Revenue Per Employee Is Skyrocketing

Andreessen Horowitz, right? My new best friend, you know, Marc Andreessen, you know, plus—

Yeah, he follows you.

Congratulations. But he follows 28,000 people. Is it really 28,000 people? 28,000 people, yeah. So ARR per FTE has skyrocketed, meaning annual revenue, recurring revenue per full-time employee has skyrocketed, right? So the graph that we're looking right now, the charts that we're looking at is one, you look at ARR FTE by percentile, okay? So I'd recommend that if you're watching this, yeah, you probably should be watching this. But when you look at, you know, 2018, okay, if you are a 90th percentile company, meaning you're like top 10%, your ARR per FTE was about close to $400K, which is already really high, okay? Then you go through the years, 2019, it goes down, 2020, it goes down, right? It's closer to $200K or so. And in 2023, okay, guess what? 2022, I think ChatGPT comes out, right? 2023, it goes up to $400K, 2024 goes up above $400K, and then now at 2025, it's Closer to about $750K or so, right? And then you look at the general sizes, let's not even pay attention to that. But the point is, if you're a top 10% company, the ARR per FT is going up and same thing with top 75%, right? So sorry, top 25%, 75th percentile, right? So closer to $400K.

So it's kind of crazy. It's kind of crazy. You need less people to get stuff done. I'm assuming they're mainly talking about software companies.

Yeah. poker game earlier this week and with a few entrepreneurs. And one of the entrepreneurs was like, I thought the stuff last year where people say people are gonna lose their jobs, I thought that was overblown. But him and his spouse, they are on Claude Code all the time on their couch. They didn't watch Netflix anymore. So they're now in a throuple, okay? 'Cause Claude Code is in there.

They're now on a what?

Throuple, throuple, couple, throuple. So you have 3 people in a relationship, throuple.

Oh, 'cause Claude is the third one.

Yeah, yeah, yeah, yeah, yeah. So, but he's like, oh, I can see it now. 'Cause he's like—

I'm like getting confused on this one, Noah.

Well, he gets it. He got it immediately. So, but my point is—

I wonder why, Noah.

So my point is like the people that were kind of naysayers kind of seeing now, he's like, oh, like some of these people like have moved on. He's like, oh, I don't need to replace these people, right? So my point of that is like, okay, 90th percentile are doing $700K revenue per employee. I think we're going to see it go higher and higher over time. And that's both, this is why when I started the year, I came in both really angry, but also really excited, right? Really excited where it's like, oh, I'm going to help, you know, help my team get better at this stuff, right? But on the other side, the anger piece is like, damn, like we're so screwed if we don't get on top of this, right? So it's like a mix of both. It's weird. You're a father, you would know. Like I kind of, I like, you want to protect them, but at the same time, like you're scared for them. So yeah. So what do you think about the FTE skyrocketing?

You mean the revenue per FTE skyrocketing?

Yes.

Yeah, I think it's a glimpse of the future. I think you're going to see it for more industries than just software or tech businesses that have recurring revenue. And it makes me as a father really question the education that my kid is going to get because if they just go through the traditional ways, I don't think they'll be needed into corporations. Corporations will just remove them.

Do you know?

Yes. Or not even hire them, but you get what I mean.

But do you know back in the day, like long time ago, how kids jumped from 50th percentile to 99th percentile when it came to education?

Parents left them on their own and let them figure things out?

No, dude, that's what our parents did. I don't know about you. I don't—

Yeah, that's what my parents did.

Okay, maybe it did turn out well for us, I guess. But it's one-on-one tutoring because back in the day, people couldn't afford one-on-one tutoring, but now everyone's going to be able to afford one-on-one tutoring. You know what I mean?

So you're saying back in the day, they did one-on-one tutoring to really get their kids—

Yeah. Like you think about like the aristocrats back in the day, or even like when we were growing up, let's say even the '30s, the '50s, the '80s, right? That's when we were growing up. But I think a lot of this stuff is much more accessible now. And, you know, I don't wanna get into kind of philosophies on the future here, but I think everyone's gonna be okay in the long term. Because if you think about it, right, again, this water bottle cost me $40. I think it's gonna get, the robots are gonna be making it. I think it's gonna deflate to like, you know, $4 or so, and then the $1 or so. So everything's gonna become cheaper, and then there's gonna be a level of universal, you know, basic income for everyone. So I think everyone's gonna be okay.

Yeah, so my son was at a playdate, Less than a week ago, it was last weekend. So we're almost—

Playdate with a bunch of kids?

One-on-one. So it was another kid and them. It could be with a bunch of kids, but this playdate was just with another kid. So this other kid is a little geeky and nerdy, and my son is as well. And they got along so well. Randomly, they started talking. One started talking about optical illusions. The other one—

How old's your son again?

My son's 4. So the other kid's same age. And then My son's not into optical illusions, so he's learning about them. This is cool. So then he starts talking to the other person about animals and facts and, you know—

Blue whales.

Blue whales or how fast they are. You know, like if I ask my son what's the bite force of a blue whale, he's like, the blue whale doesn't have a bite force. It's not like a shark.

So he called you an idiot.

He's like, yeah, pretty much. He's like, it just opens its mouth and then, you know, krill and other types of—

We didn't know any of this stuff when we were 4 years old.

Yeah. And then both the kids started talking about math. And then their love for math. So they're like, do you know what the square root of 64 is? It's not hard for an adult to know this is easy, but you're talking about 4-year-olds.

4-year-olds, I didn't know that.

Yeah, I didn't know that at 4. So they both knew the answer. Then they were talking about other math things like division, multiplication. My son, I don't know the answer to it, but he's like, do you know what 1 plus 2 plus 3 plus 4 plus 5 plus 6 plus 7 plus 8 plus 9 plus 10? And then he's like, do you know 1 times 2 times— and he's going with this, right? And the other kid, knows a lot of this stuff, but a lot of this is enabled because you could, I can't say AI, but the reality is Eric and I didn't grow up in a privileged household. We grew up in a privileged household when it comes to love, but not financial, right? So our parents couldn't provide a lot.

Yeah. So I would say our parents were middle class, right? And it was your mom, was your mom driving a lot of it?

Yes, but my parents weren't middle class when I was younger. They were middle class when I was like high school or like later.

Okay, so we're the same.

We're the same.

Yeah.

So, but my kids grew up in a very different world. So they have chess people that come every single week.

Let's just say they're privileged.

Yeah, they're privileged. My kids are financially privileged, at least. We have chess tutors, one-on-one baseball coaches to make them better, one-on-one gymnastic coaches.

One-on-one Brazilian jiu-jitsu.

One-on-one Brazilian jiu-jitsu.

Yeah, every day.

He just got his gray belt yesterday.

What level is gray belt? Is that his second, third?

Yes.

Okay, that's great.

Kids have different belts. Yeah, yeah, yeah.

Gracie jiu-jitsu.

Yeah.

So, uh, I think to get a gray belt, it's like 40 or 50 classes.

Yeah. That's awesome.

That's a lot for a kid.

Yeah.

Um, so they have everything, one-on-one tutors if they want to learn more, read more, talk about, You know, stats and data, dude, we take them to the museum. I think it was in Pasadena or by USC where you can see Space Shuttle Endeavour. I think, was that Pasadena? I forgot which part of LA it is.

JPL is Pasadena. Yeah. Right. So it's just like, they're able to get the one-on-one stuff.

But the reason I bring this up is I totally agree with you in which if people had one-on-one help and it's adapted to what they love and their knowledge of, or what they love and are passionate about, they're going to learn so much better and are going to do, uh, they're going to excel in it. And same with marketing. If you look at you and I, we were connecting with other marketers who are amazing that were doing this stuff that we're doing, but before us in their version of it for their time, because the channels are different. And we learned a lot from those people. It's like one-on-one training and education. And I do believe it's one of the best ways to learn. And AI has now enabled it where a lot of people have access to this.

I honestly think, so watch, then we can move on from this, but I think I wouldn't be surprised if your son or your daughter, like, son starts a business by age 6, because I do think with all the AI stuff now, like, 'cause at age 9 I already had a website like selling MP3s, right? And I was like reviewing MP3s, right? Had I not gotten involved with gaming, I probably would've been all in on business starting at age 9. I just didn't have the guidance and I didn't know how to double down on that, right? You started at age 14 or so, right?

Yeah, 15, I think.

15, yeah.

But you were selling CDs to start with, right? And so if we had all this stuff, probably age 6 or 7, we probably would've been going already.

My son has been trying to start a business now for 2 to 3 months. He actually has a really good idea. There you go. My wife will kill me if I say it, so I won't, but it is actually a really good idea. I was shocked that he came up with it.

Is it a rated X idea?

No, no, it's not rated X.

The way you're saying it is like such a—

It's a good idea. It's related to snacks.

Okay.

Okay, so, but outside of that, he's obsessed with money. So he's counting money.

Where do you learn that from?

Yeah, no, but it's gone too far. Every day, I need $20 from your wallet.

That's a reflection of you.

And then he counts and then he makes you count his money with him and then all the quarters. And it's like, it just takes forever. And every day he negotiates. I got a gray belt. And before this class starts, if I get the gray belt, are you going to give me at least $100?

No.

$100? He's like, okay, $50. If you give me $50, I'll try really, really hard. I'm like, the gray belt, you want the gray belt, but don't you want to be proud of me? If you want to be proud of me, you wouldn't want me to get it. So what are you going to give me? So like he's negotiating. I eventually convinced him to do it for $20. He gets another $20 from his sister. And then after he gets the $20, he's just like, you're not going to match her? I'm like, I already gave you money. He's like, you can match more.

I like that.

It's never-ending. So then he's just like, he's like, daddy, I'm going to create a business so I can make more money faster because you don't give me enough.

I like that. I like that. Whatever the motivation is.

So he makes them do chores to make money. But the problem with the chores is he doesn't make enough money from the chores. He's like, this is too slow. I need a business.

I like that. I like that. So mark my words, I wouldn't be surprised in the next, you know, 1 or 2 years or so. If you're in B2B, here's the deal. LinkedIn account-based marketing sucks, but it doesn't have to. With Carrot, it allows you to create personalized ads towards your customers and also personalized landing pages that align with the ads. So you're going to have higher conversions and influence pipeline reporting to prove that your ABM works. So if you want to learn more, just go to carrot.ai and you can join the waitlist. Again, it's karrot.ai, and we'll see you on the other side. But this actually brings me to my next point here. Task-driven white-collar work is going to zero. So when we say white-collar work, we mean that you're sitting on a computer, right? I believe that we're going to be doing a lot less tasks. We kind of touched upon this a little earlier, but I have this example over here. This is Typefully, right? This is the little Twitter app. And basically they have these AI agents that will write these tweets for you and manage your social. But earlier I gave you the kind of, you know, the programmatic SEO example, the copywriting example. If it's already a seven out of ten, it's just going to get. Ah yeah.

To be rich.

That sounds like an Indian person.

Very rich.

Is it Indian person?

Sounds like Indian person.

Ideas. Fifty ideas. Zero investment. No risk. No risk. No risk. No hard work. No hard work. Saturday Sunday off. World tour included. Shark Tank friendly ideas.

Anyway, I didn't mean to go to that, but this what I was just showing on the screen was Cloud Code kind of working with Typefully, but. I do believe that strategic work, and guess what? Watch, Neil, imagine if I worked for your company and I hated the work that I was doing. So imagine I was a paid media manager right now. I don't like managing paid ads, right? I'd rather just, maybe I like planting flowers or something like that. Guess what? You can do that now, right?

Yeah.

Long-term, 'cause the, and you can become really good at it. Maybe you know everything about gardens, maybe you're the best strategic thinker when it comes to gardening, but you're just good, but you don't give a crap about the paid media work, right? So I think it's going to put, most people in the right spot. But I think a lot of this stuff right now, like the way Jensen from NVIDIA talked about it, it's like, you know, we don't want our engineers to be coding all the time. We want them to be thinking about higher leverage stuff. Same thing with our marketers. We don't want them to be pushing a bunch of buttons. Our purpose as our companies is to help our companies, our customers make more money by getting more customers.

So back in the day when you used to only focus on marketing, and I'll share my answer after yours, when you just mainly focus on marketing, Out of an 8-hour day, I know you work more than 8 hours and I do too, but let's just use simple math. Assume our workday was 8 hours. How many hours did you actually spend on the computer doing marketing-related stuff?

And when we were like 25?

Sure.

Okay, so let me think about this. So when I was working at that education company, that time I was working 7 days a week. I was like a lot of my time, I would say over 50%, 60%, 70% on the computer? 50%, 60% of my time doing marketing.

Yeah. So I remember when I started, when I was 16-ish and back in the day, technology wasn't as great as it is today, which is obvious. I was probably spending like 85%, 90% of my time doing the actual tasks and work on a computer. Fast forward in the 20s, of course, scaling, hiring more people. I would say that it was probably somewhere around 50%, 60%.

Yeah. So you're starting, you're saying in the beginning it was 85%.

Yeah.

85, easily 85%.

Yeah, because at 25 I already had a team under me.

Uh-huh.

Yeah, so.

And then at that point, call it in my mid-20s, I would say at least 50, 60% of my time was on a computer doing just work. And now if I fast forward to today, for at least my marketing-related activities, I probably spend less than 10% of my time on the computer.

Yeah, and I'm thinking about it like, because I consider this a marketing activity, right? What we're doing. And so it's—

Recording content, this.

So, okay, if you think about it—

Creating partnerships, but some of that, you know, even with partnerships, you can have the AI help create lists. Like even though I told you I do a lot of this stuff manually when it comes to partnerships, I am having AI scrape who I'm connected with on places like LinkedIn that are large companies and where we have a lot of mutual friends. So I'm still having AI help me. It's just, I am doing some stuff manual, but before I would've had to do that and actually go through LinkedIn manually and do it all myself.

So let's say right now, give or take, we're working, you know, 60, 70 hours, you know, sometimes 80 or something like that. Would that be fair to say?

Uh, 60?

For me? Yeah. 60, 70.

I don't know how many hours I work.

I mean, we're thinking about it all the time, but yeah.

So I, I don't work the same amount of hours I used to. I know I work way more than 40. Let's go with 60.

Okay.

So 60, 'cause I work 7 days a week.

So then, uh, yeah, 12 hours a day, whatever. But anyway, it's hard to calculate this because we're thinking about work all the time. But so 10% would be 6 hours, right? Which seems about right. So let's just say we're working 60, 70 hours and I'm like thinking about it right now. I'm like, yeah, it's about the same. But the thing, I think the takeaway from this too is as you continue to advance in your career too, if you're doing something that you love, you're going to be able to work on higher leverage things. And every day you should be thinking about what's the highest leverage thing I can do today? Just one thing today to get me closer to my goals. That's what we're getting at. Because eventually you're going to have a team around you and then you can focus on what? You can focus on doing deals, you can focus on hiring amazing people. Yeah. It shouldn't be you thinking about doing all the time. And that's what we're going into with all this stuff because these things are going to do the work for you.

Dude, I just started doing it in my head. So I work, if I exclude the time I'm spending with kids and family, I work roughly, and I'm excluding the time I'm on a plane because I have nothing to do other than work. But on a normal day, I'm working 9 to 10 hours Monday through Friday. That's after adding back kid time and family time, right? And eating and all this stuff. On the weekends, I probably work 6 hours on Saturday and 5 to 6 on Sunday. Wow.

I didn't— I thought you would work less with kids on the Saturday and Sunday. That's a lot.

Yeah, because if I keep myself busy, I had to do less stuff. I love my kids and I love my family, but I'm not the type of dad— I'll throw a ball with my son and play baseball like I did that this morning. Indoors, probably not the best idea. I don't care if he hits a wall or breaks something, but he's having fun. Now I can always repair the wall, but the memory I'm going to get doing that with my kid is worth more than the wall.

Wow.

Somebody quote that.

Somebody clip that. Right. So, but on the, I'm not the guy who wants to be playing with my kids for 8 hours a day. I just can't do that. Like on the weekend, I'll take them for bike rides and I'll chase them around on the bike or I'll go to their baseball games or whatever other sports they have or do swimming with them and jump in a pool. But I like working because it keeps me going and I'm so passionate about it. I can't give it up.

I don't think you're— I think 3 to 6 hours a week, a day on the weekends is great for the kid. I don't think they want all your time.

Like, I'm— Oh no, they would take all my time.

Well, but like, think about us growing up. I don't think we were spending all that time with our parents. Like they've had boundaries.

No, a different life.

Yeah.

When we were growing up as kids, we would just go play in the front yard, right? Or outside. And you would just come home without a clock when it's dinnertime.

You agree with this? Is that your life? Mostly. Yeah.

Yeah. Same here. Kids do not do that in today's world. Go ask anyone who has kids. They don't let their kids just go play and then come back at nighttime.

Oh, you have rich kids?

No, even non-rich kids don't know. Doesn't happen. And then B, when kids go play with other kids, parents are usually there supervising. Yeah, we didn't do that stuff when we were young. Yeah, you just— if you're 5 years old, just go out.

We did always have a, a parent there, but you did?

I did not.

Yeah, we did. Yeah, maybe it's the Asian thing. Um, but okay, check this out. So let me This is the third piece to tie this in, right? So we just talked about how revenue per employee is skyrocketing. We also talked about how task-driven white-collar work is going to zero. All right, bye.

Take care.