Invest Like the Best with Patrick O'Shaughnessy
· Gokul Rajaram
[00:00:00] S1: One of the most interesting things about being on boards is that it gives you a much better perspective of what it means to an executive, by being on a board. Once a company gets a certain size, I think the CEO needs to try to see if they can join a board, because I think it helps them figure out how to deal with their board by being on the other side. A good board is composed of people who can help the company in the things where the company needs the most help on an ongoing basis. For example, every company needs somebody with – maybe one or two people now, increasing – with product and engineering experience. In fact, every tech company cares. 10 or 15 years ago, you would probably see zero product or tech people on boards. Now, every good board has one or two product or tech people. Second, you need a voice of the customer on the board. You need somebody who represents customers. So at Square, we got the CEO of Shake Shack, Randy Garutti, on the board. And he was amazing because he was the voice of the customer. The other thing, I always recommend to CEOs is, a board role is like a marriage. Once you get into it, so never, ever, ever invite anyone to join your board before spending at least a year with them. Have them join an advisory board. Have them meet with everybody on the management team. Spend time with them. Have them come to a few board meetings. Have them meet with the other board members. Have three or four people on your advisory board and then make one of them a board member if you like them, if you feel they're adding value, if your team feels they're adding value, et cetera. The other thing I've seen with boards over the last 15 years is the management team getting involved. 15 years ago, it would just be the CEO, the co-founder maybe, and the board. We'd meet for four or five hours, discuss topics. Maybe we'd bring in the management team person for one slice, the CFO, and then they would leave. Now, most companies, they have the management team attend the entire board meeting. And I think that is awesome, because I think the management team and board get to meet each other. As part of a board, you want to understand who's on the management team, who could be successor to the CEO. What are the capabilities of different parts of the management team?
· Gokul Rajaram, Patrick O'Shaughnessy
And then as the management team, you want the management team to be able to leverage the board for help. I think one of the best practices I've seen and done – I've now tried to push other companies to do it, is the notion of a board buddy. So everyone on the board should become a buddy to a management team member. And they would then meet with that management team member multiple times between board meetings. So once a month, or even text with them. And anything, they're almost like a sounding board for anything the management team member has. You can see that the different board personas I described, they map nicely. So I generally am the buddy for the head of product or the head of engineering. Somebody else is a buddy to the CFO. Someone else is a buddy to the CRO. I think the meetings in between the board meetings are actually just as important as a board meeting themselves, because there's a lot of things going on. [00:00:00] S0: It’s formal, yeah. [00:00:00] S1: That's the other thing I realized. It's not the board meeting that truly matters. It's all the things between the board meetings that are the real thing when things get done. [00:00:00] S0: I think the only thing we haven't talked about in this grand art of company building and product creation is the job of acquiring the customer, positioning the product, marketing the way it presents itself to the outside world. What's the dispatch from the cutting edge that you're seeing of how people do this?
· Gokul Rajaram
[00:00:00] S1: One of the most interesting things now, it's different between enterprise focus and consumer focus. For consumer focus companies, the big thing is how to scale influencers. They become much more powerful in how people, especially younger people, consume products and even choose products. Somebody said that TikTok is the best local search engine. And I think that's right. My kids have discovered, when they go traveling, crazy restaurants on TikTok that Google Maps would not really show or Yelp doesn't show it. So how do you reach influencers on TikTok? And there's a set of companies that's coming out that's essentially making it easy. The problem is influencers on TikTok, obviously there's head influencers, but there's a long tail that go viral for different reasons. And you want to capitalize on those viral waves if possible. So there is a set of companies that is building products to see if they can help brands connect with these influencers in scalable ways. On the enterprise side, the most interesting thing I'm seeing, it's not really an acquisition channel as much as it is an onboarding channel. It is basically presenting an outcome to a customer and saying, "Let's collaborate on outcomes." Palantir does that very well. Palantir goes to customers and says, "What's your most important business problem? Oh, here it is. Okay, great. Give us six months to solve it, engage with us. If we can't solve it, fire us, don't pay us anything. If we solve it, pay us a lot of money." So it's truly taking ownership. And I think this goes to outcome-based pricing, how your product is priced and your confidence in your ability to deliver that outcome. So I think outcome-based selling is one of the most interesting ways of changing. And in fact, one of the top pieces of advice I have for founders reaching out to companies is, you cannot lead with what your product does anymore. You've got to lead with what is the outcome you can deliver, or ideally already have delivered. I'll never forget this example. What is crazy is that companies always look to other companies in the vertical. This will never change. So for example, if you get JP Morgan to use your product, I promise you every single bank will then evaluate your product. But if you get Procter & Gamble, JP Morgan doesn't care if Procter & Gamble uses your product.
· Gokul Rajaram, Patrick O'Shaughnessy
Even when you go to market, you've got to target, instead of trying to be too horizontal, unless it’s bottoms-up. On the sales side, you've got to try to go after one or two very specific verticals because there is a very clear lighthouse effect. You want to go after the best one and get the best one. And then you basically win all the other ones in that vertical. [00:00:00] S0: I think you might know my traditional closing question that I ask everybody. What is the kindest thing that anyone's ever done for you? [00:00:00] S1: There are so many. A guy called Bob McDonald. I was a business school student on the East Coast. I was on a visa. I wanted to get a job in Silicon Valley. I was somewhat unqualified. I'd never been a product manager before. I'd been an engineer and never worked in photonics, optical networking before. And Bob saw a spark in me and said, "You know what, I'm going to make a bet on you and I'm going to hire you and I'm going to bring you to Silicon Valley." It was a Sequoia funded company, one of the hottest companies in the Valley. He could have had a pick of anyone, but he bet on me. So I basically have taken this approach that I try to pay it forward, and I have no expectation when I do something for someone. [00:00:00] S0: What created the spark in you? Where did the spark come from?
· Patrick O'Shaughnessy, Gokul Rajaram
[00:00:00] S0: What created the spark in you? Where did the spark come from? [00:00:00] S1: For me, it's all about just knowing how fortunate I am to be healthy, to have a family that loves me and to know that in almost every run of the simulation, I could be in a million different worse circumstances than I am today. And so just gratefulness and gratitude about where I'm sitting. I mean, we are sitting in literally the top 1% of the 1% of the 1% of situations right now. So literally, I think I feel pain when I see somebody suffering. As I say, there for the grace of God go I, in some ways… but for the grace of God. And you basically realize that you're very lucky to be given this one life and you have a responsibility to the world and yourself to be grateful and to lead the best life you can. [00:00:00] S0: Gokul, this was incredibly fun. Thank you so much for your time. [00:00:00] S1: Patrick, thank you, my friend.