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CEO Decision-Making: A Great Observation By Venture Capitalist Ben Horowitz

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I have been reading through "Ben's Blog," which is written by Ben Horowitz of Andreesen Horowitiz (a firm that just raised 650 million, yikes!)  He wrote a great post awhile back on how the firm evaluates CEOs. Read the whole thing, it is inspired.  I especially love this part, because it is so true and explodes the myth of the all knowing and all powerful CEO:

Courage is particularly important, because every decision that a CEO makes is based on incomplete information. In fact, at the time of the decision, the CEO will generally have less than 10% of the information typically present in the ensuing Harvard Business School case study (emphasis added by me).  As a result, the CEO must have the courage to bet the company on a direction even though she does not know if the direction is right. The most difficult decisions (and often the most important) are difficult precisely because they will be deeply unpopular with the CEO’s most important constituencies (employees, investors, and customers).

This point dovetails well with the quote at the top of Ben's Blog:

There's no sense in being precise when you don't even know what you're talking about. - John Von Neumann

I will poke around more; he is a very thoughtful guy. Also, Ben's point reminds of something I heard Andy Grove say several years back along similar lines — see this HBR post on how a good boss is confident, but not really sure.

Comments

32 responses to “CEO Decision-Making: A Great Observation By Venture Capitalist Ben Horowitz”

  1. Walter Underwood Avatar
    Walter Underwood

    10% sounds bad, but if it is a representative sample of the possibly-available information, that could be pretty sold.
    The Von Neumann quote reminds me of Richard Hamming’s theme for his book on numerical methods in computing, “The purpose of computing is insight, not numbers.”

    Reply
  2. Walter Underwood Avatar
    Walter Underwood

    10% sounds bad, but if it is a representative sample of the possibly-available information, that could be pretty sold.
    The Von Neumann quote reminds me of Richard Hamming’s theme for his book on numerical methods in computing, “The purpose of computing is insight, not numbers.”

    Reply
  3. Walter Underwood Avatar
    Walter Underwood

    10% sounds bad, but if it is a representative sample of the possibly-available information, that could be pretty sold.
    The Von Neumann quote reminds me of Richard Hamming’s theme for his book on numerical methods in computing, “The purpose of computing is insight, not numbers.”

    Reply
  4. Walter Underwood Avatar
    Walter Underwood

    10% sounds bad, but if it is a representative sample of the possibly-available information, that could be pretty sold.
    The Von Neumann quote reminds me of Richard Hamming’s theme for his book on numerical methods in computing, “The purpose of computing is insight, not numbers.”

    Reply
  5. Walter Underwood Avatar
    Walter Underwood

    10% sounds bad, but if it is a representative sample of the possibly-available information, that could be pretty sold.
    The Von Neumann quote reminds me of Richard Hamming’s theme for his book on numerical methods in computing, “The purpose of computing is insight, not numbers.”

    Reply
  6. Walter Underwood Avatar
    Walter Underwood

    10% sounds bad, but if it is a representative sample of the possibly-available information, that could be pretty sold.
    The Von Neumann quote reminds me of Richard Hamming’s theme for his book on numerical methods in computing, “The purpose of computing is insight, not numbers.”

    Reply
  7. Walter Underwood Avatar
    Walter Underwood

    10% sounds bad, but if it is a representative sample of the possibly-available information, that could be pretty sold.
    The Von Neumann quote reminds me of Richard Hamming’s theme for his book on numerical methods in computing, “The purpose of computing is insight, not numbers.”

    Reply
  8. Walter Underwood Avatar
    Walter Underwood

    10% sounds bad, but if it is a representative sample of the possibly-available information, that could be pretty sold.
    The Von Neumann quote reminds me of Richard Hamming’s theme for his book on numerical methods in computing, “The purpose of computing is insight, not numbers.”

    Reply
  9. Dan Markovitz Avatar
    Dan Markovitz

    Bob — your point that “the CEO will generally have less than 10% of the information typically present in the ensuing Harvard Business School case study” is why I deplore the emphasis on case studies in business schools. (And this is from a Stanford GSB graduate.)
    The ultimate decision/outcome in the case is always presented as a no-brainer when approached with the relevant GSB-taught tools, when the truth is that the CEO was really just guessing, and hoping that his/her gut instinct was correct.

    Reply
  10. Dan Markovitz Avatar
    Dan Markovitz

    Bob — your point that “the CEO will generally have less than 10% of the information typically present in the ensuing Harvard Business School case study” is why I deplore the emphasis on case studies in business schools. (And this is from a Stanford GSB graduate.)
    The ultimate decision/outcome in the case is always presented as a no-brainer when approached with the relevant GSB-taught tools, when the truth is that the CEO was really just guessing, and hoping that his/her gut instinct was correct.

    Reply
  11. Dan Markovitz Avatar
    Dan Markovitz

    Bob — your point that “the CEO will generally have less than 10% of the information typically present in the ensuing Harvard Business School case study” is why I deplore the emphasis on case studies in business schools. (And this is from a Stanford GSB graduate.)
    The ultimate decision/outcome in the case is always presented as a no-brainer when approached with the relevant GSB-taught tools, when the truth is that the CEO was really just guessing, and hoping that his/her gut instinct was correct.

    Reply
  12. Dan Markovitz Avatar
    Dan Markovitz

    Bob — your point that “the CEO will generally have less than 10% of the information typically present in the ensuing Harvard Business School case study” is why I deplore the emphasis on case studies in business schools. (And this is from a Stanford GSB graduate.)
    The ultimate decision/outcome in the case is always presented as a no-brainer when approached with the relevant GSB-taught tools, when the truth is that the CEO was really just guessing, and hoping that his/her gut instinct was correct.

    Reply
  13. Dan Markovitz Avatar
    Dan Markovitz

    Bob — your point that “the CEO will generally have less than 10% of the information typically present in the ensuing Harvard Business School case study” is why I deplore the emphasis on case studies in business schools. (And this is from a Stanford GSB graduate.)
    The ultimate decision/outcome in the case is always presented as a no-brainer when approached with the relevant GSB-taught tools, when the truth is that the CEO was really just guessing, and hoping that his/her gut instinct was correct.

    Reply
  14. Dan Markovitz Avatar
    Dan Markovitz

    Bob — your point that “the CEO will generally have less than 10% of the information typically present in the ensuing Harvard Business School case study” is why I deplore the emphasis on case studies in business schools. (And this is from a Stanford GSB graduate.)
    The ultimate decision/outcome in the case is always presented as a no-brainer when approached with the relevant GSB-taught tools, when the truth is that the CEO was really just guessing, and hoping that his/her gut instinct was correct.

    Reply
  15. Dan Markovitz Avatar
    Dan Markovitz

    Bob — your point that “the CEO will generally have less than 10% of the information typically present in the ensuing Harvard Business School case study” is why I deplore the emphasis on case studies in business schools. (And this is from a Stanford GSB graduate.)
    The ultimate decision/outcome in the case is always presented as a no-brainer when approached with the relevant GSB-taught tools, when the truth is that the CEO was really just guessing, and hoping that his/her gut instinct was correct.

    Reply
  16. Dan Markovitz Avatar
    Dan Markovitz

    Bob — your point that “the CEO will generally have less than 10% of the information typically present in the ensuing Harvard Business School case study” is why I deplore the emphasis on case studies in business schools. (And this is from a Stanford GSB graduate.)
    The ultimate decision/outcome in the case is always presented as a no-brainer when approached with the relevant GSB-taught tools, when the truth is that the CEO was really just guessing, and hoping that his/her gut instinct was correct.

    Reply
  17. Joe Marchese Avatar
    Joe Marchese

    The fundamental prerequisite for leadership is courage. A leader goes on to act in many ways, but without courage, nothing good results.

    Reply
  18. Joe Marchese Avatar
    Joe Marchese

    The fundamental prerequisite for leadership is courage. A leader goes on to act in many ways, but without courage, nothing good results.

    Reply
  19. Joe Marchese Avatar
    Joe Marchese

    The fundamental prerequisite for leadership is courage. A leader goes on to act in many ways, but without courage, nothing good results.

    Reply
  20. Joe Marchese Avatar
    Joe Marchese

    The fundamental prerequisite for leadership is courage. A leader goes on to act in many ways, but without courage, nothing good results.

    Reply
  21. Joe Marchese Avatar
    Joe Marchese

    The fundamental prerequisite for leadership is courage. A leader goes on to act in many ways, but without courage, nothing good results.

    Reply
  22. Joe Marchese Avatar
    Joe Marchese

    The fundamental prerequisite for leadership is courage. A leader goes on to act in many ways, but without courage, nothing good results.

    Reply
  23. Joe Marchese Avatar
    Joe Marchese

    The fundamental prerequisite for leadership is courage. A leader goes on to act in many ways, but without courage, nothing good results.

    Reply
  24. Joe Marchese Avatar
    Joe Marchese

    The fundamental prerequisite for leadership is courage. A leader goes on to act in many ways, but without courage, nothing good results.

    Reply
  25. Cindy Moret O'Keeffe Avatar
    Cindy Moret O’Keeffe

    Can’t help but think about our politicians wrangling with our budget as I read about “courage” and “deeply unpopular” decisions. Wish they had more of the former to make the later and drop the partisan nonsense. Wish Washington could go to CEO bootcamp.

    Reply
  26. Cindy Moret O'Keeffe Avatar
    Cindy Moret O’Keeffe

    Can’t help but think about our politicians wrangling with our budget as I read about “courage” and “deeply unpopular” decisions. Wish they had more of the former to make the later and drop the partisan nonsense. Wish Washington could go to CEO bootcamp.

    Reply
  27. Cindy Moret O'Keeffe Avatar
    Cindy Moret O’Keeffe

    Can’t help but think about our politicians wrangling with our budget as I read about “courage” and “deeply unpopular” decisions. Wish they had more of the former to make the later and drop the partisan nonsense. Wish Washington could go to CEO bootcamp.

    Reply
  28. Cindy Moret O'Keeffe Avatar
    Cindy Moret O’Keeffe

    Can’t help but think about our politicians wrangling with our budget as I read about “courage” and “deeply unpopular” decisions. Wish they had more of the former to make the later and drop the partisan nonsense. Wish Washington could go to CEO bootcamp.

    Reply
  29. Cindy Moret O'Keeffe Avatar
    Cindy Moret O’Keeffe

    Can’t help but think about our politicians wrangling with our budget as I read about “courage” and “deeply unpopular” decisions. Wish they had more of the former to make the later and drop the partisan nonsense. Wish Washington could go to CEO bootcamp.

    Reply
  30. Cindy Moret O'Keeffe Avatar
    Cindy Moret O’Keeffe

    Can’t help but think about our politicians wrangling with our budget as I read about “courage” and “deeply unpopular” decisions. Wish they had more of the former to make the later and drop the partisan nonsense. Wish Washington could go to CEO bootcamp.

    Reply
  31. Cindy Moret O'Keeffe Avatar
    Cindy Moret O’Keeffe

    Can’t help but think about our politicians wrangling with our budget as I read about “courage” and “deeply unpopular” decisions. Wish they had more of the former to make the later and drop the partisan nonsense. Wish Washington could go to CEO bootcamp.

    Reply
  32. Cindy Moret O'Keeffe Avatar
    Cindy Moret O’Keeffe

    Can’t help but think about our politicians wrangling with our budget as I read about “courage” and “deeply unpopular” decisions. Wish they had more of the former to make the later and drop the partisan nonsense. Wish Washington could go to CEO bootcamp.

    Reply

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