Brian Chesky is the co-founder and CEO of Airbnb, a global online marketplace for lodging and tourism experiences.

Chesky recently spoke at a Y-Combinator event. Y-Combinator is a highly influential startup accelerator that funded and mentored Airbnb and other companies like Dropbox, Reddit and Stripe.

Chesky’s speech is single-handedly responsible for something akin to tennis elbow for founders across the nation, who aggressively fist-pumped and fist-bumped to celebrate their recognition. Chesky saluted those who started their companies and encouraged them to trust their instincts and operate in “founder mode.”

What is founder mode?

Firstly, you can operate in founder mode without being a founder. Founder mode is a unique way of running a company that contrasts with the traditional “manager mode.” In founder mode, the founder or CEO remains deeply involved in the company’s operations, even as it scales, rather than delegating tasks and responsibilities solely to professional managers.

This intimate approach emphasizes a more hands-on leadership style, where founders engage directly with various levels of the organization rather than only interacting with their direct reports.

What is the opposite of founder mode?

The definition of founder mode is made clearer by giving an example of what it’s not. Marty owns a refinishing and surface stripping company in Lakeville, Conn. Marty hired Sarah as his operating officer. One of Sarah’s priorities was determining why the company had stagnated at $8 million in revenue for the previous four years. Another priority was to document standard operating procedures (SOPs).

When Sarah completed her SOP project, she questioned Marty regarding the “why” behind many of the company’s workflow. The answer fell into two categories: “because we’ve always done it that way” and “because that’s how everyone else does it.”

And just like that, Sarah knew why revenue had stagnated; Marty was stuck in manager mode.

In theory, theory and practice are the same; in practice, they’re not

As Airbnb grew, Chesky did not lack management and growth advice from MBA-types who could recite the most recently published business textbooks verbatim. Much of the advice that Chesky received was to hire quality people, then back away and give them room to do their jobs under their respective managers.

Chesky took the advice, and the company’s growth stalled. He felt disconnected from what was happening in different departments. He could not make big decisions because he was not directly facing the threats, weaknesses, and opportunities.

And management was hesitant to invest or do anything other than make minor changes. That’s when Chesky decided to reject conventional management advice and went into “founder mode.”

Several Y-Combinator event attendees were founders who also received similar management advice and felt gaslighted to take it by a group of people who purported to know better. It can be scary to dismiss the advice and strategies of experienced professionals who are supposed to know better than the founder.

But did the managers know how to grow those companies better? Or did they know how to cover their behinds and hug the line of status quo? This speech was closed to the public but went viral due to a blog post from Paul Graham, a co-founder of Y-Combinator.

Graham explained why so many founders in attendance empathized with Chesky’s comments. Chesky characterized the idea of hiring good people and giving them space to do their jobs as something that sounds reasonable, “Except in practice, judging from the report of founder after founder, what this often turns out to mean is: hire professional fakers and let them drive the company into the ground.”

Driving the company “into the ground” might sound harsh, but in the fast-paced business world, if you’re not growing, you’re dying. It’s just a matter of when that death occurs and if it happens with a whimper or bang.

Relying solely on those “good people” was not founder but manager mode. And there isn’t anything necessarily wrong with that if you want to focus on protecting your business by not taking risks. Also, there may be periods when that makes sense for your company, even if you want to grow your company over a more extended span.

A significant difference between founder and manager modes is that managers often want to protect their jobs by not risking mistakes like failed projects or capital losses on expansion projects. If the founder gives the go-ahead, managers can forge ahead operationally to do things they would not otherwise have considered.

Not that the founder can skip doing proper project due diligence or calculating return on investment, but the founder often comes up with visionary ideas and lets the team know that if it fails, then the buck stops at the top.

Am I in founder mode?

Am I personally in founder model? Yes and no. No, because conventional management wisdom advises hiring smart people and giving them autonomy, and I do that. However, I never tell co-workers to figure it out on their own. A founder should give ownership of a project plus all the necessary training and support.

Also, my team is empowered to come to me and tell me — not ask me — that they want to try something new. A few years ago, I gave all my Berkshire Money Management (BMM) teammates an envelope holding $1,000. They could keep the money if they took a risk and failed.

If they didn’t take risks, the money would be donated to my charity. If they took a risk and it paid off, it would be considered in their bonus compensation. They got the point — if a worker has ideas, a founder should hear and examine them and support their execution.

In other ways, yes, I am in founder mode. Steve Jobs, the former CEO of Apple, was deemed to be in “founder mode” when he held retreats with 100 of the most influential people at the company and worked directly with them. When you’re a 20ish employee in a company like BMM, a founder like me can be easily accessible to all the team and follow Jobs’ example.

Founders should not follow Marty’s example of management. You don’t have to be like Mark Zuckerberg, founder of Meta Platforms, who coined the famous motto, “Move fast and break things,” emphasizing speed and experimentation. However, if you keep doing what everyone else is does, like Marty, some other business will out-innovate you and leave you behind.

Data from LinkedIn’s Future of Work Report shows that “over the last eight years, 25 percent of the skills required to perform jobs have changed; by 2030, skills needed to do your job will have changed by 68 percent. Even if you are not changing jobs, your job is changing on you.”

While that is more of a warning of the need for adaptation, the point is that you have seen this play out at your own company, and you know that the only thing that is certain is change. It’s OK — no, it’s good — to break things on purpose. You can’t just keep doing what everyone else has done because that collective average can, by definition, only get you so far.

If your business stagnates, it may be time to kill manager mode and find the courage to break from the pack and enter founder mode.

 

This article first appeared in the Berkshire Eagle on September 27, 2024.