00:02:06 · Luca Ferrari, Anish Acharya
[00:02:06] S2: Yeah. So Airtable, AOL, Vimeo, Eventbrite, Commute, WeTransfer, more than 50 acquisitions at this point, but these would be some of the more, you know, the better known ones. [00:02:20] S1: Extraordinary. So you've had a really interesting sort of insider view as to how companies get built, how they plateau, and then how they start growing again. You know, Marc Andreessen has quipped before that there's no such thing as equities. Every company is either a bond, which means it generates a lot of sort of cash for a long period of time, or it's an option, you know. It's a sort of out of the money thing that may or may not happen. Do you agree with that, Luca? Do you think companies can reaccelerate once they've plateaued? What do you think?
00:02:20 · Anish Acharya, Luca Ferrari
[00:02:20] S1: Extraordinary. So you've had a really interesting sort of insider view as to how companies get built, how they plateau, and then how they start growing again. You know, Marc Andreessen has quipped before that there's no such thing as equities. Every company is either a bond, which means it generates a lot of sort of cash for a long period of time, or it's an option, you know. It's a sort of out of the money thing that may or may not happen. Do you agree with that, Luca? Do you think companies can reaccelerate once they've plateaued? What do you think? [00:02:48] S2: I think Marc likes to make statements that are a bit clickbaity and I mean it in a good way. I'll say that's a bit simplistic, but but but directionally directionally true. Mean, have been examples of companies that have dramatically changed their profiles or be accelerated. For example Apple with the iPhone clearly that was a watershed moment and that was invention and I don't think anybody expected that. And if you run that history 10 other times, maybe eight times it doesn't happen, you know. Someone else does it earlier or they they never succeed. Or NVIDIA recently with being at the forefront of AI, There are different worlds where NVIDIA keeps being a basically a video game hardware, graphics hardware company, which is a great business, but obviously not something that would be worth trillions of dollars. And and that was yes invention but a lot of let's say technological tailwinds. So it can happen but it's rare. So I agree broadly speaking with with Marc with that statement.
00:02:48 · Luca Ferrari, Anish Acharya
[00:02:48] S2: I think Marc likes to make statements that are a bit clickbaity and I mean it in a good way. I'll say that's a bit simplistic, but but but directionally directionally true. Mean, have been examples of companies that have dramatically changed their profiles or be accelerated. For example Apple with the iPhone clearly that was a watershed moment and that was invention and I don't think anybody expected that. And if you run that history 10 other times, maybe eight times it doesn't happen, you know. Someone else does it earlier or they they never succeed. Or NVIDIA recently with being at the forefront of AI, There are different worlds where NVIDIA keeps being a basically a video game hardware, graphics hardware company, which is a great business, but obviously not something that would be worth trillions of dollars. And and that was yes invention but a lot of let's say technological tailwinds. So it can happen but it's rare. So I agree broadly speaking with with Marc with that statement. [00:04:00] S1: Do you think that investors at the you know sort of overvalue growth at the expense of things like profits or you know overvalue subscribers at the sort of expense of the total size of the business?
00:04:13 · Luca Ferrari
[00:04:13] S2: It depends. So I think there are investors whose understanding of the math is not necessarily 10 out of 10, and so they do miscalculate the value of some of these things. And not just the math, but the causality between different, let's say, KPIs in the long run. But a lot of investors are actually very smart and what they're doing is they are including as a variable in the equation also what everybody else will think about the business. And so they... If they were to assume to never sell a share, never issue equity, but just live off the cash flows from that business, I think they'll take different decisions than those they try to push management to take if they're assuming that most of the value creation will come from a sale or for the rounds. So there is an element of psychology or speculation, which is very rational. And if account for that then they're not necessarily irrational in their weighing of the different factors. You could argue that the fact that broadly the market thinks that way is irrational, but sometimes there are equilibria in any complex system, including the market that you get to for historical reasons, and they are inefficient globally universally, but moving out of those particular local optima is actually expensive and unlikely to happen. So I think you're probably worse off with overall the world thinking this way, but now that we're here, it may be rational for a lot of investors to play by those rules.
00:05:52 · Anish Acharya
[00:05:52] S1: And how about founders? You know, if you're the founder of a single product unit company, you're the CEO, how much do you think you should sort of adhere to this sort of distorted view of where value accrues versus focus on simple profit maximization even if the investor doesn't feel like they get their full option on a potential sale?
00:06:12 · Luca Ferrari
[00:06:12] S2: It's just a problem to solve like old problems. You want to understand what your objective is, what the boundary conditions are and then once those are those are clear, you creatively list all the options and pick the best one. So if your goal is to say make much as much money as possible, then it may be smart to again accept or or play along with those with those expectations. As long as you know what you're trying to accomplish and why you're doing it, then you're fine. But there are alternatives and they may not necessarily lead to the greatest financial outcome or sometimes they may, it depends on the specifics. So you could choose to run a business without necessarily relying on issuing equity or selling your stake and trying to make it in the long run a great cash generative enterprise that will ultimately create value for you through for example dividends or alternatively you may work to maximize free cash flow and free cash cash flows in the in the long run-in a way that does not get you the biggest valuation today, but will in the very long run. I think you could argue this is a little bit what we did with Bending Spoons. There have been multiple instances where we knew that we could do things differently to get a better valuation in the moment. Do things that would please investors more, buy a certain type of asset, manage that asset in a different way, but we knew with at least we were very confident and I think so far history have proven us right that if we continue to optimize for the rate of compounding of free cash flows in the long run those would be much higher than they would have been following the other path and then if even if the multiple were to turn out to be lower, know, ultimately the multiple is just one factor in a multiplication. If the other factor is 10 times bigger than, you know, rest assured the overall result is gonna be bigger too. So again, just trying to understand what you're trying to accomplish, understand the boundary conditions, and then work back... Backward from those.