00:25:25 · Luca Ferrari
[00:25:25] S1: Well, there's none just trust, so they don't have any bonuses, any variable pay. We just tell them, we trust them to build the best organizations they possibly can, and then that's it. And we find that if we hire people who are intrinsically motivated, and who like the project and you work with them and you're deserving of their friendship and admiration, then they will do their very best to achieve the common goals. In fact, we find that setting highly specific concrete objectives to which career progression or pay are tied almost invariably leads to bad outcomes or inferior outcomes. Meaning maybe people will occasionally try a little bit harder in the short term, but then there's all sorts of deviations from what would be optimal holistically for the company, and that's instead optimal for specifically checking the boxes of that particular incentive system you created. And so we just tell them, we trust you to create the best teams you can. So hire well, part ways with... Hopefully, we don't need to part ways with a lot of people, but when it's necessary, please do that. Let's talk if you need help. Let's discuss. But but ultimately, it's as simple as that. And by the way, it's... It shouldn't come as a shock. I mean, most of us, I think, when we worked in projects where we thought we were doing incredibly well and everybody was pushing in the same direction, how frequently were there super mechanistic KPIs with our pay tied to it? I've never seen it. I mean, generally in startups, for example, yes, there's a broader idea if we do really well, maybe our equity will be worth more, but it's highly indirect and ambiguous and when and how much. People work hard and try their best because they feel a sense of ownership, they like working with one another, they care about the project. So we try to recreate that same setup. We give them full trust in leading hiring. And by the way, because this is centralized, they also have a much bigger sample and much better information, both in terms of what's available out there and what works and what doesn't. Again, you're a hiring manager in a team of 10, it's probably bigger than most teams. At best, you're gonna hire three people a year. I don't I'm just making it up. Something like that. It's not a huge sample to learn from. And and you... You're not focused on it. So you...
00:27:40 · Luca Ferrari
You're not gonna wake up in the morning thinking, can I be a better interviewer? Obviously. Like, it's not it's not your core problem. For our centralized talent team, that's all they do. There is no professional pride other than we're good at this. They do it at scale, so they have massive sample size, and they get to see what kind of talent we can attract across all different roles and positions. Therefore, they're much better positioned to understand whether someone is the right hire for a particular role, because they've seen what's coming in time across the board. And so they know they're better positioned to know, Okay, if we wait a little bit longer, just statistically speaking, we're likely or are we not likely to find someone who can be even better? So they have all sorts of advantages in terms of their focus, their informational sample that supports their decision making, and also this efficiency that they are hiring for a particular role, but nothing prevents them from picking from other pipelines potentially and swapping as needed. Again, maybe someone applied as a product manager, but they see that they could actually be amazing as a growth manager. They can easily make the swap because they are looking at the entire thing, not just that particular...
00:28:53 · David Senra
[00:28:53] S0: I really love your insight. It's like, well, if you're running the team and you feel the pain, you might just take the first candidate that comes along. But your whole thing is like, we know our strategy works, so now we're just gonna spend all of our time on talent. The conclusion you just shared here reminds me of Brad Jacobs, who was on this show last year. He says... He has a great maxim where he's like, an empty seat is less damaging than a poor fit. Oh, yeah. He was just like, I'll leave the position empty. Like, it's gonna be painful, but it's gonna be not... It's gonna be way worse than if we hire the wrong person. And he'll just leave it indefinitely till they find the right person. It's very similar to what you're saying.
00:29:25 · Luca Ferrari
[00:29:25] S1: Yeah. Completely. And look, I I I think in general, having sharp job descriptions is bad. You wanna have a... There is a a blob of work that needs to be done, and different things are differently important... Urgent. And if you have a team where people don't feel siloed, they're just responsible for the company's success. Again, just like a startup. If you're failing to hire someone who's supposed to take care of like a little part of this blob of potential work, It's not that that blob is ignored if it's really important. Someone will basically postpone something that's a little bit less important to take care of it. I always say, I generally talk to new hires. We have sessions where we discuss some of our cultural principles and other things. And one of the things I sometimes say is that we all have the same job at Bending Spoons, all of us, starting with me, and that's helping the company succeed. On a daily basis, it's helpful to say you're a software engineer or a product manager, just so we know Stefan and each other's sales too much. But essentially, everybody's job is the same: do whatever is needed to help the company succeed. And so I'm not worried about a seat being empty, because I don't think the concept of seat even exists, really. We'll just adapt and take over and and complete the work that needs completion. And, you know, we'll just not do some other work. Not the end of the day. Like, very little work in a company, especially digital business, is strictly necessary. Almost all of it is elective, optional. It's just a matter of what's high priority and lower priority.
00:30:53 · David Senra, Luca Ferrari
[00:30:53] S0: Say more about this. [00:30:55] S1: Well, almost everything you do, could also not be doing. Almost all of it. So winning starts with doing what's ROI positive, which is only a small portion actually of the complete universe of possible projects and tasks. And then doing things in order of priority, from say highest ROI, I mean, the risk of being a little bit simplistic and and your resources will be limited. I think most companies do things that are ROI negative. You know, there is a 100 things they could be doing, but only 10 are ROI positive, many companies are doing 40 things. Hopefully, at least they do the 10 that are ROI positive too. In some cases, tragically, they're now doing some of the ROI positive things despite doing so many other things. [00:31:37] S0: Wait, so why do think they're doing this? Is this a lack of talent, an issue of focus, not understanding prioritization? What's going on there? [00:31:45] S1: All sorts of reasons. For the [00:31:46] S0: companies you buy, because obviously you're buying things that are, there's a brand that's well known, there's a customer, there's a product there, but in almost, I think, every single example, you've massively improved everything you've purchased. So what are the most common mistakes that people under previous management were making?
00:32:02 · Luca Ferrari
[00:32:02] S1: A lot of the reasons for those opportunities not being seized, frankly, lay outside of their control. Some of it is perverse incentives. If you're running a business on a standalone basis, especially for a public company, but also private companies, ultimately they're aiming to to go public, so it's kind of the same. You'll be judged on what I often... You'll be judged on what I would, let's say, consider ultimately secondary, if not even vanity metrics, rather than, let's say, value creation through cash generation. For instance, if you are running a business where most of the revenue comes from subscriptions, you know maybe that the optimal price is a higher price, like in every pretty much with any product in a free market, if you raise prices, you're gonna have fewer customers, which can be fine. You know, maybe you have 30% fewer customers, but each ultimately contributes twice as much or better off. Right? However, often the markets will punish you dramatically if you do that because when they see that the number of subscribers has gone down, even if revenue has gone up, they would not like it. We could debate why that's the case, it's an interesting discussion. But if you're a management team, ultimately, in that particular context, you will have to heed the opinion or expectations of of the market, and you will not do that pricing change even if you know that it's gonna be positive. However, if a company or business is run within the broader benchmarks where none of the businesses, let's say ends with itself, but it's a piece of a broader puzzle, a source of cash for further deployment and growth, then it's much easier to make those otherwise unpopular decisions. And even investors would potentially support them because they're not focused any longer on, I want, say, Evernote to have as many subscribers as possible. Yeah, all else being equal, I want to have more subscribers, but I would rather have an Evernote that generates more revenue, more cash flow, so that it's more accretive to bigger Bending Spoons and we can go after bigger acquisitions and thrive. So there are incentives, and this is one example. Another one is talent. Sometimes businesses, when they have matured and, you know, everybody understands and sees they're somewhat...