AppLovin CEO: Why Founders Shouldn't Angel Invest & Why the Best Don't Need Mentorship

A lot of the things that we've been able to accomplish just don't make sense to people. In a world where things don't make sense, people think you're cheating. The founder mentality has got to be chasing winning.

In order for me to get paid anything, the stock had to clear that and then keep going up from there. Almost in every relationship of my life, I was never really present. That fear of a blowup is one of my big motivators.

Now, I have interviewed 1,000 CEOs of the largest companies over the last 10 years. This guest, Adam Foroughi, is in the top 5 I've ever met. Easily, there is no company on the planet with numbers like AppLovin. Of all the shows that I've done, genuinely, in the studio, this is my favorite one that I've ever done with a CEO.

Ready to go. Adam, I'm so excited for this, dude. It's funny: I sent you the schedule beforehand, and you're like, "That's a lot of questions." I stalked the shit out of you before this, just to be clear. So, thank you for agreeing to this onslaught of questions.

Yeah, I like it. I try to go unscripted, so I can't say I reviewed them, but it was a lot of questions.

1. Why Winning (Not Fear) Drives the Best Founders

Well, don't worry. Reviewing them is always a way to have a manufactured conversation. So, this is going to be completely unscripted.

One thing that I'm always just trying to understand before we dive in is the mentality of an entrepreneur. There are 2 types of people: people who are motivated by losing and people who are motivated by winning. What are you fearful of losing, or are you inspired by the thrill of winning?

I think if you've had success, you almost have to be inspired by winning. If you're fearful of losing or you have a fear of failure, I feel like you're almost certain to be stuck. You're not going to take shots that are material, and you're going to protect the downside more than go after the upside.

I don't tend to believe that's really the founder mentality. If you took a risk once upon a time to start a business where there was nothing—you didn't even know what it was going to become, and you knew the odds were 99.9% likely that you were going to fail—that in itself has to tell you the founder mentality has got to be chasing winning.

Over the years, I've taken motivation through winning. I think it's also important to note that founders don't tend to be motivated by money if they're really successful. That's something that I like to ask in interview questions, and I find the best people are motivated by personal growth and development, being inspired, finding things intellectually stimulating, and winning. But it never tends to be money, because money is a very, very tough thing to continuously be motivated by. Eventually, you will reach a point where money is no longer a motivator, and then you need to find something else.

I've always pushed to win, and I've always pushed to learn and grow. Those are the things that really got me going.

2. When Money Stops Mattering: The Real Founder Motivation

I actually spoke to Kathy on your team beforehand, and she said that you don't care about money anymore in terms of personal wealth. Can I ask you, how does that change how you operate as a CEO?

There was a baseline that I needed to feel like my family was good, and I was fortunate enough to start a couple of businesses before they were successful. So, I'd reached the baseline before I started this business.

In those businesses, I really aspired to get a single. I just wanted to get enough money so that I didn't have to stress about money. Once I co-founded this business with my team and we started getting going, I never really needed anything from this monetarily.

The interesting piece there is that as we were building up, we were growing really quickly. In 2015, we got approached to sell the business for quite a lot of money—in the hundreds of millions of dollars, all cash. Had I not had the single before, it might have been something that was very enticing, to just cash out the whole thing at that point in time.

But because I knew my bank account was sound, I wasn't in it for money. I was trying to build big, and I felt like this had to be the home run. I was able to think about the deal process logically and understand that the business was growing really well. It was really sound. Why would we give it up on that upward trajectory?

We were able to really play long, and I think in large part that's because I didn't start this at all considering the money that I could make from it.

3. 83M CEO Payday: The Truth Behind the Headlines

Speaking of not starting for the money, your total compensation in 2023 was $83 million, making you the 8th-highest-paid CEO in America. How do you think about that? What do people not see when they read headlines like that? What is the misconception?

To understand my compensation in 2023, you have to really look backward at 2022. We went public in 2021. In the first year, the stock went up to about a $40 billion market cap. In 2022, we fell about 92%, to a little under a $4 billion market cap.

For the life of the company, I had only taken equity—that was my founder stock—based on the money that I originally put into the company. So, I'd taken no compensation. I was taking basically the bare minimum to have benefits.

At the bottom in 2022, I made a decision, for the first time, to ask for compensation. The reason I did that is because I felt like, "I'm public. Turning this company around is a big task, and I'd like to align myself with investors to say, 'I'm going to get paid, but I'm only going to get paid if the stock recovers.'"

The thresholds of compensation that the compensation committee on the board granted me were, at a minimum, if the stock was $9. We had to get to the first threshold, which I think was about $38 to $40. In order for me to get paid anything, the stock had to clear that and then keep going up from there for me to get any sort of compensation.

Then there were, I think, 5 or 6 levels from there, all the way up to a return to $80, which was our IPO price, and I had a term to go achieve it.

I feel like CEOs who originally started a business as founders took a really big risk. If the belief is that the CEO should then never get compensation ever again, it's completely flawed logic. You want to give people who chase really big upside by creating really big things the potential to continuously have that really big upside, because it allows them, in a way, to just mentally stay motivated on what they're doing versus starting to drift to other things.

Any founder, even at the low point, I was worth quite a bit of money on paper, at least with my equity. I could have walked away and started something else. I've now had 3 successful businesses, so I believe I could have a 4th. But I really wanted to stay committed to the company and stay aligned with investors.

I think the other thing that people miss is that the CEO's job in a company, especially one that's gone from small to very, very large, is an incredibly lonely, very stressful role. If you talk to CEOs and founders—I know you do fairly often—these jobs are brutal.

People these days are afraid to talk to me because they perceive that I'm so busy, even though I'm not. I'm the same person I was 10 years ago. They don't come up to me anymore. People inside the company or outside the company, if the stock is doing well, believe you're smarter than you are, and if the stock is doing poorly, believe you're going to be so stressed out you might jump off a building.

You don't understand the things that are going on in the CEO's mind when you really haven't done that role yourself. Very few people in the world have built a business from small to very, very large and eventually taken it public.

I say that to say it's a brutal job. It's lonely. It's stressful. You almost certainly are going to have distraction from your personal life. I don't know many founders who have had that kind of success and have fantastic personal lives. You end up distracted from your kids because you're always focused on work. It consumes you.

Therefore, to then say the CEO should take less pay is quite unjust, because it's not understanding the role that the CEO has to absorb.

4. The Hidden Cost of Being a CEO: What No One Tells You

Have you ever questioned the sacrifice in any way? My brother has children, and I watch him have children and be an amazing parent, and see my parents be grandparents. Dude, I'm just grinding in the office until 11 or 12 every night. A little bit of me questions the sacrifice sometimes, if I'm honest.

At the low, low point in 2022, I decided to make some changes because I did question the sacrifice I was making. There were 2 tolls that I saw being taken on my life.

One was that my health was decaying. I felt like, if I'm this stressed out, I'm not sleeping, I'm drinking 8 cups of coffee a day, I'm losing my hair, losing my fitness, just losing the things that allow me to focus, if I don't reverse that, I'm never going to be in a place to be mentally sound to run the business.

I felt like, as the CEO of a public company, I'm committing for the next 10 or 20 years. I need to be here a long time. To do that, I needed my health. So, I stopped what I was doing and reset that.

The other piece was that I felt like I had drifted a little more distant from my children because I wasn't paying attention to them. I think any founder, or anyone who works at a tech company that's always on, knows this experience if they have kids. You hang out with your kids, but your mind is elsewhere. Either that, or you're on your phone. So, you're never really present.

What I realized is that, in almost every relationship in my life, I was never really present. What I tried to do to change that was at least take small moments to feel like I was present. Small moments might be 10 minutes at a time, because I'm not going to be able to sit down and have hours at a time.

But if I gave myself 10 minutes at a time to hang out with one of my children or a couple of my children, I felt like, okay, now I'm actually committing to them and being 100% present. That was a change.

The third change I made at that point in time was that I started introducing hobbies to myself. For example, I started learning how to surf in the last year or two. You have to put the phone down. You have to be completely disconnected, and you get mental ease.

5. Down 92%: How Do You Not Lose Your Mind?

In the absence of these changes, I feel like I would have felt like I was giving away a big part of my own ability to be stable and happy. By getting that back, I became a better CEO of the business. I became someone who could be more thoughtful and more long-term focused.

You said in 2022 you fell—you kind of dropped it in very casually—you fell 92%. I mean, 92%. What does no one know about, respectfully, being in a—I can say it now, given we're out of the trough—but being in a trough that deep that they should know?

To fall 92% in a year, you go down almost every single day of the year.

Neil Mehta once told me, “What's the difference between being down 98% and 99%? Half.”

Yeah, it's a lot. And when you realize you've fallen 92%, you've got to go up 10x to get back to where you started. So, it is a bloodbath.

A couple of things. One is that a lot of people think your psyche is tied to the stock. Beyond that, when you talk to some execs who are at public companies, they'll say they don't look at the stock price. I can say I 100% look at the stock price. It is very, very hard to run a public company and say, “I'm just going to choose not to look at the stock price” for a few days, a week, or whatever, because you've got investors who care, you've got your team who cares, and it's a real-time ticker of what the world thinks of your business.

The challenge there is when everyone is telling you that the stock is going down every single day and investors are not buying your shares, it's very easy to go, “Am I doing something wrong? Is the business a piece of shit? Is there something here that I don't understand, that everyone else in the world is smarter than me on and understands?” It can make you lose confidence and second-guess yourself.

In the face of that, I think what's important is maintaining conviction if you believe in your business. We did a couple of things, and that really allowed us to turn the business around.

As an advertising business, there's an advertising model that drives a lot of the success we have on the platform. Everything we do is on a performance basis, so advertisers plug in and aim to get a certain amount of revenue that's more than the ad dollars they spend on the platform. What delivers that equation for them is how potent our advertising model is. These models are recommendation-system models, and that's one of the earlier forms of machine learning that existed. It's really gotten supercharged with what we see today in AI and the research advancements in LLMs.

At the very bottom in 2022, we said, “We're on an older version of machine learning. We're going to completely throw out our technology, rebuild it, and go to what's really cutting-edge and current in the field of recommendation systems.” To do that was a big internal change. First, we had to slow down basically all research and development on the current system because we said, “We're going to throw it out. It's now outdated. It's not going to carry us forward where we've got to go.”

We had to turn over some people. We had to take some of the people who had helped us get to that point—which, again, was a $30 billion IPO and up from there, and then cratered—but it was a big business. We had to turn over some people who were committed to the old system and just say, “The old system's done. We're rebuilding to something new.” Then we had to have conviction behind that bet and rally everyone at the company that this was the right thing to do and that we were going to go execute on it and win.

How did you literally do that?

You have to voice confidence in your own bet. It's very, very hard to walk around confident when your stock's down that much. People are calling you, thinking you're suicidal.

To check that you're doing okay.

You almost didn't get that, but you got, “You should probably go consult a therapist, because it looks like you're going to kill yourself.” I wasn't giving off those vibes, at least I didn't think so, because I've always had a belief that, so long as we have conviction on a path, we've got a strategy that sounds right, and we've got a motivated team behind it, we're good to go.

I was able to voice confidence internally. In doing so, we were able to retain the core team and the important people that we needed to execute on this path forward. That's really the challenge you get into when the stock falls that much. It's really, really hard to understand how you can retain people.

People are working and seeing the exact same thing that we're talking about, and they and their families are probably asking, “Is this company a piece of shit? Why aren't investors buying the shares?” It's easy to get tricked into believing it is when it goes down 92%.

6. Layoffs: AI Revolution or COVID Hangover? Will the Layoffs Work?

That is a very material shift in terms of technology architecture, which leads to the layoffs we're seeing. We're seeing a huge amount of layoffs today. Are those layoffs today, do you think, due to AI efficiency, or do you think it's because of overhiring in COVID times?

I think it's the latter today because the former is still yet to take full effect at most companies. A couple of years ago, we'd been growing really fast ever since we launched Model Axon 2 in April 2023, and the stock recovered. But I think it was in 2024 and 2025—mostly in 2024—that we had a year where we probably grew near triple digits, but we ended up cutting the team's staff by 40% to 50% in most departments.

The reason I did that then was the belief that if a role was going to get automated, or if AI wasn't being adopted fast enough in those departments, it was time to let those people go and rebuild the organization as if we were building it knowing what technologies were available to us today.

Can I just pause you there?

Yeah.

What roles did you assume at that time were going to get automated, if we deconstruct those going to—and then not fast enough?

First of all, over time, companies get bloated. I said, “What are the process-oriented parts of the organization?” Even in our company, we run really lean. We've got a really high revenue per employee and EBITDA per employee, but even at that time, we'd gotten bloated over a decade-plus.

I looked first at the process-enabling parts of the organization. One was HR. HR as a function was necessary to have because you've got to be able to do things like hire people and fire people, but our team had gotten bloated, and there was a lot of process that the HR team was introducing into the organization.

As a founder, I still remember the days when we were 10, 20, 50, or 100 people and you didn't have that much process. You had one HR person per 100 to 200 people, and things felt faster. I wanted to get back to that point.

I went through and said, “What are the processes I don't like at the company? Let me just eliminate those.” Then we can go through and say, “Who are the gatekeepers of those processes?” You can remove those people. Then you go to where the areas are that you're going to start seeing a lot more automation.

An example in our business is creative production. We felt like AI was going to get to the point where creatives were going to be automatically produced. You still need humans to innovate, but you can have fewer humans because a lot of the design work can be handed off.

In engineering, your best engineers can use these tools to really accelerate themselves, and your weaker engineers might not understand how to use these tools or might only get a 2x instead of a 10x or 100x increase in output.

Can I just interrupt you there on the creative-production side? How do you think about the fear of moving before the market's ready? What I mean by that is, yes, there's a lot of promise, but you can fire people before the creative tools are there.

Your earlier question about winning ties in here is: I don't play in fear of failure or fear of losing. I also believe that, on my team across the board, our job for them has to be the right job for them at this moment, with “right” defined by the best place for personal development and growth.

If we believe that every single person has a good role, and we think that's no longer true, we should part ways, provide good severance, and make sure they're free to go do something else, because I don't like to keep people in roles that are going toward a dead end.

It was a bet and a belief that these technologies were going to get good enough to automate these roles away, but we didn't want to take the risk that we were going to keep people in dead-end roles. That just creates a morale hit. That creates this organization that ends up optimizing for people who are just not happy.

We try to optimize for our best performers. Best performers—your A players—want free rein to just go crush it. But they don't want to be distracted by unhappiness. They don't want to be distracted by people who are working in a role that's almost certainly going to get automated away.

And so, by taking it and saying, “Build the culture as if we were building it today, knowing what technologies are available to us. What would we look like?” we just went to what we would look like, and then that forcing function made us have to get to an automated place faster. It would have been a lot slower had we had people who were trying to fight adoption of the technologies because they were fearful it was going to lead to their job loss.

Do you think it is possible to have a company of your scale, which according to the numbers was 895 people with $4.3 million in revenue per head? Do you think it's possible to have 895 only A players? Is there a time when you just, by nature, have to have a B player?

So our core business—we bought a couple of businesses. We have Adjust, which is an analytics company, and Wurl, which is a CTV business. Those 2 aren't integrated; they run their own businesses.

If I just looked at the core business, our core advertising products are about 400 people. Call it some very, very high percentage of all the company's EBITDA comes from the core business. So if you then calculate the EBITDA per employee over 400, it's a really, really high number. I think it's reaching or over $10 million a head now.

And so the question of whether you can have a team full of A players: not everyone can be an A player on a team. You need some roles that are just there to be processed and keep the lights on. We're a public company, so there are certain things that have to happen just because they have to happen.

HR, for example, as I touched on earlier, we took a pretty large HR organization, one that I think had 70 or 80 people on it, and now might have 15. The people that we retained are your A players in HR. They're the doers who are individual contributors. They just get stuff done. They don't get bogged down in process.

And so, in every organization, we said, “How do we slim down to the best people?” For us, the best people are defined by those who really want to come in and make a difference and learn and develop themselves, but don't need process to get there. No management layer, no slowdown; it's just people who want to get shit done.

And so that went through the entire organization, where we leaned up to just those kinds of people. Then you start looking around the room and you've got great people everywhere. Then you enjoy working at that company.

A players, what I've learned, can exist whether it is a back-office role, an engineering role, or a front-line revenue-generating role. But A players won't exist in bulk if you have a bunch of B's, C's, and D's around them.

Can I ask what role do you dislike most but have to keep?

So long as I have all people who are doers, who are really high-output, I don't dislike any role because it fits our culture and every part of that comes together to build the business.

But, as an example, if you look at our exact team, we have a CEO, CTO, CFO, and general counsel. We don't have a CRO, and we don't have a COO. Go down the list of other C-levels that people might have: we don't have a CMO, and we don't have a chief people officer. We don't have any of these roles.

CHRO.

None of these people.

CHRO.

No. What's the point?

I'm shorting the company. If you don't have a chief human resources officer, what are you doing? They manage the HR officer.

Yeah, yeah. They manage the next person, then the next person, to the next person, to eventually the doer.

The reason I state this is because we really built a culture of doers. It was very, very hard, when you grow up, to go from a team you started that was small and was a team of doers to eventually get large and go public. It's very hard to maintain that. We didn't until we ran through the layoffs and started leaning up.

Really, the catalyst for me was this guy who's now the CTO, Giovanni, came in, and he started looking around the organization and kept saying, “Why do we have these people? Why do we have these processes?” And it reminded me that the most important question to ask in business is why.

So he inspired me to go, “It's been 10 years. We're working with all these people. We have all these processes that we built over 10 years. Why do we have these things? Why is it that I have this person who has this title who means nothing?”

I went through the whole organization. We just went back to the founding roots and tried to go back to that culture of doers. The question “why” played a huge role in that, and we were able to get to a place where everything was leaned up to doers. So we no longer have a role or a layer that I don't appreciate.

7. Why Most Companies Can't Build a Culture of A-Players

I'm a CEO listening, and I want to have a culture of doers and a culture of execution like you have. What are the biggest mistakes you see other CEOs make who want this culture but don't have it?

I think it's really, really hard, if the train leaves the station and your team becomes bloated, to go backward. The reason I say that—and this is a challenge in software today—is it's not as simple as laying off 50% or 60% of people.

If the team is bloated and there's a mixture of A's, B's, and C's, your A's are probably already long gone, and what's left is A-minuses to B-pluses and then down from there. But it's people who like working in a process-oriented, bigger company who are sticking around.

If you go fire 50% of people and the culture and the team is mediocre, you're left with half mediocrity, and you're not going to get to where we hopefully are, which is just a bunch of A players who are doers. The only way to fix a culture like that is to go and fire 99% of people and just rebuild it from the ground up.

It's exceptionally hard to do. Not a lot of people understand how to do that because they don't know what they're looking for. And it's very, very hard to do that as a public company.

So I think it's challenging. People hear that this is the way to build things, and founders remember the glory days of 50 people in a room just building stuff and things moving incredibly quickly. It's not particularly easy to take a company that's gotten to large scale with a bunch of layers and a big exec suite and then take it back down.

Will the layoffs that we are seeing not result in the desired improvements from the CEOs who are making them?

I think if they really know what they're doing and understand how the company looked when it was highly efficient when it was founded, then it's plausible that it can get back to the roots. But if it's a company that's gotten bloated to the point of mediocrity and it's just, “Let's fire half and try to automate roles,” it's probably not going to get to the place that people think it should.

We are seeing a deluge of SBC, or stock-based compensation, at a level that we almost haven't ever seen before—I don't think in corporate history. How do you feel and think about that?

We've given roughly the same amount of stock every year in terms of absolute amount, and it's roughly $300 million. If you think about our market cap, I think our market cap's about $150 billion, so our burn on stock-based comp is very, very low. You can judge us on cash flow minus SBC, which I generally think is the right way to judge companies.

What's happened in tech, though, is that there's been an expectation that stock-based comp will be high at companies. As stock prices have gone down, especially in software companies of late, you have a downward spiral that's formed, where all of a sudden a company is burning 3% of their cap table every single year to pay out equity to the team. The stock falls 66%, and now you're at 10%.

And you're at a level of dilution that it's incredibly hard to come out from underneath. And so it makes it hard to bet on those companies when they're burning that much equity.

What I found—and what we implemented in 2022, when we fell a lot—is that certain people have enough compensation to not take risk on the stock if the stock's going to be volatile. We used to believe that every single person should have equity granted by the company.

Instead, we went to a place where we said the top 10% to 15% of the company will get equity and the rest won't. They'll have the right to buy equity, and there are ESPP programs that let employees buy equity at a discount if they so choose. Otherwise, they'll just be paid in cash.

And I remember when I first started my career, I couldn't have taken risk. I was basically going paycheck to paycheck, right? If you got 25% of your pay in stock and it went up, great—you feel great. But if it falls 92%, you're like, “Damn, I can't pay my rent.” That's a real problem, right?

So we took it to a point where people who had the luxury of being able to take upside got upside. Everyone else got cash comp. They had the decision themselves, and we controlled this burn. So we got into the position where it just wasn't burdensome to our business.

And I think companies tend to give away their stock too cheaply and too broadly, not understanding who actually can drive the value of the equity and also believing that the investors are going to be accepting of really high burn rates.

Why do you believe cash flow minus SBC is the right way to value companies?

I think cash is king. I like that it's simple. I look at accounting practices, and I look at EBITDA numbers, and what's clean EBITDA versus not. At the end of the day, net income and cash—these are clean things.

If a company generates $1 billion of cash but gives out $1 billion of equity and says, “I'm just going to buy my equity at $1 billion,” they're not generating any cash. So what's the real value of that business?

Either you're diluting and they're paying all the cash they generate to buy the equity back to offset the dilution, or they're building up a cash balance that just offsets the dilution.

So what’s the point of believing that the cash flow is real in that case? I think for me, it’s just distilling businesses down to the simplest metric, which is cash flow minus SBC.

8. What % of Applovin Code is AI? What Will it Be in 5 Years Time?

We mentioned the creative changes that are happening with AI and how that impacts output. Engineering is one that you’ve mentioned several times. How have you seen engineering productivity change with AI in the last year or two? Databricks, I think, released yesterday that 50% of their code is generated by AI.

Yeah, I mean, ours is a higher percentage than that, but it depends on how you think about percentage. Yeah, I mean, 80–90% probably, but that discounts quality over quantity.

I think what’s important is that if you just shoot for a percentage of tokens consumed, you could get to a place where you’re just creating slop. If you’re incentivizing slop, you’re not going to get very far as a business. You’re going to have massive fees to pay the large language model businesses, but you’re not going to get further as a business.

What’s important is whether your engineers are good enough to use these technologies to accelerate what creates value for the company, and whether you can measure that. It’s great to deploy an army of agents to go do your work for you, but if it’s unclear what the deliverable is, and it’s unclear whether that deliverable is aligned with actual growth in the business, then it’s just waste.

It’s easy to say, “Look, the percentage of code is high,” because truly, if you set off the agents and start writing code, they’re going to contribute more code than humans. But is there value created? Everything we do with a lean team is about trying to get to value creation. If you optimize to that, you get the most out of the agents without looking at the superficial metrics, and you’re more so trying to distill it to: was your investment in tokens covered by the amount of revenue that you created from the code contributed?

What does it mean to move to value creation? How do you do that in practice?

You have to understand the KPIs of the business that drive the business. Our organization was built pretty nicely for this, for the era that we’re in.

One, we don’t have a product organization. Our engineers are meant to be product managers. If you think about what’s happening with AI-native engineers today, they have to be really imaginative. They have to be product people. They don’t have to know how to write code, but they have to be able to audit code, because frankly, you can’t just type out what you need in a complex system and get a deliverable, and then it’s done.

They still need to be able to review the code and make sure what they’re checking in is safe and high quality. But first and foremost, they need to know what the business needs, and they need to know how to measure it.

Our business has a lean team, and when you push a model improvement, it is with certainty that it’s easy to see it reflected in accuracy numbers in the model and also in revenue growth in the business. The team knows what the KPIs are that they’re optimizing to. Because they know that, they can then align with what an agent or an army of agents is going to do on their behalf and try to get to that point of extracting the most value from the investment that we’re making.

I think it’s very hard in a lot of businesses to understand exactly what the KPIs are that we’re optimizing to. They just go, “Let’s write a bunch of things and see what sticks.” Then you’re walking on a slippery slope. You may have so much cost ballooning from token usage that you don’t actually get the type of revenue growth you need to cover it.

Can you talk to me about when you optimized for a KPI that turned out to be wrong and what you learned from that?

Our business is pretty simple, so I don’t know that we ever optimized to something that turned out to be wrong, because we’ve always optimized to the same thing.

There are 2 things that drive our business. If the model is more accurately predictive, it’s going to drive more revenue for the customer—the advertiser—than their media cost spent, and everything is measurable in our system. If that function holds true, revenue should grow as well alongside it.

Because everything is tracked in real time, and because we’ve always had a very consistent business model where we don’t sell the belief that something worked—we sell the actual fact that something worked, and we can measure everything—we ended up in a lucky spot where the business was built really well to be able to utilize the types of technologies that we’re seeing out there today.

You’ve said multiple times that it’s very easy to have massive spend on the LLMs and just blunt the AI slop being created. How did you think about the decision of whether to invest in your own model, as Harvey did and as Cursor did—TBD on how that goes, we’ll see—or use existing frontier models?

Yeah, I mean, look, we’re not an interface on top of large language models. There’s usage of large language models in the company for productivity. There’s some usage of large language models in our core business as well.

But a recommendation system model is something that drives engagement—what you see in content on a social network. It’s something that drives most advertising products in the world today: Facebook’s ad system, TikTok’s ad system, ours.

This is a space of machine learning that really hit its stride about a decade ago, and I would say really accelerated with some of the research that we’ve seen come out of the large language model space lately. But it’s a space where you can’t just defer to the large language model and say, “Hey, based on what you know about this user and the data I have available, what’s the next ad to see?” That wouldn’t work as well as a custom model built for this purpose.

In a world where you get to a place where you’re utilizing the large language model or building an interface on top, you better build a moat really, really fast, given how exceptionally talented companies like Anthropic are at releasing products on top of their own models.

9. Building on OpenAI: Opportunity or Existential Risk?

Do you think the majority of companies we see created today will be commoditized and eaten by Anthropic, OpenAI, and the frontier models? I would be very, very nervous if I were building a business as an interface on top of those companies.

What does your team use internally, engineering-wise? Cursor or Claude Code?

Most people are on Claude Code. Codex is utilized as well, and Cursor less so these days.

You have 895 people today. How many people will AI replace?

It’s tough to say. Again, it’s 400 people in the core business. We run lean. Is it going to be 800 in the core business? I highly doubt it. Is it going to be 50 in the core business? I’d love it, but I highly doubt it, too.

I think we’re sort of in a range that’s a good level for what we need and for what we’re doing today. Now, if some of the things that we take bets on over time work, we’ll need more people around other businesses. But if we’re just executing on our core business, it’s very likely we don’t need to go hire a whole lot more.

You said something about an execution team of doers. It sounds great, but it’s very, very hard to do, and you need great—oh God, I sound like a real corporate—but alignment. You don’t do one-to-one meetings. How do you create a culture of execution without one-to-one meetings and without the traditional corporate scaffolding?

Yeah, so it’s really interesting. I’ll broaden this out a little bit. One of my beliefs is that really good people figure out a way. They don’t need a whole lot of mentorship.

If people on my team directly report to me, I never do one-on-ones. I don’t do reviews. If I don’t like something they’re doing, they know about it in real time via chat. If I like what they’re doing, they don’t need to know. They know that I respect them, and they’re good to go.

Good people don’t need that type of handholding, usually. What ends up happening is that people who need a lot of development do need it, and those people aren’t the people that I want on this team of A players. We tend to shy away from a lot of traditional management techniques.

Another example of this is learning and development. A lot of companies try to structure all the onboarding and learning and development processes in a company to say, “You’re new at my company. Here’s how you should learn the business.”

I remember in school, I hated classes that were structured. I didn’t learn anything. You couldn’t retain it. I wanted to learn as I went. In my first couple of jobs out of school, I came in, I was curious, and I figured stuff out.

I’ve seen a pattern that our best people come in, ask questions, and figure things out. We don’t really have formal learning and development, and it’s completely disconnected from what you would expect at a company. But we don’t want to structure people. We want to get really curious minds who come in, who are loud enough to get what they need to get, and who can learn.

Now I’m going to tie it to the AI-native world today. The benefit of not doing things in these one-on-one silos and in a very structured way is that you can document everything in Slack or in transcribed video calls.

If you do that, any new person can come in and go, “Hey, Claude, summarize for me what Adam cares about over the last quarter and write me a book of everything that matters to him. Take the person who’s running the best sales calls, summarize what he or she does on those calls, and tell me what I should know for this job.”

Then you start asking these types of questions, and you start getting really good output, because all of the information is available to Claude. You end up getting a person who can actually develop themselves through curiosity and output from the models.

And that is a much more capable future employee than someone who was just told, “Here’s what you need to know.”

You said that transcribed video calls have a lot of quality data that can be used and summarized. That’s great. I believe in in-person strongly. How do you think about in-person versus remote and the value derived?

Yeah, at the end of the day, we’re a sales business talking to advertisers. So I do believe there’s a lot of value to building relationships in person. I think you do have a loss in the ability to feed that information into the model and show other people what you’re doing in person. So what we tend to do is believe the vast, vast majority of communication needs to be written or through a video call.

When you need to build a relationship with key clients, you go in person and you take them out. If you take them out in a social gathering, you can send notes into a chat around that client and have that as your history of the in-person meeting. But you can’t replace in-person. I think as human beings, as we go to this world where bots are going to do more for us, in-person is even more valuable.

I’m similar to you in terms of a focus on execution, and I get told that not everything has to be productive and sometimes being deliberately unproductive is almost productivity. Team drinks—I don’t want to do team drinks on a Friday at 5:30. Can we not bond over a whiteboard in a project that I’m being serious about, in a project that we’re working on? We all love what we’re doing. Can we not do that? Why do we have to go and sit and drink in a pub? But I’m told that’s productive culture-building.

What I found is that in the most productive moments with your best people, you get into heated debates, like yelling matches. And if you get really heated with someone and you go right back to, “Let’s just crank,” and there aren’t moments where you go out to dinner, have drinks, and get to bond, you sometimes lose the human side of things, and you sometimes get to a place where resentment can build and then things can become unproductive. When you remember that you’re just a bunch of smart people in a room trying to figure shit out, and you really remember that at something like a dinner or drinks, you end up creating, I think, productivity out of those moments.

The other thing I’ve found is when we go out and drink and start shooting the shit, really good ideas can come of that, too. It’s not that we’re going out with a bunch of co-workers and talking about baseball. We’re going out with a bunch of co-workers, getting drunk together, and talking about work opportunities. And sometimes your best ideas come out of those moments.

You also don’t attend conferences. Why don’t you attend conferences? How do you think about that?

That’s not true anymore. I do go to conferences now. When we fell 92% in 2022, one of the things we did on the investor relations side was—when you fall 92%, no one’s buying your stock—we said, “We’re going to buy our own shares, and we’re going to shut down investor relations, because what’s the point? Why do I need to go to a conference to explain to everyone who’s selling my shares to buy my shares?” You’re not going to convince someone to buy your shares when they’re convinced every day you’re going down.

And so I just said a better use of my time was focusing internally and focusing on the long term. It’s a bad use of my time to go to conferences. As a public company CEO, you are supposed to go to conferences. You’re supposed to meet with investors. So for a period of a couple of years there, in 2022 and 2023, we basically just shut all that down.

Eventually, when the stock started gaining traction and the market cap was really recovering, I realized those were key parts of the role. I like to challenge myself and do things well, even if they’re uncomfortable to me. Here we’re sitting and having a one-on-one conversation that will eventually air. This is relaxed, but going to a conference and speaking in front of a couple hundred people is different.

I’ve always had a fear of public speaking, and so I’m an introverted person who didn’t want to put myself out there. But what I realized is that now that we’re playing at higher-stakes tables, the company’s getting bigger, and we need to be out there. We need to be conveying what it is that we do so that people can understand the business model and can understand the prospects of the business model.

And so I started doing more conferences over the last couple of years. I think they’ve been rewarding because it’s challenged me to do something that’s naturally uncomfortable for me.

What else, other than public speaking? I’m just intrigued—what remains uncomfortable but you have to do it all the same?

Yeah. I’d say maybe the only other thing that comes to mind right now is that it took me a long time to learn how to delegate. This is something that I actually committed to in that dark year, 2022, as well. I was a very controlling, hands-on CEO for a very long time. I ran it; it was almost like all roads of the company went up to me. And when we fell 92% and I realized I wasn’t making great decisions for the business, I also realized other people were smarter at other aspects of the business than I am. So why am I not deferring to them? Why am I not delegating?

And so where I got to was I started stripping away my own roles. It was almost not that I was handing things off; it was that the rest of the team said, “I’m going to come in and just take these things away.” With Giovanni, I’ll give another example: he just started taking the product role that I had run and owned for a decade at the company. He took it away from me, and it was great because now I can ride sidecar and see what the team does, but I don’t have to be in the weeds.

And so it freed me up to do more strategic thought for the business long term, and it freed me up to do more investor relations. But it’s very, very hard in a controlling founder-type business to have the founder go, “I’m going to hand things off.” Those two things, I think—one internal, one external—were important for me to really see as flaws and try to grow and develop through them.

I think we’ve seen this prevailing trend of anti-delegation now, which is Paul Graham’s “Founder Mode” and the importance of being in the weeds on certainly a number of things that traditionally would be delegated. How do you think about the power of delegation, that importance of delegation, with the rise of founder mode and founders being told, “Go back”?

The whole notion of founder mode is an extreme reaction to extreme bloat that got created in most Silicon Valley companies over the last decade. If you’re in a company with a bunch of layers and a bunch of process, how do you reverse it? We talked earlier about how, with a team of mediocrity, you can’t reverse back to a team of high output. And so, in large part, the only way to reverse is to have a founder that takes control back.

But once you get to that lean team of highly exceptional doers, if you’re then controlling and not delegating, then what are you doing? You have a whole bunch of exceptional talent around you who, in theory, in their own roles in the business, are going to be more of a subject-matter expert than one individual who runs the business can be. In that case, delegation is very powerful.

10. The Dark Side of Short Sellers & Market Manipulation

I have to ask: there was a day when the stock fell 23%, and the caption here is “The Short-Seller War.” I’m just really intrigued. Short sellers have come after you multiple times now. Is there a flaw in the mechanics of the market?

Yeah. First of all, when you go down 92% in a year, you sort of learn to take your beatings. I’ve gotten to the point where that was a massive blessing: go public and immediately take that beating. You realize that the public markets are volatile and that there are things outside your control.

The short-seller attacks were not particularly surprising to me because we went from a low point of $9 a share to a high point of $750 a share in 2 to 2.5 years. That kind of a run-up—from under a $4 billion market cap to around a $250 billion market cap—I don’t know if any other company has ever seen that kind of value creation in that short amount of time in history.

Then you looked at the companies that were at our market cap, all names that people would recognize, and then goofy-named AppLovin. Nobody knows what advertising businesses do, let alone the goofy name. And so we sort of expected it because we weren’t out there promoting ourselves. We were just executing the business.

I think because we grew so quickly in revenue, profit, and stock price, we failed to put our story out there proactively. And therefore we were sitting ducks for people who wanted to create manipulation or a narrative to cause the stock to go down.

The thing I don’t like about short sellers and the way the market’s constructed today is that they can take a position, take a large bet on puts, or sell their research to hedge funds who take a large bet on puts and put overly dramatic articles out there to try to spook investors into selling off a stock. At the beginning of their short report, they’ll say, “We’ve most likely covered our short position by the time you’re reading this report.”

And so there is not only this massive financial incentive to make the post much more dramatic than necessary or real, there’s also not really any downside or protection against what they post. They don’t have to be accurate because they don’t disclose everything they do. On the other side, we—myself as a public company executive—we operate within the boundaries of the SEC. We have to be accurate in everything we say.

We cannot go out and be misleading in any statements. And so it’s very difficult to be in that position, unable to address these types of reports and get attacked by people who don’t have any sort of downside to what they’re posting and have quite a bit of financial gain to come from attacking companies that people know less about.

What it did for us was two things. One, our team understands volatility. Like I said, you go down by as much as we did in the first year post-IPO. The team that’s still there doesn’t have a problem with volatility, and most likely they have a lot of conviction in the business model and the path to the future.

Some of the team—it was funny, because you don’t usually want people posting responses, but some of our leaders were posting, “It’s funny that the short sellers, because we’re so good at what we do and the model that we built, can’t come up with anything other than that we’re cheating.” There was a lot of pride in what we built coming out from the team. So I knew that the team was sound and we were going to be able to recover from any sort of attack.

The second piece, as a forcing function, was that it required us to go out to investors and the market and do more to market the company and explain the business. In a way, it was a rip-the-Band-Aid-off moment for us when it comes to marketing. We had to make ourselves more available, and we had to be able to articulate what it is that we do in a clear way.

Was it a mistake not to invest in brand marketing and brand awareness before that?

Look, it’s easy to say in hindsight that it could have been a mistake. We grew really fast. Like I said, when you’re heads-down and working in a lean organization, you don’t necessarily think about all those things.

What was the revenue growth in year 1, year 2, year 3—just ballpark?

Honestly, I don’t remember the exact figures, but they were near triple digits each year. Our rule of 40 in the last quarter—I think it was around 150. Not only are we growing, but we grew around 70% year over year. We have, I think, 84% EBITDA margins.

The revenue growth since we launched the Model Axon 2 model has been astounding. The profitability profile of the business is crazy. The business is expanding without adding heads.

We have a very odd financial profile because when you look at it, you go, “How can a business have 84% EBITDA margins?” There’s not another comparable company in the world that looks like it. A lot of the things that we’ve been able to accomplish just don’t make sense to people. In a world where things don’t make sense, people think you’re cheating instead of realizing you’ve built one of the coolest technologies the world has ever seen.

As a team, and as the CEO of the business, it’s my responsibility to go out and explain the business. I owe it to my team, who have built this really cool technology, to explain the business. I also owe it to our partners in the industry. When people take shots at us, on the other side you’ve got advertisers who are buying on a performance basis. They’re spending billions of dollars a year.

We put out, a little over a year ago, that the scale of investment on our platform was an $11 billion run rate. We’ve grown a ton since then. So you’re talking about well over $10 billion a year being spent on a performance basis.

A shot at us is effectively calling all of these advertisers, who are spending at that large scale, a bunch of morons. So not only did I owe it to my team, I owed it to our clients to go out and explain our business and explain why some of the world’s best marketers are buying on our platform. Some of the world’s best businesses are growing really quickly and profitably on our platform, and our engineers have built really exceptional technology.

11. Do Great Founders Doubt Themselves?

Two things. You speak with such confidence. You said “shots at us.” Do you give a fuck what other people think about you?

A long time ago, I realized you can’t control that. So, no.

Okay, you don’t? Do you ever doubt yourself? If you speak with such confidence and such assuredness—dude, I want to fucking follow you. No, I’m being serious. I’m like, what? And this is very rare, but there are moments when it’s just you and your wife in the kitchen and your head is in your hands like, “Fuck.” Do you have a doubt or not?

Building the business, almost every morning I’d wake up thinking, “I’ve got to check the stats and make sure we’re still operating, or are we going to go bankrupt today?” In a way, I’ve always had this doubt that this is real, that what we’re building is going to last, and that what we’re building is going to be really big.

In essence, that fear of blow-up is one of my big motivators. I feel like I always have that doubt. I never feel like we’ve made it, and that pushes a lot of us to keep pushing forward because we’re in a very tough space.

Advertising is very competitive. Obviously, there’s a lot of technology that’s improving in terms of capabilities for our performance stack, but that also forces us to continue to be innovative. Otherwise, we’d fall behind our peers. If we ever get complacent, we’re almost certain to lose.

I always tell investors or the team, if at any moment I sound like I don’t have conviction in our future path, we’re sort of reeling. That would be a moment to doubt us. But I don’t feel that way because I’ve been doing this for a very long time. With the team that I’ve got working on these technologies, this product, this platform, and the opportunities in front of us, I’ve always had conviction that the future was going to be better than the past. That has kept me in a position where I can voice confidence in what we’re doing.

12. TikTok, Meta & The Future of Recommendation Engines

One of my very dear friends has built up a half-a-billion-dollar position in ByteDance, obviously TikTok’s parent company. He said one of the reasons is that they have the most advanced targeting engine in the world. Would you agree?

When it comes to engagement, creating the ability for a social network not to need any social interaction and still be able to deliver you fantastic content, the TikTok recommendation algorithm is quite phenomenal.

If you think about recommendation systems, what’s the world we operate in? On the one hand, the content you see on Instagram and the content you see on TikTok are very dialed in to what you’re interested in. It’s a constant loop, and it’s very interesting.

The advertising systems, too—the ads you see on Instagram have become very much like content. They’re highly relevant. The ads that we’re able to show consumers now are getting very relevant, and they drive action.

13. The Path to a $1 Trillion Company: What Needs to Happen?

As the technology, recommendation-system models, and, generally, AI models have gotten better, the capacity to serve more relevant, more targeted ads to the consumer—even knowing less about the person—has gotten so good that people are really able to use advertising to discover the products that they want.

We mentioned TikTok and Meta there. For AppLovin, currently valued at circa $150 billion in market cap, whatever it is precisely, but give or take—for AppLovin to be a $1 trillion company, do you have to be a social network as well?

No. If you think about what creates a trillion-dollar business, I said that cash flow minus SBC is a really important metric. If we ever got to generating $30–35 billion in cash a year, we’d probably be a trillion-dollar business.

You think about what can get us to that point, and there are a couple of things. One is continued execution in the domain that we’re in. We think we can get much bigger just by better monetizing the gaming audience. It’s a billion-plus daily active users who play these games—an adult audience, with a lot of heads of household.

The next thing you think about is how you expand what you have. In the past, I’ve talked about connected TV as one of the holy grails of advertising. If you can port the performance ads we serve on mobile to television, allow small- and medium-sized businesses to serve there, and make it all performance-based, that’s a really big unlock. It’s something we still take seriously.

Then you think about what other applications there are for the technology. We’re really good at the advertising model. We have yet to have a chance to have our team work on an engagement model. So a social network for us is not a requirement to get to a trillion dollars. It’s an interesting play to recruit talent and continue to tune our skills and modeling.

When you think about the research labs and any company that’s building models, they better have things that are interesting for new researchers to come in and work on—new applications of technology. For us, a lot of these bets will also be a means to go hire some of the best people in the world. If we execute on it, obviously great, but it’s not a requirement.

Elad Gil just tweeted, actually, “Compute is the currency of the future, and compute will be one of the defining factors that the best talent looks for when deciding which company to join.” Do you agree with that, and how do you think about that?

It depends on the space. Large language models obviously have the ability to scale with more compute, and therefore it is attractive to researchers to join companies that can invest a lot in compute.

If you look at right now, we can probably all say Anthropic is doing the best in terms of releasing models and products in the large language model space as of this moment. Anthropic probably does not invest the most in compute.

Yes.

14. Stock Buybacks: How to Do Them and When They Go Wrong?

If you think about that, how did they actually get really good researchers to create the best product output? They have really good culture and really good people, and they really tuned what they were going after.

The recommendation system space does not need as much compute to create the output that's necessary to succeed. So, it's quite different. You're looking for people that still want to solve really big problems and are very mathematically inclined, but there are different spaces in modeling. There are vision models, there are LLMs, there are recommendation systems, and there are others.

Depending on the product that someone is interested in, they'll go to a different company, and you've got people that like working on recommendation system models. They're not bound by compute; they're bound by curiosity and application of techniques to create a better output.

You mentioned the buyback that you did in 2022, I think it was, when the stock was very, very low. We've seen a wave of buybacks, whether it's Wix or ServiceNow, among many others—Salesforce, huge. How should we read these buybacks—a sign of internal confidence?

So, buybacks are interesting because if you look at history, the concept of a buyback doesn't usually pan out. It's not usually a good financial bet.

It's like a bridge round?

It's tough. So here's why it's tough: it's easy when you're inside a company to think you're cheap, but you sort of trade where you deserve to trade. And it's really hard to know when it's cheap enough.

When we went public during COVID, we didn't build a really big roster of blue-chip investors, so we had a very flimsy cap table. And then this led to the stock collapsing much more than it should have. When we went public in 2021, we had $700 million of EBITDA. A $28 billion IPO company goes to $40 billion. In 2022, we cleared $1 billion of EBITDA, so we grew 40%-ish in 2022. Yet, like I said, the stock fell 92%. We got to under 4 times EBITDA.

So why did that happen? Well, we went public in COVID and didn't attract blue-chip investors. So, our cap table was basically the private-market cap table that needed to sell. That's a really big problem. Most private companies probably have half their cap table as sellers.

And so, when we went and did our buyback, we didn't say, “Hey, we're just going to go to the market and take float out—take a share back from every single shareholder.” That would imply that even a part of my shares is getting bought back, right? What we instead did was go and say, “If you are a seller, please work with us to sell back to the business.”

And so we went and deployed every dollar that we made, and we even raised some debt to deploy more, and took back a lot of the shares on the cap table that were going to inevitably sell into the public markets over the coming months. By doing that, we were able to get liquidity to company folks, investors, old ex-cofounders, and other folks on the cap table that needed liquidity.

15. Is the SaaS Model Breaking? What Happens Now?

We were able to get them liquid, no problem. We were happy to do the trade, and we were able to take out that selling pressure. The fact that these folks were willing to work with us was a gift. They were willing to work with us, so we were able to take out the selling pressure and then, as the business started accelerating, remove the selling pressure and overhang. Then you're set up in a position where you can now go attract the right investors.

Give or take, how much money did that buyback make you?

Probably, I'd say, based on where we're trading today, roughly a third of the company's value came from that buyback.

So you said $150 billion, roughly. So let's call it $50 billion, around. Well done.

Yeah, it was a good buyback.

Now, just buying out of the market, just buying your float back, it's not a good bet usually because—

Wix—I really like the Wix team. Great and lovely people, but gosh, you do a big-ass buyback, and then it's down like 25% in a week.

And that's the problem: you start doing the buyback, and if you're not right, you don't time it well. None of us are day traders when we're running businesses. You can burn the capital that you made really quickly, and then you're in a much worse spot.

You said people trade where they deserve to trade in a lot of cases. Is the SaaS apocalypse fair, then? As an investor, if I was one, when you get into an unpredictable outcome in the future, it's very easy to sell businesses, and the rapid rate of product delivery in the large language model space makes a lot of traditional enterprise SaaS companies hard to bet on years into the future. So, what happens?

Terminal value is dicier. So, you value the company less; you get out. Their stock-based comp was high, but it was an acceptable percentage of total value. The stock tanks, stock-based comp becomes too extreme. Now they're in a position where not only are they going to lose their edge, they're also competitively challenged. So, you're in a really bad downward spiral.

So, in a way, I would say not only is it fair because of the risk that exists, I'm not sure it's actually done yet. Again, I'm not a trader of businesses, but I do think we're going to go through material changes in the market, especially when it comes to enterprise SaaS, over the coming years.

It may not be that these companies that we have today as some of the SaaS leaders are completely going to wipe out, because I don't think that happens. Companies, once they're embedded with you utilizing certain software, usually don't change. But it may be that a lot of the growth opportunities are gone for these businesses.

And you strip out growth opportunities in businesses—I mean, the reason we went and traded down to under 4 times EBITDA is because investors did not believe in our future growth prospects. And when you're a public-market investor, you only like to bet on companies where you have sound belief that their future is going to be a lot rosier than the present. It is very hard to believe that right now in traditional enterprise SaaS when these large language model businesses, the frontier models, continue to get so much more powerful.

You mentioned the material changes there. What do you think the most material changes will be in the next few years?

The rate of advancement is astounding over the last few months. You see the amount of products that are rolling out. It's like every day there's something new. So, I think the coolest thing that we're seeing right now is, for people who know how to utilize it, the ability to just launch an army of agents to do certain tasks, and obviously coding is the most obvious utilization today.

So, if you see that today and believe we're already at a point where the army of agents can continue to start improving the code that's available to them and the products that are available to them in a recursive way, the rate of acceleration of technology and R&D and our imaginations becoming products is only going to get faster. Where does that lead us? I don't know. But I think it's going to be a much more productive future than the present.

I mean, we mentioned engineering again. You said you don't have a product team, so to speak. How do you think about the org chart today and how that changes over time? Do we lose product as a function?

Yeah, we chose not to have it because we wanted to have exceptional engineers that understood the product. The belief was, if our engineering team is writing the product that delivers revenue, our sales team and all other teams are effectively cheerleading for the engineering team, making sure they have what they need and then eventually going out and selling their product. But we can only sell the product if it's good enough to be sold.

The engineers, if exceptional, better be good enough at understanding the product that they need to build to go build it. And so, I do think the role of product should end up looking a lot like it does at our company over time. That is, either your product people become engineers or your engineers become product people, but you don't need both.

And so, what usually happens is whoever becomes AI-native and knows how to utilize these tools will become those powerful 10x, 100x-output folks who know how to use the tools to create that kind of output.

I do think for some time still, though, you're going to need an engineer doing the work and still making sure that the code is up to security standards, the code's not slop, and the code is good enough to contribute to your main codebase. So, there's a lot that still comes from having a traditional engineering background that's valuable in today's world.

Every day it feels like we have another major security breach. We've seen Lovable in the last 24 hours. We saw Vercel in the 24 hours before that. It goes on and on and on in the last month. To what extent are you nervous that models like Mythos [?] will unravel vulnerabilities that were previously unseen and went unseen, and we have security be the biggest problem?

Well, look, obviously there's a risk there. Now, you could say, is Anthropic slowing down the rollout because they don't have the compute? Is Anthropic slowing down the rollout because they're really concerned about the risk? It's probably somewhere in between. There's obviously a risk, though.

These models—one of the things they're built for is to audit code, expose any vulnerabilities or bugs, and solve them. And so, you would hope that we will be a lot more buttoned-up on security in the future than we are today. But because of how quickly these models are just getting exceptionally good, it's almost certain companies are going to be releasing code faster.

When you release products faster, you ship fast, you break things, and because of that, you're going to have more security breaches, most likely. But once you get past that point, you're probably going to be at a point where the technology is a lot more buttoned-up than it was before.

What is no one talking about that you think everyone should be talking about?

I do think there needs to be a lot of honesty around what the world is going to look like as these AI technologies continue to get more powerful. If every technology company could stand to lose 75–80% of its talent and get more efficient, what does that actually mean? Does it mean that there are going to be 10 times more startups? So the startup funds are going to be crushing it, people are going to be way more productive, and we're going to get way more product in the world. Plausible.

I'm a believer that the technology unlocks a lot more output, and our ability to imagine things, create, and then go and create becomes not only cheaper but much more believable. But it requires people to really level up. I think we need to be honest about what the path is going to look like, because my guess is you're going to see a lot more tech layoffs over the next couple of years as companies really start understanding that not laying people off creates a blockade to actually getting to this AI-native state.

Did you find it hard that, in a year where you have triple-digit growth—a stellar year—you're laying off such a large portion? I really like and respect you, but at that point, that's a choice you don't need to make.

Yeah. Look, again, are you playing to win, or are you playing not to lose? I feel like we're very, very transparent with our employees today. Anyone asks me, I'll say, "You're here because you're an exceptional talent." What does that mean going forward? You use these technologies to create more output. You become AI-native. You're going to have a role here. If you avoid utilizing these technologies, you're not, and you're going to get fired. That's life.

We demand that the people who are at the company are adopting these technologies rapidly to create more output. But we don't shy away from difficult discussions, because if they're not able to do that, there's a role somewhere for them, but it wouldn't be at our company.

Totally get that. Final one before we move to a quick-fire round is just on budgeting. Token budgeting is one of the biggest questions for leaders. How should I think about it—actually planning it and forecasting?

Yeah. To my point, I think it's flawed logic, because if you just throw a budget at people and you create a leaderboard of token usage, what are people going to do? Create a bunch of crap that has no value. All of a sudden, you burn your budget, you're paying really big checks, and you don't have revenue on the other side of it.

Companies need to get to the point of understanding what they're actually optimizing to, and who's utilizing the technologies and creating token consumption that actually aligns with those KPIs. When that happens, you won't be in the mindset of token budgeting. You will want to invest in tokens because there's revenue on the other side of it.

But I think today, people are just blindly going, "Spend a bunch of money, get on the leaderboard, use the tools, and something good's going to happen." You better be able to measure that; otherwise, you're going to get a lot of bad behavior. It's no different from companies that staffed up to very, very large team sizes and bloated teams over the last 10–15 years in the Valley because they had the means to, and it was, "Let's just get on a hiring quota."

Token quotas and token budgets are no different from hiring quotas. Until they get efficient, they'll be inefficient, and I think a lot of companies will just burn money.

I care desperately, before we do a quick-fire round, about being the best that I can be and being number one in my business. I also want to be a parent. What is the uncomfortable truth that I should hear about being a parent and trying to be the best?

I think it's really hard. As human beings, in order to become really good at something, you have to focus on it and you have to put out a lot of effort. At least for me, I'm not all that great at multitasking.

Being a parent is a really difficult thing. If you are a founder running something and you want to become the best—you want to be the best podcaster; I want to become the best in advertising, with my team leading us the way there—to do that, you need to prioritize that task. The second you do that, in essence, you're deprioritizing the task of being a parent, being a husband, and being a good person in your personal life.

It requires having a family that understands the commitment you have to the day job, and it requires a balance that's really hard to attain.

What have you missed that you regretted?

As you do what you do, a lot of times you're not really connected to reality or to what's happening around you because your mind is wandering. My mind is always on business. Even when I dream and I wake up, it's something about business.

I think back on moments when the kids were growing up, and it was sort of a blur, and I go, "You know, was I just not there?" I was there, but I wasn't there mentally. It is not a great thought when you have that.

16. Quick-Fire Round

On the other side, I do it because this business, which became much bigger than I thought was possible, means a lot to me. Figuring out that balance is really hard as human beings. I think it is a challenge. It's one that I'm still working on. I think it's very, very hard to accomplish being really good at all facets of life.

The ultimate challenge. Do you mind if we do a quick-fire round?

Yeah, go for it.

What have you changed your mind on most in the last 12 months?

I don't know if I've changed my mind much in the last 12 months. When I hit that low point in 2022, I got to a place where I said, "I'm going to think forward about what I do professionally, and then maybe this translates to my personal life, too, and I'm going to plan out 3–5 years and work back from it."

When you think about the current year—12 months—I feel like whatever is happening now is defined by the decisions we made in the past. Therefore, nothing that I do today is going to change an outcome in those 12 months. What I'm thinking today, or trying to execute on today, or starting to research today can change an outcome 1, 2, 3, 4, 5 years down the road.

But because it's still undefined and you're in that moment of, "Huh, I think this is something interesting," it's very hard to challenge that thought. If you believe in it and you've got conviction in it, you just run with it. I don't know that I would change anything that I've thought about in the last 12 months because I don't yet know what's going to happen from it.

Who do you not have on your board who you would most like to have on your board?

That is a tough question for me, too, because I think we have a pretty well-constructed board, but I don't have a lot of experience with boards. When we were private, from 2011, when we started the business, to 2018, when KKR invested and we got our first 3-person board, I didn't have a board. I just ran on my own and ended up deciding and making choices as I saw fit. Obviously, I would consult my co-founders and other people on the team, but there was no board because we were a bootstrap business with just a convertible note round.

Then we had a 3-person board. Now we've got quite a bit bigger than that, but not that much bigger than that. I think it's 8 or 9 people, if I recall. We have a really good composition of people now. The people around the table are a mixture of people who have worked at the company, know me intimately well, and are supportive, as well as people who have really good business instincts outside of us who bring great things to it.

I actually recently stepped aside as the chairman of the board to hand it over to this gentleman, Craig Billings. He's CEO of Wynn, one of the smartest people I've ever met, very, very competent at building businesses and understanding corporate governance.

I felt like my job is to run the business, and I don't want to be consuming my own time on anything other than day-to-day operations. The board is something that I've got to really work with and allow to be pulled into the business, contribute back to the business, and work with me on the business. But it's not something that I'm going to be good enough to be the chairman of, versus someone like Craig, who is exceptionally talented at all aspects of building a big business.

I felt like that trade was a good trade. It's not common that you'll see a CEO step aside as chairman, but I've always believed that in every role that we all do, whether it's me or someone else on the team, if there's someone better to do it, step aside and let them take over. That's something that allows you to always be leveling up.

How do you feel about founders investing?

I don't invest anymore for a couple of reasons. One is, in order to invest, you've got to sell shares in your own business to have liquidity to go invest. Again, if I didn't start this business for money, I don't know what I need to invest to create more return on.

If you're an investor, you hopefully really want to create return or impact or something that is a KPI that you care about. But the second you care about that KPI and you chase it, you're selling from your own core business to go diversify. You're not focused on your day job.

For me, my goal in life is to make my company as good as it can possibly be 3 years from now, 5 years from now, 10 years from now, 20 years from now. If I plot into the future, every second of my available time should be committed to it. Otherwise, there's some loss.

I don't know what that loss is, but if I get distracted by other things, there's some loss that I can't measure. As those losses start adding up, they can compound, and they can make it less likely that you succeed.

What decision with AppLovin would you do differently, knowing what you know now? You mentioned the weakness of your cap table there. That struck me, and I was like, do you wish you had delayed it then? There's never a good time to go public.

So, I don't question the past because the past makes up where you are in the present. I've made a lot of decisions. A lot of them end up wrong, but we pivot and learn from them.

We went public at a very difficult time, towards the tail end of the growth stock run-up during COVID. As COVID ended and usage patterns returned to what they were pre-COVID, everything collapsed in growth stocks, in particular those late-market IPOs. So you could say, okay, we didn't time the market right.

As you just said, there's no right time to go public. I also think the learning for us and anyone going public is that the moment in time is like a Series A, Series B, or Series C. It's a fundraising route. You have a business that has long-term growth opportunities that you have high conviction in and that can be big enough to be owned by anyone in the world, and interesting enough to be owned by anyone in the world.

In a world where there's no right time to go public, you can't time the market. Just go public. You take the capital you raise, and you build forward. Really, what's important for me running the business is that I'm not focused on where the stock's going to be next quarter.

3 to 5 years from now, we better be higher than where we are by enough so that I feel like people made a good return on investment owning our shares today. They better make more on us than they can make by owning the basket of the S&P, just putting their money in debt. If they make a good enough return on us over the next 3 to 5 years, I feel like I did my job right as CEO.

And then they need that in the next 3 to 5 years and the next 3 to 5 years after that, but we owe it to investors to make them a return greater than what else they can put their money in.

Finish this sentence: The advertising business that is most at risk from AppLovin in the next 3 years is...

Tough question to finish the sentence on, because I don't think it's any one. We build a business trying to better help an advertiser reach a consumer and drive a transaction inside this gaming audience of 1 billion-plus daily active users. We're trying to create incremental transactions.

When you do a performance marketing platform, we're not trying to take from others; we're trying to give an advertiser the chance to spend $100,000 a day growing your business today, spend an extra $20,000 a day with us, and create more transactional volume. Don't take from anyone else.

Take your $100,000-a-day investment in a business that might have $300,000 a day of revenue with it, and add another $20,000 of media spend. Get to $120,000 and get to $360,000 in revenue. Your business grows 20% by investing an extra 20% in our technology, our platform, and our audience that you otherwise weren't accessing in that moment.

I'm going to steal from another podcaster who's actually a friend of mine, but, yeah, “great artists steal” is another kind of quote. It's a really nice question, and it's the final one: What's the kindest thing that anyone's ever done for you?

It's a weird one. Look, maybe kindness is in those dark moments, whether it's my wife, a close friend, or people checking in on me. The reason I say it's a weird one is that we don't tend to push the word kindness around very often at the company. We believe in pushing forward in an aggressive fashion, almost cutthroat.

Do you worry that you're too aggressive? I think, candidly, some people will listen to this—and I get in trouble for this—and they would say that it's exclusionary because it's too aggressive.

Yeah. I love being aggressive. If you check with people who've come across me, you'll get half the people who say I'm very aggressive and sort of like it; half the people will say I'm an asshole. They'll all say I'm competent.

On the one hand, it sort of checks the boxes I care about. People think I'm competent. Great. But the reality is that being aggressive can rub people the wrong way.

I found—and the reason I just reacted a little awkwardly to the kindness point—that if you're too kind and not as direct, not as aggressive, you're wasting time. In a world where time is limited and you can't quantify the loss from sugarcoating things, I'd much rather be aggressive and rub some people the wrong way and surround myself with people who want to push hard than really be surrounded by people who care so much about kindness that they're willing to slow down.

Have you ever rubbed people up the wrong way and regretted it?

Not really. I guess I just don't think about it much. I don't live in much of a world of regrets because I live in a world of almost short-term memory. I make a lot of decisions, and a lot of them end up wrong. I optimize to go forward.

Same thing with interpersonal relationships. I really do want to be surrounded by people who are great, who I can work with for a long time, and who I can become friends with. I would love to be surrounded by a core group of family and friends for a very, very long time. As long as I'm here around all of that, when you're moving fast, you're certainly going to rub people the wrong way at times and you're going to miscommunicate.

You're going to do something wrong. But if you live in fear of that and allow that to impact your pace, you'll slow down. I'd rather just go fast and know that that's a risk. It is what it is.

It's so funny. I do so many shows. I've done so many shows; I've done this for 11 years. But you feel really good about shows when you're doing them. For the first 5 minutes of this, I was like, “Oh, this is going to be good.”

What's really hard, actually, is to keep it really good, and people don't think about this. It's very hard to keep quality with the length of a conversation. You were exceptional. Thank you so much for doing this with me. Thank you for doing it in person. I've loved this.

Awesome. Thanks for having me back. It's cool doing it 4 years after we first met.