"Founder Mode" and the Debate that is shaking Silicon Valley
Earlier this month, Paul Graham, a renowned figure in Silicon Valley and co-founder of Y-Combinator, published an essay called „Founder Mode.“
He wrote it after being stunned by a speech from Bryan Chesky, founder of Airbnb, held infront of a crowd of sucessfull entrepreneurs. It struck a chord with them, as he outlined a thesis on how companies should be run that discredits "professional managers."
As Airbnb scaled, Chesky was told to just hire good people and let the company run itself. But this led to bad outcomes, prompting him to develop a different leadership style by studying Steve Jobs.
Instead of following conventional advice to delegate completely, Jobs remained deeply involved in important details and maintained a direct connection with key contributors in the company. For example, Jobs held annual retreats with 100 of Apple's most important people, not just those at the top of the organizational chart, creating a stronger sense of alignment and engagement.
Chesky adopted a similar hands-on approach, realizing that founders can and should engage in more direct, "skip-level" management, rather than relying solely on standard hierarchical processes, to maintain a company's innovative and cohesive culture.
Graham’s essay was a rebuke against the MBA-types that enter companies after a certain level of scale and applying cooky-cutter frameworks to unique issues that really require the creativity and boot-strapping experience of a founder.
Members of the All-In Podcast, including David Sachs, who is part of the Paypal Mafia, thought this over-simplified the issue. While MBA-type or professional managers can be harmful to an organization for decreasing the rate of innovation, it is also flawed to favor the decision-making of founders by default. Founders make mistakes too and giving them a higher standing in the weighting of opinion can lead to dangerous silos.
Perhaps the truth lies somewhere in the middle. At some scale, you have to delegate. There’s no choice. The real question is how do you maintain the innovation and creativity of a small company at scale. And how do you maintain flat hierarchies that prevent organizations turn into slow, bureaucratic machines.
At Microsoft, Satya Nadella (a non-founder) shifted the company from a competitive, siloed environment to one that embraced openness, learning, and teamwork, leading to significant innovation and growth.
Nadella's approach offers a counter-argument to "founder mode" by demonstrating that a professional manager can successfully transform and scale a large company by empowering teams and fostering a strong, cohesive culture without the founder’s hands-on, detail-driven involvement.
On the other hand, studies have shown that founder-led companies often outperform non-founder-led companies in terms of long-term financial returns. Research by firms like Bain & Company and Empirical Research Partners found that founder-led companies tend to deliver higher total shareholder returns (TSR) compared to companies run by non-founders. A Bain study showed that founder-led companies generated 3.1 times more value over 25 years than non-founder-led companies.
It’s definitely a contentious issue and people are still fighting about what founder mode is and isn’t. I think the debate should really focus on how companies can maintain a spirit of innovation and adaptability as it scales. Getting an MBA doesn’t make you a good leader in business, but neither does being a founder.
What did you make of Paul Graham’s essay?
If you haven’t read it yet, here it is:
https://paulgraham.com/foundermode.html
Enjoy your Sunday!