Can Hustle Hurt Your Startup?

“Hustle” is the startup world’s latest buzzword obsession.

It’s seductive to think all success boils down to a single trait! But the team who works hardest doesn’t generally win.

Lots of companies fail for lack of execution and follow-through. But I’ve seen far bigger better companies fall because they were executing the wrong stuff! (e.g. Yahoo!, Evernote. I saw it a lot in my time at PayPal before David Marcus as well).

Placing smart bets and staying focused is even more critical for startups. Suppose you close a seed round. Congratulations, you have $500,000 in the bank, and about 10 months worth of oxygen for you and your team of five employees to either 1) become profitable or 2) put up the growth numbers to raise a Series A.

Let’s do the math: Six people X 10 months = 60 person-months of work. You’re trying to build a $100 million business, or a $1B business. You don’t need to work 20% harder; you need to find leverage to 10X. You need to use those 60 person-months very wisely!

All this focus on “hustle” sends founders the wrong message, saying “It’s a game of inches. If you only work a harder, that can make the difference!” And that’s just nonsense!

Hard work is critical. But the company who works the hardest doesn’t get a prize for effort!

You Don’t Get a Prize for Effort

Many of today’s top startups are trying to disrupt established entrenched industries: Uber vs. taxis, AirBnB vs. hotels, Stripe vs. banks and gateways, Transferwise vs. the whole remittance industry. These industries have legions of hard working employees. Stripe is not going to out-work the rest of the payments industry.

The only way to disrupt an established industry is to out-think them, not out-work them. And that’s why hustle alone will not get an investment from me.

Can Hustle Actually Hurt a Startup?

Okay, you get it. “Work smart.” But can hard-working employees actually hurt my company?

I once heard a Ted talk (in-person, 1997, before they were all on YouTube), and I can’t dig up the source. But it was a Harvard professor (Or was it MIT?) talking about leadership. The idea is also attributed to Kurt Von Hammerstein-Equord. Anyways, the content of the talk…

The US military does a lot of leadership studies because they have a ton of data. They give entering cadets a gazillion different tests — intelligence, skill aptitudes, personality, physical, emotional… all the data points you could want. And they have a single, consistent, well-documented independent variable: Performance evaluations, promotions and rank. So it’s the ideal test bed to ask “what makes a great leader”?

The study’s authors took all these inputs and did a massive regression analysis to find out what innate traits, from the outset, led to the most successful leaders over the long-term. And for all their thousands of variables, it really boiled down to two traits: Intelligence and hustle.

If you score every cadet on those two traits, you get, in simple terms, four kinds of cadets:

1. Smart & hard working
2. Dumb & hard working
3. Smart & lazy
4. Dumb & lazy

Obviously smart, hard-working people are wonderful. In-fact, they make the second best leaders of the four types. They have great ideas, and they follow-through tirelessly.

The only ones who scored higher were the “smart lazy” people — because they can’t be bothered, so they design systems that run themselves. And when you’re operating at the scale of the US military, your systems can’t depend on active day-to-day management by a single human point of failure.

So what of the dumb lazy people? Obviously a liability to any organization. In-fact, they’re the second worst kind of employee to have.

The worst ones are the dumb hard-working ones. They have terrible ideas, and they follow through! They squander resources and create problems for everyone else!

If you’re hiring for hustle, and hustle alone, odds are you’ll end up with some dumb, but hard-working people whom you really cannot afford.

The CEO’s job:

Every company needs a CFO, it’s a tautology. Ironically, the CFO only manages your company’s third most precious resource money! Why have money? To pay people to do work. Why pay people to do work? To get hoards of loyal customers (precious resource #2). Your company’s #1 most valuable resource is the time and attention of your employees! And who manages that resource? The CEO.

As the CEO, you set the strategy. That means, quite simply, you set the goal, and place a series of bets on what your team should be doing to achieve that goal. Once you’ve chosen the goal and have metrics in-place, your constant obsession should be: “What work should we be doing? Are we doing it? Are we doing it well? Are we learning and getting better at doing it?”

If you do this well, your organization will get big. So big, in-fact, that you cannot monitor everybody’s work each day. And that means you’re going to need a team of people who make good decisions — really smart people who think before they act.

Great. What should I do?

If you’re a VC or a leader in an organization, you have to make important people decisions all the time. Filter for smart! I don’t mean IQ tests. I mean this specific kind of smart we’ve been talking about: People who will look for leverage, for 10X projects and 80/20 opportunities!

When you’re talking to candidates — for jobs or investments, ask questions to understand why they made the decisions they did. Are they able to zoom out and see the big picture? Do they understand when they are making resource allocation decisions (spending money, people’s time)? Do they understand both explicit costs and opportunity costs (tradeoffs)? Are they thinking about the end goal, and the best ways to achieve it? Are they looking for leverage and 10X outcomes? These are the sorts of things that help you understand if a person will be good at using the investment you make in them.

Follow me: @matthlerner

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