Invest Like the Best with Patrick O'Shaughnessy
· Patrick O'Shaughnessy, Karim Atiyeh
[00:00:00] S0: To rewind the clock a little bit. If we were writing the book Karim's Entrepreneurial Journey or something, what do you think would be the prologue? What would be the opening scene of that story? [00:00:00] S1: It would certainly have to start in Lebanon, in Beirut, which is where I grew up. And I grew up in a very interesting period of Lebanon's history because I was born right at the end of the civil war. And if you rewind the clock a lot in Lebanon, you'll see that it's always been periods of peace followed by some form of conflict and war. And I was born in 89, 90 and I spent the first 16, 17 years of my life there. And it was a relatively calm period. Always spurts of conflict, but nothing really major. But you could tell growing up there that a lot of the previous generation was scarred from the war and everyone was kind of living on edge. So in other words, I'd say a sense that things are very ephemeral and could disappear very quickly was there in the air. And a sense from my parents of hey, you're going to have to do the best you can so that you maximize your chances of getting out of here and getting into the best school that you can so that you can get a visa and build a better life for yourself abroad is very important. I was living with that stress maybe hanging over my head in a country that was constantly exposed to all sorts of risks that I've learned to live with external risk very well, I would say. It doesn't really faze me.
· Karim Atiyeh, Patrick O'Shaughnessy
[00:00:00] S1: It would certainly have to start in Lebanon, in Beirut, which is where I grew up. And I grew up in a very interesting period of Lebanon's history because I was born right at the end of the civil war. And if you rewind the clock a lot in Lebanon, you'll see that it's always been periods of peace followed by some form of conflict and war. And I was born in 89, 90 and I spent the first 16, 17 years of my life there. And it was a relatively calm period. Always spurts of conflict, but nothing really major. But you could tell growing up there that a lot of the previous generation was scarred from the war and everyone was kind of living on edge. So in other words, I'd say a sense that things are very ephemeral and could disappear very quickly was there in the air. And a sense from my parents of hey, you're going to have to do the best you can so that you maximize your chances of getting out of here and getting into the best school that you can so that you can get a visa and build a better life for yourself abroad is very important. I was living with that stress maybe hanging over my head in a country that was constantly exposed to all sorts of risks that I've learned to live with external risk very well, I would say. It doesn't really faze me. [00:00:00] S0: Okay, so you're 16-ish. Maybe tell the first story of coming here, what you were doing, who you met. I love your personal story. So what happened when you were around 16?
· Karim Atiyeh
[00:00:00] S1: Even before coming, I would trap myself in libraries in Lebanon and just find books and magazines that I was interested in. And I still remember just opening up a bunch of science magazines in particular and just looking at the latest advancements, discoveries. And every time I'd look at a new discovery that was made, it was scientists at MIT or researchers at MIT. And just the name MIT just kept coming up as a place where a lot of incredible engineering discoveries were made. As a result, I was just fascinated by MIT as a school. And then I look around, I guess, my high school, and there was one person a couple years ahead of me who had gone to study MIT. So I reached out to them and asked them, what is it like? What's a good way for me to, I guess, expose myself to type of work being done at MIT? Do they offer any summer science programs? And that's when I hear about a summer science program that was hosted at MIT called the Research Science Institute RSI. So I ended up looking into that program and applying and coming a year and a half before college in 2006 to MIT for the Research Science Institute, which was very transformative experience. It was my first time in the US by myself for an extended period of time. I had come as a tourist with my parents, but I think I'd come to Disneyland once. RSI was, there I was on my own with another 60, 70 or so students, all brilliant, incredibly talented. And even before coming for the program, we had to pick what our research subject or topic would be. And I had picked computer science at the time, thinking that so great, I'm going to learn a lot more about it. And it turns out that the expectation was that I would do computer science research and not learn about computer science. So that's where I was essentially put under, I guess, a lot of stress: great, I not only need to do some research, but I also need to teach myself a lot more in a very, very short period of time. It was a fascinating experience where I ended up working at this small startup off of Kendall subway stop in Boston, the Kendall T stop called Virage. And at the time, what Virage was doing was buying lots of video news feeds from all over the country. So they'd buy the news feeds of the local ABC station in small town in Texas, all over the US.
· Karim Atiyeh, Patrick O'Shaughnessy
So they'd buy all those TV news feeds, convert the speech to text, and then classify the text using Markov chains. And a lot of techniques that we're using are essentially the ancestors of what LLMs rely on. Right. It's a lot of the best technology available for doing natural language processing at the time. And my research project involved training these models that they were using a lot more efficiently than they were. So very interesting at the time. The technology was very nascent, but it was a very cool experience. And I guess the best part about it all is the friends I've made along the way. Some of my best friends to this day I've met through RSI. It was a very fun experience. [00:00:00] S0: Maybe you can zoom forward to starting Paribus, why you started it, and what the original idea was in the Ramp story that will be written about one day in some book. It'll be a key chapter, I think, because of the people that come into your life, working together with them in a more formal capacity for the first time, the business lessons that you're learning. So my interest in Paribus is especially what are the key lessons that you learned in that chapter?
· Karim Atiyeh
[00:00:00] S1: Yeah, of course. Paribus was an interesting one. So I started Paribus with Eric, same co-founder as Ramp, obviously. Eric and I at the time were both fresh college graduates in New York, working at our first jobs, both incredibly busy at work. We were buying a lot of our supplies on Amazon online, and we were essentially doing a lot of online shopping. And Eric notices after a trip that the price that he had paid for a flight for his girlfriend at the time was very different than the price that someone else paid. And he notices that there's a discrepancy in the way items are priced online. And we were very lucky in a sense, because that was around the same time that data science was starting to become that function that is very key for really everyone, but online retailers in particular were starting to employ data teams and dynamically pricing their items to try and maximize their revenue. I was in consulting at the time, a little discontent as well. I guess that's maybe the recurring theme is I kept feeling that we were put on these projects, really smart, very ambitious people, to do a lot of manual work that could be done a lot more efficiently with software. And every time I would try to suggest that we write a little bit of software, I would get maybe a nod and, "Yeah, that makes sense." But the incentives just weren't aligned because the consulting firms are pricing for a number of people spending time on projects. So no one really had the incentive to minimize the time spent on projects and just maximize the value. But even then, I found myself running quite a bit of software during my consulting days, which is probably why the first version of Paribus that we built was essentially me writing VBA macros in Excel to track prices. So the very first version of Paribus was an Excel spreadsheet that had a set of SKUs and a job running in the background that would check the price of every single one of those items every day on Amazon. And you could do this with VBA. The programming language really doesn't matter. You can open a web browser, get to the right page, and pull the price and do it in a loop. And that was the first version of Paribus, when we were trying to figure out, is there a business there? Are prices changing quickly enough that there's enough money to be saved for customers, that there's a business model there?
· Karim Atiyeh
And clearly there was. Even in the first month that we were tracking prices, we not only noticed that, yes, prices were changing, but the rate at which those changes were happening in that one month in 2014 was increasing over the course of a month. And that trend essentially never stopped. So we quickly realized that there was a business there. Prices were changing incredibly quickly. And at the same time, all online retailers had some form of promise to their customers that if prices were to drop and to change, there was a best price guarantee or a price match guarantee. And the reason they do this is because they want to give their customers the confidence to just shop with them by default. Exactly, click that button, just do it. If something changes, we'll get it back for you. But they're also banking on the fact that no one really checks the prices of the items they buy after they bought them. With Paribus, we just automated all of it. The idea was, all these retailers have armies of data scientists working for them to price discriminate, and we're going to arm the rebels. Essentially, we're going to build a technology for consumers, the best technology possible, to try and minimize the amount of pain in their online shopping experience and maximize the amount of money that they can recoup after the fact by holding retailers accountable to their guarantees. And we did that incredibly effectively. And it was very popular, as you can imagine. If you're a customer or a consumer and you see a value prop of click a button, save money, it's free, that's a pretty great value prop. So it grew incredibly quickly. I think within the span of a year we were approaching a million users. It was growing very fast. And the experience of building it was incredibly challenging because unlike Ramp or unlike most tech companies, you are building a product on top of a very unpredictable foundation. We were building products on top of the websites of retailers who, one, don't want us there; two, are changing their pages all the time; and three, are heavily incentivized to make it harder for us over time. And when we started building Paribus around that time, Amazon still used to send receipts to your inbox. I don't know if you remember this, but you used to get a full itemized receipt with the price of every single item that you bought. You don't anymore.