Andy

Introduction to High Output Management

“At sixteen, son was watching him, mesmerized
Respect, not jocking him, was so amazing, besides
He came on the stage with lasers in his eyes
Walk with me now” — Nas, U.B.R. (Unauthorized Biography of Rakim)

I first read High Output Management in 1995. In those days, there were no blogs or TED Talks teaching us about entrepreneurship. In fact, there was almost nothing of use written for people like me who aspired to build and run a company.

Against this backdrop, High Output Management had an almost legendary status. All the best managers knew about it. The top venture capitalists gave copies of it to their entrepreneurs, and aspiring leaders in Silicon Valley devoured its contents. It amazed all of us that the CEO of Intel had taken the time to teach us the essential skill of entrepreneurship: how to manage.

This was no small thing because Intel was known as the best company in the technology industry. It had pulled off the greatest transformation in the history of the business: moving from the memory business to microprocessors more than a decade after its founding. Beyond that, Intel ran with legendary precision, which gave it the ability to make multibillion-dollar investments with high confidence. If you wanted to hire a great operational manager, then Intel was the place to go — but good luck getting one to leave the best-managed company in Silicon Valley.

Andy himself was a legendary figure. He had grown up Jewish in Hungary during a time when the country was occupied by the Nazis and, later, by the Soviet Communists. Arriving in New York, he spoke no English and had almost no money. He enrolled himself at the City College of New York, overcame his language deficiency, and went on to get a PhD from UC Berkeley. This nonnative English speaker would then write an important textbook on semiconductors in English while working at Fairchild Semiconductor. As a result, he was considered a scientific pioneer even before helping to launch Intel in 1968, building it into the seminal technology company of the era. Later, in 1997, Time magazine would recognize his nearly impossible accomplishments and name him Man of the Year.

This is in part what made High Output Management so extraordinary. Andy Grove, who built himself from nothing to run Intel, stopped what he was doing to teach us his magic. And not through some ghostwriter either — Andy wrote this book himself. What an incredible gift.

When I finally got my hands on the book, the paperback cover took me aback. The 1995 version featured a picture of Andy Grove standing next to the Intel sign. Unlike every other CEO photo that I had ever seen, Andy was not wearing a designer suit. He did not have perfectly combed hair, and he did not strike an arms-folded power pose. No, Andy Grove was dressed for work right down to his key card hanging from his belt. I did a double take. “Was that a key card? He didn’t remove his key card for the book’s cover photo?”

In retrospect, the cover was perfect. As you will see when you read this book, Andy Grove was all substance. He did not have time for pretty photo shoots or self-promotion. He wrote the book for us, but if we had to be sold on it by how he looked in the photo, then that would be our loss. The time that he did not spend styling fancy photos, he put into writing the book. He did not just give us the lessons; he articulated them in a way that connected both logically and emotionally. We would come to understand him and feel what he meant in our core.

I immediately got a jolt of this style with the title of the very first chapter: “The Basics of Production: Delivering a Breakfast (or a College Graduate, or a Compiler, or a Convicted Criminal…).” Okay, I am interested. What does making a soft-boiled egg have to do with how many prisons we build? It turns out quite a bit. High Output Management opens by teaching us the importance of proper system design even when we are dealing with a system of human beings — especially when we are dealing with a system of human beings.

Andy then shows us how you can use these same principles to understand how society should operate. It doesn’t accomplish anything to declare that we need more kids going to college than to jail and demand that we build more schools than jails. In fact, it’s counterproductive. Identifying complex system problems is one thing. Solving them is something else entirely, and Andy lays out the tools to do just that.

Over the years, I have come to consider High Output Management a true masterpiece, and there are at least three core aspects to its genius. First, in as little as one sentence, it lucidly explains concepts that require entire books from lesser writers. Second, it consistently uncovers brand-new management ideas or finds new insights in old standards. Finally, while most management books attempt to teach basic competency, High Output Management teaches the reader how to be great.

Andy introduces management with this classic equation:

A manager’s output = the output of his organization + the output of the neighboring organizations under his influence.

On the surface it may seem simple, but he clarifies the essential difference between a manager and an individual contributor. A manager’s skills and knowledge are only valuable if she uses them to get more leverage from her people. So, Ms. Manager, you know more about our product’s viral loop than anyone in the company? That’s worth exactly nothing unless you can effectively transfer that knowledge to the rest of the organization. That’s what being a manager is about. It’s not about how smart you are or how well you know your business; it’s about how that translates to the team’s performance and output.

As a means to obtain this leverage, a manager must understand, as Andy writes: “When a person is not doing his job, there can only be two reasons for it. The person either can’t do it or won’t do it; he is either not capable or not motivated.” This insight enables a manager to dramatically focus her efforts. All you can do to improve the output of an employee is motivate and train. There is nothing else.

As he describes the planning process, Andy sums up his essential point with this eloquent nugget of wisdom: “I have seen far too many people who upon recognizing today’s gap try very hard to determine what decision has to be made to close it. But today’s gap represents a failure of planning sometime in the past.” Hopefully, the value of this short insight is not lost on the young reader. If you only understand one thing about building products, you must understand that energy put in early in the process pays off tenfold and energy put in at the end of the program pays off negative tenfold.

The book has an entire section dedicated to an often neglected, but critically important management tool: meetings. Andy makes us see this oldest of business principles in a new light. He teaches meetings from first principles, beginning with how to conduct a one-on-one. It seems incredible that the CEO of Intel would take the time to explain how to have a one-on-one.

Why is he doing this? It turns out that the one-on-one is not only a fundamental element in the manager/employee relationship, but perhaps the best source for organizational knowledge that a manager can get. In my experience, managers who don’t have one-on-ones understand very little about what’s happening in their organizations.

It is by understanding the simple things that Andy goes deep. For example, when people visit today’s technology companies they often remark about how casual the environments are, but with very little explanation about why they are that way. In fact, many CEOs do not understand why as they simply follow the trend, but Andy explains it perfectly:

A journalist puzzled by our management style once asked me, “Mr. Grove, isn’t your company’s emphasis on visible signs of egalitarianism such as informal dress, partitions instead of offices…just so much affectation?” My answer was that this is not affectation, but a matter of survival. In our business we have to mix knowledge-power people with position-power people daily, and together they make decisions that could affect us for years to come.

In this fashion, the book quickly gets to the heart of complex issues. It raises and deals with the stickiest management issues. Andy asks the question of whether you should be friends with the people you manage:

Everyone must decide for himself what is professional and appropriate here. A test might be to imagine yourself delivering a tough performance review to your friend. Do you cringe at the thought? If so, don’t make friends at work. If your stomach remains unaffected, you are likely to be someone whose personal relationships will strengthen work relationships.

By breaking down the process, he makes hard things manageable.

Ultimately, the power of High Output Management is that it creates experts rather than merely competent managers.

A great example of this is the section on task-relevant maturity. This part of the book became very personal for me as it taught me how to formulate the most useful management question that I use in interviews: “Is it better to be a hands-on or hands-off manager?”

It seems like a simple enough question, but it sorts out the 95 percent of managers who never think deeply about their craft from the 5 percent who do. The answer, as Andy explains, is that it depends. Specifically, it depends on the employee. If the employee is immature in the task, then hands-on training is essential. If the employee is more mature, then a delegate approach is warranted. Andy presents a great example of this: “The subordinate did poor work. My associate’s reaction: ‘He has to make his own mistakes. That’s how he learns!’ The problem with this is that the subordinate’s tuition is paid by his customers. And that is absolutely wrong.”

Perhaps the chapter that best reflects Andy Grove is the last, “Why Training Is the Boss’s Job.” Often, people who manage in the so-called knowledge economy believe their employees are so smart that they need no training at all. Andy brilliantly corrects this notion by explaining why as customers we are flabbergasted when we encounter employees who are insufficiently trained at relatively simple tasks such as taking restaurant reservations. He then challenges us to imagine how furious customers of complex jobs will be if an employee isn’t properly trained. Finally, he reiterates his thesis that there are only two ways in which a manager can impact an employee’s output: motivation and training. If you are not training, then you are basically neglecting half the job.

Throughout the chapter, the reader feels Andy’s intense passion toward training and teaching, because in the end — more than anything else — he is a teacher…in the very best sense of the word.

Many years after reading High Output Management, I met Andy for the first time. Upon seeing him, I was so excited that I immediately blurted out how much I loved the book. In classic Andy Grove style, he shot back: “Why?” I did not expect that. I thought that he would say, “Thank you” or “I appreciate that,” but not “Why?” But that was Andy. He was always teaching and always expecting more from every student.

Caught completely off guard, I scrambled for the reason and came across a good one: “Every other management book that I’ve read explains the trivial, but yours gets to the real issues.” Upon hearing that, the master teacher softened and replied with a priceless story:

It’s funny that you say that about management books. I recently ran out of space on my bookshelf at home, so I was faced with a choice. I either had to throw away some books or buy a bigger house. Well, that was an easy decision, but which books to throw out? Then I thought, the management books! But I had a problem. Nearly every management book that I’d received was sent to me by the author and was autographed with a kind inscription. I felt badly about throwing away all those nice notes. So, I went through each book and tore out the inscription page then threw away the book. So now I have a large stack of pages of nice notes to me and plenty of space for good books.

I have never met anyone other than Andy Grove who would have a story like that. He uniquely balances the highest standards for clear thinking and performance with an undying belief in the underlying person. Who else would require so high a bar for writing that you had to be good enough to fit on his one bookshelf and still be so touched by the fact that you wanted him to read your work that he would save the page that you inscribed?

Later, in 2001, I met with Andy again and I asked him about a recent run of CEOs missing their numbers despite having told investors that their businesses were strong. The bubble had burst for the first wave of Internet companies nearly a year prior, so it surprised me that so many many of them had not seen this coming. Andy replied with an answer that I did not expect: “CEOs always act on leading indicators of good news, but only act on lagging indicators of bad news.”

“Why?” I asked him. He answered in the style resonant of his entire book: “In order to build anything great, you have to be an optimist, because by definition you are trying to do something that most people would consider impossible. Optimists most certainly do not listen to leading indicators of bad news.”

But this insight won’t be in any book. When I suggested he write something on the topic, his response was: “Why would I do that? It would be a waste of time to write about how to not follow human nature. It would be like trying to stop the Peter Principle*. CEOs must be optimists and all in all that’s a good thing.” This is classic Andy Grove. He is amazingly perceptive and can see every flaw in every person, yet despite that he believes in human potential more than anyone. Maybe that’s why he has spent so much time teaching us to be better.

It has been an honor for me to learn from Andy Grove through the years and I am excited for everyone who is new to High Output Management to join me in this experience. I know that you will enjoy this marvelous book written by the best teacher that I have ever known.

— Ben Horowitz, 2015

* The Peter Principle is a concept in management theory in which the selection of a candidate for a position is based on the candidate’s performance in their current role, rather than on abilities related to the intended role. Thus, “managers rise to the level of their incompetence.”

Foreword copyright © 2015 by Ben Horowitz. Reprinted by permission of Vintage Books, an imprint of the Knopf Doubleday Publishing Group, a division of Penguin Random House, LLC. All rights reserved.