In late 1994, Tim Brady and Yahoo founders Jerry Yang and David Filo sat down to write its first business plan. They thought that if everything went according to plan Yahoo would earn annual revenues of $80M in five years. Two years later they were making $1B a quarter. With such growth came great leadership challenges. Torch co-founder and COO Keegan Walden recently sat down with Tim to discuss these challenges, and how he mentors leaders at Y Combinator.
Keegan: You were Yahoo’s first employee and chief product officer for eight years. What were the earliest leadership challenges you faced in your time?
Tim: It was a small group of people, all pretty good friends, so it wasn’t necessarily a traditional leadership environment. The real challenge was coming up with a plan, because no one knew at the time where things were going. It was early, so we were in a position to lead the way from a product standpoint.
At that point, consumers didn’t know what was possible on the Internet. It was a vast repository of information, so having an opinion about what was possible and being able to articulate that through the product to consumers was unique. It was about us getting to a consensus of what to do and knowing that it could change at any moment if consumers didn’t like what we were doing.
A lot of the stuff going on right now, we worried about back then. Like political ads. It must have been the ’98 election. Someone gave us money to put a political ad up, which obviously raised a whole bunch of questions. We wanted it to be a balanced medium, so we were happy to put it up if we could get the opposing side to put up ads as well.
There wasn’t any targeting back then. If you came, you saw the ads. So there were always questions around ads for those trouble spots – political ads, alcohol, other vices. We ended up not taking it because we didn’t feel we could stay balanced.
These were the earliest leadership challenges. We really weren’t a big company for 18 months, in terms of people. So, there was no people management, and few had leadership skills.
Keegan: You mentioned another aspect of leadership that doesn’t get discussed very often, which is leader as forecaster. Do you think the ability to forecast is something leaders either have or don’t have, or can it be developed over time?
Tim: I think it’s both. I think you have to have a good sense of why and how you’re building a product, and you have to have a vision for what’s possible. Your ability to articulate that vision is what makes you someone that other people want to listen to and follow. Some people are naturally good at it. It’s very hard to pick someone off the street and teach that person to be that way.
That said, there’s only so much of the future you can influence. That’s what people can get better at – reading the tea leaves as they change. When YC looks for entrepreneurs, for example, if they’re not persuasive with us, how are they going to persuade other investors or prospective employees?
Keegan: How do you think about product development now versus in the early days of Yahoo?
Tim: Prior to the Internet, even software was shrink wrapped. You’d ship it to Borderland or some other software store, and the feedback cycle was super long. Before the Internet, planning was a bigger part of it, because the cost of screwing up was much bigger.
Post-Internet, it’s more about having a unique take and then being able to react to it and build quickly, because no one owns distribution. It’s a different way of playing the game. Certainly, unique ideas and good product sense are critical and you can’t win without them, but you don’t have to be as right. It’s better to be quick to react, build a product, and to look at what people are doing with the product, than it is to get it right from the outset.
Keegan: I’ve heard you say before that you and the founders thought Yahoo’s business would develop slowly when in fact it grew very fast. Contrast the challenges that founders face at the very beginning with the challenges of the growth stage, when many of your metrics are going up and to the right all at the same time.
Tim: In the fall of ’94 when we put together a business plan, we thought, “wow, if things go great, five years from now we could be making $80 million a year, which would be incredible, right?” That was our best case scenario.
And two years later we were making a billion dollars a quarter. So it happened fast. It gives you an idea of just how little we knew about what was going to happen. But it also spoke to our ability to react. Recognizing what’s going on and then reacting appropriately was the key to success online. Contrast that with early stage startups today that are looking for a signal of product-market fit. We never had that issue. It just happened.
The early days for us were about just hanging on. Putting in the hours keeping the site up, trying to grow it as fast as possible. Finding product-market fit for startups today is a very different thing. It’s a process of seeing what works and reacting to that, measuring and doubling down in areas that seem to be taking off.
You’re not completely in the dark, but you’re guessing. You’re going through this maze, following the promising leads. And once you get that product market fit, you kind of know, right? Things start to take off without you having to do anything and that’s when you find the signal.
And then there’s a growth period, which is how we spent most of our youth at Yahoo. Everything was going up and to the right, which is not always good because not everything is equally important. And when all the graphs say everything’s going great, it’s hard to prioritize correctly. You always learn more when things are going badly because you usually know why they’re going badly. The opposite isn’t always true. So part of the growth phase is trying to know why things are going well. And the trick is to invest in the right things for the right reasons so that it keeps going. That is harder to do when things are going well, because all the feedback is good.
If you think about the early phase, what drives you is the negative feedback to keep looking. Sometimes when you only get good feedback, it’s hard to know where to look.
Keegan: When you guys were making a billion dollars a quarter, how did you approach that? How did you know where to direct your resources?
Tim: The way the hierarchy was organized, I was looking after the consumers – the people using the Internet site. There was a head of sales that was trying to tap into these new budgets to steal money away from print and TV. They were trying to make those folks happy. I remember many, many late nights when me and the head of sales would talk and I would be very protective of the customer.
We would have a healthy conversation a few times a week trying to figure out how we would keep bringing in revenue and still make the customers happy. And I think that was a healthy dynamic by the way we structured the organization. The head of sales and I were good friends, and I think that that helped in us having that conversation.
Keegan: You talked about the importance of founders being able to listen while also being optimistic and persuasive, even in the face of negative feedback. Personality and leadership have gotten a lot of attention recently, particularly the dark side of personality which I think you’re kind of alluding to here.
This includes traits like narcissism. Narcissists have big egos and think they can accomplish almost anything, but also lack empathy and don’t consider the effects of their behavior on others. Do you see narcissism as a character flaw that needs to be overcome, or is it helpful in some ways?
Tim: I don’t think of it as narcissism. I think there are no redeeming qualities of narcissism even inside of a company. Full stop. Especially in startups, they fail. They fail quickly, because everything has to go right. You can have a good employee who’s trying hard but just isn’t cutting it. As a leader, you need to ask how much you want to invest in making that person successful versus cutting your losses. This applies to everything.
Certainly you need empathy on the product side, and you need a healthy dose of it to manage anybody. But at a certain point, you just don’t have that luxury. If you’re too nice, your company dies because of it. That’s why I wouldn’t characterize it as narcissism. How committed are you to this idea and seeing this idea happen? You can be completely focused on that to the extent of not being a very good human, and it’s those founders that are able to stay focused and be relentless and unsympathetic to certain things that will kill the organization. It’s about recognizing that without losing their humanity.
Because at some point if you lose it, it’s hard to get back and the other employees will see it. A good example of this is when you have to fire someone. Good founders will be very direct: “Keegan, you’re failing. Here’s why you’re failing. Here’s what I need you to do. You have two weeks to do it. If you can’t do it, we’re going to need to let you go. I’m sorry.” The rest of the organization will see that. It’s much better than saying, “Hey, Keegan, this isn’t working out. Pack your things. Good luck. Sorry it didn’t work out.”
In the former, you give a little bit of time to your startup. You need to give feedback because that person might not know they’re screwing up. They might think they’re doing great. In this way, you’re balancing the needs of the organization and the people. And doing that well is a very important skill of a startup founder.
Keegan: You’ve mentored many leaders over the years, all with different personalities and ways of leading — from senior leaders at Yahoo to dozens of YC founders. How do you approach that mentoring process?
Tim: I’ve gotten good at reading people and understanding what drives them. It’s important to understand what motivates someone and use that to help them do whatever they want to do. Recognize their motivations and then try to find their strengths and weaknesses.
It’s about getting them to double down on their strengths and either avoid their weaknesses or build them up. Hire someone to cover their weaknesses, cover their flanks where they’re not so good. Maybe it’s another way of helping them become more self-aware of what they’re good at and what they’re not, as well as what’s driving them.
Keegan: So a leader who lacks self-awareness might be driven by motivations that they’re not conscious of, and that might have a negative effect on their company?
Tim: Yeah. It’s hard to see a great leader be a great leader for a long period of time without being self-aware. They could get lucky early on with an idea and everything lines up. But at some point things will come off the rails, and if you’re not aware of what you’re good at and what you’re not good at, and why you’re doing what you’re doing, it will go poorly.
Keegan: I think that gets back to your earlier point about the importance of communicating to leaders where they’re succeeding and where they’re failing, so that they get the awareness that they need to do their jobs better.
Tim: Yeah, that’s fair. Everyone gets better when challenged, right? So part of trying to help these folks is to challenge them in ways that make them a little bit uncomfortable. You get the best out of people when they’re uncomfortable enough to make them want to work harder and better. I think that’s the other thing, both as a manager and someone who coaches.