Luca Ferrari: The Operating System Behind Bending Spoons

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, you know, people graduating in other universities, but not so much stronger. And 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.

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.

Thank you for having me. My pleasure.

Okay, I think by this point most of the listeners have heard of bending spoons, but I doubt they understand the model and what the magic is. So if you wouldn't mind educating us like two three minutes on how it works. 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, the thinking behind it. Of course, the difficult part is to build, you know, to build that system, that platform, so that we can operate these businesses better than almost anybody else. And that's what we have poured our hearts and minds into over the past, well, 13 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&D, marketing, G&A team that can fluidly move across all of our businesses. We basically replatform the acquired businesses so that they're based on the same technological foundation. An 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 codebase, re-architect cloud infrastructure. We try to launch useful new features, fix bugs, improve performance, rethink monetization and marketing. So, you know, there is a serial acquirer component that you will find in private equity, you'll find in companies like Berkshire Hathaway or TransDigm. The big difference certainly vis-à-vis private equity is that we are not a fund. We 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. And the other very big difference is definitely vis-à-vis private equity, but 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 they go from being a company to being a product installed on the same foundation, basically. So that's the model, and we've been doing it for 13 years at this point.

Yeah, it's going remarkably well. You went public. What's roughly the market cap?

At the time of IPO a few months ago, $18 billion, I think, equity value.

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 tech 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. Is that— how do you— how would you describe it?

Yeah, I don't, I don't know those companies that well, so I can't 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, this 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 make sure to have the same technological foundation, broadly speaking, the same core team that moves fluidly across to go after R&D opportunities and withdraw. when those are exhausted. And then we— a lot of serial acquirers keep these companies, broadly speaking, the same way they were before. We change them completely from the ground up, and it's very time-consuming and challenging, but the upside, 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—

It's kind of an N of 1. I agree, it's kind of an N of 1. Is the magic, Luca, in the picking or in the operating? And what percentage would you give it?

No, I mean, it's almost completely in the operating. I'd say the platform I described, we couldn't do what we do. So I'd like to think we've gotten pretty good at selecting the right businesses. But it's almost— it's relatively easy to deliver high returns if you have access to our platform. 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 ground up and run it much more successfully. Anyone who's run 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 and the culture you've established. And so, when you have access to this caliber of people, you can run a business with 20 people that someone else would need 200 people for. And so, that alone will give you both cost efficiencies and the opportunity to innovate faster, improve monetization faster. So, that's an element, for instance, of our advantage vis-à-vis these companies 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. They're natively integrated with one another and they just make 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 these technologies. I 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?

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 in interest, the top of the funnel, of 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 nobodies, no one had ever heard of you, you had no employer brand. Brand, you had no inbound interest. How did you get the talent flywheel kind of rolling?

Yeah, so we basically believe that if you have a strategy that works or can work, that almost all that matters is the talent you deploy toward the execution of that strategy and the culture, meaning like the rules of the game, how people interact with one another, what they choose to do and how. And so that, you know, those are the areas we have obsessed over Pretty much since the beginning. Now, you're right, I mean, you start with nothing, and so that's what founders or early team members need to do well. That's basically punching above their weight. I remember early on spending at least 50% of my time, probably more, for at least the first 2, 3 years on recruiting, among other talent-related things. I and a couple others managed to find lists of the best graduates or of some in that— at the time we hired pretty much only in Italy, now we're international. But some of the best Italian universities, we managed to find lists of graduates and we kind of tracked them down. And I remember calling hundreds of them, probably harassing a few until they accepted to join us. And later we built a pretty substantial talent team. These days we have scientists, researchers, and we treat the selection of talent within our pipeline probably similarly to how a quantitative trader would picking stocks. So we look for all signals and then test signals against—

Yeah.

future performance to determine whether they're predictive or what combinations of signals are, and keep iterating. It's a very rigorous and sophisticated system at this point. We assess hundreds of signals in each application. So that helps you select potentially dramatically better given the same level of employer brand and ability to attract applications. And half the game is also attracting very good applications because if you If only geniuses apply, then it's easier to build a good team. And so there I think we have kind of an unfair advantage with our model. We found that a lot of engineers, designers, product managers absolutely love the idea of being able to work at a company where they can, say, spend 9 months helping rebuild Vimeo's video infrastructure and then 6 months rethinking advertising on AOL and then maybe a year building a platform technology, all with the same employer, broadly speaking, with the same colleagues, with the same culture, the track record they're building does not get diluted as when you change employer. Obviously, a lot of that is lost. You have to reestablish credibility. And so that's a very powerful point of attraction. And the other one is because we've been so systematic and uncompromising on having extremely high levels of talent density, pretty much from the beginning, of course, compatibly with our appeal to candidates at each point in time. Once that's in place, it's a powerful means of retaining excellent performance and attracting more of those. Because when people find that they love their colleagues, they never leave. We have essentially zero regrettable churn. We had 0.6% regrettable churn of Spooners, the members of our core team, last year. And, you know, trust me, they get— there are poaching attempts from big tech all the time, so it's not for a lack of opportunities. And equally, these people will tell their, you know, former fellow students or, you know, whatever, oh, it's amazing here, you should apply. So it makes your life easier, but it's very difficult to get to a very high level of talent density late in a company's history. You need to establish it from the beginning and just be completely obsessed with it and never Giving up, even when it means hiring way fewer people than you'd like to for prolonged periods of time, parting ways with people who are being helpful just because you think you have better people. It's quite painful, both because, you know, we are— nobody is a sociopath here, and as in most companies, you don't like to, to, to, to, to tell someone who's a perfectly good contributor that they should look for, for another job. And also you're, you're losing on good capacity in the short term to look for amazing capacity down the line. So those are difficult things to do. If you do them consistently, I think you develop a very powerful flywheel.

It sounds like you need kind of a data science type team that is looking at all the inbound and is looking for signals. What are the signals that are most strongly correlated with success? The R-squared is high. And then once you get beyond that, I assume there's a human interview. What are the questions that tease out what you're looking for that maybe aren't obvious?

Yeah, so we're fairly secretive about the details. So I guess you get a similar answer from a quantitative trader. Again, that was my metaphor earlier. But now I can share some of this. There are some obvious signals in people's applications. Their GPA, for example. It's not super strong, but it's helpful. The university graduated from. 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 you know people graduating in other universities, but but not so much stronger. And and 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. But it's still predictive. I mean, all else being equal, someone from Harvard will do a little bit better than someone from a less well-known university. So some of those are probably somewhat obvious. There are many that are not. One I can share, which is, you know, relatively predictive. I was surprised when this came up. We found that if someone is politically active as a teenager, But but CZs to be in their early twenties, that that tends to correlate highly with with with with someone's drive and and entrepreneurial mindset. And and the way we have explained it is which of which at least at Danish funds are highly valued qualities. The way we've explained it is is is that if you are seventeen years old and School is not enough, you want to— you feel like you need to do more. That shows agency, that shows proactivity, that shows a level of not settling for the status quo that's generally healthy. But if you still do that when you're 25, 26, 30, it means it's probably a life mission, which is perfectly fine, but likely incompatible with your job, your career being, you know, a top priority. Your job probably takes a backseat to your political aspirations.

How do you find that signal? Do you ask them that question in an interview? Do you look through their old Instagram? Like, how does that signal even arise in the process?

Thankfully, people think they need to include leadership experiences in their CVs because that gets you a job at, you know, consulting company or something. So most people we find would include something significant in that area if they did it. But in any case, we do ask later in the process, whether it's an interview or written assessments, questions that would very clearly lend themselves to people sharing this sort of thing. And with this, I'll get to the other thing you can do, which is you shouldn't be passive in accepting whatever signals are present in someone's application. You can be very proactive. We find that a lot of the best signals in our case come from the practical tests, the things we do or ask candidates to go through. And so you can elicit signals that way. Interviews are, of all the typical elements in a selection process, at least in our experience, they are the worst predictors. But you can make them decent if you give interviewers extremely precise questions they need to ask and you tell them to ask them exactly in the same way. And then you make sure that the answers are recorded And assessed separately. So what's completely useless pretty much is having someone talk to someone else with essentially no guidelines or just a high-level agenda and then tell you, I like the guy, I didn't like the guy. That's noise pretty much. So if you structure it a lot and you try to separate the actual conducting of the interview from the evaluation of the responses, then it can be somewhat predictive.

Can I tell you about HubSpot unlocked on the sales side? A good process for doing this where we scaled our, you know, inside sales org from 10 to 1,000, where lots of— we're kind of like you. We had a better— it was harder to get into HubSpot than Harvard. So we had lots of inbound, and we would look at all the resumes, and we would look for people who went to a state school. You know, went to University of Vermont, University of Wisconsin. We weren't looking for Harvard and MIT. And we looked for a person who had done a sport, who was athletic and competitive. And we didn't think too much about it. We didn't interview them in a standard way. We just said, if they look kind of like this, let's give them a half an hour. And we give them a half an hour with a person. And what that person would do was set up a role play. So I would be the HubSpot employee, you'd be the potential. I'd set it up and then I'd have you sell to me and I give you 12 minutes to sell to me. So selling me whatever, and I'm hearing, I'm giving you objections. We finish it. Then I would give you feedback, Luca, on how you did. I give you a minute to think about it, and then we'd do the exact same thing again. And if the person absorbed that feedback and did a half-decent job at the, uh, you know, at the pitch, we would do a couple blind references. Boom, we hired them. That actually really ended up scaling for us. We didn't do the normal interviews. That really worked on the sales side because I kind of agree with you. The other thing I wanted to ask you about is just blind references. Like, where is that in your signal?

Yeah, we do that as the very last step. Oh, well, so no, we don't do actually blind references. We do references. We don't do blind references because they're illegal in Italy. So you can't ask. And so we figured, okay, let's just have a method that works across jurisdictions, even though I know in the US you can call people and ask, oh, how was this team member? But we do references. It's the candidate who presents a few names. We try to guide it toward, okay, give me people who had plenty of exposure. We try to get at least one person for at least the couple of biggest experiences someone had, so they— and ideally their manager if possible, but ultimately it's their call. And we structure those interviews with references quite a lot as well, and we find that they can be predictive, but again, you need to be scientific about it. If you leave it to someone picking up the phone and calling, then almost always it's positive. Very rarely do people give you names of people who will criticize them. And so you need to be very specific in your questions and ask to make hard grading decisions. For example, we ask them, okay, of the 20 people you've worked with the most, say something like this, I'm just— would you say this person is the best or top 5? And then you try to ask a few follow-up questions to make sure there's a little bit of substance behind that response. And you find that people who are enthusiastic, often they will tell you, well, it's above average. And you're like, hold on a sec, it sounded like this person was a genius and you're telling me it's maybe Ranked eight out of twenty, which is nice. But you know, so you you can make it predictive, but you need to put in the effort and the structure before you get there.

Okay, I love that advice. I get a lot of blind references when people do that to me. It's I think it's brilliant when they is that the best person you've ever that's ever worked for you? Well, no. And then they say why, and okay, that opens things up. I want to talk about you. I that you're the twentieth CEO I've interviewed. It's been really fun. And honestly, my thesis when I started this podcast was I'm going to figure out kind of the common thread, what everyone's doing, and I'm going to write it down. I'm going to kind of standardize it. The truth is there's not even close to a common thread. Everyone does it differently, and there is no playbook, and the playbooks are changing extra fast right now. In my last 2 interviews are emblematic of it. I interviewed Tarek from Kalshi. And he and his co-founder have, I forget, 200 employees. There's no levels of management. They all report to those 2. And he referred to it in the podcast as management by chaos. My last interview was with Ali Ghodsi from Databricks. And he's got 8 direct reports. It's, you know, very structured. His direct report team, he has 3 meetings a week with his direct reports. He has a QBR. once a quarter, and then he has an offsite strategy session once a quarter. So like polar opposites, both doing extremely well. Where do you fit in that spectrum?

Probably somewhere in between. I think these things are generally like— there's more formal approaches to management. I think they are greatly overestimated in the impact. I think if you You know, in a company's outcome, I think almost all of the outcome depends on essentially your strategy, what people sometimes call product-market fit, but also the moats you have. And, you know, that's overwhelmingly what drives it. I always ask myself if— to me, a business is a good business if it would do well even if management was mediocre, maybe not awful, but mediocre. So that's, you know, that's the first thing. And the second thing that matters to me is talent levels and culture, which culture is really like, you know, How do you make decisions? What matters? What doesn't? What do we value? What do we not value? Then everything else, reporting lines, whether you have OKRs or you keep it fluid and informal, span of control, I'm sure it does matter on the margin, making things a bit better, a bit worse, and I'm sure different solutions would be optimal depending on the people involved because ultimately a manager, a CEO is— A human being. some sort of a leader or should be, and the same strategy, the same approach to working with others depends on the human capital you have. Different people react different, the culture you're trying to foster. But I think that within reason, that doesn't make a huge difference, maybe like a plus-minus 10% kind of impact. So I think you're much better off obsessing over, well, first and foremost, the strategy, but then once that's in place, the quality of the people and the culture you establish. So if the 200-person organization, chaotic, super high— I don't know them, but assuming super high talent density, a culture of business orientation, rationality, hard work, even if a little extra structure theoretically could be helpful, I think the talent and the culture will mostly trump any such—

Structure.

gap or close any such gap and vice versa. Maybe in the other extreme, a little bit more fluidity and flexibility would be ideal, but if you have very good people and a great culture of let's get it done for the benefit of the business, people will not get stuck because there is a little extra structure. So I haven't thought a lot about these things. I'm convinced they're not the most important thing, to be honest, in excelling in business.

Fascinating. When I was the CEO, I tried to get better and evolve as the business scaled, and I got a lot of feedback. And one of the pieces of feedback I got a couple times was, Brian, you're a very good leader and a very bad manager. Are you— where are you on that?

I don't know. You know, I, I, I get a lot of feedback. Um, I don't think anyone kind of rated me on those 2, against those 2 archetypes or job descriptions.

How about a little self-reflection here?

I don't think— yeah, I'm not sure if I'm a good leader or a good manager, to be honest. I generally feel that I'm pretty privileged that I work with very good people and My I tend to be more self-conscious and and question whether I'm I'm doing enough and I'm living up to expectations. So I'm I see I tend to see the how the glass half empty. So my instinctual reaction would be I'm I'm probably not terrible at either. I would be disingenuous if I told you I think I suck. I but I I would probably rate myself something like. Okay at both, but not necessarily amazing. I'm probably a better leader than manager, if I understand what you're hinting at. I think I've generally done okay at setting a vision that made sense and a compelling vision and communicating that reasonably well. If I've succeeded as a leader, it's been mostly through what I would call servant leadership, like just working super hard and helping people as much as I could. I don't think I'm the kind of William Wallace kind of leader, someone making a grand speech and everybody, you know, gets their hearts pounding and everybody, you know, gets to work. But when you work with someone who walks the talk and is in the trenches and does their best, I think you tend to be inspired. So maybe that kind of— I try to be that kind of person. I don't think I'm a great manager. I don't think I'm the best at running one-on-ones or anything like that.

Okay. One of the things I used to say to myself is, actually, I got this quote from Eleanor Roosevelt of all people. I wanted to keep my head in the clouds but my feet on the ground. And by that I meant I wanted to be, okay, a JV William Wallace painting a picture of the future, getting everyone excited about where we're going, looking over the horizon. But feet on the ground, it's like, holy crap, are there a lot of problems and we have to deal with all these freaking problems. And my glass was very half empty, and I spent a lot of times a little negative looking at the problems. Where are you in the Eleanor Roosevelt quote?

I want to give myself a little pat on the shoulder. I think if there's one thing I tend to do reasonably well is being able to see the big picture. So, you know, I guess head in the cloud kind of thing. Maybe I'm not the best at, say, articulating it again with the grand speech, but I think I'm pretty good at, you know, in the substance at understanding what matters. Matters, what doesn't, where the opportunity is, what logically we should be doing and what's just noise. And I think I've historically been very hands-on in the details, in the trenches. I think it's a good quality that you want to have as an entrepreneur and CEO. I don't think it's a— it's not super widespread in the population, but it's quite commonly found, I think, in entrepreneurs and CEOs. And I think it's quite powerful because if you If you don't have the big picture, you can't really set a direction, a strategy that's the winning strategy, unless someone else brings it to you, which is always nice, but you can't count on that happening. Hope is not a strategy, as they say. But if you're not in the details, in the trenches, feet firmly planted on the ground, then I think you're unlikely to be able to inform that big picture properly. You're unlikely to be inspiring to your colleagues. Very few people like working with people who are in an ivory tower, that they don't get their hands dirty. It doesn't really scale. I think it's not good. You're not in a position to assess others, to coach others, because you don't really know anything about the work at some point. So I do believe you need both to be successful and finding some sort of equilibrium. I find it's easier to sequence those activities than trying to run them in parallel. So I try to have times where I'm very much in the clouds thinking, okay, what are the big problems, big opportunities? How should you go about them and be more of an architect? And then Long stretches where I just get into execution mode and I'm, you know, mud head to toe just getting stuff done, you know, blood, sweat, and tears. I think it's quite difficult to be both at the same time, but you can be both in sequence.

Let's talk about coaching for a second. Similar to me, I had never been CEO of a company with thousands of employees in public, and I was figuring out as I went along And sometimes I just didn't feel qualified to coach some of my executives. Do you ever have that feeling? And kind of— and also related to that, so many of the CEOs I'm working with, like, they have a very talented person internally, they're on their way up. Should they bet on that person or find someone who's seen the movie before and has a little bit of experience? Like, that's happening everywhere across Silicon Valley right now. Should we hire the been-there-done-that person, or should we Should you make the person— bet on the person who's on their way up and really hasn't seen anything close to this movie?

So on coaching, I, I'm certainly inadequate as a coach often with people I work with. I think at Bend Instruments we work off the assumption that our managers should always be capable of solving or advising on a solution across all problems that are experienced by their direct reports. We just think that any one person may be able to coach any other person on some things, and they should do so regardless of reporting lines. I think a good manager would generally be someone very smart, a good problem solver, so at least they can provide kind of generalist support. They should be able to— they should be emotionally supportive and ready to get their hands dirty, but ultimately Being someone's manager doesn't mean you're always better positioned to solve a problem for them. There are so many skills needed in a business like yours, like ours, that obviously you need to divide and conquer in any case. I've never been a big fan of— I mean, we do value experience, but I think we value experience a lot less than most people. I believe that, yes, the been there, done that helps, but there are a few big buts. The first one is the world changes pretty fast, so I'm not exactly certain that someone who did something 7 years ago, that still applies all that well. And there is a huge risk that people will be blind as to the new context because they did it that way, and they will just try to paste whatever solution they applied before. So maybe, you know, you buy some good, but you also buy a lot of bad. I'm not sure which of the two is stronger. For a company like Bentleyspoons, also, we have such a, as far as I can tell, distinctive culture that we found that every time we hired someone, almost every time we hired someone very experienced, they struggled to adapt. We're so hands-on, no politics, radically candid, everybody needs to carry their own weight, and it doesn't translate well. Often people who have been successful at large tech companies, they tend to have a different style to leadership, which may very well be optimal at those companies, I don't know, but it's It's not at Bento Spoon. So we also need to account for the cost of that cultural change, which sometimes doesn't even happen, and if it does, it takes a long time. And last but not least, I find that generally people lose motivation as they gain experience. And so you need to consider whether it's better to have someone with 20 years of experience but, I don't know, 6 out of 10 motivation, or someone with 2 years of experience but 10 out of 10 motivation. I find often the latter is better. It depends on the situation. So we're generally, we don't, we're not big on, on experience. We have hired experienced people occasionally, but we prefer to hire—

Has that changed as you've scaled? Have you changed your mind at all on that? Or you're like, actually, no.

No.

Yeah. Interesting. No.

And I may be wrong. Look, uh, we have tried. It's not that we never hired experienced people. We have hired some experienced people with great success. You know, it's not that we, we were completely closed-minded, uh, regarding that, but, um, No, we keep investing in students or new graduates or people with a couple of years of experience where we think that we can really help them mold their skill set and professional culture in the way that we believe will best serve them and the company in the long run. And also, there is a trade-off between talent and experience in a competitive labor market. And experience, we can provide it to you, we just need to be a little bit patient. talent, we can't, and so we focus more on talent than experience. So all considered, we're happy with this. We wouldn't change it necessarily, but we have encountered difficult situations sometimes where maybe we have a 25-year-old lead engineer or something showing up at an acquired company and essentially being the person in charge on our end, and people with 20 years of experience thinking, does this guy even know what he's doing? I think our track record consistently shows, yeah, it does, or she does. But I can see how it's a more difficult sale than if we had a 50-year-old person with 30 years of experience come in and say the same things. It's much easier to assume that person is competent.

You know, I've spoken to a couple of the founders of companies we acquired, and one of them said the person that replaced them was 25, and the other said the person who replaced him was 27. They didn't seem bothered by it, but I thought that was kind of interesting. What I'm curious about is like, let's just say that 25-year-old that takes over, I don't know, Mira or whatever company you're buying, what are you looking for in that person who's going to run that show? Is there a certain quality you're looking for? I know you rotate them around, but let's say it's the first go at it. What are you looking for?

Yeah, and we wouldn't put someone in that position we haven't tested in a smaller version of it, to be clear. So it's generally someone who led a team or a smaller business before. But yes, it could be someone with just 3, 4 years of experience.

Right.

Very, very junior. Well, on a high level, we look for smart and what we call extreme ownership. Being smart for us, I mean, pretty obviously is you learn very quickly and we have evidence of that. And you're capable, consistently capable of high-quality reasoning. So when you propose a solution or you diagnose a problem consistently, what you say or write makes a lot of sense. There's many of all the answers, but your analysis is always rational, accurate, logically sound. We think that works across the board and in almost any position. 2, we want you to have extreme ownership, which means you are absolutely You care tremendously about being or becoming the best in the world at your job, bringing the greatest possible contribution to your team and the company. You're almost fanatical about that. So, when you find an obstacle or you identify a shortcoming in your skill set, you'll be hell-bent on overcoming that. But then, of course, we look for more specific skills, but that's really like— we find that that's 80% of the job. when those are in place in big ways, those qualities, that you're very, very likely to succeed, assuming you are, you know, you can communicate a little bit, you're nice, you're not an asshole, those, you know, hygienic factors. But the core killer features are those 2.

And when it doesn't work, so you put in the 25-year-old to run it and like, I don't know, there's an immune system rejection or they just weren't up to it. What is it that That falls down?

I think when that's happened, very rarely, I can only think of 1 or 2 cases, but when that's happened, I think it's been primarily one of 2 things. One, the person, while very, very good— because it could also be that we misjudged those qualities, but so far it hasn't been because of any such— we haven't seen any such case, at least for our general managers. What we're saying is either the person— we basically, we didn't pay enough attention at a person's ability to lead others, call it communication, a certain level of common sense and empathy. And so they were incredibly smart problem solvers. They moved 100 miles an hour, but they failed to notice when someone was a little bit off. had an issue. They didn't say the right thing at the right time, and that basically created a level of hostility or at least friction that ultimately made them untenable as leaders. The other case was where enough people in the org, for all sorts of reasons, felt more competent. And although this person was great and super nice and empathetic and communicative, these people couldn't get over the fact that, oh, I'm so much more experienced, I cannot take— even if, you know, like, I cannot be led by this person, even if just formally. That's been very rare, but I can remember one such case where that occurred. And look, and there we could do one of two things. We either move or part ways with, you know, these people who reject leadership, or we change the leader. And, you know, it depends on the context which of the two makes more sense.

How do you develop these people? Like, do you actually train them, develop them, coach them, or it's like they're smart, they're going to figure it out, you kind of throw them into it and they, they're, they're good?

Yeah, we have training materials, but broadly I think 90% of, of the outcome depends on you throw them into the deep end of the pool, you know, you give them way more responsibility that seems reasonable, and, uh, and then you surround them with, uh, amazing colleagues We find that we learn primarily by working with amazing people. Almost invariably, some of the people around you will be better than you at some things. And so if you try to emulate those good traits, you'll learn from those. And also, they will suck at some things, and if you notice the weaknesses, you can avoid falling into the same trap yourself. So the level of responsibility and the level of talent around you are the 2 things that we find drive growth the most. Um, but yeah, I mean, a little bit of formal training here and there and, and active coaching certainly adds that 10-20% extra for sure.

I tell you the one thing that helped me on my journey. We did— we decided we're gonna do a 360-degree review for me, which was a good idea. And my co-founder volunteered, which is a strange thing because he's really introverted. And he's like, how do I do this without talking to other Homo sapiens? And so he did a net promoter survey. First question is, on a scale of 1 to 10, how likely are you to recommend Brian as the CEO of HubSpot? And number 2 is, why did you give that number? And then sent it out to like 25 people, the board, customers, employees, and like people wrote friggin novels. I mean, they really wrote long novels. And he spent some time, correlated it, showed me the histogram, very helpful. And then he did something clever like, For each feature, he'd be like, here's a feature, and he would pull out direct quotes on what people said about the feature. So it really hit home to me that, okay, that's a feature. In the first 10 pages, I'm going through the report and I'm like, feature, feature, I got this. I am fantastic at the SEO thing. I have this absolutely nailed. Page 11 is where the bugs started.

That's painful.

And the direct quotes in there, it was incredibly helpful, uh, to, to help me get better. One of my ahas, by the way, was some of the features were bugs. You know, people didn't like that I was really passionate, and sometimes I get really excited about things. And so the first year I tried to fix all my bugs, and then second, third, fourth year, I'm like, I'm gonna pick one or two of the bugs that I'm gonna work on. How do you personally go about getting feedback and getting better, and how do you do that with your folks?

Yeah, so we're big on feedback, a bit like you just described. We have something called radical candor internally. Basically, the idea is you should always tell people when you see something good or bad, as long as you don't share that because you're venting or because you believe there's a chance that they could improve or the team could benefit or the company could benefit.

share.

Don't worry about the accuracy of what you're saying, the wording, whether you hurt feelings. Obviously try to be nice if you can, but that's, you know, secondary to being honest. And so it's— of course we're not perfect, not everybody does it all the time, but we try to have this environment where opinions and observations flow very quickly and abundantly. So that's a very good source of learning.

That would be based on You make everyone do it face-to-face?

Yeah, we try, but our recommendation is to, if it happens in person, say it immediately, even in front of everybody in a meeting. Don't delay, just say it. Again, respectfully, empathetically, but just straight up. If it's something that you notice through asynchronous communications such as on Slack, then you can send them a message or whatever. Like, it's really secondary as long as you do it and you're fully candid. So that helps a lot. And then we have once a year, we have something a little bit like what you described where we give more structured feedback based on a bunch of assessors, not 25, but more like 6 to 10 depending on the person. Additionally, and so that applies to me as well, I try to also once a year identify at least one major point of improvement. I went through exactly the same thing where I had 5 and then I figured Halfway through the year, it's too many. If these are challenging to improve, it's— 5 is too many. So I try to have one per year that I, that I try to, to get a lot better at.

What's your one right now, Luca?

I happen to be someone who— I told you earlier that I don't remember exactly the words I used, but the message I was trying to convey is probably the greatest privilege I feel I have in my life right now, and I've had it for a while, is the quality of the people I get to work with. I don't mean it in a— I really mean it. I really believe it to be the case. And as I appreciate their skills and talents and their contribution tremendously, I'm awful at saying that aloud. I'm very critical of myself too, to be clear. I generally at night when I call it a day, generally I'm disappointed in myself. Okay, so it's not— I'm the same way toward myself as I am to others, maybe more critical of myself, I'd like to think. But so anyway, the point is, even people I hold in the highest esteem, I rarely tell them how amazing they are. And so I decided that I need to be better at telling them how much I appreciate them, again, in a fully honest way. You know, it's not like this is not being hypocritical, just voicing what I know unconsciously but I don't really linger on. So I've tried to do that a lot more. I think it's been half a success, half a failure, but certainly an improvement over past levels.

I had the exact same feedback pretty much every year, and I would— and I'm like, I'm— and there's a saying in some old-school skiing that you should give 5 pieces of positive feedback to every 1 kind of, you know, correction. I was definitely the opposite before you pointed that out.

Let's use all 6 slots for corrections.

It was pretty close to that. And so I worked on that. I got slightly better, and to the point where I would put like a 15-minute slot on Friday afternoon, like give compliments, uh, to force myself to do it. Uh, so I hear you. Most CEOs have that same— a lot of CEOs also get feedback from their teams that their trust circle is just small. They trust 4 people and they run everything through those 4 people and everyone else feels like they're very arm's length. Do you get that?

No, actually I haven't gotten this feedback. We are, we're quite distributed in that way. There's no, we don't even have a, we don't have an executive team or a leadership team. There's no clear, I mean, people could reconstruct it and say, okay, I think whoever leads product should be in there and whoever, but we never, we did have it many years ago. We dropped it 'cause we found the, The precise definition of that group didn't help at all because it would lead to some people being involved in discussions who shouldn't be involved just because they're part of the executive team, and then some people missing in discussions because we needed to have a discussion at the executive team level. So now we're just, okay, you involve whoever needs to be involved no matter, let's say, the title or the standing. Fuck the executive team. We don't need an executive team.

Yeah, interesting. So how is it organized? Like, if you do— let's just say you're doing strategy offsite where you want to think big things and do some navel-gazing. Who's there?

I'll invite people I think can contribute the most or take away the most. Sometimes invite someone who— in general, I'm— and I think this is not just me, but the company— we hate meetings and we hate big meetings. But there are cases where inviting someone who won't contribute to the meeting could still be a good thing if think they can learn something. Inviting someone just so they feel good about themselves is never an option though. It has to be useful. I would try to invite the people who I think could contribute the most. I would have to think about who those people are. Some names come to mind, but also depending on the precise, say, part of the strategy or angle, I would invite different people.

Luca, it doesn't sound like you have an org chart. You're more like Kalshi. There's no I report to Luca.

No, we do, we do actually. It's an algorithm. So we, we have 2— it's basically a matrix organization with functions and teams. Functions being in charge of the how things are done, you know, the, the hard skills. I'm oversimplifying. And teams being in charge of what we do. So like the objectives, what we're trying to accomplish to make Bennis Spoonstorm successful. And then every person has a functional lead and a Team lead, and it all flows to a single node, which currently would be me, is me. But, you know, it's basically whoever the CEO is at that point in time. So there is a pretty specific formal org, and we use it to automate a lot of stuff. But we remind people that it's only useful to the extent that it's useful. It's in no way they should feel limited by it or It's also quite fluid. We've had many cases where someone is a lead for a while and then goes back to being an individual contributor.

Yeah. You said something interesting, whoever's the CEO at that point in time. I had a chance to chat with Jensen Huang a year ago, and he's got a unique style where he's got 60 direct reports. And similar to you, he does give direct feedback, positive and negative, in public. He doesn't do one-on-ones. And I asked him, like, when, if and when you ever retire, will the person who replaces you inherit that and use that system? And he said, oh no, hell no. This is kind of built for me specifically. It's the way I work. Somebody else should come in and completely rewrite it. You said as long as you're CEO, what did you mean by that? And do you agree with Jensen?

Yeah, absolutely. I mean, I look, as I said earlier, it's almost like if you, if you're coaching or running a sports team. I think you'd be a fool saying, well, the way to win is this and that, and that's the only way to win, or the best way to win, no matter the people you have on the team, right? So the players. And so yes, I mean, if and when we change our CEO, I would encourage her or him to see whether any change is warranted. I mean, they don't have to change anything if they like it the way it is, but equally they should feel free to change things if they Okay.

Just from talking to you, you're a very first principles person. It feels like kind of a big skepticism of conventional wisdom. I was sort of the same way back in the day. What is conventional wisdom right about that you do that maybe you were like, this is wrong, we're gonna rethink it, but, ah, let's spun our wheels, we should just do what everybody else does?

You know, we've tried to build this company from the ground up. Yeah, questioning everything, not because we thought we knew better, but because we believed that— so we had this ambition of building one of the most successful companies of all time, knowing full well that we would very likely not succeed. But we thought that if that was how high the bar was going to be, the only chance we had to achieve that level of ambition was to do something differently. If you emulate what everybody else is doing, you're guaranteed to be approximately mediocre. I mean, a little bit better, a little bit worse. And so we never even bothered understanding what conventional wisdom was. We just tried to, for each important problem, we just tried to find the optimal solution given our particular context and vision. So yeah, I don't know. I'm sure there are plenty of things in conventional wisdom that make sense. I don't know, like being nice to people. I guess that I agree.

One thing that's kind of interesting that people ask me about all the time is AI-native companies seem to be running a little bit different than companies founded before ChatGPT. You're kind of famous for simplifying things, so I want to hear about that. A lot of people are just doing a lot of stuff at once. Like in year 2, they're going international. In year 3, they're starting— they're acquiring a business. Like things are just moving so much faster. Stuff that took HubSpot 8 years, people are doing in the first couple years. And then HubSpot, I was a big simplification guy. I even got myself a no hat.

Oh, that's awesome.

I go to a big meeting, and good thing about HubSpot, everyone's got great ideas. We should do this, we should do this. And we would— I would always— we're definitely a company that was much more likely to die of overeating than starvation. And so I bought this for everyone, the no hat. Things seem to be changing. I've noticed these companies, like, they're wearing yes hats and they're getting a lot done and they're pulling it off. What's your reaction to that?

It's certainly a winning strategy to be a radical simplifier.

Yeah.

Because complexity means costs, means being slower, being worse, generally speaking. But there's no— but the perfect balance depends on your particular context. Obviously, if you were to build a business, let's say, in the 1800s with no technology, no internet, probably a labor market that was way less efficient, clearly you should, at the time, you should have chosen to do a lot less than would have been reasonable in the 1990s. And so if we took modern technology and AI and what we've learned, I'm not surprised we can do more given the same, let's say, resources. Than we could in the past. But I think as a general rule, leaning less rather than more is a very, very useful thing even in this day and age. Particularly because I think the fact that some of these companies are pulling it off, it doesn't mean that they've chosen the right path. We don't know how well they would have done had they done 3 rather than 4 things and dropping the smallest, least important one. Maybe the the biggest, most important one would have been 35% better and bigger, and maybe it's a net positive. So, you know, we're big on— we have a value actually, or a quality that we call relentless simplification. We measure ourselves against and we demand—

How do you measure yourself? That's fascinating.

Yeah, measure, I meant like we assess ourselves against. It's not Frankly, it's not very quantifiable, but we want people to every time— so the rule goes like this. Every time someone recommends that we should add complexity, whether it's a step in a process, a feature, a team, headcount to a team, you name it, any element of the system, the burden of proof is on those making that recommendation. Those who believe it's a bad idea don't need to bother bringing any proof. They're fine. And so if we choose to go forward, there needs to be very clear proof that it makes sense, or it has to be reversible, and the people who drive the initiative need to then determine whether it was a clear success and otherwise revert it pretty quickly. The other part of the rule is that we need to stay alert and question complexity that's been there for a while, because we become blind to it as human beings. And anyone who does that should always be applauded, even if it's a nuisance that, oh my goodness, again we're questioning this process or or this policy. But yes, if you have better technology, AI is amazing. And as someone who failed with an AI startup in 2010— I mean, I didn't fail in 2010. We started in 2010, failed in 2013. Clearly, I believe in the power of technology. I'm not surprised we can do a lot more today than we could 20 years ago.

You decided to base the company in Milan. We were based in Boston. I felt like there were some big pluses and big minuses to being in Boston. A lot of people think just you can't create a great company out of Silicon Valley. That's obviously not me. What is your— why did you do Milan? Uh, what are the pluses and minuses of building outside the Valley? Do you, do you perennially feel like you're like not a cool kid because you're in Milan?

You know, I actually couldn't care less about coolness. Someone who buys a company like AOL cannot possibly care about coolness. You know, if anything, or maybe I do care, but I think that the uncool is cool. You choose, but it's one or the other. I'm not certain. Um, um, what are the pluses and what are the minuses?

Like, my, my, my thesis is San Francisco is the best place in the world to start a company, but holy crap, is it hard to scale there. It's so expensive that there's not a lot of loyalty. It's just darn hard to scale. What's your thesis on it?

Yeah, I mean, look, I haven't built a company in San Francisco, so I can't really tell for sure. It does strike me as a place— if you have the coolest, highest potential, best resourced company on the planet, I think that's where you want to build it. You can probably absorb the most talent the fastest there than anywhere else. If you are more of a middling project, and by the way, middling by Silicon Valley standards is a pretty high bar, then it may be harder there than in many other locations. In any case, we chose Italy, Milan. Today we're an international company. We're hiring way more people outside of Italy than in Italy at this point, but, you know, including now more and more in the States. I think we'll probably open offices there in the next year. But yes, we started it in Milan, Italy on purpose. We actually were in Denmark with my co-founders where we had completed our engineering studies and launched and then shut down our AI startup. We had 2 main reasons. One was extremely commercial and selfish. Basically what you described. We thought Italy, 60 million people, excellent education, relatively few amazing companies, certainly very few if any up-and-coming tech companies, could be a win-win for us and the talent. We brought a lot of ambition. We thought an idea that made a lot of sense, a project that we thought was exciting. And so a lot of people who would otherwise be relegated to joining an inferior business or moving abroad, but they had their family there, they loved it there, could actually stay and have everything, both an exciting job and stay with their families. And so we thought we'd be able to build a better team basically for the same dollars or a an equally good team for cheaper, which I think has proven to be true and a significant advantage. The other reason was more missionary. I believed, and I think my co-founders did too, and we certainly believe so today, that the world in general is a better place if knowledge, opportunity, wealth are a little bit better distributed. I think it's totally fine and probably even a good thing that you have one or two hubs like Silicon Valley that are one notch above. I think the world probably needs that to achieve maximum prosperity. But I think if the gap becomes immense and basically everything that matters happens in one or two places, it's a really big problem, including for the people who live in those places in the long run. And so we wanted to do our part, you know, 1%, make a 1% change by showing you can build a world-beating company massive ambitions in an unlikely place, Italy being one of many, clearly. But, you know, we are Italian. It was easy. We understood the culture better. So that was it. And we don't regret it. I think it was a good move. You can never A/B test life. So I cannot definitively say that we would have done less well had we started in Silicon Valley. But I do suspect that this has been a better choice for us.

My last Question. So I interviewed 3 of the founders— didn't interview, I called 3 of the founders of companies you acquired, and all 3 of them said the same thing. They said you are exceptionally high integrity. I don't hear that a lot about CEOs necessarily, and I don't hear that a lot in preparation for these calls. Are there some principles around that you live by? And what are they, and what can we borrow from you?

Oh, I don't know that, you know, it's, it's up to you to determine whether it's worth borrowing, but, um, um, it's not a, a point of expedience. It's a, it's a moral point. So that morality is very personal. I, um, at some point early in my adult life, I decided that I never— so, I mean, I can be transparent about it. It's not So in my early, early 20s, I cheated on my girlfriend at the time, and, and I was so ashamed. Sometimes I think making a big mistake is a better way of learning than rationalizing how you should conduct yourself. I was so ashamed of myself that I made a promise to myself to never lie, but also never omit something important that people should know. Even if it's to my detriment. And so I've tried to extend that to all aspects of my life. I suspect that although it's sometimes costly in the short run, it tends to pay off in the long run. I'm very glad, you know, you just made my day sharing that feedback. I didn't know you talked to them, but I'm glad you did, and I'm glad they said that over, you know, praising my looks or something, because— No, because it really matters. No, jokes aside, it really matters to me. It's a It's a life mission I set for myself to be that kind of person you can trust is telling you things as they are, at least as I think they are. And yeah, I think it does pay off in the long run when you become known as someone who can be trusted. It's easier to have a good life, make good friends and relationships that last, that matter, do business. People will come to you and say, okay, We're looking to sell. We believe you guys. Your word means something. And so, but it's not a— it doesn't come from a place of seeking expediency. It's really just a moral point for me. And it's very subjective in that regard.

I love that. And we'll leave it there. Congratulations on building something really special. Good luck to you on your journey to a trillion dollars, my friend.

We'll do our best. Thank you. It's been a pleasure. Thank you for having me, Brian.

Okay. I thought Luca was really interesting. His company's doing really well and the guy beats to his own drummer. Just to stick on the ending there. I mean, for CEOs, integrity is really an underrated thing. You are what your word is. You've got a great reputation probably, but you do one stupid thing and you can kind of have that crash down. So I like that. I like that he's like, I never lie and I never omit important info. And he could have just said that and I'd be like, that's a bunch of BS. But I had 3 of the companies he acquired kind of say the same thing. It reminds me of my last interview with Ali Ghodsi from Databricks, where he's like, the worst thing you can be as a CEO is conflict averse. And like, if you're never going to omit important information when talking to someone, you're going to have conflict. And so that just sort of reinforces that in my mind. Other things I really thought were unique was like the way he does hiring is really unique along a lot of different levels. I mean, he's very conscious about the top of his funnel and how he brings people in. He's very conscious about his employee brand. This does rhyme with HubSpot. We, we had a woman named Katie Burke who, who she was a marketer actually that we moved in to run HR, and she was excellent at it. And she treated it like marketing, like how do we, how do we, how do we create a flywheel? How do we pull people in and create a real employee brand? And now she's the COO actually at Harvey. But I think that's really important for scaling companies, create a hiring brand. Getting very good at hiring, I think, is important. He's got a whole darn data science team looking at hundreds or thousands of signals, trying to find the right candidates. And sounds like he does lots of interesting things in that process. One of the least interesting things it sounds like he does is the interview itself. I kind of agree with that. Like when I interview, everyone's good at being interviewed now. And so I discount that a little bit relative to other signals. So I thought that was pretty interesting. I mean, he's pretty obsessive on talent. He said it on this pod. I've heard him say it other times, like, you just can't drop the bar. And as companies scale, they inevitably do drop the bar. And it sounds like he really hasn't, and he's stuck on that. And it causes a lot of suffering and a lot of people working very long hours. But he sticks with that. And, you know, he weighed in on the age-old battle that I hear from CEOs all the time. Should I hire for experience or slope? And he's at a pretty big scale and he's still like full-on slope over experience. I think his management team's probably, other than his founders, are all in their 20s and have high slope and it's working for him. I'm not saying that's the answer. I think for some people experience matters. He also Buys a lot of companies in the in like the PLG type sales motion where you know it's not necessarily enterprise sales or maybe some experience might be useful, but that's where he comes in on that. He talks so much about team, team, team, but then at one point he's like actually you can have a mediocre team if your strategy is really good, which I thought hurt my head a little bit. And then he also talked about when he buys a company is it more his picking or his operating? So operating. You know, he's a really good operator. I think the reality is you have to be really good at all of that stuff. You need to have a really compelling strategy, and that's unique relative to your competitors and is compelling to your potential customers. You need to be an amazing operator, and you need to have an amazing team. There's not really any shortcut on any of that stuff. Anyway, that's Luca. I thought he was really interesting and smart, and I hope you liked it. Thank you.