What Can Rap Teach Us About Leadership?

| February 20, 2012

You’re just a rent-a-rapper, your rhymes are minute-maid
I’ll be here when it fade to watch you flip like a renegade”
—Rakim, “Follow the Leader”

 

The New York Times published an article about Silicon Valley VC wizard Ben Horowitz’ propensity to source Rap Music for management wisdom. Rap you say? Yes, RAP!  While some Rap continues to be about cashing in, getting more “money in the bank,” and blatant sexcapades, other rap according to VC Ben, like the Rakim lyrics cited above,  are applicable to the leadership skills needed for successful entrepreneurs. He cites three essential ingredients for founding CEO success of start-up ventures:

  • Comprehensive knowledge
  • Moral authority
  • Total commitment to the long-term

Read Excerpts from the NYT article  and Ben’s Blog  Below for tips on Entrepreneurial Leadership:

“Ben Horowitz, a prominent venture capital investor here, says rap holds a trove of lessons for tech entrepreneurs. Throw business classes and books out the window, Mr. Horowitz says, and listen to rap lyrics instead.

He applies his theory on his blog (see below), where he has attracted a following of tech readers and other executives by offering business lessons, almost all of them preceded by a rap lyric that summarizes a moral, and with recordings from Grooveshark, the music site.

In the process, he has linked two cultures in Silicon Valley, which is not exactly known for its racial or cultural diversity.

Entrepreneurs may do well to listen to Mr. Horowitz’s advice. He started the venture capital firm Andreessen Horowitz with Marc Andreessen, the co-founder of Netscape, and the firm made vast amounts of money on investments in companies like Groupon and Skype, and stands to make more on Facebook’s initial public offering.”

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From “Ben’s Blog”(Ben Horowitz of Andreesen Horowitz – A Technology Venture Capital Firm)

Why We Prefer Founding CEOs

When my partner Marc wrote his post describing our firm, the most controversial component of our investment strategy was our preference for founding CEOs. The conventional wisdom says a startup CEO should make way for a professional CEO once the company has achieved product-market fit. In this post, I describe why we prefer to fund companies whose founder will run the company as its CEO

The macro reason: that’s the way most of the great technology companies have been built

At Andreessen Horowitz, our primary goal is to invest in the great technology franchises. As we looked at the history of great technology companies, we discovered that founders ran an overwhelming majority of them for a very long time…

Two more quick data points before I move on to explain why this happens.

First, the University of Pennsylvania’s Wharton School of Business just published an analysis of recent exits for high technology companies such as BlackBoard, BladeLogic, Concur, Danger, Liveperson, LogMeIn, and Netsuite. Looking across these nearly 50 companies, the study finds that founding CEOs consistently beat the professional CEOs on a broad range of metrics ranging from capital efficiency (amount of funding raised), time to exit, exit valuations, and return on investment.

Second, for folks keeping score at home, this phenomenon appears to extend beyond high-technology companies. Felix Salmon, for instance, points out that Fortune’s editorial staff considered twelve other candidates including Warren Buffett, Carlos Slim, and Martha Stewart before naming Steve Jobs the best CEO of the decade in November 2009. Salmon points out that “not a single one of the 12 [candidates] is a CEO who was hired to run a company by its board of directors.”

There are certainly exceptions to this rule, most notably Google and Cisco (I will address both exceptions later in this post), but the evidence is one-sided and overwhelming.

The underlying reasons

From a pattern matching perspective, it makes sense that we’d prefer founding CEOs, but as I said in an earlier post, pattern matching is not knowledge. So, why are great technology companies so often run by their founders? And why do professional CEOs sometimes succeed?

The innovation business

The technology business is fundamentally the innovation business. Etymologically, the word technology means “a better way of doing things.” As a result, innovation is the core competency for technology companies. Technology companies are born because they create a better way of doing things. Eventually, someone else will come up with a better way. Therefore, if a technology company ceases to innovate, it will die.

These innovations are product cycles. Professional CEOs are effective at maximizing, but not finding, product cycles. Conversely, founding CEOs are excellent at finding, but not maximizing, product cycles. Our experience shows—and the data supports—that teaching a founding CEO how to maximize the product cycle is easier than teaching the professional CEO how to find the new product cycle.

The reason is that innovation is the most difficult core competency to build in any business. Innovation is almost insane by definition: most people view any truly innovative idea as stupid, because if it was a good idea, somebody would have already done it. So, the innovator is guaranteed to have more natural initial detractors than followers.

On Steve Jobs:

Steve Jobs’ return to Apple provides an excellent example. At the time Jobs regained control of Apple, the conventional wisdom said that Apple was getting killed by “PC Economics” and had to separate the operating system from the hardware. Specifically, Apple couldn’t compete with Microsoft unless it became more horizontal and let commodity hardware manufactures compete while Apple focused exclusively on the OS. The professional CEO who preceded Jobs (Gil Amelio) took the conventional wisdom to heart. He set out to create an ecosystem of Mac cloners who would provide the commodity hardware complement to Apple’s famous OS.

When Jobs came in and reversed those decisions, most industry analysts thought Jobs was insane. Jobs not only killed all the commodity hardware and the horizontal strategy; he went radically vertical. In addition to the basic hardware and operating system, he added applications (iLife, iWork) and peripherals (like the iPod). He even added retail stores.

Today, people would let Steve Jobs make such a radical turn at nearly any company because of the outcome he’s achieved at Apple. But remember that when Jobs returned to Apple in 1996, he was doing so as the co-founder and CEO of NeXT computer, a marginal computer workstation company which Apple purchased for less than $500M. Let’s just say he didn’t have the benefit of the doubt. What he did have: the founder’s courage to innovate despite the doubters.

Innovator’s requirements – what does it take to find the product cycle?

So where did Jobs get this “founders courage” and what is it? In addition to general brilliance, we see three key ingredients to being a great innovator:

  • Comprehensive knowledge
  • Moral authority
  • Total commitment to the long-term

Great founding CEOs tend to have all three and professional CEOs often lack them.

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