What You Do Is Who You Are: How to Create Your Business Culture

INTRODUCTION: WHAT YOU DO IS WHO YOU ARE

Revel in being discarded, or having all your energies exhausted in vain; only those who have endured hardship will be of use. Samurai who have never erred before will never have what it takes.

—Hagakure

When I first founded a company, one called LoudCloud, I sought advice from CEOs and industry leaders. They all told me, “Pay attention to your culture. Culture is the most important thing.”

But when I asked these leaders, “What exactly is culture, and how can I affect mine?” they became extremely vague. I spent the next eighteen years trying to figure this question out. Is culture dogs at work and yoga in the break room? No, those are perks. Is it your corporate values? No, those are aspirations. Is it the personality and priorities of the CEO? That helps shape the culture, but it is far from the thing itself.

When I was the CEO of LoudCloud, I figured that our company culture would be just a reflection of my values, behaviors, and personality. So I focused all my energy on “leading by example.” To my bewilderment and horror, that method did not scale as the company grew and diversified. Our culture became a hodgepodge of different cultures fostered under different managers, and most of these cultures were unintentional. Some managers were screamers who intimidated their people, others neglected to give any feedback, some didn’t bother returning emails—it was a big mess.

I had a middle manager—I’ll call him Thorston—who I thought was pretty good. He worked in marketing and was a great storyteller (an essential marketing skill). I was shocked to find out, from overhearing casual conversations, that he was taking storytelling to another level by constantly lying about everything. Thorston was soon working elsewhere, but I knew I had to deal with a much deeper problem: because it had taken me years to find out that he was a compulsive liar, during which time he’d been promoted, it had become culturally okay to lie at LoudCloud. The object lesson had been learned. It did not matter that I never endorsed it: his getting away with it made it seem okay. How could I undo that lesson and restore our culture? I hadn’t the first clue.

To really understand how this stuff works, I knew I had to dig deeper. So I asked myself, How many of the following questions can be resolved by turning to your corporate goals or mission statement?

 Is that phone call so important I need to return it today, or can it wait till tomorrow?

 Can I ask for a raise before my annual review?

 Is the quality of this document good enough or should I keep working on it?

 Do I have to be on time for that meeting?

 Should I stay at the Four Seasons or the Red Roof Inn?

 When I negotiate this contract, what’s more important: the price or the partnership?

 Should I point out what my peers do wrong, or what they do right?

 Should I go home at 5 p.m. or 8 p.m.?

 How hard do I need to study the competition?

 Should we discuss the color of this new product for five minutes or thirty hours?

 If I know something is badly broken in the company, should I say something? Whom should I tell?

 Is winning more important than ethics?

The answer is zero.

There aren’t any “right answers” to those questions. The right answers for your company depend on what your company is, what it does, and what it wants to be. In fact, how your employees answer these kinds of questions is your culture. Because your culture is how your company makes decisions when you’re not there. It’s the set of assumptions your employees use to resolve the problems they face every day. It’s how they behave when no one is looking. If you don’t methodically set your culture, then two-thirds of it will end up being accidental, and the rest will be a mistake.

So how do you design and shape these nearly invisible behaviors? I asked that of Shaka Senghor, who ran a powerful gang in the Michigan prison system in the 1990s and 2000s. Senghor knew that the lives of his guys depended on the gang’s culture. He told me, “It’s complex. Say someone steals one of your guys’ toothbrushes, what do you do?”

I said, “That seems innocent enough. Maybe the thief just wanted clean teeth?”

He corrected me: “A guy doesn’t take that risk for clean teeth. It’s a diagnostic. If we don’t respond, then he knows he can rob your guy of something larger or rape him or kill him and take over his business. So if I do nothing, I put all our members at risk. Killing the guy would be a big deterrent—but it would also create a superviolent culture.” He spread his hands. “As I said, it’s complex.”

Identifying the culture you want is hard: you have to figure out not only where your company is trying to go, but the road it should take to get there. For many startups, a culture of frugality is vital, so it makes sense to require that employees stay at the Red Roof Inn. But if Google is paying a salesperson $500,000 a year and it wants to retain her, it will probably prefer that she sleep well at the Four Seasons before her big meeting with Procter & Gamble.

Likewise, long days are standard in the startup world—you’re in a race against time. But at Slack, CEO Stewart Butterfield is convinced that if you actually work hard when you are at work, you can efficiently get a lot done. He punches out early and encourages his employees to do the same.

The culture that works for Apple would never work for Amazon. At Apple, generating the most brilliant designs in the world is paramount. To reinforce that message, it spent $5 billion on its sleek new headquarters. At Amazon, Jeff Bezos famously said, “Your fat margins are my opportunity.” To reinforce that message, he made the company be frugal in everything, down to his employees’ ten-dollar desks. Both cultures work. Apple designs dramatically more beautiful products than Amazon, while Amazon’s products are dramatically cheaper than Apple’s.

Culture is not like a mission statement; you can’t just set it up and have it last forever. There’s a saying in the military that if you see something below standard and do nothing, then you’ve set a new standard. This is also true of culture—if you see something off-culture and ignore it, you’ve created a new culture. Meanwhile, as business conditions shift and your strategy evolves, you have to keep changing your culture accordingly. The target is always moving.

CULTURE IS THE STRONG FORCE

In business, if you have a strong culture but a product nobody wants, you fail. So culture might appear to be weaker than product. But if you look more deeply, over time, culture can overcome the seemingly invincible structural barriers of an era and transform the behavior of entire industries and social systems. From this broader perspective, culture is the strong force in the universe.

In the 1970s, a bunch of poor kids from the Bronx created a new art form, hip-hop. In a single generation they overcame poverty, racism, and massive opposition from the music industry to build the world’s most popular musical genre. They changed global culture by inventing a culture premised on candor and a hustler’s mentality.

The hustler’s mentality could be seen in how hip-hop DJs sourced their basic building block: breakbeats. Breakbeats were the part of the song that everyone got excited about on the dance floor—the beat-heavy breakdown sections that featured drums and bass, or just drums. The freshest breakbeats, the ones people hadn’t heard before, were often found on obscure records. Because these records were obscure, the record companies wouldn’t restock them if they suddenly sold out, which created a supply-chain problem. Hip-hop’s entrepreneurial culture worked right around it. Ralph McDaniels, who put the first rap videos on television and who coined the term “shout-out,” told me:

A guy named Lenny Roberts supplied these records to the stores and he knew precisely what was going to sell, because he was from the Bronx and that’s where it was all breaking. He marketed these breakbeats by giving them to Afrika Bambaataa or Grandmaster Flash, and when Flash played it every DJ would go, “Oh, I’ve got to have that record,” and the records would instantly sell out. So Lenny pressed his own records with just the breakbeats: the Breakbeats Volume One, Breakbeats Volume Two, etc. He didn’t have the rights, of course, but nobody was paying any attention.

People often ask me why I preface much of what I write with quotes from hip-hop. In part it’s a hangover from my failed career as a rapper—true story. But mostly it’s because the majority of my ideas about entrepreneurship, business, and culture occur to me while I’m listening to hip-hop, so it’s my way of giving credit where credit is due. I always felt that early hip-hop songs like Eric B. & Rakim’s “Follow the Leader” or Run-DMC’s “King of Rock” were about what I was doing as an entrepreneur. They are the culture in which I work.

While the hustling part of hip-hop culture made the business go, it was the honesty that drew the fans. The great rapper Nas told me that as a kid:

The rawness was what I gravitated towards. The world was supposed to be this picture-perfect place, the Brady Bunch. We’re all trying to be the Brady Bunch, but really we’re the Little Rascals. Rap explained what’s really going on—the crimes, the poverty, the corrupt police. Rap cleansed itself of pimp-sounding music or gospel-sounding music or a funky sound or a hippie sound. It extracted all that other stuff out of it and ripped itself raw until it was simply about honesty.

A continent away from the Bronx, a group of engineers in California established a set of cultural innovations that would end up changing how almost every business operates. In the 1960s, Bob Noyce, the coinventor of the integrated circuit, or microchip, ran Fairchild Semiconductor, a unit of Fairchild Camera and Instrument Corporation.

Fairchild Camera, based in New York City, did business the east coast way, which had become the way big businesses across the country conducted themselves. Fairchild’s owner, Sherman Fairchild, lived in a glass-and-marble town house in Manhattan. His top executives got cars and drivers and reserved parking places. As Tom Wolfe observed in his 1983 Esquire story “The Tinkerings of Robert Noyce,” “Corporations in the East adopted a feudal approach to organization, without even being aware of it. There were kings and lords, and there were vassals, soldiers, yeomen, and serfs.”

Bob Noyce didn’t believe any of that made sense when it was his individual engineers—the yeomen—who were inventing products and driving the business. So Fairchild Semiconductor did things differently. Everyone was expected at work by 8 a.m., and whoever got in first got the best parking space. The company’s building in San Jose was a warehouse filled with cubicles, and nobody wore a suit.

Noyce didn’t hire professional managers. He said, “Coaching, and not direction, is the first quality of leadership now. Get the barriers out of the way to let people do the things they do well.” This created a new culture, a culture of empowerment: everyone was in charge and Noyce was there to help. If a researcher had an idea, he could pursue it for a year before anyone would start inquiring about results.

Employees who got a taste of Noyce’s culture of independence split off to start their own companies, including Raytheon Semiconductor, Signetics, General Microelectronics, Intersil, Advanced Micro Devices (AMD), and Qualidyne. Without exactly meaning to, Noyce had created the culture of Silicon Valley.

In 1968, Noyce himself split off to start a new company, resigning from Fairchild Semiconductor after being passed over for CEO of Fairchild Camera. He and his colleague Gordon Moore—the coiner of Moore’s law, which holds that microchip capacity doubles every eighteen months while its price falls in half—and a young physicist named Andy Grove founded Intel to tackle the nascent field of data storage.

At Intel, Noyce took his egalitarian ideas to a new level. Everyone worked in one big room with partitions separating them; Noyce himself sat at a secondhand metal desk. Lunch was deli sandwiches and soda. There was no layer of vice presidents; Noyce and Moore oversaw business segments run by middle managers who had enormous decision-making power. In meetings, the leader set the agenda, but everyone else was equal.

And, crucially, Noyce gave the engineers and most of the office workers substantial stock options. He believed that in a business driven by research and products, the engineers would behave more like owners if they actually owned the company.

Wolfe observedthat “At Intel everyone—Noyce included—was expected to attend sessions on ‘the Intel Culture.’” The culture was drilled into new employees by Andy Grove (who would go on to become the company’s CEO and a famous cultural innovator). Grove would ask, “How would you sum up the Intel approach?” Someone might answer, “At Intel you don’t wait for someone else to do it. You take the ball yourself and run with it.” Grove would reply, “Wrong. At Intel you take the ball yourself and you let the air out and you fold the ball up and put it in your pocket. Then you take another ball and run with it and when you’ve crossed the goal you take the second ball out of your pocket and reinflate it and score twelve points instead of six.”

This atmosphere allowed ideas to prosper; if Silicon Valley is about anything, it’s about the primacy of the idea. Breakthrough ideas have traditionally been difficult to manage for two reasons: 1) innovative ideas fail far more than they succeed, and 2) innovative ideas are always controversial before they succeed. If everyone could instantly understand them, they wouldn’t be innovative.

Imagine a culture of strict accountability that punishes failure—a very common culture back east, where executives strove to maintain their status, and failure was to be avoided at all costs. Now consider an idea that has a 90 percent chance of failing, but that would pay off at 1,000 to 1. Despite it being an extraordinarily good bet, the company that punishes failure will never fund it.

Hierarchies are good at weeding out obviously bad ideas. By the time an idea makes it all the way up the chain, it will have been compared to all the other ideas in the system, with the obviously good ideas ranked at the top. This seems like common sense. The problem is that obviously good ideas are not truly innovative, and truly innovative ideas often look like very bad ideas when they’re introduced. Western Union famously passed on the opportunity to buy Alexander Graham Bell’s patents and technology for the telephone. At the time, phone calls were extremely noisy and easy to misinterpret, and they couldn’t span long distances, and Western Union knew from its telegram business that profitable communication depended on accuracy and widespread reach. And Wikipedia was considered a joke when it started. How could something written by a crowd replace the work of the world’s top scholars? Today it is so much more comprehensive than anything that came before it that it’s widely considered the only encyclopedia.

The Intel culture, by elevating the individual and giving breakthrough ideas a chance, inaugurated a better way to do business. My business partner Marc Andreessen wrote an essay a few years ago called “Software Is Eating the World.” He described how technology has spread beyond the technology industry to take over every traditional business, from bookstores to taxi fleets to hotels. Existing companies have been forced to adopt aspects of Noyce’s culture or else expose themselves to an onslaught of existential threats. We’ve seen General Motors adopt stock options as it moved into autonomous vehicles by buying Cruise Automation, and Walmart employ a similar approach with its purchase of Jet.com.