Invest Like the Best with Patrick O'Shaughnessy
· 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?
· Patrick O'Shaughnessy, Ric Elias
[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? [00:00:00] S1: There's no magic bullet. I think you got to find people that want it. And then I think typically, athletes or people that are musicians, people that have been coached heavily in their lives end up doing well in environments like this because coaching is not criticism. It's like you're making me better. People that are super curious. I think right now, to be successful in the next five years, you almost have to be willing to re-underwrite your skill set. You need people that really are in that mindset and mode. [00:00:00] S0: If I were to be annoyingly reductive about the Red Venture stories, would it come down to you were just earlier and better at understanding how marketing was changing in the Internet era than others?
· Patrick O'Shaughnessy, Ric Elias
[00:00:00] S0: If I were to be annoyingly reductive about the Red Venture stories, would it come down to you were just earlier and better at understanding how marketing was changing in the Internet era than others? [00:00:00] S1: That would not be accurate, and that would overinflate, really, what we did. We did not know we were earlier. Actually, I would argue that we were a little late. We were late to mobile. We're trying not to be late in AI, but we're also afraid to be too early. I think we bet on ourselves. We work collectively better than most, and we're hypercompetitive against ourselves. And in life, a lot has to do with picking the right competitors. And I always joke that if this building, this campus was in Silicon Valley, it will be irrelevant. This region is something. I love that saying that you can either be the tail of the lion or the head of the rat. And so we get great talent because all the schools around here, super talented kids that want to stay in this region and want to be in a place where they get trained, they get invested in, they are pushed on, they love coming here. We have insane talent coming here. [00:00:00] S0: My sense is, and I'd love to just like pick any example you want, that frequently you would buy a new company and the performance of that company would go up a lot after you owned it. [00:00:00] S1: Correct. [00:00:00] S0: Can you pick one story and, in some detail, describe what it was when you got it and what you did and how it changed?
· Ric Elias
[00:00:00] S1: You think about the core of what Red Ventures was and it still is, to some extent, it's a B2B platform on basically doing customer acquisition, performance marketing, growth. Like at the end of the day, when I sit down with the CEO, I said, "Look, I can help you grow, and you only pay me if that's true." It's not the hardest sell. Every CEO needs growth, especially. And we bring tech operators' data. We bring a bunch of tools that are really hard for you to replicate. And it's easy to measure that we provide incremental growth versus what you would do yourself, right? So it usually is the rejection of the organization that makes it hard. So the timing of this conversation has to be either a new CEO or a crisis or a situation. A business that is usually performing pretty well or feels like they're in a good spot will not want to engage with us in that sense. So by virtue of our value proposition, we have this ability to take anybody's customer flows, and using all our capabilities, make it better. So we haven't batted 1,000, but we have had more of a quarterback completion rate than a baseball player batting average at taking a company. And if we bought it at 10x within two years, it was 4x. And that gave us a lot of conviction to a point where probably we overplayed our hand on our last acquisition, right? So it's just one of those. But we can take any funnel where there's heavy data, heavy experiences and use our technology to basically yield a lot more out of the same flows. That has happened time and time again in every asset we bought.