Oura CEO Tom Hale Drives Hardware Growth via Subscription Pivot

Oura CEO Tom Hale转型订阅模式推动硬件增长 尽管最初遭遇消费者抵触，但将硬件转向订阅模式契合了长期客户价值，并为持续的软件创新提供了资金支持。 在本次对话中，Oura CEO Tom Hale与主持人Brent深入探讨了领导力面临的严峻挑战，指出这一角色所承担的责任与压力远多于光鲜表面。他们探讨了跨越规模扩张“混乱中间期”的组织战略、如何管理美国与芬兰之间的跨文化团队，以及如何通过保持高工作要求来规避办公室政治。此外，Hale还详细阐述了Oura转型订阅模式背后的战略决策、与Gucci备受瞩目的奢侈品合作，以及为何智能戒指独特的生理学优势让他在Apple的阴影之下仍能保持自信。 从200人扩展到2,000人是企业发展的“混乱中场”，组织极易因中层管理膨胀和官僚主义而放缓，甚至在人员多于工作时滋生内耗与地盘争夺。 (18:30) 出任CEO伴随着巨大的责任与压力，“狗粮远多于香槟”，领导者必须独自承受失败并平衡团队情绪，甚至在遭遇全网舆论压力时咬牙坚持。 (2:32) Oura成功从一次性硬件购买转型为每月6美元的订阅模式，通过向软件和健康分析持续投入来拉高价值与价格比，实现了极高的用户留存率。 (29:12) 与Gucci联名推出999美元智能戒指的成功，验证了穿戴设备的情感与非功能性价值，并推动Oura全面进军Target、Best Buy等实体零售渠道。 (42:45) 面对Apple等科技巨头的竞争，手指部位高出50至100倍的生物信号强度及海量纯净睡眠数据，为Oura构建了强大的AI预测壁垒。 (45:27)

Drawing on executive experience at Oura and HubSpot, Tom Hale and host Brent argue that navigating the 'messy middle' of scaling requires absorbing severe leadership stress, fiercely resisting middle-management bureaucracy, and aligning recurring business models with authentic customer goodwill. The Psychological Burden of Executive Leadership (2:32) Both Hale and Brent observe that the operational reality of being a CEO sharply diverges from external perceptions of glamour. Hale notes that the 'ratio of kibble to champagne favors the kibble,' requiring leaders to absorb organizational failure while balancing emotional swings—raising alarm during excessive celebration and projecting optimism during crises. Brent recounts developing panic attacks once HubSpot crossed the 100-employee mark, realizing hundreds of livelihoods depended on his choices. Managing Organizational Drag in the Messy Middle (15:11) The transition between 200 and 2,000 employees represents a perilous phase where organizational progress frequently slows. In early startups, work naturally exceeds headcount; however, approaching 2,000 employees risks flipping this asymmetry, encouraging territorial politics as staff compete for projects. To avoid bureaucratic paralysis, leaders must maintain flat hierarchies, delay adding layers of external directors, and promote internal believers aiming for executive paths. Brent highlights the principle of 'vector alignment' alongside HubSpot's framework of Enterprise Value (EV) over Team Value (TV) over Member Value (MEV) to keep teams pulling in the same direction. Bridging Distinct Corporate Cultures and Mission (11:26) Managing Oura requires harmonizing an American capitalist mindset with a Finnish egalitarian, non-hierarchical culture that offers little automatic deference to authority. Hale argues against forcing a corporate monoculture, advocating instead for regular in-person gatherings funded specifically to build social capital in remote-first setups. He also practices 'lurking' in front-line Slack channels to offer direct recognition. Maintaining focus across scaling organizations additionally relies on keeping the voice of the customer central—particularly in health technology, where life-saving testimonials sustain morale—and balancing an estimated 80/20 ratio of mission-driven product builders to commercially focused sales talent. Subscription Transitions and the Goodwill Gap (27:33) Oura's shift from a single hardware transaction to an integrated $6-per-month subscription was controversial but essential to fund continuous software and biometric research. Pure hardware models disincentivize ongoing software improvements for existing users, whereas subscriptions force companies to continuously deliver value. Despite intense online backlash across Reddit and LinkedIn, Hale refused to retreat, asserting that enduring discomfort is necessary to establish new category models. To preserve customer loyalty, companies must target a value-to-price ratio above 1.5 or 2.0 and resist creeping pricing complexity. Startups benefit from maintaining a 'goodwill gap'—the deliberate margin between a customer’s maximum willingness to pay and the actual price charged—which fosters word-of-mouth advocacy and yields sustained retention. Establishing Moats Through Form Factor and Partnerships (42:45) Addressing competition from major incumbents like Apple, Hale explains that two-thirds of Oura users already wear a secondary device, typically an Apple Watch. Rather than competing directly, the form factors complement one another: rings measure resting biometrics at night while smartwatches handle daytime notifications. Physiologically, the finger's surface blood vessels deliver biometric signals 50 to 100 times stronger than the wrist, providing clean data that fuels AI models. Furthermore, selective partnerships validate commercial expansion; Oura's $999 collaboration with Gucci highlighted the emotional, non-utility value of wearable jewelry and established the consumer confidence necessary to enter physical retail chains like Target and Costco. Hale and Brent conclude that executive survival across scaling organizations hinges on enduring public criticism, keeping operational structures lean, and resisting opportunistic pricing traps. While deep data moats and specialized form factors offer defensive advantages against tech giants, long-term resilience ultimately depends on maintaining organizational conviction when navigating uncomfortable strategic transitions.

Oura首席执行官Tom Hale与前HubSpot首席执行官Brent围绕企业在200至2000人“混乱中期”的扩张陷阱展开探讨，指出高管的真正考验在于承受极度的心理压力、平衡跨国文化冲突，以及通过反直觉的商业模式转型与简约定价建立长效护城河。 CEO的心理重负与领导力本质 (2:32) 成为CEO往往伴随着巨大的心理压力而非公众想象的体面。Tom Hale与Brent均指出，随着公司规模超过100名员工，肩负员工及其家庭生计的沉重责任常导致严重的焦虑和睡眠障碍，Brent甚至在此阶段出现恐慌发作并需要药物治疗。Tom将CEO的角色比作“在颠簸的船上保持平衡”：在全员狂欢时关注潜在暗礁，在全员绝望时指向地平线的微光；Brent则称其为吸收所有负面情绪的“遮羞伞”。 在领导力哲学上，Tom将其崇拜的领袖归结为倡导创造力的Steve Jobs、彰显谦逊的Mahatma Gandhi，以及强调“人们永远会记住你给他们带来的感受”的作家Maya Angelou。面对硅谷盛行的“996”工作制，Tom认为尽管关键发版期需要高强度冲刺，但组织必须在交付后给予恢复与反思期，长期维持极限状态反而会损害生产力与身心健康。 穿越“混乱中期”与防范官僚政治 (15:11) 在员工规模从200人增长至2000人的“混乱中期”，组织往往面临中层膨胀、流程迟缓和官僚主义蔓延的风险。Brent指出，初创期由于任务量远超员工数，积极不对称促成了扁平协作与快速晋升；一旦规模超过2000人，人数反超工作量，组织便容易陷入争抢项目与划定势力范围的政治内耗。防范该现象的关键在于尽力压制中层总监级别的过早膨胀，并坚持“慢招快辞”。 为了保持组织敏捷，Brent分享了HubSpot的“EV > TV > MEV”（企业价值大于团队价值，团队价值大于个人价值）原则，强调整体利益优先于局部部门。Tom则强调CEO必须保持现场可见性，通过在Slack公开频道中直接点赞一线员工的工作来建立非等级文化；同时，管理层应保持内部提拔与外部成熟人才各半的比例，引入具备高远抱负且敢于承担风险的管理者，如同Elon Musk倡导的“矢量对齐”概念，确保所有员工的发力方向保持一致。 跨国文化融合与社交资本沉淀 (11:26) Oura的团队结构在芬兰与美国之间大致对半分布，Tom面临着融合美国资本主义绩效文化与芬兰平等主义、去层级化社会的独特挑战。芬兰文化对权威缺乏天然的遵从，Tom初次赴任时甚至经历了两次传统极寒跳水仪式作为“入职测试”，其中一次在靠近北极圈的奥卢（Oulu）更是在无桑拿预热下直接在冰河中浸泡45秒。 面对后疫情时代的协作挑战，Tom并未强制推行统一的单一体制，而是主张保留两国文化的互补性。为弥补远程办公带来的信任赤字，Oura设立了专门经费，组织团队进行高密度的两至三天线下聚会，依靠面对面的深度互动来建立社会资本。Tom强调人类进化史证明面对面连接不可替代，这种在顺境中积累的情感储备是团队抵御严峻挑战的核心保障。 订阅制转型阵痛与商誉定价策略 (27:33) Oura战略中最具争议的举措是将传统的单次硬件销售转变为每月6美元的软件订阅模式。Tom指出，纯硬件销售模式在激励机制上存在根本缺陷，厂商往往被迫将新软件功能扣留至下一代硬件以驱动换代；而订阅模式迫使团队每月交付持续价值。为平息老用户的强烈反弹，Oura为Gen 2老用户升级Gen 3提供了硬件折扣和终身免费软件订阅，同时坚决拒绝免费增值（Freemium）模式，确保停费用户的核心功能被大幅压缩。 在转型引发网络舆论声讨时，Tom选择亲自在Reddit和LinkedIn直接回复批评者，阐明订阅收入将反哺科学研发与功能迭代，成功将部分批评者转化为品牌捍卫者。针对定价策略，Brent提出“第11与第12诫命”警告：产品定价天然会随着时间推移越来越贵、越来越复杂。Oura坚持单层级、每月6美元的极简定价，将价值价格比维持在1.5至2倍以上，通过让渡部分消费者支付意愿来保留“商誉差额”，以此撬动自驱式口碑传播与极高留存率。 非功能价值释放与硬件竞争护城河 (42:45) Oura通过与奢侈品牌Gucci的跨界合作验证了“非功能价值”的巨大潜力。在Gucci前CEO Marco Bizzarri坚持下，联名款定价从常规版的299美元跃升至999美元，并在五周内全线售罄，尤其在日本和中东市场大获成功。此举不仅证明智能戒指兼具个人表达的珠宝属性，更赋予Oura进驻Target、Best Buy和Costco等主流线下实体零售渠道的信心。 面对苹果等巨头可能进入智能戒指领域的潜在威胁，Tom表示并不担忧。生理结构上，手指血管靠近体表，采集到的生物信号强度是手腕的50至100倍，能提供极高精度的静息健康数据；市场上三分之二的Oura用户同时佩戴Apple Watch，两者在夜间健康监测与日间通知场景上高度互补。Tom强调，硬件团队应警惕制造业外包捷径，Oura通过自建包括美国工厂在内的生产能力、软硬件高度一体化设计，以及十余年积累的高质量睡眠和生理数据库，构筑起迟来者难以跨越的技术与数据护城河。 本期访谈展现了一家硬件初创公司在规模扩张、跨文化管理及商业模式重塑中的抉择逻辑。Tom Hale与Brent的经历表明，卓越的领导力并非依赖单方面的强权推进，而在于承受战略转型初期的舆论与心理剧痛，并在组织规模激增时依靠极简定价、矢量对齐与底层技术沉淀穿越周期。

[0:00] Tom Hale: I want my shot. [2:32] Tom Hale: ratio of kibble to champagne favors the kibble [6:20] Maya Angelou: people will remember how you make them feel [11:26] Tom Hale: culture begins and ends at the door [11:26] Tom Hale: 100,000 generations of humanity have optimized for connecting in person [15:11] Tom Hale: I expect more from you [20:03] You can't hire a dog and then bark for them. [27:33] earn your stripes with your customers every month [29:12] sleeping bears [29:12] you don't poke them [33:49] when you explain, you lose [33:49] Tom Hale: the only way out is through [33:49] Tom Hale: Is you got to be comfortable being uncomfortable. That is the key. That is the nature of it. [36:09] Tom Hale: complexity kills [42:45] Marco Bizzarri: No. Because of Oura. You don't know how valuable it is. [51:43] Brent: no one is coming to save you [57:54] Brent: over time, your product's pricing will go up [57:54] Brent: over time, your product's pricing will get more complicated

[0:00] Just by paying attention to the work [0:02] that was happening at all levels of the [0:04] company from the lowest to the highest. [0:06] By paying attention and being like, [0:08] "Hey, that's a really good idea or have [0:09] you considered this?" [0:11] It made a culture of it's okay to have [0:14] ideas and have them move up and down. [0:16] And by the way, people would challenge [0:17] me. And in challenging me then they felt [0:19] confident that like we were going to get [0:21] to the best idea because it wasn't just [0:22] my idea. Creating this sort of [0:24] non-hierarchical culture that's not [0:26] bound by time or geography or role, [0:29] really powerful. [0:34] >> [music] [0:47] >> Okay, this episode is with Tom Hale, an [0:50] old friend of mine who's the CEO of [0:52] Oura, of Oura Ring fame. When I was in [0:55] my early 50s, I had a very bad [0:58] snowmobile accident and drove with [0:59] snowmobile [1:01] and you can't see my body, but it's [1:04] absolutely chock-full of metal and I [1:06] thought I was going to die that night. I [1:09] was lying at the bottom of the cliff [1:11] and [1:12] um [1:13] I've been a CEO of HubSpot for 15 years [1:15] like I'm done. I'm I'm tired. I'm done. [1:18] I'm burnt out. He went the other way, [1:20] you know, he had been kind of a [1:21] corporate executive some really [1:22] interesting companies his whole career. [1:24] In his early 50s he's like, "I want my [1:26] shot." And so we talked about that what [1:28] he didn't expect from the job, the good, [1:31] the bad, and the downright ugly of being [1:33] a CEO. He's pretty thoughtful about [1:35] that. [1:36] What really is interesting to me about [1:38] Tom is he spent his entire life in [1:41] companies between 200 and 2,000 [1:44] employees. That is the messy middle. [1:46] That's where things slow down. That's [1:48] where bureaucracy happens. That's where [1:50] middle managers happen. That's where you [1:52] really slow the gears of progress down. [1:55] And we talk a bunch about what it takes [1:57] to keep that engine revving through that [1:59] and how not to get caught in the [2:01] quagmire. [2:02] We also talked about he's got a team in [2:04] in Finland. This company was started in [2:06] Finland and he's got a team here in the [2:07] US. [2:09] And man, are they different? [2:11] Um the Americans are obviously very [2:13] capitalist creatures and the Finnish are [2:15] much more on the socialist side. And we [2:17] talk about how to manage those two. And [2:19] a lot of you are in the US now and [2:22] thinking about going international. I [2:24] think there's a lot of lessons here for [2:26] you. [2:26] So, lots of good stuff. I'm going to get [2:28] you back at the end with my take on what [2:30] he had to say. [2:31] Thanks for being here. [2:32] >> Hey, thanks for having me, Brent. Um I [2:34] have a little story for you. [2:35] >> Okay. [2:37] Four years ago, I was snowmobiling in [2:41] Woodstock, Vermont. As one does. Yes. [2:43] And with my son and the snowmobile went [2:47] off a cliff. [2:48] >> Oh my god. It hit the bottom. [2:50] Snowmobile's in a million pieces. My son [2:52] and I were in a million pieces. [2:54] Um and at the bottom of that I know one [2:58] knew where we were and it was 4:00 in [2:59] the afternoon. [3:00] I was pretty sure we were both going to [3:02] die that night. [3:03] >> Mhm. [3:04] And while I was sitting there at the [3:05] bottom of the cliff, I said, "I need to [3:07] make some big changes in my life." No [3:09] more snowmobiles. Yes, that too. [3:11] [laughter] [3:12] But the biggest change was I don't want [3:14] to be a CEO anymore. Uh-huh. Why did you [3:16] want to be a CEO after all these years? [3:19] >> Wow, that's a good question. [3:21] Um I think the obvious answer and maybe [3:24] the the really the true answer is it was [3:26] a bucket list item I had to check off my [3:28] list. [3:28] >> And and the thing is actually and maybe [3:30] this is TMI, but I also wanted to prove [3:33] to myself that [snorts] I had it Yep. [3:35] >> to do it. Is it everything you had [3:37] hoped? And more. [3:39] >> Really? Um much much harder Okay. than [3:42] than I thought and I'm sure you can [3:43] appreciate that and any CEO in the world [3:45] will appreciate that. Much harder. Much [3:47] harder than I thought. [3:48] >> What's harder than you thought? Um [3:51] it's [3:53] it's not the work that's harder, it's [3:55] the responsibility and the stress. It's [3:58] the waking up at 4:00 a.m. and being [3:59] like, "Oh my god, is this going to [4:01] work?" And and what is it going to take [4:03] to make it work? [4:05] That I think it's pressure, it's stress, [4:07] it's responsibility, it's all the people [4:09] that you have you know, you [4:12] they they've put their faith in you [4:13] whether it's your board or your [4:14] employees or your customers and you have [4:16] to carry that and you know, what they [4:17] say, the buck stops here. Absolutely [4:20] true. Mhm. [4:21] I felt [snorts] that too. I was pretty [4:23] calm in the first four or five years of [4:25] HubSpot, but I was kind of stricken with [4:28] stress and started having I never had [4:31] any before panic attacks like five years [4:33] in and it was that. It was like, "Oh [4:35] man, we have 100 employees and they're [4:37] really counting on me." [4:38] >> 100%. [4:39] >> Um that was the [4:41] What do people misunderstand about [4:43] CEOing? [4:45] Well, I think they think it's a lot more [4:47] fun than it is. [4:48] >> Okay, so is it not fun? Uh no, I mean I [4:50] don't I don't think actually it's not [4:51] fun. I think there is fun. I just think [4:52] that the sort of ratio of kibble, you [4:54] know, to champagne favors the kibble [4:56] >> Yes. [4:58] Yes. [4:58] >> And and I think that that part of it is [5:00] the responsibility which we just talked [5:01] about, but part of it is also you kind [5:04] of the things about work that I really [5:06] enjoy like building something in a fine [5:08] grain of detail and making it beautiful [5:10] and and and owning that and feeling [5:12] pride in that. And I I still get that, [5:14] but just not as much. [5:15] >> Mhm. [5:15] >> [snorts] [5:15] >> Um or um feeling the success. You get [5:20] everyone gets to participate in the [5:21] success, but in some way like it's [5:22] really your team, it's not you who gets [5:24] to own that success. But you know what? [5:26] Participating in failure, you get to own [5:28] that failure because in many cases like [5:30] it was either your decision or your [5:31] direction or the system that you set up. [5:33] So, I think that's I think that's the [5:34] thing people get wrong is they don't [5:36] they don't understand. They think it's [5:37] like it's glamorous and it's it's this [5:39] and that and you're on podcast or [5:41] whatever. Like that's sure, there's an [5:42] element of that, but like that is not [5:44] the main portion of the experience. At [5:46] least not for me. I call it the [ __ ] [5:48] umbrella. You have to like absorb all [5:50] the [ __ ] for the company. [5:52] >> that's right. I I mean my my analogy is [5:54] that you're on a boat and that boat if [5:57] it's going great, your job is while [5:59] everyone's over on this side of the boat [6:00] being like, "Hey, everything's great [6:01] over here." And you have to be on this [6:02] side being like, "Everything's terrible. [6:03] We have to think about that." And vice [6:05] versa, when everything's terrible, you [6:07] got to go to the other side of the boat [6:08] and be like, "Hey guys, there is light [6:11] on the horizon and where we're going is [6:12] going to be great. It may feel terrible [6:13] right now, but we've got to get there." [6:15] And I think that that's that's a big [6:17] job, a big job of responsibility and [6:18] it's hard. Mhm. [6:20] I had some CEO heroes that I copied. I [6:23] copied Steve Jobs, Jerry Garcia, and my [6:27] dad. They were my Mount Rushmore [6:30] >> Wow. Okay. [6:32] >> Who's on your Rushmore? [6:33] Well, you know, Steve Jobs I think would [6:35] make it for sure. Um and I We're kind of [6:37] we're probably similar age and I think [6:38] people who grew up [6:39] >> I got to work, you know, tangentially. [6:41] We were an ISV on the on the Apple [6:43] platform. So, we got to meet him a [6:44] couple of times and he was a hero. The [6:46] person who came back and and recovered [6:48] Apple from its demise was a hero, [6:50] bonafide. Um and the sort of champion of [6:53] creative professionals. So, he would be [6:54] one. I think not necessarily a CEO, but [6:57] Gandhi partially because he uh [7:00] sort of as a man of the people and I [7:02] think humility is such an important both [7:04] value for me personally, but also for a [7:05] CEO. It's important. So, so Gandhi would [7:07] have it. And then God, if I had to think [7:09] of one more, [7:11] um [7:12] Oh, I know who it would be. So, Maya [7:14] Angelou. [7:15] Um not because she's such a great CEO, [7:17] but because she said something which I [7:19] really believe is which is like people [7:21] will remember how you make them feel. [7:23] And I think as a leader the unintended [7:25] consequence is actually the greatest [7:27] risk, not the intended consequence. And [7:29] if you leave people feeling, you know, [7:31] in a way that you don't intend to, I [7:33] think that could be devastating for a [7:34] company. A lot of CEOs of the generation [7:38] under younger than we are, [7:40] it's not Jobs, it's Elon. [7:42] >> Yeah. And they've absorbed his for [7:45] better or worse his work ethic [7:47] and 996 and a hard coreness about it. Um [7:53] this whole generation of founders is [7:55] kind of like that. What's your take on [7:56] that? And is is is your company like [7:59] that? Um [8:01] I am somebody who probably works 996 or, [8:04] you know, something like that, some [8:06] approximation of that. And and I think [8:08] um I think there is value in it. [8:10] However, I would modify it one bit which [8:13] is that if you're working 996 or your [8:15] version of that to the exclusion of [8:18] making sure that you are [8:21] um [8:21] thoughtful and recovered and in a good [8:25] state of mind. If you're in a constant [8:26] state of anxiety and a constant state of [8:29] activity and you don't leave room for [8:30] any kind of recovery or reflection, [8:32] you're probably not doing it right. At [8:33] least in my book. And so it it it at [8:36] Oura and and what's interesting about [8:38] Oura is that we make products that are [8:40] there to help you be healthier and to [8:43] find mindfulness and recovery in your [8:45] life. Um actually when I came on board, [8:48] we had to sort of push a little bit [8:50] towards the performance and you know, we [8:53] never say 996, but we say like no, we [8:55] you like we get the job done. And and we [8:58] do what it takes to get the job done. [8:59] And so I had to shift it a little bit in [9:00] that direction, but that at the same [9:02] time we never lost the values of rest [9:04] and recovery and the importance of it. I [9:05] think the thing is like finding that [9:07] balance, that's what we talk about. We [9:08] talk a lot about balance. How do you [9:11] find balance? And I think one of the [9:12] ways to think about it from a CEO [9:14] perspective is that different parts of [9:16] the company at different times in the [9:17] year, different stages of the product [9:19] cycle are going to be at peak Okay. [9:21] >> 996 and other parts are going to be at [9:23] recovery. And that's like you just ship, [9:25] you know what? Probably shouldn't go [9:26] back 996. Take a couple days. Recover. [9:29] Rest. Think about what you want to do [9:30] next. Be intentional. And so I think [9:32] that kind of idea that you can't run [9:34] everybody at at the redline all the [9:36] time. You got to you got to dial it up [9:38] and dial it down. You got to recognize [9:40] that if you're on the bomb run to ship, [9:41] it's going to be 996 or whatever it is [9:43] to to get there. Okay, speaking of your [9:46] employees, uh you're CEO of a company [9:48] that was founded in Finland. [9:50] >> Yes. Um [9:51] >> Very proud. Yeah, they should be. [9:54] Um and you should should [9:55] It's a wonderful company. [9:57] Um [9:58] Tell me a little bit about your first [10:00] trip to Finland. [10:01] >> [laughter] [10:02] >> Yeah, so so uh [10:05] I have worked with, you know, [10:07] uh Finns in the past. So, I had a little [10:09] bit of experience, but but I had never [10:10] been a a leader of Finns. I'd been a [10:12] partner and a colleague. [10:14] And so, [10:16] there's also, I think, a good tradition, [10:18] I think, in Finland of like [10:19] um [10:21] they're not hierarchical. Not Not a lot [10:23] of respect for [10:25] Not that they don't have They're not [10:26] disrespectful. It's just like, "Look, [10:27] you know, we're all It's very socialist, [10:29] non-hierarchical society." Yep. So, I [10:30] show up and um you know, they're like, [10:32] "Well, we're going to go do some sauna." [10:34] And of course, as you know, it's a [10:35] Finnish national tradition, and so we go [10:37] to the sauna, get in the sauna, it's [10:38] hot, I'm very hot. Then we, you know, we [10:40] go outside and it's very cold and we get [10:42] in the freezing, freezing cold water and [10:44] you're shaking and then you get back in [10:45] the sauna, it's great. And I was like, [10:47] "This is amazing. I feel like I've I've [10:48] passed the test. I've shown my true [10:50] Finnishness." And then of course, we [10:52] went to the second office, which is in [10:54] Oulu, which is a little bit further, [10:55] close, you know, closer to the North [10:57] Pole. And we did the exact same thing, [10:59] except no sauna. [11:01] >> [laughter] [11:02] >> You know, and so this time like, [11:04] literally, I'm not even getting hot to [11:05] get in the water. I'm just like, you [11:06] know, I'm stripping down to my my [11:08] skivvies, I'm walking into a river where [11:10] it's freezing cold, I'm sitting there [11:11] for 45 seconds, I'm monitoring my heart [11:13] rate on the Oura Ring app. [11:16] Mostly to say make sure I stay alive and [11:19] walk out and there's nowhere to get [11:20] warm, just a towel. [11:21] >> Okay, so you passed the Sounds like you [11:22] passed the test. [11:23] >> I passed the test, but maybe just [11:25] barely. Okay, you referred to Finns as [11:27] socialist. [11:29] Um Americans are very capitalist. [11:32] >> You've got call it close to half your [11:35] employees in each country. [11:36] >> Yep. What's it like with two different [11:39] very different cultures and trying to [11:40] blend them and manage them? Like, what I [11:43] Maybe this is a philosophy of culture, [11:45] which is that you can't make a single [11:47] culture. I mean, you can. There are [11:48] elements of our culture which are shared [11:50] across Finland and the US. Um you know, [11:53] passion for the product and a sense of [11:55] mission around health and [11:57] um you know, blah blah blah. [12:00] But the thing is, they're very distinct. [12:01] I think culture begins and ends at the [12:03] door. The Finnish culture is actually [12:04] different from the US culture and what [12:06] makes the company strong is that those [12:08] cultures can coexist and they can [12:10] stimulate each other and they can [12:12] uh you know, propagate ideas across [12:14] They're not They're not like uh They're [12:16] not one monoculture. They're They're two [12:18] cultures and they they generate ideas [12:20] and they generate activity in in ways [12:21] that are different. And And quite [12:23] frankly, I think, you know, it's part of [12:25] what makes a company good is to have a [12:26] diversity of cultures and viewpoints. [12:28] Okay, I would imagine you kind of like [12:30] at HubSpot and lots of other scale-up [12:32] companies [12:34] post-pandemic people got a little more [12:36] hardcore and more into performance [12:37] culture and just started pushing harder. [12:40] Not easy. What was It sounds like you [12:43] kind of went through something similar. [12:44] What was that like in Finland with the [12:47] Finnish employees? How'd that go over? [12:49] How'd you manage through that? You know, [12:51] um well, first of all, I think COVID, in [12:53] a weird way, was a health crisis that [12:54] everybody on the planet experienced. And [12:56] so, in some sense, you had a huge [12:57] commonality, weirdly. And as a [12:59] healthcare kind of oriented company, it [13:01] actually pulled people together. And in [13:04] a in a weird way, it also changed a [13:05] bunch of other norms about how you work, [13:06] you know, remotely and all that stuff. [13:08] And actually, quite quite positive. But [13:11] to kind of go to your question, um when [13:15] you know, post-COVID, you sort of had [13:17] everybody [13:18] um I don't know if you I felt like the [13:20] whole civilization of of humanity was [13:22] like in recovery post-COVID. And so, um [13:26] you know, one of the things that that I [13:27] felt really strongly that we had to do [13:30] was to sort of establish norms of [13:32] getting people to work together [13:35] um in person, [13:36] but not come to an office. And so, what [13:39] we did is we set up like um a fund and a [13:42] practice of bringing people together, [13:44] having them stay together for two or [13:45] three days, making it really intense, a [13:48] lot of connection, and we shifted budget [13:49] and time and energy to do that. And that [13:51] actually, I think, made a huge [13:53] difference post-COVID. [13:54] >> make sure that your your kind of a [13:55] remote culture, but you you fund get, [13:58] you know, whatever. Yeah, at the team [14:00] level, at the organization level, at the [14:03] company level, and get people together [14:05] in person, because it turns out, I don't [14:07] know, 100,000 generations of humanity [14:09] have have optimized for connecting in [14:11] person, right? Like, you know, I can [14:13] read your face and know that like you [14:14] trust me or you're listening to me or [14:16] you care about what I'm saying. And that [14:18] just reinforces all this cultural and [14:20] social capital that you have as a as a [14:21] team that you're sort of banking, so [14:24] that later when, you know, things get [14:25] tough or you're remote or whatever, you [14:27] can you can draw on it. So, that was a [14:28] big a big part of what we did. I think [14:31] the other thing that that that I, you [14:32] know, maybe this is what I did [14:34] personally, was I made a point of being [14:35] incredibly visible. Um even when I [14:38] couldn't be, you know, we had hired a [14:39] bunch of people during COVID, so you [14:40] can't I can't drop by your office. But [14:42] you know what I can do? I can kind of [14:43] lurk in your in your Slack chat and if I [14:45] see some really great work, I'm going to [14:46] comment directly right on that. And um [14:49] I think this is maybe this is a hint for [14:51] other folks or maybe if they want to do [14:54] this, they can. [14:57] Just by paying attention to the work [15:00] that was happening at all levels of the [15:01] company, from the lowest to the highest, [15:03] by paying attention and being like, [15:05] "Hey, that's a really good idea or have [15:06] you considered this?" [15:08] It It made a culture of it's okay to [15:11] have ideas and have them move up and [15:13] down. And by the way, people would [15:14] challenge me. And in challenging me, [15:16] then they felt confident that like we [15:18] were going to get to the best idea cuz [15:19] it wasn't just my idea. And he would do [15:21] that We did that in Slack or we did that [15:23] in these meetings that we pulled people [15:24] together. [15:25] >> And like creating this sort of [15:26] non-hierarchical culture that's not [15:28] bound by time or geography or role, [15:31] really powerful. Okay. [15:33] Um just kind of back to you. [15:35] You've had a super interesting career. [15:39] Um [15:39] you've kind of lived in that kind of [15:42] call it 200 to 2,000 employees, roughly. [15:45] >> Yeah. [15:46] Um [15:47] a lot of the [15:49] the found CEO founders I work with are [15:51] kind of in that spot. [15:53] >> about to go in that spot. [15:55] >> Yeah. What goes wrong between 200 and [15:58] 2,000? [15:59] >> Yeah. Um yeah, let's start there. Well, [16:01] Steve Jobs famously said, right? You [16:03] know, when the bozos come. [16:05] Did they come? They did. Um I think in [16:07] every company in that scale, you you end [16:10] up hiring a lot of people and sometimes [16:12] your hiring is maybe the stakes are, I [16:15] don't know, slightly less high or [16:16] something like that. And somehow some [16:18] some bozos might come. So, the key is [16:19] like, you want to resist that, you want [16:22] to identify, you know, that and and move [16:24] to correct it if you can. And And by [16:26] bozos, just to be clear, you know, [16:28] they're people who are well-intentioned, [16:29] but maybe not as committed or as [16:31] mission-driven or as focused or whatever [16:33] it is. [16:34] So, in that scale, uh you have to be [16:36] careful. That's probably the biggest [16:37] risk I can see. The other risk, of [16:39] course, is that you lose whatever it was [16:41] that got you to 200 people, which is [16:43] that kind of like that passion, the [16:45] spirit, the sense of of mission that [16:47] brings everyone together to accomplish a [16:49] common goal. That's very difficult, but [16:50] requires everybody to like, you know, [16:52] put their shoulder against the wheel. [16:54] And I think what's interesting is that [16:55] if you can preserve that between 200 and [16:57] 2,000 people, it's the most interesting [16:59] time in a company. [17:00] More than 2,000 stops being interesting [17:02] because you're managing managers who are [17:04] managing managers. And And your [17:05] influence is is muted. At 200 to 2,000 [17:09] is a [17:10] uh I'm not a founder, I'm a CEO. But as [17:12] a CEO, I can be in touch with directly [17:15] those 2,000 people and I can touch them. [17:17] Just like I was talking about this sort [17:18] of idea of like going into someone's, [17:20] you know, small group Slack and being [17:22] present and being visible, you can do [17:25] that. And And people can talk to me. [17:27] They can walk up to me and I can I can [17:28] know their names and know what they're [17:29] working on and have an idea about like [17:31] what they're doing. I can say, "That's [17:33] not just hey, clap on the back, great [17:36] job." You know, it's more like, "You [17:38] know, I noticed what you did here and it [17:39] was really great." And that Those little [17:42] moments with a CEO [17:43] >> with that. huge. [17:45] >> do enough of that. [17:46] >> Huge. I mean, like I I remember coming [17:48] up as a as a you know, a staffer, if the [17:50] CEO noticed what I was doing and gave me [17:52] a compliment, I could I could go for a [17:55] year, you know? [17:56] And so, I do I make a big effort to try [17:58] and pay that forward in some way. Okay, [18:01] so I took two things away from there. [18:04] Um [18:05] be careful not to hire a bunch of bozos. [18:06] >> Well, yeah. How do you do that? [18:09] Oh, and my second takeaway is be very [18:11] present and give [18:13] pos- give positive affirmation from time [18:15] to time. And And negative, too. You have [18:17] to be able to let people know when [18:18] they're not doing a good job. And say, [18:20] "I'm kind of disappointed in you." And [18:21] it's not like, you know, "You're fired." [18:23] Whatever. It's [clears throat] more just [18:24] like, "Hey, [18:25] I expect more from you." And the thing [18:27] is, that that's a personal [18:28] accountability. That's really powerful. [18:30] One other thing I know we'll come back [18:31] to your question. I think one other [18:32] thing about 200 to 2,000 [18:35] is that there's an asymmetry. In In a [18:37] startup, there's this amount of work and [18:40] this many people to do it. So, you have [18:41] to be really selective about what work [18:42] you choose to take on. In 200 to 2,000, [18:45] there's this amount of work and this [18:47] many people, which actually means you [18:49] can grow someone's career really fast [18:51] and that's a great trade. Work hard and [18:53] we'll move you quickly through the [18:55] organization. We'll give you experience [18:56] that you could never get at another [18:57] company. That's a really powerful way to [18:59] sort of get the most out of your human [19:00] capital. Above 2,000, you have this much [19:03] work and you have this many people, [19:05] which means they're fighting for the [19:06] best work and that's politics. And [19:08] everybody talks about how they don't [19:09] like politics. [19:10] >> How do you keep it out? [19:12] >> [snorts] [19:12] >> You fight like hell to make sure that [19:15] that asymmetry still favors uh work [19:18] versus people, because that that's sort [19:20] of the root cause, in my mind, of [19:21] politics. [19:23] And you do other things, too. You say, [19:24] "We don't have a political culture." Or [19:25] when you see someone behaving in a [19:27] political manner, you say, you make an [19:29] example of it and say, "This is not how [19:30] we behave. We don't do this." I think [19:32] that's, you know, sort of setting a [19:34] norm. [19:35] Um hiring leaders who are not political [19:37] and then allowing them or encouraging [19:39] them to model non-political, [19:41] non-hierarchical behaviors. But I think [19:43] the fundamental is this asymmetry of [19:45] work to people, because what happens is [19:46] people get territorial and they start to [19:48] protect their work or they start to [19:49] protect their opportunity and then that [19:51] becomes You're You're You're your [19:52] talking to each other about what you [19:54] should do versus your customers. And [19:55] then [19:56] >> like that. I'm going to be Mind if I [19:57] borrow your little [19:58] >> You're welcome to completely [laughter] [19:59] steal it. I don't I'm sure someone told [20:01] me. I just forgotten who it was. [20:03] >> One of the things I notice in these [20:04] companies is like [20:06] it's the director layer comes in. [20:08] >> Yeah, yeah, yeah. And that it's it's by [20:12] definition a middle management layer. [20:15] >> Um [20:16] and I encourage founders to push that [20:18] director layer off as as long as they [20:20] can. [20:21] >> Yeah. Um [20:22] do you have any [20:24] advice for like when that comes in, how [20:27] do you make that productive? How does it [20:29] not turn into Dilbert? [20:31] Well, um and by the way, for those of [20:34] you don't know, Dilbert is a late '90s [20:36] comic strip with the pointy-haired boss. [20:38] >> [laughter] [20:40] >> I guess I guess everybody knows Dilbert, [20:41] or maybe I don't know. I think my kids [20:43] If I ask my kids, I'm sure they'd be [20:44] like, "What are you talking about?" [20:46] >> That's a good point. But But okay, I [20:47] know. Just so okay, just setting the So, [20:49] I talk to a lot of millennials and a lot [20:50] of Gen Z now, so I got to be really on [20:52] it. [20:53] Um You got a lot of rizz, by the way. [20:54] What's that? [20:55] >> You got a lot of rizz. [laughter] Thank [20:56] you. Thank you very much. Um no cap. Um [20:59] so [21:00] >> Like stuff just slows down. And like the [21:03] to-do list for HubSpot [21:05] like it just got shorter. Like the [21:07] bigger you get, the less you get done. [21:09] Do you have tricks on how to keep the [21:10] pace going? Yeah. Yeah, okay. I got a [21:13] couple tricks. I don't know. Um I think [21:15] they work. But uh here's here's one. [21:18] Okay, so the first thing is you keep as [21:20] few layers between the top and the [21:21] bottom. Meaning, you know, you don't [21:23] have senior directors and directors and [21:26] VPs and senior Like you just try and [21:28] kind of resist that for as long as [21:30] possible. I think this is famously a [21:32] flat organization if you can do that. [21:34] So, that I think that's that's one way [21:35] to do it. I think the second one is when [21:37] you think about middle management, um I [21:39] often favor promoting people internally [21:42] in the company into middle management as [21:43] opposed to hiring them. Now, I don't [21:45] always do that. But one one of the [21:47] reasons you do that is because you're [21:49] able to identify both the kinds of [21:51] people who might be good at it, but also [21:53] you're able to identify are they true [21:54] blue believers and do they have the [21:55] passion and the mission? Because the [21:57] worst thing you can have is somebody [21:58] who's in middle management who has no [21:59] ambition. Mhm. Because that's actually [22:01] the Dilbert. The Dilbert's like, I I [22:03] don't want my life to be complicated. I [22:04] want my work life to be as as manageable [22:07] as possible, and I'm going to manage [22:08] everything to be managed. And that's the [22:09] definition of an empty suit, right? What [22:11] you hire is an ambitious middle manager [22:14] whose ambition is to be a CEO. And know [22:15] that at some point they're going to [22:16] leave because they're going to have to. [22:19] But that ambitious middle manager is one [22:21] of the most effective prophylactics [22:23] against sort of the propagation of [22:25] bureaucracy. And I think the other thing [22:27] that you do is you say, "Listen, um we [22:29] really are going to empower you, and [22:30] we're going to hold you accountable." [22:31] And then you make that true. You can't [22:33] hire a dog and then bark for them. You [22:35] have to hire somebody and say like, "You [22:36] have got to do this, and I'm going to [22:38] hold you accountable for it. I might [22:39] have some advice for you, and I might [22:40] have some guidance. And and like but but [22:43] you've got to do it. And it comes back [22:44] sort of a variation on ambitious middle [22:46] management, but it's basically we're [22:47] going to give you the keys to the car. [22:49] So, drive fast, but don't crash. Yeah, [22:52] yeah. And and I think that the last [22:53] piece of it is you create a company [22:55] culture that reinforces that that's like [22:57] re- risk-taking. You know, we're going [22:59] to we're going to let you take some [23:00] risk. And um but we're going to support [23:03] you through that. And we're going to [23:03] give you the the best advice we can. It [23:05] goes back to this asymmetry thing where [23:07] if you have enough time and energy to [23:09] talk to people in middle management, you [23:10] can one, root out the people who are [23:13] >> [snorts] [23:13] >> the Dilberts because you're talking to [23:15] them. And then two, you can find the [23:16] ones who are not the Dilberts that you [23:17] can encourage them and model and say, [23:19] "Hey, do what do what Sal's doing. Sal's [23:21] doing an amazing job." Okay, related to [23:23] this, this is more in B2B than B2C, [23:26] and you worked in a bunch of B2B [23:28] businesses. As the layers come in, the [23:31] distance between the CEO and the [23:33] customer Yeah. increases. Do you have [23:36] any hacks for [23:38] Okay, now you ain't got a bunch of [23:38] layers. [23:40] How do you stay in touch with the [23:41] customer? How does that customer's voice [23:43] propagate through the org? [23:44] >> Yeah. Well, I I I worked at SurveyMonkey [23:46] for a couple of years. And this is one [23:48] of the things that we did was like to [23:49] make sure the voice of the customer was [23:51] sort of [23:52] both programmatically pulled into the [23:54] company and then distributed within the [23:55] company. So, I think the ways you do [23:56] that are like, you know, NPS surveys and [23:58] sharing the the verbatim. And you have [24:01] rituals and meetings where you do that. [24:03] And I I can't remember, was it HubSpot [24:04] that where they had the customer at the [24:05] table every time? We did. Right? You [24:07] always had like [24:08] >> We still do at the board meeting. We [24:09] invite a customer. We do a customer [24:11] panel. And I just I think that's what [24:12] you do. You set a culture that says [24:15] it is part of the your job expectations [24:17] that you're going to have customer [24:18] interactions. If that's cruising Reddit [24:21] or talking to people on airplanes or [24:23] going to, you know, at B2B going and [24:25] talking to customers, you are just going [24:27] to do that. That's part of the job [24:28] expectation. And you create both the [24:30] time and the expectation that you do [24:33] that so that you end up with more [24:34] customer input. And then you say, "By [24:36] the way, this is how you're successful [24:38] in this organization. You're successful [24:40] when you're framing things in terms of [24:42] customer needs and solutions for [24:43] customers and customer narratives and [24:46] customer values. And in health in [24:48] particular, like it's actually really [24:50] easy because the customer stories for us [24:53] are things like, "You saved my life. Uh [24:56] you got me pregnant. Um [24:58] you you saved my father's life. You [25:00] helped me change my life for the [25:01] better." And those narratives, by the [25:03] way, are incredibly motivating. Those [25:05] kinds of narratives, like people wake up [25:07] in the morning at at Aura and are like, [25:09] "Man, I I could I could I could save [25:11] someone's life today. What am I going to [25:13] What am I going to do to make that [25:15] better?" And the thing is that that [25:16] flywheel of like both customer [25:18] understanding means you do a better job, [25:20] but also customer empathy for something, [25:23] you know, that's important. [25:25] It just drives like, I don't know, extra [25:26] 10, 15, 20, 30% of performance because [25:29] people believe in what they're doing. [25:31] Okay. A lot of founders have asked me [25:33] about this the kind of the missionary to [25:35] mercenary ratio. And the mercenaries [25:37] start showing up around 200. [25:39] >> Yeah, yeah. Um [25:41] talk to me about [25:42] >> Hey, listen, if you're in sales and [25:44] you're not a mercenary, [25:45] right? Um and and so I mean it's it's [25:47] it's different by different companies, [25:48] right? I mean, some companies are more [25:49] sales-driven, some are more [25:50] marketing-driven, some are more [25:51] product-driven. So, I think that that [25:53] ratio, by the way, you need both. You [25:55] need missionaries and mercenaries. I [25:57] think if you have mercenaries in your [25:58] product and engineering org, probably [26:00] not the right place for mercenaries. You [26:01] want people who want to build beautiful [26:02] things that are amazing that that are [26:04] express who they are. [26:06] >> building something boring? [26:07] Same. You find the people who are [26:10] passionate about it, you know? I mean, [26:12] uh you find the people who care about [26:14] what it is that they're doing. Or you [26:15] find a way to make them care. I mean, [26:17] SurveyMonkey, it's interesting. At [26:18] SurveyMonkey, um we translated the [26:21] mission into giving a voice to all the [26:25] people who don't have voices. And And [26:26] the thing is like, okay, sort of sort of [26:28] true. Yep. But the reality is the people [26:30] who came to work were like, "Yeah, I'm [26:31] amplifying the voices of like employees [26:33] or customers or whatever." And that was [26:34] the reason for them to be committed to [26:36] their mission. So, I think you got to [26:38] find something that does it. Um I just I [26:41] I think it is so important to have [26:43] missionaries in the company and to to [26:45] elevate them. At the same time, you [26:47] know, if you're going to market, you [26:49] want people who have commercial [26:50] instincts. [26:51] And And commercial instincts are [26:53] correlated highly [26:54] with a mercenary viewpoint. Now, [26:57] I think mercenaries are also a caustic [26:59] term. Yeah. It basically implies that [27:00] you're willing to kill for money. [27:02] I don't mean it that way. Well, [27:03] >> [laughter] [27:03] >> no, but that's what I'm saying. That's [27:04] what I'm saying. Like that's what that [27:05] term means. And what you really want are [27:06] people who like [27:08] they want to solve customer needs [27:10] uh and drive a commercial outcome. And [27:12] that's what That's what, you know, the [27:14] the thrill of the chase, the the sense [27:16] of victory when a customer when you have [27:18] a customer win. And you know, doesn't [27:20] have to be a zero-sum game where like [27:21] the customer loses if the company wins. [27:23] And by the way, that they get their [27:25] jollys out of seeing the numbers and [27:27] putting them up. And I just think you [27:29] need both. Yeah. Maybe it's a Maybe it's [27:31] 80/20, I don't know. Making it up. Okay. [27:33] You've been through some dramatic [27:35] moments in your career. Um [27:39] and I want to get to that. But one of [27:41] those dramatic moments was you made a [27:42] business model shift. [27:44] >> Yeah. [27:45] Uh historically, you just bought the [27:46] Ring, and that was it. [27:48] >> Typical hardware model. You introduced a [27:49] $6-a-month uh subscription service. [27:54] Can you And it was controversial. Your [27:56] customers were not happy. Um [27:58] just take us behind the scenes of that [28:01] decision. Was that kind of percolating [28:03] in the org, in your head? Was that the [28:05] first thing you did when you came in as [28:07] the CEO? Was it contentious within the [28:09] leadership team? [28:10] Um [28:12] I I think the answer is it was the [28:15] strategy. [28:17] Um and the strategy was in order to be [28:20] the most competitive hardware company in [28:21] the world, you needed to be a really [28:23] great software company. And to be uh a [28:26] really great software company, you [28:27] needed a a business model and a way to [28:31] deliver periodic software value. The [28:33] problem with the hardware model is that [28:35] you ship your hardware, and it's fixed. [28:37] And that's it. And you might ship a, you [28:39] know, a little bit of a software update [28:41] or a firmware update or something. But [28:42] like really, you're not really changing [28:43] the value proposition for that product [28:45] with new capabilities. And the reason [28:46] why is because when you ship the next [28:48] version of the hardware, you want all [28:50] that value to go in that next version of [28:51] hardware. So, someone moves from their [28:53] iPhone Totally. 13 to their iPhone 14. [28:55] Totally. So, you're disincented actually [28:57] to provide value to your customer over [28:59] time. The power of a subscription model [29:01] is that you got to kind of earn your [29:02] stripes with your customers every month. [29:05] Yeah. Every month. Now, by the way, $6 a [29:08] month for Aura is kind of a low bar. [29:10] Whatever, two cups of coffee. And if [29:12] we're delivering information that helps [29:14] you with your health, the value of that [29:16] is so priceless. Like the two times, you [29:20] know, that like we help you get to bed [29:22] early, or we predict that you're going [29:23] to be sick, or we tell you when to, you [29:25] know, [29:26] procreate in order to have a baby. Like [29:28] the value of that is so high that the [29:30] the ratio of V to P, value to price, [29:33] is measured in multiples. [29:34] >> contentious inside the org? Okay, so I'm [29:36] getting to that, right? So, but so I'm [29:38] saying it was our strategy. It was our [29:40] strategy. [29:41] >> that in as your strategy from what I [29:42] understood. Uh well, no, actually it [29:44] would have already It was already there. [29:46] And I think there were things that I did [29:47] maybe to sort of tune it a little bit, [29:49] but and I don't even say I, I'd say the [29:51] team did this. [29:52] But but the the Was it contentious? It [29:54] was contentious. And partially [29:55] [clears throat] it was contentious [29:56] because going against the grain of [29:58] expectation, hardware should be a single [30:00] price. [30:01] >> Yeah. It was was contentious. And this [30:03] idea that like [30:05] um I don't know, you probably have some [30:07] subscriptions that you would you would [30:08] be really sad if you stopped paying for [30:10] them, right? Like Netflix and Spotify or [30:11] something like that. You probably use [30:12] those things, and if you if you were [30:15] forced to give them away Hubs by. And if [30:17] you were forced to give them away, you'd [30:17] be really sad. Yes. Right? So, the idea [30:20] is like well, if you can do that, then [30:21] you probably have a right to charge for [30:22] subscription. Now, that being said, [30:24] there are lots of subscriptions that you [30:25] probably pay for that you don't get any [30:26] value from. Mhm. And you continue to pay [30:28] because of either inertia or whatever. [30:30] And those things we used to call them in [30:32] the back of the days, we called them [30:33] zombie subscriptions, and the customer [30:35] who used them were sleeping bears. Yep. [30:36] And you know what you don't do with [30:37] sleeping bears? Poke them. Yeah, you [30:39] don't poke them. And so, as a result, [30:40] what you want to do is avoid the [30:41] situation where you got a bunch of [30:42] customers who are not getting value, but [30:44] you're still collecting price. [30:46] In which case, the value is low and the [30:48] P is high. You want to avoid that. So, I [30:49] think we felt that that was the strategy [30:51] that was going to be okay. So, that [30:52] controversy [30:53] part actually was relatively easy to [30:56] kind of navigate because we said, [30:57] "Listen, one, um there's a reason that [31:00] we're doing this. We're creating a [31:01] business model that will allow us to [31:03] invest in software value and deliver [31:05] feature value and analysis value on your [31:08] health over the periods of time. And [31:10] then and like the product will get [31:11] better every month. And like SaaS, [31:14] you're getting a new release every [31:15] time." And by the way, turns out that [31:17] worked. Mhm. We don't We have some of [31:19] the like literally the best retention I [31:21] have ever seen in my 30 years of working [31:23] in subscription business at Oura. And [31:25] that's because the value that we deliver [31:26] is constantly a multiple of the P, the [31:28] price that we take. So, that was that [31:30] was that part. The second part of it [31:31] was, "But what about all our customers [31:33] who bought a product? How can we [31:34] introduce a subscription for them?" And [31:36] that was easy. That was give them a [31:38] pathway to get to effectively what they [31:40] had before. And so, in the in the [31:42] in our version of it, if you were gen [31:45] two customer, [31:46] if you wanted to get a gen three and you [31:48] paid to get a gen three, and we gave [31:50] upgrade discounts, which is crazy. Who [31:52] gives upgrade discounts on hardware? If [31:54] you if you did, you would be a lifetime [31:56] subscriber. And it was to make that [31:58] transition in business model as smooth [32:00] as possible. And so, in doing that, [32:02] actually tremendous value because if [32:04] you're a lifetime subscriber for the you [32:06] know, committing to just the next [32:07] version, you were going to get free [32:08] software for the rest of your you know, [32:10] time that you wore an Oura ring. Great [32:12] deal. In fact, some of our most loyal, [32:13] highest retaining customers are those [32:15] customers because they have no [32:16] disincentive to churn. So, that was the [32:18] second thing. And then the third thing, [32:20] and this was a little bit like the [32:21] genius of it. Can you buy a Hubspot in a [32:24] like a perpetual license model? No. No. [32:26] Why not? Because that's how it's sold. [32:28] >> Mhm. Same thing. I think people have an [32:30] expectation about subscriptions that [32:32] it's the freemium business model. I give [32:34] you 50% of the value for free because I [32:37] want you to try the application, and [32:39] then if you pay, you'll get the other [32:40] 50%. And we did something very [32:42] different. We said, "It is a [32:43] subscription product. And if you pay, uh [32:46] the product will be as functional as it [32:48] is, and if you don't pay, it'll collapse [32:50] down to be very minimally functional." [32:52] It's It's not it won't work, but it's [32:54] not 50% of the value. And so, as a [32:55] result, interestingly, when we rolled [32:58] out the subscriptions, what we saw was [33:00] that some people were like, "Oh, [33:01] I'm not going to pay and A lot of [33:03] people. And [laughter] well, actually [33:04] less than you would think. [33:06] >> Oh. It was I remember hearing [33:07] >> It was a lot of agita. It was a lot of [33:09] agita, but like the reality was [33:11] It was a lot It was a lot of noise. And [33:12] I think you know, [33:13] you make a bargain with your customer, [33:14] it's hard to change that. There's no no [33:16] question about that. But what would [33:18] happen is like someone would see the [33:20] product, and then they'd stop paying for [33:22] whatever reason. Sometimes it's just [33:23] like their credit card died and they [33:24] didn't update it or whatever. And it [33:26] would collapse down to sort of its [33:27] non-subscription [33:29] um kind of experience. And then they'd [33:31] be like 24 hours later, they would renew [33:33] because they would see that the value [33:34] that they were getting was absolutely [33:36] worth that price. And I think that that [33:38] is the key. If you can keep that value [33:40] over price ratio north of 1 and 1/2 or [33:43] 2, Mhm. then you know, you're doing it [33:46] right, and your customers are going to [33:47] reward you with retention and loyalty. [33:49] Okay. When when this rolled out, it was [33:51] noisy. You were newish. [33:53] >> Yeah. And you were catching hell on the [33:55] internet. [33:56] >> Yeah. [33:57] What did that feel like inside your [33:58] body? Did that that bother you as it [34:00] rolled out? Like that kind of thing [34:02] bothers me when that happened. It it [34:03] did. And I'm I'm I'm you know, I don't [34:06] know if [34:07] if this is something that everybody [34:08] does, but like I spend a lot of time [34:10] reading Reddit and interacting with [34:12] customers, and I respond to people who [34:13] you know, connect with me on LinkedIn. [34:15] People were flaming us, and and I would [34:17] argue with them. Not argue, but like be [34:19] like, "Hey, let me tell you what this [34:20] means is that if we can invest in this, [34:22] we can we can invest more in science, [34:24] and we can invest more in research, and [34:25] we can deliver you more value." [34:26] >> When you explain, you lose. [34:28] I'm not sure that's true. Okay. Because [34:30] I because sometimes I would win. Okay. [34:32] Right? And some And when I won one [34:33] argument like that, that person would [34:36] become uh you know, an agent of making [34:37] that argument 10 times to 10 other [34:39] people without me in the room. And the [34:40] reality is is like [34:42] if you think about sort of the the the [34:44] that that transition, Mhm. it's been an [34:45] unqualified success. Unqualified [34:48] success. At any point during the very [34:50] noisy parts, did you and the team say, [34:54] >> [snorts] [34:55] >> "Maybe we shouldn't have done it. Maybe [34:56] we should roll it back." Or inside your [34:58] belly, you know, after a couple of rough [35:01] Reddit threads, did you think, "Maybe I [35:04] should roll it back." and then talk [35:05] yourself out of it? [35:06] I think once. [35:08] I think once. And I can't remember the [35:10] exact moment, but I do remember where I [35:11] was where I was having the conversation. [35:12] I was in the garage at Salesforce Tower. [35:14] Okay. And I was talking to someone on [35:16] the phone, and I was like, "Oh, this is [35:18] like this painful, and what do we And [35:20] and I thought, "God, you know, the only [35:22] way out is through." [35:24] The only cuz because if we if we do roll [35:25] it back, then everybody would have been [35:27] right, and we would have been wrong, and [35:29] there's no recovering from that. So, we [35:30] went through. And by the way, like I I [35:32] think it was the right it was the [35:34] absolute right way to approach that [35:35] problem. Yeah. You get You have to get [35:37] Maybe this is a good CEO lesson from a [35:40] person who has been a CEO now for you [35:42] know, some number of years. [35:44] Is you got to be comfortable [35:46] being uncomfortable. [35:47] >> Mhm. That is the key. That is the nature [35:49] of it. Mhm. You can feel that [35:51] discomfort, and you got to let that [35:52] discomfort and sit with it because like [35:54] that's actually where the magic happens. [35:56] When you're doing something that either [35:58] no one else has done or doesn't feel [36:00] like it can be done. We were defining a [36:01] new way to think about hardware um and [36:04] and like a business model around these [36:06] kinds of products. No one else was doing [36:07] it this way. It was just us. Okay. I'm a [36:10] customer. You've got one I believe you [36:12] got one subscription level. It's the [36:14] right? [36:15] I have a lot of conversations with [36:17] founders about pricing. Like a lot. [36:20] Everyone [36:20] >> By the way, that's great. [36:21] >> thinks but think Everyone thinks We'll [36:22] talk about that more. Yeah. And [36:26] there's like there's entropy and there's [36:28] like gravity in the world where over [36:30] time the pricing just gets more [36:32] expensive for everything almost. And [36:34] over time it gets really complicated. [36:37] And I think there's a big cost to that [36:40] complication. [36:42] I also think there's a cost particularly [36:44] for startups for making their product [36:45] too expensive. It creates friction, [36:48] slows down the sales process, it creates [36:50] an adversarial relationship with the [36:51] customer. And my thinking is that gap [36:54] between what they would pay and what [36:56] they pay, there's goodwill in there that [36:58] pays itself back over time. [37:00] >> Um [37:02] why don't you introduce another tier [37:03] with more stuff in it? Do you have these [37:05] conversations? What's your What's your [37:06] pricing? [37:07] >> time we bring a new feature and we [37:08] decide to put it you know, into the [37:10] product for free, [37:11] >> Yes. I think about that value over price [37:13] ratio and keep keeping that value over [37:16] price ratio north of 1.5 or 2. And new [37:19] features is part of the promise that we [37:20] made in there. Now, there might be [37:22] something that's completely non-linear, [37:24] right? Some some value. Um [37:27] uh example, we we partner with a company [37:29] called Natural Cycles. They make a FDA [37:33] uh cleared digital contraceptive. If you [37:35] use Oura in concert with Natural Cycles, [37:37] it's it's a way to not have to do [37:39] hormonal birth control or have a [37:41] surgical IUD and and you know, have a [37:43] way to not get pregnant. Yep. Wow, [37:45] interesting. Should that be free inside [37:47] of a $6 a month subscription? Probably [37:49] not. And why not? Oh, well, because the [37:51] value that you're getting from that [37:53] much much greater than the value you [37:54] might get from some advice about your [37:56] sleep or your health or how many steps [37:57] you took or whatever, all the things [37:58] that you you do value. And so, in that [38:01] case, there is kind of a a tier Yeah. um [38:03] because you're buying Oura and you're [38:05] paying an Oura subscription, and then [38:06] you're adding Natural Cycles on top of [38:08] that. And that Natural Cycles I think is [38:09] like $20 a month. So, you understand [38:12] that value. So, the the key is is that [38:14] in I think your your premise is really [38:16] the right one, which is the delta [38:17] between what they pay and what they [38:19] might pay Goodwill. And think about that [38:22] in the right way, you're thinking about [38:23] like what is the optimal What's the [38:25] optimal price point? Um I also think to [38:28] your you know, maybe to underscore what [38:30] you said, but worth repeating, [38:31] complexity kills. It does. Complexity [38:33] kills. And I know some people are like, [38:35] "Well, [38:36] it gives our sales people a lot of [38:37] ability to understand how much value [38:40] we're delivering for the customer and [38:41] then price into that value." [38:43] For consumer products or products where [38:46] like it's a [38:47] a single decision and there's a low you [38:49] know, like people can turn off Oura, [38:51] they you know, click the button [38:52] >> Yeah. and they're out, you got to make [38:54] it simple so that they can do the [38:56] equation in their head, "Am I getting [38:57] enough value for this $6?" And the [38:59] answer is yes. Okay. [39:01] Another question that a lot of founders [39:03] and CEOs I coach ask is about doing big [39:07] partnerships. [39:08] >> Yeah. Um [39:10] How You've got some interesting ones, [39:12] very interesting ones. [39:14] >> Yeah. Uh [39:15] Gucci I believe is one of your partners. [39:17] >> one. Fascinating. Great stories with [39:20] Gucci. I'll tell you that much. Okay, I [39:21] want to hear that. Most partnerships [39:23] fail. [39:24] Um over over the long haul. [39:26] Um if the incentives aren't aligned. [39:29] Okay, so talk about that. Tell me about [39:31] how the Gucci partnership happened, and [39:32] tell me about the incentives. Well, let [39:34] let's let's zoom all the way out. I [39:35] think you have to be uh selective about [39:38] who you partner with. And maybe one of [39:39] the criteria for that selection is do [39:41] you have mission alignment and do you [39:43] have incentive alignment? Because if you [39:44] do, then you're building something that [39:46] probably has more durability than a very [39:49] commercial transactional partnership, [39:51] which is just about if you make money, I [39:53] make money and make you know, there's [39:54] just there's more to it than that and [39:56] that that alignment, by the way, will [39:57] get you through those rough moments when [39:59] your partnership might dissolve. Okay. [40:01] Like a marriage or something like that, [40:02] right? So, I think it's really important [40:05] to to recognize that there are different [40:06] classes of partners, too. There are [40:08] people who are on your platform and you [40:10] know, your obligation to them is to [40:11] provide that platform and have it be [40:12] robust and performant and scalable, but [40:14] you don't have to do a whole lot for [40:16] them. And then there are ones that you [40:17] are like, you're you know, Natural [40:19] Cycles and Oura, great example of a [40:20] really, really close partnership and if [40:22] one of us got into a bind, we would come [40:24] to each other's aid in a second, in a [40:26] hot second. So, different scales of [40:28] partnership. Now, the question is like, [40:31] how do you make that decision? [40:33] I actually think [40:35] um [40:35] if you're a vertical product with a [40:37] narrow customer ICP, actually guess [40:40] what? Service that customer really, [40:41] really well. And if you're a broad [40:43] horizontal product and you need to [40:44] service a wide range of ICPs and a wide [40:46] range of customer needs, then [40:47] partnership is literally your best way [40:49] because it turns out you're going to [40:50] need that both to be able to build a [40:52] complete solution or or product for a [40:54] customer and go to market. Because you [40:56] need that go-to-market. Maybe infamously [40:58] in enterprise software, going to market [41:00] in all these different categories, you [41:02] need partners to do it. This is why [41:03] Salesforce had, you know, force.com and [41:05] like every every platform company in the [41:07] world does it. So, it's really important [41:09] to understand what it is you're trying [41:10] to accomplish. All right. So, that's [41:11] that. So, with Gucci, what was [41:12] interesting is they were both. How did [41:14] it start? I don't know. [41:16] >> [laughter] [41:17] >> Who called? Did they call you? Uh You [41:20] called them? [41:20] >> You know, it's a good question. I'm not [41:21] sure. [41:22] >> have been on my short list of No, I'm [41:24] not sure. Well, you know, we we sell a [41:26] lot to women. Of course. And you know, [41:28] one of the sort of critiques from women [41:29] is like, can you make it can you make it [41:31] more appealing? Can you make it more [41:33] beautiful? Can you put diamonds on it? [41:34] We actually for a while had an Oura Ring [41:36] with a diamond in it. Um and people [41:38] loved it. I mean, and what that sort of [41:40] tells you is that there's utility value [41:42] that we deliver, but there's also kind [41:43] of like this intangible fashion value. [41:46] So, uh when when it came time to partner [41:48] with with Gucci, they they had the [41:51] design. They had a design that was a [41:52] successful design. It was a black ring [41:55] with sort of uh what's called a gold [41:57] torsion, which is [41:58] >> Wait, what do you mean they had a they [41:59] brought you an idea? [42:00] >> No, they already had a design that was [42:01] successful in the market. It was a [42:03] non-tech ring. Okay. [42:05] >> It was just the design part. It was the [42:06] fashion part of it. [42:07] >> Okay. They had a ring that they that [42:09] worked. Yeah, and and they sell lots of [42:10] rings and so this but this one was [42:12] particularly successful. It was black [42:13] with gold and the interlocking G's and [42:14] it was kind of like I would describe it [42:16] as the kind of ring you might wear if [42:18] you were a Roman emperor at a [42:20] gladiatorial contest where you were [42:22] about to decide whether or not like [42:23] someone was going to live or die. It's [42:24] like that kind of vibe. [42:26] >> Got it. And um [42:27] >> [laughter] [42:28] >> It was I mean, it's beautiful. It was [42:29] boss. I mean, you felt like a Roman [42:31] emperor when you wore this ring. [42:32] >> Okay. I need I need some more boss in my [42:34] life. [42:34] >> Yeah, of course, we all do. So, um [42:37] you know, we the two things that I [42:38] remember so distinctly about that was [42:41] one, actually goes to pricing and we [42:43] were like, how how much do you think we [42:45] should price this for? And like we [42:46] charge our $299 is what we charge and [42:48] they were like, $999. And I was like, no [42:51] way. [42:52] >> [laughter] [42:52] >> We can't charge that much. This is this [42:54] is the Gucci team. [42:54] >> Which person? [42:56] Um Were you dealing with the CEO of [42:57] Gucci? [42:58] >> Marco Bizzarri. Okay. [42:59] >> And he's a genius. I love him. He's no [43:01] longer the CEO of Gucci. Um but he said, [43:04] look, $999. [43:06] It's a no-brainer. And I'm sorry for the [43:08] accent, but like it was it was amazing [43:10] because he had so much confidence and we [43:12] said, wait, is that because of Gucci? [43:14] And he says, no. [43:15] Because of Oura. You don't know how [43:17] valuable it is. [43:19] And so, we priced it at $999 and I [43:20] remember being like my jaw was on the [43:22] floor and I was terrified that it was [43:23] not going to work. And when we launched [43:25] it, literally we sold through them in [43:27] like 5 weeks. Sweet. And it was just And [43:29] the thing is it's because again, the [43:30] power of non-utility value. [43:33] It's an intangible, but it's one people [43:35] care a lot about. [43:36] >> it? Did you sell it or did they sell it? [43:37] >> Well, so that was the other that was the [43:38] other observation. Remember I said like [43:40] partners can be distribution and they [43:41] can be value. So, they gave us this sort [43:43] of value. That their value was the [43:45] design and the Gucci brand and the power [43:46] of their collaborations and a customer [43:48] base who loves Gucci and all that stuff. [43:50] They also had distribution. They had [43:51] retail distribution. So, they sold it. [43:53] We didn't even sell it on our website. [43:55] You had to go to Gucci's uh website or [43:58] to a Gucci store. Okay. And the thing [44:01] >> were your channel. They were our first [44:03] channel partner. And the thing is is it [44:04] was like hotcakes, of course. Japan and [44:07] the Middle East, top two markets, flying [44:09] off the shelves in the Japan and Middle [44:11] East. And what we learned was, oh my [44:13] god, this thing, it's a piece of [44:15] jewelry. It expresses something about [44:18] you and you want to look at it. You want [44:20] to put it on your body and you want to [44:21] look at it and say, oh, does it look [44:23] good on my fingers? How's the shape of [44:24] my finger? And we were like, oh, [44:26] insight, retail is a critical channel [44:29] for us and that gave us the confidence [44:31] to enter retail. Now we're in Target, [44:33] Best Buy, Costco, you know, [44:35] you know, we'll be everywhere and that [44:37] insight was critical because what it did [44:39] is it put this object of desire in the [44:42] focus of people uh in a way that we [44:45] couldn't do that on the website. Wait, [44:47] and how did the Don't give me anything [44:48] confidential, but how did the terms [44:50] work? Did Gucci pay you $299 for [44:52] everyone they sold? Um [44:54] yes. That's basically the way it worked. [44:56] [laughter] [44:57] Yeah, they we they were our distribution [45:00] partner. There were there were other [45:01] elements of it that had to do with with [45:04] the way the subscription worked. Um you [45:06] know, because of course uh we we [45:09] you know, we had to we had to solve that [45:10] problem. But but effectively, yeah, they [45:13] were a distribution partner and and [45:15] Gucci's famous for doing collaborations. [45:17] So, of course that that's part of what [45:18] they they knew how to do that really [45:20] well. Okay. This is scarcity, by the [45:21] way. So, that's the that's the so what [45:23] of that. [45:23] >> We just had the Ferrari CEO on talking [45:25] about scarcity. [45:27] Um okay. When I was growing up at [45:30] HubSpot in the early days of HubSpot, uh [45:32] salesforce.com was a terrific partner. [45:34] They sold sales software, we sold [45:35] marketing software. They were the older, [45:38] bigger [45:39] player in the space. I would go to the [45:41] Salesforce conference every year, [45:43] Dreamforce. Waiting to see. [45:45] >> Sitting there like [45:46] >> [laughter] [45:47] >> Here's our new It's called Salespot. [45:51] And then 2012. [45:53] >> Yeah. Yeah, they We used to say, [45:56] um [45:56] Salesforce is to sales as HubSpot is to [45:58] marketing and under our breath we'd say, [46:00] until Salesforce says it. [46:02] >> [laughter] [46:03] >> Anyway, they did it. [46:04] Uh and that was uh that was painful, but [46:07] we pivoted, it all worked out great. [46:09] Uh [46:11] I mean, and don't spin me on this one. [46:14] Why would why would I spin you? [46:15] >> Cuz I hear What is there to even spin [46:17] about? [46:17] >> Okay. Apple. Yeah. They have their big [46:20] announcement. [46:20] >> Yeah. Um you're sitting there watching [46:23] the announcement. Are Do you have the [46:24] same feeling in your stomach I had when [46:27] I was at Dreamforce that they're going [46:28] to come out with a ring and blah blah [46:30] blah blah blah. You know, I mean, that's [46:32] obviously um [46:34] you know, one of the things we think [46:36] about is like, who and which major tech [46:38] platform is going to come out with it. [46:40] But I'll give you a couple of reasons [46:41] why actually [46:42] I sleep soundly, okay, about that. Um [46:45] and I'm not spinning you. I'm just going [46:47] to tell you how it is. [46:48] >> [laughter] [46:48] >> Um so, the first one is you might be [46:51] surprised to learn this, but really 2/3 [46:54] of Oura Ring wearers have a second [46:55] wearable. [46:57] Yep. And most often that second wearable [46:59] is an Apple Watch. Yeah. And that's [47:02] because in weird way, they're [47:03] complementary. [47:04] Um we measure at night. During the [47:06] night, your Apple Watch is usually on [47:08] your bedside stand charging. [47:10] Uh they provide a lot of utility during [47:12] the day with notifications and alerts [47:14] and a screen to display it on. We're [47:15] kind of a quiet in the background check [47:17] engine light for your body that sort of [47:19] So, kind of complementary. I think the [47:21] world is going to be one where [47:24] um you're going to have a bunch of [47:25] different you know, things that deal [47:27] with you and your health and those [47:28] things are going to talk and they have [47:29] to talk. That's the second reason. And [47:31] so, in a world where you have an Apple [47:33] Watch or a Garmin or whatever, like your [47:35] Oura Ring, which is measuring over time, [47:37] long periods of time, measuring at night [47:39] when your body's at rest and so the data [47:41] quality and signal is very, very clean [47:43] and very, very clear. And by the way, [47:45] the accuracy of measuring on the finger [47:47] is very different than measuring on the [47:48] wrist. Our signal strength is 50 to 100 [47:50] times stronger there and so as a result, [47:52] more information is stored, we can [47:53] derive more things from it. All sort of [47:55] interesting. So, that kind of [47:56] complementarity still exists. And then [47:59] maybe the last one and I think this this [48:00] is maybe more specific and germane to [48:03] Apple [48:04] um is that like [48:06] I think all of this stuff is [48:08] data is kind of the the oil for [48:11] the predictions, the inferences that an [48:13] AI might make and in order to do that, [48:16] you need to collect a lot of data. And [48:17] we have a huge advantage in that. Yeah. [48:20] Uh a lot of people talking about [48:21] hardware these days. Any advice on [48:23] getting into the hardware business? And [48:24] is there is there different ways to [48:26] think about the business model and how [48:28] it works? It's then then cuz you kind of [48:30] grew up in the software business. Yeah, [48:31] I grew up in software business and so I [48:33] think I always tend to think in terms of [48:34] software. But like advice I might offer [48:36] for for hardware folks, I think the the [48:39] the barriers are are interestingly lower [48:41] now. But I but you have to maybe resist [48:44] some of those um shortcuts. Uh so, for a [48:48] long time famously, we did not [48:49] manufacture in China. [48:51] Um and for a lot of different reasons. [48:52] Today actually we we we're opening up a [48:54] a factory in the United States uh to [48:56] serve one of our one of our customers [48:57] who cares a lot about security and [48:59] privacy. Um so, we made a decision that [49:02] was maybe not the easy decision. The [49:04] easy decision is like, find a factory [49:06] manufacture in China. It's the cheapest, [49:07] fastest and they they do an amazing job. [49:09] And we for a long time really kept [49:10] control of that. By the way, that was a [49:12] competitive advantage for us. It allowed [49:15] us to build the art and science of of [49:16] building Oura Rings in a way that not [49:18] everybody could copy and gave us a you [49:19] know, a lead. So, resist that shortcut. [49:22] That that might be one. I think the [49:23] second one and this goes to your [49:24] business model question is to think [49:26] about the power of hardware and software [49:28] Yeah. and how you think about those [49:29] business models having interplay. We [49:31] don't say, oh, it's a piece of hardware [49:32] and if you want, you can buy the [49:34] subscription. Nope, it's a subscription [49:35] product that's integrated hardware and [49:36] software and that is the value [49:38] proposition. That's the business model. [49:39] By the way, I think that's really really [49:41] useful. [49:42] Um and then um [49:43] maybe the last one is you think about [49:46] what are the constraints in hardware, [49:47] which are like, I don't know, the laws [49:48] of physics and cost and the fact that [49:50] you have to have physical inventory and [49:52] all those things, and find ways to get [49:54] really really good at those. If you're [49:55] going to build hardware, you have to be [49:56] really really good at those things, and [49:58] you have to be really good at [49:59] forecasting. Yeah. And so uh make sure [50:01] you are good before you try and scale up [50:04] or spend too much money. Um the last [50:06] thing I'll say, and this is inspired by [50:07] being here, um is that I think AI is [50:10] changing the game. Yeah. AI is changing [50:12] the game for how you do this. The the [50:13] ability to iterate over a thousand [50:15] different designs and to test them and [50:17] model them, like that's unprecedented. [50:18] And so if you're doing anything in [50:19] hardware, think about that. Okay, last [50:21] question. [50:23] A lot of people listening to this [50:25] podcast are, let's say, a VP at such and [50:28] such a company. [50:29] And they want to be a CEO someday. [50:32] What advice would you give them? [50:33] Maybe they don't want to start [50:34] something, they want to become a CEO. [50:37] I I think again, this is sort of [50:40] reflecting on my own experience, and so [50:42] it's an N of one. Um but I I was very [50:45] intentional in the middle part of my [50:47] career about operating every function. [50:50] Mhm. So, you know, I've run call [50:51] centers. [50:52] Um well, I've been on a sales team. Um [50:55] you know, I was a product person by [50:56] training. [50:57] Um you know, I did a bunch of time in [50:59] the field. Um you know what, I was an [51:01] M&A executive. I did internal startups [51:03] and I did like, you know, running big [51:04] businesses. So, I think it's about that [51:06] diversity of experience as a CEO that [51:08] one gives you empathy for all the [51:10] different functions that you're [51:11] ultimately going to have to oversee and [51:12] maybe even assess the leaders that you [51:14] choose for those functions. And then [51:15] maybe more importantly, um you start to [51:18] see how they how the interplay works [51:20] inside of a company because you have an [51:22] appreciation for each one at a finer [51:23] grain than you might otherwise. [51:25] Interesting. I I just interviewed the [51:27] CEO of Goldman Sachs, who obviously [51:30] isn't the founder of Goldman Sachs. He [51:31] said the exact same thing. [51:32] >> Is that right? [51:33] >> Yes. That's interesting. [51:34] >> Yes. [51:34] I appreciate you. Thanks for coming on [51:36] the pod. You're a fantastic. Congrats on [51:38] all your success. [51:39] >> Thank you. Yes. I'm a happy customer. [51:40] Thank you. Stay stay healthy. Thank you. [51:43] Okay, I hope you like that chat with [51:44] Tom. Here's I'm giving you some of my [51:46] takes on it. [51:48] He's a first-time CEO, and I spend most [51:50] of my life these days coaching [51:51] first-time CEOs in really great [51:53] companies. [51:54] And I kind of added up the things that [51:57] surprise first-time CEOs. So, if you're [52:00] a CEO want-to-be, these are some of the [52:03] the surprises. The first surprise is [52:05] it's actually way more stressful than [52:07] you thought when you started it. And for [52:10] me, where it got really stressful wasn't [52:12] so much like 10 employees. It was when [52:14] we hit 100 employees, and I just started [52:17] thinking about, man, all those employees [52:18] are counting on me. Their spouse and [52:21] their kids are counting on me. A lot of [52:22] times their parents are counting on me. [52:24] And so my stress level really cranked [52:26] around 100. I started getting help for [52:29] it. I start I got on an SSRI. I was [52:31] having panic attacks and kind of calmed [52:33] myself down. But the ironic thing is the [52:36] bigger the organization gets, kind of [52:38] the more pressure's on you. [52:40] Um [52:41] the other thing that seems to surprise [52:43] most first-time CEOs is really you're [52:46] constantly selling. You're selling to [52:48] accounts, customers. You're selling to [52:50] potential employees. You're selling to [52:52] investors. You're selling to partners. [52:53] You're just always selling, and that [52:56] surprises particularly technical [52:57] founders. [52:59] Uh the third thing is just like the [53:01] sense that no one's coming to save you. [53:02] Like in my previous jobs, I always had a [53:05] boss or I had all these resources around [53:07] me in a bigger company, but like it's [53:09] really on you. Your VCs aren't going to [53:11] save you. Your co-founders aren't going [53:13] to save you. The responsibility is much [53:16] much bigger than being an exec in [53:18] another startup. As part of that, like [53:21] as a CEO, you get plenty of complaints. [53:22] You get complaints about your VCs, [53:23] complaints about your employees, [53:25] complaints about your customers. You got [53:26] a you you got a lot of complaints if [53:28] you're like me. There is nobody to [53:30] complain to except your co-founder. You [53:32] can't really complain full hog to your [53:34] VCs. Uh you can't really complain to [53:37] your employees, so it's like pretty [53:38] contained. Almost every one of the 10 [53:41] CEOs I've interviewed has been through [53:43] some kind of really hard crisis, like [53:47] Parker from his first startup blowing up [53:50] to his big drama with Deal. Uh almost [53:53] all of them have really traumatic [53:55] crises, and that can kill a company [53:58] quite easily unless you're quite [53:59] thick-skinned. So, the the [54:01] thick-skinnededness is really important. [54:03] The problem when you hit those crises is [54:05] you think like you're floundering in the [54:07] water, you're in the middle of this [54:08] crisis, you think it will never end. And [54:11] then people on X and people on Reddit [54:14] will dunk on you and tell you what a [54:17] [ __ ] you are. That surprised me. It [54:19] shouldn't have, but it did. [54:21] Um the hours are brutal. Whether your [54:24] company's 996 or not, you're 996, [54:27] especially in the early days. Firing [54:29] people is worse than you thought. It [54:30] never gets easier. The other thing that [54:32] kind of happened to me is the larger the [54:35] company got, [54:37] I noticed that the company and I, like [54:40] my brand, kind of merged with the [54:42] company. And everything I said and [54:44] everything I did, all the employees, the [54:46] more everyone was watching them [54:47] everything very carefully. And they may [54:49] not have pretended they were listening [54:50] that carefully, but if I said something [54:52] in the hallway, like wouldn't it be [54:54] great if it was this feature, 5 minutes [54:56] later someone was coding it. So, you [54:57] really can't think out loud that much as [54:59] a CEO. [55:01] Those are some of the surprises of [55:03] first-time CEOs. He talked about a [55:04] couple of those. A bunch of the other [55:06] ones I've picked up from the CEOs I work [55:08] with. Hopefully you're avoiding some of [55:09] them. Tom is an expert in going from 200 [55:13] to 2,000 and not not losing your mind on [55:15] the way. And typically what happens from [55:17] 200 to 2,000 is things really start to [55:20] slow down, and lots of companies kind of [55:22] die in there. [55:23] Um [55:24] a couple things to avoid that quagmire. [55:27] One is there's an old expression, hire [55:30] slow and fire fast. [55:33] It's very old, and it's very true. Now, [55:35] it's easier said than done. Lots of [55:37] founders tell me, the first time I [55:39] thought I should have fired somebody, I [55:41] should have fired them cuz I always end [55:42] up firing them. I say that same thing, [55:44] but I never really did it. I was always [55:46] more patient than I should have been, [55:48] but I'm also a homo sapien, and it was [55:50] hard for me to do that. [55:51] The second thing I would say is you hit [55:53] 200 employees, [55:55] and maybe get some VPs, and that's when [55:57] the director layer shows up. And in [55:59] particular when you hire that director [56:01] layer from the outside, they're kind of [56:03] a professional middle manager. And so [56:05] push that director layer off as long as [56:07] you can. Keep the span of control. Maybe [56:09] it's not Jensen Huang's 60, but keep it [56:11] wide and avoid that middle layer. [56:14] Um the thing that really helped HubSpot [56:17] is we talked about [56:19] EV, [56:20] enterprise value, [56:22] versus TV, [56:24] your team's value, versus MEV, your own [56:27] value. And the thing [56:30] that happens inside of companies is as [56:33] they get bigger, people don't solve for [56:35] themselves as much, they solve for the [56:37] team. And when they solve for their [56:39] team, they kind of sub-optimize the team [56:41] next to them, so that TV is where a lot [56:44] of execs in a lot of companies fall [56:45] down. So, I recommend that. I wrote on [56:48] whiteboards all over the place, EV [56:50] greater than sign TV greater than sign [56:52] MEV, and I kind of pounded that into the [56:54] company. Anytime someone in a meeting [56:56] was talking very TV, I would push on the [56:59] EV. I don't think you should have all [57:01] been there, done that folks. I think you [57:03] should have 50% been there, done that, [57:05] and 50% homegrown. That institutional [57:08] knowledge for the homegrown is super [57:09] useful. [57:10] People underestimate the value of [57:12] homegrown and how people can grow and [57:14] learn. So, I like that ratio. [57:17] And the last thing I would just say is [57:18] Elon, this is a big Elon thing. [57:21] I was at the Sequoia's uh base camp [57:24] event. Um must have been 10 years ago [57:27] where he did this vector alignment [57:28] thing, and he described all his [57:29] employees as vectors. And they were [57:32] different sizes. Some people were more [57:33] powerful than others, but they were kind [57:35] of all pointed in different directions. [57:37] And he said the key for him is no matter [57:40] how big or small the employee is, how do [57:41] you get them all pointed in the same [57:43] direction and get stuff done? Vector [57:45] alignment and a little tiny bit of [57:47] lightweight planning can help you a lot [57:49] with that. [57:50] Those are some of my tricks to not fall [57:52] into the 200 to 2,000 trap. Okay, Tom [57:55] had some interesting thoughts on [57:57] pricing. I do, too. [57:59] Um [58:00] you know, when Moses came down from the [58:02] mountain, [58:03] it's well known he had 10 commandments, [58:06] five on one tablet, five on the other. [58:09] It's not as well known that there was a [58:11] third tablet with an 11th and a 12th [58:14] commandment. The 11th commandment [58:17] was over time, your product's pricing [58:20] will go up. [58:22] The 12th was over time, your product's [58:24] pricing will get more complicated. [58:27] Now, [58:29] your sales organization loves that. Your [58:30] products don't. What I liked about what [58:33] Tom did, he shifted his business model [58:35] to subscription, but he kept it [58:36] relatively cheap. It's six bucks a [58:38] month. [58:40] Um and [58:42] you know, he he he didn't overcomplicate [58:44] it. It was quite simple. And I think the [58:45] move for for founders is like if the [58:47] supply and demand curve looks like this, [58:51] people very quickly rush to almost [58:53] perfectly match that supply and demand [58:55] curve, the willingness to pay with the [58:56] pricing model. And that encourages [58:58] [music] the pricing model to get more [58:59] complicated and more expensive. [59:01] I think that's fine when you're 15 years [59:04] old, but in startup mode, I think you [59:06] want a gap between those two things. You [59:08] want a less [music] adversarial [59:10] relationship with your customers. You [59:11] want to be delivering maximum value to [59:13] get word of mouth. And that gap is [59:16] goodwill, and that goodwill pays itself [59:18] back in spades. So, [59:20] don't maximize that supply and demand [59:22] curve would be my advice. Okay, those [59:24] are my thoughts on Tom. Some really good [59:26] tips [music] in there, I thought. I hope [59:28] you enjoyed it, and I'll see you on the [59:29] next episode of Long Story Short.