Invest Like the Best with Patrick O'Shaughnessy
· Patrick O'Shaughnessy, Ric Elias
[00:00:00] S0: What was the first thing you ever bought? What business was the first business you ever just bought outright? [00:00:00] S1: First meaningful thing we bought where we literally broke the bank, we had a pristine balance sheet, was Bankrate. Bankrate at the time was $1.4 billion, and it wasn't worth that. Before we bought Bankrate, we bought an asset in financial services. That it was a tiny asset where we said, "Let's go and prove that we can actually use that asset in Google and paid search and SEO and really start doing what we did in telecommunications using someone else's brand, using our own brand in financial services." We did really well. And we're like, "Okay, let's put all our chips in the middle of the table." And Bankrate was our first big acquisition at the time. We owned CreditCards.com, The Points Guy, Bankrate and a bunch of other miscellaneous assets. And it was our first, okay, we're in the big leagues now, and we have a lot of debt. [00:00:00] S0: There's quite a lot of glossing over, going from $2 million, paying back your investors to $1.5 billion acquisition. [00:00:00] S1: Yes. This is a decade...
· Ric Elias, Patrick O'Shaughnessy
[00:00:00] S1: Yes. This is a decade... [00:00:00] S0: But I'd love to dig into some degree. What would you credit your early operating success with? Obviously, you got to that scale on an unusual way with not a lot of outside backing and control of your own destiny and permanent capital and all these things. So if you think back on that specific chapter, what was going on? What were the things you were doing or the way you were doing those things that made it possible? It's a strange story.
· Ric Elias, Patrick O'Shaughnessy
[00:00:00] S1: Survival, to some extent. When you spend the first four years, two little kids, both of us not taking any money home, humility, understanding that this could change easily. Early on, we would meet with our 80 employees, call it, 2007 and '08, and we were now making millions of dollars of profit. And I will say, "I'll enjoy this. These are the good old days. Someday, this will end." It was this constant belief that this was a moment in time, and if it didn't work as hard as we worked the last three years, this will end. So a lot of it was like we were relentless. And one of the things early on is for whatever reason, we have never competed against anybody. I never thought that our competition was somebody else. And we've really never competed, and maybe it's because of our near-death experience as a business so early, against the fear of something. We always thought, look, if we can compound our performance a little bit every month, and our business model gave us the fruits of that, it was all performance-based deals. We got addicted to this notion of incremental performance just becomes really virtuous for us. And that was our thing. Your strengths become a bit of your vulnerability. I think to this day, our DNA, thousands of people strong, is incredible operators, really good optimizers, maybe not as great people doing high-end product or experimentation and other things. Now we brought in a lot of people to help do that and all of that. That is probably our core DNA of Red Ventures. [00:00:00] S0: I'm going to zoom back and forth a lot here.
· Patrick O'Shaughnessy, Ric Elias
[00:00:00] S0: I'm going to zoom back and forth a lot here. [00:00:00] S1: Sure. Sure. [00:00:00] S0: I'll go all the way back to today. I show up today, and I've not seen anything like this. We're on a massive campus. There's thousands of people here. It feels like a self-contained world, and it is. Physically, literally, it's a self-contained world. And it has a very specific coherent vibe to it, which makes me wonder about culture. You said there's more than a dozen companies in all sorts of places, but it feels like this is one company and one team just walking around. Maybe say a bit about how you've designed and what it is. What am I feeling? How did that come to be? Because I think those are hard to establish.
· Ric Elias
[00:00:00] S1: I am wonderful at explaining the world looking backwards. We were talking earlier today. I can give you the greatest story, which I will in a second, but I'm not really sure that when we set out to do this, this was the original plan. This is just the ability to iterate and pivot and iterate and change and all of that. One of the real unique things -- look, we didn't raise outside capital until 2010, a decade of bootstrap. When we raised capital, we didn't need capital. We didn't need it for anything. We did it because our employees wanted a little liquidity and investors were wanting to buy in. So as a result, and in general, ultimately, we ended up in a structure where we have permanent capital, meaning we have wonderful investors. General Atlantic was our first investor, still a great partner. Silver Lake came in five years later, also equally a great partner. But the notion that we don't have a clock, that we don't have a photo-op moment where we're going to go public or we're going to try to sell the business, for good and for bad, it's just giving us license to invest in things that others wouldn't. And back to the principle of a place we want to work for, we decided that our culture was really going to become that string of DNA that will permeate around the whole company. And when you walk into our building, you'll see a series of belief statements written on a wall. And our belief was, look, we can't teach you values. We can't teach you things that you learned at home, but we can tell you what we believe. And if those things resonate with you, then you may want to work here. And then when we do performance reviews, when we do evaluations of things, when we -- anything we do, we come back to, okay, that is kind of our framework. The beliefs evolve and will evolve and will continue to evolve because the core belief is everything is written in pencil, which in itself is a bit disorienting at bad times, that it can be other things. But look, this is all a game. At the end of the day, we've been really lucky to play 24 innings of an incredibly interesting game. Not every inning has been perfect, and that's part of what makes it beautiful.
· Patrick O'Shaughnessy, Ric Elias
[00:00:00] S0: Which of those four beliefs, not counting that core one, is most on your mind these days? [00:00:00] S1: There's seven beliefs right now, we've added some. Making every second count really matters because I think the world right now, those starting in a perch, which I think we are, have an advantage. But those who are going to be incredibly nimble and willing to adjust and adapt at a whole new wave of innovation coming is what matters. And one of the things that happened during COVID is our operating rigor diminished. I'm not sure that is for us alone, but this notion of working less intensely in the office, less together. There's some very good positive things that come out of it in a lot of capacities. And I worry about, do we have that fight? Do we have that thirst? Do we have that fear of not being relevant in 10 years? And I don't think the people that show up today and look at this beautiful campus feel the same hunger we felt when we didn't know if we were going to make it. It's a circle of life. But how do you instill a desire to people wanting to go do something for their growth, for their own good? It's a really interesting challenge in kind of a leadership standpoint. [00:00:00] S0: Have you found anything that does that effectively for the marginal person that shows up and has a much bigger foundation to build on top of what you did originally, whether it's an incentive structure or an attitude or a way of operating? Is there anything that works?