Luca Ferrari: The Operating System Behind Bending Spoons

Introduction

Luca Ferrari: I think people will be surprised by how poorly graduating from Harvard or Stanford predicts performance. People think, oh, you must be a genius. No. Actually, yeah, you're probably a little bit stronger than people graduating from other universities, but not so much stronger. And often we find that people tend to lose some of that potential raw-talent edge by being a bit more entitled, thinking too highly of themselves.

Brian Halligan: Today we have Luca Ferrari on. I've wanted to have him on for a long time, because he runs Bending Spoons, which is this fascinating company. It's a little bit of a private equity roll-up company, but it's really a tech platform company, and it's unique. I can't find any other company that rhymes with it. He is very unique in the way he thinks, the way he builds, and the way he CEOs. Hope you like it.

Okay, Luca, welcome to Long Strange Trip. Thanks for coming on.

Main Conversation

Luca Ferrari: Thank you for having me. My pleasure.

Brian Halligan: I think by this point most of the listeners have heard of Bending Spoons, but I doubt they understand the model and what the magic is. So if you wouldn't mind educating us—two or three minutes on how it works and what's special about it.

Luca Ferrari: Yeah, sure. The entire thesis on which the company is built is that if we can build a machine, a system, whereby we can operate digital technology businesses better than almost anybody else, then we are pretty much guaranteed to be able to compound capital efficiently for a very long time through acquisitions. The reason is that if a lot of businesses are better off once they're integrated into the system—what we call our platform—than being operated as standalone companies by someone else, then we should be able to offer prices to people that are appealing. They will sell their businesses to us, and we still deliver a high return for shareholders. That's the thinking behind it.

Of course, the difficult part is to build that system, that platform, so that we can operate these businesses better than almost anybody else. That's what we have poured our hearts and minds into over the past 13 years, technically. We have tried to have an amazing team of people, a strong culture, powerful proprietary technologies, lots of proprietary data. We buy these businesses and we integrate them very deeply into this platform. We have a shared R&D and marketing team that can fluidly move across all of our businesses. We basically re-platform the acquired businesses so that they're based on the same technological foundation. An investor at some point called it an operating system. I think it's a pretty apt comparison, or metaphor.

And then we transform them pretty deeply. We rebuild the org, rewrite big chunks of the code base, re-architect cloud infrastructure. We try to launch useful new features, fix bugs, improve performance, rethink monetization and marketing.

So there is a serial acquirer component that you will find in private equity, that you will find in companies like Berkshire Hathaway or TransDigm. The big difference, certainly vis-à-vis private equity, is that we are not a fund. We buy off our balance sheet. We have never sold a material business. We don't intend to sell one in the future. So we buy to hold and operate forever. And the other very big difference—definitely vis-à-vis private equity, but also the Berkshires of the world—is that we transform these businesses pretty deeply and we integrate them all together. They're much simplified. They go from being a company to being a product installed on the same foundation, basically. That's the model. We've been doing it for 13 years at this point.

Brian Halligan: It's going remarkably well. You went public. What's roughly the market cap?

Luca Ferrari: At the time of IPO, a few months ago, $18 billion, I think. Equity value.

Brian Halligan: Congratulations. I'm a huge fan of the model. It's really unique. I was comparing it in my head to Berkshire Hathaway, but it reminds me—when I was in my 20s, I worked for a U.S. tech company called PTC, and they moved me to Japan to set up the Japanese operations when I was very young. My office was inside of Mitsubishi headquarters, so I dealt with the Mitsubishi headquarters people and all the different divisions. It feels more like Mitsubishi or Samsung than it does like some big PE firm or like Berkshire. How would you describe it?

Luca Ferrari: Yeah, I don't know those companies that well, so I can't say for sure. But again, the distinctive features are: we buy to hold and operate forever, so I think that strikes out PE firms. And then this very deep integration. Most companies that acquire other companies seriously, in my experience, try to run them somewhat separately, for the most part. At least that's what I've seen. We take the completely opposite approach, where we make sure they have the same technological foundation, broadly speaking the same core team that moves fluidly across to go after R&D opportunities and withdraws when those are exhausted.

A lot of serial acquirers keep these companies broadly the same way they were before. We change them completely, from the ground up. It's very time-consuming and challenging, but the bright side of that is we generally deliver very high returns. I don't really know of any company that does it this way out there.

Brian Halligan: I agree, it's kind of an n of 1. Is the magic, Luca, in the picking or in the operating? What percentage would you give it?

Luca Ferrari: It's almost completely operating. Without the platform I described, we couldn't do what we do. I'd like to think we've gotten pretty good at selecting the right businesses, but it's relatively easy to deliver high returns if you have access to our platform.

For example, we have been enjoying an inflow of exceptional talent. We got 800,000 applications last year. We hired fewer than 300 people. When you have amazing engineers, designers, product managers, general managers, it's much easier to take a business, rethink it from the ground up, and run it much more successfully. Anyone who's run a digital business—probably any business, but certainly a digital business—for a sufficiently long period of time will tell you that headcount matters not a lot. It's how good the people are and the culture you've established. When you have access to this caliber of people, you can run a business with 20 people that someone else would need 200 people for. That alone will give you both cost efficiencies and the opportunity to innovate faster, improve monetization faster. So that's one element of our advantage versus these businesses being run as standalone companies.

We have also invested a lot over the past decade in building powerful proprietary technologies to do pretty much everything you need to run a digital business. They're natively integrated with one another, and they just make everything so much more effective and faster. If I were to run one of these businesses on a standalone basis, I certainly wouldn't have the resources to build this technology. I wouldn't even know where to start. So that's also kind of a cheat code.

So definitely the operational part is far more important than the picking. But we try to pick well, obviously. Why do it poorly if you can do it well?

Brian Halligan: Luca, I want to click on the hiring. I spend most of my time with CEOs these days, and everyone talks about having high talent density, being a talent magnet. A lot of them pull it off early, but as it scales, it kind of inevitably waters down. You seem to have almost industrialized this talent density idea, and you have some very unique ways of pulling in applications, pulling in interest at the top of the funnel, and qualifying the interest.

Let's talk about the top of the funnel and the qualification process. And roll the clock back to when you were nobody. No one had ever heard of you, you had no employer brand, you had no inbound interest. How did you get the talent flywheel rolling?

Luca Ferrari: We basically believe that if you have a strategy that works, or can work, then almost all that matters is the talent you deploy toward the execution of that strategy and the culture—meaning the rules of the game, how people interact with one another, what they choose to do and how. Those are the areas we have obsessed over pretty much since the beginning.

Now, you're right. You start with nothing. So that's what founders or early team members need to do well: punch above their weight. I remember early on spending at least 50% of my time, probably more, for at least the first two or three years, on recruiting, among other talent-related things. At the time we hired pretty much only in Italy—now we're international—but a couple of others and I managed to find the lists of graduates from some of the best Italian universities, and we kind of tracked them down. I remember calling hundreds of them, probably harassing a few, until they accepted to join us.

Later, we built a pretty substantial talent team. These days we have scientists, researchers, and we treat the selection of talent within our pipeline similarly to how a quantitative trader would pick stocks. We look for all signals, and then test signals against future performance to determine whether they're predictive, or what combinations of signals are, and keep iterating. It's a very rigorous and sophisticated system at this point. We assess hundreds of signals in each application. That helps you select potentially dramatically better, given the same level of employer brand and ability to attract applications.

Half the game is also attracting very good applications, because if only geniuses apply, then it's easier to build a good team. And there I think we have kind of an unfair advantage with our model. We found that a lot of engineers, designers, and product managers absolutely love the idea of being able to work at a company where they can, say, spend nine months helping rebuild Vimeo's video infrastructure, and then six months rethinking advertising on AOL, and then maybe a year building a platform technology—all with the same employer, broadly speaking the same colleagues, the same culture. The track record they're building does not get diluted. When you change employer, obviously a lot of that is lost; you have to re-establish credibility. So that's a very powerful point of attraction.

The other one is that because we've been so systematic and uncompromising on having extremely high levels of talent density pretty much from the beginning—compatibly with our appeal to candidates at each point in time—once that's in place, it's a powerful means of retaining excellent performers and attracting more of them. When people find that they love their colleagues, they never leave. We have essentially zero regrettable churn. We had 0.6% regrettable churn of Spooners, the members of our core team, last year. And trust me, there are poaching attempts from big tech all the time, so it's not for a lack of opportunities. And equally, these people will tell their former fellow students, "Oh, it's amazing here, you should apply."

So it makes your life easier. But it's very difficult to get to a very high level of talent density late in a company's history. You need to establish it from the beginning and just be completely obsessed with it, and never give up—even when it means hiring way fewer people than you'd like to for prolonged periods of time, or parting ways with people who are being helpful just because you think you can have better people. It's quite painful. Nobody is a sociopath here, and in most companies you don't like to tell someone who's a perfectly good contributor that they should look for another job. And also you're losing good capacity in the short term to look for amazing capacity down the line. Those are difficult things to do. If you do them consistently, I think you develop a very powerful flywheel.

Brian Halligan: Can you talk about the team? It sounds like you have a data science type team that is looking at all the inbound and looking for signals. What are the signals that are most strongly correlated with success, where the R-squared is high? And then once you get beyond that, I assume there's a human interview. What are the questions that tease out what you're looking for that maybe aren't obvious?

Luca Ferrari: We're fairly secretive about the details. I guess you'd get a similar answer from a quantitative trader—that was my metaphor earlier. But I can share some of this.

There are some obvious signals in people's applications. Their GPA, for example. It's not super strong, but it's helpful. The university they graduated from. I think people would be surprised by how poorly graduating from Harvard or Stanford predicts performance. People think, oh, you must be a genius. No. Actually, yeah, you're probably a little bit stronger than people graduating from other universities, but not so much stronger. And often we find that people tend to lose some of that potential raw-talent edge by being a bit more entitled, thinking too highly of themselves. But it's still predictive. All else being equal, someone from Harvard will do a little bit better than someone from a less well-known university. Some of those are probably somewhat obvious.

There are many that are not. One I can share, which is relatively predictive—I was surprised when this came up—we found that if someone is politically active as a teenager but ceases to be in their early 20s, that tends to correlate highly with someone's drive and entrepreneurial mindset, which are highly valued qualities, at least at Bending Spoons. The way we've explained it is that if you are 17 years old and school is not enough, you feel like you need to do more—that shows agency, that shows proactivity, that shows a level of not settling for the status quo that's generally healthy. But if you still do that when you're 25, 26, 30, it means it's probably a life mission, which is perfectly fine, but likely incompatible with your job, your career, being top priority. Your job probably takes a back seat to your political activity.

Brian Halligan: How do you find that signal? Do you ask them that question in an interview? Do you look through their old Instagram? How does that signal even arise in the process?

Luca Ferrari: Often people mention it, because—thankfully—people think they need to include leadership experiences in their CVs, because that gets you a job at a consulting company or something. So most people, we find, would include something significant in that area if they did it. But in any case, we do ask later in the process, whether in an interview or in written assessments, questions that would very clearly lend themselves to people sharing this sort of thing.

And this gets to the other thing you can do, which is: you shouldn't be passive in accepting whatever signals are present in someone's application. You can be very proactive. We find that a lot of the best signals in our case come from the practical tests, the things we ask candidates to go through. You can elicit signals that way.

Interviews, of all the typical elements in a selection process, at least in our experience, are the worst predictors. But you can make them decent if you give interviewers extremely precise questions they need to ask, and you tell them to ask them in exactly the same way, and then you make sure the answers are recorded and assessed separately. What's pretty much completely useless is having someone talk to someone else with essentially no guidelines, or just a high-level agenda, and then tell you, "I liked the guy. I didn't like the guy." That's noise, pretty much. If you structure it a lot and you try to separate the actual conducting of the interview from the evaluation of the responses, then it can be somewhat predictive.

Brian Halligan: Can I tell you about what HubSpot unlocked on the sales side? We had a good process for doing this. We scaled our inside sales from 10 to 1,000. We were kind of like you—it was harder to get into HubSpot than Harvard, so we had lots of inbound. We would look at all the resumes, and we would look for people who went to a state school—University of Vermont, University of Wisconsin. We weren't looking for Harvard and MIT. And we looked for a person who had done a sport, who was athletic and competitive. We didn't think too much about it. We didn't interview them in a standard way. We just said, if they look kind of like this, let's give them a half an hour with a person.

What that person would do was set up a role play. I'd be the HubSpot employee, you'd be the potential hire. I'd set it up and then I'd have you sell to me, and I'd give you 12 minutes to sell me whatever. I'm giving you objections. We finish it. Then I would give you feedback on how you did. I give you a minute to think about it, and then we do the exact same thing again. If the person absorbed that feedback and did a half-decent job at the pitch, we would do a couple of blind references. Boom, we hired them. That actually really ended up scaling for us. We didn't do the normal interviews. That really worked on the sales side, because I kind of agree with you.

The other thing I wanted to ask you about is blind references. Where is that in your signal?

Luca Ferrari: We do that as the very last step. Well—we don't actually do blind references. We do references. We don't do blind references because they're illegal in Italy, so you can't ask. We figured, okay, let's just have a method that works across jurisdictions, even though I know in the U.S. you can call people and ask, "Oh, how was this team member?"

We do references where it's the candidate who presents a few names. We try to guide it toward, okay, give me people who had plenty of exposure. We try to get at least one person for each of the couple of biggest experiences someone had, and ideally their manager if possible, but ultimately it's their call. And we structure those interviews with references quite a lot as well. We find that they can be predictive, but again, you need to be scientific about it. If you leave it to someone picking up the phone and calling, then almost always it's positive. Very rarely do people give you names of people who will criticize them.

So you need to be very specific in your questions and ask for hard grading decisions. For example, we ask them something like: of the 20 people you have worked with the most, would you say this person is the best, or top five? And then you try to ask a few follow-up questions to make sure there is a little bit of substance behind that response. You find that people who are enthusiastic will often tell you, "Well, it's above average." And you're like, hold on a sec. It sounded like this person was a genius, and you're telling me they're maybe ranked eighth out of 20—which is nice, but, you know. So you can make it predictive, but you need to put in the effort and the structure before you get there.

Brian Halligan: I love that advice. I get a lot of blind reference calls, and I think it's brilliant when people do that to me. "Is that the best person that's ever worked for you?" "Well, no." And then they say why, and that opens things up.

I want to talk about you. You're the 20th CEO I've interviewed. It's been really fun. Honestly, my thesis when I started this podcast was: I'm going to figure out the common thread, what everyone's doing, and I'm going to write it down and kind of standardize it. The truth is, there's not even close to a common thread. Everyone does it differently and there is no playbook. And the playbooks are changing extra fast right now. My last two interviews are emblematic of it. I interviewed Tarek from Kalshi, and he and his co-founder have, I forget, 200 employees. There's no levels of management. They all report to those two. He referred to it in the podcast as management by chaos. My last interview was with Ali Ghodsi from Databricks, and he's got eight direct reports. It's very structured. He has three meetings a week with his direct reports, he has a QBR once a quarter, and then he has an offsite strategy session once a quarter. Polar opposites, both doing extremely well. Where do you fit in that spectrum?

Luca Ferrari: Probably somewhere in between. I think more formal approaches to management are greatly overestimated in their impact on a company's outcome. I think almost all of the outcome depends on your strategy—what people sometimes call product-market fit, but also the moats you have. That's overwhelmingly what drives it. I always ask myself if a business is a good business, if it would do well even if management was mediocre—maybe not awful, but mediocre. That's the first thing.

The second thing that matters to me is talent levels and culture. Culture is really, how do you make decisions? What matters, what doesn't? What do we value? What do we not value?

Then everything else—reporting lines, whether you have OKRs or you keep it fluid and informal, span of control—I'm sure it does matter on the margin, making things a bit better or a bit worse. And I'm sure different solutions would be optimal depending on the people involved, because ultimately a manager, a CEO, is some sort of leader, or should be. The same strategy, the same approach to working with others, depends on the human capital you have. Different people react differently to the culture you're trying to foster. But I think within reason that doesn't make a huge difference. Maybe a plus or minus 10% kind of impact. So I think you're much better off obsessing over, first and foremost, the strategy, and then once that's in place, the quality of the people and the culture you establish.

If the 200-person organization is chaotic but—I don't know them, but assuming—super high talent density, a culture of business orientation, rationality, hard work, then even if a little extra structure theoretically could be helpful, I think the talent and the culture will mostly trump or close any such gap. And vice versa. Maybe at the other extreme a little bit more fluidity and flexibility would be ideal, but if you have very good people and a great culture of "let's get it done for the benefit of the business," people will not get stuck because there is a little extra structure. I haven't thought a lot about these things. I'm convinced they're not the most important thing, to be honest, in excelling in business.

Brian Halligan: Fascinating. When I was the CEO, I tried to get better and evolve as the business scaled up, and I got a lot of feedback. One of the pieces of feedback I got a couple of times was, "Brian, you're a very good leader and a very bad manager." Where are you on that?

Luca Ferrari: I don't know. I get a lot of feedback. I don't think anyone has rated me on those two archetypes.

Brian Halligan: A little self-reflection here.

Luca Ferrari: I'm not sure if I'm a good leader or a good manager, to be honest. I generally feel that I'm pretty privileged that I work with very good people. I tend to be more self-conscious and question whether I'm doing enough and living up to expectations. I tend to see the glass half empty. So my instinctual reaction would be: I'm probably not terrible at either. I would be disingenuous if I told you I think I suck. But I would probably rate myself something like okay at both, but not necessarily amazing.

I'm probably a better leader than manager, if I understand what you're hinting at. I think I've generally done okay at setting a vision that made sense—a compelling vision—and communicating that reasonably well. If I've succeeded as a leader, it has been mostly through what I would call servant leadership: just working super hard and helping people as much as I could. I don't think I'm the William Wallace kind of leader, someone making a grand speech and everybody gets their hearts pounding and gets to work. But when you work with someone who walks the talk and is in the trenches and does their best, I think you tend to be inspired. I try to be that kind of person. I don't think I'm a great manager. I don't think I'm the best at running one-on-ones or anything like that.

Brian Halligan: One of the things I used to say to myself—actually, I got this quote from Eleanor Roosevelt, of all people—I wanted to keep my head in the clouds but my feet on the ground. By that I meant I wanted to be a JV William Wallace, painting a picture of the future, getting everyone excited about where we're going, looking over the horizon. But feeling the ground is like, holy crap, there are a lot of problems. We have to deal with all these freaking problems. My glass was very half empty, and I spent a lot of time a little negative, looking at the problems. Where are you on the Eleanor Roosevelt quote? Are you glass half empty? Do you think that's sort of like all CEOs, and you kind of have to be that way?

Luca Ferrari: Look, I want to give myself a little pat on the shoulder. If there's one thing I tend to do reasonably well, it's being able to see the big picture. So, head in the clouds kind of thing. Maybe I'm not the best at articulating it, again, with the grand speech, but I think I'm pretty good, in substance, at understanding what matters, what doesn't, where the opportunity is, what logically we should be doing, and what's just noise.

And I think I've historically been very hands-on, in the details, in the trenches. It's a good quality that you want to have as an entrepreneur and CEO. It's not super widespread in the population, but it's quite commonly found, I think, in entrepreneurs and CEOs. And it's quite powerful, because if you don't have the big picture, you can't really set a direction or strategy that's the winning strategy—unless someone else brings it to you, which is always nice, but you can't count on that happening. Hope is not a strategy, as they say. But if you're not in the details, in the trenches, feet firmly planted on the ground, then I think you're unlikely to be able to inform that big picture properly. You're unlikely to be inspiring to your colleagues—very few people like working with people who are in an ivory tower and don't get their hands dirty. It doesn't really scale. And you're not in a position to assess others or coach others, because you don't really know anything about the work at some point.

So I do believe you need both to be successful. In finding some sort of equilibrium, I find it's easier to sequence those activities than to run them in parallel. I try to have times where I'm very much in the clouds thinking, okay, what are the big problems or big opportunities, how should we go about them—being more of an architect. And then long stretches where I just get into execution mode and I'm, head to toe, just getting stuff done. Blood, sweat, and tears. I think it's quite difficult to be both at the same time, but you can be both in sequence.

Brian Halligan: Let's talk about coaching for a second. Similar to me, you had never been CEO of a company with thousands of employees that's public. I was figuring it out as I went along, and sometimes I just didn't feel qualified to coach some of my executives. Do you ever have that feeling?

And also related to that: so many of the CEOs I'm working with have a very talented person internally who's on their way up. Should they bet on that person, or find someone who's seen the movie before and has a little bit of experience? That's happening everywhere across Silicon Valley right now. Should we hire the been-there-done-that person, or should we bet on the person who's on their way up and really hasn't seen anything close to this movie?

Luca Ferrari: On coaching, I'm certainly inadequate as a coach, often, with people I work with. At Bending Spoons, we don't work on the assumption that our managers should always be capable of solving, or advising on a solution to, all problems experienced by their direct reports. We think that any one person may be able to coach any other person on some things, and they should do so regardless of the reporting lines. A good manager would generally be someone very smart, a good problem solver, so at least they can provide generalist support. They should be emotionally supportive and ready to get their hands dirty. But ultimately, being someone's manager doesn't mean you're always better positioned to solve a problem for them. There are so many skills needed in a business like yours, like ours, that obviously you need to divide and conquer.

In any case, I've never been a big fan of—I mean, we do value experience, but I think we value experience a lot less than most people. I believe that, yes, been-there-done-that helps. But there are a few big buts.

The first one is the world changes pretty fast, so I'm not exactly certain that something someone did seven years ago still applies all that well. And there is a huge risk that people will be blind to the new context, because they did it that way, and they will just try to paste whatever solution they applied before. So maybe you buy some good, but you also buy a lot of bad. I'm not sure which of the two is stronger.

Also, for a company like Bending Spoons, we have such a distinctive culture, as far as I can tell, that we found almost every time we hired someone very experienced, they struggled to adapt. We're so hands-on. No politics. Radically candid. Everybody needs to carry their own weight. It doesn't translate well. Often people who have been successful at large tech companies tend to have a different style of leadership, which may very well be optimal at those companies—I don't know—but it's not at Bending Spoons. So we also need to account for the cost of that cultural change, which sometimes doesn't even happen, and if it does, it takes a long time.

Last but not least, I find that generally people lose motivation as they gain experience. So you need to consider whether it's better to have someone with 20 years of experience but, I don't know, six-out-of-ten motivation, or someone with two years of experience but ten-out-of-ten motivation. I find often the latter is better. It depends on the situation. So we're generally not big on experience. We have hired experienced people occasionally, but we prefer to hire—

Brian Halligan: Has that changed as you've scaled? Have you changed your mind at all on that? Or are you like, actually, no?

Luca Ferrari: No. And I may be wrong. Look, we have tried. It's not that we never hired experienced people. We have hired some experienced people with great success. We weren't completely closed-minded regarding that. But no, we keep investing in students or new graduates or people with a couple of years of experience, where we think that we can really help them mold their skill set and professional culture in the way that we believe will best serve them and the company in the long run.

And also, there is a trade-off between talent and experience in a competitive labor market. Experience, we can provide it to you. We just need to be a little bit patient. Talent, we can't. So we focus more on talent than experience.

All considered, we're happy with this. We wouldn't change it, necessarily. But we have encountered difficult situations sometimes, where maybe we have a 25-year-old lead engineer or something showing up at an acquired company and essentially being the person in charge on our end, and people with 20 years of experience thinking, does this guy even know what he's doing? I think our track record consistently shows, yeah, he does, or she does. But I can see how it's a more difficult sale than if we had a 50-year-old person with 30 years of experience come in and say the same things. It's much easier to assume that person is competent.

Brian Halligan: I've spoken to a couple of the founders of companies you've acquired, and one of them said that the person who replaced them was 25. The other said the person who replaced him was 27. They didn't seem bothered by it, but I thought that was kind of interesting.

What I'm curious about is, let's say that 25-year-old takes over whatever company you're buying. What are you looking for in that person who's going to run that show? Is there a certain quality you're looking for? I know you rotate them around, but let's say it's their first go at it.

Luca Ferrari: We wouldn't put someone in that position we haven't tested in a smaller version of it, to be clear. So it's generally someone who led a team or a smaller business before. But yes, it could be someone with just three, four years of experience. Very junior.

At a high level, we look for smarts and what we call extreme ownership. Being smart, for us, means pretty obviously you learn very quickly, and we have evidence of that, and you're consistently capable of high-quality reasoning. When you propose a solution or you diagnose a problem, what you say or write consistently makes a lot of sense. It doesn't mean you have all the answers, but your analysis is always rational, accurate, logically sound. We think that works across the board, in almost any position.

Then we want you to have extreme ownership, which means you care tremendously about being or becoming the best in the world at your job, bringing the greatest possible contribution to your team and the company. You're almost fanatical about that. So when you find an obstacle, or you identify a shortcoming in your skill set, you'll be hell-bent on overcoming it.

Then of course we look for more specific skills. But we find that when those two qualities are in place in big ways, you're very, very likely to succeed—assuming you can communicate a little bit, you're nice, you're not an asshole, the hygiene factors. But the core killer features are those two.

Brian Halligan: And when it doesn't work? You put in the 25-year-old to run it and there's an immune system rejection, or they just weren't up to it. What is it that falls down?

Luca Ferrari: When that's happened—very rarely, I can only think of one or two cases—it's been primarily one of two things. It could also be that we misjudged those qualities, but so far we haven't seen any such case, at least for general managers.

What we've seen is, either we didn't pay enough attention to a person's ability to lead others—call it communication, a certain level of common sense, and empathy. So they were incredibly smart problem solvers, they moved 100 miles an hour, but they failed to notice when someone was a little bit off or had an issue. They didn't say the right thing at the right time. And that created a level of hostility, or at least friction, that ultimately made them untenable as leaders.

The other case was where enough people in the org, for all sorts of reasons, felt more competent. Although this person was great and super nice and empathetic and communicative, these people couldn't get over the fact that, "Oh, I'm so much more experienced. I cannot be led by this person, even if just formally." That's been very rare, but I can remember one such case. And there we could do one of two things. We either move or part ways with these people who reject leadership, or we change the leader. It depends on the context which of the two makes more sense.

Brian Halligan: How do you develop these people? Do you actually train them, develop them, coach them? Or is it, they're smart, they're going to figure it out, you kind of throw them into it?

Luca Ferrari: We have training materials, but broadly I think 90% of the outcome depends on throwing them into the deep end of the pool. You give them way more responsibility than seems reasonable, and then you surround them with amazing colleagues. We find that we learn primarily by working with amazing people. Almost invariably, some of the people around you will be better than you at some things, and if you try to emulate those good traits, you learn from them. And also, they will suck at some things, and if you notice the weaknesses, you can avoid falling into the same trap yourself. So the level of responsibility and the level of talent around you are the two things that we find drive growth the most. But yeah, a little bit of formal training here and there, and active coaching, certainly adds that 10, 20% extra, for sure.

Brian Halligan: I'll tell you, the one thing that helped me on my journey: we decided we were going to do a 360-degree review for me, which was a good idea. My co-founder volunteered, which is a strange thing, because he's really introverted. He's like, how do I do this without talking to other Homo sapiens? So he did a Net Promoter survey. First question is, on a scale of 1 to 10, how likely are you to recommend Brian as the CEO of HubSpot? Number two is, why did you give that number? And then he sent it out to like 25 people—the board, customers, employees—and people wrote freaking novels. Really long novels. He spent some time correlating it, showed me the histogram—very helpful. And then he did something clever. For each feature, he would pull out direct quotes on what people said about it. So it really hit home to me: okay, that's a feature. The first ten pages, I'm going through the report and I'm like, feature, feature, I got this, I am fantastic at this, I have this absolutely nailed. Page 11 was where the bugs started.

Luca Ferrari: Painful.

Brian Halligan: And the direct quotes in there were incredibly helpful to help me get better. One of my ahas, by the way, was some of the features were bugs. People didn't like that I was really passionate and sometimes got really excited about things. The first year I tried to fix all my bugs, and then the second, third, fourth year, I'm like, I'm going to pick one or two of the bugs that I'm going to work on.

How do you personally go about getting feedback and getting better, and how do you do that with your folks?

Luca Ferrari: We're big on feedback. A bit like what you just described, we have something called radical candor internally. The idea is you should always tell people when you see something good or bad, as long as you don't share it because you're venting, but because you believe there's a chance they could improve, or the team or the company could benefit. Don't worry about the accuracy of what you're saying, the wording, whether you hurt feelings. Obviously, try to be nice if you can, but that's secondary to being honest. Of course we're not perfect. Not everybody does it, not all the time. But we try to have this environment where opinions and observations flow very quickly and abundantly. That's a very good source of learning.

Brian Halligan: Face to face? You make everyone do it face to face?

Luca Ferrari: We try. Our recommendation is, if it happens in person, say it immediately. Even in front of everybody in a meeting. Don't delay. Just say it—again, respectfully, empathetically, but straight up. If it's something that you notice through asynchronous communications, such as on Slack, then you can send them a message. It's really secondary, as long as you do it and you're fully candid. So that helps a lot.

Then once a year we have something a little bit like what you described, where we give more structured feedback based on a bunch of assessors. Not 25, but more like six to 10, depending on the person. That applies to me as well. I also try, once a year, to identify at least one major point of improvement. I went through exactly the same thing where I had five, and then I figured halfway through the year, if these are challenging to improve, five is too many. So I try to have one per year that I try to get a lot better at.

Brian Halligan: What's your one right now, Luca?

Luca Ferrari: Oh my God. I don't know if I want to share that. It's fine. So, I told you earlier—I don't remember exactly the words I used, but the message I was trying to convey is that probably the greatest privilege I feel I have in my life right now, and I've had it for a while, is the quality of the people I get to work with. I really mean it. I appreciate their skills and talents and their contribution tremendously. I'm awful at saying that aloud.

I'm very critical of myself too, to be clear. Generally, at night, when I call it a day, I'm disappointed in myself. So I'm the same way toward myself as I am to others—maybe more critical of myself, I'd like to think. But the point is, even people I hold in the highest esteem, I rarely tell them how amazing they are. So I decided that I need to be better at telling them how much I appreciate them—again, in a fully honest way. It's not hypocritical, it's just voicing what I know unconsciously but don't really linger on. I've tried to do that a lot more. I think it's been half a success, half a failure, but certainly an improvement over past levels.

Brian Halligan: I got the exact same feedback pretty much every year. There's an old-school saying that you should give five pieces of positive feedback to every one correction. I was definitely the opposite before that.

Luca Ferrari: Let's use all six slots for corrections.

Brian Halligan: I was pretty close to that. So I worked on that. I got slightly better, to the point where I would put a 15-minute slot on Friday afternoon—"give compliments"—to force myself to do it. So I hear you. Most CEOs have that same one.

A lot of CEOs also get feedback from their teams that their trust circle is just small. They trust four people, and they run everything through those four people, and everyone else feels like they're at arm's length. Do you get that?

Luca Ferrari: No, actually, I haven't gotten this feedback. We're quite distributed in that way. We don't have an executive team or a leadership team. People could reconstruct it and say, okay, I think whoever leads product should be in there, and whatever. We did have one many years ago. We dropped it because we found the precise definition of that group didn't help at all. It would lead to some people being involved in discussions they shouldn't be involved in, just because they're part of the executive team, and then some people missing in discussions because we needed to have a discussion "at the executive team level." So now it's just, okay, you involve whoever needs to be involved, no matter the title or the standing. We don't need an executive team.

Brian Halligan: Interesting. So how is it organized? Let's say you do a strategy offsite, where you want to think big things and do some navel-gazing. Who's there?

Luca Ferrari: We've never done it. Or maybe we did something like that a long time ago, maybe five or six years ago, once. I would invite people I think can contribute the most, or take away the most. Sometimes you invite someone who—in general, and I think this is not just me but the company, we hate meetings, and we hate big meetings. But there are cases where inviting someone who won't contribute to the meeting could still be a good thing, if you think they can learn something. Inviting someone just so they feel good about themselves is never an option, though. It has to be useful. I would try to invite the people I think could contribute the most. Some names come to mind, but depending on the precise part of the strategy or angle, I would invite different people.

Brian Halligan: Luca, it doesn't sound like you have an org chart. You're more like Kalshi. There's no "I report to Luca."

Luca Ferrari: No, we do, actually. It's an algorithm. It's basically a matrix organization, with functions and teams. Functions are in charge of how things are done—the hard skills, I'm oversimplifying—and teams are in charge of what we do, the objectives, what we're trying to accomplish to make Bending Spoons successful. Every person has a functional lead and a team lead, and it all flows to a single node, which currently is me. But it's basically whoever the CEO is at that point in time. So there is a pretty specific formal org, and we use it to automate a lot of stuff. But we remind people that it's only useful to the extent that it's useful. In no way should they feel limited by it. It's also quite fluid. We've had many cases where someone is a lead for a while and then goes back to being an individual contributor.

Brian Halligan: You said something interesting: whoever's the CEO at that point in time. I had a chance to chat with Jensen Huang a year ago, and he's got a unique style. He's got 60 direct reports. Similar to you, he gives direct feedback, positive and negative, in public. He doesn't do one-on-ones. I asked him, if and when you ever retire, will the person who replaces you inherit that and use that system? He said, "Oh no, hell no. This is built for me specifically. It's the way I work. Somebody else should come in and completely rewrite it." You said it—"as long as you're CEO." What did you mean by that, and do you agree with Jensen?

Luca Ferrari: Yeah, absolutely. As I said earlier, it's almost like if you're coaching or running a sports team. I think you'd be a fool saying, well, the way to win is this and that, and that's the only way to win, or the best way to win, no matter the people you have on the team, the players. So yes, if and when we change our CEO, I would encourage her or him to see whether any change is warranted. They don't have to change anything if they like it the way it is, but equally, they should feel free to change things if they thought that would improve things.

Brian Halligan: Just from talking to you, you're a very first-principles person. It feels like a big skepticism of conventional wisdom. I was sort of the same way back in the day. What is conventional wisdom right about? Where did you think, this is wrong, we're going to rethink it—but you spun your wheels, and you should have just done what everybody else does?

Luca Ferrari: We've tried to build this company from the ground up, questioning everything. Not because we thought we knew better, but because we believed—so, we had this ambition of building one of the most successful companies of all time, knowing full well that we would very likely not succeed. But we thought that if that was how high the bar was going to be, the only chance we had to achieve that level of ambition was to do something differently. If you emulate what everybody else is doing, you're guaranteed to be approximately mediocre—a little bit better, a little bit worse. So we never even bothered understanding what conventional wisdom was. For each important problem, we just try to find the optimal solution, given our particular context and vision.

I'm sure there are plenty of things in conventional wisdom that make sense. I don't know—being nice to people? I guess I agree with that.

Brian Halligan: Being nice to people is overrated.

Luca Ferrari: Most people will say it's probably a good thing to try to be nice to those around you. I agree with that. Let's put it that way. I don't need to be unconventional there.

Brian Halligan: One thing that's kind of interesting, that people ask me about all the time: AI-native companies seem to be running a little bit differently than companies founded before ChatGPT. You're kind of famous for simplifying things, so I want to hear about that. A lot of people are just doing a lot of stuff at once. In year two, they're going international. In year three, they're acquiring a business. Things are just moving so much faster. Stuff that took us about eight years, people are doing in the first couple of years.

At HubSpot, I was a big simplification guy. I even got myself a "No" hat.

Luca Ferrari: Oh, that's awesome.

Brian Halligan: I'd go to a big meeting—the good thing about HubSpot is everyone's got great ideas, we should do this or this—and I would always say we're definitely a company that's much more likely to die of overeating than starvation. So I bought this for everyone to know that. Things seem to be changing. I've noticed these companies are wearing "Yes" hats, and they're getting a lot done, and they're pulling it off. What's your reaction to that?

Luca Ferrari: Look, I think it's healthy. It's certainly a winning strategy to be a radical simplifier, because complexity means costs, means being slower, being worse, generally speaking. But the perfect balance depends on your particular context. Obviously, if you were to build a business in the 1800s, with no technology, no internet, probably a labor market that was way less efficient, clearly at the time you should have chosen to do a lot less than would have been reasonable in the 1990s. So with modern technology and AI and what we've learned, I'm not surprised we can do more, given the same resources, than we could in the past.

But I think as a general rule, leaning less rather than more is a very, very useful thing, even in this day and age. Particularly because the fact that some of these companies are pulling it off doesn't mean they've chosen the right path. We don't know how well they would have done had they done three rather than four things. Dropping the smallest, least important one—maybe the biggest, most important one would have been 35% better and bigger, and maybe it's a net positive.

So we're big on—we have a value, actually, or a quality that we call relentless simplification, that we measure ourselves against and we demand.

Brian Halligan: Measure yourselves against? That's fascinating.

Luca Ferrari: I mean we assess ourselves against it. Frankly, it's not very quantifiable. But the rule goes like this. Every time someone recommends that we should add complexity—whether it's a step in a process, a feature, a headcount, a team, any element of the system—the burden of proof is on those making that recommendation. Those who believe it's a bad idea don't need to bother bringing any proof. They're fine. So if we choose to go forward, there needs to be very clear proof that it makes sense, or it has to be revertible. And the people who drive the initiative need to then determine whether it was a clear success, and otherwise revert it pretty quickly.

The other part of the rule is that we need to stay alert and question complexity that's been there for a while, because we become blind to it as human beings. Anyone who does that should always be applauded, even if it's a nuisance—"Oh my goodness, again we're questioning this process, or this policy."

But yes, if you have better technology—AI is amazing. As someone who failed with an AI startup—we started in 2010, failed in 2013—clearly I believe in the power of technology. I'm not surprised we can do a lot more today than we could 20 years ago.

Brian Halligan: You decided to base the company in Milan. We were based in Boston. I felt like there were some big pluses and minuses to being in Boston. A lot of people think you just can't create a great company outside of Silicon Valley. That's obviously not me. Why did you do Milan? What are the pluses and minuses of building outside the Valley? Do you personally feel like you're not a cool kid because you're in Milan?

Luca Ferrari: I actually couldn't care less about coolness. Someone who buys a company like AOL cannot possibly care about that. If anything—or maybe I do care, but I think that the uncool is cool. You choose. It's one or the other. I'm not certain.

Brian Halligan: What are the pluses and what are the minuses? My thesis is San Francisco is the best place in the world to start a company. But holy crap, is it hard to scale there. It's so expensive. There's not a lot of loyalty. It's just darn hard to scale. What's your thesis on it?

Luca Ferrari: I haven't built a company in San Francisco, so I can't really tell for sure. It does strike me as a place where, if you have the coolest, highest-potential, best-resourced company on the planet, that's where you want to build it. You can probably absorb the most talent the fastest there than anywhere else. If you are more of a middling project—and by the way, middling by Silicon Valley standards is a pretty high bar—then it may be harder there than in many other locations.

In any case, we chose Italy, Milan. Today we're an international company. We're hiring way more people outside of Italy than in Italy at this point, including now more and more in the States. I think we'll probably open offices there in the next year. But yes, we started it in Milan, Italy, on purpose. We actually were in Denmark with my co-founders, where we had completed our engineering studies and launched and then shut down our AI startup.

We had two main reasons. One was extremely commercial and selfish—basically what you described. We thought Italy—60 million people, excellent education, relatively few amazing companies, certainly very few if any up-and-coming tech companies—could be a win-win for us and the talent. We brought a lot of ambition, an idea that made a lot of sense, a project that we thought was exciting. So a lot of people who would otherwise be relegated to joining an inferior business, or moving abroad even though they had their family there and they loved it there, could actually stay and have everything: both an exciting job and their families. We thought we'd be able to build a better team, basically, for the same dollars—or an equally good team for cheaper—which I think has proven to be true, and a significant advantage.

The other reason was more missionary. I believed, and I think my co-founders did too, and we certainly believe so today, that the world in general is a better place if knowledge, opportunity, and wealth are a little bit better distributed. I think it's totally fine, and probably even a good thing, that you have one or two hubs like Silicon Valley that are one notch above. The world probably needs that to achieve maximum prosperity. But if the gap becomes immense, and basically everything that matters happens in one or two places, it's a really big problem—including for the people who live in those places, in the long run. So we wanted to do our part, make a 1% change, by showing you can build a world-beating company with massive ambitions in an unlikely place. Italy being one of many, clearly. But we are Italian. It was easy. We understood the culture better.

So that was it. We don't regret it. I think it was a good move. You can never A/B test life, so I cannot definitively say that we would have done less well had we started in Silicon Valley. But I do suspect that this has been a better choice for us.

Brian Halligan: My last question. I didn't interview them, I called three of the founders of companies you acquired, and all three of them said the same thing. They said you are exceptionally high integrity. I don't hear that a lot about CEOs, necessarily, and I don't hear that a lot in preparation for these calls. Are there some principles around that that you live by? What are they, and what can we borrow from you?

Luca Ferrari: I don't know. It's up to you to determine whether it's worth borrowing. But it's not a point of expedience. It's a moral point, and morality is very personal. At some point early in my adult life, I decided that I never—so, I can be transparent about it. In my early 20s, I cheated on my girlfriend at the time, and I was so ashamed. Sometimes I think making a big mistake is a better way of learning than rationalizing how you should conduct yourself. I was so ashamed of myself that I made a promise to myself to never lie, but also to never omit something important that people should know, even if it's to my detriment. I've tried to extend that to all aspects of my life.

I suspect that although it's sometimes costly in the short run, it tends to pay off in the long run. I'm very glad. You just made my day sharing that feedback. I didn't know you talked to them, but I'm glad you did, and I'm glad they said that over praising my looks or something. Jokes aside, it really matters to me. It's a life mission I set for myself, to be that kind of person you can trust is telling you things as they are—at least as I think they are. And I think it does pay off in the long run. When you become known as someone who can be trusted, it's easier to have a good life, make good friends and relationships that last and matter, do business. People will come to you and say, "Okay, we're looking to sell. We believe you guys. Your word means something." But it doesn't come from a place of seeking expediency. It's really just a moral point for me, and it's very subjective in that regard.

Brian Halligan: I love that, and I'll leave it there. Congratulations on building something really special. Good luck to you on your journey to $1 trillion, my friend.

Luca Ferrari: We'll do our best. Thank you. It's been a pleasure. Thank you for having me, Brian.

Brian Halligan: Appreciate you.

Brian's Takeaways

Brian Halligan: Okay. I thought Luca was really interesting. His company is doing really well, and the guy beats to his own drummer.

Just to stick on the ending there: for CEOs, integrity is a really underrated thing. You are what your word is. You've got a great reputation, probably, but you do one stupid thing and you can have that crash down. So I like that he's like, "I never lie and I never omit important info." He could have just said that and I'd be like, that's a bunch of BS. But I had three of the companies he acquired say the same thing. It reminds me of my last interview with Ali Ghodsi from Databricks, where he's like, the worst thing you can be as a CEO is conflict-averse. If you're never going to omit important information when talking to someone, you're going to have conflict. So that just sort of reinforces that in my mind.

Other things I thought were unique: the way he does hiring is really unique along a lot of different levels. He's very conscious about the top of his funnel and how he brings people in. He's very conscious about his employer brand. This does rhyme with HubSpot. We had a woman named Katie Burke who was a marketer, actually, that we moved in to run HR, and she was excellent at it. She treated it like marketing: how do we create a flywheel, how do we pull people in and create a real employer brand? And now she's the COO at Harvey. I think that's really important for scaling companies, to create a hiring brand. Getting very good at hiring, I think, is important. He's got a whole darn data science team looking at hundreds or thousands of signals, trying to find the right candidates, and it sounds like he does lots of interesting things in that process. One of the least interesting things he does, it sounds like, is the interview itself. I kind of agree with that. When I interview, everyone's good at being interviewed now, so I discount that a little bit relative to other signals. I thought that was pretty interesting.

He's pretty obsessive on talent. He said it on this pod—I've heard him say it other times—you just can't drop the bar. As companies scale, they inevitably do drop the bar, and it sounds like he really hasn't. He's stuck on that. It causes a lot of suffering and a lot of people working very long hours, but he sticks with it.

He weighed in on the age-old battle that I hear from CEOs all the time: should I hire for experience or slope? He's at a pretty big scale and he's still full-on slope over experience. I think his management team, probably other than his founders, are all in their 20s with high slope, and it's working for him. I'm not saying that's the answer. I think for some people experience matters. He also buys a lot of companies with a PLG-type sales motion, where it's not necessarily enterprise sales, where maybe some experience might be useful. But that's where he comes in on that.

He talked so much about team, team, team. But then at one point he's like, actually, you can have a mediocre team if your strategy is really good, which hurt my head a little bit. And he also talked about, when he buys a company, is it more his picking or his operating? Operating. He's a really good operator. I think the reality is you have to be really good at all of that stuff. You need to have a really compelling strategy that's unique relative to your competitors and compelling to your potential customers. You need to be an amazing operator, and you need to have an amazing team. There's not really any shortcut on any of that stuff.

Anyway, that's Luca. I thought he was really interesting and smart, and I hope you liked it.