Reid Hoffman’s Two Rules for Strategy Decisions

• Ben Casnocha

MARCH 5, 2015

Reid Hoffman — the co-founder and chairman of LinkedIn and partner at the venture capital firm Greylock — is a preeminent Silicon Valley strategist. I recently ended mytour of duty as Reid’s chief of staff and wrote a long essay about that experience —“10,000 Hours with Reid Hoffman: Lessons Learned on Business and Life.” These are the two major strategic decision-making lessons that I learned from working so closely with him.

Reid’s first principle is speed. One of his most popular quotes is, “If you aren’t embarrassed by the first version of your product, you shipped too late.” Another is, “In founding a startup, you throw yourself off a cliff and build an airplane on the way down.” Practically, Reid employs several decision making hacks to prioritize speed as a factor for which option is best — and to speed up the process of making the decision itself.

When faced with a set of options, Reid frequently will make a provisional decision instinctually based on the current information. Then he will note what additional information he would need to disprove his provisional decision and go get that. What many do instead — at their own peril — is encounter a situation in which they have limited information, punt on the decision until they gather more information, and endure an information-gathering process that takes longer than expected. Meanwhile, the world changes.

If you move quickly, there will be mistakes borne of haste. If you’re a manager and care seriously about speed, you’ll need to tell your people you’re willing to accept the tradeoffs. Reid did this with me. We agreed I was going to make judgment calls on a range of issues on his behalf without checking with him. He told me, “In order to move fast, I expect you’ll make some foot faults. I’m okay with an error rate of 10-20% — times when I would have made a different decision in a given situation — if it means you can move fast.” I felt empowered to make decisions with this ratio in mind — and it was incredibly liberating.

Speed certainly matters to an extreme degree in a start-up context. Big companies are different. Reid once told me that the key for big companies like LinkedIn is not to pursue strategies where being fastest is critical — big companies that adopt strategies that depend on pure speed battles will always lose. Instead, they need to devise strategies where their slowness can become a strength.

Reid’s second principle is simplicity — simplicity enables speed.

Making the complex simple does not mean ignoring complexity. Reid is a nuanced thinker who does not shy away from detail, second order effects, exception cases, and so on. But especially in a group decision-making process where there are various points of view, it’s important for the leader to distill and frame the option set with simplicity. Wrestle with complexity, yes, but frame and commit to a decision that’s simple enough for everyone to understand and act on.

In situations with many paths, Reid frequently groups the possible options into “light, medium, heavy” or “easy, medium, hard.” For example, we debated different ways to publish and promote the LinkedIn Series B pitch deck we created. We could simply click publish, share it on LinkedIn and Twitter, and see how it spreads. We could reach out to journalists in advance and give someone an exclusive, early look. We could write a series of supplementary essays that appear simultaneous with the deck. We could audio record his oral commentary on each slide. Reid bucketed the options into three categories: basic, intermediate, and advanced. “How intensively do we want to go after this?” We decided on a level of intensity and executed on the relevant set of actions.

When there’s a complex list of pros and cons driving a potentially expensive action, seek a single decisive reason to go for it — not a blended reason. For example, we were once discussing whether it’d make sense for him to travel to China. There was the LinkedIn expansion activity in China; some fun intellectual events happening; the Chinese edition of The Start-Up of You was launching. Together, these constituted a variety of possible good reasons to go, but none justified a trip in and of itself. Reid said, “There needs to be one decisive reason. And then the worthiness of the trip needs to be measured against that one reason. If I go, then we can backfill into the schedule all the other secondary activities. But if I go for a blended reason, I’ll almost surely come back and feel like it was a waste a time.” He did not go on the trip.

If you come up with a list of many reasons to do something, Nassim Taleb once wrote, you are trying to convince yourself — if there isn’t one clear reason, don’t do it.

Reid is not someone who can recite Clay Christensen or Michael Porter verbatim. In fact, Reid has never formally studied strategy and he rarely references the famous gurus. Instead, his views on strategic decision-making are hard won through experience and specific to entrepreneurial contexts: situations where the overall battlefield is foggy, the ground underneath you is shifting, and death is assured if your next step is not the right one. And yes — this increasingly describes the battlefieldall organizations are fighting in, not just start-ups.

Strategy is one of the most written-about topics in business, but much of it is interesting when you’re reading it but rarely remembered or acted upon. The heralded “strategy frameworks” are either too complicated or too context-dependent or too abstract. What I love about Reid’s principles is they are short and pithy — thus, memorable — and yet they are nonetheless ideas with teeth: they really can distinctively shape the pattern of one’s decision making.