You don’t have to be a founder to tap into ‘founder mode’, but it helps

A couple of weeks ago, Paul Graham posted an essay on ‘founder mode’ – the idea that founders are better placed to run an organisation than professional managers. I was initially surprised that this idea seemed novel to so many people. But then I realised that, through our experiences at Faculty, we might have a special vantage point on this topic. And some useful insights to share. 

At Faculty, we help organisations master their use of AI. Across the public and private sectors, we’ve seen up close the differences between founder-led organisations vs those led by professional managers. Both the good and the bad. 

Through the experiences of starting and successfully growing a company, founders have an inherent set of advantages that professional managers typically do not. Below I’ll outline what exactly these advantages are, why they’re important, their limitations, and how managers can best compensate for them.

What do we mean by ‘founder mode’?

Let’s start with a definition of ‘founder mode’. To make any kind of progress in an organisation, you need to be able to fix its problems or alter its overall direction. Either way, it’s about making changes for the better. Founder mode is the ability to make these positive changes faster and with higher probability, by tapping into the advantages naturally conferred to (or learned by) a company founder.

But founder mode is actually not unique to founders. It’s possible to earn the same set of advantages through other routes. Take Microsoft’s Satya Nadella for example. He has spent 32 years at the company and has made profound changes there as CEO, despite not being a founder himself. If anyone embodies founder mode at a large organisation, it’s him. 

Ultimately, Satya accumulated a similar set of experiences (and battle scars) at Microsoft as founders do. The difference is that he will have had to be more deliberate to get the same experiences. Either that, or he got very lucky – but just observing his actions, I’d bet it was intentional. 

But studying examples like this can lead you to realise why founder mode is a real thing. If you’re a founder, by default you can’t help learning the lessons that outstanding professional managers like Satya have to deliberately engineer for themselves.

At least, if you’re successful. Which is a crucial point; there’s a selection bias on founders. When Paul Graham talks about ‘founders’, I’m sure he is primarily referring to ‘successful founders’. That means that they will have been put through the ringer and come out the other side reasonably successfully. 

That matters. One, these founders will probably be talented. Two, they will have learnt many things along their journey. Both are important, but let’s assume that we’re comparing an equivalently talented manager and founder, so we’re only really interested in the differences created by the founding process. 

So how does founder mode play out in more detail? Let’s start by imagining you’re the CEO of a company, and you want to make a change. There are a number of key steps: 

• Figuring out the direction of the change 

• Figuring out the details of the change 

• Having the courage to implement the change

• Having the ability to implement the change 

• Having sufficient reasons to take the pain 

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Here’s why at each step successful founders have advantages.

1. Figuring out the direction of the change 

Founders know what they are trying to achieve. Making a significant change will always require trade-offs. For example, if SpaceX’s mission is to get to Mars, should they just build rockets (a high focus approach), or should they build rockets and Starlink (lower focus, but requiring higher resources)? 

That depends on whether Starlink would be a distraction from the mission, or an enabler based on the resources and capabilities it would create. It’s genuinely hard to know whether to do it or not, so they will want a very smart person who deeply understands and believes in the mission to be making the call on that tradeoff. Fortunately, SpaceX has Elon Musk at the helm. 

Successful founders have to deeply understand and wholeheartedly believe in the mission and strategy of their organisation. Managers however can vary in their understanding and commitment.

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2. Figuring out the details of the change

Founders know the details of how things work. Continuing with our SpaceX example, imagine the insight Elon can bring to individual plans for the organisation. 

“Adam, not Burt, should start building Starlink satellites. We tried to build hardware in Burt’s department 3 years ago, and it just didn’t work because the clean room facilities are too high spec. You’d think engineers wouldn’t mind, but the extra processes slowed them down so much it just was a waste of time”. 

This type of (completely fictional) level of detail is incredibly helpful in suggesting viable strategies for making changes. Successful founders have developed good models of the world, and deep knowledge of their business. They’ve run many years of experiments, and succeeded or failed, and learnt many things along the way.

They’ve probably been exposed to more failure than any managerial business career would tolerate while the company was small and few were watching. And they carry the learnings. 

They’ve watched the systems of the business being built, and have the kind of esoteric knowledge of exactly how processes are structured – why they work in particular ways, and why they don’t work in others. 

Managers vary in their models and understanding of the organisation’s inside details. Some managers get to their position by being good at the execution, while some are good at playing the bureaucracy.

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3. Having the courage to implement the change

Founders have learnt courage. Plenty of SpaceX rocket launches failed. But they had the courage to keep going. Founders have been wrong before and have found out that it doesn’t kill them. That means they are willing to try things, and roll them back if they don’t work. They have seen ideas and initiatives grow from nothing, and know what it actually takes to make that happen. 

I have a slightly silly expression, “Things don’t work until they do”. I use it to try to reassure people who haven’t seen things fail for long periods of time before succeeding. When something doesn’t work immediately, it’s easy to lose faith. 

But in everything I’ve done as a founder, I’ve done it badly at first. There have been long series of iterations to get things working as intended. Managers won’t necessarily have had this experience, or the space to fail like a founder can, and so can be tempted to give up too early when ideas don’t hit the mark straight away.

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4. Having the ability to implement the change

Founders have political capital. That is helpful, because any change upsets the status quo; inevitably some people will win and other people will lose.

In many large organisations, the people who are going to lose can follow a couple of simple strategies. One, they can wait out the person who’s trying to make the change. Two, get the person or project moved, stopped, or even fired. But when that change-maker is a founder, both of those routes are hard. It’s unlikely that an individual can wait out a founder, or get them sacked. 

Importantly, this operates on a rational level and a subconscious level. As humans, we have a strong intuition that if you build something, you own it. Those natural, intuitive, property rights give founders an intuitive legitimacy in changing the organisation. You might think high status plays a part. It does in general, but I don’t think it’s hugely differentiating compared to a high status managerial CEO. 

Founders have one final advantage here; they will have personal relationships with many people across the organisation. They probably hired many of them. They’ve probably bumped into them once a week for years. All this builds some sense of trust. 

Collectively, this changes the game theory for people with incentives to resist the change, and means founders can change an organisation more effectively. Managers will struggle to generate this level of legitimacy and capital, certainly if they are jumping from job to job every 2-3 years.

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5. Having sufficient reasons to take the pain

Finally, founders know how to take pain. And most organisational change is painful. Certainly, the hard changes that professional managers will avoid are very hard. There has to be a reason to take the pain of this change.

Founders will invariably have a very strong psychological attachment to their company. They really want it to succeed. They are also incentivised through large amounts of equity, which means their incentives are aligned to the long term future of the company. In principle, a professional manager could be given a similar equity stake, but in practice, they often aren’t. 

Clearly, none of this is to say that only founders can operate in founder mode. It’s that successful founders almost can’t help learning these lessons, whereas professional managers will have to seek them out.

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Founder mode is not without limitations

All the attributes above lead to faster organisational changes. But those can be in a bad direction, as well as good. To complete the picture, let’s talk about the downsides of founder mode.

Even working well, tapping into founder mode can generate bigger errors but also enable an organisation to correct them faster. But these strengths can become extreme weaknesses. The political capital that comes with being a successful founder can lead them to develop a Napoleon complex. 

The mission and strategy could be wrong. The lessons they’ve learnt could have been more contingent on the circumstances than they realise. Their attachment to their mental picture of the company and its ideals can stop it from growing. So founder mode still requires a talented person to make work effectively.

My personal opinion is that great founders – think Jobs, Gates, Musk, Zuckerberg, etc – are better for companies than great managers. Empirically, they seem to create the largest outliers, those that generate the largest impact in the world. Obviously, a huge part of that will be down to their raw individual talent. But a significant part will be from the founder learning curve. That said, a great manager will likely be better for an organisation than a founder who’s in over their head.

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What can managers and non-founder led organisations take from this?

To reiterate, it’s not necessary to be a founder to work in founder mode. But you do have to have founder-like experiences. These are learned by doing hard, new things, and growing them.

Fortunately, there are always new initiatives going on in a company. And if you treat succeeding at those projects like a founder treats succeeding at a startup, you can learn the same lessons. But be warned, this will be hard work. 

By the same token, it’s not necessary to have a founder to make founder mode change. You just need someone with founder-like experience in founder-like circumstances. Finding people with founder-like experience in the organisation might be hard, but it’s certainly possible. 

Creating a structure in the organisation where this person has founder-like political power is easy in principle. Generally, this is reporting directly into the CEO, with full control of all the levers necessary to make the change succeed or fail. The problem is that many organisations struggle with the autonomy that it implies.

Finally, all of these lessons apply to both public and private organisations. You might be interested to think about what founder mode might look like in governing a country. Historically, I think this was more akin to a conquering monarch than a modern democratically elected president. In more recent history, someone like FDR or Thatcher was probably the closest thing we’ve seen to founder mode operating in government. And this is a model we seem to be moving further away from. 

I believe we lean to founders in companies because the advantages outweigh the disadvantages. But I think we lean to managers over ‘founders in government’ because the appetite for risk of failure is far lower. And while it would be a very bad idea to return to the conquering monarch archetype of country founder, Karl Popper has some very interesting ideas on how we could introduce something more akin to founder mode back into government. I’ll write more about this in the future.