Rick Rubin & Intuition-Driven Building

`1:27:47`

I was like, "Did I write this book?" Not like, really. He wrote the book. — Yeah. Okay. — But you know what I mean? Like the... — I just read it, just did an episode on it. — Yeah. Yeah. — And when I hear you speak... He's just like, we live in a magic world. All that stuff's not... You have an intelligence that is not coming from your brain. — Yes. — The world is beyond your comprehension. You have to be comfortable with ambiguity and not knowing, and I just — Yes. — feel I hear that from you constantly. — There's Taoism in that, which is not knowing, not trying, not doing. Like, the world just works somehow in some magical way that we don't fully know. And this isn't about getting metaphysical, actually. I actually want to kind of bring it back, but I do think that there's... This is part of the make-it-up-as-you-go

`1:28:33`

philosophy of business, — Mm-hmm. — which is just kind of going a bit more with the flow of where things go. This is the squirrel. Like, there's something very honest and real about that that works to me, and so it's similar to what he's talking about, which is, like, things just happen. You don't need to know exactly why all the time, but feel into them and understand them and pay attention to them, and trust them, and trust your intuition, your gut. Like, I'm a fully intuition and gut-driven entrepreneur, and I don't even love that word, "entrepreneur." I make products. There has to be business around it. I run the business, but I'm gut and intuition-driven. I don't look at numbers.

`1:29:20`

I don't care about the numbers as long as we're profitable, and I know there's enough blubber in the business, as we've talked a little bit about. To make... — No one's going to get that. — That's fair. — You have to talk about the blubber. And then I want to get back to intuition. — Yeah. Okay. — And then we'll get back to Rick Rubin. — Yeah, sure. — You mentioned this point that your business should have some blubber. And it's very memorable. What does that mean to you? — And I had not said that before until last night. The word "blubber," it just came to me, which is just like, I don't want to run a very tight-margin business where I can't make mistakes, or I'm afraid of them. So, I believe in cushy margins. — Blubber. — So we can screw up, and it won't matter that much. I mean, it can matter, obviously. Again, I'm not oblivious to the reality,

`1:30:05`

businesses can go out of business. They do all the time. All of them do eventually basically, at some point. We take risks. We don't put ourselves at risk, is kind of how I like to think about this. So, I'm willing to take plenty of risks, but I'm not going to do something that's going to bet the farm unless we had to. And if I'm at the point where I have to, I feel like it's over already anyway, frankly. I'm not interested in betting the farm. It's just not even that fun. I'd rather just have the farm and then not have the farm. — So big margin of safety is the way you think about it. — Big margin of safety. — A lot of cash, high profit margins. You still pay attention to your costs. — Yeah. We pay attention to costs. — Yeah. Yeah. — When we talk about cutting costs, like we just... David wrote this great article about how getting off the cloud is going to save us something like ten million bucks and whatever it is. And a lot of people are like, "Why are you putting in all this effort to save ten million bucks?"

`1:30:50`

It's because it's our money, man. We don't have outside funding, and I don't want any outside funding. Everyone has wanted to give us money over the years. I don't want anyone's money. It's our money. We make money through our customers, through revenue. So we take very good care of that money, and we're careful with it, and we watch our costs. So again, if you want to stay in business, your only competition are your costs, which hopefully you want to stay in business. So these are the things that I'm paying attention to, and so I want to have margin. That's why we keep the company small. We don't spend money on marketing. We've spent some money on marketing over the years, but it's been a rounding error for 27 years. We don't waste money on stupid things. We just don't blow it on things. We just save it, keep it, and allow ourselves to make more mistakes elsewhere that we sort of enjoy trying and making.

`1:31:37`

And so, I would not want to run a grocery store. I don't want to run a 2% or 1% margin business. And what's always blown me away is how many companies in Silicon Valley who are in the software business lose gobs and gobs of money. It's like the most unbelievable thing for an industry like Silicon Valley to lose so much money on the highest margin product in history, software, with no costs, nothing. There's nothing to software. It's bits. There are some data costs, but it's called basically zero, all things considered. And there are still companies that are blowing billions, have never made a penny. They're big companies that you know of, just blowing money. It just blows my mind. It seems so incredibly irresponsible to me, but that's just me coming from a

`1:32:23`

small business entrepreneur mindset, I suppose. But I just don't get that world. — So the blubber, if we're going to use... — The blubber, let's get back to the blubber. — The blubber helps you stay in business. — Yeah, it's fat reserves. Like, you should have those. It's cool to have 6% body fat, but it's not a good thing to live that way for a long period of time. You need to have some... If you're stuck out in the wilderness for a while, you need to burn something, right? — You're dead. — So, we've lived through dot-com crash, 2008 stuff, COVID. We have fat on the bone. I think it's very important to have that and not just be at the bone. The other thing is that because we're an LLC, at the end of the year, whatever money is left over goes to the members, the unit holders, which are me, David, and then we have two other people on the cap table.

`1:33:11`

And then also, 10% of our profits go to our employees every year. And it's based on seniority. Or actually, that's the wrong... It's based on longevity, not seniority. The two aren't the same thing. However long you've been here. So every month you've been... You basically accrue units, up to ten years' worth of units. At that point, you've maxed out your units, and we distribute profits based on that. So, it's not based on which role you're in. It's not based on the salary or your title. If you've been here for ten years and you're a principal software engineer making hundreds of thousands of dollars a year, your bonus, your profit-sharing bonus, is the same as someone on customer support who's maybe making 90 grand or a hundred grand, who's been here for 10 years.

`1:33:56`

So, all that money goes to real people. It's real money, it's real cash. No options, no RSUs, no stock, any of that BS. I find almost all of that to be pretty much BS, unless you're a really well- established public company. Our bonuses are based on profits. We've been profitable for 27 years, and they're distributed every year, and they're meaningful. I looked this up before the show. About 20 out of the 62 people last year, or 2024, because we haven't closed the final books on 2025 yet, there were six-figure bonuses, and this is year after year after year after year. It's real cash. That's the beauty of a simple business, a simple cap table, an LLC, and sharing real profits. There are plenty of people in

`1:34:43`

our industry, plenty of our competitors, which I'm not going to name, that hire a lot of people and promise them a lot of stock, and you look at the chart, and it's down and to the right. And I feel bad for those people because they were promised something they'll never, ever get. So getting back to real, I want to pay people with real money they can actually put as a down payment for a home, pay for the college education for their kids, go on vacation, sock it away, whatever they want to do. This is real cash on an annual basis, and this is all part of a good business with sound fundamentals that has high margins and high profits and is an LLC, so we can distribute it every year. We have to, in fact, you can't leave any money in an LLC. You can, but you've got to pay taxes. Anyway... — I know. — You know what I... Just so, there's some pedantic person watching, you know.

`1:35:29`

— The wrong show for this. I want to go back to Rick Rubin and you knowing yourself through this psychedelic experience, partially in your forties. Before you had that experience, what was your inner monologue like? Let's say, when you're running your business, you're 10 years into it, you're 35 years old at the time, did you have a negative inner monologue? — No, I think I was just more aggressive. I don't know how I'm coming off. I try to be pretty steady. — You're definitely not... No, you're like a soulful dude. — Okay, good. Okay. Well, I don't know. Like, I don't know. Sometimes I have a scowl, and — Yeah. — people think... I was probably a lot more aggressive... — No, it's not a scowl. The kids call it — Probably resting face... — RBF.RBF, Resting B**** Face. — oh, yeah. — You should see our photographer, Mike. — Yeah. — He sends me pictures of me, I'm like,

`1:36:15`

"I'm happy!" — You're like, "I'm happy!" Exactly. — There are so many times where I'm like, — Yeah. — literally, we're having this conversation, — Yeah. — and this is how I know I'm going to do this for a long time, I'm like, "This is so much fun." "Can I do it again tomorrow?" — Yeah. Yeah, exactly. Yeah, exactly. — While we're talking. But, like, my face just, like... — I know. Yeah, anyway, I think I was more maybe aggressive, or I don't even... I kind of don't remember myself, actually. I'll just pull it back to something else, then I'll come back to this thing in my mid- thirties, perhaps. But we don't do post-mortems. I don't look back on things. I don't like to look back on things, actually. — Jimmy Iovine sat in that exact same chair, and he said, "I have no rear view mirror." — Yeah, but that's how I feel. — No trophy room. No, just like... — So you're like, "What were you like at 35?" Like, I don't... Probably more aggressive, but I don't really know. And I'll tell you why — Yeah. — I don't like to look backwards. First of all, backwards is a story you're telling yourself about what you remember

`1:37:00`

about something, and it's probably not true, and it's probably perverted in a million different ways. And there are a million different things that have happened to you that cause you to be the way you were. And all the things, like, I don't know what any of them are, and the reason I don't like the post-mortems in business, and I know a lot of businesses do this, they launch something, they spend all this time and energy looking back on it, trying to figure out why it did what it did. And my general sense is you'll have no effing idea why it did what it did. You're going to find some reasons that you're going to believe, but had you done that again, it may have turned out differently. Who knows? One little thing could have been different the world could have been different, the way you said something could have been different, who knows, right? If you want to find certainty, you're going to find it, because you'll convince yourself of it. I just don't have any interest in looking back.

`1:37:47`

I'd rather learn by doing something again, making more things. So if you draw a line, people are like, "Well, you should learn from your mistakes." I'm not sure what you can learn from them, frankly. I think you learn from moving forward and doing something. You learn by doing. You can't redo what you did, you learn by doing. So if you don't like something that you did, and you kind of have it in your head, just don't do that again. Like, that's the learning. It takes one second to know that, and move on, and learn by doing new things. So, I don't like to look back. Now, that's not like absolving myself of things I'm not proud of. That's who I was when I did the things, and that's that. So, I'm moving forward. — So, I want to pull up something. The reason I asked the question about the — Yeah. — negative inner monologue, it's very common with a lot of people.

`1:38:33`

— Yeah. — And we've been talking a lot about Rick Rubin, and I love his answer — Yeah. Okay. — to this, which it sounds like if I was going to ask you this question now, you would answer it in a similar way. So, he was asked the question, "Do you have an engine of constant dissatisfaction, self-criticism, that I could have done better?" And his answer was almost near... — Can I guess? — Go ahead. — I don't know what it is. — Okay. — You couldn't have done any different than what you did. Is that his answer? — Very close. Yeah. — Yeah. — So, he goes... — And I believe that to be true. Go ahead. — This is what I wanted to know, how you look at this. So, I was going to — Yeah. — ask you to answer that question next. — Yeah. — So he goes, "No, I'm pleased with the work that we did, excited to keep working. It's fun." You've said this multiple times today. — Yes. Yeah. — "I don't know what else I'd do with myself. I like making things. It's fun." That sounds like you again. — Yeah. Yeah. — "I feel like it's my reason to be on the planet, so I just keep doing it.

`1:39:20`

If it could have been better, I would've kept working on it. If it could be better, it's not done. I've done everything I can to make it the best it can be. I can't do more than that, so there's nothing to be critical of. It's almost like a diary entry." — Yes. — It's very fascinating. "Everything we make is a reflection and a moment in time. Could be a day or could be a year." — 100%. That's exactly how I see things, which is, I did what I did, I did the best I could or the worst I could, whatever it is, it was what I did, and there it goes. Now what? That doesn't mean be an asshole to people, and just... You can be an asshole. Other people remember what you did, too. So, they'll remember what you did. So you want to just be a good, honest person anyway, but

`1:40:08`

some people might hear this, that's why I'm saying this, some people might hear this and go, "Well, that's an excuse to just do whatever the hell you want. There's no ramifications to any of these things." There are ramifications to these things, but they are written in history, and that is that. I've always just tried to do the best I can. This is why... I'm going to tie this back to numbers. We don't have revenue targets, except for, like, I want to be profitable. I don't have sales targets, revenue targets, user targets. I don't have any of these things. We just do the best work we can. A target shouldn't make me do better work. I should do better work because of the pride I take in the work that I do, and the seriousness in which I take the work that I do, and the enjoyment in the work that I do. I'm going to do the best I can. That's what I do. That's all I can do. That's all I should be doing,

`1:40:53`

and I don't need something to try to tell me that I could do better had I aimed for some target. The target is the work I'm doing now. That's the best I can do. So, fully on board. He said it more eloquently than I did, but that's how I've always felt about this stuff, which is why I don't like measurement. I just like the product. The product is the measurement, not the number of things that people have done it, used it, and whatever. It is what it is. The number, the money, is ultimately like the byproduct of making something good. It's not the reason to do it. People are in search of certainty all the time, and I think it's nowhere to be found. But it makes people very uncomfortable not to know why this happened, or... And by the way, I shouldn't say it's not to be found. If you're making widgets on a line,

`1:41:41`

and the widget's supposed to have a circle in the middle, and all of a sudden the circle's off, you can trace that back to where the machine went offline. Like, you can figure out some of these things. Of course, if they're mechanical and you can track it all down, but most businesses are not mechanical in that way. They are a series of decisions, ideas, timing, market conditions, competitor conditions, perhaps, your mood on a given day, the way it rolled out, what other news was happening in the day the thing... Like, to try to pinpoint the answer and then to go, "Okay, now next time we know not to do or to do," and to feel like you now know something that you actually don't know, but to be so certain that you do because you've "figured it out," I think it's really dangerous. — Is that why I've heard you say a few times that you don't think