Leave Good People Alone and Fakers Will Drive the Company Into the Ground

At a Y Combinator event last week, Brian Chesky, the head of Airbnb, gave a talk about what happened as his company grew. Graham reports that most founders he spoke with after the event called it "the best they'd ever heard." Writer Paul Graham, who was there, describes a talk that struck a chord because so many founders had lived the same failure.

Graham says the theme was that standard guidance for managing bigger firms is mistaken, guidance he summed up as "hire good people and give them room to do their jobs."

In Graham's account, Chesky followed that advice as Airbnb grew, and the results were disastrous. One after another of the most successful founders at the event said the same advice had damaged their own companies.

The method behind the advice treats branches of the organization chart as sealed boxes. You give your immediate reports a goal and leave how to get there to them, because getting into the details would be micromanaging. Sounds great when described that way. Except, based on accounts from many founders, the practical result is often, in Graham's words, "hire professional fakers and let them drive the company into the ground."

For Graham, the advice was written for someone leading a business they did not start, the way a professional manager leads it. Founders need a different method, founder mode, which means staying close to the work, including the details, rather than working only through direct reports.

Chesky worked out his version in part by learning from how Steve Jobs, who ran Apple, stayed deeply involved. Early signs suggest the new approach is succeeding. Airbnb's free cash flow margin is now among the best in Silicon Valley, meaning the cash it keeps from each dollar of sales after paying costs, a sign the business can fund itself and invest without borrowing.