Focus on building 10x teams, not on hiring 10x developers

There are a lot of posts out there about identifying and hiring 10x engineers. And a lot of discussion about whether or not these people even exist. At Spool, we’ve taken a very different approach. We focused on building a 10x team.

We believe that the effort spent trying to hire five 10x developers is better spent building one 10x team.

10x matters because of the Economics of Superstars

The “Economics of Superstars” observes that in some industries, marginally more talented people/groups generate exponentially more value [0]

The Economics of Superstars phenomenon requires a distribution channel to move a large volume of goods. For superstar athletes, television enables endorsements and merchandise sales. For software developers, the Internet enables scalable distribution of digital goods.

Finding a way to be 10x better than median can now generate exponentially more value for people who make digital goods.

In software, the superstar is the team, not the individual

In the Economics of Superstars, if an individual has tremendous control over the outcome (points scored in a basketball game), that individual is the beneficiary. So Kobe gets a big chunk of the value he generates for the team, stadium, and advertisers.

Software development, however, is more like rowing. It’s a team sport that requires skill and synchronization. This applies at all scales. On a three-person boat, one person out of sync will stall your boat. As you get bigger, no single developer can impact your team’s performance, so again synchronization is key.

Making your team as efficient as possible is what determines long-term success. [1]

A bunch of 10x people != A 10x team

Most hiring processes assume that if you find a great developer and put them on a great team, the individual and team will do well. Good teams try to nail down “culture fit” but this is usually only based on whether the candidate gets along with the team.

Throwing together a bunch of great developers who get along does not make for a 10x team.

How to Think About Building a 10x Team

Building a 10x team is a different task than trying to make an existing team 10x more efficient. The hardest part about building a 10x team is that who you need next is a moving target because it’s a function of who is already on the team.

The following are the top three non-technical questions we (Spool) ask ourselves when considering a candidate:

  • Does this person extend the team’s one strategic advantage? Successful startups do NOT have world class design, engineering, sales, and marketing all at once. They tend to be phenomenal at one thing and competent at the rest. Eventually they upgrade talent for “the rest.” For example, Zynga first nailed virality with crappy graphics, then later upgraded their art teams.
  • Is there enough shared culture? – Communication overhead will cripple most teams. Hiring people with a common culture is the simplest way to solve this problem. For example, alums of a university tend to use the same  jargon, think similarly, know the same programming languages, etc.. They will communicate naturally and are free to focus on higher order problems. It’s not a surprise that Paypal was mostly UIUC, for example. At Spool we’ve consciously hired mostly Stanford alums because Curtis and I are Stanford grads. Update: I apologize if I gave the impression that we don’t value diversity. As you can read in the comments, we’ve gone out of our way to build a diverse team. But there are many things that don’t impact your success early that you can short-circuit by picking people who have a similar enough background. Goldilocks Principle ftw 🙂
  • Does this person make other people better? A friend once told me that the best hire he made was a mistake. Had he properly screened this candidate’s technical ability, he wouldn’t have hired the candidate. But it turned out this engineer was so driven that he immediately made everyone else on the team more driven. Just by hiring him, the team became more productive, which far outweighed that individual being an average engineer. It’s sometimes worth trading off some technical ability to get a multiplier for your whole team.

What sorts of people make other people better?

When we were building Spool’s founding team, we looked for people who were technically solid but especially good at making other people around them better. The following are the types of people we identified that do this. There are probably others.

  • The Lead Engineer  sets the technical standard. She will conduct the hardest interviews and will generally work technical magic. She will raise everyone’s technical bar. This is usually what someone says when they mean 10x developer.
  • The Hustler will bend the rules a little when need be, find loopholes in a system, find people you need to find, hack together systems to extract data, and set the standard for just getting things done. She challenges everyone’s thinking about how to get things done.
  • The Little Engine That Could refuses to lose. She manages to do great things through sheer determination. Sometimes she will tell you about this in an interview, but many times you will need to dig into someone’s background to get a read on this. She makes everyone else more driven, focused, and makes them believe great things are possible.
  • The Teacher soaks up and disseminates information. A teacher is constantly learning new technologies or synthesizing large amounts of information. She then distills the critical points and actively shares them with others. She makes everyone more productive almost immediately. This adds up tremendously over the years.
  • The Anti-Pinochio  is willing to call b.s. on anyone, including the CEO. She is great at spotting b.s. and willing to ask questions of anyone. This keeps a team honest and a company transparent. This is different from being an asshole or a heretic.
  • The Energizer Bunny throws herself into a task fully and doesn’t have an off switch. She gets everyone to give 100% and is so enthused that everyone else becomes enthused. She sets the bar for effort and make everyone want to work harder just so they don’t disappoint her. This extends outside work too. She’ll be the first person at the party, the last one to leave, and will make everyone have more fun every day. Happy, enthusiastic teams are productive teams.
  • The Heart – this is the person on the team that everyone misses when she’s not around. She’ll bring cookies in for the office, she will remember birthdays, she will make people feel better when they’re down, and she will make people do great things because she’s just so lovable. People want to come to work to see this person everyday. Just having people look forward to showing up every day is a huge productivity boost.
In the following diagram, each color is a team-member rated from 1-10 on these characteristics. You can see that there’s a big hole with no color. I would gladly say no to a traditional 10x engineer to get one person with tremendous grit/determination on this team.

These personalities all play off each other. For example, a Teacher loves working with an Energizer Bunny because there is someone around to soak up all of that knowledge she shares. Or a Hustler and Lead Engineer can combine to uncover a new distribution channel because they iterate fast and are ruthless. As a result of having these people, you get massive productivity gains from complementary personalities and abilities. Combine these with your favorite/appropriate software development methodologies and you’ve got a killer team.

I’m sure there are other people who have techniques for building 10x teams. And the dynamics of what makes for a great team are going to be different across industries and stages of company. If you’re reading this and have thoughts, please do leave a comment. I’d love to incorporate it into our hiring practices.

Footnotes

Thanks to Curtis SpencerChristine TieuAditya Koolwal, Chandra Patni, Daniel WitteShazad Mohamed, Blake Scholl for reading drafts of this and providing input.

[0] – More on the Economics of Superstars

For example, Kobe Bryant is in the 99.999th percentile of ability, while the median NBA player is in the 99.99th percentile. For that small percentile improvement in ability, Kobe Bryant generates millions more in ticket sales, merchandise, concessions, and tv advertising for his team. This pattern repeats every where and is starting to appear with software development teams and startups. If you’re good, you can be Facebook, Google, Dropbox, etc. If you’re not, you can’t get a series A to get off the ground.


[1] Evidence building 10x teams matters more than finding 10x individuals

[2] – “Crazy” offers from Google/Twitter/Facebook/etc.

Historically, engineer/product manager/designer salaries have been relatively constrained (red line below). This is because we lacked an efficient distribution mechanism to take advantage of their special talents, so teams had to be very large to achieve scale and no individual could easily have massive impact.

But we are experiencing the beginnings of a world where the Economics of Superstars applies for small 10x teams because a small team can use Internet distribution as leverage. What is really interesting is that retention packages now are not about the individual. They are about keeping 10x teams together. The people who are really getting great retention bonuses are the people who make 10x teams possible. They are either the leaders in a product or engineering organization that know how to build 10x organizations, or they are the employees who make everyone around them better, or they are key employees whose departure would be seen as a signal that the team is no longer a 10x team. These packages are also a defensive move to prevent competitors from acquiring the building blocks that enable 10x teams. Losing key members of a team will result in other members leaving, and will enable the competitor to aggregate a team that operates like a 10x team. It’s not about the individual; it’s about team dynamics.

Another example from Google is how well they reward great teams and keep them together. Google’s Founder Awards disproportionately reward the best teams internally for exceptional accomplishments.

It seems like we’re moving to a world where a great team of developers can make $300k+/year each. But not by just walking in the front door — it really messes with team dynamics and manager-employee dynamics to hire people with those sorts of salaries. But rewarding a team and keeping great teams together is much easier to justify.

How the Economics of Superstars will play out for 10x Teams

[3] – More on Talent Acquisitions: Talent acquisitions are like record contracts

Startups eliminate the guess work that a large organization has in identifying teams with 10x ability. The startup ecosystem is as close to a meritocracy as we have — no bureaucracy, no legal department, no recruiting pipeline, minimal funding required to get started, etc. If a five-person team manages to build something and get any traction, they’ve accomplished something tremendous.

Identifying startups with 10x teams, is like a scout going through YouTube to find the next great band. If you find raw talent and give it the right platform (publicity, marketing, new instruments), you can turn that talent into something huge. Industries that have recognized their industry operates under the economics of superstars take these bets regularly – think about the English Premiere League, NBA, music industry, film industry, publishing industry, etc. If a bet pays off, you get Ronaldinho or The Beatles. Would you have given the following talented band $1 million/year and have full rights to all of the revenue they generated?

The Beatles before they were The Beatles

(This is The Beatles before they were The Beatles)

Again, because software is complex and you need teams to execute, the value aggregates in the team, not the individual. You rarely see Google hiring random individuals for $2.5 million over 4 years. Google, Facebook, Twitter, Groupon, etc. are paying to keep teams together and working on the things they’ve developed expertise in. These acquirers understand that it’s about finding 10x teams and giving them the resources of a bigger company. $10 million for four people over 4 years is worth it for many acquirers, because the incoming team has to be marginally better and the result will be exponential value generated for the acquiring company .

Equity does not equal sense of ownership

Equity != Sense of Ownership

A lesson I learned the hard way in my first startup: Giving someone more equity in your company does not mean they will act more like an owner. Some of the best people I’ve hired had relatively little equity. But they took ownership. The painful part, is that I’ve given big equity stakes to people who didn’t end up acting like owners.

Entrepreneurs have to resist the urge to give someone more equity to make that person feel more like an owner. A sense of ownership is not linearly correlated to equity. It’s a binary property unique to that individual. For some people this is a very small amount of equity. For others, no matter the amount of equity they will never act as much an owner as others.

How employee equity and ownership really work

Implications

  • Find the amount of equity that makes someone act as much like an owner as they will act. This is more of an art than a science.
  • Everyone has a natural high and low amount of ownership they’ll feel. This is hard to change or move.
  • People who exhibit high levels of ownership are worth generous equity because they make everyone around them act like owners as well.
  • Good cultures reward this behavior. Founders and boards should give these sorts of employees additional equity grants as a gesture of thanks. It won’t make them act any more like an owner (after all, they’re getting the additional grant because they act like owners anyway) but it will send the right message to the entire company. This also makes it easy to start people off with lower equity packages and decide on the job who actually acts like an owner.

And for employees, instead of quibbling over small equity grants, find a company that rewards this sort of behavior and act like an owner. This will yield far more personal gain to you than a hard fought negotiation when you’re being hired.

Electronically Track Balls and Players

This idea is so obvious it would not even be worth mentioning, were it not for the fact that I can’t find a discussion about it on the Internet. The only thing I can find is an article from 2002: http://www.nature.com/news/2002/021104/full/news021104-6.html

Why is the entire playing field for a sport, all of the players, and the ball somehow tracked electronically? Why in the world are football referees eyeballing whether or not a player crossed the goal-line for a touchdown or where to spot the ball after a player is tackled? Arbitrarily putting the ball down and then calling out the guys with the chains has got to be one of the dumbest rituals in all of sports.

RFID would seem to be a more reasonable easy way to make baseball, football, soccer, and even basketball (goal tending would be easy to track) would benefit from this.

I can’t even imagine the argument about slowing down the game would apply because you could built an interface to it that the refs can use immediately. If the ball in basketball is on the downturn when it’s tapped in the air, a little signal could vibrate in the ref’s pocket. If it doesn’t, then it doesn’t. When the ref wants to spot the ball to see if a team made a first down in football, a simple device could tell them approximately where to spot the ball and more importantly immediately tell the ref whether or not this was a first down.

Simple and no change to game play, and actually makes the game move faster in some cases.

Place to Drop Off the Kids

What if there were a convenient place where parents could drop off their kids while they’re in a store — grocery store, wal-mart, at the mall, etc. — where the kids are:

  1. entertained
  2. supervised (with background checks for employees)
  3. safe
  4. exposed to educational tools

I’m imagining a place where kids younger than 5 can play with semi-educational toys, kids from 5-8 can do puzzles and board games with each other, and kids 8-12 can surf the Internet (with a very strong filter, of course). You could stockpile the place with DVDs as well and give kids headphones so they can watch their own little movie and it could be stocked with things from PBS.

Then you charge the parents like $15/hr per kid (or some other reasonable figure that makes the financials work) and because the parent is free to get their errands done and it’s very convenient. And to make the parents feel better, their kid is sitting there learning in a safe environment so they can justify the cost to themselves as welll.

I’m betting most of the time you’d just have a single person in the place and you’d only have a handful of kids, so your human costs would be low. At peak hours (which you could gather data on initially) you could staff it with more people. In a big place like a mall you’d get a lot more people of course so you’d have to have more people on hand but you’d make a lot more on volume.

I wonder if you could even demonstrate that having this kind of a store is more likely to bring parents to a particular mall and so you could justify getting free rent from the landlord.

Marvel MMORPG

Marvel should license their brand and all of their superheroes to a video-game company or hire a good video game company to create a massively mult-play online role playing game. World of Warcraft is huge these days and to get into that world you have to learn all of this backstory and character types and blah blah blah. With the Marvel Universe, thanks especially to their movie success in the last 10 years, everyone knows the main characters. The X-men characters, Spiderman characters, Hulk characters, the Avengers, the Fantastic Four…you could be one of those people, customize your character, get level upgrades and special body-armor and things like that for going on quests.

Given their brand names I bet they could get a million people on that thing pretty quickly. I know I would consider that and I really wouldn’t consider World of Warcraft.

Inverse Social Network

In thinking about what I really want out of a social network (that is not currently available), I really want the inverse of what a typical social network currently is.

The State of Today’s Social Networks

Roughly speaking, today’s social networks are all about allowing an individual to share information with the rest of the world (pictures, contact information, blog-like thoughts, etc. ) and communicate with “friends” (or receive communications from friends). Clearly, there are different flavors of these networks — LinkedIn serves a different purpose than Facebook — and so the features they highlight and the usage patterns of these features are going to be different.

What’s the problem and what is missing?

The problem here is that people will automatically filter what they’re willing to share to the lowest common denominator. If you are “friends” with your boss, your mom, and your best friend and you don’t want to share everything with all of them, chances are you’ll pull back and limit what you share. Clearly this is an issue unto itself but I won’t touch that because I think you can get around this with groups and group level privacy settings.

This lowest common denominator effect does highlight something else though, and that is that there is clearly a lot of information missing from someone’s profile. More precisely, all of the information I know about someone else is missing from their profile and in many cases this is the really critical information about someone.

For example, if I know my boss’s kid’s name but he doesn’t want to reveal that for the whole world to see on his LinkedIn profile, I actually have a unique piece of information that is quite valuable. Or, if I have a casual acquaintance who has let me know his hometown but who has not publicly offered this information, again I have some unique knowledge about that person that I may want to remember.

Inverse Social Network

Rather than seeing a page of what someone is willing to share there is a lot of information that I know about people that I would like to merge with the information they’re willing to share. This way what you end up with when you’re looking at a profile page of person A is a complete snapshot of everything you know about that person. With a simple search and tagging feature I think this could be really powerful because I would be able to remember everything I ever knew about someone. If I’m going to have a meeting with a client, I can pull up their page and see everything I know about them. If I’m going to see a friend from out of town that I haven’t seen in 6 months and I have no idea what his brother’s name is, I can look it up.

And I may even want to share what I know with other people who may find it useful. So if I have a group of friends whom I trust, I may want to share information about my boss or one of our mutual friends so that we all have access to the same information. I think this sort of sharing would make people afraid but there isn’t much you can do to stop it in the first place. If I tell my friend what my boss’s kid’s name is and he happens to remember it, that pretty much accomplishes the same thing today.

I could imagine this being integrated with an email client as well so that I can easily reference information about people I’m emailing, and perhaps being a browser plug-in so that the information is available while I’m viewing their facebook profile, myspace profile, or linked-in profile…maybe with some greasemonkey or just a simple window overlay that slides in and out easily with a key combination on the keyboard.

I think this would be a huge win for anyone who has a lot of meetings — namely anyone in the business world.

Who Should Build This?

I think he best candidate is probably LinkedIn. They have the right demographic of users and it would fit in nicely with their existing social network. It would also allow them to move into having more of a browser and desktop presence, and if it gets popular enough on the desktop/browser they would end up with the really interesting side effect of knowing which profiles on different social networks are actually the same people so you’d end up with an uber-graph of people connected to each other.

The other type of company that might benefit from this is a startup, exactly because if they end up with good penetration, they would be able to overlay friendships across different social networks on top of each other and create linkages between different social networks. I don’t know how you would monetize that off the top of my head but it seems like useful data.

So someone please go build it. Thanks.

A high quality news program on the Internet

Someone should put together a good comprehensive summary of the news and post it on YouTube. The problem with network news is that they have to fill it with feel good stuff, celebrity junk, and have commercials that take up 30% of the on-air time.

You could even exploit the long tail and do some fancy personalization if you recorded say 100 short segments that covered the major headlines of the day. You could then have standard transitions that you use between segments that are also pre-recorded. Based on a profile people create you could you could automatically slice together different segments that might be of interest to that user.

You could also have a few “stock” compilations for things like world news, US news, politics, entertainment news, etc. People could just come to these and hit play without having to sign in or save/create a profile.

Why is this better than reading the news? For the same reason that going to a lecture is better than a book. If you can see it AND hear it, it’s far easier to stay engaged and just reading on your own is a lot more effort. There are a lot of people out there who would rather listen and watch the news than read it and have to hunt around for the most relevant stories.

So start simple, do a news recap without all the crap on most news shows, put it on YouTube and get a userbase. Then launch your own site with high quality production and personalization. Done and done.