(2018-08-21) How Keith Rabois Builds Billion Dollar Businesses - Radical Simplicity

How Keith Rabois Builds Billion-Dollar Businesses: Radical Simplicity. Every Business Is Just An Equation. Once stakeholders have a complete understanding of their company's variables, they can start to adjust the levers that control profitability and growth.

At Square Up, Rabois and the team focused on isolating one variable in that much larger equation: cost per customer. They brainstormed ways to manipulate its output, like lowering incidences of fraud, reducing customer service inquiries, and renegotiating with partner companies

For companies to continue to grow, it’s crucial for new hires to understand such business equations.

Rabois has a special title for people who display high levels of strategic thinking: barrels. While some people are great team members who can contribute to a project—“ammunition” in Rabois' framework—barrels are people who can “take an idea from conception to execution.” (Business Model, Product Strategy)

You need one barrel per initiative.

When reorganizing a company, Rabois starts by listing its problems next to its barrels, then connecting them one-to-one. As he explained, “Among many important things that Peter (Thiel) taught me at PayPal is: You've got to get your most talented people working on the most important problems, regardless of what it does to your organization chart.”

Rabois' philosophy for nurturing top talent is simple. He gives them more and more responsibility until they either reach a point of failure or are capable of running the company.

Apple's popular concept of a directly responsible individual (DRI) is a great example

he has a decision-making process for delegating work that allows him to manage employees differently depending on his confidence in their plan of action. He considers two variables—the potential consequences of the decision and his own level of certainty about what the right decision is—and delegates accordingly

He also takes into account an employee's task-relevant maturity, a concept from Andy Grove's famous High Output Management, Rabois' favorite book on management. It is a gauge of how mature a team member's skills are in a specific niche. The more mature someone's task-relevant skills are, the more Rabois is willing to delegate.

The key to speed, according to Rabois' framework, is simplicity. “Speed comes from simplicity. The more you can get your team to be instinctually reacting with high fidelity to your goals, the faster everything will fall into place,” Rabois says. “It's easy to deluge people with data and analysis. It's hard to tell people exactly what matters, what they need to do and the simple philosophy guiding it.” (SimplestThing)