'Founder mode' is the latest fault line in Silicon Valley

• Silicon Valley is split over the best way to run a company.
• An essay called "Founder Mode," inspired by Airbnb's Brian Chesky, says leaders need to be more hands-on.
• While many leaders agree, some think managers play a vital role within tech firms.

September has started with some navel-gazing in Silicon Valley as tech operators have been forced to confront an awkward question: are they running their companies the right way?

There are a few good reasons this question has surfaced. For one, industry veteran Paul Graham — a cofounder of startup accelerator Y Combinator — published an essay titled "Founder Mode" at the start of the month that either resonated or struck a nerve with leaders.

For the uninitiated, Graham has established a reputation in tech circles as a shrewd and erudite thinker. Over the past two decades, he's regularly weighed in on topics that both would-be entrepreneurs and more established leaders often fret over.

Essays on generating "superlinear returns" and becoming "ramen profitable" have found viral acclaim among startup founders. So, too, have broader ruminations on being stubborn, the art market, and having kids. Famously, Graham was also an early mentor to Sam Altman.

In his latest essay, Graham argues that there are two ways of operating a growing company — "founder mode and manager mode" — with those falling into the latter category at risk of seeing their company being driven into the ground.

His rationale is pretty straightforward. Manager mode, he claims, involves a more hands-off approach to operations by delegating tasks to direct reports who are left to figure out details alone. Founder mode, he says, is about doing the exact opposite.

Airbnb's cofounder and CEO Brian Chesky, the inspiration behind Graham's essay, sees leaders like Steve Jobs, Elon Musk, Jony Ive, and Hiroki Asai, his global head of marketing, as exemplars of founder mode.

A slowdown in capital flowing into tech businesses has made leaders more sensitive to Graham's question. Economic uncertainty has pushed them to think hard about their operations.

But as a fierce debate has raged through social media in recent days, it's become clear that the tech world is split on what, exactly, is the best way to run a tech company.

Founder mode versus manager mode

Filip Dames is one tech figure who has found plenty that resonates with him in the founder mode philosophy.

As a founding partner at investment firm Cherry Ventures and part of the founding team of online retail firm Zalando, Dames has seen "efficiency go out the window" for startup leaders who bring in, say, a "super senior sales guy" to solve problems as they grow in size.

"They will never be as dedicated, they will never have as much skin in the game," Dames told Business Insider. "For them it's a job, and for you as a founder, it's basically your life."

The idea gets to the heart of what the pro-founder mode camp prizes. In a podcast, Airbnb's Chesky argued that founders differ from managers by being the "biological parent" of the company they oversee.

"You can love something, but when you're the biological parent of something, like, it came from you, it is you, there's a deep passion and love," he said.

Of course, tech leaders do become encumbered with a growing list of responsibilities as their companies grow. Big Tech firms like Meta and Google went on a huge hiring binge during the pandemic to meet the growing demand for digital services, but they have since laid off layers of middle managers.

For Dames, growth doesn't necessarily mean companies and founders must switch to manager mode.

In his view, many large companies where the CEO is the founder "manage to run things with the founder DNA" by ensuring the full organization works with the same clear "values" in mind. "I think eventually as the company grows the only way to do it is through values," he said.

A value-led approach has been key for tech founders who have managed to maintain success at their companies years after they raised their initial round of seed money. Jeff Bezos, for instance, has famously retained Amazon's "Day 1" culture, first established in 1997.

Others see a risk in sticking to a single operating mode. According to Hussein Kanji, a founder and partner at venture capital firm Hoxton Ventures, it's easy to end up down the wrong track "if you live just in one mode."

"People love making things black and white when the world runs in a lot of different shades of truth," he said. "People have lost their ability to engage with seemingly contradictory ideas at the same time." In his view, the best leaders are the ones who "know when it's time to be binary."

It's a view that tallies with Dames, though he sees founder mode leaders having more of an edge during times that call for a shift in approach.

"If you have more of the manager mindset and you're used to just calm waters, that makes things really difficult if you're in a fast-change environment and you need adaptability," he said. "The reality just changes."

That said, some of the most successful tech companies right now are overseen by leaders who weren't their founders. Satya Nadella at Microsoft is one such leader, as is Dara Khosrowshahi at Uber.

It is unclear how Silicon Valley will resolve this debate. In an X post on Tuesday, venture capitalist Chamath Palihapitiya weighed in by dismissing Graham's categories and suggesting instead that there is "first principles management and stupid management."

"When your company isn't working, the only solution is to take the time, as laborious as it sounds, to break your business down to its core essentials and rebuild it from the ground up with zero nostalgia or loyalty to people or technology," he wrote.

Expect divides on the leadership merits of founders and managers to continue for some time.