From PayPal Mafia to Viral Startups: How David Sacks Leads Growth at Iconic Companies

Aydin Mirzaee (Fellow.app)  05:56

David, welcome to the show. Obviously, this is a very special occasion for us episode number 100. And we’ve been doing this for roughly two years now. And we really wanted to have someone very special on the show for episode 100. So it’s quite an honor to have you on you’ve had a pretty extensive leadership career. You’re known as this great operator of many of like, the great tech companies that a lot of folks look up to you were founding CEO at PayPal, you started Yammer. And you know, I think it was one of the fastest growing companies and certainly achieving the unicorn valuation, and selling it to Microsoft. So there’s a lot of stuff that we want to dig into. But one thing that was really interesting is I feel like I stumbled upon this gem of a deck that I don’t think anyone knows exists. And it’s really awesome. And as I was looking at this deck, we decided we had prepared all these questions, but I decided to scrap all of those. And then just focus on this because it’s so relevant to what we talked about on the podcast, the deck is titled low charisma leadership. Maybe let’s start with why did you put together this deck in the first place?

David Sacks (Craft Ventures)  07:07

Well, somebody asked me to give a talk on leadership and not just leadership, but management. And I was speaking to a bunch of sort of mid level managers at companies. And so the idea was, well, what do you do? How do you be a manager, I’d be a better one. And so I put together a bunch of concepts that I had either read about elsewhere, or had sort of learned, or some hybrid, some combination of the two. And I called it low charisma man and leadership, because these are management techniques that really anybody can use, you don’t need to be like a super charismatic type of person, which is what we think about when the word leadership comes up, we always think about somebody with like a lot of innate charisma. But that’s not really necessary to be an effective manager. And so what I was talking about was sort of the techniques that really anyone can learn.

Aydin Mirzaee (Fellow.app)  07:58

Yeah, I mean, that sounds very appealing. It used to be the that only the extroverts could, well, a lot of people had the perception that you had to be an extrovert. But I think like, it turns out that introverts make really good leaders. And so I’d love to dive into some of the some of the things that you talk about here. So one of which is, you know, I would imagine, and you’ve done this a few times now, being at companies that scale from 50, to 500, to 1000. And beyond, one of the things that starts to become really important is process. And I guess, like when you think about process, I think a lot of startups shy away from it. And they are, you know, afraid of it because it’s rules and rules can be constricting. So what were some of the, I guess, like, how did you think about those in maybe scaling either PayPal, or scaling Yammer, just the like bringing in process and like teaming the growth? Well, you

David Sacks (Craft Ventures)  08:56

have to be careful about introducing a lot of process because what process does is it reduces your flexibility in order to hopefully deliver something that is more predictable, repeatable, and hopefully, higher quality in a specific instance. So you know, as an example, what when an organization will do that’s like early stage and has a lot of generalist doesn’t have a lot of process is they will, you know, you’ll have leaders to find what’s expected. They’ll communicate goals, they’ll measure results, and everyone just figures out how to achieve that. What a process does is all those things, but in a very specific case, you’ll define what’s expected, communicate the goals and measure the results, but you’ll do it for something very specific. Okay, well, we need to fix bugs. So what’s our time to fix the bugs? You know, what’s the error ray will allow? Here’s how we’re going to do product management. Here’s how we’re going to do customer support. You start to create a lot of again, defined proceeds expectations, measurable results that you can get more efficient and better at that thing. But the trade off stuff that you’re making is that you are kind of hardwiring things in a way. But if you think about what a company does at scale, all these processes get chained together to create a service delivery machine where the quality of the product becomes much more consistent, and it becomes much more efficient to deliver that. So this is one of the things that I think a startup figures out as it scales, but you just don’t want to do it prematurely, because you end up making the organization very rigid when you put in too much process.

Aydin Mirzaee (Fellow.app)  10:32

Yeah, that I think makes a lot of sense. And, you know, I think it’s both sides of the equation. And part of it is how do you feel about I guess, if what areas may need more process? Do you think that for example, depending on the type of leader that you have within a department or within a function that you might need different levels? Or is it really agnostic, and it just depends on whether or not like how much creativity and innovation you need in a function?

David Sacks (Craft Ventures)  10:59

Yeah, I mean, it really depends on the function, I think, like one area where you’ll rapidly see the need for more process is in product management. In the very early stages of a startup, usually, the founder CEO is the product manager, and that person will race around telling the engineers what to build, often on sort of a task level. And that stop scaling after a while, right, the company gets to 50 people, 100 people and has dozens of engineers, the CEO can’t manage all that themselves. And so they will hire product managers to do it. And so now you have PMS, you have engineering teams, those teams of managers. And you can’t just if you want to be efficient, about maximizing the engineers time, you can’t just be running around giving them instructions on an ad hoc basis, you want to have a more efficient process where the PMs will figure out a spec, and then talk through with engineers, and then there’ll be some expectation around timelines, and you’ll scope the project down to fit the timelines, you’ll try to create a more predictable delivery schedule. And, you know, it’s something that you evolve towards. Similarly, you think about sales, right? You’ll typically start with in the very early days of a startup, there might be salesperson number one, it could be one of the founders doing it, or it could be that sort of all purpose, it could be like a player coach type, sales leader sales at number one. And they will typically be very entrepreneurial. And they will race around kind of manufacturing deals trying to figure out what it takes to create a deal. But that doesn’t really scale. Because what you really want to do in order to scale revenue is build a higher 10 A’s and they each have a quota. And they can predictably hit quota. So then you can hire the next 10 reps. And so in order to scale your sales organization, you have to put in place proxies. And you’ll need those proxies to train the reps and define their territories to make sure they’re not coming in conflict with each other, you’ll need a way of taking in the feedback, the sales reps are giving you to improve the product, and so on down the line. So you know, what happens is, as the company has more of a need to scale, you will introduce processes a way to achieve a more predictable result, and sort of rein in the chaos and create something that’s more defined and orderly. But the danger is just putting in place too much process before you really have product market fit. Because if you do that, and you need to pivot, you’ll be stuck with this old way of doing things that is based on, you know, like a hypothesis that turns out not to be correct. So you want to gradually introduce process improvement, as you feel like you’re getting the product market fit more dialed in.

Aydin Mirzaee (Fellow.app)  13:46

Yeah, that makes a lot of sense. And I’m curious, was there it you may not have had such an example. But are there examples of cases where there were processes and maybe you had to do a pivot of some sort? And you decided to, like scratch a bunch of things and maybe throw them out? Yeah,

David Sacks (Craft Ventures)  14:03

I mean, I’ve seen situations where you’ll decide that that a product just isn’t right. And then maybe there’s some operations or customer support that’s already been defined based on that product and you’ll potentially shut that product down or that feature down or you’ll like reinvent it and then you’ll see this all the time that customer support and operations are downstream of the product changes and so that’s another reason why you’ll introduce product into a process into a company is to make sure that all the people who are affected by a change actually know about it, basically change management. One of the things you’ll see happen early in a company’s life that becomes chaotic is the product will just change and nobody told the sales reps Hey, the product change now my demos different No, I told customer support, hey, we have to be ready for this new feature. You know, it just happens and then everyone is like running around trying to understand it. And so starves, figure out that this is one of the reasons why you need product managers is to make sure that all the dependencies on product, know that it’s coming and get ready. And so the whole organization can move in sync, rather than part of it playing catch up with other parts of the company.

Aydin Mirzaee (Fellow.app)  15:18

Yeah, I think, you know, I was smiling because yes, it is chaotic. And sometimes product does forget to inform other people downstream. So I guess so this is interesting. So a company’s growing, and all of a sudden, you have these managers, these middle managers, and I think from everybody’s favorite management book are a lot of people cite Andy groves high output management as being like one of the greatest of all time, there’s this great quote that says, middle manager, you’re in effect, a chief executive of an organization yourself. And it ends with managers output is the output of their team, right? So knowing that, like if people know that their output is actually the output of their team, like what kind of changes in their behavior? How should they start to act? What kind of things should they do? What kind of things should their team do? How do you think about that balance?

David Sacks (Craft Ventures)  16:12

Yeah, and I, you know, that book, high output management sort of by Andy Grove is sort of the Bible for that, I picked out the concepts that I thought were most helpful. So first of all, you really do want to encourage your managers to think of themselves as the CEO of their department or their team. And you want to empower them to be able to act that way and take actions semi autonomously or have agency. And if there for some reason, they feel like they can’t take those actions, you want to figure out why is there some dependency that hasn’t been near? Are they lacking some some skill or some tool, some set of people that they need? So you know, always asking the question, Well, why is it that they’re not able to act like a mini CEO, will enable you to refine the organization in ways that are helpful, but you also just want to you want employees who can act like many CEOs and think of themselves that way. And then that kind of leads to, you know, how you think about the output of your team. And what you know, Andy Grove says is that the way to think about your output when you’re a manager is you don’t measure your performance. Individually, you think of your performance as being the output of the team. That’s basically the difference between being an IC and a manager, when you’re an IC, your output is just what you do individually, when you’re a manager, your output is the team’s output. So, you know, that got me thinking about, you know, how do you think about concepts like micromanagement, you know, and the way to think about it is that when you’re a manager, you want to engage, you want to do the things that maximize the output of your team. So usually, that will mean empowering your team to be able to achieve, you know, results, so maximizing the performance of the ICS on your team. But also, I don’t think you need to be afraid to roll up your sleeves and do some of the work yourself if you have the ability, as a manager to take care of a task more quickly than anybody else on the team. Whereas it would take your whole team like a week to do it, you should just do it yourself. It’s fine. I think sometimes a lot of managers think, Oh, I’m a manager, now I shouldn’t be doing the work myself, I’ll just delegate it. The problem is, if you just delegate it, and then the person who you delegated to delegates it and then it gets delegated all the way down the chain, you’ll end up with the least qualified people in the company doing all of the work. And that can be a problem, right? I mean, everything gets infinitely delegated down to like the summer intern or something like that. So you want the person who’s in the best position to do the work, such that you will maximize the output to do the work. And sometimes that means you delegate it, and sometimes it means that you do it yourself. What you want to do as a manager is focus on the activities that are highest leverage, right. And that’s what you want to think about is what creates the most leverage in the role. And you want to allocate resources so that you produce the most output. And usually the resource that is most important that is most limited is not money, but time. That’s usually the biggest constraint that we have. And so the key thing is to spend your time wisely. So as a manager, you want to think about how do I allocate my time to maximize the team’s output? If it means doing the work myself, I’ll do it myself. If it means delegating, I’ll delegate it think about like Michael Jordan ticking the game winning shot, right? I mean, he always wants the ball in his hands when there’s 15 seconds left in the game, even though everyone’s guarding him, because it’s a very high leverage situation for him to win. And so if you’re in that sort of, like the game is winding down, it’s a do or die moment, the shot clock is winding down, the buzzer is about to go off. You got to make sure the ball is in the hands of the best person to take that shot, whether it’s a manager or the CEO or something like that. But in a lot of other situations that aren’t high leverage, you want to delegate those tasks. Know that you can spend your time on more important things?

Aydin Mirzaee (Fellow.app)  20:02

Yeah, that’s a really good way to put it. And it’s interesting, like the infinite delegation, and everything is going to get done by insurance. That’s a very interesting way to look at it. What are, I guess, some high leverage activities, like if you were to think about high leverage activities, what are some of those that you could think of?

David Sacks (Craft Ventures)  20:22

So number one, prioritization, making sure that your people are working on the most important things. And I really can’t stress that enough. Because only the manager can really do that, and making continuous adjustments to make sure that your people understand what the most important things are, and that that’s what they’re doing. Extremely important. So that’s number one is prioritization. Number two, is communication, communicating what those priorities are in a way that the team understands. And they can ask you questions, and you can make sure that you’re truly aligned. And when there’s disagreements, you make sure that you resolve those so that you’re working effectively together as a team to create alignment. And a lot of the time, there’ll be training involved as well. I mean, if you’re the sales leader, and you’ve got a bunch of new AES, you might be training them on the product, they might be shadowing you in one of your deals, they can learn, by the way, apprenticing in a startup is one of the best ways of learning the job, because nobody has time to go through a formal training program, and no one has time to create the formal training in the first place. So what typically happens in a startup is you get hired, a new employee gets hired, they just get thrown in to the deep end of the pool, and they apprentice with somebody who’s been there a while and knows what they’re doing. So training the people on your team so they can do the job is important. And then you want to measure performance. So setting up the metrics, like every manager should understand like, what are the metrics? I’m trying to measure? How am I actually measuring them? Is there a dashboard somewhere? Do I want the team to be able to see that dashboard? You know, so thinking through that, again, you’re a mini CEO. So in the same way, the CEO always has their dashboard and their report, they’re showing the board, a manager should be thinking about what’s my dashboard of KPIs? And what am I showing my boss. And then I think just feedback loops was always something I thought was important, where you have in addition to metrics, you have other kinds of feedback, that allow you to understand what’s happening, what’s going wrong, so that you can learn and adjust. And, you know, I call them pipes, you know, I always wanted as many pipes into my brain as possible. So I would in addition to being very metrics based, I would want to look at what are the biggest customer support problems we’re having? What are the issues that are sort of falling between the cracks that no organization or group in the company is really focused on, because that would indicate to me there was some sort of org problems. So finding the outliers, the things that don’t neatly fit into the patterns, that’s another form of feedback, that’s important. So managers should be doing all of these things. Again, prioritizing, communicating, aligning training, metrics and feedback. And you know, that’s a lot to do right there, right? And so if you’re doing all of those things, probably you are going to be delegating a lot of the actual work, and that’s appropriate, but maybe not all of it. Yeah. So

Aydin Mirzaee (Fellow.app)  23:05

this makes a lot of sense. And I can imagine that if you had to put all of the things that say, a great manager, or a great leader does into processes, it would be very hard to do, you would have a lot of rules. So part of it is hiring really great people who are great managers and leaders alike, over your time, have you? Are there things that you would look for? Like how would you figure out like a leader that you’re going to hire? Like, are there certain traits, you look for certain questions you would ask? I’d like to really figure out if this person is going to be a great leader to hire into the organization. You know, the,

David Sacks (Craft Ventures)  23:43

the thing I always asked them was just, you know, what do you think about Yammer? What do you think about people? You know, what do you think about the company that you know, we’re working on? And what do you think about the product, and the thing I would really value is that they came in, and first of all, they knew the product. Well, they already, like done a little bit of diligence. And they had some interesting thoughts and ideas. Clearly, they were excited about the product, and what we were doing, and they had kind of like a point of view, you know, a strategic point of view. So when I was looking for an executive, that’s the type of conversation I would have. And of course, you know, as the CEO, I was thinking all day about is this working or not like is this strategy we’re working. And so having that conversation with a candidate would be a way for me to preview what it’d be like to work with them. You know, as an executive in the company. When I hired executives, I always wanted them to be sort of what is known as T shaped, which is, they have the ability to go deep in a particular area, like they might be an expert in technology to be your CTO or they’d be an expert in sales that could be your CRO, or marketing, they become your cmo and so on. So I want them to have that like deep expertise in one area, but I want them to have the top of the tea as well, which meant the ability to engage with the CEO and the other executives is a strategic conversation. But that wasn’t just about their specific area. But that went across the whole company. And one of my favorite things to do as CEO of Yammer was when we finally got kind of the exec team in place, the C level executive team, we do a weekly exec meeting. And I would raise a strategic topic and let them sort of argument and sort of debate it, I called it, taking the Rubik’s cube out of my head, putting it on the table, and letting them fill out a few sides. And then I would take it put it back in my brain. So you’re stuck on some, some part of the Rubik’s Cube, right, but when you see other people take it out and start to work it then you can start to make progress on it. And one of the frictions that I always thought was really valuable at Yammer. And I think this is true for Sass companies in general, was the the tension or the debate between sales and product. And so we had very good sales leader, very good product leader. And there was always like a healthy friction, they’re typically what the sales leader would want, were features that would immediately win them. The big deals that were outstanding. It was basically here are the objections I’m facing right now, I need you to fix these three things, I can close these big deals and make my number for the quarter. And the head of product was more like No, no, like, those features really don’t matter. You should like tap dance around that go handle the objection without coding around it. Because here’s our vision. And these things are more important. And so there was like a very healthy debate between like, what’s more important right now the short term or the long term? Now, I would often agree with the head of product about, you know, the long term vision. But, you know, sometimes the head of sales makes a compelling point that, hey, we can close a million dollar deal this quarter, if we had this feature, we need to do it. And so sometimes you compromise to get something like a high priority done. Also, it’s really important to hear the salespeople tell you what is wrong, like what are the features that you’re missing, in order to they’re basically blockers that are preventing you from closing more deals. Now the trick there is you have to weed out the idiosyncratic feedback, this is really important. And a bad salesperson will give you a bunch of idiosyncratic feedback, they’ll give you 10 Different things you have to do. Whereas a really good sales leader will say, listen, we’re getting these 10 complaints from customers, but these are the really the top one or two, the rest of them, I can like talk around. But these are the ones I really need. And these are the ones that are common denominators, basically. So finding those common denominator blockers, sales blockers, and then having them go into the product roadmap, that’s a really important feedback loop, that I think the CEO needs to help manage between the sales and product development organizations. So I would do that a lot in my exec meetings, we kind of got off on the topic of what I would look for, into how I would kind of manage my exec team. But the point is, you know, knowing that that was my exec team, I would want to look for execs who I thought could engage on both levels that they would be T shaped, they would be able to run their department like a mini CEO of that department, while also being able to engage with me and the other mini CEOs and thinking about the sort of lateral strategy of the company. Because I thought that would lead to a better, it’s hard to build these companies figuring out product market fit is hard. And if you try to do all the thought work yourself, it’s just it’s that much harder. It’s it’s good to have thought partners, at least that’s what I found. And, you know, founders who are seeking feedback from others and testing their assumptions, we’re open minded receive critical feedback. I think, ultimately, they’ll do better than the potentially the autour founder, who thinks they know everything. And, you know, it’s kind of like, this is like the Hollywood tour, you know, they think they’re like the director of a movie where I don’t need to listen to anybody else. I’ve got this movie playing in my mind, well, maybe the movie is correct. And you definitely want to find a restaurant product vision. But it’s good to have a founder who also listens to feedback.

Aydin Mirzaee (Fellow.app)  29:04

Yeah, that makes a lot of sense. And it was really interesting, the idea of taking a Rubik’s cube out of your head, and then putting it on the table. I’ve always found that telling people what your problems are the things that you’re thinking about is always really helpful. Because even if they can’t help on the spot, like they may come back later and say, Hey, you should talk to this person or, you know, have you thought about something this way, but it’s very, I love the T shaped analogy, making sure that you have many CEOs, you know, across your executive team. So as we’re talking about CEOs, what is the CEOs job, or how did you think about your job at Yammer and did it change drastically? You know, obviously, there’s the pre Product Market Fit space, so let’s ignore that for a little bit. But post product market fit when a company’s 50 people and it starts to continue to scale. How did you see Your job function as CEO changing?

David Sacks (Craft Ventures)  30:03

Yeah, it’s interesting, I think in the beginning of a company, the CEO is basically a product manager, I mean, they have the original idea for the product, usually. And they’re going to basically, their first job is to execute some sort of initial MVP, some sort of building of that product. And so they’ve got the vision in their head, and they’re going to translate it. And you don’t have to be an incredible manager or anything like that. Because you don’t need that many people to build version one of the product, it’s really about product vision. And then what happens is the company starts to scale. And then I’d say also, there’s a version of this where the founders sort of salesperson number one as well, where they’re often out there doing the initial sales. And so you have to understand the product well enough to sell it, obviously, you got to have some basic sales ability. So that’s what you’ll typically see, in a very early stage kind of pre Product Market Fit CEO is some combination of pm and E type skills. But the management doesn’t usually come into it, and they’ve gotta be able to fundraise, but the management has really come into it to get to 50 100 employees. And then I think the job levels up and especially as you get into the hundreds of employees, and the way I saw it is by the time I got to about 500 employees, I thought my entire job was basically to find it this way it was to get the right people in the right jobs in the right roles, working on the right strategy with the right culture, motivation. That was it. And just to unpack that it’s getting the right people in the right roles. So working on the right strategy, and then right culture motivation. So if you think about getting the right people in the right roles, there’s two pieces that one is hiring, you know what we talked about. And then the other is defining the org chart in a way that makes sense. And you know, when you’re in a fast growing company, it’s amazing. Like how quickly your org chart is changing. You’re constantly needing to create new teams, new organizations, to reorg things, or layer people. I mean, it happens all the time. And so you’re constantly tinkering with the org chart to make sure that people are in the right roles. And frankly, I would like to say we got better at hiring. But hiring is hard. And there’s only so much you can learn from, you know, the interview process. And there’s a lot of adjustments, you have to make post hiring as well, I would say, I wasn’t actually the greatest person in hiring. But after working with someone for about three months, I was pretty good at knowing their strengths and weaknesses. And so at that point, I can make sure they’re in the right role, because I can really cater to their strengths and sort of play around the weaknesses. Maybe they were really good at, we hired someone to do marketing, it turns out, they’re fantastic product marketing, and terrible at sales enablement, well, make them the product marketer and have someone else to the sales. And it was so you make adjustments to your chart based on the resources that you have. So that was part of it was like the people. And of course, you have to then have the right culture and motivation. And culture is kind of the soft part. That’s the hard one, the motivation stuff. That is a function of you have to make sure the compensation is correct that the equity component is correct, that they have the right manager that they’re feeling fulfilled in their job. I mean, there’s all these questions around how you motivate people, and then get them working in a culture that feels like more than the sum of its parts. And then finally, you just have to make sure everyone’s working on, you know, on the right things. And that really comes down to the strategy. Do you have the right strategy for the company? And have you prioritize the key elements that strategy, the key things you need to do right now. And that last piece, if you’re the CEO, you’re really the only one who can do that. And it’s extremely important. I’ve seen teams, that it’s not like, it was necessarily the greatest team in the world. It doesn’t have to be like PayPal Mafia type team, where everyone like, literally becomes a unicorn founder. And the next company was more crazy. Right? Right. Exactly. So doesn’t have to be like that. I’ve seen merely good teams do great things, because they had the exact right market strategy, right? They knew exactly what their wedge in the market was, they had like a go to market plan, and they just executed against it. And it was the right strategy. So and by the same token, when great teams pursue strategies that don’t work, that’s not going to work. You know, Buffett has a quote about when a great management team goes up against or when a management team with a reputation for excellence goes against a market with a reputation for basically being a lousy market, it’s usually the reputation of the market that comes out in tact, meaning that you know, great team against bad market or bad market plan, it’s the market plan is going to win. So you have to have the right plan basically. And that’s something only the CEO can do. So that was sort of my definition of what the CEO at scale did. And yes, there are things that you have to do like fundraise and you do PR and communications to people want to hear from the CEO and all the vision stuff. And that is very important, but I always thought that the most important thing was right people right roles right? culture, right motivation, doing the right things,

Aydin Mirzaee (Fellow.app)  35:02

you know, the thing that you said, which was, you know, maybe, and maybe I would argue that I don’t know that I agree with you, because you said that I may not have been the greatest at hiring, but then we had this PayPal Mafia situation, and everyone was so great and did all these things. So I don’t know if I buy that. But I really like what you just said, which was, you know, after three months, I knew what their strengths were, and I could put them in the right seat. To tie this people think back to what we started talking about, which was, you know, complex problems. And figuring out when to delegate, one thing that I’ve always kind of like really thought about is, when a CEO has a problem. And again, you could be a CEO of a departments, you have a team? How do you know when you should solve a problem? Or when you should spin up a team and hire a senior leader an exec, or so on and so forth? You know, the question is, like, how do you know this should be delegated or no, this is a problem that I should solve, as, like the leader of my function, or the leader of my company?

David Sacks (Craft Ventures)  36:03

Well, I think that sometimes you just don’t have the expertise in house, and you want to hire for that. But just be careful, because I think sometimes there’s magical thinking around, okay, we have this problem in the company. But if we just hire this, like unicorn person that’s like magical person to fix a problem that we can fix it. But sometimes there’s not like a magical perfect person to solve that problem. And you’re better off and it can take a long time, you can waste a lot of time trying to realize that. And so, in my opinion, there’s no problem in a startup that’s so difficult, so complicated, that a smart generalist, given sufficient time, couldn’t figure it out, you know, if you focused on it, and had the right sort of definition of the problem, the right way of thinking about it, you could learn what you need to learn. I mean, when I started Yammer, I knew nothing about SAS, I didn’t even know, I don’t even know, I hadn’t even heard the word SAS, I didn’t know that’s what we were doing. I just thought that enterprise software should be consumerized. I thought, like, we should build enterprise software to be like consumer software, instead of like all these horrible enterprise products. So there were all sorts of things I didn’t know about. I had never done sales before, even though I had, you know, been part of I had been CEO of PayPal, I just didn’t know any of the stuff about enterprise software. But there’s nothing you can’t learn as a founder or as an executive in these companies. None of this stuff is rocket, you know, so working at SpaceX is tough. It’s not rocket science. And so what I would say is like, Yeah, I think it’s good to hire expertise. But don’t let the lack of having that expertise be a delay in solving some mission critical problem.

Aydin Mirzaee (Fellow.app)  37:39

Hey, there. Before we jump into the next part of the interview, I wanted to remind you that there is an exclusive part of this conversation, where I asked David, the important question of how is it possible that you had so many amazing people all working under the same roof? How is it that the PayPal Mafia came together, and we’re making it available only to our newsletter subscribers, so if you haven’t signed up for the Supermanagers, TLDR, go to fellow dot app slash newsletter, to sign up to get the exclusive part of the interview. And on top of that, we’ll also send you David’s SAS board meeting template, and some of the other resources mentioned in this episode. And with that said, let’s go back to the interview. That’s good advice. There are no magical people that will just come solve your hardest problems. But if you are trying to hire for expertise that you don’t have, how did you know that you were, uh, how do you go about that? You know, especially, I mean, you hired all sorts of functions at the companies that you were at. And I assume you weren’t an expert at all of them. So Right? How did you know that you were making a good choice? Or, like, did you like are there any sort of steps that you think about in hiring for something that you may not fully understand yourself?

David Sacks (Craft Ventures)  38:57

Yeah, so one of the things I would do is, I would ask the candidate, like, tell me what like a CMO does, if I’m interviewing the for Chief Marketing Officer, right? I never had a CMO at PayPal. And now I need to hire one for Yammer. So what I would do, we would set up interviews with a bunch of cmo candidates, they had cmo expertise on their resume. And I’d be like, teach me the job of CMO. And, you know, tell me about how you did it at previous companies. And so essentially, you can get five different people to teach you how they see the job of a CMO. And then you can kind of say, oh, yeah, that makes sense. You start to hear enough common denominators to like, Okay, this is kind of how it works. And then here’s where the people are a little different. So you can get five people who’ve done the job to basically tell you what the job is, and that was my shortcut, really. So and then, you know, if you do a bunch of interviews like that, you’ll kind of figure out like what you’re looking for.

Aydin Mirzaee (Fellow.app)  39:50

That’s a really good hack. One thing I did want to ask you about is just this and you You’ve talked a lot about this before, which is the concept of a cadence. Is that companies have and this relates to some of the process things that we were talking about before. But how would you describe a cadence? And why should companies have one?

David Sacks (Craft Ventures)  40:10

Right? Well, I think it’s important to create some urgency, like you said, I think it’s important to have deadlines, and everyone working towards those deadlines. And for sales is easy. So what happens with sales is you want to put them on a quarterly sales plan. And so that’s the first step in the cadence is, you know, everyone has sales on a quarterly plan, I think every quarter begins with a sales kickoff, you give them their quotas, instead of having a single annual quota for the year, you’re better off dividing by four and giving him a quarter for the quarter, you do retraining at your sales kickoff, you update the territories, all that kind of stuff. So that’s the starting point. And really, the only thing decide there is whether you’re going to be on a December 31 or January 31 fiscal year, because that’ll determine the start date of your quarters. And so now that you have your your sales quarters, that will determine your fiscal year and your fiscal quarters. So now FPN, A is aligned with sales. So now the whole go to market function has like this seasonal cadence has rhythm to it. And you really know what’s gonna be happening in each month of the year, the beginning is going to the beginning of the quarter is gonna start with the kickoff, the middle of the quarter is gonna have a lot of inspection to make sure you’re on track, the end of the quarter is going to have closings, and it creates some predictability. Now, the question I think, really is how do you get product and marketing on a cadence. So it’s not just like randomly shipping stuff whenever it gets done. And I think the key thing here is the idea of a launch event. So I like to schedule a launch event in the middle of a quarter, you don’t want to do at the end, because it’s too much chaos for the sales cycle and the product management cycle to be kind of peaking at the same time. So I like to do an event in the middle of the quarter. And it’s going to be a PR event, a marketing event and a product launch event and you combine basically a bunch of new features, along with news, it could be a new milestone achieved, in the metrics, it could be announcing a fundraising round, it could be some important new customer, but you’re going to package up a bunch of news and new products, and you’re going to create basically a marketing splasher, what’s known as lightning strike. Now, having done that, what you then do is go to product and engineering and you basically say, Look, come hell or high water on April 15, or whatever it is the middle of the quarter like we are doing this big launch event. So what can we ship by April 15. And you work backwards from having the ship date from the launch date. And now everybody knows, wait a second, we’re doing like a big event. And this could be you want to figure out what the event is going to be I love doing user conferences, that’s something you would do once a year. And then the other three quarters of the year, you could do like a city event. Or you could do a webinar, you know, now we’re kind of out of the world of everything having to be a physical event, you can basically do it as some sort of webinars, Zoom call, whatever. But basically, you want to have a date and time you want to have invitations go out. And now the team knows that they have to hit that date. Otherwise, because the invitations have gone out, there’s no choice. So that will then create predictability around the product development calendar. And now you can kind of snap these things together, because sales and product both know what each other are doing. And you can start to synchronize the whole company’s activities around this fairly predictable calendar.

Aydin Mirzaee (Fellow.app)  43:33

Yeah, I like that a lot. And the reason I like it is because you’re taking the system approach, and solving a lot of problems that maybe others try and solve in a very like surface level. So they might come in and say, Hey, we don’t end up shipping things on time, or it takes us forever to do things. And with this systematic view, you’re kind of solving all those problems and getting all these side benefits. When you think about, can I

David Sacks (Craft Ventures)  43:59

just add one thought to that? So I think one of the things that forces is better planning. So if you think about it, like when I was a CEO, and I knew look where we have our user conference in four months, I’m going to be on stage presenting the new product. So I have to think now about what is going to be meaningful to the audience, and what are they going to react to and I’d be in product development meetings. And we’d be going through the roadmap and what we could accomplish by you know, four months from now at the launch event. And sometimes I say guys like this is just not an exciting enough feature. I don’t think our customers will care. Like, let’s focus on something more important. So I’d be forced to think about things from the customer’s point of view. Or I could say guys, these are like nice little improvements, but there’s not enough sizzle here give me like, one sizzle feature that again, that’s like newsworthy that we can announce and will appear to be a game changer. So thinking is a forcing function. They’re having to think through what the roadmap is going to be and thinking about how an audience full of people, whether they’re in, you know, some sort of event ballroom or whether they’re on a webinar, thinking through how they’re going to react and making sure it’s relevant to them. I think that forces a good, you know, better planning cycle.

Aydin Mirzaee (Fellow.app)  45:14

Yeah, I love that it’s a forcing function and other things that need to be forcing functions as well. I mean, we talked, for example, about, you know, continuous learning and setting processes where, say, sales can communicate back to product, and, and so on, and so forth. What are some things like, how do you think about meetings, specifically as forcing functions of certain things happening? So for example, you know, quarterly business reviews, or different sort of syncs that might occur, how did you utilize some of these sorts of, I guess processes at either of the companies, I think

David Sacks (Craft Ventures)  45:49

some of them are good, but you want to make sure that you don’t have too many. So like I mentioned, for sales, I think there’s a certain rhythm to the quarter where you want to begin with a sales kickoff where you do a lot of presentations and training, the middle of the quarter, there’s inspection at the end of the quarter, you have closing plans. Similarly, with product, the meetings, I always found the most valuable was we will do a roadmap reprioritization with the product management leaders periodically. And it wasn’t just with a head of PM, but also with the team leads and we go through maybe every certainly once a quarter, but sometimes more frequently than that, and we just reprioritize their list, because deciding what you’re going to spend your precious engineering bandwidth developing that is like an extremely, you know, high order bit. So that was useful. And then the other very high leverage type of standing meeting that we did was design review. So you know, and there would be two points where you could do that you could do it based on the mocks. Or you could do it based on a final review of the feature before it ships. And doing it the mocks is better, because that way, you’re not making corrections in code. But the point is, I would always do a design review for major features with the team. And that was an important recurring meeting, I thought for me as a CEO to kind of get leverage. So you know, and then of course, we would do like a weekly executive meeting where I would be with my direct reports, we do the Rubik’s cube. So I think some degree amount of standing needs is important. That being said, I really liked the freedom as CEO to not have my entire calendar filled up, and to not have more than a couple of standing things maybe every day, and most of my schedule was fluid. And so I could, like go work on whatever I thought was most important that day. And, you know, sometimes I might think about like, in the shower that morning, I’m reviewing, like, what are the things I’m most worried about? Like, what do I think we’re not getting right. And then when I got to the office, I just marched over to the desk of the person who was responsible for that, and surprised them, then dig in on that, and, you know, hopefully, get some comfort around it or maybe make some adjustments. So I think it’s good to have enough freedom in your schedule, to give yourself the ability to focus on what’s most important. And, you know, sometimes, and I think this is mostly for the CEO, to be able to go outside the company. And you know, I go have lunch with Marc Benioff. And I’d always come back from a meeting like that with like a few ideas. And oh, wow, like this, we should be thinking more about this, you know, and I’d make some adjustments. So as the CEO, you don’t want to spend too much time outside the company wants to most your time inside, but you need to spend enough time outside, that you’re getting not just kind of in this like closed loop, you know, you want to be out there talking to customers, you want to be talking to other founders, you want to be learning best practices, you want to, you know, find out, you know, what’s happening in the larger world. And so giving yourself the freedom to do some of that is important too. And then when you learn something, you want to be able to reach back into the company, and then do something about it. So yeah, that’s kind of a long winded way of saying that some but not too much on the standing meeting stuff,

Aydin Mirzaee (Fellow.app)  49:03

you know, for all the managers and leaders constantly looking to get better at their craft, or their final thoughts or words of wisdom that you’d like to leave them with?

David Sacks (Craft Ventures)  49:14

Yeah, well, you know, I think one framework that’s useful for managers to think about in terms of motivating their employees is a framework that Daniel Pink came up with, he wrote a book called Drive. And what he said is, you know, the traditional way that managers think about motivation is in terms of external motivators, like the traditional carrot and stick approach, which is we’re gonna give people rewards, usually monetary rewards for doing a good job, and we’re gonna punish them, fire them or whatever, Pip them if they don’t do a good job, and I think there is definitely a place for that. But I think that when you’re dealing with knowledge workers, people who have a lot of options in terms of where they can work, you know, engineers and so forth who are sort of fiercely independent and can go do their own projects. Have some other company, it can’t just be carrot and stick, you have to figure out like the deeper intrinsic motivations of what, what makes people happy. And and what pink says is there’s three autonomy, mastery and purpose. So autonomy is how much room are you giving that person who’s reporting to you to make their own decisions. Second mastery is do they feel like they’re getting better at their job. And obviously, the first two are related, because the more mastery they have, the more autonomy you can give them. So I think it’s okay to start with less autonomy. But you have to, hopefully, they’re getting better at their job, and you’re giving them more autonomy. And they feel like they’re achieving mastery. And then third purpose, they have to understand why they’re doing what they’re doing. And they have to see that as a worthwhile endeavor. And so you really want to make sure that like you are kind of filling your employees bucket in terms of their internal motivators, which are all about autonomy, mastery, and purpose. And, you know, one way to think about whether you’re being successful with this, is I have a thing called the employee motivation, diagnostic checklist. So this is a checklist if something’s not working with an employee, this is sort of like a heuristic you can run through. So the first question you want to ask it, and this is assuming the employee does doesn’t seem to be motivated, they’re not doing their job, and you’re trying to figure out why. So the first question you have to ask is just can the employee do the job? And it appears to be a skills issue, then can it be fixed through better feedback or training, so sometimes, like they just don’t know, you need to give them some feedback, need to give them more training, if it’s a sales problem, and it still can’t be fixed with training and feedback, there’s probably nothing you can do. That’s the situation worse, it’s not going to work out. But let’s say that they have the skills and you have given them feedback and training, then you have to ask the question, is it clear what they’re supposed to be doing? And that’s when always Yes, exactly. And so, you know, what frequently is the case is that the manager has not been clear enough around objectives around ownership, like who actually owns this project, or this feature? And accountability, right? You might have like dueling teams, like we’re overlapping. And, you know, it’s become too political, because you haven’t clarified like, who’s responsible? Who’s the owner? So that could be on you. That can be your fault, as the manager is you have not clarified ownership. So is it clear what they’re supposed to be doing? And do they have the ownership to do it? Okay, let’s assume those things are clear. And it’s still not happening. The need to ask the question, are the rewards clear. And sometimes, you know, the rewards are not clear. I mean, let’s say that, it’s like the third most important, let’s say, I’ll give you an example. Let’s say that, you’ve told your sales team, your sales leader, hey, I really want you to push for this new experimental product that we have, we have no idea whether it’s going to work or not, but we want you to push it to our customers. But it hasn’t been made part of their sales plan. They don’t get spiffed for that. And so everyone understands who’s supposed to be doing it. But the sales plan says that if you sell this product over here, you get commissioned, and if you’ve pushed this experimental, hard to sell product over here, you get nothing. What do you think they’re going to do? So it might be a rewards problem, okay? In which case, you’re gonna have to fix that you’re gonna have to clarify the incentive structure. Okay. And then, but let’s say that’s clear, let’s say the rewards aren’t clear, then you need to ask the question. Well, do they agree with this? Is there an autonomy problem, because fundamentally, they don’t believe in what they’re being asked to do? In which case, you need to hear their concerns and create alignment. So like those, that can be the problem, if the rewards are clear. The other thing you have to do is okay, well, maybe the rewards are clear. But they’ve given up, you know, they feel like the task they’ve been given, they understand it, they know, they’ll be rewarded for it, but they just don’t think it’s achievable. And you haven’t really listened to them to figure out whether they think it’s, in other words, they don’t think that mastery is something they can achieve. So you have to basically address that. And you might need to simplify the task, or are they uninterested? Is it the case that the job has gotten boring because they have achieved some mastery. So you’ll see this customer support all the time that you will get Cs agents who are like the best, and they’ll lose motivation, not because they don’t know how to do the job, not because there aren’t rewards, but because they’ve actually mastered it, and the job is getting boring to them. Now, a salesperson. Typically good salespeople are not wired to have this problem, because they actually liked the repeatability of winning over and over again, and they get compensated for that. But as someone that customer support might feel like okay, I’m winning over and over again, but the job is getting boring. So you got to figure out well, how do I make it interesting for this top performer? And then the last thing is just, you know, have they lost motivation because they feel like they don’t know If the work is sufficiently important, and you may need to reconnect them to the mission of the company and renew their sense of purpose. So all of these things are, this is, you know, this is a diagnostic checklist for what do you do with an employee who doesn’t appear to be motivated. And you can see that there’s so many different ways, or reasons why an employee can lose motivation. It’s such a complicated problem of how you motivate employees, we went through, I think, eight different reasons why an employee could have lost motivation. And they’re all very different. So they all kind of come down to this, this Daniel Pink framework of, you know, characteristics. Is there some problem with that? Or is there some problem with autonomy, mastery and purpose. So if you think about that as the heuristic, it’ll help you to unpack what might be going on in the heads of your reports. And that’s usually the most difficult part of being a manager is just like being the psychologists and trying to understand what’s happening in the minds of your reports and fixing those problems. And so I always found that to be a pretty useful framework when I was doing management. Yeah, this is,

Aydin Mirzaee (Fellow.app)  56:08

yeah, I was gonna say, This is awesome. And we’re gonna include this in the show notes. But it’s just so interesting to hear you, you know, go through this that you’ve thought about even things like employee motivation down to such a systematic view, where you’ve just like abstracted out this checklist, and now it’s a tool and everyone can use it. David, this has been super insightful. Thanks so much for doing this.

David Sacks (Craft Ventures)  56:29

Absolutely. Great to be with you. Thanks, Aydin.