Inside Bending Spoons: Finding Talent, Leveraging AI & Driving Operational Excellence | Luca Ferrari

So, we're going to start this episode in a locked-in stance because we've just been talking off camera, and I was like, “God damn it, we need to start recording immediately.” I didn't even want to start here, but you noticed the AppLovin mug, and then you were like, “Oh, Foroughi.” Then you laughed. What do you think of Adam Farugi?

He's great. Uniquely focused and ruthless—and I mean it in a positive way. When there's a goal, he goes for it. Very rational and effective. I think he's 10 out of 10 in those areas.

When I published the episode that I did with him, I think I titled it “The Best Founder No One's Ever Heard Of,” because at the time he was running a roughly $150 billion market-cap company with about 400 employees, and they were printing about $6 billion in cash. He lays out exactly how his success works. We were talking about fanaticism before we started recording, and he's just fanatical. The success of his company goes before almost anything—or, no, it does go before almost anything—in his life. He's completely obsessed and committed to excellence.

I think you share that trait with him. We had lunch together probably 6 months ago, and I talked to you right after. I was like, “Man, you've got to do the show,” because I know a lot of founders. I don't know any other founders who think like you.

1. Luca on building the best company there ever was

One of the things you said that I think everything else—all the other ideas—flow from is that you want to be the best in the world at what you do, even if that's not possible. Can you talk a little bit more about that?

I've always been kind of polarized in my interests. I either choose to do something and then I'll try to max that out, try to be the best or part of the best team, or I will try not to do it at all. If it really has to be done, then I'll literally try to just check the boxes for minimum commitment.

All sorts of rewards, emotional and material, are at the extremes. I think I have a close-to-10-out-of-10 relationship with my wife. To me, that's worth 100 times more than having an adequate relationship with my wife. It's the same with my job and my colleagues: trying to build the best company there ever was.

We understand that's aspirational and likely nearly impossible. But I think if we get close to that accomplishment, the rewards—the fulfillment, the satisfaction, the learning along the way, and the financial rewards—will be exponentially greater than just doing well enough. You have limited time and energy. You want to find one or very few pursuits to try to go all out on, and everything else, keep it eliminated if you can, or keep it at the bare minimum.

You just said you're trying to build the best company there ever was.

Yeah. Again, just aspirationally—don't take it as arrogance. I know we have a slim chance, but waking up in the morning and thinking we're not building a nice church, but trying to build the greatest cathedral that anybody has ever built, that's a lot more exciting to me. It gets you further. It's more fun and energizing. Better people will want to work with you.

I think one of the big ways in which life is interesting is surrounding yourself with amazing people—better people than you are, if possible.

Do your co-founders feel the same way?

You'd have to ask them. I think we probably, for the most part, I'd say, yeah.

Is this something that you guys repeat to each other throughout the company—that you're trying to build the best company ever?

We're not big on founders. I know this is maybe ironic to say, given your podcast, but we try to eliminate the idea of “founder” from this company as much as possible. We think it distracts people from the company. The company is the center, and whether you're a founder or you joined a little bit later, all that matters is your contribution, your trajectory, and the people at the company.

The people I know best and with whom I work most closely, regardless of whether they're founders, broadly share this ambition. So, yes, but it's not necessarily a founder thing; it's more of a Bending Spoons thing.

The way I've been describing you to other founders is, it's almost like Luca is the gold standard of entrepreneurship, right? Because, if I'm not mistaken, when we were talking, you were like, “Well, I don't really listen to podcasts. I didn't read books. I didn't study other entrepreneurs.” You've evolved the way you build your company completely independently of anything going on around you.

Yeah. I think part of that is—I don't know how much the audience knows about Bending Spoons, but we started in Copenhagen, Denmark, and quickly thereafter moved to Milan, Italy. These are not exactly—and certainly Milan, not exactly at the time, over a decade ago—a center of entrepreneurial pursuit or an ecosystem where you turn left and right and have all these other startups, advisers, and whatnot.

Of course, we were absolute nobodies, so it's not that we could pick up the phone and call Jeff Bezos, right? We just had to figure things out on our own.

We were trying to build, aspirationally speaking, the best company in the world. If you emulate what most people are doing, you're pretty much guaranteed to, at best, be mediocre—mediocre plus, maybe you execute a little bit better. But if you want to try to be the best of the best, you need to take some risks and rethink things.

So we figured, okay, let's try to experiment, invent, and think from first principles. We will make more mistakes and it will take longer than if we copied some of the tried-and-tested approaches, but we should be able to find at least a few insights, a few new ways that will set us apart.

2. Logic over numbers

I think being more isolated geographically has probably played to our advantage in that regard, so that we weren't under the influence of the mantras that everybody in the big startup hubs was preaching over time.

3. Talent and why experience is overrated

Let's give a little bit of background on Bending Spoons. You had a startup before Bending Spoons that failed, right?

Yeah.

Okay. What did you learn from that failure, and what lessons did you learn that helped you start Bending Spoons?

That was called Evertale. It ran from 2010 to 2013. We were using AI to write diaries automatically. You would install an app, and then it would collect data and figure out what you'd done, where you'd gone, and whatnot. It was actually pretty cool, but we never managed to make it scale. Commercial failure.

Some of the most crucial lessons were, number 1, the importance of talent. We had a very small team—at its peak, maybe 12 people—but we saw that the contribution of the best person we had on the team, relative to, say, the median person—forget about the bottom—was easily 10 times as great. Literally worlds apart.

That taught us that the range of productivity, at least in our field of digital technology, is massive. The value of having that sort of individual on board is gigantic. Also, that person who was performing at the peak in that group was actually one of the least experienced people.

That showed us that experience is certainly valuable, but not as critical as people sometimes tell you it is. If you have someone who's really smart and really cares, often they'll be able to deliver as much value, if not a lot more value, than someone with a lot more experience.

Let's give a concrete example. I'm just going to pull up the notes. When we were having lunch, I was like, “Oh, this is too good,” and I started texting on WhatsApp. I think at the bottom I say, “These are notes for when you do the show,” even though this was 8 months ago or whenever it was.

Let's talk about the Evertale story in one second. You mentioned something interesting. You said, “I'd rather hire young graduates, find someone good, and then saturate their capacity.” You said most executives are overvalued or overrated, in your opinion. Can you give examples of how you've done this?

Why talent, let's say, over experience? I think there are a few reasons for that. Number 1, most of the things we do—and, broadly, most industries, certainly the technology industry—are not rocket science. They do not require immense amounts of notional knowledge and repeated, extensive track records. They require, actually, a good brain and a desire to do well, to achieve, first and foremost.

Also, our field, technologically but also in terms of customer expectations, evolves very quickly, so experience gets stale relatively fast.

Wait, before you go on—sorry, I'm going to interrupt you. Explain more about how customer expectations evolve rapidly in your field.

Yeah. I'm not sure how it works if you sell software, but when it comes to selling technical tools, what people consider excellent today—whether that's an intuitive interface or effective monetization—is very different from what things looked like 10 or 15 years ago. Completely different.

I'm sure at least the people in the audience who are at least, I don't know, 35 years old will remember what software looked like in the early 2000s. By today's standards, that's primitive and almost unacceptably bad, and people would never use it or buy it. And the ways you build that software…

But behind the scenes, how you efficiently wrote software in 2010 bears very little resemblance to how you do that today in 2026. Whatever people learned back then, some of it will port. I'm sure you are more mature emotionally and know how to work with others, but a lot of that experience you can basically throw away.

The value of accumulating many years of experience is not as great, I believe, as some people think it is. Additionally, not all experience is created equal. You can actually get worse through experience. If you're exposed to low standards of performance, for example, you'll normalize those over time, and you'll actually be a less capable team member than someone who has never been exposed to any standards and perhaps naturally believes that the bar should be held higher.

If you've been working for a long time in an organization where the way to progress and succeed is by pleasing others and doing what they tell you to do, even though you don't necessarily think it's optimal for the organization—call it politics—I don't know that that experience will necessarily make you a lot more capable if you, for example, join a company like Bending Spoons, where I'd like to think we're a radical meritocracy and try to be rational in deciding and doing what's right for the company.

For all these reasons, experience can be extremely valuable, but it's not necessarily extremely valuable. Talent—meaning a good brain and a massive eagerness to excel, grow, and make an impact—never fails to be valuable. In a competitive labor market where you can't have everything at the same time, you need to prioritize.

We tend to favor talent also because we can give you experience. We just have to be a little bit patient, make sure we expose you to good challenges, and surround you with amazing colleagues. You'll accumulate experience very quickly.

First principles, really. Based on those anecdotes and observations during the first company I co-founded, but also at Bending Spoons in the early days, we repeatedly saw that that thesis was supported by facts. We kept investing, first of all, in attracting excellent talent and then in creating, ideally, the perfect conditions for that talent to flourish very quickly.

Of course, you need to establish your structure and operations to get the most out of the human capital you have. I would build a company differently if I had to work with inferior talent, because we believe we have amazing colleagues.

Well, say more about that. How did you build the company?

If you have mediocre talent, then I think the appeal of process and procedures becomes greater. You need more checks and rules because you need to provide more guidance. You can't count on people to problem-solve autonomously as much, and you can't count on them coming to work with as much fire in their belly.

We sometimes say that process and procedures are terrible, but honestly, they can be the lesser evil if you're in that situation. If you're lucky enough or good enough, for whatever reason, to have a very strong team, then generally speaking, you want to have as few rules as possible.

It's not that processes and procedures are always bad. There are cases where you want to have some of those, but to the extent possible, get rid of them. Give people massive leeway to express and develop their talent. Make them feel trusted so that they will bring the best of themselves to work, and that will be good for everybody.

They get to do better work. They get to learn a lot faster. Their careers can be turbocharged. But again, that only works if you have a very good team.

I suppose it's probably similar with sports. I would imagine that how you coach—and I'm going to the extreme; I'm not saying Bending Spoons is that—but if you were coaching the Team USA Dream Team with Jordan and Barkley and those guys, you would do it a certain way that would be different from the way you would optimally coach a team of modest talents.

You can probably win with both. It's a lot easier to win with Jordan, but certainly you're not going to tell your more modest talents, “Go and figure it out.” You'll try to give them a system that's a lot more guiding.

We try to approximate the Dream Team as much as possible, aspirationally, and then give people a lot of space to live up to expectations.

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4. Turning hiring into a science

Okay, but go back. How do you identify talent when that talent doesn't have experience? Have you done that?

I think you can think about life in general, when it comes to people and accomplishments, as a combination of certain inputs that you control—how much you work and what you do, for example—and a bunch of elements you don't control. Those boundary conditions are sometimes knowable and sometimes unknowable, sometimes fixed and sometimes shifting. The combination of those ingredients leads to outputs or results, call it what you will.

Outputs and results are fairly easily observable. Sometimes there is a gigantic amount of inputs that go into achieving a certain output, and those inputs go into it for a long period of time, whereas the output can be very simple. The company achieved a certain amount of revenue, or you won a certain tournament, no matter the field.

It's a lot easier to just look at the results, the outputs. It's the convenient, sometimes lazy, way. But life, typically, in most pursuits and most endeavors, is so complicated. The amount of inputs, the amount of people contributing different inputs, and the amount of variables you don't control—those boundary conditions are such that if you just look at the outputs, sometimes you get a massively distorted picture of what the person contributed.

A lot of it could be luck. A lot of it could be actual human performance, but not by that individual—by someone else you failed to know was involved, who maybe wasn't as front-facing.

The more extensive someone's track record is, the more results are likely to correlate with actual talent. Take an investor. You can get lucky for 1 year, 2 years, or 4 years, but it's unlikely for 30 years. I don't think anybody would question that Warren Buffett is almost certainly insanely good at investing.

You can never prove it definitively. You could have been lucky for decades, but that's astronomically unlikely, right? But if you find any hedge fund that delivered 50% performance in any given year, it could easily be that they got lucky with 2 stock picks.

Maybe those were terrible ideas. Maybe they picked them for the wrong reasons, but whatever—the boundary conditions changed and they made a lot of money. When you pick someone who's very experienced, with decades of work, probably you can get away with just looking at the results and making some reference calls. Very likely, you'll get a reasonably accurate assessment.

But if you have to pick someone who hasn't even graduated yet, or maybe has been in the workforce for 1 or 2 years, then you don't have the luxury of using this. The sample is too small, and so you need to find different ways.

Something we do is make extensive use of testing. We develop tests that people go through that we've found over time to proxy their mental capacity and faculties pretty well.

For example, we've really built a science out of studying people's track records, including academic records, personal projects, and similar things. In some applications, we identify over 100 different signals, and through those we predict their long-term potential.

It's not entirely dissimilar from what an algorithmically oriented stock trader would do. The more quantitative hedge funds identify and test hundreds or even thousands of signals. Many of these are only marginally predictive, but in aggregate, they make you predictive enough that you can succeed because you're just better than others.

We have all these signals, some of which are completely obvious. Someone's GPA tells you something. A higher GPA is better than a lower GPA. It doesn't prove anything, and it's not definitive, but it's a good sign.

Some are more subtle, and we keep working and investing scientifically in identifying and measuring these signals.

So, over time, I think we have developed a competitive advantage in finding people who, despite their minimal track record, are very likely to excel.

Okay. This is one of the things we talked about at lunch, and one of the things I texted you, where you essentially said that not many companies have brilliant people in HR. You were like, “No, you actually need brilliant people in HR.” You said that you can make hiring a science, that at the time you had a team of about 50, and that these were engineers—not typically people you find in HR, right?

You said you compare 1, 2, or several years of performance with the signals from their CV, which is what you just described—those 100 signals—and that you centralized hiring and firing. I guess you call them talent managers, and they’re in charge of both entries and exits. The hiring and firing is centralized for all the companies that you own.

Yeah, it’s very unusual. By the way, the signals are not just from the CV. They could come from email exchanges with our recruiting team, from the tasks we ask a candidate to complete—anything really qualifies as a signal. We just care that it’s predictive. It doesn’t have to be something that intuitively makes sense, as long as we can prove it’s likely not a statistical fluke, but actually—

Give me an example. I’m a little confused.

For example, one of the qualities that we value in people is collaboration, because what we do is such a team sport. You need to be somewhat collaborative. You don’t have to be the nicest person in the world, but if you’re arrogant, dismissive of others, or just an ass, that typically doesn’t work unless you’re a freaking genius. We might accept it occasionally, but almost nobody is. For most people, you need to be nice enough.

When they’re interviewing—especially because they’re smart and have already passed the more cognitively oriented test—they’re generally quite nice because they know that if they come across as super arrogant, they’re not going to get an offer. We found that whether the interviewer felt the interviewee was open to criticism and reasonably pleasant to talk to wasn’t a good predictor of whether they actually collaborated on the job.

We have a role that’s almost like customer support: people who help with the logistics of your application process, such as scheduling interviews. It’s more of a support role, which clearly does not come across as being connected in any way to the final assessment. How people interact with those people is a lot more predictive of how they actually are as human beings.

We found that people who were curt, and sometimes even disrespectful—although that’s rare—ultimately predicted poor behavior in a social context much better than how they interacted in an interview. Again, that’s 1 of hundreds of signals. In and of itself, it’s not definitive, but it helps form an accurate picture at the end of the day.

That would be for collaboration, but then we would have other signals for a hardworking attitude, whether you’re creative, whether you’re logical in your thinking, perseverance, and so on. Identifying what’s important is not rocket science. You can imagine what’s important to performance. The difficult part is spotting it through these subtle signals.

The interesting part is that you just said—how many companies do you own right now?

We’ve bought a little over 50 businesses over time.

But you could see that if you own 50 businesses, there are multiple different ways to organize it. You’re kind of like a conglomerate. Hiring could be pushed down to the individual company level, and you’re like, “No, no, this is so important.” In the talk I had with you, you said it was all that matters.

I was going to say maybe the most important. You just said it’s almost all that matters, so it is the most important. I’m going to centralize this. Does centralization also allow you to take the insights you learn from 1 of the 50 companies and disperse them to the others? Is that what happens?

I firmly believe that in business and entrepreneurship, the number 1 thing is strategy—meaning what we’re trying to do, how we’re going to do it, and why we think it’s going to work. If you have a terrible strategy, you can have the best team and you’re not going to go anywhere.

But once you have a strategy that makes sense, the team is almost all that matters. I’d say the team and the culture—which are basically the rules for how we engage with one another—are almost all that matters. I don’t think there’s such a thing as overinvesting in creating a great team, and we try to be generous with our time and resources when it comes to that.

5. Why Bending Spoons doesn't use bonuses

Why centralize hiring and parting ways with people? I think there are plenty of good reasons for it. In most companies, say you run a team of 10 people. You might be told that there’s a budget for hiring 2 people, but once that’s in place, you decide who gets hired. HR will screen CVs, perhaps pre-interview a bunch of people, send you 5 candidates, and then you pick the one you prefer. End of story.

We think that system is bad for a few reasons. First of all, hiring managers—meaning the person who runs the team—have almost all the wrong incentives when it comes to hiring. For instance, they probably don’t want to work late or on the weekends. They feel they need help, so they’ll try to fill the position as quickly as possible.

I’m sure they won’t hire someone they think is a net negative for the team, but as long as they find someone who they think can get the job done somehow, they’ll probably hire that person. Obviously, as a farsighted, ambitious organization, you don’t want to hire the first person who is adequate. You want to hire someone who can be amazing over time. So that’s the first bad incentive.

The second problem, which is connected to that, is that if you’re running the team, most people—although they would be willing to coach someone if it came down to it—would much rather hire someone who is already fully mature and competent. That way, they can either do other things or work less. If you leave it to a hiring manager to decide, they’ll favor very experienced candidates over green, immature candidates who could potentially become much better contributors over time.

I like that you identified the incentive misalignment that you find in typical companies. What’s the incentive structure for your hiring managers in your company?

There’s none. It’s just trust. They don’t have any bonuses or variable pay. We tell them we trust them to build the best organizations they possibly can, and that’s it.

We find that if we hire people who are intrinsically motivated, who like the project, and if you work with them and are deserving of their friendship and admiration, then they will do their very best to achieve the common goals. In fact, we find that setting highly specific, concrete objectives to which career progression or pay are tied almost invariably leads to bad or inferior outcomes.

Maybe people will occasionally try a little bit harder in the short term, but then there are all sorts of deviations from what would be optimal holistically for the company. Instead, people optimize for checking the boxes of that particular incentive system you created.

So we just tell them, “We trust you to create the best teams you can. Hire well. Part ways when necessary.” We don’t need to part ways with a lot of people, but when it’s necessary, please do that. Let’s talk if you need help. Let’s discuss it. Ultimately, it’s as simple as that.

By the way, it shouldn’t come as a shock. Most of us, I think, when we worked on projects where we thought we were doing incredibly well and everybody was pushing in the same direction, how frequently were there highly mechanistic KPIs with our pay tied to them? I’ve never seen it.

Generally, in startups, there’s a broader idea that if we do really well, maybe our equity will be worth more, but it’s highly indirect and ambiguous. People work hard and try their best because they feel a sense of ownership, they like working with one another, and they care about the project. We try to recreate that same setup.

We give them full trust in leading hiring. By the way, because hiring is centralized, they also have a much bigger sample and much better information, both in terms of what’s available out there and what works and what doesn’t.

Again, if you’re a hiring manager on a team of 10, it’s probably bigger than most teams. At best, you’re going to hire 3 people a year—I’m just making it up, something like that. It’s not a huge sample to learn from, and you’re not focused on it. You’re not going to wake up in the morning thinking, “How can I be a better interviewer?” Obviously, it’s not your core problem.

For our centralized talent team, that’s all they do. Their professional pride is that they’re good at this. They do it at scale, so they have a massive sample size. They get to see what kind of talent we can attract across all different roles and positions.

Therefore, they’re much better positioned to understand whether someone is the right hire for a particular role, because they’ve seen what’s coming in over time across the board.

And so, they know they’re better positioned to know, “Okay, if we wait a little bit longer, statistically speaking, are we likely—or are we not likely—to find someone who can be even better?” They have all sorts of advantages in terms of their focus, the informational sample that supports their decision-making, and their efficiency. They are hiring for a particular role, but nothing prevents them from picking from other pipelines, potentially, and swapping as needed. Again, maybe someone applied as a product manager, but they see that the person could actually be amazing as a growth manager. They can easily make the swap because they are looking at the entire thing, not just that particular role.

I really love your insight. It was like, well, if you’re running the team and you feel the pain, you might just take the first candidate who comes along. But your whole thing is, “We know our strategy works, so now we’re just going to spend all of our time on talent.” The conclusion you just shared here reminds me of Brad Jacobs, who was on this show last year. He has a great maxim: “An empty seat is less damaging than a poor fit.”

Oh, yeah. He’s just like, “I’ll leave the position empty. It’s going to be painful, but it’s going to be way worse if we hire the wrong person.” He’ll just leave it open indefinitely until they find the right person. It’s very similar to what you’re saying.

6. Why everyone in the company has the same job

Yeah, completely. And look, I think in general, having sharp job descriptions is bad. You want to have a blob of work that needs to be done, and different things are differently important and urgent. If you have a team where people don’t feel siloed, they’re just responsible for the company’s success. Again, just like a startup, if you’re failing to hire someone who’s supposed to take care of a little part of this blob of potential work, it’s not that that blob is ignored. If it’s really important, someone will postpone something that’s a little bit less important to take care of it, right?

I always say this to new hires. We have sessions where we discuss some of our cultural principles and other things, and one of the things I sometimes say is that we all have the same job at Bending Spoons—all of us, starting with me—and that’s helping the company succeed on a daily basis. It’s helpful to say, “You’re a software engineer, I’m a product manager,” just so we don’t step on each other’s toes too much, but essentially everybody’s job is the same: do whatever is needed to help the company succeed.

I’m not worried about a seat being empty because I don’t think the concept of a seat even exists, really. We’ll just adapt, take over, and complete the work that needs to be completed. We’ll just not do some other work. At the end of the day, very little work in a company, especially a digital business, is strictly necessary. Almost all of it is elective or optional. It’s just a matter of what’s higher priority and what’s lower priority.

Say more about this.

Well, almost everything you do, you could also not be doing. Winning starts with doing what’s ROI-positive, which is only a small portion of the complete universe of possible projects and tasks, and then doing things in order of priority. So, from the highest ROI down, again at the risk of being a little bit simplistic, your resources will be limited.

I think most companies do things that are ROI-negative. There are 100 things they could be doing, but only 10 are ROI-positive. Many companies are doing 40 things. Hopefully, at least they do the 10 that are ROI-positive, too. In some cases, tragically, they’re not doing some of the ROI-positive things despite doing so many other things.

Wait, so why do you think they’re doing this? Is this a lack of talent, an issue of focus, or not understanding prioritization? What’s going on there?

Oh, I mean, there are all sorts of reasons. For the companies you buy, obviously you’re buying things where there’s a well-known brand, a customer base, and a product. But in almost every single example, you’ve massively improved everything you’ve purchased.

So what are the most common mistakes that people under previous management were making?

A lot of the reasons those opportunities weren’t being seized frankly lay outside of their control. Some of it is perverse incentives. If you’re running a business on a standalone basis, especially if you’re a public company—but private companies are ultimately aiming to go public, so it’s kind of the same—you’ll be judged on what I would consider secondary, if not vanity, metrics, rather than value creation through cash generation.

For instance, if you’re running a business where most of the revenue comes from subscriptions, and you know that the optimal price is a higher price—as with pretty much any product in a free market, if you raise prices, you’re going to have fewer customers, which can be fine—maybe you have 30% fewer customers, but each ultimately contributes twice as much. You’re better off, right?

However, often the markets will punish you dramatically if you do that, because when they see that the number of subscribers has gone down, even if revenue has gone up, they will not like it. We could debate why that’s the case. It’s an interesting discussion. But if you’re a management team, ultimately, in that particular context, you will have to heed the opinion or expectations of the market, and you will not make that pricing change even if you know that it’s going to be positive.

However, if a business is run within the broader Bending Spoons, where none of the businesses is an end in itself, but is a piece of a broader puzzle—a source of cash for further deployment and growth—then it’s much easier to make those otherwise unpopular decisions. Even investors would potentially support them because they’re no longer focused on, “I want Evernote to have as many subscribers as possible.” All else being equal, I want to have more subscribers, but I would rather have an Evernote that generates more revenue and more cash flow, so that it’s more accretive to the bigger business and we can go after bigger acquisitions and thrive.

So, there are incentives, and this is one example. Another one is talent. Sometimes businesses, when they have matured and everybody understands and sees that they’ve somewhat saturated their opportunity—maybe they’re growing 15%, maybe they’re flat, but they’re not doubling every year or something—have long stopped attracting some of the hungriest, most ambitious talent. These executive teams have access to perfectly valid talent, but maybe not standout talent.

And wait a minute. I think it just clicked for me—one of the unexpected benefits of what you’re doing. It’s like, you buy AOL, and I’m working on AOL. I don’t think I’m working for AOL. I think I’m working for Bending Spoons.

Exactly.

So, I know consulting—the big strategy consulting companies: McKinsey, BCG, Bain. Did you get hired there?

I got hired because, in parallel with the startup we were talking about—

Tell the story. We’re going to go back to Bending Spoons soon. This is a hilarious story, dude.

I have a background in engineering physics, and with 2 friends of mine, also engineers, we had this idea of building that company, that AI self-writing diary I was describing earlier, Evertale. But we had no money. All of us came from the countryside in the northeast of Italy.

We thought it wouldn’t be easy to raise seed capital either. Maybe it’s easier—or was easier, and certainly is easier—in the States. It wasn’t for us. So we figured, how do we do this?

The 3 of us were very good friends at the time, and even more so today because we’ve gone through so much over the following 15-plus years. We figured, okay, we’ll all look for a job, and whoever gets the most lucrative offer accepts it and pays for rent and food for the other 2. The other 2 would work on a prototype and, basically, the startup until we could convince someone to give us some money, so whoever was working could quit and we could all focus on the startup.

We all looked for a job, and frankly, 1 of us was doing a PhD already, so that was our backup plan, but not a super-lucrative job. We were hoping to do better than that. I happened to get an offer from McKinsey for a consulting job as a strategy consultant, and that was the best offer we got.

You come from a town of fewer than 1,000 people or something like that.

At least at the time, yes—fewer than 1,000.

I don’t think anybody in your family went to college. I think your parents cut hair, right?

They’re retired now, but yes, they used to cut hair.

Maybe some of those billions you’ve got in your pockets are helping them retire.

Well, it’s all virtual. I haven’t sold a whole lot of stuff.

I remember I was terrified because I’m close to incapable of lying or being opaque. I always want to be honest and transparent. That’s why I decided I would tell the partner from McKinsey who extended an offer to me that, yes, I was going to work there if they wanted me, and I would give it my 100%, but the plan was for me to quit as soon as possible to go do the startup.

And I was so convinced that they would withdraw the offer, because who wants to hire someone who is not planning to be there for very long? I was trying to leave as fast as possible.

Exactly.

Incredibly, that partner was enthusiastic about the project and said, “Yeah, it’s great. We want to have you here.” So, very grateful and very inspired, I worked very hard, as hard as I could. I was working on the startup basically during the night—but when people say “during the night,” they mean from 7:00 p.m. to 9:00 p.m. I mean from midnight to 2:00 in the morning, and then on the weekends.

After my 1 year at McKinsey, I had 3 weeks of vacation or something like that, and I spent it working full-time on the startup. About a year later, we managed to raise about $500,000, so I quit. I finished a project, worked for another 2 or 3 months, and then I left. So, yes, that was my stint in consulting.

I think I saw something there that has some similarities to Bending Spoons. Most of the people who applied to work at McKinsey—and I’m pretty sure it was the same for BCG and these other consultancies—were very excited to be working there. They got some of the best graduates, at least from business, maybe not as much from engineering.

But then you would end up serving telcos, banks, and insurance companies, to which you would never have sent your CV. I think Bending Spoons is kind of similar for software engineers, product designers, and product managers. I believe we got some exceptionally good talent, especially students and new graduates, for reasons we can discuss. Talent density is one of them, as are career opportunities.

Then they end up working on AOL or Evernote. These are businesses they would not have applied to if the whole prospect had been to work there for 5 or 10 years. But they’re incredibly excited, and rightfully so, to spend, say, 12 or 18 months at AOL rebuilding the technological foundation and rethinking the customer experience and monetization. That’s a very interesting challenge because you get to change a lot of things across a very large user and customer base.

So, you get the best of a startup and a big corporation. From the big corporation, you get to work on large user and customer bases. We’re not trying to find product-market fit, and we have a lot of resources. But from a startup, you have a tiny team, lots of responsibility, and you’re actually making big changes.

We’re not refining a button or trying to add the next 0.5% in revenue. We’re trying to rebuild almost from the ground up in many cases. Going back to what some of these executive teams from the acquired companies are getting wrong, they’re actually often doing well, but they can only work with the teams they can realistically attract.

We’re often able to bring in a lot of fresh talent with new perspectives and excellent skills. It’s a lot easier to rethink and rebuild these companies when you have access to this talent pool.

One of my biggest partners is Ramp, and I’m really close with the founders there. I happened to be with them the night that—

Eric?

Eric and Karim. I was with Karim the night that one of their main competitors—which they didn’t even view as a competitor anymore, but everybody else said was Brex—got acquired. Karim said something interesting. I asked, “How do you think about this?” He said, “People thought there was a war between Ramp and Brex, but I didn’t. If there was a war, it’s definitely over now.”

I asked, “Why?” He said, “The best talent’s not going to go to Virginia and work for Capital One. We’re going to keep getting better talent.” Even in that gap between the talent we have and the talent they’re going to attract, you play it out in year 1, year 2, and 5 years from now, and it’s over. It’s all about people. It’s very similar to what you’re saying.

Yeah. I don’t know their industry well, but it sounds possible. I tend to agree with that.

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7. On finding great potential and saturating their capacity

I want to go back to this idea of saturating their capacity because it’s still one of the most interesting things you told me when we had lunch. You talked about how it’s better to have no habits than bad habits.

I’m going to find graduates, or in some cases people who haven’t even graduated yet. They might start as an intern or in a very entry-level position at Bending Spoons, and then you say, “We identified this talented person.” What do you mean by saturating their capacity? Give me concrete examples of how you’ve done this.

Everybody at the company—certainly the people who have shown promise—should have way more on their plate than feels even remotely comfortable. The reason why you should do that is manifold.

The first reason is that every time you choose what to work on, whether you do it consciously or unconsciously, you’re prioritizing a set of work items, each with its own return attached. You may be unaware of the potential returns or be very deliberate, but either way, that’s what’s happening.

The bigger the universe of work items you can prioritize from, mathematically, the higher the returns on your time will be. Let’s say you have 10 possible tasks, each with a certain ROI attached. If I add an 11th, it’s impossible—assuming that you select well—that adding an 11th task will lower the ROI of what you choose to do, because you still have the other 10.

If this has lower ROI than the others, you’re still going to do the others. But it’s possible that it happens to have the highest ROI of all, and so you end up doing something more valuable. The more work you give people, the better the opportunity for them to create value.

8. Luca's principle of relentless simplification

That’s especially true if they choose well. Therefore, it’s very important to work with people who are smart, and it’s very important for managers and leads—the number-one thing they can do, or certainly one of the most important things they can do—to help their reports select well. We try to coach them in this regard.

The other very important thing you accomplish when you give people a lot more work than feels comfortable is that you’re forcing them to come to terms with the immensity of the possible. Sometimes, as people grow and their professional aperture expands, they get overwhelmed because there’s too much to do. They say, for example, that we need more people on the team, and I think that’s generally a terrible way of looking at life or the world.

Generally speaking, there’s always a lot more you could be doing than you can do in terms of your capacity. It’s just that some people don’t realize it. It’s not that if you’re a student and you’re done studying for an exam, there’s nothing else you can do. There’s plenty you could do. You could launch a startup or take a second degree on the side. It’s just that you may not be sufficiently proactive and imaginative to figure it out.

When people jump into a job and you give them a relatively short task list so that they’ll be done within their 8 hours and have nothing else on their mind, that initially feels easy and comfortable. But you’re failing to train them in a massively important skill: handling the immensity of the possible.

Once you become really good at being comfortable with having 100 times more things you could be doing than you can actually do, that’s an insane superpower to have. It enables you to handle a vast array of possibilities and surgically select those with insanely high returns. It’s something you can only do if you’re not thoroughly overwhelmed.

So, is it better to have someone become overwhelmed by that immensity when they’re 10 years in and running a 100-person organization with a billion dollars in revenue, or is it better to test them on that and coach them on it—not on day 1, but maybe on day 7 and throughout the first year?

That way, first of all, you only promote to that higher level of responsibility people who have proven that they can do it. If they actually can do it, they begin benefiting from it much earlier, even if their scope is more limited.

But you need to completely eradicate the concept that you’re only good at your job if you exhaust your checklist, your task list. There’s no such thing. You’re always going to have at least 1,000 options. But I think, again, life, if you look through the veil, is like that anyway. You’re just unconscious about this most of the time.

Is this related to what you were saying earlier, where you were like, “Listen, they’re not going to be A+ companies if they were standalone brands. They’re not going to get the talent that we’re going to get at Bending Spoons. We can have a massive impact because they have a huge customer base, but then we can treat it like a startup”? But then you said something about working on this for 12 to 18 months. So then you rotate teams throughout the different companies. Is that part of saturating their capacity? It’s like, “Okay, this opportunity in this business—this person is really talented, but there are no other ways to utilize that talent to a higher degree here, so let’s move them to another team.” Am I understanding that correctly, or—

No, no, that’s not it. Yes, we rotate people all the time. There are various reasons for that. Part of it is that, at some point, when you’ve looked at the same thing for a long time, you stop having good ideas. So it’s good to get new people in to maybe take a fresh look.

Part of it is that we find if people keep working with the same people, you risk developing subcultures. We’re highly opinionated on what the optimal culture looks like. We want it to be uniform across the company. If someone comes up with a better idea, that’s awesome, but that has to be spread across the company. We don’t want to have subcultures, so you want to move people and mix and match so that they don’t get used to a different way of working, at least on the important aspects.

Another reason is that they get to learn more. That goes back to what you were discussing. It’s slightly different from having an immense set of possible tasks. There is an element of diversity there. You need new challenges and diverse challenges to keep honing your craft and finding new ways of growing. So that helps, too, and it also keeps enthusiasm levels higher because humans tend to get bored. We want to try new things to stay motivated.

Last but not least, as we keep acquiring new things as an organization, the universe of things we could be doing expands with new acquisitions. Often, working on those new things yields the highest expected returns. So, regrettably, we have to remove resources from businesses that would still have plenty of opportunity in them. But, relatively speaking, it’s better to work on a new business.

For all these reasons, we rotate people all the time, and I think it’s been quite successful for us to do it that way.

You just said you have very strong opinions—you’re highly opinionated—on the culture they should have. Do you want to share some of those opinions?

The main quality we look for in people—we call it extreme ownership. We try to work with people who care tremendously about being the best in the world at what they do and about bringing value to the team.

Hold on. Did you get that from Jocko’s book?

Actually, the name, yes. The concept is not exactly the same. There are similarities, but I thought the terminology “extreme ownership” was so immediately evocative of what you look for that I said, “Okay, we need to use that for sure.”

Obviously, I only read biographies and history, but I always tell people that’s one of the few business books I’d actually recommend reading. You can read it in a weekend, and it’s very direct. It’s just like Jocko—I’ve met him in real life. He’s the exact same person.

Yes.

So, extreme ownership.

Yeah, extreme ownership. We define it a little bit differently.

So how do you define it, then?

Extreme ownership is caring in your belly tremendously about being the best at what you do and about helping the team and the company succeed. It’s a matter of priority, and it’s an intense priority. We want to work with people who feel that way about their work at Bending Spoons.

We’d rather not work with someone who’s really, really smart and very competent, but for whom doing well here would only be priority number 3 or 4. We’ve seen it time and again. We’ve had people who were probably close to genius-level IQ fail here because, ultimately, they saw their job as a way to earn a living, to make ends meet, rather than actually transcending apparent limitations, winning, and being amazing at what—

Okay, hold on. You just got done saying, “Hey, we’re going to centralize hiring. We have a bunch of engineers. You need to have brilliant people in HR.” We went through this very unique way that you think about this, right? But how do you screen for that? How do you screen for being successful here and helping this company be successful? Is that one of their top priorities—maybe the top priority in their life?

Yeah. I mean, it’s never going to be—obviously, if you have a family, that will be number 1—but if you start telling me, “After my family, there’s being a great gamer at night,” plus—

People are going to apply for a job and say that. What are the actual things that you—

Yeah. So I think, first of all, you try to—I don’t want to give too much away, but let’s say—

If it’s a proprietary doc—

No, no. But I would say, first of all, you want to see if there is a capacity to express extreme ownership. There are a lot of people—I suppose every human being in theory has it—but I find that a lot of people don’t seem to be, at least, inclined to develop extreme ownership for almost anything. They just struggle to care tremendously about things in life.

9. The origins of Bending Spoons

There’s no moral judgment, but I’m just saying I want to be part of a team that has a real chance of redefining what’s possible and succeeding at a really high level. Of course, that type of profile is not going to be highly appealing to everyone. I don’t think I’m saying anything shocking here.

So you look for signs in someone’s past of that extreme ownership at work. Maybe they were fully focused on their studies. Okay, did they do incredibly well, at least? Maybe they did a lot of work next to studying because they didn’t have the financial means, or they wanted to learn a craft.

Maybe they were into open source. Is their contribution extremely small, or is there something where it looks like they put in a lot of effort? Maybe they didn’t have a breakthrough, but you can tell through the sheer volume of contributions that they really care. Did they launch a startup? Was it because it was cool for a few months, it didn’t work out, and that was too bad? Or did they grind at it for 3 years, and it was incredibly unsuccessful, but you can tell they wouldn’t let up? Something that shows they’re capable of putting their passion into something.

So, in your S-1, I think you referenced Henry Singleton and Tom Murphy. I just did another episode on Singleton on my other podcast, Founders. Singleton made a very early investment in Apple, right? Then he ended up joining the board, and he was asked by his partner, “There are a bunch of companies trying to make the personal computer. Why did you choose Apple? How did you pick the best one of the bunch?”

He said 2 things. First, he thought people were going to be intimidated because they had never dealt with one—there was no such thing as a personal computer. These people could be intimidated, and they’d be less likely to be intimidated by a computer named Apple.

But more important than that, he said the founders of Apple had to make it work. There were a lot of founders he met at other computer companies who wanted to start a computer company, but if it didn’t work out, they’d be okay. He said the founders of Apple had to make it work. They had nothing else. There was no way Steve Jobs was going to give up.

The idea that Singleton, being the genius that he was, identified that in a 19- or 20-year-old Steve Jobs is incredible.

I think sometimes, of course, when discussing one of the greatest entrepreneurs ever to do it, people focus on the eye for detail. He certainly had that. He was certainly good at perceiving what consumers would want. I think maybe that wasn’t even his main thing, but I believe what we would call extreme ownership in his case—we would probably call it differently, but I think deep down it would be the same thing.

He cared so badly about seeing Apple succeed the way he thought it should, by building those amazing products. When you want something so badly, you’re not guaranteed to win, obviously, but it just sets you apart—

Because there are a million different little decisions you’re going to have to make, and you’re just going to pay attention and care more about every single little decision. I’ve mentioned this quote so many times in these conversations we get to have with these founders on the show, but I think Josh Kushner said it. It’s one of my favorite quotes I’ve ever heard.

And Josh’s point was, if you have to pick the person who is the smartest, the person who has the most experience, or the person who wants it more, you always pick the person who wants it more.

Oh yeah.

I think that’s kind of what you’re getting with extreme ownership.

Completely. Look, what we found is that there is a level of—let’s call it intelligence, broadly speaking, not just purely logical-analytical—that’s necessary in our endeavors. But after you pass a certain threshold, which is admittedly a fairly high threshold, we’re not talking about genius level, then it’s almost all about how badly you want it. You really want to be amazing.

I was talking about this with some new joiners yesterday or the day before. I brought up the example of Rafa Nadal in tennis. I think I’ve said this before. Most experts I’ve talked to believe he probably wasn’t even a top-50 talent in his generation, but he went down as one of the 3 best, for sure. Some say the best or second best to ever do it.

And where he really stood out was that extreme ownership. He just woke up in the morning and was like, “I’m going to be the best tennis player I can possibly be. I’ll give it my all, 100%.”

Did you read his autobiography? It’s called Rafa.

I haven’t.

You should. I think you’d be interested, because a lot of people don’t know the amount of injuries he had when he was younger. He shouldn’t have even been able to play at all, much less be one of the best to ever do it.

Unbelievable. Absolutely. What I said to those new joiners was, “I don’t believe there is almost any chance you will fail to have an amazing career, at least at Bending Spoons. Probably almost anywhere, certainly in business, where we try to be extremely meritocratic.”

If you really bring it—if you’re an extreme owner—I would bet there’s less than a 1% chance you fail to have an amazing career. We know you’re smart; we tested that. We’re unlikely, unless you cheated somehow, to be wrong. You studied what you needed to study, so you have some of the foundations. It’s almost all about whether you come to work to be amazing, to be better today than you were yesterday, to see your team be better, and to see the company take a step in the right direction—or whether you come to work basically waiting for the day to be over.

Of course, you’re going to try to be okay at it, but you don’t really care too much as long as you have a job. If you’re part of the former group, you’ll do extremely well, for sure. So that’s really a key cultural tenet for us. We select for it, and we try to foster it. We would much rather have a smaller team of people feel that way than vice versa.

By the way, it’s contagious. If you have a high density of people who feel like that—highly accountable and proactive—because if you’re an extreme owner, you care tremendously. You’re going to be entrepreneurial because you’ll be paranoid about things that could go wrong and enthusiastic about new ideas and how you can improve things.

If I ask you to do something, you will not forget; you’ll get it done. More than that, you’ll even come back and do more things than I expected you to, and that will be incredibly exciting for me. I’ll want to show you that I can be just as good. There’s an escalation of positive reinforcement that you accomplish if there’s a high density of that feeling within the team. As soon as you dilute that, the people who feel that either leave or lose it.

You can’t have an extremely high-performance team where more than a small fraction of people lack extreme ownership. Steve Jobs famously was looking for A players, and I think he was looking for people who had that desire, that drive to do something amazing, even before looking for people who were brilliant. Obviously, you want to have both if you can, but you can never have a high-performance team where more than a small fraction of people lack extreme ownership.

What are some of the things that are also important?

Yeah, one thing that we call relentless simplification. We believe that most things don’t matter. Most things do more harm than good. However, humans have a tendency to add complexity and do things that destroy value.

If you leave an organization—almost any environment—unattended, and you don’t provide guidance in this regard, it will tend to become more complicated. People will be adding parts. When I say “parts,” I mean it could be expanding a team, adding a step to a process, adding an entire new process, or, if it’s a product, adding a feature to the product or new rules. It really applies to almost any human endeavor: people will tend to add pieces and very rarely remove pieces.

With every piece you’re adding to this ensemble, this system, you’re not adding complexity linearly. You’re not just adding the piece; you’re also adding interdependencies and interconnections with some, and sometimes all, of the other pieces. If you go from 3 to 4 pieces, the system isn’t getting 33% more complicated. It might be getting 40% or 50% more complicated, depending on the connections and how these new connections impact the other connections.

Most human organizations, if you don’t make a conscious effort to achieve simplicity—avoiding this increasing complexity and embodying simplicity—will go down that path. That’s how we got to our modern society, with all the bureaucracy and complicated regulation. A lot of it, or almost all of it, probably had been meant to be a good thing when it was introduced, and maybe in a vacuum it was. But people failed to account for the cost of these new connections and frictions.

We have this principle whereby we ask everyone who works here, first of all, every time someone suggests that we should be adding complexity, the burden of proof is on those making that suggestion. The people who support the thesis that we shouldn’t be adding that complexity don’t need to prove it. They’re done. They just have to raise a flag and say, “I don’t think we should.”

That helps reduce the addition of complexity dramatically, and the complexity you add tends to be, hopefully more often than not, good complexity, because you have to prove it. Hopefully, if you’re intellectually honest, that should be a good idea.

The other part of relentless simplification is that we want people to be on the lookout for existing complexity and suggest that we should be removing it. Understanding how we operate and the biases that accompany us throughout our lives is very important. Charlie Munger famously studied biases, and I think knowing your weaknesses, or likely weaknesses, is 50% of avoiding them or overcoming them.

Knowing that we as humans tend to exhibit something called consistency bias, but also inertia bias—I’ve heard those described with slightly different names—essentially, we tend to assume the status quo is fine. We focus on deltas, the new things that are added or the changes. We become blind to our surroundings as they stay the same day after day. So we ask our colleagues, and all of us, to make a conscious effort to question what’s already there. The longer it’s been there, the more we should be questioning whether it’s still net positive, so we can look for things we can get rid of.

Have you paid attention to how Elon talks about this at all?

Maybe, maybe not.

Okay. I mean, it’s one of the things he probably repeats the most. Obviously, he has that famous 4-part algorithm that he applies to every company he does. But there are emails from him, and I think he might have even tweeted this. It’s just, “Go ultra-hardcore on deletion.”

He’s obsessed with exactly what you’re saying. You call it relentless simplification; his is that he wants to delete, delete, delete, delete as much as possible. Simplify, simplify, simplify.

We had Tobi Lütke on the podcast a few months ago, and he said something that was very interesting. He said, “In technology, the world belongs to the fast. It belongs to these teams that can actually get ahead by reduction.” Very few teams have understood the skill and the genius of getting ahead by reducing.

The illustration of his point, which he did beautifully, was, “The modern-day Picasso would be the picture of the Raptor engine that SpaceX designed.” You see the first one—

It got super simple.

Yeah. It’s got all kinds of weird wires coming out of there, and then the second version has a little less, and then the third one is just beautiful.

I actually posted the clip of Tobi saying this on the podcast 2 days ago, and then I quoted it with a picture of the Raptor. Somebody asked for Elon’s explanation, and he goes into it and responds about how he thinks about this process. But he’s completely obsessed with going ultra-hardcore on simplification and deletion.

It is a superpower—super, super powerful—because, yes, it breeds speed and scalability, besides which is a slightly different thing.

But you just nailed it. He even goes into, “Well, the complexity is nonlinear,” like you just said. If I have 100 parts in this engine compared to if I have 5, what does the supply chain look like? What does the manufacturing look like? What is repairing it like? Figuring out what actually went wrong.

Like, there are just a million other things that get more complicated with more complexity. So, it's both that people don't focus on simplification for some reason. I think there are probably anthropological reasons. There are certainly societal reasons, but people don't focus on simplification unless, again, they're unusual, radical lateral thinkers like Elon, or you teach them.

10. Why Bending Spoons doesn't use job titles

But when they do, the second problem is that they tend to be incremental about it. Often, by far the biggest wins in terms of simplification come from complete removal. For example, you just said that Elon is a master at that. In our context, I remember we were banging our heads against the wall approximately a decade ago with job titles.

Pretty much every company we had was very small, but still had enough people that job titles were a thing. You wanted to have a senior this, staff that, or director, and we were trying to develop definitions. Who should be a director? If that exists, if it's a thing, you probably need to define it. You spend time trying to define it, and then you assign someone that title, whether it's senior engineer or something else. Then the other person who isn't a senior engineer is disappointed: "Why is she a senior engineer and I'm not?" Then you need to have that conversation, and it's an emotional drain.

At some point, we were looking for ways to streamline and simplify it, and someone said, "Why do we even have titles? What's the benefit of titles?" Someone else was like, "Well, you need titles. Everybody has titles." Why do people have titles? Let's really try to dig deep into the root cause.

I agree—everybody has said there's probably some benefit. Let's not be arrogant; there's probably some benefit. What's that benefit? We ultimately determined that the benefit was that people really needed titles for, let's say, bragging rights. It feels good to be able to show progress in one's career, and they're useful if you need to find a new job, to be able to very conveniently and efficiently convey a level of experience or capability that you've achieved.

We were like, "Okay, but all we're saying here is probably true, but it's also not something that the company needs to be involved with." So, we just got rid of titles. We told people, "You can pick your title for your CV, LinkedIn, whatever. We don't need to know. We don't want to know. We don't need to approve it. We don't want to see it. Just don't embarrass us. If you're a new hire, don't say you're the CTO, because then people will question our integrity as a company. But as long as it's broadly reasonable, we're good."

We have never reintroduced them. We don't have any titles. The person who runs product, which technically would be called a CPO, is just the product management lead for us. As simple as that. It's completely automated.

What do you mean, it's completely automated?

The organization is based on algorithmic rules. If you have direct reports and those reports are product managers, this tool will automatically call you the product management lead. Whether you have 2 or 200 people, you're the product management lead.

There's no discussion. We don't need to agree on whether you are or aren't. There's no senior, junior, director, or VP. I just made the example of, let's say, the topmost leader in product. For us, that person has the same, quote-unquote, job title as a person leading 1 person. If that person needs to do something with LinkedIn, they can put whatever they want out there. We never have to have this discussion.

We never looked back. We probably saved easily hundreds, if not thousands, of person-hours in terms of defining terms and having emotionally draining discussions with people. We never had a problem—not a single instance of someone complaining that we didn't formally assign them a title, ever, across many hundreds, actually multiple thousands, of people.

That's an example of something that everybody does a certain way. If you're trying to simplify incrementally, maybe you achieve a little bit of uplift, perhaps 5%. But if you get rid of it completely, it's liberating. It's a 10x improvement, potentially, or whatever baseline you want to use—however you want to measure it.

Often—not always, but often—you find these opportunities in a product. Get rid of an entire part of the product. 2% of people use it, but it's adding complexity to the codebase, bugs, and issues. Sure, someone will be disappointed, but the 98% of people who don't use it can be served so much better that 1 year down the line, you'll be 2x as well off. Just do that. Don't slowly transition out through a million migrations, headaches, and issues.

I found one of my all-time favorite quotes when I was reading the book Zero to One. The quote says, “The single most powerful pattern I have noticed is that successful people find value in unexpected places, and they do this by thinking about business from first principles instead of formulas.” That is exactly what AppLovin has done with their advertising platform. AppLovin connects you with over a billion potential new customers inside mobile games. AppLovin allows you to capture undivided attention. AppLovin ads are full-screen video ads that are watched for an average of 35 seconds. That is retention that blows other ad platforms out of the water. And you can launch on AppLovin in minutes. You set the goal and AppLovin achieves it. There’s no complex setup, no expertise needed, and AppLovin scales quickly. They can put your ads in front of over a billion potential customers. Other businesses have seen immediate results, have scaled to hundreds of thousands of dollars of spend per day, and increased their revenue by millions. So you want to get started quickly before all of your competitors are on AppLovin. And you can do that by going to applovin.com. That’s applovin.com.

11. The proprietary operating system behind Bending Spoons

Before we go back to these other cultural tenets of yours, tell me about this automated system you just described. It's like running the company in the background. What is this?

I wouldn't say it runs the company in the background, but we're pretty fanatical about technology in general. Again, I personally was involved with AI in 2010, which at the time nobody—well, it looked weird because it wasn't really a thing. Today, obviously, if you're building a startup with AI, people look at you like, "What the heck are you doing?" Of course, you should be building a startup.

We carried with us this passion for using technology and cutting-edge tools to be more productive and more effective. At Bending Spoons, we've invested pretty heavily over the past decade in developing what you could look at as an operating system. At this point, we have over 50 proprietary tools that run almost everything we do, or at least support it through automation.

Then we buy companies, and it's almost like installing them on this operating system. A lot of the operations are subsequently run homogeneously, consistently, and very efficiently through it. For example, we have 1 system to manage payments, 1 system to run A/B tests, 1 system to predict user lifetime value, 1 system for recruiting and talent predictions, and 1 system to orchestrate the many AI models we use internally to run our operations.

We always use the ideal one in terms of cost and quality. We have 1 system to authorize different colleagues to have access to different systems—holistic credentials management—1 system for data aggregation and processing, and the list goes on and on. We keep refining them.

We have an open-source community internally, whereby we have platform teams who own these different tools and make them better by the day. Each of our businesses, as it uses them, finds ways that they come up short. They can add features and fix bugs, and as they improve them, those improvements are propagated and automatically made available to the entire portfolio of businesses.

Adding businesses actually makes us better as a whole, not just because we're adding revenue, but because we're adding another entry point for innovation and improvement ideas on this kind of operating system. It's been a boon for us. It's hard to estimate exactly how much in terms of efficiency and effectiveness it's added, but it's certainly transformative, let's say.

So, adding more businesses is better for you. But then is that not in conflict with the fact that I think now, for your acquisitions, you want to do fewer and bigger?

Yeah. I mean, there's a trade-off. Obviously, like in almost everything in life, fewer, bigger acquisitions are better for us to the extent that it means we can focus our limited operational capacity on those transformations and getting those right.

We have seen that, in terms of time and effort, it doesn't take a lot more time to transform a company that's bigger in terms of revenue than a company that's smaller. So, the same amount of time invested, roughly speaking, in Evernote in early 2023—we had a team, a task force of Spooners, people from the core team. Probably about 50 people joined Evernote and really drove that transformation: rewriting the codebase, rearchitecting the cloud infrastructure, rethinking monetization, reorganizing the company, and all that.

That was a business generating a little less than $100 million in revenue.

At the time you acquired it?

Yeah, at the time we acquired it.

And then, in the first half of this year, we did broadly speaking the same thing with Vimeo, with roughly the same number of people—50 to 60. But Vimeo is roughly $400 million in revenue, so approximately 4 times as large, and the team originally was over 1,000 people. We were a little over 300 people, so 3 to 4 times the scale, whether you want to look at revenue or headcount. Roughly the same number of Spooners were introduced into the business to change it.

That’s incredible.

Part of that is, I believe, that intrinsically, the complexity of transforming a business doesn’t scale linearly with the revenue of that business. Partly, in the meantime, we’ve gotten a lot better. For example, we’ve expanded and improved that operating system, so we’re getting more productive.

Because of that, we prefer to acquire relatively few businesses and make sure each counts. It has to be larger and larger as we scale as a company. Currently, we’re at roughly $3 billion in run-rate revenue, so the business that moves the needle for us today needs to be a lot bigger than when we acquired Evernote.

In terms purely of that operating system of technologies, we do benefit from more diversification because the more teams we have who adopt these technologies, the more likely we are to find ways that they could be made better and innovated on.

So how do you reconcile the two?

We tend to prioritize the former because I think there are bigger businesses—

Because you developed this operating system over how many years—a decade and a half, something like that?

But, yeah, we started 13 years ago. Obviously, when we kicked off the project with 5 people, we didn’t have the luxury of investing in R&D in our technology. I think we started in earnest with significant investments maybe 10 years ago, something like that.

And has anybody—I don’t think you would do this—but has anybody tried to come and buy these tools from you?

First of all, we like to keep them for ourselves because they’re a competitive advantage. Also, you can’t do everything in life. You need to prioritize and focus, and we just decided that we use these tools for our own benefit, to run this business as well as we can.

I also don’t think they would be all that appreciated by the broader market for a couple of reasons. Number 1, they tend to be very, very advanced. Most people out there who run a digital business actually don’t want—maybe they think they do, but they don’t want—the most sophisticated A/B testing platform. It’s overwhelming. They’re not obsessive about A/B testing; they want something that’s a little bit more approachable.

So they wouldn’t necessarily take full advantage of the real power of the platform. There are solutions out there on the market that are more mass-market, a little bit more intuitive, and easier, that I would recommend to them rather than our own, which is, again, meant for a high level of sophistication.

Lastly, a lot of these technologies are doubly powerful because they’re fully, natively integrated with one another. They’re all built to function together, and so it’s very difficult for a business out there to choose to adopt 50 different things. They’re not going to scrap everything they’re doing, and so a lot of the value fades away from only giving you one thing.

12. Why Bending Spoons isn't private equity

So I don’t even think the business opportunity will be all that great to market this stuff.

I’ve heard people who don’t pay attention to Bending Spoons. They’re like, “Oh, this is just another PE play.” And I was like, “I don’t think that’s it at all.”

Can you—so let’s walk through one of the acquisitions. You mentioned earlier—I don’t know if this is a term you put on it—but when you’re starting a company, you have to luck your way into product-market fit. You don’t want to do that; you want to buy a working product.

So let’s take Evernote, for example. I was an Evernote customer for, I don’t know, 8 years. What did you see in Evernote? What was the state of the business, and what happened after the fact, I guess?

And, by the way, I think people who compare Bending Spoons to private equity have a simplistic, superficial view of the world. They’re like, “Okay, they acquire companies, and they’ve raised prices. Okay.” But Google acquires companies—it has acquired hundreds of companies—and has raised prices hundreds of times, so it’s a pretty limited set of criteria to compare.

I’ll give you the highlights on a high level, and then I’ll translate them to the very specifics of Evernote or any business you want me to talk about. First major difference: we’re not a fund. We don’t buy to sell. We have never sold a material business. We buy to hold and operate forever.

The second very big difference is that our interventions on the businesses are very, very deep. Again, I’ll be very clear as I describe Evernote, but we transform them, sometimes beyond recognition. I’d like to think for the better. That’s what we try to do here.

And the third aspect is we integrate these businesses very, very deeply into a shared platform, including the technological operating system we were discussing, but also this core team of Spooners who run the businesses. A lot of the R&D and marketing—we move them around fluidly across businesses.

None of this bears any resemblance to what private equity does, because those are funds. They buy to sell after, say, 5 years. They generally intervene maybe on some costs or pricing, but I’ve never seen private equity reinvent a product or rebuild the technological infrastructure. They generally don’t integrate the businesses together under a shared platform because they don’t have the platform. Even if they did, they need to sell them piecemeal. So if you integrate them, you can’t sell them, or at least it would be much more difficult to sell them.

So we are almost as different as it gets, other than we acquire stuff for a living. That’s for sure something we have in common.

13. How Bending Spoons acquired & transformed Evernote

Now, Evernote specifically: what we saw in it—well, Evernote in its history has been used by a quarter of a billion people. A quarter of a billion people. Extensive reach and usage ultimately build a brand naturally. There’s that, plus the experience needs to be good, which it often was, especially for the first many years.

It’s certainly a brand that almost everybody has heard of and is familiar with, often perceived positively, sometimes not as much, but certainly not negatively. More often, it’s, “Oh, it’s something from the past. It’s probably not that relevant,” but nobody has a negative association with Evernote—or very few people do.

So it was a very well-known, powerful brand, a pretty sizable user and customer base, and several million active users and customers at the time of acquisition and to this day. We believed there was a substantial opportunity for improvement across the board. I’ll describe the improvements in a moment.

Lastly, something we always seek in acquisitions is predictability. We like to buy stuff where we have a good sense of where it’s going at least 5 years out, at least once it’s under management and installed into our platform. In that case, a few factors enabled us to predict its future.

One, the user and customer base was highly tenured. On average, I think a paying customer had been on the platform using Evernote for 5 to 10 years. I don’t remember exactly, but assuredly long periods of time. Most of the revenue was from subscriptions, which we tend to be able to predict in terms of future performance better than more volatile revenue streams like advertising.

Most of the value lay with existing users and customers, as opposed to hypothetical new users and customers to acquire out there. We find that it’s much easier to bet on existing customer bases than new acquisition because new acquisition of users and customers tends to be much more volatile, with changes in competition and in the advertising dynamics around acquiring customers.

So we liked the whole package. We thought the price was reasonable.

Do you disclose what you bought it for?

Well, it can be seen directionally from our financial statements. It was about $200 million, give or take.

Say that number again.

$200 million.

$200 million. Okay. More or less—about $200 million, something like that. So, wait, they were doing $100 million in revenue, right?

A little less, like $90 million.

$90 million. And were they making any money, or no?

I would say roughly break-even. Slightly profitable.

Okay.

Roughly break-even. Slightly profitable.

And what’s it doing now?

We don’t disclose profits by individual business, but I would say it’s very, very profitable. You can see our overall profitability as a group. Our adjusted operating income margin is around 54% to 55%. Individual businesses tend to be more profitable, especially if you’ve owned them for more than a couple of years.

So hold on before you go in there. In an Evernote case, you drastically increase the profitability based on these—

Revenue went up.

Well, that’s what I was going to ask. Does the revenue also have to go up, or are you just fine if you just make it?

We try to improve revenue and reduce costs. Sometimes we’re successful on both fronts. Generally, I would say sometimes more on one than the other, but on Evernote we both increased revenue and reduced costs.

Explain the difference between what you were doing and what they were doing when they were doing whatever—$90 million—and not making any money, or breaking even.

So what is the difference between how you were running the business and how they were?

We made a lot of changes. We rebuilt the organization extensively. It was roughly 350 team members, and we made it substantially smaller. I think a year to a year and a half after the acquisition closed, we were down to around 50 to 60 team members. Approximately.

Okay. When you acquired it, they had 350 people working on the product or the company?

This is what we were talking about before we started recording, which I think is really important. This is why I like Adam from AppLovin, too, because his whole thing is that if you factor in either his cash flow-to-employee ratio or market cap-to-employee ratio, that's a very interesting metric. His whole thing is, "I'm doing this with 400 employees."

You mentioned previously that it's important to see what can be done and how efficiently a business can be run. It's similar to how other runners didn't crack the 4-minute mile, for example, until somebody did it. Once they see somebody do it, then you just see it happen all the time.

So why could you do this with, let's say, 300 fewer people than they could?

I think there are different factors. One is access to talent. We've been able to build an employer brand—a company where some of the best people want to work. We got 800,000 job applications last year, and we hired fewer than 300 people. If you're running Evernote, even if you're Steve Jobs—

800,000 people are not applying to Evernote.

Exactly. And it's not anyone's fault. That executive team was doing the best they could with the resources they reasonably had available. We had the good fortune to be able to take advantage of an arbitrage in access to talent.

We also have a massive advantage in that each of these businesses matters to us, but it's not everything, and so we can take risks. For example, if you're running Evernote and that's all you do—it's a standalone company—and you make the change I just described in terms of headcount, if something goes wrong, you're out of a job. As a CEO, realistically, you're done, because that will be the blemish on your CV that you can never clear, pretty much.

It's not that we want something to go wrong if Evernote is part of Bending Spoons. But we can make bets where the expected outcome is highly appealing, even if they're a little bit more risky and less appealing if that's all you do with your life.

The upside is, again, almost like insurance: on average, we get it right, and it's a great value. Occasionally, maybe we make a mistake that would be painful if that business were run as a standalone company, but net-net, we do so much better and learn so much faster. The good lessons we learn from one business we can port and apply, as relevant, to all the other businesses.

Third, we had access to that technological platform. It enables us to do so much more with fewer people. If you're running Evernote standalone, you're not going to have the resources to develop those technologies.

You also don't have the business case, because we can amortize those investments over all of our businesses. As more businesses are added, it's increasingly easier to justify those investments. It's difficult to justify them if all you do is Evernote.

Then again, there are those perverse incentives I mentioned earlier. If you're judged by Evernote and Evernote alone, making a change that would, for example, result in a smaller number of monthly active users or subscribers will get you so much hate, even though it might be the right thing to do for the business.

We could make some of those unpopular decisions more easily and take full advantage, because the business has been thriving relative to its previous trajectory, both financially and in terms of customers.

These are some of the big reasons. The changes were sweeping. We rebuilt the organization. I mentioned that it was a lot smaller, and by the way, today we run Evernote with about 20 people.

What?

Yes, because in the meantime, you keep improving. I'll describe the improvements we made. Some are fundamental improvements in the underlying technology and codebase that enable the team to do more with fewer resources, because everything gets a little bit cleaner, more maintainable, and manageable.

14. How Bending Spoons uses AI

Part of it is that our operating system of technologies has gotten so much better over the following 2 or 3 years, so we're much more productive. Especially with AI, we've had some close-to-breakthroughs in productivity.

Can you talk about that?

Yeah, sure.

Everybody's interested in this right now. There are a bunch of founders who have already been on the show who are coming back on, and we're just going to do an hour on how they're literally redesigning their entire organizations with AI.

Yeah, we've been using AI pretty aggressively for as long as I can remember. Certainly in 2018, I'd like to say we were using it to predict user lifetime, basically, to inform our A/B testing.

Over the past 2 years, especially with the very rapid progress in LLMs, we've been able to have major breakthroughs in various areas, especially software engineering, data analysis, and product design. I'll give you a couple of examples.

For design, we recently deployed a tool we built in-house called Diagram. Whether you're a designer, a product manager, or a growth manager, you go to this tool. It looks a little bit like Figma, broadly speaking, but it's specialized in our particular context and fully integrated with everything else at Bending Spoons.

You can tell the tool to pull up screens for the app you're working on—say it's Evernote—for the relevant features. Then you guide it as it produces new versions of those interfaces, and it will do so by automatically following the design guidelines that the head designer for that tool has laid out in some document somewhere.

You don't have to know where they are; the tool knows. You just tell it what you need, and it'll give you work that the head designer would typically approve.

It will automatically look into the codebase to understand how the different interfaces interact functionally. It will make proposals that make sense from that point of view. Once you're happy with your proposal, it will develop the code for you.

The lead engineer will then be able to review and approve it if it's fine. Because it's integrated with our A/B testing system, you'll automatically have a new segment where you can test that new onboarding flow or whatever.

If you had the skills before, as a product designer, now you can do it sometimes in maybe 1% of the time. In many cases, it's actually a better result because it's so precise, and humans tend to miss things.

Interestingly, it enables people who couldn't design before—product managers, software engineers, and growth managers—to do design work. This makes our teams a lot more efficient.

A lot of the inefficiencies stem from this: I'm a product manager, I have an idea, and I want to test something, but I need to wait for the product designer to be available. Then I need to explain what I have in mind. I fail to explain it properly, and 3 days later I get work back that's not what I meant.

These inefficiencies stem from this exchange of information. We humans are insanely inefficient at exchanging information. We're quite efficient at absorbing information, but when we have to articulate ideas, language is very, very inefficient. It's better than not having language, but it's inefficient.

Even more so when it's with another human with whom the iteration cycle will be slow, because they may not be able to do the task immediately. Even if they do, it will take them time. But with the machine, you can tell it, and it'll do it right away, and it will take a fraction of the time. So you can iterate very quickly.

Overall, you get to the result in a tiny fraction of the time. Interestingly, you can do it even if you can't design. This is one example.

Another example is something we call Alt Spooner. It stands for alter ego, or alternative Spooner, and it's basically an agent that lives in Slack. We use Slack for communications, and it has, by design, the same access as you do as an individual in the company.

It has access to the same tools, to the same degree. If you have full access, it has full access; if you have partial access, it mimics you. It's meant to be you, basically, but artificial, and you can instruct it to do pretty much anything you could do.

It could do some things better and some things worse. We have an Evernote channel on Slack where we can report feedback on things that could be improved—bugs or new features.

I was there to provide input on something. I was using the tool, and it failed at something, and I wanted to relay that. I saw live one of the best uses of Alt Spooner by one of my colleagues.

She runs Evernote, and she wrote in this channel. She tagged Alt Spooner and said, "I noticed this bug. Could you please go to Morus..."

It’s our customer support tool that collects feedback from users to check whether it’s just that I got unlucky or if it’s a widespread phenomenon or issue, and then report back so we know how to prioritize it. Separately, can you look into the codebase for root causes for this issue, and if you can find and propose a fix, ping Marco, who’s the lead engineer for that particular product, so that he can review the code and push it to production if it’s fine?

She, the general manager of Evernote, essentially identified and fixed a bug in maybe 3 minutes—something that would have taken—

If this is human-to-human coordination—

Yeah, weeks, maybe.

Forever, exactly. There are many more examples.

I wanted to know the trajectory of monthly active users on Meetup, one of our properties, recently, for an analysis I was doing. Generally, I would have to ask a data analyst, and they’d be busy. I would either interrupt them, or they would get back to me a couple of days later. It would presumably take them a couple of hours to give me that.

I interacted with my old Spooner and went back and forth, asking for further cuts: “Okay, just show me for the US. Just show me users on iPhone.” I got all the answers and all the graphs in a few minutes.

Perfect. Done. I need to go back to this because you just blew my mind. I know you’re not telling us exact numbers, but Evernote’s doing probably a couple hundred million or thereabouts in revenue.

Let’s say more than $100 million, less than $200 million.

Okay, so there you go. That’s the range of revenue. It is profitable, and you just gave a hint as to what the operating profit percentage might look like, right? And you’re doing this with 20 people?

Yes, that’s right. Plus the slightly unquantifiable help of that platform, which keeps pumping out technological improvements that automatically benefit everybody. You can allocate it by dollars in revenue or whatever, but yes, people wake up in the morning and fix bugs for Evernote, launch features, and optimize monetization. That’s about 20 people right now.

Okay. So, are you seeing this kind of efficiency in the rest of the businesses that you own as well?

Yeah, for the most part. I think not all functions are equal.

Are you optimizing for that?

No, I mean, we just try to make each business as successful as possible. It’s not that we know we want to have the smallest number of people we can. If more people create more value for customers and for the business, assuming we can hire enough, fast enough, we would certainly deploy them.

Sometimes we have situations where we would want to have more people; we just don’t have them. That’s a separate issue. We don’t aim to minimize the number at all. We just try to run these businesses as well as possible.

We often find that some of these businesses, when you take them back to startup mode, have been large, slightly bureaucratic, sometimes political organizations for a while. Things tend to grind to a halt. It’s difficult to be entrepreneurial and enthusiastic, move fast, and work on what matters. If we bring them back to a much smaller size with a much higher talent density and get rid of a lot of red tape, then even though the team is smaller—or perhaps precisely because the team is smaller—product development and optimization of monetization pick up again.

Evernote is a good example. If you look at the timeline of product improvements and features in the 2 or 3 years before and after we acquired it, it’s night and day. I feel very comfortable saying it’s at least 3 times as fast under almost any frame of measurement, despite the team being much smaller. But “despite” is the wrong word in many ways. It’s because it’s a lot smaller. These people are, again, startups. Instagram was built by, I don’t know, 10 people.

I think it was about 12 when they got acquired. It’s crazy proof that small teams of very capable people with extreme ownership, who really care, can outwork and outproduce vast organizations where either not enough people care, or they do but there are so many feet to step on and so many hurdles to overcome to get stuff done that they fail to do so.

Nobody wants that to be the case. It’s more like a frog-in-the-boiling-water kind of phenomenon, where you keep adding teams, processes, and rules, and then at some point it becomes very difficult to care and very difficult to get stuff done.

This goes back to how I’ve been describing to other founders this whole island of entrepreneurship. I know you mentioned being influenced by Henry Singleton, for example, and he would do this too. Over and over again, he says that at one time he owned 130 different businesses, and 129 of them were profitable. He wanted to break the business units into the smallest parts possible. The difference between you and him was that you like breaking things down into smaller parts with fewer people and more efficiency, but he kept the business units separate, whereas you’re actually studying them all, using the insights, and spreading them across your entire organization.

That’s very similar to what Mark Leonard did with Constellation. Is there anybody else you’ve been influenced by, or do you take an idea or two from different people?

Frankly, not a lot. Going back to what we were discussing earlier, we were growing up as a business in no man’s land, in a way, in Italy. We purposefully chose to stay a little bit isolated to try, at the risk of reinventing the wheel, to also come up with some real, powerful innovations.

I’d say maybe Netflix. I don’t really know Netflix from the inside, and I don’t know anyone who works there, but there’s their famous cultural deck, and then there have been a couple of books written about it. I think some of those ideas—that you want to beat complexity with talent, not process, and keep rules to a minimum—rubbed off on us.

Other than that, I think we’ve tried to be quite autonomous in coming up with our own ideas.

Do you describe Bending Spoons as a conglomerate, or no?

I mean, it’s a conglomerate to the extent that—

But do you actually use that word?

No, I’ve never used it. It doesn’t bother me, but I think, at least in my mind, a conglomerate is a set of relatively distinct and separate parts. In our case, we try to make everything as homogeneous and integrated as possible, as I described.

So Berkshire and Teledyne would be much more conglomerate?

Exactly. Exactly.

What Singleton and Buffett did better than almost anybody in history is quite different from what I think we’ve been doing really well. They were—and in the case of Buffett, still are—exceptional at selecting and picking companies and management teams that should be worth more than the market was valuing them at.

I wouldn’t say either of them—certainly not Berkshire, I think by their own admission—would be considered exceptional operators. They generally would avoid buying businesses where they thought a lot had to be fixed. They didn’t like that; they liked businesses that were already good.

For the people listening to this who haven’t studied Singleton, you can just go back. I just did an episode on him on my other podcast. It’s remarkable how many ideas we’ve heard from Buffett and Munger that Singleton discovered 20 years before them. Buffett and Munger both say, “These are the ideas we got from him.”

If I have to think about all the people who did exceptional things in business and investing, and take their achievement—assuming we can quantify it—and divide it by their level of popularity, or simply how well-known they are, he would be at the top of the ranking.

He’s been one of the most successful investors and businesspeople ever, by any measure, and yet very few people know him. I think if you ask 100 people, even in business, 95 will not know who he was.

15. How Bending Spoons thinks about capital allocation

One of the things Buffett and Singleton had in common is that they primarily saw their job as capital allocation. Their main talent was capital allocation, right?

Singleton—I think you might have said this, and I could be wrong, but this is what I’m going to ask you—after he stopped acquiring companies, he had bought about 160 in 10 years, something like that. I forget the exact number. Then he said, “Now we’re going to reverse course.” He didn’t make another material acquisition for the rest of his career. He focused on capital allocation, improving the business units he had, and discovering where the best dollar could be spent.

Was it improving the operations of one of his companies? Was it buying another company? He discovered that it was actually buying back his own shares. I think I heard you say before that, out of all the investment opportunities you see in the future, it might be buying back Bending Spoons shares.

Yeah. Not imminently. I think we see a runway right now where allocating capital toward acquisitions is—and I expect will continue to be—far too attractive. The returns will be way too appealing for that not to be the priority.

But I think if you ask me in the very long run, that could be an appealing way of creating shareholder value. I think what Singleton did incredibly well was that he was acutely aware of the circumstances and boundary conditions. He was very creative and made fully rational decisions.

For a decade or more, the market was affording his stock a good multiple, and he was aggregating a lot of businesses. He was buying at a lower multiple and, on top of that, exploiting the arbitrage. He was also very astute at selecting those businesses. He was kind of double-dipping: a business that was undervalued regardless—people didn’t see the potential in the medium to long term—and, in addition to that, the business would then join a conglomerate with a higher multiple. So, double value creation.

Later, the market changed its preferences, as markets often do. So you’ve got to stay open-minded about it, and he started appreciating more vertical businesses. He worked on improving those businesses and spinning them off so they could be maximally appreciated.

He was never opinionated on how they should be done. I believe he looked at investing and running a business as a puzzle and tried to find the best solution. I’ve never met him, of course, but that’s how it looked to me. He was also a great engineer. He could have been one of the best engineers had he wanted to pursue that, and almost a grandmaster at chess, I believe, or at least—

He could play chess blindfolded. There was a story in, I think, the episode I just did, where he was playing with his back turned and said, “Hold on, you told me the wrong move three moves ago.”

He was obviously a genius with an exceptional IQ. Charlie Munger is on record saying he was the smartest single human being he ever met in his entire life. And you imagine all the people Munger met in his entire life.

16. Why procrastination without laziness is good

Singleton took Teledyne public almost immediately. Did you know, when you started Bending Spoons, that you weren’t going to stick with one company? You were going to keep acquiring? You started with really small acquisitions, they were successful, and you kept on that path. Was the plan for you and your co-founders, “This is going to be a public company one day”?

I’d say when we talked about public versus private, more often than not, we thought this would at some point be a public company. There are advantages and disadvantages to being a public company. I’d say for most companies, the advantages are greater than the disadvantages, and for a company like Bending Spoons that requires capital to grow fast, I think the advantages are way too large.

It’s not really a discussion as to whether you should be public, but it’s not all roses. Obviously, there are new pressures, incentives, and noise that you’d be better off without, for sure.

How long did it last from when you knew you were going to go public to when you actually went public?

We like to make decisions as late as possible. I think procrastination is awesome if it doesn’t come from laziness, because if you postpone decisions, you often have more information when you actually get to make them.

Singleton said something like this, where he was like, “If you don’t make a decision, in many cases it resolves itself.”

Yeah.

It removes the need to make a decision.

It’s a slightly different thing. It’s another reason why—well, it’s a subset of what I said. There are some decisions where the only advantage of making them now is that you can forget about them. There’s something to be said for that, and I think if the decision is not particularly important, sometimes the moment you bring it up, just make it so that you can free up your RAM to tackle other tasks.

But if the decision is so critical as to whether you should be a public company or whether you want to buy one company or another, generally speaking, you’re better off delaying it as much as possible. There’s almost no cost to delaying it other than the slight discomfort that it’s still on your shelf. You still need to make it.

Worst-case scenario, you’ll be just as well off when you eventually make it as you were earlier, but often you have more information. Maybe, as we were just saying, the boundary conditions shift and you don’t need to make the decision anymore because it’s irrelevant. Maybe you would have made a decision one way, but then, as the world changes or you learn something else that you had failed to spot earlier, you end up with a different option.

With the IPO, we decided relatively early, probably something like the first half of 2025, that we would want to prepare to go public in the near to medium term—probably late 2025, mid-2026, or late 2026. But we would delay the decision as to whether to actually pull the trigger until as late as possible in the process.

We knew that we were probably going to be a public company at some point. I’d say certainly by late 2025, no doubt about it. But we didn’t know if we would necessarily go public in early July 2026. We just said, “Okay, let’s get ready, and then we’ll see.”

I think the definitive decision—“Okay, we will go public as soon as possible”—was made in the spring of 2016.

17. Operational excellence is not optional

Earlier you said that, assuming the first thing a company has to do is have a strategy, and assuming that strategy is good, then the most important thing is talent acquisition. How do you articulate the strategy of Bending Spoons?

Basically, we want to achieve the maximum level of operational excellence, which means getting the most out of a business possible by any means necessary—both through structural means, such as integrating everything on the same platform so that we eliminate all redundancies and can achieve all sorts of scale advantages and network advantages, and through sheer investment in talent and technology.

By any means possible, we want to achieve the greatest advantage as an operator. Once you have that—meaning a business is better off with you than with almost anybody else—for a sufficiently large number of businesses, then you’re almost guaranteed to be able to compound capital very efficiently through acquisitions.

By definition, mathematically, if a business is better off with you than with everybody else, and there are enough of those businesses out there, you should be the highest bidder when one is on sale. The seller should still get excellent returns from the sale, and you get excellent returns as well.

We probably focus 99% of our resources and efforts on being the best operator, building up that platform, and unlocking as many of these structural advantages as we possibly can, and remarkably little on the acquisition side of things.

We are very deliberate and highly sophisticated, but once we have a powerful platform and these structural advantages, it actually gets pretty easy to deliver very high returns through acquisitions. It’s not that we necessarily see things in businesses that nobody else saw. It’s just that we know those businesses are going to do so much better with us than with almost anybody else, so we can offer more.

That operational excellence allows you to bid higher as well. I think you said you’re pretty sure that you bid maybe 50% higher than the next-highest bid on Evernote, for example.

Yeah. I mean, I can never know for absolutely sure, because obviously the sell side only tells you so much. But I’m pretty confident that our offer was way, way higher than the next-highest bid, which, by the way, in hindsight, we should have negotiated better.

18. How Bending Spoons negotiates acquisitions

No, but we talked about this at lunch. You have a very unique approach to negotiation. Let’s talk about this now. You don’t want to come in as most people do, where it’s, “Let me just put a really low number down right now, and then you say a higher one, and then we go back and forth and back and forth.”

I think you want to be known as—I want to say generous, because obviously nobody buys a company out of generosity—but you want to come across, or establish a reputation, as someone who’s not trying to get the last penny out of a negotiation. You want to help the seller get good value from the transaction.

At the same time, you want to be known as pretty firm. You want to say, “I put a number that I think is absolutely fair and highly competitive on the table. I probably think I could have gotten lower, but again, I’m not trying to get all the value out of this transaction. I wanted to get a lot of the value, but at the same time, I’m not going to be available for a lot of back-and-forth.”

And you tell them that upfront?

Generally, no. If they ask us, sure, but hopefully they do their research.

I can only think of one case in recent memory—which was actually quite recent—where we ended up raising our offer substantially. The reason is that, in that case, we were forced, really, by the seller to put a number on the table before we had the data we needed.

Mhm.

Rather than not participate or risk having to change it a lot later, we said, “Okay, look, we don’t know a whole lot. Based on what we know, we think we’d be happy to do this for between X and Y.”

Later, as we progressed through the sales process, got more data, and finally could form a somewhat complete opinion, we found that we could offer a lot more.

And so, we increased that offer substantially.

Did you increase the offer on your own, or did they say, “That’s way too low”?

I don’t actually remember exactly how it played out.

How would you do that today?

Probably a mix of the two.

How would you do that? How would you do that today?

I think I would, frankly, do it similarly, because we just didn’t have the data, and the data wouldn’t be forthcoming unless you put the number on the table. We’re not trying to prove a point and be dogmatic and say we only put a number on the table if we have absolute certainty. We said, “Look, we are not highly confident in this number because we don’t have a lot of data, but this is the number.”

Okay. Let’s say, in a different example, you have the numbers that you need and you put the number out. Is that number pretty firm?

Generally, yes. I don’t think we increased it almost ever by more than 5% or 10%.

Did you ever hear about the way Buffett bid for Clayton Homes?

No, I don’t think so.

The founder of Clayton Homes wrote an autobiography. I can’t remember what it’s called, but I think his name is Jim Clayton. His son was handling negotiations because Jim had stepped down, and his son was the CEO. His son goes to Buffett and says, “The board would entertain an offer at $17.” Buffett goes, “$12.50 bid.” The guy comes back and says, “All right, we talked it over. We’ll take $15.” Buffett goes, “$12.50.” He goes back and says, “All right, we’re going to do $14.” Buffett goes, “$12.50 is my final offer.”

Then his closer was, “I can assure you, if every capital market in the world closed tomorrow, you can still rely on this offer.” They said, “We’ll take $12.50.”

I will not name names, but we have had 1 or 2 situations a little bit like that. I think it’s easier to do because we’re so confident. I don’t believe to this day that we have ever been outbid. I don’t remember a single case, at least not in the last 5 years, in which we put forth an offer and then the seller sold to someone else.

We have had cases where they chose not to sell. Maybe they thought the offer was too low, but we have never seen that business being sold to someone else. We have been able to deliver the extremely high returns we have while winning essentially all winnable sales processes because of that massive advantage as an operator. We can deliver such improved performance vis-à-vis private equity, primarily, and most other people.

When you have the ability to basically bid higher than almost everybody else almost every time, you can be confident in your offer. I can’t say everybody else every single time, of course, because there will be exceptions, but that is generally the case.

We have seen situations where we put forth an offer and the seller thought they could get more, so they chose not to engage further. Then maybe we hear back from them 9 months later or 6 months later, and they’re willing to transact at that price because they needed to convince themselves that that’s actually what they could get.

It’s harder to do if you think your offer is weak. Then you need to be much more persuasive and try to get it done before people shop it around. In our case, we always say, “Do you want to shop it?”

Often, people try to look for exclusivity. They’re like, “Okay, this is my offer, but unless I get exclusivity within 5 days, the offer is gone,” because they know that their best chance is to win on timing: “I’m here now.” They know the offer is not that great.

In our case, when we’re asked, we almost always say, “Look, if you want to, we encourage you to go and shop it around. In fact, once you convince yourself that this is the best offer, it’ll be easier for us. It’ll be a lot smoother: we’ll sign faster, we’ll close more easily. We want you to be fully satisfied that this is the best value for you and your shareholders that you can get.”

That’s generally been our approach.

From the outside, I would ask: How much of your business is run by numbers? Remember the discussion we had on jiu-jitsu and MMA?

Vaguely. Okay.

Which part? You mentioned some people that you were fans of in the sport of jiu-jitsu and MMA. Then you said—

You said one of the weirdest things anybody’s ever said to me in my life: “By the way, I don’t know what they look like.”

Oh, yeah, yeah.

I’m like, how can you be a fan?

I remember. Yes, yeah.

How can you be a fan of a sport and not know what the person looks like?

We don’t say I’m a fan of the sport, but I know something about the sport. I’m a little bit of a geek for stats and numbers. The same goes for a lot of sports, like CrossFit. I don’t practice CrossFit. I barely ever—I’ve probably seen—

You don’t watch the sport. You study the data that comes off the sport. That’s what I’m trying to get to. I would tell you that Tia-Clair Toomey is the greatest CrossFitter. She probably won 8 CrossFit Games. She only missed once when she was pregnant, I think, a couple of years ago, and then she came back and won again. I just love the stats.

But you don’t know what she looks like.

If she were walking down the street, would you recognize her?

No, I don’t think I’ve ever seen her. If I’ve seen her, it was maybe while I was Googling a picture, I guess.

So help me understand this. This part of you is one of the most memorable things you’ve ever said to me, where you had a bunch of knowledge about these people. You clearly retain these numbers. Are you running your business the same way?

I would say I’m a strong believer in logic and rationality. I think logic and rationality, properly defined, are perfect; they’re always good for you. I’m skeptical about numbers actually meaning what you think they mean. Numbers can be very dangerous because they are an approximation of reality, and if you take numbers at face value—if you’re not sufficiently skeptical and inquisitive—you risk being misguided.

Numbers are wonderful and very useful, but they need to be handled with care. What we try to preach at Bending Spoons is that there’s never a decision that you have to make where being logical and rational isn’t the optimal strategy. No matter how quantifiable or unquantifiable the matter at hand is, you’re going to be as logical and as rational as you can.

Whether you should be data-driven, let’s see—I mean, some things are very clearly well informed by numbers. In other cases, it’s probably useful to bring numbers to the table, but they don’t tell you everything. Some things are somewhat dangerous.

For example, today we generate well over $4 million in revenue per Spooner.

$4 million in revenue per employee?

Per, yeah—per core-team employee. We pay some of the highest compensation in the markets where we operate because we want to work with some of the best people.

That’s not the main thing, but we want to make sure it doesn’t become a thing. We want them to feel that they’re highly valued, so we focus on the things that are actually more exciting and motivating than the extra dollar. Pay needs to be high enough that nobody forgets about it, but it’s not front and center, let’s say.

Having said that, as is only natural, we don’t want to waste money on compensation if it doesn’t bring better talent. I’m not saying anything shocking here. I remember having this discussion with some of my colleagues about whether we should raise salaries, or pay in general, and I was firmly of the opinion that we should. We have, by the way, and we will further do so in the future.

Someone suggested that we run an experiment: We would put out job descriptions with a higher salary than we would typically pay at the company and see whether that would get us more applications, better applications, and higher conversion rates.

I was in favor of running that experiment because, had we seen major uplifts, that would have very strongly supported the view that we should be increasing salaries. But I told the team before we ran the experiment that even if we didn’t see any uplift, I would still be of the opinion that we should raise salaries.

The reason why I believe so is that I think the people who click on a job ad and then actually decide what to do are only a fraction of the people who could be clicking on that ad. A lot of those people will have already decided whether they’re inclined to apply or whether they’re just curious.

If you look at conversion from a piece of information you’re changing so late in the funnel, essentially, and you run an experiment that’s going to last 2 months, you’re going to fail to observe all the compounding effects of establishing a reputation as an extremely high-paying company. Those will never show up immediately.

You need people to spread the word at universities and in workplaces. You need to start showing up on job boards. As you know, there are websites comparing companies, and that will take many months at a minimum, probably multiple years.

In the same way, today Bending Spoons is generally regarded as one of the highest-talent-density, best places to go work. It’s not something we achieved overnight. It’s a slow investment in that.

The test showed modest uplifts, but not enough in and of itself to justify perhaps paying people 20% more.

19. Insisting on a culture of extreme ownership

I cannot definitively prove that we were right in ultimately increasing compensation a lot, but I believe we were. If you base your decisions on numbers alone, or primarily on numbers in every case, you're very likely to miss out on a lot of opportunity. I'm sure Steve Jobs would have said that numbers were occasionally interesting to him, but definitely not the guiding or deciding factor in many of the best decisions they made at Apple.

We try to make the maximum possible use of numbers, but with skepticism and context. Logic and rationality—they never fail you. They're the best thing.

Luca, man, out of all the founders I talk to, you're one of the least predictable people that I have conversations with. I really appreciate that you exist. I love what you're doing at Bending Spoons, and I hope we have multiple conversations in the future. Thanks for taking the time, man.

Thank you, David.

I hope you enjoyed this episode. Please remember to subscribe wherever you’re listening and leave a review. And make sure you listen to my other podcast, Founders. For almost a decade, I’ve obsessively read over 400 biographies of history’s greatest entrepreneurs, searching for ideas that you can use in your work. Most of the guests you hear on this show first found me through Founders.