Founder mode is wishful thinking

Another one of Paul Graham’s essays is making the rounds: founder mode. Paul’s writing is generally thoughtful and to the point, but I am not sure I am getting it this time around. The idea seems to be that as startups scale up, their founders are told to become managers and that makes them feel unhappy. That I get. Your nimble startup has become the slow moving corporation to quit. It’s annoying.

It’s less clear what the alternative is, other than that it is called Founder mode (vs manager mode). Graham is uncharacteristically vague about it himself. “...another prediction I'll make about founder mode is that once we figure out what it is, we'll find that a number of individual founders were already most of the way there” - he writes, my emphasis. Founder mode is better than manager mode, we just need to figure out what it is.

It all starts with a talk from Brian Chesky of Airbnb. Seeing manager mode fail, he switched to this mythical founder mode and now things are supposedly better. As proof Paul states that “Airbnb's free cash flow margin is now among the best in Silicon Valley” That seems like an oddly cherry-picked metric. Since Airbnb’s IPO their stock is down 25% while the S&P 500 is up 55%. Microsoft, a company firmly in manager mode, almost doubled in value.

The only other person mentioned that supposedly cracked founder mode is of course Steve Jobs. In Silicon Valley, Jobs' pioneering spirit and revolutionary ideas have earned him well-deserved recognition as one of the most influential innovators.. But when you think about it, he was not a great founder. Here’s a quick recap of what happened before his second coming.

Apple was founded in 1976 and IPO’d a mere four years later. This astonishing success however, is just based on one product, the Apple II. And the Apple II was created by one man. Steve Wozniak. Jobs wanted to create his own computer which became the Lisa. Jobs was then kicked off the team, took over the Mac team. The Mac launched late and over budget partly thanks to Jobs micromanaging. It also underperformed in the market so that when Jobs left the company a year later, the Apple II was still responsible for 80% of Apple’s revenue. As a founder he did not do much better at Next or Pixar.

When Steve came back 12 years later, everything was different. There are many books about how and why, but I think it is fair to say he somehow figured out how to run a big company. In manager mode. He wasn’t what you’d classically call a good manager, but he was effective.

So what’s founder mode all about? I think it is nothing more than wishful thinking. A silicon valley founder leads a team of like minded people who are in it for the mission, storming ahead disrupting markets left and right. Even if that is not true, that’s how it will be remembered. Money is not important because the VCs provide it. And so your company grows and becomes successful. More people join and they are liking the stock grants. First the value of the stock is based on growth, then on revenue and finally profits, or so your CFO tells you. Wallstreet knows that gravity defying start-ups will eventually fall in line.

And so you find yourself in your CEO office thinking about how this upcoming feature will slip by a quarter, how some VP wants to cancel a project that you don’t remember and that the yearly planning is about to kick off even though it is only August. And you think to yourself, there has to be more to life than this. Founder mode. If only.