Invest Like the Best with Patrick O'Shaughnessy
· William Hockey
[00:00:00] S1: I think one of the best determinants for success of founders is can they find the most boring thing humanly possible interesting. And can they find that interesting over a multi-decade period? Who doesn't find AI interesting? Yes, geopolitics, fantastically interesting. There's all these general topics that are quite broad, that are very mass market interesting. And that's what makes Twitter so fascinating, that's why podcasts are fascinating. It's because people like to feel that they are really smart across a broad swath of categories. But that doesn't really align to company building. So many people right now are thinking about and have a lot of knowledge around how AI is going to disrupt software, how AI is going to disrupt vertical software, how AI is going to be the next CRM. These are generalist topics that I can probably find a thousand people that have interesting, compelling ideas and can go pretty deep on that. But you can't create value there. You can create value if you're like, I'm the number one person in the entire world at this little niche thing, and I think this niche thing can generate billions of dollars of revenue over time. But the problem is, those places are really boring. The fun ones like food and surfing in Thailand or whatever, those are solved categories. Yes, I would also love to be an expert on hospitality in Thailand and Southeast Asia. That's a fun problem. I could imagine one going niche on that for a multi-decade period, but that's solved problems. But I think finding the extremely boring thing that requires you to read hundreds of thousands of pages that you cannot Gemini Deep research your way through, that's where value is. But it's fucking boring for a lot of people. You have to suffer in silence for a huge amount of time. And if you can find that super fascinating, if you can love to learn that, then I think you'll be successful. But I think it's a minority of people. My partner kind of gives me shit all the time about like, "How on earth do you find that book interesting? What is wrong with you?" And I was like, "Well, if I don't, you and I are gonna be super poor."
· Patrick O'Shaughnessy, William Hockey
[00:00:00] S0: You said earlier that building a company for the second time is a lot easier than the first time. [00:00:00] S1: Yeah. [00:00:00] S0: What are the most extreme ways that that's true? What are the things that you've done the most differently this time than the first time? [00:00:00] S1: Experience is valuable. I started Plaid right outta college. And I think Zach, who was my absolutely incredible co-founder, we both said like, "Man, if we would've just worked at a company for like nine months…" [00:00:00] S0: You would've learned a lot. [00:00:00] S1: Yeah. We probably would have saved three years. Because the amazing thing about working at a company, especially an early stage company, is you just fail forward all the time. And that's an incredible lesson. But when you fail forward as a founder, that's a lot of dilution. That's a lot of time, that's a lot of wasted resources. And if you can do that on somebody else's dime, amazing. Now I think it's a little bit easier because everybody has YouTube videos on YC startup school and there's some PDF for everything, and you can probably Gemini your way through the early stage part of a company. But experiences matter a lot. [00:00:00] S0: What about picking talent? What things do you optimize for now that have been honed because of your prior experience?
· William Hockey
[00:00:00] S1: People always think about employees in this kind of missionary mercenary framework. You have to look into an employee, like what do you want to do? There's the mercenary type, which is super smart, probably super pedigreed. And really what they're doing is they are using your company as a launchpad for something else. They are using your company to collect a bunch of two year vested options from the top five companies, and hoping one of them goes up. That can be a valuable employee, but you have to have a very specific type of company that is used to that churn and burn, in order to take advantage of them. Then you have the missionaries. Which is, this person is very mission focused. Inspiration is super important to them, and if you get that right, they will go to the ends of the earth for you, regardless of their short term benefits. These people also have some downsides as well, which is the moment maybe you want to be a little bit more commercially oriented, or the moment you have to maybe make tradeoffs on your mission or something like that, that can cause a lot of societal unrest inside of your company. Then there's the third category of employees, which are generally what I think are probably the best. They're a combination of everything, but really what they care about is they care about – yeah, we want a ton of upside but we also want some stability. We also want people that are like hey, I get to be friends with my coworkers. I like to be in an environment that is warm and welcoming, but also gives me the near term and long term financial value. And I'm willing to work really hard to get there. Everybody has personality types, everybody has different styles and you have to figure out what is right for your business. But I think it's very challenging to tell that on LinkedIn. Everybody's like, okay cool, you went to the right New York Prep school, thus you went to the right Ivy League school that happens to have this good engineering program. And then you have these couple of LinkedIn things that are good for me and boom, done. That can be super successful, but that is also not right for everything. And so just getting that hone for talent is super important.
· Patrick O'Shaughnessy
[00:00:00] S0: How much do you care about mission? It's an interesting part of the equation.
· William Hockey
[00:00:00] S1: You need a mission, otherwise people just go work at hedge funds. You need to say like hey, we are building something bigger. And I think we absolutely are. But I think mission can actually be a little bit distracting. I think a lot of times people focus a ton on, "Hey, what are the values of my company? What good are we doing?" And I think that's an important part of the equation, but I think it's – on a list of five things most important, I think it's probably on the bottom end of that five list. And I think a lot of times we can be kind of distracted by that. That's because, when you're pitching investors, investors want to feel like they are part of something. They want to feel that man, I'm not just recycling pension fund money into other capitalists. And that's what we do, we want to feel like it's bigger than that. And so I think we've taught people that, man, you need to focus on like the millennia journey. You need to focus on the impact that we're doing. And yes, numbers go up, but numbers go up is only one part of the equation. I think that's important for employees, but I think it's sometimes not the best. In the end, what do you want to do? You want to convince somebody to buy your product, and you deliver them enough of an experience that they can't build it themselves, and they're gonna pay a lot of their hard-earned money to you. That's the goal. And that person doesn't give a flying fuck about what your mission is. They just care about, does this product create value for me and am I willing to pay for it? That's it. And if you start to drink your own Kool-Aid too much, you kind of forget that.
· Patrick O'Shaughnessy
[00:00:00] S0: It makes me smile to think about your earnings and cash flows. It's such a novelty that a company like yours would have a bunch of this, so young in its life and at this scale. How do you pick your margins? How do you think about how profitable to be and why? You mentioned earlier that it's like having a funding round every year. Does that imply that you're actually spending it, so you're not paying taxes so that you can spend it on growth? How do you think about earnings in a high growth technology business?