SymmetricalDataSecurity: Software engineers make excellent CEOs, but few of them think they could do it

Wednesday, March 31, 2021

Software engineers make excellent CEOs, but few of them think they could do it

I recently read a somehow controversial article on why CEOs are failing software engineers. In the article, software management theorist Gene Bond argues that since business-educated CEOs only learn about financial and business management, they can't understand the creative management necessary to discover and realise new works of value.

"New value is a function of failure, not success; and, much of software engineering is about discovering new value. So, in effect, nearly everything [they] are taught as a business major or leader is seemingly incompatible with software engineering."

But what if CEOs were former software engineers? Would they still fail the software engineers they lead? Data seems to show otherwise when you know that eight of the ten most valuable technology companies have CEOs who also are engineers. Jeff Bezos, the richest man in the world, was exposed to tech and coding at a young age. Bill Gates, the second richest, fell in love with programming at 13 years old, and Mark Zuckerberg, famously kept coding Facebook while being CEO for years. Still, the majority of software engineers think they can only become CTO and have little interest in business.

Top-performing CEOs have engineering degrees

Every year since 2014, the Harvard Business Review has published an annual ranking of the best-performing CEOs in the world and, for the past three years, there have been more CEOs with engineering degrees than MBAs, including this year's number one, NVIDIA CEO Jensen Huang. One likely explanation for this trend is the increase of technology CEOs on the list, as the industry has seen exponential growth in recent years. But maybe there's something else.

First of all, software engineers know how to set up the right environment for fellow developers because, well, they've been there. They know what developers look for in a job. It's not surprising that twelve out of the twenty tech CEOs most favoured by their employees have an engineering background or coded at some point in their careers. As Stack Overflow and Trello founder Joel Sposkly puts it: "building the company where the best software developers in the world would want to work [leads] to profits as naturally as chocolate leads to chubbiness or cartoon sex in video games leads to gangland-style shooting sprees". After all, he did build two multi-million companies that considerably impacted the software ecosystem.

Joel Spolsky’s formula on how to build profitable software companies

I also believe that having a software engineering mindset, even if self-taught, allows CEOs to manage their companies very differently than financially focused peers.

Approaching business processes like programming tasks

While Microsoft valuation hardly moved during Steve Ballmer's fourteen years tenure as CEO, it grew over 200 % since Satya Nadella took over in 2014. The difference? Steve Ballmer was a sales-oriented business school drop-out, while Nadella is a former software engineer turned executive.

Microsoft stock price under Satya Nadella - CB Insights‌‌

So what does Nadella, and other engineers-turned-CEOs have in common? Well, suppose we take aside the ability to understand technology and have a long-term vision about it. In that case, I believe one of their key attributes is the ability to approach business processes like programming tasks.

Do you know what programmatic marketing, growth hacking and the lean startup have in common? They're all business methodologies that were created by engineers. They leverage logic and processes instead of intuition; they're data-driven and promote iterative experimentation. And, when you go beyond the buzzwords and watch the results, they're behind the wild success of tech companies like Dropbox and Slack (whose CEOs are, by the way, former developers).

Another trait of software engineers is their inclination to automate recurring and tedious tasks. As Bill Gates is known to say, "I always choose a lazy person to do a hard job, because a lazy person will find an easy way to do it." And software engineers are known to be lazy. So, as CEOs, they're more likely to look for scalable solutions through automation, rather than merely hiring more human beings. Some CEOs take this thinking to another level like GitLab CEO Sid Sijbrandij, who started the company's famous handbook because he didn't want to repeat himself for every batch of new hires.

What's even more interesting is when software engineers become CEOs of non-software companies. In this case, they run their firm like a software company, making software the cornerstone of their strategy, like Elon Musk with Tesla. One key component of electric automaker Tesla's success, as spotted by Nathan Furr and Jeff Dyer, is that "it introduced a new hardware and software architecture. For example, a Tesla has more software than the average vehicle and it is integrated around a single central software architecture. Although most gas-powered cars have software too, they typically have less software and operate on a different architecture making it more challenging to imitate Tesla's ability to update software and optimise vehicle performance.

Last but not least, they understand like Jeff Bezos that "failure and invention are inseparable twins." In his famous letters to shareholders, Bezos often shares that what makes Amazon successful is their ability to accept the failed experiments necessary to get to invention.

“Outsized returns often come from betting against conventional wisdom, and conventional wisdom is usually right. Given a ten percent chance of a 100 times payoff, you should take that bet every time. But you’re still going to be wrong nine times out of ten [...] In business, every once in a while, when you step up to the plate, you can score 1,000 runs.”

Why so few software engineers want to become CEOs

So if software engineers can become excellent CEOs, even in non-tech businesses, why so few of them make it to the top? According to a 2019 Forbes study, still, 64% of F100 CEOs had a business-related undergraduate degree. I don't think it's just about software engineers' dislike for business. I believe it's also about how few of them consider the CEO position as a career choice. They're always told that if they're interested in management, the highest possible job is CTO. When hiring software engineers for a startup job, they first think they should be CTO.

Of course, not everyone wants to start a startup, the surest way to become CEO. But with more and more tech CEOs promoted from within after technology management roles, it's a choice to consider.

Summary

CEOs with a background in financial and business management often fail to understand software engineers
Former software engineers and self-taught developers make excellent CEO
One of their key attributes is their capacity to approach business like programming
CEO is a valid career choice for software engineers and they shouldn’t be afraid to consider it if they’re attracted to the business side