Invest Like the Best with Patrick O'Shaughnessy
00:14:47 · Luca Ferrari
[00:14:47] S2: So EverTail was your startup by the book, meaning this idea that probably won't work but if it works could be huge and very innovative like nobody had attempted as far as we could tell anything like that before. And so we worked super hard on that project for about three years. And naturally as you are a start up or when you do something, I think you tend to network with people in a similar situation for a bunch of reasons. And so over time we got to observe probably a couple dozen teams go through similar journeys as we did. And through that observation, we saw that of course most failed, which you would expect, and maybe three or four had levels of success. We saw almost no correlation between the teams we considered more talented and more hardworking and those who come out on top. And so we concluded it's not a huge sample, but probably to go from zero to one, luck plays a huge role. There are so many factors and variables that even if you're a genius and you work your ass off, the stars will probably not align for you anyway. Whereas at the same time, we also found that our skills at all the functional things like software engineering, AI at the time for what it's worth, product design, product management, marketing, although they were still pretty crude three years later, they were night and day relative to when we started. We were on a clear path to, I'd like to think, excellence. And so we thought being really good at the functional knowledge and skills necessary to run a digital business is probably a matter of, assuming you are reasonably talented, a matter of perseverance, effort, discipline. We can bet on that. We don't want to bet our entrepreneurial lives on getting lucky. So why don't we try to be excellent at the functional things and then buy businesses from people who maybe got lucky or they're very good but they also the passions change between going from zero to one to two to 10, like it's a different job. And so maybe there are very talented people who have gotten far, they're just a little bit fed up with it, they're not interested in running the next phase of it. We should be able to find situations where it's a great deal for both parties because of these factors. That turned out to be true and now in hindsight, twelve years later, there is a lot more to it.
00:16:47 · Luca Ferrari, Patrick O'Shaughnessy
There are structural advantages in integrating different businesses under the same roof, But at the time we didn't have that insight, which today is probably more important than what I just described. But what we had identified was enough to drive some level of success for the first maybe five or six years. I'm going to come back [00:17:04] S0: to the beginning and the early acquisitions, but since you mentioned it now, describe what you've learned those advantages are that exist having, I'll call it a home office that sits on top of a lot of different business units.
00:17:14 · Luca Ferrari
[00:17:14] S2: I'll give you an obvious one and two not so obvious ones. The obvious one is of course you get to negotiate with a vendor for cloud infrastructure, advertising partner better. So that adds probably a couple of percentage points in EBITDA margins. It's good. It's useful. It's not transformative. Or you can make an R and D investment in a general purpose technology that many businesses can unleverage and although that investment would be prohibitively expensive, irrational to make any one of those businesses individually, it's actually very appealing if you can deploy it across. The two more important ones are, or at least equally important, but I think more important ones are one, we can move R and D and also marketing resources fluidly across businesses. In my experience, the R and D opportunity when you run a business is quite fleeting. It changes quite rapidly over time. Maybe your new certain field or that field evolves and there is an opening to expand the feature set, upgrade your technology. In time, that's going to be table stakes. There's a window that actually yields substantial returns, But hiring people, coaching people, training people, organizing people is very slow. So you really have two choices. Either you make it happen in a few months, but you're going to do massive damage to your team, your culture, your talent, it's going be low. If you're to do right, it's going to take years. At the same time, as you go after an R and D opportunity, basically you build the features. Every business has a kind of a saturation point where there's nothing more, at least nothing more very substantial to build, but then you are stuck with a larger team and of course it's costly, emotionally taxing for all involved to shrink that team, it's difficult. Because of all these factors, in my estimation most companies are years behind in terms of the optimal staff. They're actually years behind what they should be, could they control the people factor perfectly instantaneously. Some management teams are better than others. It's really just an inherent inefficiency of a single product model. But because we can pool at least part of our R and D resources and we really work on hiring people who are super flexible, adaptable, there's a whole batch of things you need to do for this to be feasible.
00:19:16 · Luca Ferrari
We can move them very quickly and attack these opportunities and withdraw as the opportunities are not there any longer. This makes us super efficient, both on the offensive and on the defensive. Another major advantage of our model, take Evernote. It's a very nice business, nice product, beloved product. Most people would consider the prospect of working at Evernote just average appealing. Like it's a nice, probably nice company, but it's not as excited as I would be thinking about OpenAI or the next big thing. So on average, a business like Evernote, no matter how charismatic, intelligent its leaders are, will attract somewhat average talent. There will be a Gaussian function and some people better than others, but Bending Spoons has a model that's very appealing to people. First of all, it's growing fast, so it feels like you were going places. You have variety, so you know that you can test your skills and fine tune and expand your skill set across a variety of challenges and businesses and technologies. It's more, and in a way from the talent attraction perspective, better than an Evernote standalone. So all else being equal, we can attract stronger talent. Layer on top of that the ability to make massive investments in processes, knowledge and the tools required to attract and predict talent. We have a massive investment in AI applied to predict future performance based on CVs, cover letters, test results. It's a very expensive investment to make. It's difficult to justify for a company that maybe only hires 20 people a year, smaller. And we can build on top of that inherent advantage by doing even better on basically we have access to better talent plus we'll be better at selecting within that talent pool than most companies would. So that gives us a major talent edge that's just not attainable for companies. I'm sure again, OpenAI probably has access to many of the best talents, but 99% of companies cannot say that. We're better off. This year alone, this 2025, with almost at the end of the year, we'll be receiving about 800,000 unique job applications. We'll be hiring two fifty people. So that's one in 3,000, 4,000. It's super selective and it's not because I'm smart or anything, it's just inherent advantages of the Bending Spoons model.
00:21:16 · Luca Ferrari, Patrick O'Shaughnessy
Of course, an employer brand built over a decade of investment and people work here saying it's amazing, talent is great. So you can't shortcut it, it takes forever, but you couldn't as a standalone company even if you had the patience. [00:21:29] S0: I heard somewhere that for a long time on Slack, your label was recruiter, which is pretty cool. [00:21:34] S2: I think it still is. [00:21:35] S0: It still is. You mentioned the idea of building an employer brand for a decade plus. Talk about those two things, how they go hand in hand and what you've done that's been most successful at building the employer brand.
00:21:35 · Patrick O'Shaughnessy, Luca Ferrari
[00:21:35] S0: It still is. You mentioned the idea of building an employer brand for a decade plus. Talk about those two things, how they go hand in hand and what you've done that's been most successful at building the employer brand. [00:21:45] S2: By far talent density. We think about the jobs we offer as our most important product. So you need to know what your customer is, what you're offering, how you're differentiated and have the courage of really focusing on that sharply. I find a lot of companies are almost afraid of someone not liking them, some team member getting offended by some practices. And they are unappealing in general because they're too vanilla, too boring, they're nothing in a way, they're everything and nothing and certainly they're not appealing for the most brilliant and driven people who want very clear, excising opportunity. So we have focused pretty much from the beginning of getting better over time at it on being the ideal place for incredibly talented and hungry, determined professionals. We make a promise to them to surround them with incredibly high talent density. Just mentioned how selective we are, the entry point, we continue to be selective throughout. That certainly forces us to have difficult conversations and there are moments of stress, but overall it's a clear positive. Yes, it's a more intense, challenging workplace, but for people who want to be the best version of themselves professionally as quickly as possible, it's almost a unique opportunity. So that's our customer. That's the person we want to surround ourselves with.