Secretary Problem in Small/Medium Business Operations | Lazy Leverage Podcast

To the number one small business operations podcast in the entire world. This is Lazy Leverage with John Matzner, and I'm Peter Lohmann. How are you today, John?

I'm well. How are you, Mr. Lohmann?

Dude, we get some really nice feedback about this show, by the way. I've seen like I peek around on Twitter and stuff and people are like, I love the show. Like I hear people say really nice things.

You're back on Twitter.

I jump in there like once a week to select a tweet for my newsletter.

What, what I would say is it, it's reaching the exact people that I like. Like there's somebody who we know, I won't say who it is, who I talked to an hour yesterday, who's doing our vertical communities thing with a private equity company.

Oh, wow.

Like we'll talk about that separately. You know who this guy is and he's smart as shit and he's awesome and he's cool. And I'm like, oh yeah. So, and he loves, like, he loves Lazy Leverage. So I like it. It like, it attracts my people. It's not gonna be like make your first $10,000 with passive income, which is gonna get a million downloads. But the 11 people who I actually care about are going to listen.

So Hermosi says the future of social is live, by the way. So we're ahead of the, we're ahead of the curve here with a lot.

I mean, if he says it, it's got to be true, right?

I think so. I already got my Hermosi reference in too, right at the top of the show. All right, so we're gonna be talking about the traveling— not the traveling secretary problem, what am I mixing up there— the secretary problem, uh, as it's colloquially known. Which is basically, how do you—

well, let's start with why it matters.

Okay, why does what matter?

Why does this— why does— why should somebody pay attention to what the secretary problem is and the solution to the secretary problem? Why should people care about what—

yeah, so basically, if you're trying to hire somebody, how do you know when you should, quote, settle for a hire? Like, in other words, how do you know when you've seen enough candidates that you have a benchmark of quality that you can use to make an intelligent hiring decision.

What other forms other than hiring does the Secretary Problem apply to?

Uh, selecting a wife.

I'm asking you a rhetorical question. Wait, house hunting.

House hunting.

Which house should we move into or apartment to move into? Um, uh, finding a deal on a car, finding a deal on a car, getting quotes for home improvement.

Yep.

Repair work. And, uh, you know, I've never bought a roof before. How do I know I'm not getting screwed?

You know, it actually probably works on the other side of the hiring table as well. It probably works for employees, right? They should do so many interviews and get so many offers and then make a decision on which offer to take, right? Wouldn't that work the other way just the same?

Yeah, yeah. It's, it's how to make a, a data-backed decision with incomplete information in a systematic way.

Exactly. Data-backed decision with incomplete information, which is, which is small business operations, right? I mean, your life as a business leader is making decisions with incomplete information. Anytime you can pull data into that is going to help you.

Or method, essentially, right? Like, really, it's, it's method, right? And We're going to put some big glaring caveats at the end of this, both of which have an impact on the core flow. But do you want to lay through, lay out what it is and the book answer? And we'll discuss that and then talk about kind of like these, um, complicating factors, or do you like, how do you want to do that?

Well, yeah. So the book answer, and you can look this up on Wikipedia, the secretary problem. The book answer says, uh, you should interview 37% of the pool and then hire the next person you interview who is better than everyone who came before.

Better than the top person from the first third.

Exactly right. Yep. And so if you, in this like made-up perfect scenario, if you knew there was 100 candidates, you should Go through the full interview process, but do not hire the first 37. And you're kind of making an assumption that after you hire them and a couple days has passed, they're no longer available. Once you've done that, continue interviewing, but now hold in your mind who is the best person of that first 37, and now hire the next person who comes along who's better than any of those, assuming none of those were available.

So I want to give a couple examples here, and I was like, oh man, I'm glad I just like searched this real quick. Okay. This is also called the ideal stopping problem.

Okay.

Or solution, right? The ideal stopping. Here are some examples. We talked about employees already. We talked about house and apartment coming. I'm going to have a couple, couple others. The marriage problem.

Yeah. I said you have a— picking a wife.

Estimated window of time from 18 to 40 during which you should plan to date. The theory suggests use the first 37% of that time until roughly the age of 26 to establish your preferences. And then the next person who is better than all the previous partners partners is the one.

So the time domain really makes this much more realistic. And gave you—

give you a couple other ones that are great.

Yeah.

Selling a house or a car. When you receive a series of offers, you face the decision of whether to accept the current bid or wait for a higher one. Optimal stopping helps determine the best time to stop waiting and accept an offer.

So why is it 37%, do you think? Is something about the standard deviation or whatever?

Math. Yeah, it's, it's some mathy math thing, right?

Some normal distribution thing.

Parking spot selection. When driving down a street towards a destination, you must decide whether to take an available spot further away or risk going further in hopes of finding a closer one.

You pull that out when your wife's in heels. You're like, well, technically we haven't passed 37% of the— just pull up and let me out.

Last one. I like this one too, because this applies not just to software but other things. Product or software releases. Companies decide when to stop debugging a new software product and release it to the public using similar principles to balance the cost of delays against the risk of bugs.

Interesting.

So I just want to broaden this beyond just, you know, beyond just, oh, it's interviewing candidates at Sagan or some shit like that, right? This is a widely applicable economic theory. So put in one sentence, it's don't do anything for the first 37% and then find the best one. And then the next person you talk to who is as good or better than that one is who you should hire right away. And that is a mathematically optimized decision.

Yeah, and I think it's important that you distinguish between what is the limiting factor here. Is it time or is it a quantity? Like, if you know there's only 25 houses on the market, yes, then you should go tour 37% of those and then make your decision.

Yes.

Or on the other hand, if you're like, well, I have 10 years to pick a mate, well, then you should take the first 3.7 years, like, there, because there's an unknown quantity.

Yeah, time-bound or quantity-bound. So you're getting roofing quotes, there's 6 companies that service your geography for roofing. You get bids from the first two, you do not accept either of them, and then the next roofer after that that is better than the best of the first two, you buy from.

Yeah, because there's— the reason this exists is because there's limited resources, right? You can't just interview 16 roofing companies. No one has time for that.

Yeah, and this is a mathematically kind of rigorous way to do it without You know, it maximizes your statistical probability of getting a good outcome.

It's not a guarantee though, because there could be a weird anomaly where for some reason you interviewed the best 3 your first time out and then none of— no one better ever comes along or whatever.

Or conversely, there could be 2 rock stars and then crap. Or there could be 2 terrible people and then the first person was solid and you hired them right away when there was actually even better people behind them. So it is a, it is a representation of statistical distribution associated with optimal outcome, right?

Yeah.

So do you want to inject the two? I think you already talked about one of the big kind of conflating factors. We're going to tie this into a particular situation with you and kind of wander around this topic a little bit. But the first conflating factor you already mentioned, which is when you have an— you have to know the total N, which is total number of applicants anticipated, total number of roofing contractors, total number of parking spots available. Or distance to the destination. But if that's unknown, you have to accommodate, right? Which is what you said, which is something like time-bound.

Yeah, right.

You don't know how many potential mates you have in the world, so you can't say what's one-third of that.

Our restaurant reservation is 10 minutes from now, right? So we need to spend 3.7 minutes driving around looking for a parking spot.

Oh, that's exactly how you do that. I didn't consider using the time of when you have to be there.

Yep. Right.

And if you have 20 minutes to drive around, you spend 6 and a half minutes driving around, and then you look at the best spot closest after that 6 and a half minutes.

Yep.

Yes, dude, that's so brilliant. I never realized to think— I always— I didn't realize you could do it on a time bound.

I didn't either until you read that little blurb on the pre-show. Now we look like geniuses. Well, you didn't know that, God.

That's a really good— you know, we should probably do something like that with Sega.

Yeah, you should.

We should probably tell our people, is this a time bound hire or not? Because if it's time bound, my suggestion is you interview a few candidates That's with one-third of the allotted time. And then the next, we should turn that into like a method or something called like the Sagan selection method or something. It's like mathematically backed. It's a really good idea. Cause a lot of people. Yeah, it's a good idea. Um, okay. You want to introduce the second conflating factor?

You're talking about the Nicaraguan.

Uh, well, it ties into that, which is the second one is if you have an expert, so At Sagan, we hire 10 bazillion executive assistants. So the secretary problem ultimately solves for when you can only determine things comparatively, not in an absolute sense.

Yeah. Like you enter into the decision with almost no information.

Effectively zero information.

Yeah.

Sagan is not, or your real estate agent is not, or your property manager is not. You're saying this option is the best you're going to get, even though it's the first one.

I've seen 5,000 of these, take my word for it.

Correct.

Right.

And so I think the other conflating factor is when you have a source of absolute data and you're not just comparing options with, with essentially tabula rasa in the beginning, right?

Yeah. And I, I think this is a maybe a good side quest to go down and talk a little bit about hiring, hiring in the world of small business. I think the mistake that employers make most often is they actually settle too quickly for candidates. And maybe Sagan won't like to hear this, but, um, my experience has been my benchmark for hiring is much higher than average. And that actually was really imparted to me by my business partner. He's got a very high bar for hiring and I sort of was able to—

he also has no computer or electronics on his desktop. So, you know, you can't take what he said. Did you write him a letter to figure that out?

Yeah, he hasn't quite gotten there yet, but it's his dream to not have a computer. Yeah. But he always had really high standards when we would interview people. And after a while, I got to really appreciate that. And I saw the results of waiting an extra week or two and interviewing a few more candidates than I probably would have and finding that person who was, you know, a click or two better than I would have just kind of quickly settled for. So It's hard to have a barometer for that, especially when you're starting out. And if you've never worked with outstanding people before, you may not realize the level of talent that is actually available. And it's a very difficult thing to explain to somebody because if you haven't worked with somebody really good before, you don't even know what you're missing. I couldn't explain how good it is in some ways.

Just a small tangent on what you just said about knowing what good looks like. I found one of the things I do a lot that I've stolen from EOS, from you, is oftentimes when I feel like a meeting's a little bit off track, I have our teams grade it. And what I realized was our working-level team were giving way too high of grades because they'd never seen what a good meeting was.

Yeah.

And so they'd be like, 8 out of 10, 9 out of 10. And I'd be like, 3. And then a month later they'd regrade it and I'd be like, do you guys all looking back agree it was a 3? And they're like, oh yeah.

Yeah.

Oh yeah. Because they didn't realize what, you know, part of what I did was help build their taste about like, she rambled, she read the slides, he wasn't prepared. Oh, 8. Cuz we were all like, yeah, working really good. You know?

So the other side of the coin for hiring in, in small business is that not only do you have to get a taste for what good looks like, but you also have to be worthy of a great person to work for you. Like, when you're new, you don't know enough to be worth an A-player working for you. What do you, what do you have to offer? You have almost no experience, your company's small. And so there's like this little kind of parallel growth that happens where you grow as a leader, you grow as an entrepreneur, entrepreneur, your business gets larger, the opportunity gets more interesting. And your quality bar at the same time is going up as well. And you don't want to get too far ahead on one or the other, it's just not really going to work. But you don't want to lag too far behind on, on either one.

It's probably a better way to take it to a ridiculous extreme. A guy who runs a fully subcontracted remote cleaning company, uh, says, I'm looking for A-players. It's like, bro, you're not an A-player. Like, why are they going to work for you?

Yeah.

What do you offer them? Like, like you have to be worthy. A lot of people have said like, you know, oh, I want like a Bincy, right? Bincy, my longtime partner in crime. I'm like, you, you think Bincy would work for you? You know how hard I invest in that relationship and our relationship and my relationship with Renee, my longtime business partner, my relationship with— like, you have to be worthy of that too. So we were on a little bit of a hiring kind of corner here, but I totally agree with you. A lot of times you need to say like, like, are you worthy of the level of talent that you're looking for?

What would you say to somebody who had that moment of self-analysis insight and, and came to the conclusion like, hey, you're right, John, I'm, I'm not worthy of a Binsey. I realize I have so much to learn and so much to grow.

Yeah.

What would be your suggestion on how they could work on that? What, what should they do? What should they read?

If it was me and I had somebody who was like a kind of like awkward, kind of like didn't like developing people leader, I'd say you should start like a vertical community for property managers with a low headcount back office staff, because now you don't have all these people in person.

Nice.

You don't have to have these development conversations.

You don't need any skills.

It's just 3 or 4 of you and a circle group and deal with Sagan., and you can make even more money than you do with being a real leader.

You know, like, again, it's a random example.

Random. Totally random. No, my advice— I set that one up a little bit. My advice would be leadership and management and becoming worthy of a good team is a muscle, and you just haven't worked out that muscle. And so, I would go to school, I'd go to work, I'd read, I'd study, I'd get a coach, I'd get mentors, I'd ask my team, hey, where am I failing you as a leader? How can I better support you? Just think of it as a a workout muscle and you haven't been working out. So hit the gym. And so what's hit the gym look like? Leadership podcasts, management stuff, read Christian Ruff's stuff, read Jocko's stuff. All of that stuff is good and start kind of internalizing, you know, what being a good leader means, what having career development, how to attract the right people. That's how I think about it.

We did an interesting exercise at our company's annual offsite, um, in the fall. We all went around with a piece of paper and we wrote everyone's name out and we said you had to answer 2 questions. If there's one thing I could get you to start doing, what would that be? And if there's one thing I could get you to stop doing, what would that be? And so everyone went around on a piece of paper and wrote their answers. So 2 answers for each person. So you end up writing like 16 things because there's like 8 people there. And then it would make it— the papers would make their way all the way around the table. And then you were left with these two pieces of paper of things that your team wants you to start doing and things that your team wants you to stop doing. So that was a really interesting way. How was it? It was great and incredible. Yeah, the answers were consistent for me. Yeah, there was a consistent theme where people wanted me to start giving more feedback to them about their performance. It was like 60% of the answers. Wow. That almost word for word. So I really have been, you know, thinking about that.

The only modification I'd put to that is, well, we do a version of that, not as well as you just did, is we do stop, start, continue.

Okay. Yeah. Start, stop, continue. Yeah.

I like the—

I think we've done that.

It's like, I love when you do this. It makes me feel so valued. It's like, oh, okay. That's not a stop or start. Um, okay. So back to, you want to get back to kind of like the hiring process, knowing when to quit, that kind of thing. Yeah. So you had a particular— it, it kind of dredges up what I would call a very hard topic, which is more or less comparative salaries versus absolute salaries and geographic price differentials. Exactly. And it's a, it's a fascinating concept, and there are some people who are, in my opinion, are so extreme in one sense or the other There are people who are like, regardless of where people are located, we pay them the same. I don't care if they're in Bangladesh or San Francisco. If they're an engineer, they make the same amount. Oh, there are people I've seen do that. And then the inverse is, oh, she runs my whole company. She's a VA from the Philippines. I only pay her $6 an hour.

Yeah, we don't pay more than the median wage in that country or whatever.

Oh, $800 a month is fine. Why would we ever pay more than that?

Right. Yeah.

So there's— so it is not a solved problem by any extent. So let's talk about your particular scenario.

And so, yeah, my specific problem, this is present day for me. We are hiring for essentially like a business operations person at Crane. So we need kind of a back office project manager type person to come join the team at Crane, which is a very small team. So it's a very important hire because the team is still small. And so I, of course, put through a hiring request with Sagan. I'm getting candidates coming through, and we had a candidate I really liked from Nicaragua and interviewed the candidate, liked the candidate, and sent an offer. And the candidate would not negotiate the offer. They were like, here's the rate I want. I will not budge off of that. And I felt like the rate that they were asking for was kind of high, even though it was within the budget that we had given Sagan. And so I checked with you and I checked with a friend that lives in Nicaragua, and both of you basically said the same exact thing, which is like, oh, the amount that she's asking for, given her experience, is definitely too high.

So you should— to be, to be clear though, I would easily pay somebody in that country with the right background 5 times that. Oh, that's just more this particular person for this rate in that country was Above what my—

well above what my experience suggested.

So the equivalent, to use a silly example, let's be specific. Uh, Philip, somebody from the Philippines with 4 years experience of as an executive assistant with mildly accented English asking for $2,300 a month. Now I have, I have many people from the Philippines who I pay more than that, but that role with that level of experience, that's about $1,000 too much. So I just want to give like a specific example of— it's not that I don't pay people from the Philippines freaking $10,000 a month or whatever, right? But it's just that role with that level of experience, it was just kind of like—

yeah. So I passed on the candidate, um, and now I'm getting presented with new candidates from different countries with higher wages even than the high end of basically what this Nicaraguan candidate—

are they better than her?

It's an important question to me. I think they're kind of similar. Okay. They're kind of similar. And so I'm kind of thinking now, like, well, what— how, you know, should I have actually just gone with that candidate even though I would have been like, quote, overpaying for that country for that experience level? Yeah. Or, or is that a signal in and of itself? If somebody was unrealistic with pay expectations, that actually says a lot. And so it was smart to pass. I'm kind of like mixed up about this. Like, should I just say, hey, I have $3,000 a month available. The first person who meets my requirements, doesn't matter the country, doesn't matter whatever, we make the hire. Or we just say, no, we're not going to pay more than 75% of the rate, you know, based on the country and the conversion rate with the US dollar and all this other stuff. Yeah.

Uh, first thing is this is not the secretary problem because you're talking to people who have experience. You're talking to me, you're talking to your friend. Our recruiter Vicky was, was saying, was putting this, turning the screws on you because she's like, she was a candidate, right? Did she do a good job?

Yeah, she did a good job. It was funny because when I mentioned that to you, I kind of thought you might like smack her hand or something. You're like, oh, that's great, I'm glad to hear that.

Well, because, because the thing is, is that I tell our team all the time is like sommeliers don't just say yes, they have taste. And Vicky has taste. And I'm like, please share that with Peter. I, he might not agree with you, but please, like You're here because you're good.

Yeah. And if you're not good, then she might've been right.

Yeah.

If I should've taken her advice. So, but yeah. Okay.

So the first thing, the first thing I would say is, uh, it, it ties into a bigger concept that I've wrestled with, which is I absolutely hate, even though my team has prevented me from doing this, the idea of a budget for a role. I hate it. I don't think we should ask people who do not have as much experience as us what their budget— what's my budget? $5 a month, but I'm open to other offers. How much do you want for RL Property Management? $100 million, but I'm open to other offers. I'd be willing to take a look. What's my budget? $1. What's their desired compensation? $1 million a month. Let's see if we can make a deal. Like Like, I'm trying to pay you as little as possible and you're trying to get— so saying what your budget is, I'm just kind of like, I just philosophically don't always love that. So that's part one.

So how should it work though?

Part— well, it goes to part two. Part two is what I think it should work is talking about compensation as a piece of other trade-offs. I am willing to pay more I am willing to compromise. I want to pay less and have only a percentage of my requirements met, or I want to optimize for low cost with as many candidate, you know, qualifications met as possible.

Okay.

Because now it's in the context. What am I trying to do? I'm trying to get somebody incredible for $1 a month. But push comes to shove in the tradeoffs between salary, availability, other candidates, it's a fascinating tangle, uh, that we have in small business of candidates and salary.

And to me, it's very unclear if it's rational for me to pay more for a better candidate in, in such a— like, if you're running a call center with 100— yeah, CSR, these people are all-stars. Yeah, yeah. If you're running a call— if you're running a call center with 100 CSRs, like this becomes very simple. But when you have a tiny little business with 3, 5, 6 employees and a candidate comes along who's a little better than you thought you needed and they're asking for a little bit more, should you take that? Or should you say no, like, we really need to save the budget?

Or to put it another way, I've never done budgets. I never do budgets. It's like, find me somebody good, give me a spread. Yeah, I don't have a budget. If I gave you somebody who's an absolute rock star, how quickly are you going to drop that budget, right? You're gonna laugh your way to the job offer. Oh wow, this went over budget.

It's just like— but there's a limit to that too though, right? Like, you wouldn't pay them a million dollars.

Like, so the, the other thing would be is— and I don't think SEGA members do this nearly enough. Some of them do it, and it kind of throws our team off. But I'm like, I think we need to facilitate this more, is I think that you— there are certain people who I would make certain offers at certain prices. So they were listed desired salaries, $3,000. I'm like, to me, you're not worth $3,000 a month. So I'm going to make you an offer at $2,500 a month.

That's what I did.

That's exactly what I did. You say no, no problem.

It's exactly what I did.

And then you mispriced your— if you're regretting it, then you mispriced your offer. But I think all the time it should be a give. You know, I've done that all the time. I'm like, Yeah, I can't pay you this much, but I give you a job at this rate.

It's like, done.

Yeah. Or vice versa. Or do I have another option, or is this my only option? Or do I— could I get more people out of, you know? So I think for me, um, I, I just— I think salary's silly until you're looking at specific people. What's your budget for house? It's like no more than X, but other than that, I don't know. I'm open. I'm open to your suggestions. You know, yeah, I mean, you could probably go back and hire her. I'm sure she's still available.

Yeah, I mean, we've got, we've got a couple other interviews lined up and yeah, yeah, it's not off the table.

I just think it, all of this stuff to me only works in the context of trade-offs. So when people say things like, well, I want the owner to answer the phone, it's like, awesome, then prepare to not have your phone calls returned quickly. It's a trade-off. I want to buy products made in the US. Okay. You're going to pay 50% more. But just saying, I want, I want products. I want my whole office in Southern California with motivated people who have a smile on their face. It's like, awesome. Sagan membership is now $40,000 a month.

Yeah.

Right.

Okay.

That's the only, so it's like, when you talk about a candidate or what you're looking for, if it's not done in the context of trade-offs, I basically ignore it. You know, I'm really looking for somebody— it's like, what are you willing to trade off?

All of life is optimizing around trade-offs. It's figuring out what are the things that don't matter to you that matter to other people, and vice versa, and kind of exploiting that. I mean, whether you're buying a house, starting a company, pricing a product or service to a customer, hiring an employee, picking an office location, it's all like what you ideally want to look for is like try to find things that other— like if you're searching for a house, dude, did you read that tweet?

I was about to mention that. What somebody wrote, when I'm looking for a house, the first thing I do is write down things that I'm okay with that other buyers like me, uh, aren't.

Didn't read that tweet, but that's exactly what I was about to say. Right? Yeah. Like find stuff that you don't care about at all. Right. And ideally, um, this gives you this lets you get into interesting properties at weirdly good prices. So like, I'll give you a specific— same with businesses.

Yeah, you can swap real estate for businesses.

Yeah. For example, let's pretend you don't care at all about train noise. In fact, you love trains. You're a train spotter or whatever, right? Well, that's great news because most people— there's a discount for homes that are right up against railroad tracks. But if that doesn't matter to you, then you're going to get the equivalent of a million-dollar house for $500,000. But to you, it's just as good as the million-dollar house. So in like all of life is this, right? Whether you're finding a wife or whether you're hiring for a role or whether you're starting a company or like putting a product out to market, like ideally when you're putting together like a product offering, like for property management, you want to find the things So even like pricing strategy. So I'll give you a really specific example from our company about pricing.

This is— yeah, you're— that's like, that's like telling you about LeadSimple.

I love pricing. Yeah. So yeah, and I think this is fairly unique to us. Um, one thing that owners care about is, uh, approving maintenance expenses. So in an ideal world, the owner wants to hear about every maintenance expense ahead of time and manually approve it. Right. Well, that's not scalable for a property management company, or we'd be on the phone with owners 24/7. We wouldn't be able to dispatch maintenance and everything would get clogged up. So what we offer is 3 pricing points, and the lower the maintenance approval threshold, the higher the monthly fee for our management services. Incredible. Yeah. So for owners who are like, you know what, I need to know every dollar that's spent at the property, we're like, that's absolutely great. It's $200 a month. And the maintenance approval limit is $250, which is effectively zero because you, you almost can't even send anybody for less than that. And for owners who are like, you know what, I've been with you guys 3 years, you could rebuild the whole house after a fire. I don't even care. Just tell me when you're done. I don't even want to hear about it. You're like, great, your maintenance approval limit is $5,000 and I can save you 25% on the monthly management fee because I can just operate and I don't have to keep you in the loop. I don't have to get your approval. So that's exactly like these levers that you're pulling and figuring out what matters to them that doesn't matter to me, and what are they willing to pay? And so I love that stuff.

Now, I, first of all, I didn't realize that we shared this dynamic pricing and all that. I love it because, you know, I'm like, I love that kind of stuff. When Sagan was originally created, what I wanted to do, and I still want to freaking do this, but Kayvon won't let me, what I wanted to do was say, Sagan is $400 a month, and then I will get as— do as many hiring requests as you want, and I charge you my recruiter's time, who's $15 an hour, plus 10%. So if you hire the first candidate presented, you just got a hire for $50.

This is—

and if you want to look aligned, you want to look at candidates for 2 years, sure. Here's a recruiter, go look at 10,000 and it's just $19 an hour. You look at how you want to send more comments. Great. You want to reject instead of now I essentially have to eat out that cost, but I'm like, I could cut membership in half if I said, Peter, how much recruiter time are you booking for this job?

Yeah. And it's a little complicated to administer, but I do like there's, there's an appeal for me there, which is it aligns the incentives a little bit better because right now Seguin is incentivized to kind of pressure your customers to accept candidates because we eat the overage search because, yeah, because we eat the overage, right? So if the average hire, if the average customer of Seguin looks at 5 candidates before they make an offer, once you get to candidate 7 or 8, your team's kind of like, come on, like, we just accept one because you're eating money at that point.

Whereas if it's the other model, Yeah. It's not exactly that we're eating money. It's more that, uh, it's more, it's not that we're eating money. It's that we're, we're basically just fucking around. Like there's no way you should not need to look at 8. I mean, that's what I'd say.

Yeah. You get what I'm saying?

I mean, I've even thought about things like if you hire one of the first 3 candidates presented, we don't charge you a credit.

Ooh, that's interesting. Cause it's like, look, I don't have to have a bunch of meetings.

I do not want to talk to you. I just want to hire for you. Yeah. So you hire one of the first 3 presented, it's no credit. That's what I charge you.

Yeah, I'm into that.

So it's like I'm always thinking about shit. Like, I'm like, oh, it's cost plus. Oh, it's, it's cost plus hours. Oh, it's a minimum. Like, all that stuff I'm thinking about. Yeah. So it's aligned because now it's cost-based. I'm like, I physically can't lose money on a hiring request.

I can't, right?

It's cost plus fee, you know? So, um, Anything else on dynamic pricing? Oh, we were talking about the craziness of comparative salaries. I think you have to say to yourself, what is this person worth to me? And then make an offer at that number. And whether that's above or below their budget or what they're asking, that to me is how urgent is the hiring request? What other options do you have? How frustrated are you? It's so subjective. And you price that into your offer. Yeah, that's what I do.

Yeah, yeah, it's all good. Um, surge pricing, like with Uber and stuff, to get more drivers on the road. Um, people get really mad about surge pricing or variable pricing. You see this come up from time to time, every year or two. It makes the cycle, like the news, it makes the rounds through the news, is like such and such company is experimenting with surge pricing, and you're like, what? People get so mad. Um, but in fact, it's been around a lot longer than people think. Um, all you gotta do is look at happy hour search pricing. It's the bar's slow, they have to be open between lunch and dinner.

Well, it's the inverse of search price.

Well, yeah, but it's—

yeah, essentially it's dynamic pricing. Dynamic pricing.

Dynamic pricing.

Yeah.

Yeah.

Or look at, look at what an Airbnb costs on a holiday weekend versus— it's just the market. It's, it's more perfectly matching supply and demand.

I mean, that's— there's something— there's certain categories of products and services where it's perceived as very distasteful by the average person, which it's interesting to think about why that is, right? Like, why is it that people totally accept it with Uber and happy hours and Airbnbs? But if, you know, you're— if your grocery store had like surge pricing on bananas, you'd be like, get the hell out of here.

They're just trying to rip you off. Or water after a hurricane.

Well, yeah, let's not go there. Why? It's, it's very— I feel like that's like the most extreme but most politicized version of this.

Oh, and I— you and I have different politics.

Not really. I think our politics are—

I'm a libertarian. You're like a Democrat, I think, or you're like somewhere in the middle.

Yeah, yeah.

I just know you left Twitter because Trump got elected. That's all I know. So I was, you know, uh But what I was going to say was, just from my position, the raising of the price allows new supply to enter the market. What happens when you cap a price is, well, shortages, obviously.

But the specifics of an emergency situation is like, okay, so generators are now 5 times the price. Yeah. Is the store really going to get more generators though? Yeah. Are they really going to get more generators before the emergency is over, or are they just going to make a bunch more money on the existing inventory they have?

If I'm 2 states over generator, and I see that I can sell a generator for $1,000, which usually goes for $200, I'm getting my ass in a U-Haul and driving 50 generators from my local—

Yeah.

When you see surge pricing in Uber, you see basically supply flood into the market because they're like, I'm getting $100 a ride.

Yeah, but that's like a much more fluid, dynamic, expected, predictable type of a thing.

I'm pretty much a free market absolutist. Not, not exactly absolutist, but like pretty, a couple clicks off that. And so that's a whole nother topic, but yeah. Um, so my sense, my belief, my recommendation for people is to not do it based on cost. Like that's expensive for a VA. Just say like, what is it worth to you? And make an offer based on that. That's, and they, and if you're an employee, what, you know, I mean, I've told candidates to do this. They don't listen to me. I'm like, you should be flexible or inflexible based on the opportunity. You're gonna go be an outbound cold caller for an asshole. Well, I'd probably charge more. You're gonna go be in an environment where you can learn and develop and get exposure to an industry you really wanna get into, charge less.

Yeah. So that brings up something interesting. I mentioned this to you right after this whole thing went down is I made a mistake here and, and maybe I made a mistake in passing on this candidate, but I made another mistake. Which is I didn't sell her on the opportunity because I forgot that no one— that she has no clue who I am because I'm used to people knowing who I am at this point, especially people I'm interviewing. So I didn't explain like all about RL and Crane and the newsletter and the podcast. And I'm speaking—

that was probably your biggest thing. Yeah, honestly, that was probably your biggest mistake.

So, so to her, I'm just, you know, the cold caller from your example, the outbound guy. Like, I should have taken more time to show her, like, and here's the growth of Crane. In 2 years, we went from 0 to over a million ARR, right? Do you want to be a part of that? Or, or, yeah, you know, there's going to be more opportunities here. Look at the growth rate.

You know, or you should have— you know who should have reached out to her, right? Who?

Danny.

Yeah, have Danny reach out to her.

That's a good idea. Yeah.

Have Danny reach out to her this afternoon and say, hey, I know you're interviewing with Peter. Uh, he told me he feels really bad because he didn't tell you what we're up to. I just want to tell you what we're doing and what your role is going to be, and at least reopen the conversation because we'd hate to lose you. Yeah. And have Danny do it because Danny is like a fellow, like, person who's seen this, can literally— like, I, when I'm trying to get somebody really good, you know, I haven't talked to our team. Like, talk to our team. They talk to me for 10 minutes and I'm like, And like, even RL—

so RL's like 35 people now. We've got 7 people on our leadership team. 2 of them started as admin assistants at like $13 an hour. Correct, correct. So like, that's what happens when people stick around with me.

Correct. And say— and not Peter Lohmann, the boss, who they're used to getting smoke blown up their butt— be like, hey, you know, I do this all the time on interviews. I'm like, Anya This is Carrie. She's interviewing for an account executive position. Please tell her the good, the bad, and the ugly of working at Second.

Yeah.

And then I, and then I leave the Zoom.

I like that.

And it works really well cuz they're like, if you don't like the, cuz I want them to hear what it's really like. I don't want to be like, it's always great.

Right.

I won't be like, John moves really fast and gives you a lot of responsibility. He's gonna, but I'm like, just tell him that.

I do that. So when we're hiring at RL. Especially for leadership team positions, I'm super clear on like the downsides. I'm like, listen, I need to tell you some of the bad stuff about working here and this industry, right? There's a lot of negativity. I have high expectations. You're not going to get a lot of feedback from me.

It's not going to be an email from me before noon.

You're not going to get an email response from me before noon. You know, it's very— we've gotten feedback from people before that it's so results-oriented and so unstructured that they feel adrift. And they sort of don't know what to do. There's no schedule. I don't care when they come or go. And I give them that feedback like, hey, just so you know, you need to be very self-organized and self-motivated because I'm not going to be checking in with you every hour. So I go through all kind of like these negatives. I love it.

And yeah, I love it. Um, final thoughts?

Hmm, I don't think I have anything else to say about hiring right now.

Yeah, I don't think I do either. I think it's a really important topic. It represents both of our phases.

And so, um, I'm still big on predictive index. Like I lean heavily on it.

Yeah. Yep. Um, okay. Uh, quotes, ideas, tech tools. I'll give one. Granola, uh, which is my favorite kind of meeting recorder of choice, does like a year in review like Spotify does.. And it gave me some really funny stuff about like who you meet with the most. And it looks at all your transcripts, but some of our team, some of our team sent me theirs, cause I'm in some of theirs. And so one of them, Soph, our head of recruitment, it said, you're best at turning bullying into leverage. You handle executive teasing by threatening to post hostage videos to Twitter, proving you're being held against your will. Cause I always make fun of Soph. And that came up in her year in review. Nice. Cause I always give her a hard time.

Time.

So that's awesome. Use Granola, get the year in review thing.

It's, it's clever. Yeah, I'll talk about— so right now I'm on the hunt for a software to help keep track of credit card receipts, which sounds really stupid and boring, but when you have like 35 employees, it starts to become really important. Um, we use Chase credit cards because they have great points. And here's the cool thing about points— I know a lot of people like crap on using credit card points, Points are a way, a tax-free way to get money out of your business. Just so you know, if you didn't know that, there's no tax on credit card points. And we're talking thousands of dollars that you can generate in credit card points every month and then move it to a personal credit card by transferring the points and then spend them on your family vacation. So call me stupid for paying attention to that. That's fine. The problem is all of like the Chase credit card ecosystem, which is what we're in. I'm looking for a great way to track those credit card receipts the way that like Relay does. If you've used Relay or Ramp, it's super clean and easy. Every time a credit— every time an employee or you swipe a credit card, you get a little notification or an email from Ramp or Relay, and they're like, hey, I need the receipt for that. And so you forward it to an email address, or you can even snap a picture, or you can text it. They make it super easy. Yeah, maybe you could build it, but just payment rails, man. I don't want to get involved in that. So I've been looking for a solution.

What is this other API?

Whatever, I have no idea. So I messed around with Expensify. That's not the right solution. And I have a meeting on Monday with a company called File, F-Y-L-E, which I think might be the right solution here. Um, but yeah, it's just kind of something silly that I'm working on right now because if you have any suggestions, uh, yeah.

Hit up Peter on LinkedIn or his website or something. I don't know.

Facebook.

Cool. All right. Good stuff, Peter. I'm gonna hit pause. All right.