Diving Deeper into Founder Mode
How founder mode has won wars, built the maffia, and some of the world's most impressive companies on the planet
One of the more recent concepts that caught my attention is “founder mode,” a term introduced by Paul Graham when reflecting on a speech Brian Chesky gave at a YC event in September 2024.
Being a serial founder myself; weathering economic booms and busts, collaborating with various managers and fellow founders, and experiencing the frustration of working alongside individuals who can manage but not build, I found this article particularly refreshing. Let’s take a moment to examine the core themes behind it and explore Founder Mode a bit deeper.
What we will be discussing:
How the concept of founder vs manager mode is not new, and can be related to the wartime vs peacetime CEO concept, and even traced back further to military vs political concepts.
Explore how founders and managers might be indeed two different animals, on a cultural and neurobiological level.
Discuss the pitfalls of professional managers, and founders while exploring ways to reconcile these seemingly contradictory characters.
According to Brian Chesky, he noticed that venture capitalists and managers often failed to offer genuinely helpful insights. Worse still, their advice can sometimes be counterproductive, likely because they lack firsthand experience in founding a business from the ground up, at best having only managed one. Whenever a speech, such as Brian’s, ensues discussions (for example here, here, here, or here), it’s usually a sign that the speaker has touched on something that resonates.
In this case, Brian, touched upon the difference between managers and founders. Indeed, a contentious topic that resonates when people debate about leadership.
It’s not about who’s better. It’s about who’s more suited, when.
To make things worse, most founders present during this particular talk acknowledged how these very advisors, professional managers, VCs - often MBA schooled - seemed to behave in ways that would make founders feel inferior. Paul Graham sums it up as following:
Founders feel like they're being gaslit from both sides — by the people telling them they have to run their companies like managers, and by the people working for them when they do. Usually when everyone around you disagrees with you, your default assumption should be that you're mistaken. But this is one of the rare exceptions. VCs who haven't been founders themselves don't know how founders should run companies, and C-level execs, as a class, include some of the most skillful liars in the world.
Paul Graham
Indeed it is not very uncommon for professional managers to behave as the masters of the universe, or for MBA-educated managers to add a few extra inches to their strut when walking into the office. I have learned that in business, you have the empty suits that believe the ship is moving because of the compass, and those that realise it’s the engine. Some make the mistake of overvaluing the administrative aspects of running a business over the entrepreneurial decision-making that happens every day.
It seems however, this is not a personal opinion but a studied phenomenon. A study of 444 U.S. CEOs that were MBA holders found that their firms saw a 20% market value decline compared to non-MBA CEOs, spent almost twice as much on acquisitions, showed lower cashflows and inferior returns on assets. A rather unsurprising finding also showed their success tended to more short-lived. Indeed, an MBA education may indeed create a bias toward more superficial metrics and short-term thinking rather than deep business building, hence the self-serving behaviour often exhibited by professional CEOs and MBA-managers.
According to prolific business leaders, such as Elon Musk (2024) or Steve Jobs (1985) and while each holding their own views, it is clear to see a convergence on their experiences and beliefs on the matter of founders vs managers.
The best managers I hired, where those that were brave enough to roll up their sleeves, get in the mud, and took the risk to suck at something new. I admit it takes a strange, and unique, type of individual to expose themselves to such risk, stress and hardship and still stay the course.
Wired for war, not paperwork
Research in organizational psychology and behavioral economics has revealed fundamental differences between founders and professional managers in how they think, make decisions, and respond to challenges. These differences appear to be deeply rooted in their cognitive patterns and personality traits, suggesting that founders and managers may indeed be "different animals" at a very fundamental level.
A comprehensive meta-analysis by Zhao and Seibert in 2006 found that entrepreneurs score significantly higher on traits like openness to experience and conscientiousness, while showing lower levels of neuroticism compared to managers. These personality differences help explain why founders often thrive in uncertain, high-risk environments that might paralyze traditional managers. But the distinction goes beyond personality traits. Sarasvathy's groundbreaking research further revealed that entrepreneurs and managers follow fundamentally different logic patterns when making decisions. While managers tend to follow a 'causation' approach - starting with a predetermined goal and finding means to achieve it - entrepreneurs employ 'effectuation,' starting with available means and allowing goals to emerge contingently.
This explains why founders often excel at creating something from nothing, while managers perform better at optimizing existing systems. Founders thrive in the fog where managers freeze. "Founder mode" isn’t a switch you flip; it’s a skull full of instincts most suits lack.
These cognitive differences manifest in how each group handles risk and uncertainty. Finally, I’ve found that in 1987’s March and Shapira's research showed that managers tend to view risk through the lens of potential downside and loss prevention, whereas entrepreneurs are more likely to see it as an inherent part of opportunity creation. This fundamental difference in risk perception helps explain why founder-led companies often outperform in innovative sectors where uncertainty is high and conventional management wisdom may actually hinder progress.
This research helps explain why founders like Brian Chesky, and myself, find typical management advice unhelpful at best - it's not just a matter of experience, but of fundamentally different cognitive approaches to business building. The concept of "founder mode" isn't just a behavioral choice, but reflects deeper differences in how founders and managers are wired to approach challenges and opportunities.
The very dangerous paradox that destroys companies and ruins lives
While founders rarely pretend to be pure managers, the reverse scenario is surprisingly common. This asymmetry reveals an interesting psychological phenomenon in organizational behavior. As Dacher Keltner explains in his research on power dynamics, individuals in formal authority positions often fall prey to what he terms the 'power paradox' - the very experience of power fundamentally changes how people perceive themselves and their capabilities.
This dynamic is particularly visible in professional management circles. Management positions, with their formal authority, status symbols, and organizational validation, can create an illusion of comprehensive competence. Also Henry Mintzberg observed this in his book 'Managers Not MBAs'; management education often reinforces this paradox by providing analytical tools that create a false sense of mastery over business creation. The result is what he terms the 'MBA syndrome' - where management training produces individuals who believe their theoretical understanding equals or surpasses the practical wisdom gained through actual business building. This syndrome births overlords who think spreadsheets trump scars. Founders, battered by reality, know their limits. Managers, cushioned by hierarchy, don’t. They preach to the trench-diggers from ivory towers, blind to their own myopia. It’s not ignorance; it’s structural arrogance.
The problem compounds itself because unlike founders, who face constant market feedback and the very real possibility of failure, managers in established organizations often operate in environments that reinforce their perceived superiority. Their formal authority is rarely challenged, their decisions are implemented by virtue of their position rather than merit, and their status is continuously validated by organizational hierarchies.
This creates a peculiar blindspot. While founders typically maintain acute awareness of their limitations - having faced them directly in their entrepreneurial journey - managers can develop what Jeffrey Pfeffer describes as 'power-induced cognitive distortion.' They begin to believe that their ability to manage existing systems equals or surpasses the ability to create new ones, despite these being fundamentally different skills requiring different cognitive approaches.
This explains why professional managers might confidently offer advice to founders while remaining blind to their own limitations in understanding the entrepreneurial process. It's not merely about experience; it's about how organizational power structures and management education can create a dangerous overconfidence in one's ability to understand and direct business creation.
Founder Mode Built Empires, and Crime Syndicates
In my view, a true leader stands in the trenches with their troops, rather than issuing orders from a safe office. People are less inclined to follow leaders who are simply parachuted in, compared to those who earned their position. Yet, paradoxically, positions are less likely to be “earned” during times of economic calm, but rather during turbulent times.
The distinction between founders and professional managers mirrors a pattern that repeats throughout history: the fundamental difference between wartime and peacetime leaders. We could argue how the concept of founder mode is related to the concept of a wartime leader. This dichotomy, famously articulated in Ben Horowitz's book "The Hard Thing About Hard Things" finds its echoes in various contexts - from corporate boardrooms to historical battlefields, and even in the streets of organized crime.
Let’s have a look at the differences between Winston Churchill versus Neville Chamberlain. Chamberlain, the quintessential peacetime administrator, excelled in normal times with his methodical, diplomatic approach. Yet when facing Hitler's aggression, his negotiation-focused leadership proved catastrophically inadequate. Churchill, often struggling with what he called his "black dog" of depression, emerged as the perfect wartime leader. His paranoia became prescience, his stubbornness transformed into necessary resolve, and his unconventional thinking became the key to survival.
This pattern extends beyond traditional warfare, and we find similarities with how criminal families are organized. In "The Godfather," Michael Corleone's decision to replace Tom Hagen as consigliere emerges from the same insight - different circumstances demand different types of leaders. A peacetime consigliere, like a professional manager, excels at maintaining and optimizing existing systems. But when existence is threatened, you need a wartime consigliere - someone willing to break conventions, think unthinkably, and act decisively.
The Amplification of Leadership Mistakes
The parallels between wartime CEOs and leaders in high-stakes environments are striking. They share a distinct operational style: direct involvement in critical operations, hands-on leadership, emphasis on personal loyalty, and reliance on small, proven teams. Their decision-making pattern shows similar hallmarks: rapid action, willingness to break conventional rules, and personal accountability for outcomes. Most importantly, they share a mindset: acute awareness of existential threats, comfort with conflict, and a focus on survival over optimization.
VCs often mistake this concept, as their natural inclination is replace the founder as CEO with a professional manager, believing this will improve company results.
More often than not, it won’t. But that’s not relevant for most VCs, as they are not in the value-creation game, but in the portfolio risk management game. Even most VCs are sorely mistaken as to understand what game they are actually playing. But research shows how founder-CEOs make for better leaders. Coach them, and pair them with a gritty COO; not some boardroom mannequin. Most VCs wouldn’t know, they’ve never built a damn thing, although a new generation of former founders are stepping in the VC game, and bring a breath of fresh air.
The Hard Switch: War to Peace
Founder mode, viewed through this lens, is essentially wartime leadership in the business context. Founders, like wartime leaders, must navigate existential threats, make decisions with incomplete information, and often break established rules to survive. They operate based on first principles rather than established playbooks, prioritizing effectiveness over procedure.
What makes this particularly fascinating is how mental states traditionally viewed as disadvantageous can become assets in these contexts. Nassir Ghaemi's "A First-Rate Madness" suggests that certain mental health challenges - depression, bipolar disorder, and other conditions - might actually enhance crisis leadership. The very qualities that make someone struggle during peaceful times - hypervigilance, obsessive focus, mood intensity - can become advantages during turbulent periods. This helps explain why founders, often described as difficult, obsessive, or unstable, excel at building new enterprises while struggling with routine management.
But good leaders know when it’s time for war, and when it’s time for peace. At least this is a common understanding. Quite reasonable even. But this requires vision, developed by an extremely deep understanding of the market and the industry you’re in, often requiring a thorough technical understanding of the product. This comes often as a natural thing for founders, whilst for managers this requires a shift from their core competencies.
Exceptional leaders do have the skills to transition at the appropriate times, and switch modes. Understanding when it’s time for war, and when it’s time for peace. Therefore, perhaps it makes more sense to talk about two modes of operation. While founder-CEOs perform better than manager-CEOs in general, it is clear how an unbalanced leadership style, or wrong mode of operation, destroys company value.
Taking a few steps back
These discussions about founder vs manager quickly descent into very nasty argument based on semantics. If we take a few steps back, we quickly realize that the discussion is about leadership and personality.
Personal anecdotes aside, I have natural tendency to favour doers over talkers. Fighters over politicians. In my personal network of founders and managers, they all share one common trait; they roll up their sleeves, all have their scars, and they spring to action in a heartbeat. These are doers, founders or professional managers alike. The ones that rapidly fall out of favour are those that talk the talk, but never walked the walk. I find street-credibility, original vision, grit, and personality the single most important characteristics of any leader.
So, if we focus back on the word that originated this post, founder mode isn’t a buzzword; it’s survival mode, baked into history’s bones. Managers optimize the known; founders wrestle the void. Yet, both can kill a company. One through cowardice, the other through madness. The trick?
Know the terrain, know your beast, and never trust a suit who’s never bled.