The Exchanges

Q We are seeing a deluge of SBC stock-based 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 about that?

A So, we, we've given roughly the same amount of stock, um, every year in terms of absolute amount. It's roughly three hundred million dollars. And so if you think about our market cap, I think our market cap's about a hundred and fifty billion dollars. Our burn on stock based comp is very, very low. And so you can judge us on cashflow 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 stock based 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 that was burning three percent 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's incredibly hard to come out from underneath, and so it makes it hard to bet on those companies when they're burning that much equity. What I found in, in 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 gonna be 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 ri…

AI assessment note: “judge us on cashflow minus SBC, which I generally think is the right way”

Q You said multiple times about it's very easy to have massive spend on the LLMs and just on the AI slot being created. How did you think about the decision whether to invest in your own model as Harvey did, as Kursa did, TBD on how that goes? We'll see. Versus existing frontier models.

A Yeah, I mean, look, we're not an interface on top of large language models. There's usage of large language models in the company for productivity. There's some usage of large language models in our core business as well. But a recommendation system model is something that drives engagement. What you see on content on a social network is something that drives most advertising products in the world today. Facebook's ad system, TikTok'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 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.

AI assessment note: “That wouldn't work as well as a custom model built for this purpose.”

Q We mentioned TikTok and we mentioned Meta there. For AppLovin, currently valued at circa a hundred and fifty billion market cap, whatever it is precisely, but give or take. For AppLovin to be a trillion dollar company, do you have to be a social network as well?

A 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 SBC before is a real, real important metric, right? Like, if we ever got to generating 30, thirty five billion dollars a cashier, it would 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 things that can get us there. One is continued execution in the domain that we're in. We think we can get much bigger Just to better monetizing the 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 about is how do you expand what you have? So in the past I've talked about connected TV is one of the holy grails of advertising. If you can port the performance ad we serve on mobile to the television and allow small and medium-sized 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 chance to have our, our team work on an engagement model. So a social network for us is not a requirement to get to a trillion dollars. It's an interesting play to recruit talent and continue to tune…

AI assessment note: “a social network for us is not a requirement to get to a trillion dollars”

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

A That, that's, uh, that's not true anymore. I could 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 gonna buy our own shares, and we're gonna shut down investor relations, because what's the point? Why do I need to go to a conference to explain to everyone who's selling my shares to buy my shares? You're not gonna 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 of 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 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 that'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 person that didn't want to put myse…

AI assessment note: “That, that's, uh, that's not true anymore. I could do go to conferences now.”

Q We are seeing a deluge of SBC stock-based 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 about that?

A So, we, we've given roughly the same amount of stock, um, every year in terms of absolute amount. It's roughly three hundred million dollars. And so if you think about our market cap, I think our market cap's about a hundred and fifty billion dollars. Our burn on stock based comp is very, very low. And so you can judge us on cashflow 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 stock based 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 that was burning three percent 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's incredibly hard to come out from underneath, and so it makes it hard to bet on those companies when they're burning that much equity. What I found in, in 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 gonna be 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 ri…

AI assessment note: “you can judge us on cashflow minus SBC, which I generally think is the right way”

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

A That, that's, uh, that's not true anymore. I could 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 gonna buy our own shares, and we're gonna shut down investor relations, because what's the point? Why do I need to go to a conference to explain to everyone who's selling my shares to buy my shares? You're not gonna 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 of 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 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 that'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 person that didn't want to put myse…

AI assessment note: “That, that's, uh, that's not true anymore. I could do go to conferences now.”

Q Speaking kind of not starting for the money, your total comp in 20, 23 was eighty three 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?

A Yeah, so to understand my comp in 23, you gotta really look backwards in 22. We, when we went public, we went public in 21. Um, in the first year, the stock went up to about forty billion dollar market cap. In 22, we fell about 92% to a little bit under four billion dollar 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 had taken no compensation. I was taking basically the bare minimum 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 is because I felt like I'm public, turning this company around is a big task, and I'd like to align myself with investors to say, I'm going to get paid, but I'm only going to get paid if the stock recovers. So the thresholds of compensation that the comp committee on the board granted me were at a minimum, the stock was nine dollars. We had to get to the first threshold, I think was about 38 to 40 dollars. 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 think, five or six levels from there. So all the way up to a return to 80 dollars, which was our IPO price. And I had a term to go achieve it. I feel like CEOs who are founders…

AI assessment note: “I'm going to get paid, but I'm only going to get paid if the stock recovers.”

Q I was just, uh, Eli Gill just tweeted actually, uh, compute 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?

A 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, but if you look at right now, I mean, we can all say, Probably Anthropic is doing the best in terms of releasing models 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 that, how did they actually get really good researchers creating the best 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 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'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.

AI assessment note: “Depends on the space. So, large language models obviously have the ability to scale”

Q Can I be respectful, but ask a slightly controversial question? The earliest raises for you were not easy. You did not have traditional VCs in. Why do you think that was? And going back to your being able to Sell there. Your vision was clearly the right one, but no offense, VCs didn't bite. How do you think about that? And again, I meant it with respect.

A I know, it's, it's all got like the best thing that ever happened to me was hearing no at a million over four. I would have given up 25% of the company for a million bucks. Could have been one of the best VC return investments of all time. The reality is VC community feeds off the same thing I said, which is pattern recognition. So one, if you're in their community, you've raised from them before, it's a blank check going forward if you've had some I didn't have that. My prior businesses were bootstrapped, so I was sort of an outsider going in, and then the second point is they follow themes that are hot in the market in the day. Over the years, for instance, gaming's become hot, so now there's tons of gaming funds, and there's tons of crypto gaming funds, and tons of money pouring into space. Well, in 2012, everyone hated gaming, and everyone hated advertising. Most of the world probably is now appreciating advertising and understands that's what Facebook and Google are as well. Still, people conceptually don't like the notion Back in the day, though, you bring up those two words in a pitch meeting, and that's it, crickets, and so I couldn't get them to understand that we saw the world ahead of where it was evolving to, and that's sort of hard to do unless someone trusts you inherently from a past experience.

AI assessment note: “The reality is VC community feeds off the same thing I said, which is pattern recognition.”

Q worry, reviewing them is always a way to have a manufactured conversation, so this is gonna be 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 people. People that are motivated by losing, or people that are motivated by winning. What are you fearful of? Losing, or are you inspired by the thrill of winning?

A I think you almost, if you've had success, you almost have to be inspired 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, that are material and you're going to protect downside more than go after 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 five nines likely that you were going to fail. That in itself has to tell you the founder mentality has got to be chase winning. And so over the years, I've taken motivation through winning. And 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's something that I like to ask in interview questions. And I found the best people are motivated by personal growth, development, being inspired, finding things intellectually stimulating, winning. But it never tends to be money because money is a very, very tough thing to continuously be motivated by. Eventually you will reach a point where money is no longer a motivator, and then you need to find something else. So I've always pushed to win, and I've always pushed to learn and grow, and those are the things that reall…

AI assessment note: “I think you almost, if you've had success, you almost have to be inspired by winning.”

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

A 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. A lot of them end up wrong. I optimize to go forward. Same thing with, with 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 would love to be surrounded by a core group of family and friends for a very, very long time, as long as I'm here. Around all of that, when you're moving fast, you're certainly going to rub people the wrong way at times, and you're going to miscommunicate. You're going to do something wrong. But if you live in fear of that, and 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.

AI assessment note: “Not really. Um, I mean, I guess I just don't think about it much.”

Q Speaking kind of not starting for the money, your total comp in 20, 23 was eighty three 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?

A Yeah, so to understand my comp in 23, you gotta really look backwards in 22. We, when we went public, we went public in 21. Um, in the first year, the stock went up to about forty billion dollar market cap. In 22, we fell about 92% to a little bit under four billion dollar 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 had taken no compensation. I was taking basically the bare minimum 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 is because I felt like I'm public, turning this company around is a big task, and I'd like to align myself with investors to say, I'm going to get paid, but I'm only going to get paid if the stock recovers. So the thresholds of compensation that the comp committee on the board granted me were at a minimum, the stock was nine dollars. We had to get to the first threshold, I think was about 38 to 40 dollars. 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 think, five or six levels from there. So all the way up to a return to 80 dollars, which was our IPO price. And I had a term to go achieve it. I feel like CEOs who are founders…

AI assessment note: “If the belief is that the CEO should then never get compensation ever again, it's completely flawed logic.”

Q You said multiple times about it's very easy to have massive spend on the LLMs and just on the AI slot being created. How did you think about the decision whether to invest in your own model as Harvey did, as Kursa did, TBD on how that goes? We'll see. Versus existing frontier models.

A Yeah, I mean, look, we're not an interface on top of large language models. There's usage of large language models in the company for productivity. There's some usage of large language models in our core business as well. But a recommendation system model is something that drives engagement. What you see on content on a social network is something that drives most advertising products in the world today. Facebook's ad system, TikTok'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 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.

AI assessment note: “That wouldn't work as well as a custom model built for this purpose.”

Q want to do team drinks on a Friday at five-thirty, like, can we not bond over a whiteboard and like a project that we're, and 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.

A What I've 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 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 that you're just a bunch of smart people in a room trying to figure shit out, and you really remember that at something like a dinner, 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 we drink and we start shooting the shit, really good ideas can come of that too. It's not that we're going out and with a bunch of coworkers and talking about baseball. We're going out with a bunch of coworkers and getting drunk together and talking about work opportunities. And sometimes Your best ideas come out of those moments.

AI assessment note: “you end up creating, I think, productivity out of those moments.”

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

A 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 that you can't reverse back to a team of high output. And so in large part, the only way to reverse is to have a founder that takes control back. But once you get to that lean team of highly exceptional doers, if you're then controlling and not delegating, then what are you doing? You have a whole bunch of exceptional talent around you who in theory 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, and in that case delegation is very powerful.

AI assessment note: “once you get to that lean team of highly exceptional doers... delegation is very powerful.”

Q I was just, uh, Eli Gill just tweeted actually, uh, compute 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?

A 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, but if you look at right now, I mean, we can all say, Probably Anthropic is doing the best in terms of releasing models 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 that, how did they actually get really good researchers creating the best 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 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'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.

AI assessment note: “Depends on the space. So, large language models obviously have the ability to scale”

Q I actually spoke to Cathy 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?

A There, there was a baseline that I needed to feel like family was good, and I was fortunate enough to, to start a couple of businesses before they were successful. So I had 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 money where I didn't have to stress about money. Once I co-founded this business with my team and we started getting going, I never really needed anything from this monetarily. And so the interesting piece there is when, as we were building up, we were growing really quickly. And in. 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've 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, 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 upward trajectory? So we were able to really play along. 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.

AI assessment note: “I was able to, to think about the deal process there logically”

Q Finish this sentence. The advertising business that is most at risk from app loving in the next three years is?

A It's a 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 go, you spend a 100,000 dollars a day growing your business today. Spend an extra 20,000 dollars a day with us and create more transactional volume. Don't take from anyone else. Take your 100,000 dollar a day investment business that might have 300,000 dollars a day of revenue with it and add another 20,000 dollars of media spend, get to 120 K and get to 360 K of 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.

AI assessment note: “I don't think it's any. We're not trying to take from others.”

Q 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 one-to-one meetings. How, how do you do the culture of execution without one-on-one meetings, and without the traditional corporate scaffolding?

A 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. If I go to, if I don't like something they're doing, they know about it in real time via chat. If I like what they're doing, they don't need to know. They know that I respect them, and they're good to go. Good people don't need that type of hand-holding, usually. And what ends up happening is people who need a lot of development too, those people aren't the people that I want on this team of A players. And so, we tend to shy away from a lot of traditional management techniques. Another example of this is, like, something like learning and development. A lot of companies try to structure all the onboarding and learning and development processes in a company to say, you're new at my company, here's how you should learn the business. 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 forma…

AI assessment note: “if I don't like something they're doing, they know about it in real time”

Q want to do team drinks on a Friday at five-thirty, like, can we not bond over a whiteboard and like a project that we're, and 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.

A What I've 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 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 that you're just a bunch of smart people in a room trying to figure shit out, and you really remember that at something like a dinner, 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 we drink and we start shooting the shit, really good ideas can come of that too. It's not that we're going out and with a bunch of coworkers and talking about baseball. We're going out with a bunch of coworkers and getting drunk together and talking about work opportunities. And sometimes Your best ideas come out of those moments.

AI assessment note: “you sometimes lose the human side of things, and you sometimes get in a place where resentment can build”

Q Ok, you don't. Do you ever doubt yourself? You speak with such confidence and such assuredness. Dude, I want to fucking follow you. No, I'm being serious. I'm like, 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. Do you have a doubt or not?

A You know, I'll say, like, building the business, almost every morning I'd wake up thinking, I gotta check stats, make sure we're still operating, or are we gonna 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 gonna last, that what we're building is gonna be really big, and in essence, like, that fear of blow up, 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 because we are in a very, very tough space. Advertising is very 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 …

AI assessment note: “I've always had this doubt that this is real, that what we're building is gonna last”

Q You said people trade where they deserve to trade in a lot of cases. Is the sasspocalypse fair then?

A 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 the rapid rate of product delivery in the large language model space makes a lot of traditional enterprise SaaS companies hard to bet on years into the future. So what happens? Well, terminal value is dicier. So you value the company less, you get out. Their stock-based comp was high, but it was an acceptable percentage of total value. Stock tanks, stock based 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 really bad downward spiral. So in a way, I would say not only is it fair because of the risks that exist, I'm not sure it's actually done yet. You know, again, I'm not a trader of businesses, but I do think we're going to go through material changes in the market, especially when it comes to enterprise SaaS. Over the coming years. 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. Cause I don't think that happens. Companies, once they're embedded with 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 and businesses. I mean, the reaso…

AI assessment note: “not only is it fair because of the risks that exist”

Q 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?

A 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 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, 10 X, hundred X 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 is not slop. The code is good enough to contribute to, um, your main code base. So like there, there's a lot that still comes from having a traditional engineering background that's valuable in today's world.

AI assessment note: “either your product people become engineers or your engineers become product people, but you don't need both”

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

A 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 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 blockade to actually getting to this AI native state.

AI assessment note: “there needs to be a lot of honesty around what is the world going to look like”

Q I care desperately, before we do a quick thought, 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?

A 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 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 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 deprioritizing 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.

AI assessment note: “the second you do that, in essence, you're deprioritizing the task of being a parent”

Q It will be great, but I want to start with some context, because we look at AppLovin today, and it's this kind of real behemoth, actually. It's incredible, and there's always a founding story. So what was that aha founding moment for you with the start of the company?

A You know, this is, well, my fifth startup, so I normally talk about only the successes, so maybe the third successful ones. But we started in 2010 trying to build mobile apps, and for a couple years we were just building apps, and we couldn't grow them. And my past successes were in advertising, and looking at the app store back then, it was already getting cluttered. So our thesis on the company was just that app content creation was gonna explode. The market is really cool. Mobile devices, we could already see how intimate and highly used they were, and that was only gonna grow. So app discovery was gonna be a real big problem, and we wanted to solve it through advertising. So really, I don't know if we had any aha moments. It was just like, we put our heads down, saw a problem, went out and solved it, and sort of hit the ground running, and it worked out.

AI assessment note: “I don't know if we had any aha moments. It was just like”

Q It will be great, but I want to start with some context, because we look at AppLovin today, and it's this kind of real behemoth, actually. It's incredible, and there's always a founding story. So what was that aha founding moment for you with the start of the company?

A You know, this is, well, my fifth startup, so I normally talk about only the successes, so maybe the third successful ones. But we started in 2010 trying to build mobile apps, and for a couple years we were just building apps, and we couldn't grow them. And my past successes were in advertising, and looking at the app store back then, it was already getting cluttered. So our thesis on the company was just that app content creation was gonna explode. The market is really cool. Mobile devices, we could already see how intimate and highly used they were, and that was only gonna grow. So app discovery was gonna be a real big problem, and we wanted to solve it through advertising. So really, I don't know if we had any aha moments. It was just like, we put our heads down, saw a problem, went out and solved it, and sort of hit the ground running, and it worked out.

AI assessment note: “I don't know if we had any aha moments. It was just like, we put our heads down”

Q I have to ask, there was a day where the stock fell 23%, and it was, the caption here is the short seller 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?

A Yeah. I mean, look, first of all, like when you go down 92% in a year, you sort of learn to take your beatings. And so 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 control. The short seller attacks were not particularly surprising to me because we went from a low point of nine dollars a share to a high point of 750 dollars a share in two, two and a half years. And so That kind of a run up from under four billion dollar market cap to, to around two hundred fifty billion dollar 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 Apple. 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 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 …

AI assessment note: “the thing I don't like about short sellers in the way the market's constructed today”

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

A You have to understand the KPIs of the business to 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 organization. Our engineers are meant to be product managers. And if you think about what's happening with AI native or engineers today, they have to be really imaginative. They have to be product people. They don't have to know how to write code, but they have to be able to audit code because frankly, you can't just 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 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 the 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 that they can then align with what an agent is going to, or army of agents 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 of businesses to understand exactly what are the…

AI assessment note: “You have to understand the KPIs of the business to drive the business.”

Q 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 nine to five?

A So, so our core business, so we bought a couple of businesses. We have adjust as an analytics company and we're all as a CTV business. So those two aren't 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 high percentage of all the companies EBITDA comes from the core business. So if you then calculate the EBITDA per employee over 400, it's a really, really high number. Um, I think it's, it's reaching over ten billion, uh, ten million ahead now. And so the question on, can you have a team full of A players? Not everyone can be an A player in a team. You need some roles that are just there to be processed and keep the lights on, like we're public companies, so there's certain things that have to happen just, just because they have to happen. But, but 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. 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 devel…

AI assessment note: “Not everyone can be an A player in a team. You need some roles”