01:21:44 · David Senra, Luca Ferrari
[01:21:44] S0: Do you disclose what you bought it for? [01:21:46] S1: Well, it can be seen directionally from our financial statements. It was about $200,000,000 give or take. Say that again. Number again? 200,000,000. [01:21:53] S0: 200. Okay. [01:21:54] S1: More or less. About. Okay. $20.03, something like that. [01:21:56] S0: So wait, they were doing 100,000,000 in revenue? [01:21:59] S1: A little [01:21:59] S0: less, like 90. 90. Were they making any money or no? [01:22:03] S1: I would say roughly breakeven. Okay. Roughly breakeven. Slightly profitable. [01:22:09] S0: And it's doing what now? [01:22:11] S1: So we don't disclose profits by individual business, but I would say it's very profitable. You can see our overall profitability as a group. Adjusted operating income margin were at around 50 four-fifty 5%. Individual businesses tend to be more profitable, especially if you've owned them for more than a couple of years. [01:22:35] S0: Hold on, before you go on in there, an Evernote case, you drastically increased the profitability based on these rough [01:22:42] S1: Revenue went up to That's what I [01:22:44] S0: was going to ask. Does the revenue also have to go up, or you were just fine if [01:22:46] S1: you just make it? We try to improve revenue and improve costs. Sometimes we're successful on both fronts. Generally, I would say sometimes more on one than the other, but on Evernote, we both increase revenue and reduce costs.
01:22:46 · Luca Ferrari, David Senra
[01:22:46] S1: you just make it? We try to improve revenue and improve costs. Sometimes we're successful on both fronts. Generally, I would say sometimes more on one than the other, but on Evernote, we both increase revenue and reduce costs. [01:23:01] S0: Explain the difference of what you were doing compared to were doing, whatever, 90,000,000 and not making any money or breaking even. What is the difference between how you were running the business and We how they [01:23:11] S1: made a lot of changes. We rebuilt the org vastly. So it was roughly 350 team members. We made it substantially smaller, I think, a year, a year and a half after the acquisition closed. We were more around 50 to 60 team members.
01:23:11 · Luca Ferrari, David Senra
[01:23:11] S1: made a lot of changes. We rebuilt the org vastly. So it was roughly 350 team members. We made it substantially smaller, I think, a year, a year and a half after the acquisition closed. We were more around 50 to 60 team members. [01:23:32] S0: Hold on. So when you acquired it, they had three fifty people working on the product Approximately. The Okay. And you're cutting that down to, let's say, 50 to 60. This is what we were talking about before we started recording, which I think is really important. And this is why I like Adam from App eleven too, because his whole thing is like, if you factor in either his cash flow to employee ratio or market cap to employee ratio, it's just like, that's a very interesting metric, where his whole thing is like, I'm doing this with 400 employees. You mentioned previously, it's like, to see what can be done and how efficient a business could be run, it's very similar to like... It's a good example for other entrepreneurs in the same way that, like, other runners didn't crack four minute mile, for example, until somebody did it. And once they see somebody did it, then you just see it happen all the time. Yeah. So why could you do this with, let's say, 300 people less than they could have? [01:24:27] S1: I think there are different factors. One is the access to talent. We... We've been able to build a... An employer brand, a company that... Where some of us people wanna work. We got 800,000 job applications last year. We hired 300 people. So... And and if you're running Evernote, even if you're Steve Jobs
01:24:27 · Luca Ferrari, David Senra
[01:24:27] S1: I think there are different factors. One is the access to talent. We... We've been able to build a... An employer brand, a company that... Where some of us people wanna work. We got 800,000 job applications last year. We hired 300 people. So... And and if you're running Evernote, even if you're Steve Jobs [01:24:47] S0: 800,000 people are not applying to Evernote.
01:24:50 · Luca Ferrari
[01:24:50] S1: Yeah. Exactly. And it's not it's not anyone's fault. I mean, the... That that executive team was was doing the best they could with the with the resources they reasonably had available. So we had good fortune to be able to take advantage of an arbitrage in access to talent. We also have a massive advantage in that each of these businesses matters to us, but it's not everything. So we can take risks. For example, if you're running Evernote, and that's all you do, that's a standalone company. And you make the change I just described in terms of headcount. If something goes wrong, you're out of a job, as say, a CEO, and realistically, you're done because that will be the blemish on your CV that you can never clear, pretty much. It's not that we want something to go wrong if, say, Evernote is part of Bending Spoons, but we have... We can make bets that are... The expected outcome is highly appealing, but maybe they are a little bit more risky, and so not so appealing if that's all you do with your life. The upside of, again, it's almost like insurance. On average, we get it right and it's a great value. Occasionally, maybe we make a mistake that would be painful if it were... If that business was run as a standalone company. But, you know, net net, we do so much better, and we learn so much faster, and the good lessons we learn from our business, we can port them and apply them as relevant to all other businesses. Three, we had access to that technological platform. So talent levels, ability to take some risks that would be uncomfortable for that management team, given their boundary conditions. Three, the technological platform I discussed, it just enables us to do so much more with fewer people. But if you're running Evernote standalone, you're not going to have resources to develop those technologies. Also, you don't have the business case because we can amortize those investments over all of our businesses and increasingly more businesses is required. It's difficult to justify if all you do is Evernote.
01:26:52 · Luca Ferrari, David Senra
And then again, those perverse incentives I mentioned earlier, whereby if you're judged by Evernote and Evernote alone, making a change that would, for example, result in a smaller number of monthly active users or subscribers will get you so much hail, even though it's maybe the right thing to do for the business, could make some of those unpopular decisions more easily and take full advantage because the business has been thriving relative to previous trajectory and financially and in terms of customers. So these are some of the big reasons. The changes were sweeping. The org, we rebuilt it, I mentioned, was a lot smaller. By the way, today, Evernote, ran it with about 20 people. What? Yes, because in the meantime, you keep improving. I'll describe the improvements we made, but some are fundamental improvements in the underlying technology code base that enable the team to do more with with fewer resources because everything gets a little bit cleaner and more maintainable and manageable. Part of it is our operating system of technologies has gotten so much better in the following two, three years that we're so much more productive. Especially with AI, we have had some close to breakthroughs in productivity. Can you talk about that? [01:28:08] S0: Yeah, sure. Everybody's interested in this right now. There's a bunch of founders that have already been on the show that are coming back on, and we're just going to do an hour of how, literally, they're redesigning their entire organizations with AI.