00:26:04 · Luca Ferrari
[00:26:04] S0: A lot of iteration, you know, one of the big lessons as an entrepreneur, my colleagues and I learned early at a failed startup in between 2010 and 2013 and some lessons we learned that were instrumental to building management was that you need to be intellectually humble. It's good to have a vision at the same time, it's good to assume they're probably wrong. And so for our technologies, we operate in a similar manner. We try to be opinionated on what ideal looks like, but then we never make multi year investments. And before we test them on the ground, we like to identify smaller pieces we can build, put in the hands of our different businesses to see if they're useful and depending on adoption reception, we will further develop or rethink. And also we, while we have platform teams who own all of these technologies, we have found that it's never a good idea to take a platform team and task them with building something entirely new. It's much better to have the people who need it build it. So we will identify one of our businesses where that particular tool will be especially important, and then they will build it themselves. And if it's, once it's successful or if it's successful, it'll be handed over to our platform teams to be further refined, expanded. And the reason why this works is that when you need something, when you have experienced the pain of a certain problem, you're far more likely to develop a... An actually useful solution as opposed to taking a more academic angle where you think you know what the problem is, and then you get more excited about the engineering challenge than actually solving the problem. So these are probably the two main principles. Iterate with small iteration cycles, quick iteration cycles with high levels of intellectual humility, assuming you're wrong, you wanna constantly test and and and confirm you... We are... You're in fact right. And if not, you know, just... And and to always start building with people who have faced the problem, people in the trenches, and as opposed to with centralized teams who are in an ivory tower and I haven't actually gotten their hands dirty with that particular issue.
00:28:20 · Luca Ferrari, S1
They're fine later to to refine, expand and manage, but I think when when you go from zero to one with a new technology, it's better to have it built if you if you have that possibility by the people who understand the issue very, very well. And for us, it's fine because ultimately we have engineers in our businesses and in the platform. So it's, you know, it's not that we lack the capabilities either way and we can move them around all the time. [00:28:48] S1: You're taking an extreme first principles approach to software companies, but you also have a bit of an algorithmic of bend to it. Where's the tension between the intuitive approach versus deploying a system?
00:29:05 · Luca Ferrari
[00:29:05] S0: I think you ultimately to get to the truth. If you had a perfect understanding of the truth of your relevant context, life broadly, your business and the market more narrowly, you would be almost guaranteed to succeed because you would not set objectives for yourself that are impossible. And those you set, which would presumably be possible unless you're mosaicistic, you would be almost guaranteed to reach them because you would know exactly. It's almost like if you're a physicist and you need to compute the trajectory of a ball, we have the formulae, we have the math, it's basically you're always gonna get it right, assuming you don't do calculation mistakes. Now the point is, it's very difficult to know the truth. It was very difficult to figure out how physical bodies behave, you know, through physics, thanks Newton and others, but it's in many ways equally difficult, sometimes more difficult to figure out how a business works, how the market works, because there are so many variables. It's a fast changing context. So I think it starts with taking a scientific approach of doing everything you can to probe the world, learn from those experiments, those observations, adjust your model of reality and then execute accordingly. So be highly disciplined and deliberate in improving your level of understanding of the truth. Again, takes a level of intellectual humility, intellectual honesty, that if you think your vision is right, you're perfect, already got the whole thing figured out, know, let me break the news, haven't, not even Steve Jobs, maybe one of the best ever doing, not even him had it all figured out, he failed repeatedly, so you haven't either. So you wanna, again, probe things, figure things out. I... Through through that process, I think of of approximation of toward the truth, you expand your competitive advantage, because most people don't have almost any understanding of the truth. Most people don't actually seek the truth. They seek pleasure or comfort and they wanna just confirm that they're right and they're good. Just that mindset, that scientific process of approximation toward the truth will set you apart and give you very good chances of succeeding.
00:31:43 · Luca Ferrari, S1
Now in our particular context, developing this, again, operating system or this technological platform is just an instance of that process of work, it's not the root cause or where our culture originates, it's just a manifestation of it. And our attention to talent, our acquisition strategy, everything follows from the same root approach. Again, seeking the truth, refining that model of the truth all the time and adjusting our strategy and execution accordingly. [00:32:16] S1: I was talking to Christie about this before recording, but I think there are some misconceptions of the business model of the company. A lot of people put you in the PE bucket, some people put you in the product manager bucket, there's also the technology bucket. So of those different angles, it seems very much you're a technology company. Why do you think so many people misconstrued that?
00:32:39 · Luca Ferrari
[00:32:39] S0: Some of the ways we are most different from private equities are number one, we're not a fund, we don't buy to sell companies, we have never sold a material business, we intend to own and operate these businesses forever. Whereas private equity for those among the audience who don't know, generally these are funds, they raise money from third parties, from limited partners, and then they hold the companies for, on average, five years, and then they sell them. And so it's a completely different approach and mindset to what you do, what you do not do. The second big difference is that private equity is typically they are a financial place where there's a small group of very capable financial operators and they'll buy these companies, they'll make changes often, change the management team, again, they may touch prices, occasionally operations. It's a relatively hands off approach. I'm not aware of many instances in which the underlying technology for that business was rebuilt, the product was dramatically changed, the organization was dramatically changed. At Bending Spoons we, and again, of course that's the case because a private equity of a small team of financial operators, financial specialists. So you just don't have the, let's say the workforce and expertise to make some of these changes. If you look at the Bending Spoons organization, at this point, approaching a thousand people in the core team over 2,000, including all the acquired teams, most people, 60, 70% of this pretty large team are software engineers, AI research engineers, product designers, product managers, growth managers. And so obviously these people are not sitting around doing nothing. What does our software engineer do? What does a product manager do? What does a product designer do? They build product and technology. So that's almost all we do. And we implement these very deep transformations in the acquired businesses where we rebuild big chunks of the code base, we re architect a cloud infrastructure, we launch a lot of features, if we think they're useful, change the user experience, trying to make it more intuitive, we experiment tremendously with monetization and often reinvent monetization in pretty significant ways, what's premium, what's available for free, the prices, the different segments of customers.
00:34:55 · Luca Ferrari, S1
We rethink marketing from scratch, or at least in very major ways. And these transformations are very time consuming and challenging. They're also some of the most fun parts of what we do. And that's where a lot of our returns originate. So difference number one, we don't sell businesses. Number two, we transform them pretty deeply at the core. And the third major difference is that we try to integrate these businesses pretty deeply altogether on top of that shared platform operating system. And we have this core team or centrally, let's say managed, and then they are deployed into the different businesses and move very fluidly across the businesses. And this is unavailable to private equity structurally because as a private equity, you wanna buy a business and then sell it. If you integrate it with all the other businesses you bought or most of them, can, I mean, it's gonna be extremely difficult if not, if possible at all to sell it to someone else? So yeah, there are similarities, but there are also pretty glaring differences between what a typical private equity does, whatever typical means, because again, private equity is a very diverse world and what Bending Spoons does. [00:36:05] S1: You've raised little equity and you've fueled most of these acquisitions with debt. I'm curious, big can these acquisitions get?