How should a C.E.O. operate?
Silicon Valley has been abuzz in recent days over one topic in particular: How hands-on should founders be in their companies? In the framing of Brian Chesky, the Airbnb co-founder and C.E.O., and Paul Graham, the Y Combinator co-founder, it comes down to “founder mode” versus “manager mode.”
It’s not a new question — and it draws on longstanding examples like Steve Jobs — but it has taken on fresh significance as start-ups struggle with how to grow while keeping antsy investors happy.
Graham kicked off the latest discussion. “Till now most people even in Silicon Valley have implicitly assumed that scaling a start-up meant switching to manager mode,” he wrote. “But we can infer the existence of another mode from the dismay of founders who’ve tried it, and the success of their attempts to escape from it.”
He explained how the founder C.E.O. operates:
It’s pretty clear that it’s going to break the principle that the C.E.O. should engage with the company only via his or her direct reports. “Skip-level” meetings will become the norm instead of a practice so unusual that there’s a name for it. And once you abandon that constraint there are a huge number of permutations to choose from.
Graham took a shot at business schools for missing the trend, saying of the more hands-on founder mode, they “don’t know it exists.”
The prime example Graham cited was Chesky. The Airbnb boss shared his story at a recent Y Combinator event, and also discussed it on a podcast: “The less hands-on I was, the more I got sucked into problems. And by the time I got sucked into a problem, it was like 10 times as much work,” Chesky said on the podcast.
Instead, he decided: “I’m going to be involved in every single detail. And Airbnb is not going to do anything more than I can personally focus on.”
That has gotten results, Graham wrote, with Airbnb now having some of the best free cash flow in Silicon Valley. Then again, Airbnb’s stock price is 31 percent below its 52-week high.
Examples of founder mode include Jobs, whose approach Chesky said he studied; Jensen Huang of Nvidia, who has 60 direct reports; Elon Musk, who is deeply immersed in the operations of his many companies; Mark Zuckerberg of Meta; and Sam Altman of OpenAI.
Outside tech, Howard Schultz, who built Starbucks from a local Seattle coffee chain into a global colossus and was famously hands-on, also fits the mold.
Many founder-C.E.O.s applauded the approach, including Tobias Lütke of the e-commerce company Shopify. (Graham noted that among those who reviewed drafts of his post were Musk, Patrick Collison of Stripe, and Ryan Petersen of Flexport, as well as the investors Ron Conway and Jessica Livingston, and the Y Combinator leaders Garry Tan and Harj Taggar.)
Dan Rose, who held leadership positions at Amazon and Meta, wrote that Jeff Bezos and Zuckerberg “were both micro-managers, deep in the details of the product and business. They never set expectations of autonomy, and they fired anyone who resisted their oversight.”
Others said there were nuances. Jessica Lessin, the founder of The Information, argued that founders do need capable managers, noting that Jobs relied on Tim Cook to oversee the vast and intricate manufacturing operation that became one of Apple’s most crucial assets.
A start-up investor, Henrik Torstensson, agreed that execution mattered, citing Microsoft under Satya Nadella as a “Hall of Fame example” of manager mode done right.
Others riffed on the debate with memes and humor, joking that it’s another phrase for micromanaging. “Everyone loves founder mode this weekend until the average ceo starts applying it on Tuesday,” Packy McCormick, a writer, posted on X.
HERE’S WHAT’S HAPPENING
The E.U.’s top court says the bloc’s regulator should not have investigated the Illumina-Grail deal. The Court of Justice ruled that the European Commission overstepped its authority when it examined and then blocked the $7 billion deal, even though Grail had no presence in the European Union. Illumina has already abandoned the transaction because of antitrust concerns on both sides of the Atlantic.
HPE will pursue its $4 billion claim against the late British tech mogul Mike Lynch. HPE, a successor to Hewlett-Packard, said it would continue legal proceedings in London, seeking compensation over its $11 billion acquisition of Autonomy, the tech company he founded. Lynch died last month when his yacht sank off the coast of Sicily, just months after he was acquitted in a U.S. court of fraudulently inflating Autonomy’s value.
China escalates its trade spat with the West, zeroing in on Canada. China’s commerce ministry said on Tuesday that it would investigate imports of canola and other goods to see if they were unfairly priced in China, days after Ottawa announced that it would impose a 100 percent tariff on Chinese-made electric vehicles. The news comes as Beijing has reportedly threatened to retaliate against Japan for restricting access to the top semiconductors.
Harris’s pitch to union workers
The Harris-Walz campaign spent Labor Day seeking to shore up support from blue-collar workers, an effort that included Vice President Kamala Harris publicly opposing Nippon Steel’s $15 billion bid to buy U.S. Steel.
It’s part of the Democratic ticket’s pitch in key battleground states including Pennsylvania and Wisconsin. But Harris needs to strike a balance between appeasing working-class supporters and deep-pocketed donors wary of her veering too far to the left.
“U.S. Steel should remain American-owned and American-operated,” Harris said at a campaign event in Pittsburgh on Monday. The move — which aligned her with President Biden, who also spoke at the event, and Donald Trump — won the approval of the United Steelworkers union that has firmly opposed the deal with Japan’s Nippon Steel.
That makes the fate of the transaction increasingly cloudy, though Nippon Steel has been betting that the merger review would continue past November, potentially sapping unions of sway.
Gov. Tim Walz of Minnesota also warned unions about a second Trump presidency. Speaking in Milwaukee, he suggested that Republicans would seek to cut overtime pay, raise the age for social security and Medicare and repeal the Affordable Care Act.
Democrats have largely enjoyed the backing of union leaders, including Shawn Fain of the United Automobile Workers and Randi Weingarten of the American Federation of Teachers. They have pledged to use their organizing muscle to get out the vote for Harris, particularly in industrial battleground states.
But Trump has also been making a play for blue-collar voters, arguing that he would deliver more for them than Harris. His campaign has resonated with many of the white male workers who represent a large portion of organized labor. And one major union leader, Sean O’Brien of the International Brotherhood of Teamsters, spoke at the Republican National Convention and hasn’t committed to endorsing Harris.
That said, some unions were outraged when Trump joked about strikebreaking with Elon Musk, one of the former president’s biggest backers, whose Tesla company doesn’t have a unionized work force.
Harris must also work to keep corporate backers on board. While business supporters have flocked to the vice president, they have also pushed her to abandon the tough antitrust regulation approach overseen by Lina Khan and, more recently, reconsider a tax on the wealthiest Americans.
-
In other election news: A recent Wall Street Journal poll showed that Americans were feeling (slightly) more optimistic about the economy. And here’s how some backers of Nikki Haley’s presidential run are weighing the Harris-Trump contest.
OpenAI’s growing pains
Months ago, OpenAI endured a brief civil war that saw the ouster of Sam Altman as C.E.O., largely over his commitment to the safety of the start-up’s artificial intelligence products.
Now it’s reorganizing itself to help pull in more investment. But that effort comes despite unresolved questions about whether the company is meant to serve the public good or simply make money, The Times’s Cade Metz and Mike Isaac write.
OpenAI may change its corporate structure. The company was initially formed as a nonprofit research lab, but formed a for-profit subsidiary in 2019 to allow outside investment. That arm has since drawn billions of dollars, including $13 billion from Microsoft. The tech giant is in talks to participate in yet another fund-raising round — alongside existing investors like Thrive Capital and new ones like Apple and Nvidia — that could elevate OpenAI’s valuation to more than $100 billion.
The board of the original nonprofit OpenAI controls the organization, without official input from investors. But the company is considering changes to that structure, Metz and Isaac write, though it hasn’t settled on a specific approach.
OpenAI needs more money. The A.I. race is becoming increasingly expensive, as tech titans including Alphabet and, yes, Microsoft, spend big on research. While OpenAI has annual revenues of more than $2 billion, Metz and Isaac report, one estimate puts its potential costs this year at $7 billion.
The company has already evolved in ways that depart from its founding principles. Of the 13 people who helped found OpenAI, only three remain. Among those who have left are Ilya Sutskever, the A.I. scientist who pushed for Altman’s ouster, and John Schulman, who led a team focused on the technology’s risks.
OpenAI has recently hired veteran tech executives including Sarah Friar, the former C.E.O. of Nextdoor, as C.F.O.; Kevin Weil, who led product at Twitter, as chief product officer; and Chris Lehane, a former Clinton White House official and Airbnb executive, who is set to become head of global policy.
The transition points to the identity crisis at the heart of OpenAI. Other employees who were uncomfortable with Altman’s management have left. Elon Musk, who co-founded the company, has sued it twice, claiming that it put profits ahead of the public good.
Some former OpenAI employees see more problems on the way. They point to questions about the safety of the technology the company is creating and note that executives tasked with monitoring those products have left.
OpenAI says it’s the cost of growing up. “Scaling a company is really hard,” Jason Kwon, the company’s chief strategy officer, told The Times. “You have to make trade-off decisions all the time. And some people might not like those decisions.”
(The New York Times sued OpenAI and Microsoft in December for copyright infringement of news content related to A.I. systems.)
THE SPEED READ
Deals
-
Private equity firms are raising record sums for real estate secondary funds, which buy assets from other investors. (NYT)
-
An Australian real estate company owned by Rupert Murdoch said it was interested in buying Rightmove, a dominant player in Britain’s real estate listings market. (CNBC)
Artificial intelligence
-
“Mickey Mouse Smoking: How A.I. Image Tools Are Generating New Content-Moderation Problems” (WSJ)
-
Blackstone reportedly plans to buy AirTrunk, an Australian data center operator, for about $13.5 billion in a bet on A.I. in the Asia-Pacific market. (FT)
Best of the rest
-
Volkswagen is weighing a sweeping closure of factories in Germany, the first in its history, setting up a potential clash with labor unions. (NYT)
-
“Will Automation Replace Jobs? Port Workers May Strike Over It.” (NYT)
We’d like your feedback! Please email thoughts and suggestions to [email protected].
The post Why Silicon Valley Is Abuzz Over ‘Founder Mode’ appeared first on New York Times.
