When Evernote‘s founding CEO and current chairman Phil Libin started his productivity app company with cofounder Stepan Pachikov in 2007, he began seeking out mentorship from some of the biggest names in tech, like Amazon’s Jeff Bezos and LinkedIn’s Reid Hoffman.
They were generous with their time and remain role models to Libin, but it was Hiroshi Mikitani, founder and CEO of the multibillion-dollar e-commerce conglomerate Rakuten, who gave him perhaps the most readily actionable advice he’s received as a manager, he tells “The 4-Hour Workweek” author Tim Ferriss on Ferriss’ podcast.
Mikitani calls it “The Rule of 3 and 10”: Every time a company triples in size, “everything breaks.”
Mikitani grew Rakuten from the ground up, and today it has roughly 12,000 employees. He noticed that from one to three employees, from three to 10, from 300 to 1,000, etc. (the rule rounds up to multiples of 10 for ease of understanding), that everything stops working as it should.
“And by everything he means everything,” Libin tells Ferriss. This includes how the company handles payroll, how managers schedule meetings, how teams communicate, how it budgets, and how its hierarchy is balanced.
The problem, Libin says, is that many CEOs of rapidly growing startups “blow right through these triplings without even realising it.”
Libin, using his own company as a hypothetical example, tells Ferriss: “We’re at 400 people now at Evernote. And when I really think about it, it’s like, OK, we’re at 400 people now, but some of our processes and systems have been in place since we were 30 [people]. So we kind of skipped a few steps. And everything is creaky and broken, and you really have to try to adjust.”
Regardless of where your company is in its life, being aware of the Rule of 3 and 10 is “super eye-opening,” Libin tells Ferriss. “That’s one of the most actionable pieces of advice I’ve gotten.”