$160B Market Cap, $5.48B Revenue, $10M EBITDA Per Head: Inside AppLovin’s Profit Engine

A lot of the things that we've been able to accomplish just don't make sense to people. And in a world where things

people. And in a world where things don't make sense, people think you're cheating.

The founder mentality has got to be chase winning.

In order for me to get paid anything, the stock had to clear that and then keep going up from there.

Almost in every relationship of my life, I was never really present.

That fear of blowup is one of my big motivators. Now I have interviewed a

motivators. Now I have interviewed a thousand CEOs of the largest companies over the last 10 years. This guest Adam Ferogi is top five I've ever met. Easily

there is no company on the planet with numbers like apploving. Of all the shows that I've done genuinely in the studio, this is the favorite one for me that

I've ever done with a CEO. Ready to go.

Adam, I'm so excited for this, dude.

It's funny. I sent you the schedule beforehand. You're like, that's a that's

beforehand. You're like, that's a that's a lot of questions. I I stalked the [ __ ] out of you before this, just to be clear. So, thank you for agreeing to

clear. So, thank you for agreeing to this onslaught of questions.

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

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

conversation. So this is going to be completely unscripted. One thing that

completely unscripted. One thing that I'm always just trying to understand before we dive in is like mentality of entrepreneur. There's two types of

entrepreneur. There's two types of people. People that are motivated by

people. People that are motivated by losing or people that are motivated by winning. What are you fearful of losing

winning. What are you fearful of losing or are you inspired by the thrill of winning?

I think you almost if you've had success, you almost have to be inspired by winning. Um if you're fearful of

by winning. Um if you're fearful of losing or you have a fear of failure, I feel like you're almost certain to be stuck. you're not going to take shots um

stuck. you're not going to take shots um that are material and you're going to protect downside more than go after upside. And I don't tend to believe

upside. And I don't tend to believe that's really the founder mentality. If

you took a risk once upon a time to start a business where there was nothing, you didn't even know what it was going to become and you were you knew the odds were 99 59's likely that you were going to fail. That in itself

has to tell you the founder mentality's got to be chase winning. And so over the years I've taken motivation through winning. And and I I think it's also

winning. And and I I think it's also important to note that founders don't tend to be motivated by money as well if they're really successful. That that's

something that I like to ask in interview questions and I found the best people are motivated by personal growth, development, in being inspired, finding things intellectually stimulating,

winning, but it never tends to be money cuz money is a very very tough thing to continuously be motivated by. Eventually

you will reach a point where money is no longer a motivator and then you need to find something else. So, I've always pushed to win and I've always pushed to learn and grow and those are the things that really got me going.

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

CEO?

There there was a baseline that I needed to feel like family was good and I was fortunate enough to to start a couple businesses before they were successful.

So, I'd reached the baseline before I started this business. And I said those businesses, I I really aspired to to get a single. I just wanted to get enough

a single. I just wanted to get enough money where I didn't have to stress about money. Once I co-founded this

about money. Once I co-founded this business with my team and we started getting going, I never really needed anything from this monetarily. And so

the interesting piece there is when as we were building up, we were growing really quickly. And in 2015, we got

really quickly. And in 2015, we got approached to sell the business for quite a lot of money in the hundreds of millions of dollars all cash. Had I not had the singles before, it might have

been something that was very enticing to just cash out the whole thing at that point in time. But because I knew my bank account was sound, I wasn't in it for money. I was trying to build big and

for money. I was trying to build big and and really I felt like this had to be the home run. I was able to to think about the deal process there logically and understand that the business is

growing really well. It's really sound.

Why would we give it up on that up upward trajectory? So, we were able to

upward trajectory? So, we were able to really play long and I think in large part that's because I didn't start this at all considering the money that I can make from it.

Speaking of not starting for the money, your total comp in 2023 was 83 million bucks, making you the eighth highest paid CEO in America. Um, how do you

think about that? What do people not see when they read headlines like that? What

is the misconception?

Yeah. So, to understand my comp in 23, you got to really look backwards in in 22.

We when we went public, we went public in 21. Um in the first year, the stock

in 21. Um in the first year, the stock went up to about $40 billion market cap.

In 2022, we fell about 92% to a little bit under $4 billion market cap. I for

the life of the company had only taken equity that was my founder stock and based on the money that I originally put in the company. So I I'd taken no compensation. I was taking basically the

compensation. I was taking basically the bare minimum um to have benefits. At the

bottom in 22, I made a decision and that was for the first time to ask for compensation. And the reason I did that

compensation. And the reason I did that is because I felt like I'm public.

Turning this company around is a big task. And I'd like to align myself with

task. And I'd like to align myself with investors to say I'm going to get paid, but I'm only going to get paid if the stock recovers. So the thresholds of

stock recovers. So the thresholds of compensation that the comp committee on the board granted me were at a minimum the sock was $9. We had to get to the first threshold I think was about $ 38

to $40. And in order for me to get paid

to $40. And in order for me to get paid anything, the stock had to clear that and then keep going up from there for me to get any sort of compensation. And

then then there were I I think five or six levels from there. So all the way up to to a return to $80, which was our APO price and I had a term to go achieve it.

I feel like CEOs who are founders originally started a business taking really big risk. If the belief is that the CEO should then never get compensation ever again, it it's

completely flawed logic. You want to give people who chase really big upside by creating really big things the potential to continuously have that really big upside cuz it allows them to

in a way just mentally stay motivated on what they're doing versus start drifting to other things. Cuz any founder, even at the low point, I was worth quite a bit of money on paper at least with my equity. I could have walked away and

equity. I could have walked away and started something else. I I've now had three successful businesses, so I believe I could have a fourth, but I really wanted to stay committed to the company and stay aligned with investors.

I think the other thing that people miss is that the CEO's job in a company, uh, especially one that's gone from small to very, very large, is an incredibly lonely, very stressful role. And if you

talk to to CEOs and founders, I know you do do fairly often, these jobs are brutal. It's people these days are

brutal. It's people these days are afraid to talk to me because I'm so busy. They perceive even though I'm not.

busy. They perceive even though I'm not.

I'm the same person I was 10 years ago.

They don't come up to me anymore. Or

people on inside the company or outside the company, if the stock is doing well, believe you're smarter than you are. And

if the stock is doing poorly, believe you're going to be so stressed out you might jump off a building. Like it's you don't understand like the things that are going on in the CEO's mind when you you really haven't done that role

yourself. And very few people in the

yourself. And very few people in the world have built a business from small to very very large and eventually taken it public. So I say that to say it's a

it public. So I say that to say it's a brutal job. It's lonely. It's stressful.

brutal job. It's lonely. It's stressful.

You almost certainly are going to have distraction from personal life. I don't

know many founders who have had that kind of success that have fantastic personal lives. Yet you end up

personal lives. Yet you end up distracted from your kids cuz you're always focused on work. It it consumes you. And therefore to then say the CEO

you. And therefore to then say the CEO should take less pay is something that's quite unjust because it's not understanding of the role that the CEO has to absorb.

Have you ever question the sacrifice in any way? My brother has children and I

any way? My brother has children and I watch him have children and be an amazing parent and see my my parents be grandparents. Dude, I'm just [ __ ]

grandparents. Dude, I'm just [ __ ] grinding in the office till 11 at 12 every night. A little bit of me

every night. A little bit of me questions the sacrifice sometimes if I'm honest. Did you ever

honest. Did you ever uh I would say at the low low point in 22 I decided to make some changes because I did question the sacrifice I was making. There were two tolls that I

was making. There were two tolls that I saw that were were being taken on my life. One was my health was decaying and

life. One was my health was decaying and I felt like if I'm this stressed out where I'm not sleeping, I'm drinking eight cups of coffee a day. I'm losing I mean losing my hair, losing my fitness,

just losing the things that allow me to focus. If I don't reverse that, I'm

focus. If I don't reverse that, I'm never going to be in a place to be mentally sound to run the business. And

I felt like as a CEO of a public company, I'm committing for the next 10, 20 years. I I need to be here a long

20 years. I I need to be here a long time. To do that, I needed my health.

time. To do that, I needed my health.

So, I I stopped what I was doing and reset that. The other piece was I felt

reset that. The other piece was I felt like from my children, I drifted a little bit more distant cuz I wasn't paying attention to. And I think any any founder or anyone who works at a tech company that's always on knows this

experience. if they have kids. You hang

experience. if they have kids. You hang

out with your kids, but your mind is elsewhere. Either that or you're on your

elsewhere. Either that or you're on your phone. And so, you're never really

phone. And so, you're never really present. And what I realized is like

present. And what I realized is like almost in every relationship in my life, I was never really present. And so, what I tried to do to change that is at least take small moments to feel like I was

present. And so, small moments might be

present. And so, small moments might be 10 minutes at a time because I'm not going to be able to sit down and have hours at a time. But if I gave myself 10 minutes at a time to hang out with one of my children or a couple of my

children, I felt like, okay, now I'm actually con committing to them to be 100% present. And that that was a

100% present. And that that was a change. Um, and the third change I made

change. Um, and the third change I made at the point in time was that I started introducing hobbies to myself. So for

example, I started learning how to surf in the last year or two years. You have

to put the phone down. You have to be completely disconnected. You get mental

completely disconnected. You get mental ease. And in the absence of these

ease. And in the absence of these changes, I feel like I would have uh would would have felt like I'm giving away a big part of my own ability to be stable and happy. And by getting that

back, I became a better CEO of the business. I became someone who could be

business. I became someone who could be more thoughtful and who could be more long-term focused.

You said in 2022, you fell, you kind of dropped it in very casually. You fell

92%.

I mean 92%.

What does no one know about respectfully being in a I can say it now given we're out of the trough but like being in a trough that deep that they should know.

I mean like to fall 92% in a year you go down almost every single day of the year. So and I think most

year. So and I think most Neil M once told me what's the difference between being down 98% and 99%. Half.

99%. Half.

Yeah it's a lot. And then also like when you realize you fall 92% you got to go up 10x to get back to where you started.

So it's like it is a it's a bloodbath.

Um a couple things like one is a lot of people think your psyche is tied to the stock and I mean beyond that when you talk to some exacts who are at public companies they'll say they don't look at

the stock price. It is I can say I 100% look at the stock price. Like it is very very hard to run a public company and say I'm just going to choose not to look at the stock price for for few days week whatever cuz you've got investors that

care. you got your team that cares and

care. you got your team that cares and it's a real-time ticker on on what the world thinks of your business. The the

challenges there are when everyone is telling you that that the stock is going down every single day, investors are not buying your shares. It's very easy to go, am I doing something wrong? Is the

business [ __ ] is something here that I don't understand that everyone else in the world is smarter than me on and understands? And so it can make you lose

understands? And so it can make you lose confidence and second guess yourself. In

the face of that, I think what's important is if you believe in your business, maintaining conviction. And so

we did a couple things and and really that allowed us to turn the business around. As an advertising business,

around. As an advertising business, there's an advertising model that drives a lot of the success that we have on platform. Everything we do is on a

platform. Everything we do is on a performance basis. So advertisers plug

performance basis. So advertisers plug in, they aim to get a certain amount of revenue that's more than the ad dollars that they spend on the platform. Now

what delivers that that equation for them is how potent our advertising model is. And these models are recommendation

is. And these models are recommendation system models and that's one of the earlier forms of machine learning that existed and it's really gotten supercharged with what we see today in

AI and the the research advancements in LMS. Well, in 22 at the very bottom we said we're on an older version of machine learning. we're going to

machine learning. we're going to completely throw out our technology, rebuild it, and go to what is really cutting edge and current and in the field of recommendation systems. To do

that was a big internal change. One, we

had to slow down basically all research and development on the current system because we said we're going to throw it out. It it's now outdated. It's not

out. It it's now outdated. It's not

going to carry us forward where we we got to go. We had to turn over some people. We had to take some of the

people. We had to take some of the people that had helped us get to that point, which again was a $30 billion IPO and and up from there and then then cratered. But a big business, we we had

cratered. But a big business, we we had to turn over some people who were committed to the old system and just say the old system's done. We're rebuilding

to something new. And and then we had to have conviction behind that bet and rally everyone at the company that this is the right thing to do and we're going to go execute on it and win. And so when you do that,

how did you literally do that? You have

to voice confidence in your own bet. And

so it's very very hard to walk around confident when your socks down that much. I mean, people are calling you

much. I mean, people are calling you thinking you're suicidal. So like you got to drown out that noise. Like I

said, the CEO to check that you're you're doing okay.

Yeah. Yeah. You almost like didn't get that, but you got looks like you should probably like like go consult a therapist cuz it looks like you're going to kill yourself. Um, and and like I wasn't giving off those vibes cuz like

at least I didn't think so. Cuz I've

always had a belief that so long as we have conviction on a path and we've got a strategy that sounds right and we've got a motivated team behind it, we're

good to go. And so I was able to voice confidence internally. In doing so, we

confidence internally. In doing so, we were able to retain core team and the important people that we needed to go execute on this path forward. And that

that's really the challenge you get into when the stock falls that much. It's

really really hard to understand how can you retain people is people are working and seeing the exact same thing that we're talking about and they're probably and their families are probably going is

this company a piece of [ __ ] Why aren't investors buying the shares? Well, it's

easy to get tricked into believing it is when it goes down 92%.

That is a very material shift in terms of techn technology architecture which leads to the layoffs. We're seeing a huge amount of layoffs today. Are those

layoffs today, do you think, due to AI efficiency or do you think it's because of overhiring in co times?

Yeah. I mean, look, I think it's the latter today because the former is still yet to take full effect at most companies. But a couple years ago, we we

companies. But a couple years ago, we we grew I been growing really fast ever since we launched this this Model Axon 2 in in uh April of 2023 and the stock

recovered. But I think it was in 24 25

recovered. But I think it was in 24 25 um but mostly in 24 we we had a year where we we probably grew near double digits um sorry near triple digits but

we ended up cutting the team's staff by 40 50% in most departments and the reason I did that then is a belief that

if the role was going to get automated or that AI was not being adopted fast enough in those departments it's time to let those people go and rebuild the

organization as if we were building it knowing what technologies were available to us today. And

can I just pause you there?

Yeah.

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

Yeah. I mean it's like like first of all like a lot of one you end up over time companies get bloated. So I said like what are the processoriented organizations like what what is created

even in our company we run really lean.

We've got a really high revenue per employee in EBIT dot per employee but even at that time we'd gotten bloated over a decade plus and so I looked at first like what are the process enabling

parts of the organization so one was HR um HR as a function is was was necessary to have because you've got to be able to do things like hire people and fire

people but our team had gotten bloated and there was a lot of process that the HR team was introducing in the organization as a founder I still remember the days we were 10 20, 50, 100 people and you didn't have that much

process. You had one HR person per 1 to

process. You had one HR person per 1 to 200 people and things felt faster. So I

wanted to get back to that point and so I went through and said what are the processes I don't like at the company?

Let me just eliminate those. Then we can go through and say like who are the gatekeepers of those processes? You can

you can remove th those people and then you go to the where are the areas that that uh you're going to start seeing a lot more automation. So an example in our business is creative production. We

felt like AI is going to get to the point where creatives are going to be automatically produced. You still need

automatically produced. You still need humans to innovate, but you can have less humans because a lot of the design work can be handed off. Um, in

engineering, you you have your best engineers can use these tools to really accelerate themselves and your weaker engineers might not understand how to use these tools or might only get a 2x

instead of a 10x or 100x increase in output. So,

output. So, can I just interrupt you there on the creative production side? How do you think about the fear of moving before the market's ready? And what I mean by that is yes, there's a lot of promise,

but you can fire before the creative tools are there to deliver what was.

So, so your earlier question about winning ties in here is I don't play in fear of failure or fear of losing. And I also believe on my team

of losing. And I also believe on my team across the board, our job for them has to be the right job for them at this moment and right defined by the best place to have personal development and

growth. And and if we believe that every

growth. And and if we believe that every single person has a good role, if we think that's no longer true, we should part ways, good severance, and make sure they're free to go do something else because I don't like to keep people in

roles that are going towards a dead end.

Now, it was a bet and a belief that these technologies were going to get good enough to automate these roles away, but we didn't want to take the risk that we were going to keep people in deadend roles. That just creates

morale hit that creates this organization that ends up optimizing to people who are who are just not happy.

And we try to optimize to our best performers. Best performers, your A

performers. Best performers, your A players want free reign to just go crush it. But they don't want to be distracted

it. But they don't want to be distracted by unhappiness. They don't want to be

by unhappiness. They don't want to be distracted by people who are working at a role that is almost certainly going to get automated away. And so by taking it and saying build the culture as if we were building it today knowing what

technologies are available to us, what would we look like? We just went to the what we would look like and then that forcing function made us have to get to an automated place faster and we it

would have been a lot slower had we had people that were trying to fight adoption of the technologies because they were fearful it was going to lead to their job loss. Do you think it is possible to have a company of your scale

which according to the numbers was 895 with 4.3 million revenue ahead? Um

do you think it's possible to have 895 only a players? Is there a time when you just by nature have to have a native either?

So so our core business so we bought a couple businesses. We have adjust is an

couple businesses. We have adjust is an analytics company and world is a CTV business. So those two aren't

business. So those two aren't integrated. They run their own business.

integrated. They run their own business.

So if I just went to the core business, our core advertising products are about 400 people. So call it some very very

400 people. So call it some very very high percentage of all the company's EBIDA um comes from the core business.

So if you then calculate the EBIDA per employee over 400, it it's a really really high number. Um I think it's it's reaching or over 10 billion uh 10

million ahead now. And so the question on can you have a team full of A players? Not everyone can be an A player

players? Not everyone can be an A player in a team. you need some rules that are just there to be processed and keep the lights on. Like we're a public company,

lights on. Like we're a public company, so there's certain things that have to happen just just because they have to happen. But like HR for example, like

happen. But like HR for example, like that I touched on earlier, we we went and took a pretty large HR organization, one that I think had 70 80 people on it and now might have 15. The people that

we retained are your A players in HR.

They're the doers who are individual contributors. They just get stuff done.

contributors. They just get stuff done.

They don't get bogged down in process.

And so every organization we said, how do we slim down to the best people? And

for us, the best people are defined by those that really want to come in and make a difference and learn and develop themselves, but not need process to get there. No management layer, no slowdown.

there. No management layer, no slowdown.

It's just people who just want to get [ __ ] done. And so that went through the entire organization where we leaned up to just those kinds of people. And then

you start looking around the room and you've got great people everywhere. then

you enjoy working at that company. And

so A players, what I've learned, can exist whether it is a back office role or an engineering role or a front lines revenue generating role, but A players won't exist in bulk if you have a bunch

of B's, C's, and D's around them.

Can I ask what role do you dislike most, but you have to keep? I mean, so long as I have um

all people who are doers who are really high output, I don't dislike any role um because it fits our culture and every part of that comes together to build the

business. But it's like as an example,

business. But it's like as an example, if you look at our exact team, we have CEO, CTO, CFO, and general counsel. We

don't have a CRO, we don't have a COO.

Um go down the list of other C levels that people might have. We don't have a CMO. We don't have a chief people

CMO. We don't have a chief people officer. We don't have any of these

officer. We don't have any of these roles.

CHRO.

None of these people.

CHRO.

No. What's the point?

I'm I'm shorting the company. If you

don't have a chief human resources officer, what are you doing?

I mean, look like so the they managed the HR officer.

Yeah. Yeah. They managed the next person then the next person to the next person to eventually the doer. But the reason I state this is because we really built a

culture of doers. And it was it is very very hard when you grow up to go from a a team you started and was small and was a team of doers to eventually get large

and you go public. It's very hard to maintain that. We didn't until we ran

maintain that. We didn't until we ran through the layoffs and started leaning up. And really really the catalyst for

up. And really really the catalyst for me was this guy who's now the CTO Giovani came in and he started looking around the organization and kept saying why do we have these people why do we

have these processes and it reminded me that the most important question to ask in business is why and so he's inspired me to go you know it's been 10 years we're working with all these people we

have all these processes that we built over 10 years why do we have these things why is it that I have this person who has this title who means nothing And I went through the whole organization.

We just went back to the the founding roots and tried to go back to that culture of doers. And the question why played a huge role in that and we were able to get to a place where everything was leaned up to doers. So we no longer

have a role or a layer that I don't appreciate.

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

I think it's really really hard if the train leaves the station and your team becomes bloated to go backwards. And the

reason I say that and this is a challenge in software today is it's not as simple as go lay off 50% 60% of people. If the team is bloated and

people. If the team is bloated and there's a mixture of A's, B's and C's, your A's are probably already long gone and what's left is like A minuses to B+es and then go down from there. But

it's people who like working in a processoriented bigger company that are sticking around. If you go fire 50% of

sticking around. If you go fire 50% of people and the culture and the team is mediocre, you're left with half mediocrity and you're not going to get to where we hopefully are at, which is just a bunch of a a players who are

doers. The only way to fix a culture

doers. The only way to fix a culture like that is to go and fire 99% of people and just rebuild it from the ground up. It's exceptionally hard to

ground up. It's exceptionally hard to do. Not a lot of people understand how

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

I think it's challenging. People hear

that this is the way to build things and founders remember the days the glory days of 50 people in a room just building stuff and things moving incredibly quickly. It's not

incredibly quickly. It's not particularly easy to take a company that's gotten large scale with a bunch of layers big exact suite and then take it back down.

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

I I think if they really know what they're doing and they understand how the company looked when it was highly efficient when it was founded, then it's plausible that it can get back to the

roots. But if if it's a company that's

roots. But if if it's a company that's gotten bloated to the point of mediocrity and it's just let's fire half and try to automate roles, it's probably not going to get to the place that

people think it should. We are seeing a deluge of SBC stockbased compensation uh at a level that we almost haven't ever seen before I don't think in corporate history. Um how do you feel and think

history. Um how do you feel and think about that?

So we we've given roughly the same amount of stock um every year in terms of absolute amount. and it's roughly $300 million. And so if you think about

$300 million. And so if you think about our market cap, I think our market cap's about $150 billion. Our burn on stockbased comp is very very low. And so

you can judge us on cash flow minus SBC, which I generally think is the right way to to judge companies. What's happened

in tech though is that there's been an expectation that stockbased comp will be high at companies. And as stock prices have gone down, especially in software companies of late, you have a downward

spiral that's formed where all of a sudden a company is burning 3% of of their cap table every single year to pay out equity to the team falls 66% and now

you're at 10%. And you're at a level of dilution that it's incredibly hard to come out from underneath. And so it makes it a hard to bet on those companies when they're burning that much

equity. What I found in and what we did

equity. What I found in and what we did implemented in in 22 when we fell a lot is that certain people have enough compensation to not take risk on the stock if the stock's going to be

volatile. And we used to believe that

volatile. And we used to believe that every single person should have equity granted by the company. Instead, we went to a place where we said the top 10 to 15% of the company will get equity and

the rest won't. they'll have the right to buy equity and there's ESP programs that let employees buy equity at a discount if they so choose. Otherwise,

they'll just be paid on cash. And I

remember when I first started my career, I couldn't have taken risk. Like I was basically going paycheck to paycheck, right? Like it's if you got 25% of your

right? Like it's if you got 25% of your pay in stock and it went up, great. You

feel great. But if it falls 92%, you're like, damn, I can't pay my rent. That's

a real problem, right? Like so we took it to a point where people who had the luxury of being able to take upside got upside. Everyone else got cash comp.

upside. Everyone else got cash comp.

They had the decision themselves and we controlled this burn. And so we got into the position where it just wasn't burdensome to our business. And I think companies tend to give away their stock

too cheaply and too broadly not understanding who actually can drive the value of the equity and also believing that the investors are going to be accepting of really high burn rates.

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

I mean I like I think cash is king. I

like it's simple. I I mean I look at accounting practices and I look at like Ebida numbers and like what's clean Ebida versus not. End of the day like net income, cash, these are clean

things. If a company generates a billion

things. If a company generates a billion dollars of cash but gives out a billion dollars of equity and says I'm just going to buy my equity at a billion dollars. They're not generating any

dollars. They're not generating any cash. So like what's what's the real

cash. So like what's what's the real value of that business? either you're

diluting and they're paying all of the cash they generate to buy the equity back to offset the dilution or they're building up a cash balance that just offsets the dilution. So like what's the

point um of of believing that the cash flow is real in that case. So I think for me it's just distill businesses down to the simplest metric which is cash flow minus SPC.

We mentioned the creative changes that are happening with AI and how that impacts output. Engineering is one that

impacts output. Engineering is one that you mentioned several times. How have

you seen engineering productivity change with AI in the last year or two? Data

bricks, I think, released yesterday that 50% of their code is generated by AI.

Yeah, I mean ours is a higher percentage than that, but it depends on like if you think about percentage you say yours is.

Yeah, I mean 80 90% probably, but like that that discounts quality over over quantity. So like I think what's

quantity. So like I think what's important is you could if you just shoot off for a percentage of tokens consumed, you could get to a place where you're just creating slop. If you're incentivizing

creating slop. If you're incentivizing slop, like you're not going to get very far as a business. You're going to have massive fees to go pay the large language model businesses, but you're not going to get further as a business.

What's important is are your engineers good enough to use these technologies to accelerate what creates value for the company? And can you measure that? And

company? And can you measure that? And

it's great to deploy an army of agents to go go do my work for me, but if it's unclear what the deliverable is and it's unclear that that deliverable is it aligned with actual growth in the

business, then it's just waste. And so

it's easy to say look percentage of code is is high because truly if you set off the agents start writing code, they're going to contribute more code than humans. But is there value created? And

humans. But is there value created? And

so everything we do with lean team is try to go to value creation. And if you optimize to that, you get the most out of the agents without looking at the superficial metrics more so trying to

distill it to was your investment in tokens covered by the amount of revenue that you created from the code contributed.

What does it mean to move to value creation? Like how do you do that in

creation? Like how do you do that in you have to understand the KPIs of the business that drive the business. And so

ours our organization was built pretty nicely for this for for the era that we're in. One, we don't have a product

we're in. One, we don't have a product organization. Our engineers are meant to

organization. Our engineers are meant to be product managers. And if you think about what's happening with AI native or or engineers today, they have to be really imaginative. They have to be

really imaginative. They have to be product people. They don't have to know

product people. They don't have to know how to write code, but they have to be able to audit code cuz frankly, you can't just go type out like what you need in a complex system and get a deliverable and it's done. They still

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

to measure it. And so our business with a lean team and one where when you push a model improvement it is with certainty that it's easy to see it reflected in

accuracy numbers in the model and also revenue growth in the business. The team

knows what the KPIs are that they're optimizing to. And because they know

optimizing to. And because they know that, they can then align with what an agent is going to or army of agents is going to do on their behalf and try to get to that point of get the most value

out from the investment that we're making. I think it's very hard in a lot

making. I think it's very hard in a lot of businesses to understand exactly what are the KPIs that we're optimizing to.

So they just go, let's just write a bunch of things and see what sticks.

Then you're walking on a slippery slope.

It's you may have so much cost ballooning from token usage that you don't actually get the type of revenue growth you need to cover it.

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

I mean, our business is pretty simple.

So, I don't know that that we ever optimized to something that turned out to be wrong because we've always optimized to the same thing. There are

two things that drive our business. If

the model is more accurately predictive, it's going to drive more revenue for the c the customer, the advertiser, then their media cost spent and everything is

measurable in our system. And if that function holds true, revenue should grow as well alongside it. And so because everything is real time tracked and because we've always had a very

consistent business model where we don't sell the the belief that something worked, we sell the actual fact that something worked and we can measure everything. We ended up in a lucky spot

everything. We ended up in a lucky spot where the business was built really well to be able to go utilize the types of technologies that we're seeing out there today.

You said multiple times about it's very easy to have massive spend on the LLMs and just blunt the AI slot being created. How did you think about the

created. How did you think about the decision whether to invest in your own model as Harvey did as cursor did TBD on how that goes we'll see versus use existing Frontier models.

Yeah. I mean look we're we're not an interface on top of large language models there. There's usage of large

models there. There's usage of large language models in the company for productivity. There's some usage of

productivity. There's some usage of large language models in in our core business as well. But a recommendation system model um is something that drives engagement. what you see on content on a

engagement. what you see on content on a social network. It's something that

social network. It's something that drives most advertising products in the world today. Facebook's ad system, Tik

world today. Facebook's ad system, Tik Tok's ad system, ours. And so, this is a space of machine learning that really hit its stride about a decade ago and I would say really accelerated with some

of the research that we've seen come out of the large language model space lately. But it's a space where you can't

lately. But it's a space where you can't just go defer to the large language model and say, "Hey, based on what you know about this user and the data I have available, what's the next ad to see?"

that wouldn't work as well as a custom model built for this purpose. In a world where you get to a place where you're in a category where you're utilizing the large language model or you're building

an interface on top, you better build a moat really, really fast given how exceptionally talented companies like Anthropic are about releasing product on top of their own models.

Do you think the majority of companies we see created today will be commoditized, eaten by anthropic and open AI and frontier models? I would be very very nervous if I was building a

business as an interface on top of those companies.

What does your team use internally engineering wise? Cursor or cloud code?

engineering wise? Cursor or cloud code?

Uh most people are on cloud code. Um

codeex is utilized as well and cursor less so these days.

You have 895 people today. How many

people will appear?

So it's tough to say. I mean again it's 400 people in the core business. We run

lean. Um, is it going to be 800 on the core business? I highly doubt it. Is it

core business? I highly doubt it. Is it

going to be 50 on the core business? I'd

love it, but I highly doubt it, too. So,

I I think we're sort of in a in a range of of a a good level for what we need for what we're doing today. Now, if some of the things that we'll take bets on over time, work, we'll need more people

around other businesses. But if we're just executing on our core business, it's very likely we don't need to to go hire a whole lot more. You said about kind of execution team of doers. It

sounds great but it's very very hard to do and you need great oh god I sound like a real corporate but alignment but you don't do onetoone meetings. How how

do you do the culture of execution without one-on-one meetings and without the traditional corporate scaffolding?

Yeah. So it's really interesting. So um

I'll broaden this out a little bit. One

of my beliefs is that really good people figure out a way. They don't need a whole lot of mentorship. So if people on my team, if they directly report to me, I never do one-on ones. I don't do

reviews. There, if I go to if I don't

reviews. There, if I go to if I don't like something they're doing, they know about in real time via chat. If I like what they're doing, they don't need to know. They they know that I respect them

know. They they know that I respect them and and and they're good to go. Good

people don't need that type of handholding usually. And what ends up

handholding usually. And what ends up happening is people who need a lot of development do, those people aren't the people that I want on this team of A players. And so we tend to shy away from

players. And so we tend to shy away from a lot of traditional management techniques. Another example of this is

techniques. Another example of this is like something like learning and development. A lot of companies try to

development. A lot of companies try to structure all the onboarding and learning and development processes in a company to say you're new at my company.

Here's how you should learn the business. Well, I remember in school I

business. Well, I remember in school I hated classes that were structured. I

didn't learn anything. You couldn't

retain it. I wanted to learn as I went.

And I my first couple jobs out of school, I came in and I was just curious and I figured stuff out. I've seen a pattern that our best people come in, they ask questions, they figure things out. And so we don't really have formal

out. And so we don't really have formal learning and development and it's completely disconnected from what you would expect at a company. Um, but we we don't want to structure people. We want

to get really curious minds who come in who are loud enough to get what they need to get and who can learn. And now

I'm going to tie it to the AI native world today. The benefit of not doing

world today. The benefit of not doing things in these one-on-one silos and very structured is you can document everything in Slacks or transcripted video calls. If you do that, any new

video calls. If you do that, any new person can come in and go, "Hey, Claude, summarize for me what Adam cares about over the last quarter and write me a book of everything that matters to him

and take the the person who's running the best sales calls and summarize what he does or she does for those calls and tell me what I should know on this job."

And then like you start asking these types of questions, you start getting really good output cuz all of the information is available to cloud and you end up getting a person who can actually develop themselves through

curiosity and and output out of the models. And that is a much more capable

models. And that is a much more capable future employee than someone who was just told here's what you need to know.

You said about transcribe video calls having a lot of like quality data that can be used summarized.

That's great. I believe in in person strongly. How do you think about

strongly. How do you think about inperson versus remote and the value derived?

Yeah, I mean we're we're end of the day we're a sales business talking to advertisers. So I do believe there's a

advertisers. So I do believe there's a lot of value to building relationships in person. Um I I think you do have a

in person. Um I I think you do have a loss in ability to feed that information in the model and show other people what you're doing in those in person. So what

we tend to do is believe the vast vast majority of communication needs to be written or through a video call. And

when you need to build a relationship with key clients, you go in person and you take them out. And if you take them out in a social gathering, you can send notes into a chat around that client and have that as your history on the the

inerson meeting. But you can't replace

inerson meeting. But you can't replace in person. I think as human beings, as

in person. I think as human beings, as we go to this world where bots are going to do more for us, in person's even more valuable.

I'm similar to you in terms of a focus on execution and I get told that not everything has to be productive and sometimes being deliberately unproductive is almost productivity.

Allah team drinks. I don't want to do team drinks on a Friday at 5:30. Like

can we not bond over a whiteboard in like a project that I'm being serious like in a project that we're working. We

all love what we're doing. Like can we not do that? Why do we have to go and sit and and drink in a pub? Like, but

I'm told that that's productive culture building.

What I found is in the most productive moments in with your best people, you get in heated debates, like yelling matches. And if you get really heated

matches. And if you get really heated with someone and you go right back to let's just crank and there's not moments where you go out to dinner, you have drinks, you get to bond, you sometimes

lose the human side of things and you sometimes get in a place where resentment can build and then things can become unproductive. When you remember

become unproductive. When you remember that you're just a bunch of smart people in a room trying to figure [ __ ] out and you really remember that at something like a dinner, at something like drinks, you end up creating, I think,

productivity out of those moments. The

other thing I found is when we go out and and we drink and we start shooting the [ __ ] really good ideas can come of that, too. It's not that we're going out

that, too. It's not that we're going out and with a bunch of co-workers and talking about baseball. We're going out with a bunch of co-workers and and getting drunk together and talking about work opportunities. And sometimes your

work opportunities. And sometimes your best ideas come out of those moments.

You also don't attend conferences.

Why don't you attend conferences? How do

you think about that?

That that's uh that's not true anymore.

I do go to conferences now. So when we fell in 2022, um one of the things we did on the investor relations side, you fall 92% no one's buying your stock. We said we're going to buy our own shares and we're

going to shut down investor relations cuz what's the point? Why do I need to go to a conference to explain to everyone who's selling my shares to buy my shares? You're not going to convince

my shares? You're not going to convince someone to buy your shares when they're convinced every day you're going down.

And so I just said a better use of my time is focusing internal and focusing on the long term. And it's a bad use of my time to go to conferences. And as a public company CEO, you are supposed to

go to conferences. You're supposed to meet with investors. So for a period of a couple years there, 22 and 23, we basically just shut all that down.

Eventually, when the stock started gaining traction and the market cap was really recovering, I realized those were key parts of the role. And I I like to challenge myself and do things well,

even if they're uncomfortable to me. And

so, I mean, here we're sitting and we're having a one-on-one conversation, they'll eventually air. This is relaxed, but like going to a conference, speaking in front of a couple hundred people, I've always had a fear of public

speaking. And so, I'm an introverted

speaking. And so, I'm an introverted person that didn't want to put myself out there. But what I realized is now

out there. But what I realized is now that we're playing at higher stakes tables, the company's getting bigger, we need to be out there. We need to be conveying what is it that we do so that people can understand the business model

and can understand the prospects of the business model. And so I started doing

business model. And so I started doing more conferences over the last couple years. I I think they've been rewarding

years. I I think they've been rewarding because it's challenged me to do something I'm that's naturally uncomfortable for me.

What else other than public speaking?

I'm just intrigued remains uncomfortable but you have to do it all the same.

Yeah. So, I I'd say maybe the only other thing that comes to mind right now is it took me a long time to learn how to delegate. And this is something that I

delegate. And this is something that I actually committed to in that in the dark year 22 as well. It it was I was a very controlling hands-on CEO for a very

long time. I ran it. It was almost like

long time. I ran it. It was almost like all roads of the company went up to me.

And when we we fell and I realized I'm not making great decisions for the business, I also realized other people are smarter that other aspects of the business than than I am. And so why am I

not deferring to them? Why am I not delegating? And so where I got to was I

delegating? And so where I got to was I started stripping away my own roles. And

actually it it was almost not that I was handing things off. It was that the rest of the team said, "I'm going to come in and just take these things away." like

and and again this this Giovani I'll I'll give another example is he just started taking the product role that I had run and owned for a decade at the company he took it away from me and it

was great because now I can ride sidec car I can see what the team does but I don't have to be in the weeds and so it freed me up to do more strategic thought for the business long term it freed me

up to do more investor relations but it's very very hard as a controlling founder type business to have the founder go, I'm gonna hand things off.

And so those two things I think were one internal, one external were were important for me to really see as flaws and try to grow and develop through them.

I think we've seen this prevailing trend of anti-delegation now, which is, you know, Paul Graeme's founder mode and the importance of being in the weeds on certainly a number of things that

traditionally would be delegated. How do

you think about the power of delegation, that importance of delegation with the rise of founder mode and founders being told go back?

The the whole notion of founder mode is an extreme reaction to extreme bloat that got created in most Silicon Valley companies over the last decade. So like

if you're in a company with a bunch of layers and a bunch of process, how do you reverse it? I mean, we talked earlier about how a team of mediocrity, you can't reverse back to a team of high

output. And so in large part, the only

output. And so in large part, the only way to reverse is to have a founder that takes control back. But once you get to that lean team of highly exceptional doers, I if you're then controlling and

not delegating, then what are you doing?

You have a whole bunch of exceptional talent around you who in theory on their own roles in the business is going to be more of a subject matter expert than one individual who runs the business can be.

In in that case, delegation is very powerful. I have to ask there was a day

powerful. I have to ask there was a day where the stock fell 23%. And it was it the caption here is the short seller war. I'm just really intrigued. Short

war. I'm just really intrigued. Short

sellers have come after you like multiple times now. Is there like a flaw in the mechanics of the market?

Yeah. I mean look f first of all like when you go down 92% in a year you you sort of learn to take your beatings. And

so I I've gotten to the point like that was a massive blessing. Go public and immediately take that beating. you

realize that the public markets are volatile. There's things outside your

volatile. There's things outside your control. The short seller attacks were

control. The short seller attacks were not particularly surprising to me because we went from a low point of $9 a share to a high point of $750 a share in

two two and a half years. And so that kind of a runup from under $4 billion market cap to to around $250 billion market cap. I don't know if anything any

market cap. I don't know if anything any other company has ever seen that kind of value creation in that short amount of time in history. And and then you looked at the companies that were at our market

cap, all names that people would recognize, and then goofy named App Leven. Nobody knows what advertising

Leven. Nobody knows what advertising businesses do, let alone the goofy name.

And so we sort of expected it because we weren't out there promoting ourselves.

We were just executing the business. And

I think because we grew so quickly, both revenue, profit, and stock price, we sort of failed to put our story out there proactively. And then therefore we

there proactively. And then therefore we were sitting ducks for people that wanted to create manipulation or narrative to cause the stock to go down.

Now the thing I don't like about short sellers in the way the market's constructed today is they can take a position take a large bet on puts or sell their

research to hedge funds who take a large bet on puts and put over overly dramatic articles out there to try to spook investors to sell off a stock. And at

the beginning of their short report, they'll say, "We've most likely covered our short report by our short position by the time you're reading this report."

And so there is not only this massive financial incentive to make the post much more dramatic than than necessary or real, there's also not really any

downside or protection against what they post. They don't have to be accurate

post. They don't have to be accurate because they go disclose everything they do. Now on the other side, we myself as

do. Now on the other side, we myself as a public company executive, we operate within the boundaries of the SEC. We

have to be accurate in everything we say. We cannot go out and be misleading

say. We cannot go out and be misleading in any statements. And so it's very very difficult to be in that position, unable to address these types of reports and

get attacked by by people that don't have any sort of downside to what they're posting and have quite a bit of financial gain to come from attacking companies that people know less about.

What it did for us were two things. I

mean, one, our team understands volatility. Like I said, you go down by

volatility. Like I said, you go down by as much as we did in the first year post IPO. the team that's still there doesn't

IPO. the team that's still there doesn't have a problem with volatility and most likely they have a lot of conviction in the business model and the the path to the future. So some of the team it was

the future. So some of the team it was funny like cuz you don't usually want people posting responses but some some of our leaders were posting you know it's funny that the short sellers

because we're so good at what we do and the model that we built they can't come up with anything other than we're cheating and so like there was a lot of pride in what we built coming out from the team. So I knew that the team was

the team. So I knew that the team was sound and we were going to be able to recover from any sort of attack. The the

second piece that it did as a forcing function was it required us to go out to investors and the market and do more things about marketing the company and explaining the business. And so in a way

it was like a ripoff the band-aid moment for us when it comes to marketing. We

had to make ourselves more available and we had to be able to articulate what it is that we do in a clear way. Was it a mistake to not invest in brand marketing, brand awareness before that?

Look, it's easy to say in hindsight, it it could have been a mistake. Um, we

grew really fast. Like I said, when you're going your heads down, you're working in a lean organization.

What was the revenue growth year one, year two, year three kind of ballpark just, you know, honestly, I don't remember exacts, but like near triple digits each year. I mean, our rule of 50 in the last

year. I mean, our rule of 50 in the last rule of 40, sorry, in the last quarter, I think was like 150. So, like, not only are we growing, we grew like 70% year-over-year. We have 80, I think 4%

year-over-year. We have 80, I think 4% Ebida margins. So, like it's the revenue

Ebida margins. So, like it's the revenue growth since we launched Axon 2 model has been astounding. The profitability

profile of the business is crazy. The

business is expanding without adding heads. Um, we we have a very odd

heads. Um, we we have a very odd financial profile because when you look at it, like you go, how can a business have 84% EBID margins? It it just

there's not another comp in the world that looks like it. And so a lot of the things that we've been able to accomplish just don't make sense to people. And in a world where things

people. And in a world where things don't make sense, people think you're cheating. instead of realizing you built

cheating. instead of realizing you built one of the cooler technologies the world's ever seen and then you go like as a team and me as the the CEO of the business, it's my responsibility to go

out and explain the business. I owe it to my team who's built this really cool technology to go explain the business and we owe it to our partners in the industry cuz when people take shots on us on the other side, you've got advertisers who are buying on a

performance basis. They're spending

performance basis. They're spending billions of dollars a year. We put out that a year ago the scale of investment on our platform was 11 billion run rate.

We've grown a ton since then. So that

was a little over a year ago. So you're

talking well over $10 billion a year of dollars spent on a performance basis. So

shot on us is effectively calling all these advertisers are spending at that large scale a bunch of morons. So, not

only did I owe it to my team, I owed it to our clients to go out and explain our business and explain why some of the world's best marketers are buying on the other side. Some of the world's best

other side. Some of the world's best businesses are growing really quickly and profitably on the other side. And

our engineers have built really exceptional technology.

Two things. You speak with such confidence. You said shots on you. Do

confidence. You said shots on you. Do

you give a [ __ ] what other people think about you?

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

control that. So, no.

Okay. You don't? Do you ever doubt yourself? If you speak with such

yourself? If you speak with such confidence and such assuredness, dude, I want to [ __ ] follow you. No, I'm

being serious. I'm like, what? And this

is very rare, but there are moments when you're just you and your wife in the kitchen and your head is in your hands like [ __ ] Uh, do you have a doubt or not?

You know, I'll say like building the business almost every morning I'd wake up thinking I got to check stats, make sure we're still operating or are we

going to go bankrupt today? And like so in a way I've always had this doubt that this is real, that what we're building is going to last, that what we're

building is going to be really big. And

in in essence, like that fear of blowup is one of my big motivators. And so I I feel like I always have that doubt. I

don't ever feel like we've made it. And

that pushes a lot of us to want to keep pushing forward cuz we are in a very very tough space. advertising is very competitive. We have obviously there's a

competitive. We have obviously there's a lot of technology that's improving in terms of technology capability for our performance stack, but also that forces us to continue to be innovative

otherwise we'd fall behind peers. And so

if we ever get complacent, we're almost certain to lose. And I always tell investors or team if at any moment I sound like I don't have conviction in

our future path, we're sort of reeling.

That would be a moment to doubt us. But

I don't feel that way because I can I've been doing this a very very long time.

And with the team that I've got working on these technologies, this product, this platform, and the opportunities in front of us, I've always had conviction that the future was going to be better than the past. And that has kept me in a

position where I can voice confidence in what we're doing.

One of my very dear friends has built up a half a billion dollar position in in Bite Dance, obviously Tik Tok's parent company, and he said one of the reasons is cuz he they have the most advanced targeting engine in the world. Would you

agree? I

I would say when it comes to engagement, creating the ability for a social network to not need any social interaction and still be able to deliver you fantastic content, the Tik Tok

recommendation algo is quite phenomenal.

And if you think about recommendation systems, like what's the world we operate in? Well, on the one hand, the

operate in? Well, on the one hand, the content you see on Instagram, the content you see on Tik Tok is very dialed in to what you're interested in.

It it is a constant loop. It's very

interesting. the advertising systems too. The ads you see on Instagram have

too. The ads you see on Instagram have become very much like content. They're

highly relevant. The ads that we're able to show consumers now are getting very relevant and they drive action. As the

technology and recommendation system models and just generally in AI models has gotten better, the capacity to serve more relevant, more targeted ads to the consumer, even knowing less about the

person has gotten so good that people are really able to use the advertising to discover the products that they want.

We mentioned Tik Tok and we mentioned Meta there. For apploving currently

Meta there. For apploving currently valued circuit 150 billion market cap whatever it is precisely but give or take for apploving to be a trillion dollar company do you have to be a

social network as well. Um, no. I think

look, if you think about like what what creates a trillion dollar business and I sort of said cash flow minus SBC4 is a real real important metric, right? Like

if we ever got to generating 30 $35 billion a cash a year, we'd probably be a trillion dollar business, right? So

you think about what can get us to that point. And so there there's a couple

point. And so there there's a couple things that can get us there. One is

continued execution in the domain that we're in. We think we can get much

we're in. We think we can get much bigger just to better monetizing the gaming audience. It's a billion plus

gaming audience. It's a billion plus daily active users who play these games.

Adult audience, a lot of heads of household. The next thing you think

household. The next thing you think about is how do you expand what you have? So in the past I've talked about

have? So in the past I've talked about connected TV as one of the holy grails of advertising. If you can port

of advertising. If you can port the performance ad we serve on mobile to the television and allow small and mediumsiz businesses to serve there and make it all performance-based, that's a really big unlock. So it's something we

still we still take seriously. Then you

think about what are other applications of the technology. We're really good at advertising model. We have yet to have a

advertising model. We have yet to have a chance to have our our team work on an engagement model. So a social network

engagement model. So a social network for us is not a requirement to get to a trillion dollars. It's an interesting

trillion dollars. It's an interesting play to recruit talent and continue to tune our skills and modeling. And as you think about the the research labs and any company that's building models, they

better have things to to that are interesting for new researchers to come in to work on new applications of technology. And so for us, a lot of

technology. And so for us, a lot of these bets will also be means to go higher into some of the best people in the world. And if we execute on it,

the world. And if we execute on it, obviously great, but not a requirement.

I was just Eli Gil just tweeted actually uh computer is the currency of the future and that compute will be one of the defining factors that the best talent looks for when deciding which company to join. Do you agree with that

and how do you think about that?

Depends on the space. So large language models obviously have the ability to scale with more compute and and therefore it is attractive to researchers to join um companies that

can invest a lot in compute. If you look at right now, I mean we can all say probably Anthropic is doing the best in terms of releasing models and and product in the large language model space as of this moment. Anthropic

probably does not invest the most in compute. Yes. So like if you think about

compute. Yes. So like if you think about that, how did they actually get really good researchers creating the best product output? Well, they have really

product output? Well, they have really good culture and they have really good people and they really tuned what they were going after. recommendation system

space does not need as much compute to create the output that's necessary to to succeed. So, so it's quite different.

succeed. So, so it's quite different.

you're looking for people that still want to solve really big problems and are very mathematically inclined but there's different spaces in modeling and there there's vision models there's the

LLMs there's recommendation system there's others like so depending on the product that someone is interested in they'll go to a different company and you've got people that like working on

recommendation system models and they're not bound by compute they're bound by curiosity and application of techniques to create a better output you mentioned the buyback that you did in 2022 I think it was or when the stock

was very very low we've seen a wave of buybacks whether it's Wix or Service Now among many others Salesforce huge how should we read these buybacks a sign of internal confidence and

so you know buybacks are interesting because if you look at history the the concept of a buyback doesn't usually pan out it's not usually a good financial bet and it's like a bridge round

it's it's tough so here's why it's tough it's easy when you're inside a to think you're cheap, but you sort of trade where you deserve to trade. And it's

really hard to know when is it cheap enough. The reason why our our buyback

enough. The reason why our our buyback was very very successful is when we went public during CO, we didn't build a really big roster of blue chip investors. So, we had a very flimsy cap

investors. So, we had a very flimsy cap table. And and then this led to to the

table. And and then this led to to the stock collapsing much more than it should have. When we went public in 21,

should have. When we went public in 21, we had $700 million of IBIDA. $28

billion IPO company goes to 40 billion.

In 22, we cleared a billion of IBIDA.

So, we grew 40%ish in 22. Yet, like I said, the stock fell 92%. We we got to under four times. So, why did that happen? Well, we went public in CO

happen? Well, we went public in CO didn't attract blue chip investors. So,

our cap table was basically the private market cap table that needed to sell.

That's a real big problem. Most

companies that are private probably have half their cap table as sellers. And so

when we went and did our buyback, we didn't say, "Hey, we're just going to go to the market and take float out like take a share back from every single shareholder." That would be imply that

shareholder." That would be imply that even partially part of my shares are getting bought back, right? And so what we instead did was go and say, "If you

are a seller, please work with us to sell back to the business." And so we went and deployed every dollar that we made and including we raised some debt to deploy even more and took back a lot

of the shares on the cap table that were going to inevitably sell into the public markets over the coming months. By doing

that we were able to get liquidity to company folks, investors and old ex-coounders and other folks on the cap table that needed liquidity. We were

able to get them liquid no problem.

we're happy to do the trade and we were able to take out that selling pressure with these folks being the fact that they were willing to work with us was a gift. They were willing to work with us.

gift. They were willing to work with us.

So, we were able to take out the selling pressure and then as the business started accelerating, you remove the selling pressure and overhang, then you're set up in a position where you can now go attract the right investors.

Give or take. How much money did that buyback make you? Uh, so probably I'd say like based on where we're trading today, roughly a third of the company's value came from that buyback. So you

said 150 billion roughly. So let's call it 50 billion around.

Well done.

Yeah, it was a good buyback.

Now, now just buying out of the market, just buying your float back, it's not a good bet usually because it Wix it really I really like the Wix team. and great and lovely people, but

team. and great and lovely people, but gosh, you only do the buyback, a big ass buyback, and then down like 25% in a week.

And that's the problem is you start doing the buyback and if you're not right, you don't time it well. And we're

not, none of us are day traders when we're running businesses. You can burn the capital that you made really quickly and then you're in a much worse spot.

You said people trade where they deserve to trade in a lot of cases.

Is the SAS apocalypse fair then? you

know, as an investor, if I was one, when you get into an unpredictable outcome in the future, it's very easy to sell businesses and and uh the rapid rate of product delivery in the large language

model space makes a lot of traditional enterprise SAS companies hard to bet on years into the future. So, what happens?

Well, terminal value is diceier. So, you

value the company less, you get out.

Their stockbased comp was high, but it was an acceptable percentage of total value. stock tanks, stockbased comp

value. stock tanks, stockbased comp becomes too extreme. Now they're in a position where not only are they going to lose their heads, they're also competitively challenged. So you're in a

competitively challenged. So you're in a really bad downward spiral. So in a way, I would say not only is it fair because of the risk that exists. I'm not sure it's actually done yet. We're I you

know, again, I'm not a a trader of businesses, but I do think we're going to go through material changes in the market, especially when it comes to enterprise SAS over the coming years.

And it may not be that these companies that that we have today as some of the the SAS leaders are completely going to wipe out because I don't think that happens. Companies once they're embedded

happens. Companies once they're embedded with you utilizing a certain software usually don't change. But it may be that a lot of the growth opportunities are gone for these businesses. And you strip out growth opportunities in businesses.

I mean the reason we went and and traded down to under four times IBITA is because investors did not believe in our future growth prospects. And when you're a public market investor, you only like

to bet on companies where you have sound belief that their future is going to be a lot rosier than the present. It is

very hard to believe that right now in traditional enterprise SAS when these large language model businesses, the models, the frontier models continue to get so much more powerful.

What do you you mentioned the material changes there? What do you think the

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

I mean the rate of advancement is astounding over the last few months. You

see like the amount of products that are rolling out. It's like every day there's

rolling out. It's like every day there's something new. So, I think the the

something new. So, I think the the coolest thing that we're seeing right now is for people who know how to utilize it, the ability to just launch an army of agents to do certain tasks

and obviously coding is the the most obvious utilization today. So, I if you see that today and and believe we're already at a point where the army of agents can continue to start improving

the code that's available to them and the products that are available to them in a recursive way. The rate of acceleration of technology and R&D and our imaginations becoming products is only going to get faster. Where does

that lead us to? I don't know. But I

think it's going to be a much more productive future than the present.

I mean, we mentioned engineering again.

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

Yeah, I mean, we chose not to have it because we wanted to have exceptional engineers that understood the product.

The belief was if our engineering team is writing the product that delivers revenue, our sales team and all other teams are effectively cheerleading for the engineering team, making sure they have what they need and then eventually

going out and selling their product. But

we can only sell it the product if it's good enough to be sold. The engineers,

if exceptional, better be good enough at understanding the product that they need to build to go build it. And so I do think the role of product should end up looking a lot like it does at our

company over time. is that either your product people become engineers or your engineers become product people but you don't need both. And so what usually happens whoever becomes AI native and

knows how to utilize these tools will become those powerful 10x 100x output folks who know how to use the tools to create that kind of output. I do think for some time still though you're going

to need an engineer doing the work and still making sure that the code is up to security standards, the code's not slop, the code is good enough to contribute to um your main codebase. So like there there's a lot that still comes from

having a traditional engineering background that's valuable in today's world.

Every day it feels like we have another major security breach. We've seen

lovable in the last 24 hours. We saw Vel in the 24 hours before that. It goes on and on and on in the last month.

To what extent are you nervous that models like Mythos will unravel vulnerabilities that were previously unseen and went unseen and we have security be the biggest problem?

Well, look, obviously there's a risk there. Now, you could say is Anthropic

there. Now, you could say is Anthropic slowing down the roll out because they don't have the computer is anthropic slowing down the roll out um because they're really concerned about the risk.

It's probably somewhere in between.

There's obviously a risk though. These

models, one of the things they're built for is audit code and expose any vulnerabilities or bugs and solve them.

And so you would hope that we will be a lot more buttoned up on security in the future than we are today. But because of how quickly these models are just getting exceptionally good, it's almost

certain companies are going to be releasing code faster. When you release products faster, you ship fast, you break things, and because of that, you're going to have more security breaches most likely. But once you get

past that point, you're probably going to be in a point where the technology is a lot more bunded up than it was before.

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

I do think there needs to be a lot of honesty around what is the world going to look like as these AI technologies continue to get more powerful. If every technology

more powerful. If every technology company could stand to lose 75 80% of their talent and get more efficient, what does that actually mean? Well, does

it mean that there's going to be 10 times more startups? So the startup funds are going to be crushing it and like people are going to be way more productive and we're going to get way more product in the world. Plausible. Um

I'm a believer that the technology unlocks a lot more output and our ability to imagine things create and then go and create becomes not only

cheaper much more believable. But it

requires people to really level up. And

I think we need to be honest about what the path is going to look like because my guess is you're going to see a lot more tech layoffs over the next couple of years as companies really start

understanding that not laying people off creates a a blockade to actually getting to this AI native state.

Did you find it hard that in a year where you have tripledigit growth, stellar year, you're laying off such a large portion? cuz uh I I really like

large portion? cuz uh I I really like and respect you, but at that point that's a choice you don't need to make.

Yeah. I mean, look, like again, are you playing to win or are you playing not to lose? And so I feel like we're very very

lose? And so I feel like we're very very transparent with our employees today.

Anyone ask me, I'll say you're here because you're an exceptional talent.

And what does that mean going forward?

You use these technologies to create more output. You become AI native.

more output. You become AI native.

You're going to have a role here. If you

avoid utilizing these technologies, you're not. and you're going to get

you're not. and you're going to get fired and that's life. And so we demand that the people who are at the company are adopting these technologies rapidly

to create more output. But we don't shy away from different difficult discussion cuz if they're not able to do that, there's a role somewhere for them, but it wouldn't be at our company. Totally

get that. Final one before we move to a quick fire is just on budgeting. Token

budgeting is one of the biggest questions for leaders say how should I think about it? actually thinking about planning it, forecasting.

Yeah.

What's your to my point I think it's flawed logic because if you just throw a budget at people and you create a leaderboard of token usage, what are people going to do? Create a bunch of crap that has no

do? Create a bunch of crap that has no value. And all of a sudden you burn your

value. And all of a sudden you burn your budget, you're paying really big checks and you don't have revenue on the other side of it. Companies need to get to the point of understanding what are they actually optimizing to and who's

utilizing the technologies and creating token consumption that actually aligns with those KPIs. When that happens, you won't be in the mindset of token budgeting. You will want to invest in

budgeting. You will want to invest in tokens because there's revenue on the other side of it. But I think today people are just blindly going at spend a bunch of money, get on the leaderboard, use the tools, something good's going to

happen. You better be able to measure

happen. You better be able to measure that otherwise you're going to get a lot of bad behavior. It's it's no different than companies that staffed up to very very large team sizes and bloated teams

over the last decade 15 years in the valley because they had the means to and it was let's just get on a hiring quota.

Token quotas and token budgets are no different than hiring quotas. Until they

get efficient, they'll be inefficient and I think a lot of companies will just burn money.

I care desperately before we do a quick fight about being the best that I can be and being number one in my business. I

also want to be a parent. Um, what is the uncomfortable truth that I should hear about being a parent and trying to be the best?

I think it's really hard. I mean, like, look, as human beings, we end up to become really good at something, you have to focus on it and you have to put out a lot of effort. And at least me,

I'm not like all that great at multitasking. Being a parent is a really

multitasking. Being a parent is a really difficult thing. So if you are a founder

difficult thing. So if you are a founder running something and you want to become the best you want to be the best podcaster I want to become the best in advertising with with my team leading us

the way there to do that you need to prioritize that task and the second you do that in essence you're dep prioritizing the task of being a parent

being a husband being a a good good uh person in the personal life. It requires

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

What have you missed that you regretted?

I mean as you do what you do like I said a lot of times you're not really connected to reality to what's happening around you because your mind is wandering. I mean my mind is always on

wandering. I mean my mind is always on business. Even when I dream and I wake

business. Even when I dream and I wake up it's like something about business.

And so I think back at like moments where the kids were growing up and sort of a blur and I go, you know, was I just not there? And I was there, but I wasn't

not there? And I was there, but I wasn't there mentally. And it it is not a great

there mentally. And it it is not a great thought when you have that. And on the other side, like I I do because this business that became much bigger than I thought was

possible means a lot to me. And figuring

out that balance is really hard as human beings. I think it it is a challenge.

beings. I think it it is a challenge.

It's one that I'm still working on. I

think it's very very hard to accomplish being really good at all facets of life.

The ultimate challenge. Do you mind if we do a quick firearm out?

Yeah, go for it.

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

I don't know if I've changed my mind much in the last 12 months. I mean, like when I hit that low point in 22, I sort of got to a place where I said, I'm

going to think forward about what I do professionally and then maybe this this translates to my personal life, too. and

I'm going to plan out 3 to 5 years and work back from it. And so when you you think about the current year, 12 months, I feel like whatever is happening now is

defined by the decisions we made in the past. And and therefore, like nothing

past. And and therefore, like nothing that I do today is going to change an outcome in that 12 months. What I'm

thinking today or trying to execute on today or or starting to like research today can change an outcome 1 2 3 4 5 years down the road. But because it's

undefined still and you're in that moment of, huh, I think this is something interesting. It's very hard to

something interesting. It's very hard to challenge that thought. If you believe in it and you've got conviction in it, you sort of just run with it. So, I

don't know that I would change anything that that uh I've thought about in the last 12 months because I yet don't yet know what's going to happen from it.

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

So, that is a tough question for me too because I think we have a pretty well- constructed board, but I don't have a lot of experience with boards. Um, when

we were private from 2011 when we started the business to 2018 when when KKR invested and we got our first threeperson board, I didn't have a board. I just ran on my own and we ended

board. I just ran on my own and we ended up like just deciding and making choice as I sort of saw fit. Obviously, I would consult my co-founders, other people on the team, but there there was no board

because we were a bootstrap business with just a convertible note round. Then

we had a three-person board. Now, we've

got quite a bit bigger than that, but not that much bigger than that. I think

it's it's uh eight or nine people if I recall. Um, and we have a really good

recall. Um, and we have a really good composition of people now. the the

people around the table are a mixture of people who have worked at the company, know me intimately well, and are supportive or have really good business instincts outside of us who bring great

things to it. And I actually recently stepped aside as the chairman of the board to hand it over to to this gentleman, Craig Billings. He's CEO of Win, one of the smartest people I've

ever met, very very competent at building businesses and understanding corporate governance. And I felt like my

corporate governance. And I felt like my job is to run the business and I don't want to be consuming my own time on anything other than day-to-day operations. And bored is something that

operations. And bored is something that I've got to really work with and allow to be pulled into the business and contribute back to the business and work with me on the business, but it's not

something that I'm going to be good enough to be the chairman on versus someone like Craig who is exceptionally talented at at all aspects of building a big business. And so I felt like that

big business. And so I felt like that trade was a good trade and and uh it's not common that you'll see CEO step aside as chairman, but I've always believed that in every role that we all do, whether it's me or someone else on

the team, if there's someone better to do it, step aside and let them take over. And that's something that allows

over. And that's something that allows you to always be leveling up.

How do you feel about founders investing?

Uh so I don't invest anymore um for a couple reasons. One is in order to invest, you've got to sell shares in your own business to have liquidity to

go invest. And I don't know again if if

go invest. And I don't know again if if I didn't start this business for money, I I don't know what I need to invest to create more return on. And if you're you're an investor, you hopefully you

really want to create return or impact or something that is a KPI that you care about. But the second you care about

about. But the second you care about that KPI and you chase it, you're selling from your own core business to go diversify. You're not focused on your

go diversify. You're not focused on your day job. And for me, my goal in life is

day job. And for me, my goal in life is to make my company as as good as it can possibly be three years from now, five years from now, 10 years from now, 20 years from now. If if I plot into the

future, every second of my available time should be committed to it.

Otherwise, there's some loss. I don't

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

What decision with Apploving would you do differently knowing what you know now? You mentioned the weakness of your

now? You mentioned the weakness of your cap table there. That struck me and I was like, do you wish you delayed it then? There's never a good time to go

then? There's never a good time to go public.

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

decisions. A lot of them end up wrong, but we pivot and we learn from them. We

went public in a very difficult time towards the late of the growth stock runup during CO and the second CO ended and and usage patterns returned to what they were pre-COVID, everyone collapsed

in growth stocks, in particular those late market IPOs. So you could say like, okay, we didn't time the market right.

As you just said, there's no right time to go public. I also think the learning for for us and and anyone going public is the moment in time. It's like a series A, series B, series C. It's a

it's a fundraising route. You have a business that has long-term growth opportunities that you have high conviction in and can be big enough to be owned by anyone in the world and interesting enough to be owned by anyone

in the world. In a world where there's no right time to go public, you can't time the market. Just go public. You

take the the capital, you raise, and you build forward. And really what's

build forward. And really what's important for me running the business is I really am not focused on where the stock's going to be next quarter. 3 to 5 years from now, we better be higher than

where we are by enough so that I feel like people made a good return on investment owning our shares today.

They better make more on us than they can make by owning the basket of the S&P, just putting their money in debt.

And if they make a good enough return on us over the next few to five years, I feel like I did my job right as CEO. And

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

Finish this sentence. the advertising

business that is most at risk from app loving in the next three years is so tough tough question to finish the sentence on because I don't think it's

any we we we build a business trying to better to help an advertiser reach a consumer drive a transaction inside this gaming audience billion plus daily

active users we're trying to create incremental transactions when you do a performance marketing platform we're not trying to take from others we're trying to give an advertiser the chance to

You spend $100,000 a day growing your business today. Spend an extra $20,000 a

business today. Spend an extra $20,000 a day with us and create more transactional volume. Don't take from

transactional volume. Don't take from anyone else. Take your $100,000 a day

anyone else. Take your $100,000 a day investment business that might have $300,000 a day of revenue with it and add another $20,000 of media spend. Get

to 120K and get to 360K revenue. your

business grows 20%.

By investing an extra 20% in our technology, our platform, our audience that you otherwise weren't accessing in that moment.

I'm going to steal from another podcaster who's actually a friend of mine, but yeah, great. Why what is it great artist steal is another kind of quote. Um, it's a it's a really nice

quote. Um, it's a it's a really nice question and it's final one. What's the

kindest thing that anyone's ever done for you?

It's a weird one. Look, maybe kindness is like in in those dark moments, whether it's my wife, close friend, people checking in on me, but the reason

I say it's a weird one is like we don't tend to push the word kindness around um very often at at the company. Like we

believe you're pushing forward in an aggressive fashion um almost cutthroat.

And do you worry that you're too aggressive?

I think candidly I think some people will listen to this and I get in trouble for this. They would say that it's

for this. They would say that it's exclusionary because it's too aggressive.

Yeah. I I love being aggressive. I mean,

like, if you do checks on me and people who've come across me, you'll get half the people that say I'm I'm very aggressive and they sort of like it, half the people will say I'm an [ __ ] They'll all say I'm competent. So, like

on the one hand, like it sort of checks the boxes I care about. I mean, like people think I'm competent. Great. But

the reality is aggressive can rub people the wrong way. But I found, and the reason I just reacted a little awkwardly to the kindness point, if you're too kind and not as direct, not as

aggressive, you're wasting time. And in

a world where time is limited and you can't quantify the loss from sugar coating things, I'd much rather be aggressive and rub some people the wrong way and surround myself with people that want to push hard than really be

surrounded by people who care so much about kindness that they're willing to slow down.

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

Not really. Um, I mean, I guess I just don't think about it much. I don't live in much of a world of regrets because I live in a world of almost short-term

memory. I make a lot of decisions.

memory. I make a lot of decisions.

A lot of them end up wrong. I optimize

to go forward. Same thing with with interpersonal relationships. And I

interpersonal relationships. And I really do want to be surrounded by people who are great, who I can work with for a long time, who I can become friends with. And I I I would love to

friends with. And I I I would love to have be surrounded by a core group of family and friends for a very very long time. As long as I'm here around all of

time. As long as I'm here around all of that, when you're moving fast, you're certainly going to rub people the wrong way at times and you're going to miscommunicate. You're going to do

miscommunicate. You're going to do something wrong. But if you live in fear

something wrong. But if you live in fear of that and you allow that to impact your pace, you'll slow down. And I'd

rather just go fast and and uh know that that's a risk and it is what it is. It's

so funny. I I do so many shows. I've

done so many shows. I've done this 11 years. But you feel really good shows

years. But you feel really good shows when you're doing them. And it's funny.

For the first 5 minutes of this, I was like, "Oh, this is going to be good."

And what's really hard actually is to keep really good. And people don't think about this. It's very hard to keep

about this. It's very hard to keep quality with length of conversation.

You were exceptional. Like, thank you so much for doing this with me. Thank you

for doing it in person. I've loved this.

Awesome. Thanks for having me back. It's

cool doing it four years after we first met.