws from centuries-old history to explore what makes for a purposeful culture. Fortune spoke to the technologist, investor, and noted hip hop aficionado about what he learned. (Responses edited and condensed for clarity.)

Your first book consistently tops the reading lists of executives Fortune talks to. Why follow it?

It does make you nervous. Is it going to be a good second album, or [will it go the way of] Terence Trent D’Arby? It’s a little scary to write a second one.

The new book was a little bit of unfinished business. One thing I felt like I didn’t address in Hard Things was culture. As a CEO, I felt like I hadn’t ever 100% figured out culture. It’s a very complex topic. Watching people build their companies, I could tell that some people didn’t know what they were doing. Most CEOs don’t. It’s a challenging task to get people to behave the way you want them to without being there to give them instruction. None of these things end up being explicit instructions, so how do you get them to land?

What is it that you actually built? What was it like to work there, what was it like to do business with you? That really speaks to culture. When it goes bad, it’s almost never because of bad intentions. It’s usually not understanding the consequences of your actions.

I think about culture every time I pass a Chick-fil-A. Political controversies aside, by every measure it’s a fast food restaurant—and yet the service stands out compared to its peers. Its employees are always unfailingly polite.

And they’re drawing from the same resource pool, too.

I learned so much doing this book. It was an incredible journey for me. For example, I learned a lot about the Haitian Revolution as the only successful slave revolt. Slave culture was very incompatible with military culture, where you have to trust the order and carry it out. Slave culture is the opposite—it’s short term, you don’t own your tomorrow, there is no notion of tomorrow. So to take slave culture, one that never had any scale, one built by people from tribal societies that also didn’t scale—how did they defeat Napoleon? I’m absolutely obsessed with differences in culture. How do you combine the best elements to get what you want? You use a variety of techniques to do it.

One that struck me the most was this notion of ethics and why they mattered in the culture [that drove the Haitian Revolution]. This is the one that certainly caught Uber—they weren’t unethical, just silent on ethics. In Haiti, it started with, “Officers can’t cheat on their wives,” a rule to create discipline and trust. Your word was everything: “I’d sooner relinquish my command than break my word.” Toussaint L’Ouverture didn’t allow pillaging, which really ended up distinguishing them and had all these knock-on effects. In contrast to the European superpowers running around pillaging everyone, these guys were half-naked and yet committed no acts of violence against people. It’s interesting—the white women in the colony supported Toussaint over the armies, which was key to his success. He said, “Look, we’re fighting for liberty, we’re not fighting for stuff.” That was a huge strength.

A lot of what culture is about is this higher purpose. For the Samurai, you had to keep death in mind at all times. Why? To make sure you live your life right.

All of these examples are, in a way, extreme: true matters of life or death. How does one take these lessons and apply them to a comparatively comfortable corporate existence?

That’s an excellent point, and a big reason why I wrote the book. What are the mechanics of getting the company to live that way? The normal way is, you bring in HR consultants, have an offsite, put the values on the wall. That doesn’t really do anything other than create a culture of hypocrisy.

It’s easier to see the consequences of things we do all the time that don’t seem like much but are powerful. In the book, I write about [author and criminal justice reform advocate] Shaka Senghor. On Shaka’s first day in prison, he ends up in a recreational area and one prisoner walks up to another and stabs him in the neck, then goes to get lunch. And Shaka says, can I really do that? And that shocked me. When I spoke to him, I said, “Shaka, you already did that, you’re in prison for murder. And he says, “No—I shot a man in a drug deal that went bad. I reacted in a situation. That’s very different than taking a two-liter bottle, sharpening it into a weapon over two weeks and deciding to stab someone, actually doing it in front of everyone, then walking away and getting a sandwich.”

So it’s the premeditation.

And the intensity of the moment. Prison culture is so fucking violent because of things like that. It teaches people that they can’t survive if they don’t do things like that. So apply that to business. You’re new at a company, you’re watching the big ones who make a big salary or the ones who are honored, and asking, what are they doing? If they’re talking shit about coworkers, going home at four in the afternoon…that’s what you’re gonna do, too.

Very few CEOs are conscious enough to ask what the experience is like at their company. I am sure that, at a Chick-fil-A, if you don’t say good morning to a customer, it’s a problem.

One of the things businesspeople like to stew on is whether culture can be changed—especially if it’s a bad one. Now that you’ve written your book: Can it?

If a guy who’s born a slave can take a bunch of slaves and turn them into one of the greatest fighting forces in the world, you absolutely can change the fucking culture at your company. That’s a mistake that people often make—that you can’t.

One of the more striking examples of that is Sun Tzu running a concubine army and changing the culture around [military] drills in an instant by cutting people’s heads off. It’s very possible. It’s a matter of technique and commitment to change.

People can come in and water down a culture, but if you’re taking away the old culture, you need to give it a stronger purpose than it had. [When it removed controversial CEO Travis Kalanick] Uber didn’t quite replace the culture with a stronger culture. That’s one of the mistakes it made. Travis’s culture was really compelling, creative, powerful, and motivating—the “super pumped” virtue. He did a lot right and had one very big flaw in the code. But they lost a lot of what he did right in the transition, and you can see that attrition today. (Editor’s note: Horowitz’s firm famously passed on investing in Uber, choosing rival Lyft instead.)

You operate in the world of Silicon Valley, where there’s an obsession with the future and where “ancient history” means Steve Jobs visiting Xerox PARC in the late 1970s. Why go so far back into world history?

You have to write every book for yourself—if you don’t like the book, nobody’s going to like the book. It really came from my own journey to understand culture. Because I hadn’t mastered it, I went back to the things that had influenced my thinking and tried to go much deeper into them.

The fact that Genghis Khan figured out inclusion better than any consultant in Silicon Valley and everyone had forgotten that? That’s crazy. Why don’t people look at the guy who had the amazing result? As opposed to anti-bias training, which is scientifically proven to make you more biased. Plus, I always wanted to call a chapter: “Genghis Khan, Master of Inclusion.”

What surprised you in the course of researching this book?

One that was very hard for me was, in every single historical example, people made horrible mistakes. Toussaint, a giant hero of mine, made terrible mistakes. It became an important point in the book—nobody gets this entirely right. As human beings, we’re flawed. He wasn’t perfect and his imperfections cost him the ultimate price.

The opening quote in the book comes from the Samurai—essentially, you’re going to fail a lot and if you’re not, you’re not useful in this task.

One thing from the book that was interesting to me was how [Creative Artists Agency co-founder] Michael Ovitz used the dress code to dominate the market. Nobody in Silicon Valley thinks like that, that you could pull that off. But he did. And the way he enforced it was such a super-reinforcement of the culture: “We’re the most professional motherfuckers in this town.” And when he spots one of his guys not wearing a suit… “What, are you a customer? You’re not CAA.”

I learned a crazy amount. In the last book, I wrote down what I knew. For this one, I learned a lot from writing it.

Let’s talk about office space purveyor WeWork, which is dominating news headlines right now for having a corporate culture so all-encompassing and detached from reality—it’s literally The We Company—that it hid the problematic business underneath it. In light of the book’s lessons, what do we draw from this?

It’s easy to shit all over everything Adam [Neumann, WeWork’s co-founder and former CEO] did now—the swing and the miss with the IPO, [the takeover by] SoftBank, all of that. But what he accomplished wasn’t trivial; it was very real. WeWork started with a giant vision: “We will change the way that work happens, and make it much more human.” He built a culture around that, and lived it himself. And it was such a compelling narrative that he was able to raise nearly as much money as anybody has privately and build a very talented workforce—those employees are really very good. And from a business standpoint, he created a consumer brand on a real estate company. Who’s done that? Maybe Donald Trump, I guess.

A slightly different category, I think.

Yeah (laughs). The core thing in WeWork’s culture was optimism: “Dream bigger.” It ended up being the Achilles heel because there were clearly things that were not expected in the business, and I’m sure people said something along the way, and I’m sure bad news was difficult to deliver in that environment. That’s where cultural design is very complex. And you have to be careful of that.

I talk about that in the book. The Samurai are an honor culture. But you need to be polite and have rules of engagement—you can’t just have strong, massive cultural concepts and not define the limitations on that. From afar, that seems like the mistake [Neumann] made.

I often speak with executives at very large, very established—well, Fortune 500 companies. They often don’t have a bad culture or a good one but none at all, partly because of their long history, partly because of their size. They don’t get to start fresh like an Uber or WeWork. What do you make of this cultural inertia? How to break the cycle?

And what do you do in the subculture versus the main culture? The bigger the company, the more complicated that design. Especially if you have different businesses with different missions, like a mega conglomerate.

The Samurai had eight to 10 virtues, depending on how you count, and that culture lasted 1,000 years and was very strong and pronounced, even if there were negative aspects of it. These corporate cultures, they have 15 to 20 values and have a more complicated mission than the Samurai ever had. So executives should ask: What are the three to five things that will really distinguish us in our behavior? These large companies have all these values because of that long history and HR consultants adding them along the way. Ask yourself: What’s core to the strategy of the company? Start there. There’s no way you’ll land 20 things across a conglomeration of businesses.

It starts by defining a task that you can actually achieve. You’re talking about how everybody behaves every day. Who are you kidding? You don’t even know. You need to get to something you actually can get your head around.

This conversation has spanned a number of topics and several centuries. What have we missed?

The other important dimension of the book is this whole area of inclusion. Everybody’s focused on how many people they have coming in of every race, gender, what have you. But that’s not the real thing. The real thing is: What is it like when they get there? What’s the culture with respect to them and their skill sets? So often, the way they come in fucks up the culture. People don’t un-see or un-hear that you came in the side door, and that feeling multiplies. You need to measure employee satisfaction among your diverse population. That’s the metric. It’s not how many you have; it’s what it’s like to work there. It’s not your huge pipeline.

Can you see the talent you don’t have? Can you see what you can’t do? You won’t value it coming in if you can’t see it. In the business context, that’s how you get the competitive advantage. You get the sharper handle on talent, see things people can’t, compete and win. That’s how Genghis Khan used inclusion. Not all diverse companies perform better. But if you do it the right way, you will.

For more on Ben Horowitz, read our February 2014 cover story, “Silicon Valley’s Stealth Power,” and watch his 2013 interview at Fortune’s Brainstorm Tech conference in Aspen.