“You got to focus on culture” — Ben Horowitz’s Guide to Starting a Cultural Revolution
What do startups, prison gangs, and a Haitian revolutionist have in common?
“Culture is really important. You got to focus on the culture!”
That was the advice given to Multi-Billionaire Ben Horowitz.
When he was an aspiring entrepreneur, he asked successful CEOs and investors on how they built their companies.
Their advice was confusing.
“What do you mean by culture?” he responded.
He was recounting the conversation in his keynote speech at Startup Grind Global.
It wasn’t until he became a VC that Ben finally understood the importance of culture.
As he coached other businesses and CEOs, he realized that they also had trouble understanding it.
Foosball Tables Aren’t Culture
When you hear, “culture,” you probably think of foosball tables and beanbag chairs.
Genius engineers wearing graphic t-shirts and jeans to the office.
Buzzfeed’s free employee lunch.
These benefits are great. But they aren’t culture.
Horowitz calls them, “perks.”
Your startup’s mission on how it’s going to change the world isn’t culture either.
Neither are the corporate value posters displayed at the workplace entrance.
These elements can inspire your culture. But, they don’t define it.
So, what is culture?
Horowitz defines culture as, “the collective behavior of everybody in the organization.”
It’s how leaders and managers commit to decisions, qualify and attract talent, and run a healthy work environment.
But, culture is best expressed through the actions of employees and managers when there’s little supervision.
For example, Theranos was a medical startup that promoted innovation and consumer health advocacy. Its valuation was at $9 billion.
Their mission was to create a blood testing device that could identify complex health issues with small drops of blood.
They swore to the public and their investors that they had what it took.
Until the Wall Street Journal exposed their asses!
Theranos was full of shit. Their device, Edison, couldn’t produce accurate blood results. Their lab used a third-party tool to create samples.
They lied to their stakeholders.
Theranos’s culture of deceit and secrecy obliterated their CEO’s, Elizabeth Holmes, assumed net worth of $4 billion to $0.
For years, Holmes convinced audiences that Theranos was an honest company. But, their private actions proved otherwise.
How a toxic culture ruined Zenefits
Theranos wasn’t the first billion-dollar startup to fuck themselves over.
Zenefits is one of the most embarrassing Silicon Valley scandals in recent history.
It was an HR software company that sold and managed health-care insurance.
This once-beloved unicorn raised $583 million and was valued at $4.5 billion in 2016.
Even Horowitz’s firm, Andreessen Horowitz invested in it. I believe that this scandal inspired his keynote speech.
Business Insider published details about the inappropriate behavior in Zenefits’s culture.
As Zenefits hacked enormous growth, they quickly hired thousands of new people.
Most of these new hires weren’t qualified, experienced, or well-trained by managers.
That was their first strike.
The second strike was the promotion of alcohol and inappropriate behavior within the workplace.
Employees took shots whenever they achieved milestones or broke records. But, because this was so common, people got drunk throughout the day.
“We started breaking records daily, sometimes twice a day, We should have cut out that tradition immediately, but we didn’t.”
— a former sales manager
An email was sent out asking employees to stop having sex at work:
Subject: [MUST READ]-Urgent Building Announcement
Hey San Francisco,
It has been brought to our attention by building management and Security that the stairwells are being used inappropriately. The stairwells were recently opened up to Zenefits employees for our convenience in getting from floors 4 and 5…
…Also, cigarettes, plastic cups filled with beer, and several used condoms were found in the stairwell. Yes, you read that right. Do not use the stairwells to smoke, drink, eat, or have sex. Please respect building and company policy and use common sense. Keep in mind that policy violations may be grounds for termination.
If the stairwells continue to be used inappropriately, our privileges may be taken away.
Emily Agin
Director of Real Estate and Workplace Services
Crazy, right?!
Soon, the startup’s overall performance was declining.
“Nobody was hitting their quota, and most of the team members weren’t even closing a deal. The majority of the sales team had a ‘zero’ on the board month after month.”
— a former employee
Their third and most harmful strike was the frequent use of a macro program.
At Zenefits, the goal was to sell health-insurance. But, most of the salespeople were not licensed to do this.
Managers didn’t care until certain states started to question them.
In California, salespeople were required to finish a 52-hour online insurance training program to get licensed.
But, because they didn’t want to wait so long, they downloaded a macro software that tricked web browsers into thinking that they were active for all 52-hours.
This act of fraud ignited investigations from independent firms and the California Department of Insurance.
These were the consequences of Zenefits’s dysfunctional culture:
- The CEO resigned
- Alcohol was banned
- 250 people (17% of the workforce) were laid off, including the entire enterprise sales team. In 2017, they laid off almost 50% of their workforce!
- Investigated for selling insurance without a license in several states
- Fired people who use macro programs
- Employee morale dropped
Like Theranos, Zenefits was fake AF.
They had their feel-good mission statement and corporate values on their website. But, behind the scenes, they were a big-ass mess.
Horowitz would say that unprofessionalism and dishonesty was their culture.
Their poor decisions were accepted by leaders, supervisors, and employees.
Prison Gangs Thrive on Culture
“If you come into prison, and you don’t do things the right way, you die,” said Horowitz.
He was explaining the relevance of culture in high-stake organizations like prison gangs.
Prison gangs function like major corporations.
They plot strategies, develop business plans, follow a bureaucratic model, and run an informal HR department.
For example, La Nuestra Familia sends an in-boarding survey to new inmates called NAQ. It asks about their offenses, prison relatives, and how they can provide value to their crew.
Behind bars, gang leaders are managers of violence.
Horowitz recounted a conversation he had with Shaka Senghor, a former prison leader.
Senghor explained how simple offenses like stealing toothpaste could cause major consequences.
To protect his crew, Senghor needs to decide whether to kill the thief or not.
Such harsh leadership decisions reflect on the circumstances within prison culture.
Contrary to popular belif, prison fights aren’t random. They’re orchestrated by leaders trying to maintain status and control within the system.
Prison gangs follow corporate protocol
Correctional officers and prison authorities don’t want to admit this fact: prisons need gangs
“[They provide] governance in a brutal but effective way, “ says David Skarbek, a prison researcher. “They impose responsibility on everyone, and in some ways, the prisons run more smoothly because of them.”
Gangs are in the business of selling contraband. Trading illegal alcohol, narcotics, and cell-phones can create a deadly economy.
Because violence can interfere with their income, gangs have developed a culture that enforces fair trade, punishes stealing, and promotes responsibility.
Skarbek credits this culture for decreasing prison deaths, “[While] the number of prison gangs and members has increased, prison violence has declined dramatically. The rate of inmate homicides declined 94% between 1973 and 2003.”
Gangs also control business activity in the streets. Outside gang members rely on prison leaders to govern them.
Any of their offensives will be punished behind bars.
For example, if a member steals from their crew, he’ll get on the “bad-news list,” or BNL.
The BNL is a list of inmates who haven’t satisfied their debts or betrayed the gang.
As a gang member, you’ll most likely enter prison at some point in your life.
So, when it’s your time to go to prison, you’ll be attacked on sight.
This brutal enforcement causes inmates to quickly satisfy their debt to avoid punishment.
This system leads to smoother transactions and less violence in the outside criminal world.
Why prison gangs are important
Should you join a gang to understand the culture better?
HELL NO!
But, you should understand the importance of rules and systems when running an organization.
Creating a culture of accountability and fairness will decrease the chances of chaos.
And, it should be well-controlled by leaders and managers.
If an employee betrays the culture, they should be punished.
But, no shanking!
This is what Zenefits failed to do. Employees and managers openly discussed using the macro program. They suffered no consequences until it was too late.
There wasn’t a culture that deterred them from committing fraud.
How Culture Freed Haitians From Slavery
In his speech, Horowitz wore an awesome black T-shirt:
It had a picture of the former Haitian slave, Toussaint L’Ouverture.
Where Nat Turner failed, L'Ouverture prevailed.
L’Ouverture led the first and only successful African slave rebellion in history called, The Haitian Revolution.
Not only did it end enslavement in Saint Domingue — modern-day Haiti — but also ended French control over the region.
Terrible slave conditions ignited the rebellion.
French plantation-owners often worked African slaves to death. With poor nutrition, slaves were expected to work 12 hour-work days.
Millions of slaves died after years of forced servitude. Thousands committed suicide.
Saint Domingue had the highest slave death rate in the western hemisphere.
Why past slave rebellions failed
In retaliation to such inhumane treatment, the African slaves resisted against their French owners.
But they usually failed due to the acceptance of slave culture.
Because they were born into slavery, most slaves had low loyalty for rebel leaders.
They accepted their violent treatment, had no confidence in freedom, and had an unhealthy loyalty to the French elite.
“Slave culture is detrimental to a winning revolution,” explained Horowitz.
There were many organized attempts to freedom. But, Horowitz only discussed those that were led by François Mackandal and Vincent Oge.
Mackandal (?-1758) was an escaped Maroon slave. He was charismatic, athletic, and fearless.
He called himself “The Black Messiah,” because he believed that God sent him to free blacks from white rule.
He and his followers would poison slaveholders, their families, and their livestock.
But, soon he started to poison his fellow slaves. He punished them for minor offenses.
He created a culture of tyranny. Combined with slave culture, his soldiers began to resent him.
One day, Mackandal organized a mass-poisonous attack on the French colonists. But before it could begin, he was captured.
One of his followers betrayed on him. He told writer and politician, Médéric Louis Élie Moreau of Mackandal’s plan.
Mackandal was burned to death on a stake. “He was defeated by the culture he set,” said Horowitz.
The second rebellion was by Vincent Ogé (1755–1791).
He was a free and wealthy mixed man who revolted against white colonial authority.
He gathered a group of mixed race people to rebel against racial laws discriminating against light-skinned men regardless of their wealth and education.
He was asked to partner with black slaves. He refused.
Although he had African ancestry, Ogé did not respect his darker counterparts. He wanted to increase political power within his light skin social circle.
He was selfish AF. He had no intentions to end slavery.
This not only disgusted the black slaves, but the white colonial elite also did not trust him.
Ogé and his force of 250–300 followers defeated several detachments of colonial militias.
But they were soon overpowered by a more massive army of professional soldiers.
He and his crew were tried and convicted of treason. Ogé was publicly executed by being broken on a wheel.
How L’Ouverture transformed slave culture
Toussaint L’Ouverture was the leader who gave Saint Domingue (Haiti) their independence.
After he freed the Haitian slaves, L’Ouverture realized that they were not equipped to run the French colony themselves.
They were born from enslavement. Slave culture was all they knew.
So, he decided to integrate them into a newer and more advanced culture with these four steps:
- He kept what worked
- He created shocking rules
- He incorporated other cultures
- His decisions demonstrated priorities
1. He kept what worked
L’Ouverture knew that European soldiers were attempting to discover his combat plans.
To avoid detection, he leveraged the power of music.
During slavery, music was one of the few luxuries that slaves had. They used it to express worship and share urban legends.
L’Ouverture placed women outside of his camp to sing songs containing strategic maneuvers.
They sang attack orders to his soldiers.
As they fought against the Europeans, they implemented his military tactics.
2. He created shocking rules
L’Ouverture valued integrity. He famously said:
“I’d rather relinquish my command if I cannot keep my word.”
So, he created this shocking rule: “Officers cannot cheat on their wives.”
Typically, soldiers would celebrate victories by raping and pillaging conquered territories.
To prevent his army from acting barbaric, he made them focus on loyalty.
He believed that officers who couldn’t stay true to their marriage, couldn’t stay true to him.
3. He incorporated other cultures
L’Ouverture was a well-educated former slave. He admired the works of Julius Caesar.
Especially, Caesar’s strategy to ruling the Roman Empire.
He kept the leaders of conquered colonies in power instead of killing them, because they knew more about their land and culture than him.
The leaders could govern in Caesar’s absence. Thus, the colonies will continue to thrive under his empire.
To overcome slave culture, L’Ouverture assigned conquered European officers to high-positions in his army.
Because they were more advanced, they transformed the culture at a faster rate and taught soldiers how to better fight.
4. His decisions demonstrated priorities
After he won the revolution, L’Ouverture decided not to kill the former plantation owners.
Only because he needed them to maintain Haiti’s economy.
He believed that his people could only prosper with a healthy economy.
Plantation-owners were banned from having slaves. But, they could hire former slaves as employees.
This gave forced laborers the hope of achieving social mobility with the money they earned. They could finally move away from slave culture.
Horowitz posted a slide depicting the positive results of L’Ouverture efforts before he died:
4 Ways to Transform Your Culture Today
I explained how a dysfunctional culture ruined multi-billion dollar startups.
Why prisons needs gangs to improve incarcerated life.
And, how an ex-slave transformed his army’s culture to win a revolution.
These are all excellent examples. But I bet you’re thinking, “How can I develop a good culture for my business?”
It’s by practicing the four strategies L’Ouverture used.
1. Keep what works
In business, we’re often tempted to produce new products, try different marketing channels, and implement creative strategies.
All can distance us from our desired culture.
When Apple was nearing bankruptcy, major investment and businesses analysts advised them to be more like Microsoft.
They were like, “Forget Macintosh. Be like Bill!”
Gil Amelio did just that. His result? Apple’s stock dropped to a 12 year low and Amelio was fired.
By copying Microsoft, they failed to focus on what worked: integrated systems, not clone manufacturing.
This disaster forced Steve Jobs back as CEO.
He gave his critics the middle finger and worked to improve Apple’s product line.
He also developed a new culture inspired by the user experience and innovation, instead of practicality.
Soon, the iMac, iPod, and iPhone were released. Apple became relevant again.
Sometimes, trying new things isn’t worth it. Especially, if you’re trying to copy someone else’s success.
Do you think L’Ouverture would have won against the Europeans if he used standard military communication?
Nope. Letters and telegrams would’ve been discovered pretty quickly.
So, he created his ownform of communication.
2. Create shocking rules
There’s power in shock-value.
Mark Zuckerberg was ahead of the herd when he practiced growth.
His rule at Facebook is: “Move fast and break things.”
Horowitz said,” This might seem counter-intuitive to engineers.”
Their goal is to fix things not break them.
But Zuckerberg knew that he had to motivate his team to surpass the competition and ship new features quickly.
So he created a culture where engineers were encouraged to experiment and adapt to rapid iterations.
If it was legal or not, it didn’t matter. They just had to win first.
Create your shock statement that surprises employees by inspires them to keep working.
3. Incorporate outside leadership
L’Ouverture did one of the most effective and underrated military tactics ever.
He hired more-qualified people to lead his team and the economy.
As humans, we can’t be great at everything.
So, whenever an unfamiliar situation arises, it’s best to learn from people who have already mastered it.
For example, Google wanted to compete against Microsoft with new enterprise software services. But CEO, Larry Page, knew nothing about them.
So, he hired Dianne Greene, an enterprise expert, to transform his product culture with her knowledge and experience.
That’s how we got the G Suite enterprise option today.
4. Make decisions that demonstrate priorities
Sometimes, you need to ignore certain goals to make room for better ones.
At Netflix, mail-delivery DVDs were once 100% of their revenue. But CEO Reed Hastings knew that they wouldn’t sustain them forever.
He wanted to focus on the next big thing: online streaming
In a sudden move, he banned the DVD team from his executive staff meetings.
This way, he could focus primarily on transitioning their culture to online streaming.
For your business, you should practice Warren Buffett’s 2-lists hack.
First, write ten of your startup’s goals for the upcoming year.
Next, circle the top three goals that you want to achieve.
Write the three goals on one list. And the extra seven on another list.
The list of three is your priority list, “The To-Do List.” Spend most of your team’s time and energy committed to accomplishing those goals.
The list of seven is your, “Not-To-Do List.” You’re not even going to think about those goals until you finish your first three.
This strategy will increase productivity because you’re no longer multitasking. You’re spending energy on the essentials.
At Netflix, online streaming was a priority. And mail-delivery DVDs were on the “Not-To-Do List.”
Conclusion
We’re entering a new cultural revolution.
Companies like Thearnos, Zenefits, and now, Outcome Health, illustrate how toxic culture can ruin a business.
Investors and entrepreneurs are realizing that a good idea and personal brand isn’t enough to predict a successful startup.
They must prioritize a healthy and honest culture so they won’t make devastating mistakes.
Here are the key takeaways:
- Culture is the collective behavior of everybody in your organization.
- Toxic culture will ruin your business.
- Startups needs to create a culture of accountability and punishment.
- You can always improve a bad culture.
- Focus on systems and products that works best for your specific business.
- Inspire your team with shocking statements that motivates them to work.
- Learn and hire people who are masters of topics you’re not familiar with.
- Prioritize the goals you want to achieve. Avoid those that don’t help.
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Sources:
Why prisons need prison gangs by Shannon Mizzi, Quartz
“Prisons Gangs and the Community Responsibility System” by M. Garret Roth and David Skarbek, Review of Behavioral Economics
How Gangs Took Over Prisons by Graeme Wood, The Atlantic
Ben Horowitz: To Create Culture, Start A Revolution by Twain Liu, Startup Grind
LIES, BOOZE, AND BILLIONS by Julie Bort, Business Insider
Francois Macandal: The True Story, Facts, Myths and Legends by Mark Davis, Macandal
Warren Buffett’s “2 List” Strategy: How to Maximize Your Focus and Master Your Priorities by James Clear
Case Study 1: St. Domingue — Vincent Oge & Toussaint l’Ouverture by The Abolition Project
Vincent Ogé by Wikipedia
Slavery in Haiti by Wikipedia
