Invest Like the Best with Patrick O'Shaughnessy
· Ric Elias, Patrick O'Shaughnessy
[00:00:00] S1: I love to bet. I hate to gamble. And I think life is about understanding odds and edges and risks, and this whole notion of can you win multiple ways also applies on the other side. When I look at a business model, if the business has three variables for it to work, I will never invest in it. There are some great businesses that need three variables. They're going to need a ton of capital, a ton of luck. They're going to have to figure some stuff. If the business has two variables, then you're compounding the risk. So you better be fairly certain that one of those variables you have high confidence on, and the other one you have some visibility. And if the business has one variable and you have an inkling, lean right in. So a lot of this is just decompose risk of what you're investing in, and it applies to everything. So it's both the multiplier and then the discount that you would apply to an intuitive decision. And when we see something, we're like, "Okay, that's worth the bet." But understanding that when you're betting, you're going to lose some. And if you're -- I think if anything, you need to have bad bets to be able to be a good better. Otherwise, you're just taking fastballs, 85 miles an hour down the plate. [00:00:00] S0: What episode of Red Ventures' history do you look back on with the most pride?
· Ric Elias
[00:00:00] S1: We all have revisionist history. It's funny because we're getting a lot of momentum back, and a lot of things are happening that are on the positive side. But still, there's this sense of, "Man, these are not the same days that it used to be." And of course, they're not. Everything -- Danny Meyer, a good friend of both of ours, says that cultures are like sharks. They have to keep swimming to survive. And to compare it to something, first, I don't think the past is always as good as we remember it being. But the reality is that there was a moment in our journey where I remember leaving a big company event here on campus, and it was a magical night and we had this incredible energy. And I got in the car and I'm like, "It just cannot get any better than this," to see a couple thousand people just completely pulling in the same direction, trying to do something, and it was -- just felt like unity. You couldn't -- it was like lighting in a bottle at a moment in time. And it was a moment in time. You felt that today, this is a magical place. There's a magical culture here. But comparatively, so probably when we were compounding at 30% for five years in a row and we're just success after success, it was like, "Wow, we're really good." Reality is we were really lucky that we were really good, and it was a matter of when that we needed to do it. I'm kind of very excited for the next five years. I spend a lot of time listening to your digestion of AI, but I think AI is really going to change a lot of our businesses, some of the traditional ones. But even our partner business, our client business is going to really change and some of our assets. So I think the next five years may be the most exciting ones. And we're either going to get run over or we are going to play in it, and we'll see.
· Patrick O'Shaughnessy
[00:00:00] S0: You described this evolution from the early days of performance marketing focus into businesses all over the world that do lots of different things. I know health care is one space that you're really interested in. We don't have to get into the specifics of the business, but we can if you want. Talk about what in that world seems like an opportunity and interesting to you. It does seem like such an important space, and that's a very different world than the world you started in.
· Ric Elias
[00:00:00] S1: We owned a bunch of really interesting assets. We owned a bunch of assets that created a lot of both data and consumers' path, but you realize that those are kind of narrow businesses that exist for a period of time. We did this JV with UnitedHealthcare, who -- their CEO, Andrew Witty, is a fantastic CEO, is a fantastic human being. And his view is that the health care company of someday of the future, five, 10 years from now, will be very much consumer-driven, consumer-led. And they need to be making that investment today because they are really good in the health plan side. They're really good in the provider side. They got to get really good in the consumer side. And he is like, there's no way a company this big will ever figure that out. So I got to find a clean environment, where I can make sure that we're both investing, but I need the tech, I need the people, I need the alignment of incentives. So we did a long-term partnership to go build this. And it's been great. First year was typical. Put two organisms together and our joke was like, look, we don't want our size and your speed. That will be a disaster. We're doing this so that we get our speed, your size, and that team is doing incredible work. And we have some big bets that we're making, and the next couple of years should play out. But we're preparing for a future world. Health care is counterintuitive. The money in health care and its very specific pockets, if you really think about it, there's not a lot of value that has been sustained because where the money is, given the government is putting their thumb on the scale with Medicare and all this different stuff, is just really tricky. And I think doing it as part of the best and biggest health care provider and platform out there in UnitedHealthcare was the best way to do it.
· Patrick O'Shaughnessy, Ric Elias
[00:00:00] S0: And so what is the North Star for the product in that business? What is the thing you're trying to deliver? [00:00:00] S1: Ultimately, you want a place where the consumer gets all the answers, all the connectivity, access to do I qualify for this thing? Is it covered? Is it not? It is preventive. And you can see how AI will play a role in a very personalized way. So it's almost like an agent for you personally around your health that because of HIPAA and all this kind of stuff, it has to exist inside an ecosystem. This is not going to be able to live outside. And this is the largest platform to do it inside of. [00:00:00] S0: You mentioned speed. One of the very popular ideas in the West Coast in start-up land is you could beat anybody if you're fast enough. What do you think is the role of speed in business?
· Ric Elias
[00:00:00] S1: We used to call it speed, and then we ended up tripping ourselves because we were like, speed trumps perfection. Well, there's some stuff you need perfection. There are times where if you're all speed, you burn a team. So we talk about two concepts as an iteration of that. One is pace because pace is sustained speed. You see these marathon runners who go out and win the first mile and never finish a race. So you got to understand pace and how do you bring it in organization. And the other one is not sprints. It's you're almost running intervals inside of a race. So when you combine pace and intervals, we got a big push for the next 60 days. There, we got different things. I think that's the sustainable piece. Is speed part of this? I'm not sure that's right, but that's how we think about it. Because otherwise, you end up either in a body shop or people get burned out or to what end. And again, it has to be managed and purposeful. I do think that reps really matter. And the ability to do this faster is how you can build better models, it's how you can build better product, it's how you can get to differentiation. And when we go to big companies and our business model at the core is a B2B business. What we say to them, look, we have a platform that allows you to grow faster than you're growing, and we're willing to get paid only if that is true. And part of that is because we can iterate in ways that you could never iterate. And if you give us the right APIs and the right controls, we are industrial-grade security, industrial-grade everything, we may be able to help you. I think that's the key to this is we're servicing big companies that have to deal with a lot more than we do.