17 Startup Principles by Sam Altman

Alex: What's up, everyone? Welcome back to another episode of Founder’s Journal. I'm Alex Lieberman, co-founder and executive chairman of Morning Brew. Before hopping into the episode, I would love to hear from you; shoot me an email, introduce yourself. There is nothing better than meeting my listeners and learning more about them, so just say what's up, share a sentence or two about who you are, and I will 100% respond. My email is alex@morningbrew.com. Now let's get into it. 

On today's episode, I'm going to break down “17 Startup Principles” by Sam Altman, the CEO of OpenAI and former president of Y Combinator. The essay is called “What I Wish Someone Had Told Me.” And as I read this piece, I found myself nodding from beginning to end. Sam managed to bottle up so many thoughts and experiences that I have had as an entrepreneur over the last decade, but I never articulated in such a clear way. So without further ado, let's hop into the episode. 

“What I Wish Someone Had Told Me” by Sam Altman. Number one: optimism, obsession, self-belief, raw horsepower, and personal connections are how things get started.”

Now, I want to go a little bit deeper here. Let's talk about optimism. I am so glad that Sam called it out because I've always been self-conscious about being a default optimist. Some really successful entrepreneurs that I know well are default cynics or pessimists, and so I've always worried that optimism would lead me to being blind or being caught off guard as I build a business, but I now believe that's just not true. In fact, I think that fear of being caught off guard is just an excuse for not thinking critically enough about reality and what could go wrong. 

Next, let's talk about raw horsepower, as Sam calls it. I've always called this relentlessness, and what relentlessness means to me is not just showing up every day, it's showing up with a level of intensity that makes people think you're a little bit crazy. On top of that, relentlessness is having a willingness to do whatever it takes to will your business into existence, even if that means making an ass of yourself, because that is likely exactly what you'll have to do, especially in the early days. 

Finally, I just wanna mention one other characteristic that I think Sam is missing here, and that is critical thinking. Oftentimes where you start with a business is not where you will finish, and the only way that happens is by constantly talking to your customers and having the clarity of thought to understand what changes need to be made to better solve their problems. Sometimes this means solving a different problem. Other times it means solving the same problem in a different way. Let's move to number two.

“Number two, cohesive teams, the right combination of calmness and urgency, and unreasonable commitment are how things get finished. Long-term orientation is in short supply. Try not to worry about what people think in the short term, which will get easier over time.” 

So to go deeper here, Dara from Uber has famously said that his approach to business and strategy is being short-term impatient and long-term patient, which is perfectly put. And here's another way I think about it, with a specific example. Let's say you take a thousand dollars and you put it into the markets. Assuming the markets go up by 7% per year, which they've done historically, your $1,000 is worth $15,000 after 40 years. Compounding is beautiful. Building a business is no different. If you add 7% more customers each month, improve the product by 7% each month, improve your people by 7% each month, your business will be exponentially better in the long term. And to make that happen, you need to be committed to the long term. You need to be patient and know that it will take time to build what you want to build. Anything worth building is worth waiting for. But in the short term, you will need to do everything in your power to make sure that you are growing by that 7% if you want a chance at the exponential outcome. To do that, you'll have to be impatient and ruthless about staying on track and continuing to compound. 

Number three, it is easier for a team to do a hard thing that really matters than to do an easy thing that doesn't really matter. Audacious ideas motivate people.”
So I completely agree with this. I think big ideas are the greatest recruiters. Smart, ambitious people want to work on big, ambitious ideas. Sure, Elon Musk or Sam Altman can attract any top 1% employee, and especially an engineer, because of their reputation. But I believe just as important as the founder, even if it's someone as big as Elon or Altman, is the ultimate north star of the business. It just so happens that Elon and Sam Altman are working on big, audacious problems in addition to them being big personalities on the internet. 

Number four, incentives are superpowers. Set them carefully.”

So anyone who has built a business knows how painfully true this statement is. Charlie Munger famously said, show me the incentives and I'll show you the outcome. If you want to drive the right behaviors by your customers, your people, and your investors, you need to take stock of how you're incentivizing them periodically. Are you incentivizing your employees to work hard, think critically, and collaborate to succeed at your company? Or are you incentivizing them to do the bare minimum and spend time gossiping and politicking? You should go through this same line of questioning for everyone, your employees, your investors, and your customers. 

Next up, number five. “Concentrate your resources on a small number of high conviction bets. This is easy to say, but evidently hard to do. You can delete more stuff than you think.” 

Let's go deeper here. I've learned about myself that I have trouble saying no. I'm also very excitable, and oftentimes the things I say yes to aren't actually the greatest use of my time. This is where creating very specific constraints can actually be super helpful for someone like myself. So let's play out a hypothetical exercise that I can do to try to get focused. If I tell myself I can only pursue one new business for the remainder of 2024, how would my decision-making change? I believe a few things would happen. I'd first realize that I don't actually have high conviction in many of the things I traditionally have said yes to. I wouldn't instantly say yes to anything until I've thought really hard about if this is going to be the one thing that I'm going to focus on. And also I feel like I would be able to dedicate myself fully with my full resources and my full capacity to the one thing that I choose. Finally, I think I'd also realized that me spending time on a lot of low conviction things was a misguided way to increase my odds of success by keeping more options open. In fact, I believe the best way to succeed is to close off as many options as possible once you have high conviction in one thing. Let's move on to the next one. 

Number six, “communicate clearly and concisely.” You know, the irony isn't lost on me that that point was written in four words, nice and clear and concise by Sam. But just to go a little bit deeper here, not only is this so important, it's also something we can all get better at no matter how articulate we are. And I have a simple exercise that forces you to get more clear and more concise when talking with people in your business. For a single day, keep track of how often people will ask you for follow-up questions or clarifying questions when you're talking with them over Slack in person or on calls, and save that number. At the end of the day, that's gonna be your baseline. Then for a week, get super focused on saying things as clearly as possible. Use simple words, not big words. Explain things as if the person has less context than they actually do. Avoid logic jumps; be as linear as possible. Then after a week, get a sense of your new baseline. Count follow-up and clarifying questions again for a full day and record that number. Have you made progress? You need to answer that question for yourself. The more clearly that you speak, the less clarification people will need when you speak to them. 

Next up, number seven. “Fight bullshit and bureaucracy every time you see it, and get other people to fight it too. Do not let the org chart get in the way of people working productively together.” I don't have much to say here other than that this point, point number seven, is one that increases in importance as you grow your company. Every additional hire makes seven more and more powerful, and if you wanna see what it looks like to recognize and also remove a poisonous org chart, I highly recommend you listen to the podcast interview between Lenny Rachitsky and Brian Chesky, who is the CEO of Airbnb, and he recently went through this exact exercise. 

Principle number eight, “outcomes are what count. Don't let good process excuse bad results.” Said differently, there are no participation trophies in startups. That's my view on it. It doesn't matter how hard you work or what work you do, if you don't hit the goals that you've set for yourself and the business, that's what truly matters. Now, I will give a caveat here though; it is also important to treat yourself and your people with grace. If you have confidence in your strategy and you believe your people are doing the right work to execute on the strategy, it's also not productive to make wholesale changes because you didn't achieve the outcomes you wanted. 

Principle number nine, “spend more time recruiting. Take risks on high potential people with a fast rate of improvement. Look for evidence of getting stuff done in addition to intelligence.” To go deeper here, at the end of the day, most of your problems in business post-product-market fit are people problems. If you can spend additional time to decrease the odds of people problems happening, you should do that every day of the week. That is also why when you're in hiring mode in the early years of your business, unless you already have a management layer or an executive team, you or one of your co-founders will probably have to spend something like 50% of their time exclusively recruiting and hiring. 

Principle number ten, “superstars are even more valuable than they seem, but you have to evaluate people on their net impact on the performance of the organization.” I wanna just share one thought here, which is that what I have found is people can be superstars in one business and not superstars in another business. I've seen so many examples of people who absolutely crushed it, let's say in a late stage company, but they didn't have necessarily the capacity or the proper skill set to crush it in an early stage company. Or I've seen people who were great independent contributors and they were superstars in those roles, but they weren't superstars once they became managers. That's the definition of the Peter principle. So something else to keep in mind is not just the net impact of a superstar on performance of the organization, it's also the fact that superstars aren't necessarily superstars everywhere. The odds are higher that they are, but it's not always true. 

Principle number 11, “fast iteration can make up for a lot. It's usually okay to be wrong, if you iterate quickly. Plans should be measured in decades. Execution should be measured in weeks.” To go a little bit deeper here, but I don't have much more to say, this is a different flavor of the same point that I shared above about short-term impatience and long-term patience. How you or your team works and what you work on should be handled with urgency and impatience. Where your team is working toward should be handled with patience. 

Principle number 12, “don't fight the business equivalent of the laws of physics.” I love this one. “And this is why momentum is one of the most underrated but important parts of business that I talk about all the time. When you have momentum, you need to do everything to preserve it. And when you don't have momentum, you need to do everything to find it. Momentum isn't just important for the sake of growing your business. It's also incredibly important for the sake of your culture, both internally and externally. It exudes confidence in people on the outside world to be interested in being customers in your business, and exudes confidence internally in your employees to keep working tirelessly towards your mission.

Principle number 13, “inspiration is perishable, and life goes by fast. Inaction is a particularly insidious type of risk.” So I totally agree with this and I would break this down further. I think there are two steps to action. There's urgency, which is having the thought to act, and then there's action, which is the act of doing the thing. I think you can actually be too fast to act sometimes, just as inaction can be a bad thing. So I think sometimes my issue isn’t inaction, it's actually rapid action, too fast of action, but I don't think you can ever have too much urgency when building a business, and that's why I think people should optimize for urgency. And then you should optimize for thoughtful action.

Principle number 14, “scale often has surprising emergent properties.” So what I'll say here is this is, of the 17 principles, this is the only one that I'd be curious to understand what Sam means. Literally speaking, it means that as your business hits scale, there are benefits that did not exist prescale, but I'm wondering what that actually looks like in practice. So Sam, if you're listening to this podcast on the off chance, please let me know. 

Principle number 15, “compounding exponentials are magic. In particular, you really want to build a business that gets a compounding advantage with scale.” So this could look like network effects if you are a two-sided marketplace like DoorDash or a social network like Meta, or it could look like scale economies if you're Netflix, who can spend $20 billion a year on content because you can spread all of those costs across hundreds of millions of customers.

Principle number 16, “get back up and keep going.” All I'll say here is this has been the story of my life as an entrepreneur for the last 10 years. 

And principle number 17, “working with great people is one of the best parts of life.” I totally agree, and I think the hardest part about it is to work with truly great people actually isn't that easy. In theory, it's great. It's not easy to actually make happen. You have to be working on something that is interesting enough to great people. You have to be a compelling enough thinker slash storyteller to attract great people, and you need to be good enough at understanding what great actually looks like. What I found is that the best entrepreneurs are so good because they are simply better at knowing what great looks like and not settling for any less. Far too many entrepreneurs settle for getting employees that are good and not great, and also to work with great people, you have to be uncomfortable. It is uncomfortable to hire people that are better than you. Your survival brain kicks in at first, and you worry about your job. You worry that these people won't learn from you. You question your value. In fact, all of these things, all of these worries are a sign that you're actually hiring the right people. 

And so those are the 17 principles from “What I wish someone had told me” by Sam Altman. If you wanna read the full essay, make sure to check it out in the show notes. And as always, thank you so much for listening to Founder’s Journal. Don't forget to email me and say what up. I will respond, to alex@morningbrew.com. And with that, I will catch you next episode.