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Building a Company from First Principles

· 2 min

Work with the right people

The people you work with are the most important part of the journey. You will spend more time with them than with your partner. Working with the wrong people will make your life miserable, and operating in a bad mood will make you fail.

  • Work with people who give you energy.
  • Hire intelligent people who want to take on broad responsibility in their role. They should have a real objective.
  • Fire bad fits fast. It’s usually a very relieving moment getting a bad fit out of the team. You hired them to solve a problem for you, not to create a new problem for everyone.

Solve the right problem

Choose objectives that matter for the company.

  • Solve a problem that makes people pay for it. Play stupid games, win stupid prizes.
  • Talk to your customers. Every role should. That shows people what actually matters.
  • There are just two ways to make revenue: sell to new customers or sell more to existing ones.
  • Make sure your revenue is not flowing out the other side. You want good churn rates.

Focus, focus, focus / Optimize for ownership

  • Every person on the team should have one meaningful objective. Multiple people can have the same one. Give one person two objectives and none will be a success. Give people objectives that are not critical for the company and you will create waste.
  • Eliminate barriers. That’s good for smaller cycles and lets intelligent people move freely to get their job done.
  • Never hire people for jobs that are not critical. Have the team do those jobs on the side. It’s desired that they just get done as well as needed.

Optimize for iteration speed / Action creates information

  • The cheaper it gets to learn, the more demand there will be for learning (Jevons paradox).
  • Being successful is only a numbers game. If you have tried often enough, lucky cases will compound. Make sure to learn from the things that don’t cut it.
  • Any job should be doable by as few people as possible. As many as necessary: risky things might get a second pair of eyes.

Optimize for simplicity

  • Nothing creates more iteration speed than simplicity.
  • Anything simple that solves the most important problem can solve more complex problems down the line (Gall’s Law). That applies to organization structures and processes as well as products.
  • Never stop cutting complexity.