Luca Ferrari: The Operating System Behind Bending Spoons

00:00:00 · Luca Ferrari, Brian HalliganPlay from here

[00:00:00] S0: I think people would be surprised by how poorly graduating from Harvard or Stanford predicts performance. Like, people think, oh, you must be a genius. No. Actually, yeah, you're probably a little bit stronger than people graduating in other universities, but not so much stronger. Often we find that people tend to lose some of that potential raw talent edge by being a bit more entitled and thinking too highly of themselves. [00:00:44] S1: Okay, today we have Luca Ferrari on. I wanted him to have him on for a long time because he runs Bending Spoons, which is this fascinating company. It's like a little bit of a private equity roll up company, but it's really a tech platform company and it's unique. I can't find any other company that sort of rhymes with it. He is very unique in the way he thinks and the way he builds and the way he CEOs. Hope you like it. Okay, Luca, welcome to Long Strange Trip. Thanks for coming on. [00:01:12] S0: Thank you for having me. My pleasure. [00:01:14] S1: Okay. I think by this point, most of the listeners have heard of Bending Spoons, but I doubt they understand the model in what the magic is. So if you wouldn't mind educating us like two, three minutes on how it works and what's special about it.

00:01:31 · Luca FerrariPlay from here

[00:01:31] S0: Yeah, sure. So we, I mean, the entire thesis on which the company is built is that if we can build a machine, a system whereby we can operate digital technology businesses better than almost anybody else, then we are pretty much guaranteed to be able to compound capital efficiently for a very long time through acquisitions. And the reason is that if a lot of businesses are physically better off, once they're integrated into the system, what we call our platform, then being operated as standalone companies by someone else, then we should be able to offer prices to people that are appealing. And so they will sell their businesses to us and we still deliver a high return for shareholders. So that's the you know, thinking behind it, of course, the difficult part is to build, you know, to build that system, that platform so that we can operate businesses better than almost anybody else. And that's what we have poured our hearts and minds for into over the past, well, years technically. And so we have tried to have an amazing team of people, strong culture, powerful proprietary technologies, lots of proprietary data. And what we do, we buy these businesses, we integrate them very deeply into this platform. So we have a shared r and d marketing g and a team that that can fluidly move across all of our businesses. We basically replatform the acquired businesses so that they based on the same technological foundation, some investor at some point called it an operating system, I think it's a pretty apt comparison or metaphor. And then we transform them pretty deeply. So we can rebuild the org, rewrite big chunks of the code base, re architect cloud infrastructure, we try to launch, you know, useful new features, fix bugs, improve performance, rethink when it's decision and marketing. So the, you know, there is a serial acquire component that you will find in private equity, you'll find in companies like Berkshire Hathaway or TransDigm. The big difference certainly vis a vis private equities that we are not a fund, never, you know, we buy off our balance sheet, we've never sold a material business, we don't intend to sell one in the future. So we buy to hold and operate forever.

00:03:42 · Luca Ferrari, Brian HalliganPlay from here

And the other very big difference is definitely vis a vis private equity, also certainly, you know, the Berkshires of the world is that we transform these businesses pretty deeply and we integrate them all together. So they're much simplified, a bit like a go from being a company to being a product installed on the same foundation basically. So that's the model I've been doing it for for thirteen years at this point. [00:04:07] S1: Yeah, it's going remarkably well. You went public. What's roughly the market cap? [00:04:12] S0: At the time of IPO a few months ago, dollars 18,000,000,000, I think, equity value. [00:04:19] S1: Congratulations. I'm a huge fan of the model. It's really unique. I was comparing in my head to Berkshire Hathaway, but it reminds me, when I was in my 20s, I worked for a US company called PTC, and they moved me to Japan to set up the Japanese operations when I was very young. And my office was inside of Mitsubishi headquarters. And so I dealt with Mitsubishi headquarters people, but like all the different divisions. It feels more like Mitsubishi or Samsung than it does like some big PE firm or like Berkshire. How would you describe it?

00:04:55 · Luca Ferrari, Brian HalliganPlay from here

[00:04:55] S0: Yeah, I don't know those companies that well. So I can say for sure. But again, the distinctive features are we buy to hold and operate forever. So I think that kind of strikes out PE firms. And then again, these very deep integration, most companies that acquire other companies serially, in my experience, try to run them somewhat separately, for the most part, at least that's what I've seen. We take the completely opposite approach where we again, we have made, we make sure to have the same technological foundation, broadly speaking, the same core team that moves fluidly across to go after R and D opportunities and withdraw when those are exhausted. And then we a lot of serial acquirers keep these companies, you know, broadly speaking, the same way they were before we change them completely from the ground up. It's very time consuming and challenging. Upside, you know, the bright side of that is we generally deliver very high returns. So I don't know, I think I don't really know of any company that does it this way out there. But [00:05:59] S1: it's kind of an end of one. I agree. It's kind of an end of one. Is the magic Luca in the picking or in the operating? And what percentage would you give it?

00:06:10 · Luca FerrariPlay from here

[00:06:10] S0: Doctor. No, I mean, it's almost completely operating. I'd say the platform I described, we couldn't do what do. So I'd like to think we've gotten pretty good at selecting the right businesses. But it's relatively easy to deliver high returns if you have access to our platform. Because, for example, we have been enjoying exceptional, an inflow of exceptional talent, we got 800,000 applications last year, we hired fewer than 300 people. So when you have amazing engineers, designers, product managers, general managers, it's much easier to take a business and rethink it from the you know, from the ground up and run it much more successfully. Anyone who's run a certainly a digital business, probably any business, but certainly a digital business for a sufficiently long period of time will tell you that headcount matters. Not a lot, but it's just how good the people are in the culture we have established. So we, when you have access to this caliber of people, you can run a business with 20 people that someone else would do 200 people for. And so that alone will give you both cost efficiencies and opportunity to innovate faster, improve monetization faster. So that's an element, for instance, of our advantage vis a vis this company is being run as standalone, or businesses being run as standalone companies. We have invested a lot over the past decade in building powerful proprietary technologies to do everything pretty much I mean, across the board that you need to run a digital business or natively integrated with one another. They just makes everything so much more effective and faster. If I were to run one of these businesses on a standalone basis, I don't know that I would be well certainly wouldn't have the resources to build this technology, it wouldn't even know where to start. And so you know, that's also kind of a cheat code. So definitely the operational part is far more important than the picking. But we try to pick well, obviously, why do it poorly if you can do it well.

00:08:00 · Brian HalliganPlay from here

[00:08:00] S1: And Luca, let's just, I want to click on the hiring. So I spend most of my time with CEOs these days. And everyone talks about being, have high talent density, being a talent magnet. And a lot of them pull it off early, but as it scales, it kind of inevitably waters down. You seem to have almost industrialized this talent density idea and you have some very unique ways of pulling in applications, pulling an interest at top of the funnel, qualifying the interest. Let's just talk about the top of the funnel and talk about the qualification process and talk about it like roll the clock back when you were nobody's, no one had ever heard of you. You had no employer brand. You had no inbound interest. How did you get the talent flywheel kind of rolling?