00:17:22 · Luca Ferrari
So when you pick someone who's very experienced, decades of of work, probably you can get away with just looking at the results, maybe some reference calls, very likely you'll get a reasonably accurate assessment. But if you have to pick someone who hasn't even graduated yet, or maybe he's been in the workforce for a year or two, then you don't have the luxury of using this, like the sample is too small. Exactly. You need to find different ways. Something we do is making extensive use of testing. So we develop tests that people go through, that we have found over time proxy pretty well their mental capacity and faculties, for example. Have over time developed we've really built a science out of studying people's track records, including academic records and personal projects and similar things, whereby in some of the applications we identify over 100 different signals. And through those we predict their long term potential. It's not entirely dissimilar from what a stock trader who is algorithmically oriented would do. More quantitative hedge funds they would identify and test hundreds or even thousands of signals. Many of these are only very marginally predictive, but in aggregate, they make you predictive enough that you can succeed because you're just better than others. So we have all these signals, some of which are completely obvious, you know, someone's GPA tells you something, you know, higher GPA is better than lower GPA. It doesn't prove anything. It's not definitive, but it's a good sign. Some are more subtle, we keep working and investing scientifically in identifying and and measuring these signals. So over time, I think we have developed a competitive advantage in finding people who, despite their minimal track record, are very likely to excel.
00:19:08 · David Senra, Luca Ferrari
[00:19:08] S0: Okay. So this is one of the notes that we talked about at lunch, and this is one of the things I text you, where you essentially said you need... A lot of other companies kind of... Don't really... Do know how many companies have brilliant people in HR? And you're like, no, you actually need brilliant people in HR. You said that you've... You can make hiring a science, that you had at the time a team of like 50, and you actually, these are engineers. These are not typical people that you find. Right? And then you say, you compare one to several years of performance, the signals from their CV, which is what you just described, or these 100 signals, signals rather, and that you centralized hiring and firing. And I guess these are you call them talent managers, and they're in charge of both entries and exits. The hiring and firing is centralized for all the companies that you own. [00:19:51] S1: Yeah. It's very unusual. And by the way, the signals are not just from the CV, but they could be from email exchanges with our recruiting team. From the tasks we ask a candidate to go through anything, really. Anything qualifies as a signal, we just care that it's predictive. It doesn't have to be something that, let's say, intuitively immediately makes sense as long as we can prove it's likely not a statistical fluid production. [00:20:15] S0: Give me an example of that. I'm a little confused.
00:20:16 · Luca Ferrari
[00:20:16] S1: Well, I mean, for example, one of the qualities that we value in people is... Because what we do is such a team sport. Need to be somewhat collaborative. You don't have to be the nicest person in the world, you know, like, but if you are arrogant or dismissive of others or just an asshole, that that doesn't work typically. Unless you're a freaking genius, we might, you know, accept it occasionally, but it's almost nobody is. So for most people, you need to be nice enough. And we find, though, that when they're interviewing even assholes, especially because these are smart assholes, because they've already passed the more cognitive oriented test, they're generally quite nice. Because they know that if they come across as super arrogant, they're not gonna get an offer. We found that whether the interviewer felt that the interviewee was, you know, open to criticism and reasonably pleasant to talk to, wasn't a good predictor of whether they were actually collaborative on the job. So we have a role, call it like a, it's almost like customer support. People help you with more the logistics of your application process of scheduling interviews. So it's more of a support role, which clearly does not come across as in any way connected to the final assessment. How people interact with those is a lot more predictive of how they actually are as human beings. And so we found that people who were curt and sometimes, of course, even disrespectful occasionally, that's rare. Ultimately, that predicted poor behavior in a social context much better than how they interacted in an interview. You know, again, one of hundreds of signals in and of itself is not definitive, but it helps form an accurate picture at the end of the day. And that that would be for collaboration, but then we would have others for hardworking attitude, whether you're creative, whether you're logical in your thinking, perseverance. Identifying what's important is not rocket science, you could imagine what's important to performance. The difficult part is spotting it through these subtle signals.
00:22:16 · David Senra, Luca Ferrari
[00:22:16] S0: And the interesting part is that [00:22:17] S1: you just said, how many companies do you own right now? We bought a little over 50 businesses over time. [00:22:24] S0: But you could see, if you own 50 businesses, there's multiple different ways. You're a conglomerate. The hiring could be pushed down to the actual individual company level, and you're like, no, no, this is so important. And the talk I had Almost all matters. I was going say, maybe the most important, so you just said it's almost all that matters, it is the most important. So I'm going to centralize this. Are you also then the centralization allows you to kind of take the insights that you learn from one of the 50 and disperse it to the other ones? Is that what happens?
00:22:51 · Luca Ferrari
[00:22:51] S1: I firmly believe that in business entrepreneurship, the number one thing is called it a strategy, meaning what we're trying to do, how and why do we think it's going to work. That is, if you have a terrible strategy, you can have, you know, the best team, they're not going go anywhere. But once you have a strategy that makes sense, the team is almost all that matters. I'd say the team and the culture, is like the rules of how we engage with one another, it's basically almost all that matters. And so I don't think there's over investing in creating a great team within vision. We try to be generous in our time and resources when it comes to that. So why centralizing hiring and parting ways with people? I think there are plenty of good reasons for it. One is that team managers. By the way, most companies, let's say you run a team of 10 people. Most companies you'd be deciding, maybe there's a budget, you know you can hire two people, but once that's in place, you'd be deciding who gets hired. Probably HR will screen CVEs and send you and maybe pre interview a bunch of people and send you maybe five candidates, and then you pick the one you prefer. End of story. We think that system is bad for a few reasons. First of all, hiring managers, meaning that that person who runs the team have almost all the wrong incentives in hiring. For instance, they probably don't want to work late or on the weekends. They feel they need help. So they will try to fill the position as quickly as possible. I'm sure they will not hire someone who they think is a net negative for the team, but as long as they find someone who they think can get the job done somehow, they'll probably get that person. Obviously, a far sighted, ambitious organization, you don't wanna have you don't wanna hire the first person who's adequate. You wanna hire someone who can be amazing over time. So first, bad incentive. The second problem, and it's connected to that is if you are running the team, probably most people, although they would be willing to coach if it comes down to it, they would much rather hire someone who's already fully mature and competent. So they, again, they can either do other stuff or world class. If you leave it to a hiring manager to decide they'll favor very experienced candidates over green, immature, but potentially much, over time, much better contributors.
00:25:17 · David Senra
[00:25:17] S0: I like that you identified the incentive misalignment that you find in typical companies. What's the incentive structure for your hiring managers in your company then?