· Peter Rahal, David Senra
[00:00:00] S1: No, I know. But it's like the nature of these organizations. The more people they want, nature pulls it in together. It almost wants to be that, a group of people. [00:00:00] S0: I mean, Luca Ferrari just did the exact same thing. [00:00:00] S1: Yeah. [00:00:00] S0: Because he acquires these companies, and in some cases, they have like hundreds of... These are software companies, so he's like, "How are they all making money?" [00:00:00] S1: Yeah. [00:00:00] S0: It's like, how are you unprofitable as a software company? [00:00:00] S1: The best gross margin business there is. [00:00:00] S0: And it's like, what are these 400 people doing? And in one case, he bought a company that had 400 people, and he got it down to 20. And now it went from losing money to it's a cash printing machine. He's almost making every year in profit what the acquisition cost was- [00:00:00] S1: Wow [00:00:00] S0: ... originally. But that was his whole thing, it's like it's in human nature to- [00:00:00] S1: Yes [00:00:00] S0: ... add layers and complexity. [00:00:00] S1: Yeah. [00:00:00] S0: And I think he said the company value of his is like, anybody in the company can raise their hands like, "I don't want to add this complexity." And he goes, "It's on the person wanting to add the complexity." It's like, you can just raise your hand. You don't have to say anything else. [00:00:00] S1: Yeah. [00:00:00] S0: But the person who wants to add this has to be the one in the company to justify it. [00:00:00] S1: Yep, so you got to fight it.
· Peter Rahal, David Senra
[00:00:00] S1: Yep, so you got to fight it. [00:00:00] S0: Okay, so you have the Medici level, you have all these semi-autonomous business units. How much power does the person running the individual business unit have? [00:00:00] S1: Quite a bit. [00:00:00] S0: These are typically former founders? [00:00:00] S1: Yeah. [00:00:00] S0: Okay. [00:00:00] S1: Either former founders or they have to be product leaders. That's like a credential, meaning they have to be back to my, like, they have to pick up the phone to fix the product, they're the wrong guy. So they have to be product first. Ideally, a founder or someone who has that experience, but not necessarily. But product leaders. [00:00:00] S0: Okay, tell me more about the organization now.
· David Senra, Peter Rahal
[00:00:00] S0: Okay, tell me more about the organization now. [00:00:00] S1: So at Medici is product, cash, people, law, regulatory. So, that sits there. I sit there, and we serve the BUs, right? And then there's a lot of collaboration in general. We're all in the same office. There's a cross-functional team at each BU, so it's supply and demand. So demand is sales and marketing, demand is finance and supply. And CPG, it's very cross-functional. So the typical business units are organized around sales, which is working with the retailers, marketing, and that's really demand, right? They generate demand. Marketing can be mostly e-commerce, but it's also all social, digital. And then there's the supply side, which is supply chain, which is end-to-end, so raw materials to fulfillment and warehousing, and then finance, which is forecasting, pricing. And so finance is the referee. So that cross-functional team runs the business. [00:00:00] S0: Wait, what do you mean finance is the referee? [00:00:00] S1: Meaning they define the framework for pricing, they define the budget. They're sort of the ones... Because there's inherently tension between supply and demand, right? Like, there's always a healthy tension there. The finance is the referee in terms of they define the rules of the game, and they ultimately run the P&L, in my view. [00:00:00] S0: Explain the tension between supply and demand.
· David Senra, Peter Rahal
[00:00:00] S0: Explain the tension between supply and demand. [00:00:00] S1: Supply people are really driven by accuracy and efficiency. Sales and marketing people are really more charismatic and want to generate demand, and maybe that requires less accuracy. So they have a conflict of interest sometimes because one just wants to grow as fast as possible, the other one wants to make sure the supply is there appropriately and accurately. [00:00:00] S0: I'm still not understanding, though. Say more about the accuracy. You're using the term accuracy. [00:00:00] S1: Why would someone be interested in supply chain? Generally, you like to know what you need, where is it- [00:00:00] S0: You're talking about the personality types. [00:00:00] S1: Personality types, yes. [00:00:00] S0: Okay. [00:00:00] S1: And their function is to make sure what do we have, where is it, when do we need it, how much do we have? And then sales is like, "I want to go win." And often they will outkick their coverage or there will be issues, and ultimately supply has to go fix those problems. [00:00:00] S0: Okay, so how many business units do you currently have at Medici? [00:00:00] S1: One, two, three, four. [00:00:00] S0: You said something earlier that I wanted you to expand on, too. You said, "It's very important for me to be aerodynamic as I go through things." [00:00:00] S1: Yeah, just like efficiency and simplicity. I think the best design is the simplest design, and just I think my nature.
· Peter Rahal, David Senra
[00:00:00] S1: Yeah, just like efficiency and simplicity. I think the best design is the simplest design, and just I think my nature. [00:00:00] S0: So how does that manifest, your nature manifest in the way you're building this business? Because it looks super complicated. [00:00:00] S1: It is complicated, but... Well, one, it's a very flat organization, so there's not a lot of depth. So I have like 25 direct reports. [00:00:00] S0: What's interesting is I read this book on Jensen, and Jensen has famously like 60 direct reports, and a lot of people when that came out in the book, and I think he's talked about this in some interviews too, they're like, "That's way too many. How could he do it?" And it's like, "Well, this guy's running the most valuable company in the world. Seems to be working for him." How many direct reports is too many?
· David Senra, Peter Rahal
[00:00:00] S0: What's interesting is I read this book on Jensen, and Jensen has famously like 60 direct reports, and a lot of people when that came out in the book, and I think he's talked about this in some interviews too, they're like, "That's way too many. How could he do it?" And it's like, "Well, this guy's running the most valuable company in the world. Seems to be working for him." How many direct reports is too many? [00:00:00] S1: Well, I used to think that like seven or eight was the most you could have to really develop and give the right attention to develop the best leaders possible. Now, I think the value of having so many direct reports is that it allows you to see a lot, and it keeps the organization, and keeps me closer to the problems. And what I tell people if they're reporting to me is like, "I'm not going to manage or tell you what to do. We're going to work together to set priorities. But I am going to expect you to bring things to me. You need to bring the problems to me, and we're going to figure it out together. But I'm not going to be managing your to-do list." So it takes a certain type of leader to report to me. I'm not going to manage them. But I'm going to lead them. Yeah, so it requires these leaders to have just better agency and autonomy if they're working with me, versus a conventional organization, which is like, "Oh, I only have eight direct reports." Then you just get this very, very stacked thing that the hierarchy gets too stacked and information doesn't flow as well. [00:00:00] S0: Do you have a co-founder? [00:00:00] S1: Yeah.