“I deliberately understaff every project” | Leadership lessons from Rippling’s $16B journey

Matt McGinnis:It is really important to me that we feel that we've deliberately understaffed every project at the company if you overstaff you get politics you get people working on things that are further down the priority list than necessary that is poison it's wasteful it slows you down it creates cruff

Lenny Rachitsky:You've been a long time COO at Rippling recently you moved into CPO Chief Product Officer at Rippling something you talk a lot about is that extraordinary results require extraordinary efforts if you wanna be in

Matt McGinnis:The ninety ninth percentile in terms of outcomes it's gonna be really difficult you gotta sort of remind people that if they ever find themselves in the comfort zone at work they are definitely making a mistake it's supposed to be really freaking exhausting

Lenny Rachitsky:You're a big fan of escalating issues

Matt McGinnis:Fundamentally the most selfish thing you can do is withhold feedback from someone when you think a thought that would help someone improve and you avoid giving it to them because it would make you uncomfortable well you're optimizing for your own comfort and it's fundamentally selfish

Lenny Rachitsky:So many people have teams that are

Matt McGinnis:Not functioning incredibly well teams will always optimize for local comfort over company outcomes the purest form of ambition and most intense source of energy in the business is the founder CEO every next concentric circle of management beyond the founder CEO has the potential to be an order of magnitude drop off in intensity that is fucking dangerous as an executive as a leader your job is to preserve that intensity at its highest possible level

Lenny Rachitsky:You've had a couple of really interesting experiences with your own startup

Matt McGinnis:We talk in Silicon Valley about never quit but that is complete venture capital bullshit

Lenny Rachitsky:Today my guest is Matt McGinnis Chief Product Officer and formerly long time Chief Operating Officer at Rippling if you don't know much about Rippling it's a massively successful business last valued at over $16,000,000,000 they have over 5,000 employees and Matt has been instrumental to that success he's also got a really rare combination of brutal honesty a ton of experience building a very complex and very successful business and being able to clearly articulate what he has learned really well Matt shared a lot of insights and advice that I have not heard anyone else on this podcast share and I left this conversation feeling that every leader needs to hear his advice a huge thank you to Albert Skrashim and Sunil Rahman for suggesting topics and questions for this conversation if you enjoy this podcast don't forget to subscribe and follow it in your favorite podcasting app or YouTube it helps tremendously and if you become an annual subscriber of my newsletter you get a year free of 19 incredible products an entire year of lovable Revolut Bold Gamma Aneta Linear Devon Posthawk Superhuman Descript Whisperfull of Perplexity Warp Granolah Magic Patterns Raycast Shapird Mobbin and Stripe Atlas head on over to Lennysnewsletter.com and click Product Pass with that I bring you Matt McGinnis after a short word from our sponsors

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Lenny Rachitsky:Matt thank you so much for being here welcome to the podcast

Matt McGinnis:Thank you for having me

Lenny Rachitsky:I wanna start with something that I know is really important to you something you talk a lot about that I don't think people hear enough on podcasts like this which is that extraordinary results require extraordinary efforts talk about why that's so important what you think people need to hear

Matt McGinnis:I this is a term that phrasing I actually attribute to a friend of mine Dan Gill who's the Chief Product Officer at Carvana which as a company also doesn't get enough credit for how much of a tech company it actually is super interesting and I think as a general framework for me not just and a lot of what I say with you today is not really specific to product in any way we should actually talk about that it's like the product function is an instantiation of like the general concept of management like being a Chief Product Officer is not that different from being a chief whatever officer you have to apply the same frameworks and concepts to get people to achieve goals together but one thing that is like absolutely universal that I think we honestly I think we forget it in Silicon Valley or a lot of people don't sort of internalize it is that if you wanna accomplish something truly extraordinary if you wanna be in the ninety ninth percentile in terms of outcomes it's gonna be really difficult like it's gonna be really uncomfortable and you gotta sort of remind people of that that if they ever find themselves in the comfort zone at work they are definitely making a mistake like they have definitely screwed up somehow it's not that it's not that an extraordinary effort is sufficient to an extraordinary outcome but it is 100% true that it is necessary and so I do use that framework as a sort of guiding principle in my own leadership

Lenny Rachitsky:To make this even more real for people what are examples of moments that were extraordinarily hard

Matt McGinnis:It is not about any sort of grand single story I think the truth or the story is actually told through a thousand little things and so for me the story is told through a thousand Jira tickets not through a thousand grand events the extraordinary effort thing is is is an reminder that like it's supposed to be really freaking exhausting it's supposed to be so like on Friday night when you get hit with an escalation on Friday night when you get sort of you know hit with a bunch of new bugs from someone in the engineering team that you've got a triage those are the moments where great players and great teams are separated from good players and good teams and it's so easy to say this at a company like Rippling because because we're winning like as a company for all of our foibles and we should spend time today talking about where things are not perfect and not great but the growth rate of the company on the on the revenue foundation that we have is extraordinary like really really compelling and it it gives you as a leader the air cover to get up in front of your team and say hey guys I need the last ounce of oil that you've got left and if your company's not growing very quickly if things aren't that great if your growth rate is 30% or 40% you know it doesn't feel as good as a contributor in that business to like lean in and give everything you've got on Friday or Saturday or Sunday because you don't know that it's gonna yield much and so extraordinary results outcomes demand extraordinary efforts but if there's no chance at an extraordinary outcome it's very hard to get the extraordinary effort and so I like to remind people at Rippling at least that like it's so rare to have the opportunity to be able to be a part of a team where the extraordinary effort that you do put in on Friday or whatever whenever it is is actually contributing to an extraordinary result it's a it's a it's a very special and rare thing and it gives me a superpower as a leader because I can lean on that when I you know when I'm wringing the oil out of somebody who's in the bored and tired zone

Lenny Rachitsky:I saw the same thing actually at Airbnb with Brian Chesky it always felt like things were going great and like maybe we could take a break after something we shipped was killing it and it always felt like the opposite it always felt like how do we press the gas pedal further how do we go faster how do we go bigger there's never like a moment to take a break

Matt McGinnis:I spent seven years at Apple and learned under Steve Jobs you know when he was the CEO learned what we called the death march which is what we did to the engineers it was like the the soon as you shipped one version of the the iPhone like you were just immediately thrown into the into the pit of building the next one and there was no break it was just it was just relentless and talk about an extraordinary outcome at the end of the day there is no relief it just like every in a competitive market and and if the market is valuable it's competitive no question if you leave anything on the field if you sort of leave a crack for your competitor like 100% chance they're gonna go fill that crack and so you have to be relentless there can be no relaxation of the organize doesn't mean people can't come and go or people can't take vacations or sort of live their lives of course and you can't it's not like people are human beings who can't grind the individuals down but the team as as a collective group of people has to be sort of on the ball all the time there can't be a break and if you leave one you're just begging for the slightly more hungry competitor to come in and eat your lunch and you know that's the beauty of capitalism

Lenny Rachitsky:Also very counterintuitively and maybe like the the more optimistic perspective here is when you do give your team space to just twiddle their thumbs bad things start to happen morale actually dips in my experience people get distracted they're like oh what are we even doing it's not interesting I find that keeping people busy and motivated and fired up even though you may think they'll be happier taking a like many week break and slowing things down I find they get more more actually goes down in those experience in those moments

Matt McGinnis:Here's the so here's the management framework that I use fairly often as an executive you don't know how to get any decision exactly right it's not knowable you don't know how much budget to allocate you don't know how many people to put on a project you don't know how to set a deadline for when you're gonna ship something but of course you have to set some defaults so you you make your best guess and then you manage to that best guess and you learn as you go because in software development and in in business in general everything's emergent it's these are not things that are knowable top down or a priori and so you take a best guess and knowing that you're not going to get the right answer you need to decide whether oversteering or understeering relative to your perceived midpoint is is better and so let's talk about staffing like when you staff a project is it better to overstaff or is it better to understaff knowing that you can't get it right well it's better to understaff if you overstaff you get everything you just said you get politics you get people working I think most importantly on things that are further down the priority list than necessary you have like 20 things on a stack rank list and like you know that you gotta do the top five but the next 15 down it's kind of ambiguous but you've overstaffed the project so like the next 10 things down are getting worked on before you even know if they're necessary that is poison it's wasteful it slows you down it creates cruft and so it's very clear that understaffing is less evil than overstaffing in this particular framework the advice is understaff deliberately always and then the wisdom the wisdom element is to know not to under understaff and sort of knowing the difference between those two things and so that's the way we work at Rippling everyone is constantly asking for more resources and of course where we can afford to and where it's appropriate new resources arrive but it is really important to me that we feel that we've deliberately understaffed every project at the company

Lenny Rachitsky:There's a previous guest I forget who that this who this was they used this metaphor of they want their team to be dehydrated to always be wanting more water and then eventually they're too dehydrated and okay let's we needed someone to help

Matt McGinnis:Interesting

Lenny Rachitsky:Yep there's a line along the lines of extraordinary efforts I wanna make sure I read because I think this is really good this may be a way to summarize what you're saying that good teams get tired and that's when great teams kick the good teams' asses

Matt McGinnis:Yes this was a quote actually from Sunil and he found it from a from a women's basketball team coach and it is it is to my point earlier about like you gotta run the engine at in in the red line at all times because the minute you let your guard down the minute you slow down the minute you relax the minute you leave a crack for your competition the great teams are gonna come in and kick the good team's ass and it's like know sports I'm not a very sporty guy but sports analogies are sort of irresistible because at the end of the day business is a game you know none of this matters we're not gonna carry it to the grave it's like you're here you're here to do this stuff because it somehow fulfills you while you're on the planet and I love the sport of business and I find that that sports notwithstanding the fact that I watch very little of it isn't is a very that military you know those are sort of very ripe sources of parallel concepts to apply in leadership

Lenny Rachitsky:I find also those most intense stressful long nights are the moments you remember most and remember most fondly back to when you're building something the key though is that it has to go well as you said if you are succeeding and winning all of this is romantic in the end and nostalgic remember that time we built this thing and worked late nights and shipped this thing if it doesn't go anywhere you don't you don't feel that so I think that's a really important component of this is you need to be winning and succeeding

Matt McGinnis:I mean one thing that I've learned from Parker is Parker is our CEO at Rippling he you know he said you don't you don't really learn from your mistakes you learn from your successes and I it's like you do of course and he would admit you you learn a bit from mistakes but I do think that this is sort of feel good bullshit that you know I was like well you know you didn't succeed but you know at least you learned something I've had failures like

Matt McGinnis:I look back at the nine years I spent working on Inkling from day one in 2009 until we sold that business to a private equity firm in 2018 up the curve of Silicon Valley coolness back down the other side into obscurity like of course I learned and grew a ton during that time but in now what I think is six or seven years and trying to do the math seven years coming up on at Rippling I've learned so much more because I've seen success like I've seen rapid wild crazy off the charts success of the business and it's more informative like there's more to glean from seeing how it's done right than there is to glean from seeing how it's done wrong if I tell you you're gonna get on an airplane and one maintenance technician has seen it done right a 100 times and the other maintenance technician has seen it done wrong a 100 times but he learned from his mistakes like it but still hasn't had any success himself I mean give me a break there's not even a comparison which plane you're gonna feel more comfortable on and so I do think that like learning from your mistakes thing is a bit of a feel good trope that actually has very little substance in reality it's it's and it's why as an early career product manager or it's it's why like frankly at any stage of your career when you wanna learn you should join a winning team like it's cool to go and start a company at 22 good luck to you the the odds are not in your favor but the folks who when I look at a resume and I see that someone's joined they were at like really good companies when those companies were super exciting and in crazy growth mode I'm like I instantly wanna interview that candidate because I wanna hear what they learned from being part of a winning team and that's that's sort of one of my go to heuristics when I'm looking at candidate profiles and I think it's an undertold trope like but not sorry not an undertold trope it's a it's a piece of advice that I don't think people embrace enough in the valley that like success begets success and you should chase success

Lenny Rachitsky:When

Lenny Rachitsky:Speaking of success and learning you've been a long time COO at Rippling and the reason you're here recently you moved into CPO Chief Product Officer at Rippling which is very exciting and very rare I don't see a lot of COOs moving into product let me ask you why that why did you move into into that role I feel like you've been killing it at CEO maybe that's the reason be careful what you're good at and also just what what are some surprises about this about moving into product because a lot of people imagine what it's like and then you're actually doing it

Matt McGinnis:The story at Rippling is pretty interesting and I'll tell it because I think it explains why you know why I'm making this transition but this isn't really about me I think it's sort of a pattern that your listeners would find useful in general your best executives are the ones that you can mostly toss into any challenge and they will bring order to chaos they will fix the thing and I do appreciate the terms that people have used at Rippling for me you know talking about McGinnis' injured birds where at any given moment some function is in disarray or in jeopardy and I go and focus very carefully on that function to get it back in order batting 800 maybe you know like not always wild success but I did that anywhere except R and D I would be I would you know think about helping out with components of the sales organization like our channel team or I spent time you know building out the recruiting function a few times when it needed to be sort of rethought in response to our growth and but it never R and D and so I I sort of I I would have my feet up on the table looking out across the floor at this dumpster fire off in the distance just sort of emitting smoke and wondering if someone was gonna go in and deal with that and you know the the smoke takes various forms and when you're growing as quickly as Rippling is growing it's not always something that necessarily even impacts customers but it's the sort of thing where you're like fuck that that architecture is not right or this they're not measuring adoption correctly from the outside I actually had quite a few criticisms that I could lob in and what happened at Rippling was we made some hiring mistakes I think the folks that we had in those roles would agree that they weren't the right people we had a hiring mistake in engineering leadership where the product leader at the time had to sort of run engineering we subsequently had a mistake in in product hiring and a lot of us had to sort of pitch in Parker and I sort of stared at each other through two years of this kind of disarray or this chaos or this agony of of things and just never really having good executive leadership over both engineering and product at the same time and I remember Parker sort of Parker sort of slumped down in his seat and said oh fuck I have to run another search and I said no like the gig's up I'm gonna go do it and he really sprung up in his seat he's like really like you would go do that I'm like dude this is what this is what the business needs and so that's what I did and that really started about a year ago in sort of I realized I was gonna do it and express that to Parker in December I really took it on in January '25 and so it's been eleven months of learning

Matt McGinnis:Jumping into the product role when the product function itself although staffed with really talented people wildly under understaffed and without a single spiritual leader on top of it to drive consistency and process excellence had become locally optimized but globally incoherent and if you know Conway's law you are destined to ship your org chart and so with a locally optimized globally incoherent team you had a locally optimized globally incoherent product experience that needed to be resolved and so my efforts over the last eleven months have been to establish you know like greater clarity in terms of how we do things around here better process better you know general leadership hiring and firing I mean just doing the sort of cleanup on aisle 3 that needed to be done even though a lot again a lot of the people in the in the team were quite talented and doing an excellent job of managing their specific domains jumping into the product role has been like quite eye opening I feel a little bashful about the naivety of my view from the outside a year ago product teams have a hierarchy of needs and we like to sort of point at the failures to meet elements of that hierarchy higher up the triangle and sort of impugn the failure of that organization for not as an example measuring adoption metrics very carefully and not closely tracking those metrics as a means by which to drive execution when I jumped in was like man you know we need to establish some some basic standards for test coverage we need to establish some basic standards for how we do what I call a factory inspection on a product once it's ready to roll off the assembly line do we have a checklist for what we call product quality and what does product quality mean those basic things weren't there and so the idea that we should be spending time measuring adoption metrics is absolute insanity you're skipping a lot of steps between here and there and so we have made great strides and I think it's translating to product quality improvements for our customers but I feel as I said a little dumb for the way I was thinking about it before I jumped into the deep end there is just no excuse as an executive for sitting outside of the mess and thinking you know the answers it's a it's a cardinal sin as an executive to do that you need to go and see you'd be in the boiler room you need to study the system bottom up and and develop hypotheses for how to amend the system and that's what I've been doing

Lenny Rachitsky:I love hearing this because so many people have teams that are not functioning incredibly well and hearing from someone that is not a a long time product person come in and try to fix these problems I think is really useful and interesting for people to hear to to dig into this a little bit more was the big lesson and kind of eye opening moment that there's a lot of kind of foundational work that needs to happen to achieve this outcome that you're trying to achieve is measure engagement and adoption well is it like tracking and metrics and data science is that kind of the the lesson there

Matt McGinnis:The lesson is that everything must be done in its time and order and you can move really really quickly you can you can there's no sort of excuse not to move with urgency on all of these things but you gotta do them in order and you have to you have to lead bottom up like you gotta lead from the specific circumstances you observe and I think for me one of the best things that's happened over the last eleven months is that I've gained a greater trust in my own instincts that that the that the that sort of patterns I've matched across other functions do indeed apply in product but I have both of the advantage and disadvantage of not having let a product function before and therefore must think about every problem from first principles I have no choice I can read shit on the internet I can like listen to clear thinkers on topics and import their ideas but I'm very reluctant to import an idea without breaking it down into its constituent parts and figuring out how it applies at Rippling and so I don't actually give a

Lenny Rachitsky:Shit

Matt McGinnis:About adoption metrics as a matter of principle I care about adoption metrics when I care about adoption metrics like I realize that that's a tautological statement but it's like I'll get there and so in certain parts of our product I really do care about adoption metrics I care a lot about adoption metrics in our applicant tracking system our recruiting product because it's in a really good place from a usability standpoint it's very well instrumented it's got like very happy users it's got an awesome growth profile and so we should we should be really focused on the adoption metrics because I think that's gonna be an important ingredient to low churn over time you know removing friction from the implementation process as an example there are other parts of our product where I would say I don't care at all about adoption and am much more focused on foundational things like I said earlier test coverage or whatever just to make sure that the thing is stable and good and delivering exactly what it's supposed to deliver to deliver once it's adopted

Lenny Rachitsky:Now that you're on the inside of the product team what's something that you think people outside of product say Matt two years ago or other I don't know go to market leads other execs should hear need to understand about product that they don't until they're on the inside

Matt McGinnis:I'll give you another framework that I like to use in the financial world there's this concept of alpha alpha is outperformance relative to the index so that's why you have seeking alpha.com as a very popular website what they mean by that is you're looking to buy something some combination of assets that will outperform let's say the S and P 500 if that's your benchmark so alpha is the outperformance relative to the index and then you have the concept of beta beta is just volatility beta is not good a high beta stock jerks around for no particular reason it's like discorrelated with the index it just you know it's very high beta great if you're an options trader but other than that it's not really something you want in an asset and so your ideal stock is a very high alpha very low beta stock they don't really come in that shape because alpha and beta tend to be correlated but that's what you want when you buy a financial asset so what's the analogy I think you have high alpha people who are very valuable I think you also have low beta people who are also very valuable people Dennis Rodman basketball player nut job very high alpha and you know there's room on every team for one Dennis Rodman is a favorite of mine it's like you can have one difficult employee who's got a ton of upside and so this alpha beta thing I use it pretty often when contemplating what kind of person I want and also what kind of process I want so when you're building a product from zero to one you're probably pursue pursuing alpha you're looking for some angle on this market or this customer problem where the product is actually gonna provide an outsized return relative to whatever the default solution is when you have a more mature product or if you have somebody in the product operations group or whatever you probably want a more low beta environment where it's like it cranks it out it does it very reliably our payroll product we badly want the payroll product to be very low beta we really don't want the payroll product to have any unpredictability or aberration and so we're willing to accept more process and here's a fundamental principle of design in an organization which is that processes processes in a business exist for the sole purpose of lowering beta processes are for decreasing volatility in the output of the system the the the downside of a process is that it suppresses alpha and you have to be super super careful and judicious in the application of process in the product team to know that you're lowering beta in the places where you wanna do that without suppressing alpha in the places where you need it and so as we've gone through the last you know year of reforming the way that we build product at Rippling it's been a game of recognizing those places where I need to implement a touch of process just a touch other places where I need to implement a very clear rigid process where I don't want alpha I just want low beta and so examples of this are let's say our product quality list which we lovingly at Rippling call the pickle

Lenny Rachitsky:Why pickle

Matt McGinnis:Yeah so it's actually a really important thing I think if you wanna bring about cultural change in a team like look we have we have 1,300 people in our R and D organization it's a big ship that we have to steer if you wanna create a moment that sticks in people's brains and sort of becomes a zeitgeist or something that they latch onto you gotta create an entity a vessel for meaning and then you gotta fill that vessel with your meaning a meme you might say yeah well sure a meme yeah like a meme is actually a good example of this in common culture you know and I in pop culture I think like it's why when see when people come to the table with with with ideas from the outside I welcome those outside ideas but if the first thing I ask the person to do is to tell me what they mean without using those words so when someone comes in and says hey I wanna do this thing on strategy I'm like cool tell me what you mean without using the word strategy and it forces them to break it down into its constituent parts and if they can articulate it clearly without using that word I know that they know what they're talking about and if they just fumble around with the word strategy again I'm like okay you actually haven't thought this through and so with the pickle with the product quality list it's like could come up with some generic term for this but I really want a new joiner at the company to understand that this is an idiosyncratic thing to Rippling this is unique to us you you wanna understand this thing I also want it to become a component of common parlance in the day to day work of the product management and engineering teams and so pickle as cheeky or silly as it sounds was deliberately sort of angular or stood out as a vessel I could fill with a particular meaning and so we have a product quality list and the product quality list is lightweight in the sense that it just articulates in the simplest ways the standards we want you to meet when you ship a product doesn't apply to every product not every line applies to every product but it's comprehensive and it provides me with a framework for iterating over time as we learn and so just yesterday we shipped the product to Parker this is part of our process when we ship a new product it goes to Parker who is the big admin for Rippling at Rippling if you're not aware Parker is the sole payroll administrator for Rippling for all 5,200 employees he personally runs payroll always there is no exception for all 5,200 people he does complain about it sometimes but it's a remarkable achievement for the software and perhaps for him and so he also installs any new app that we're gonna install for ourselves because we dog food the hell out of everything we build yesterday he goes to install this new application we're about to ship a new app for feedback allowing people to give one another feedback in their companies and he installs it and he goes in and it dumps him onto an empty screen and he's like what the fuck is this what is this what's going on like hey wow we're talking about fail so I chop another one of my fingers off I'm down to nine and I'm like what what did we miss what we missed was there was a fucking feature flag fucking feature flag I'm just I'm not allowed to say feature flag without fucking in front of it because like feature flags are the bane of my existence and the worst things in the world that constantly cause problems engineers put one in temporarily and forget it it's like shims if you're building a house and the general contractor puts little shims in places and then forgets that they put the shims there and then builds a wall over them and eventually the shim fails and all of sudden your door doesn't fit like feature flags are super dangerous and need to be managed carefully so fucking feature flags anyway we had one Parker installs it they forgot to disable the feature flag he gets a blank screen when he installs the application what did I do my reaction was ugh go back to the team give them direct feedback tell them not to make that mistake again but also ask the question how do we miss this in the factory inspection process and the answer is we didn't have any line item in the pickle for feature flags and so I added a line to the fucking pickle that said you are allowed to have one feature flag that governs your entire product at ship it's an extreme standard that might not be achievable but it's the standard we aspire to this framework the pickle given these lightweight checklists iterated on consistently in response to everything we learn as we go constitutes a very nice lightweight way to lower the beta of the system with hopefully only a modicum of negative impact on the alpha for how we build product and so that's you know you asked me a very simple question I gave you a very long winded answer but these frameworks help me design systems that scale you know across one going to 2,000 technical workers

Lenny Rachitsky:Wow okay by the way pickle is that is that like an acronym or it's just like I like this word we're gonna call it pickle

Matt McGinnis:Product quality list

Lenny Rachitsky:Product okay I see so it's the consonant okay

Matt McGinnis:P Q L which okay how could you pronounce it other than pickle

Lenny Rachitsky:I'm imagining all your decks have little pickle emojis and

Matt McGinnis:And the pickle emoji thing the dancing pickle in Slack there's a lot of yeah it lends itself to a bit of fun

Lenny Rachitsky:What I think about is pickle Rick yeah do think Jacob get that reference this is a Rorzak test okay so this high alpha low beta I love this concept so the idea is depending on the team depending on the problem we need a high alpha low beta person or actually we're okay with a lot of variance for this specific project

Matt McGinnis:That's yeah we're willing to accept a bunch of volatility in this area in exchange for the upside we get from the creativity and risk taking of these people or these pro or the lack of process that sort of gives them the latitude to do what they wanna do

Lenny Rachitsky:And so when you're hiring you're looking for again is this person in low beta or not that's gonna be for sure

Matt McGinnis:I mean it's really quite a useful way you know when you you meet a candidate and you I mean my my my modus operandi and I think you know with we'll talk about hiring for a second I think I've spent a lot of time with teams at Rippling talking about how I hire and it is born of batting practice me to yeah it'd be super interesting to actually be able to rewind the tape on my life and sort of contemplate how many candidates I've met in every context many thousands maybe tens of thousands I don't know it's a lot of batting practice and a lot of model training in my brain and so I rely a lot on my intuition which of course HR people say you're not supposed to do that's complete bullshit if you have a good intuition you should absolutely rely on your intuition and what you have to do after you have a a reaction to a candidate when you when you're looking at hiring somebody is you need to decode you need to decode your intuition so that it can be expressed to other people productively and so one of the frameworks that I use for this is spotac it's a very ugly acronym there's a hat tip to somebody out there in the universe who originally thought of this it's not me but I adopted it and it's it's that people are smart passionate optimistic tenacious adaptable and kind those five things six can't even count I I told you I lost a finger right when I made a mistake so I was down one

Lenny Rachitsky:Nine nine to go

Matt McGinnis:Spotac isn't by itself a good top down framework but when you're thinking about oh why did I not why did this candidate just like why did it not click why did I not like them you go down the list you're like oh yeah I know this person it's it's that they were not excited about the idea they weren't passionate you know it's like it's that they talked shit about their previous manager and that they were a victim of the performance of their last two companies that's what it was they're not optimistic you know it's the the framework is super useful to evaluating people and I think the the alpha beta framework is also super useful when you come away from a conversation you're like I like that guy I think he'd be really really good why is it that I don't think he would do a good job on this product in particular and the answer is like this is a high alpha product area and he's a low beta person valuable but definitely not the right fit for this and so I think it's really useful in that context as well

Lenny Rachitsky:I love all these frameworks you're speaking to this audience frameworks frameworks frameworks so high high alpha low beta sometimes high beta is okay spotech in hiring is there anything else that you find really useful before we move on

Matt McGinnis:To a different topic when I first started working in the product organization I was introduced to a an interview framework or an interview tactic that I hadn't really used much at all I think in my career which is that every product person at every seniority level is given the same case study and the case study is extraordinarily difficult it requires you to think about many many dimensions simultaneously to think about data propagation issues it's it's quite technical and the rubric that we use to sort of evaluate performance of that case study is it gives you guidance on what for us like an entry level PM looks like what a junior mid career senior executive PM might look like and everybody comes away from that interview feeling like poop like they had failed it whereas on our side of it we're like wow that person got really far like they saw around three or four corners in a really impressive way there was 10 they didn't see around but they saw around four of the hardest ones and they were not defensive when we gave them new information that called into question the validity of their solution and they were willing to interrupt us to ask more questions and and and like a lot of the sort of basic human interaction models I I you know you never think that like giving someone an impossible task and even including the L five person versus the VP on the same thing would be productive and let's just say our recruiting team still sort of a bit about this and feels like we eliminate people too aggressively at this stage of the interview process but I found the wisdom in it and think it's actually quite useful to give everyone the same simple complicated prompt and just see hand them a drill bit give them the concrete wall and see if they can get a millimeter or an inch into the concrete know they're never gonna get all the way through the wall it doesn't matter you're gonna learn a lot and I've found that to be kind of an eye opening new thing for me that that has been fun I mean look the joy of product and the joy of product management and the joy of of being part of product I think there's a bunch of joys actually if I could give you a sort of running list but like one of the big joys is that you get to work with some of the smartest people in software engineers are very smart they're not always the best sort of social you know entities salespeople are awesome social entities they're not always the best systems thinkers you can go down the list but the the magic of product management is that you kinda have to you know we talk about the the mini CEO I think it's kind of a stupid misnomer but there's some there's some wisdom there and I think the wisdom is that you have to be a polymath like you've gotta be really good at working with other people you gotta be good at communications and articulation you gotta be good at project management you gotta be good at the science and the math and the engineering it's really fucking cool so I think one of the great joys of this job for me has been interacting with like the the tippity top of the smartest and and most polymathic people in the industry I'll say one other thing about what I love about leading product which is as a COO my job was to accept the product as it was and optimize everything around that my job was to make sure that the product operations in our business the interface to the insurance carriers the interface to the payment entities the government regulators that stuff all just sort of worked it was to make sure that our sales engine our marketing engine all the go to market stuff like optimized itself around what the product was it was about recruiting and making sure we got people in to work on the product you kinda go down any function that isn't in R and D and I had some hand in trying to figure out how to make that function work to the best of its ability given what the product was and now that I lead product I'm like oh wow this is the high order bid not that I didn't sort of understand that but like now I really get that product is the high order bid if you get the product right it fits in the market everything else gets easier finance is easier sales is easier marketing is easier recruiting is easier everything gets fucking easier and so I think the other joy of of leading the product function is that I get to set the highest order bit in the business's success to one

Lenny Rachitsky:This is really great to hear a lot of times people outside product don't understand these sorts of things and look down on product a lot of times especially you know sales folks CEOs a lot of times I love that you're seeing this and realizing this and recognizing just how important and interesting and and challenging this work is and just how awesome PMs are you know as you know a lot of people are a very anti product manager why do we need product managers we don't need them just slow everything down all this process

Matt McGinnis:I have a distinction there which is I'm anti shitty product managers

Lenny Rachitsky:That's exactly how I put it if you hate product managers you just haven't worked with a great product

Matt McGinnis:Manager look I I love wine wine's one of my things and I've learned a lot about wine and one of the my favorite lines like don't like chardonnay and I'm like no no no no chardonnays are the most fucking amazing varieties of of wine in the world you just haven't had good chardonnay you know and there's a chardonnay out there for you product management is like you don't like product management think product managers suck it's like well you just you just haven't had a good chardonnay yet

Lenny Rachitsky:That's exactly what

Matt McGinnis:Once you have one you you know you can't unlearn it you know

Lenny Rachitsky:Like let's find that PM ASAP okay

Matt McGinnis:Let's find that chardonnay ASAP

Lenny Rachitsky:That PM with them with some chardonnay you bet you touched on this product market fit point I wanna double down on this thread you had a you've had a couple of really interesting experiences of struggling to find product market fit with your own startup you said you worked on it for nine years you said mhmm okay and then with rippling complete opposite extreme product market fit up into the right what's something you've learned about just that that you think people maybe don't understand about what it feels like what it takes to get to product market fit how things change

Matt McGinnis:There's a line that this venture capitalist whose name I will not mention said which was that product market fit is a sort of thing where you absolutely know it when you see it and therefore if you don't absolutely know it you don't have it and this kinda gets back to my point about learning from mistakes versus successes it's like ah man over and over again over the course of the many years that that I spent at rippling sorry inkling we thought we had it we thought we had product market fit maybe maybe you know and in hindsight with the benefit of now having experienced solid product market fit it was so so obvious that we didn't and I've invested in like 60 companies or 70 companies I don't know it's not something I actively do but but opportunities by virtue I think of my my role at rippling sort of show up and I talk to lots of entrepreneurs and I love it and I find it super stimulating and I love the fresh ideas and it's just something I do as a real cherry on top of the sport that I play already but when I get the investor updates for the guys who've been at it for like three four you know years and I read the updates from them that I sent to my investors in 2011 and 2012 I'm kinda heartbroken

Matt McGinnis:We talk in Silicon Valley about never quit but that is complete absolute venture capital bullshit the incentive of a venture capitalist is to put money into your company and milk you dry they never get their money back there is no way for them to take that investment back and so the only logical desire that they would have is for you to keep trying against all odds because there is the occasional example where someone pivoted from a to x and it was wildly different and it worked slack was originally some sort of a gaming company and became corporate chat you know Airbnb maybe it's like there's some examples of companies having made wild pivots and succeeded but man is that rare I mean just so exceedingly rare and I think it's important to remember like you know I'm 45 years old I we're gonna be on the planet I mean the average age of a man in the United States when he dies is something in the mid seventies like I got 20 30 maybe if I'm lucky forty years left on the planet very conscious of the time that I have and like I don't regret what I did at inkling I learned a lot it informed what I do now I don't think the chapter I'm in right now could have come without the chapters before it and so it's a it's a beautiful wonderful thing that I did what I did but when I read the investor update and I'm like you're where I was and you are not getting out of this

Matt McGinnis:The Silicon Valley try until you die mindset is not pro entrepreneur it's pro venture capitalist and I know why that is but I think it's important to say out loud that you should fucking quit you should reset the clock you should reset the cap table because trust me product market fit when it arrives is insane and it's exciting and you should pursue it and never delude yourself into believing you have it when you don't it is dangerous and regrettable how's that for a speech

Lenny Rachitsky:Beautiful the the the anti the anti VC speech

Matt McGinnis:The I got more where that came from by the way it's not it's not anti VC it's anti VC propaganda it's the incent everybody's acting in accordance with their incentives in Silicon Valley the executives the founders the the venture cap everybody's of course acting behaving in you know in accordance with their incentives and the venture capitalists have very strong enduring incentives that have shaped the dynamic of how Silicon Valley works there's nothing wrong with that it's just really really important to point them out and scream at them for the 25 year old entrepreneur who has no fucking clue how this stuff works trust me the 45 year old entrepreneur or the 50 year old venture capitalist who have been in the game for a while they get it they've observed it they know what it's like the system is there to take advantage of the people who who don't or at least it is the easiest prey for the incentive structures not for venture capitalists as individual people who are beautiful and wonder all of them it's really wonderful people it's it's just that the incentive structures lead to some real harm I think in certain cases

Lenny Rachitsky:And the thing I find is when you do quit VCs like I'm always just like hey let me know when you're starting your next day I'm excited to invest they're never they rarely unless they're not a great VC they rarely are they just pissed at you for like how could you possibly not make this work

Matt McGinnis:I that's the thing like as a as a founder when it's time to throw in the towel on your business and you're so obsessed with giving money back to the cap table I always remind the entrepreneur like hey if you're in the seed investing game your forecast is zero your assumption on every investment is that it's gonna go to zero any seed investor who doesn't take that stance is is off their rocker anyway you know they're a very bad investor seek investors who play the long game who wanna be in your second and third company and are willing to take a bet on the first one and let it go to zero so that you can get on with stuff I mean this is like I've had that conversation many times

Lenny Rachitsky:This episode is brought to you by GoFundMe Giving Funds the zero fee donor advised fund I wanna tell you about a new DAF product that GoFundMe just launched that makes year end giving easy GoFundMe Giving Funds is the DAF or donor advised fund supported by the world's number one giving platform and trusted by over 200,000,000 people it's basically your own mini foundation without the lawyers or admin costs you contribute money or appreciated assets like stocks get the tax deduction right away potentially reduce capital gains and then decide later where you wanna donate there are zero admin or asset fees and you can lock in your deductions now and decide where to give later which is perfect for year end giving join the GoFundMe community of over 200,000,000 people and start saving money on your tax bill all while helping the causes that you care about most start your giving fund today at gofundme.com/leni if you transfer your existing DAF over they'll even cover the DAF pay fees that's gofundme.com/lenny to get started this begs the question of just when is it time to quit you know people hearing this might be like oh man like what are some signs that okay it's time to it's time to wrap it up

Matt McGinnis:Here look history provides us with a clear guide when you look at companies having hit it big they hit big pretty quick it's very very dangerous to be late to the party it's very very dangerous to be early to the party and the vast majority of the time that's the problem you know like Rippling had it been started in 2014 would not be what it is today I think Rippling had it been started today would not be what it is five years from now today and so I think like timing is a lot and it's very hard to control for but when you get the timing right and the market is real and the product works product market fit like I said earlier it's it's super clear and so if I were to pick a number out of a hat just from my lived experience I think it's very important one one aside don't ask people for advice ask people for relevant experience if you ask them for advice they will always give it but if you ask them for relevant experience they rarely have any to offer and if they don't have any to offer then don't ask for their advice so ask people for relevant experience and I try to do this you know with with my own entrepreneurs when I work with them it's like let me offer you whatever relevant experience I have and my relevant experience on this topic of when to quit is like I think we could have called it after the second or third pivot which was somewhere around year four it is all is of course very important to believe in what you're building and to be you know like to be persistent but there is definitely no shame in saying look pivoted once or twice it's not catching I gotta go do the next thing and I think like if you're year four year five in your entrepreneurship journey and it's not just obviously a screaming rip roaring growth story it's extraordinarily diff this is so extremely rare so beyond even already the rare scores you're gonna you know face from the outset that that that that that that now is is gonna convert to something crazy so that's hard to hear I I guess but man it can be really liberating when you're like fuck it I'm I'm gonna do this I have the energy I'm gonna do it again I'm just gonna do it with a clean sheet

Lenny Rachitsky:That is really helpful you have this really fun way of describing product market fit around receptors and drugs

Matt McGinnis:Oh yeah yeah I think this is a really fundamentally misunderstood dynamic when I when when founders message me and they're like hey like like my LinkedIn post and my tweet for this launch I do it I retweet it I like it whatever nobody follows me on Twitter anyways it doesn't matter but like I yeah I do that and then but I think to myself like this is not what this is about like this is not this is not how great companies are

Lenny Rachitsky:Built

Matt McGinnis:It can be a a nucleating a nucleating event but it's not a major thing because nobody cares about your company like your launch doesn't matter big fat pull the pull the slingshot back launches amount to the tiniest thimble of water in the ocean of noise about startups and companies and so you just gotta build it brick by brick bottom up and and these launches don't really amount to much and so how do you think about that like how do you think about the insignificance of your launch or you think about all the effort you're putting into building a product that you believe is gonna have product market fit well if if you recognize that the market is immutable no amount of tweeting LinkedIn posting advertising is gonna change whether the market wants your product it's not it might raise awareness about your product but it's not gonna change whether somebody wants it then you take a different mindset you have to view your startup as running an experiment in the universe to see what you get in return for that and this analogy of like drug discovery and binding receptors is nobody at Genentech thinks they can market their way to better performance inside your body the binding receptors for that drug they exist or they don't and when they build their product their goal is to find out whether the binding receptors exist but fate already has decided the outcome this is absolutely true very software product you build fate has already decided the outcome the market's either gonna latch onto your product and run with it or it's not do not ship the product find a lack of success and then try to market your way through that because the binding receptors likely don't exist and I I for me it was a very liberating mindset because now I just have to find the right drug and I can forget trying to convince the body to develop the binding receptors for whatever it is that I'm building

Lenny Rachitsky:Mhmm what I love about your advice here is you were an early investor in Notion which is one of the classic stories of it took them I think it was four years to get to something they moved to Japan they worked on the whole thing and so is there a lesson from there like is that a rare example where it actually worked and that's not an example to be inspired by because it's extremely extremely rare

Matt McGinnis:Let's talk about alpha beta again

Lenny Rachitsky:Okay

Matt McGinnis:As an investor you might build a checklist of things you wanna make sure are true or false about a company and hope that that's going to yield the kind of like investment success you're looking for does it have this kind of founder does it have you know is it a C corp in Delaware like you know boom boom boom boom boom boom boom and these checklists are all about what they're all about suppressing beta they're about avoiding avoidable mistakes they're about bringing stability Jeff Lewis is an investor who has many angular views on things and I think one of his most enduring phrases is narrative violations this idea that like the common wisdom must be violated in some way by every company that has an outsized success it is absolutely true and when I give these general observations on the patterns in Silicon Valley the most successful businesses inevitably violate something on that list in some really important way and so Notion you can't replicate Notion's success as an entrepreneur you can't replicate it because you're not Ivan you can't replicate it because you're not Notion you can't replicate it because it's not 2010 when they started the company do the math on that or 2011 actually these guys stuck with it they went through hell they pivoted they went to Japan and sat in kimonos and meditated on what they were gonna build and by hook slash crook they got to where they are today as a really wildly successful business in an extraordinarily difficult market where building businesses is virtually impossible in productivity it is dominated by Google and Microsoft carving out your own niche in that market is just unthinkable and so I look at Notion as having succeeded by virtue of the narrative violation of persistence I don't think it's a good idea for very many people it happened to work for them and I look at it as being a function of the founding team and their specific idiosyncrasies the the absolute insistence on craftsmanship from Ivan this is him that's his thing the takeaway lesson is not give up or don't give up the takeaway lesson is certainly not go do what Notion did the takeaway lesson is that every company succeeds on the foundations of the idiosyncrasies of the founder the idiosyncrasies of the founder Rippling succeeds for almost the polar opposite reasons that Notion succeeds but in both cases the companies succeed on the idiosyncrasies of the founder and so embracing that recognizing those idiosyncrasies that's what great investors do they spot that element of spikiness and greatness in a candidate investment and they convert that to a commitment and then of course the investor or the good ones accept what they get in exchange from that for the universe from the universe

Lenny Rachitsky:I love that we went in this direction I wasn't planning to talk about your investing career just to give people a reason to listen to this and maybe rewind and I wanna ask another question around investing what are some other companies you invested in early

Matt McGinnis:First of all okay so I I I sort of hate the question like what are some other companies you've invested that's a fair question but the problem is like I'm gonna give you a bunch of companies I've invested in that that won you know that are like really notable so what I would like to do instead of answering that question is I'm gonna give here let me let me give you some some like some bait like I I was one of the first investors in Notion I was perhaps the first I don't know ask Ivan Clever which you had a great exit I was one of the first investors in Zenefits if you've heard of it

Lenny Rachitsky:Heard of it I

Matt McGinnis:Was before I joined one of the first investors in Rippling and then more recently like invested in here's a funny one I was one of the first investors in Deal if you've heard of them.

Lenny Rachitsky:I.

Matt McGinnis:You know I I was able to exit I was able to exit that position and then you know hopefully that company's going to zero with their criminal behavior but whatever I was but more recently like if you've if you know like Decagon which is doing some really cool stuff on the AI front killing it I mean Langchain like great so those are some companies that maybe you've heard of but like how about like I invested in Macro founder was Derek Lee Macro's out of business I invested in Debrief Ned Roczen it's it's out of business you know I invested in Verb Data with David Hertz out of business I'm reading from a list I invested in what's the number 70 companies according to this list where I track things and most of them went to zero and all of those founders were awesome all those founders were kick ass and all those founders put a shit ton of energy into building their businesses and they went to zero and they're enduring relationships I can call on any of those people I think maybe with the exception of Deal and you know call in a favor and and and have and I've you know I've got a few subsequent and actually a lot of them joined Rippling believe it or not so I don't know companies I've invested in is a long list and I love to give you names of companies that don't exist anymore because it's self serving and a horrible survivorship bias you just list the good ones.

Lenny Rachitsky:I love that answer I think I think you're being modest in the context of your hit rate is clearly very high even one or two incredibly successful companies out of 70 is is a win in VC and so you're doing very well but I I think that's a really important perspective when you see people's logos on their websites of all the companies they've invested in have no idea how many they've how many had bats they've had.

Matt McGinnis:I think it's good practice to ask people to give you the full list.

Lenny Rachitsky:Yeah what are your favorite failures that you've invested in oh yeah no I'm not I'm not actually okay well I.

Matt McGinnis:Was like no I we don't spend time on it but I think it's actually a good question yeah like what are some of your fail are best failed investments.

Lenny Rachitsky:Show me the logos of the companies that didn't work yet.

Matt McGinnis:It's a really it's a question.

Lenny Rachitsky:Yeah there's a topic around this area that I wanted to spend time on and I haven't heard anyone think of things this way which is this idea you talk about of compounding plus power law plus entropy and how that's a really useful frame to think about business.

Matt McGinnis:So you you you you kick this conversation off sort of invoking the extraordinary outcomes demand extraordinary efforts line hat tip to Dan Gill and these are part and parcel like man understanding the nature of the universe is a pretty good way to work within it and so like power law distributions happen everywhere it explains why so few people control so much wealth it it explains why Steph Curry is just so vastly better than the next guy down on the list on the basketball team it explains why populations are concentrated into a really relatively small number of megacities in the world it's like power distribution just plays out everywhere and like once you see it you can't unsee it it's it's sort of plays out in many dynamics people tend to think that like the world plays on a more linear relationship where the x and y axis are sort of you know y equals x but that is absolutely not the case and the implications are profound it's like if you build something to 80 or 90% the y axis is barely budged yet you haven't like hit the inflection point in terms of reward and so the implication of the power law more broadly is that people who are in the top 10% the top 5% don't just get 10 or you know 20% more reward they get 10 x the reward or 100 x the reward it's really dramatic entropy the second law of thermodynamics this is a very simple concept it's the reason your sock drawer becomes messy it's the reason that potholes form it's the reason we have to put so much energy into maintaining the aircraft we fly to keep them safe because they really really really wanna fall apart and that's the nature of things if you if you abandon a city for a few months it starts to go fallow you know and so entropy is just this concept that shit tends toward disorder and the the universe I mean life itself is a temporary victory against entropy you and I should not exist the sun gives energy to the planet it organizes stuff that we can eat and like we fight entropy until we lose the battle somewhere as I said earlier at the age of 70 or 80 if we're lucky what does this have to do with with product.

Matt McGinnis:This is really about effort the only antidote to entropy the only antidote to decay in a system is energy you gotta inject energy so if you have a code base every line of code that you add to that code base increases the entropy of that system and demands ever more energy from human beings to go in and tend to it to make sure it doesn't break and if you want to achieve greatness if you want an extraordinary outcome and in particular if you wanna be in the top 10% top 5% on the x axis so that the y axis is through the roof then you have to relentlessly inject energy at every single step of the game teams will sadly but because we are all human teams will always optimize for local comfort over company outcomes not because they get together and think we should do that although unions do do that unequivocally deliberately but even in a collection of product managers or engineers what's going to happen over time is entropy is going to creep in and people are going to optimize for local comfort your job as an executive as a leader is to fight that entropy tooth and nail every single day it means that every time you see a bug every time you see a bug not most of the time every time you go and you drop it at the feet of the product manager or the engineering manager every time in public preferably it means that every time someone comes to you to hire someone and says that they have skipped the back channel every time you're like you can't hire this person unless you do the back channel it means that when you get into the bored and tired zone on any process that you as the executive have got to demand the ninety ninth percentile of energy because otherwise entropy creeps in and the system decays you have to do this one of the messages that I delivered recently at our big executive big like our top 75 manager off-site that we do roughly every eighteen months was a reminder that like if the if the purest form of ambition and the purest and most intense source of energy in the business is the founder CEO that every next concentric circle of management beyond the founder CEO has the potential to be an order of magnitude drop off in intensity and that is fucking dangerous because if you go to two layers and it's two orders of magnitude drop off in signal and intensity that is a very dysfunctional organization so what I said to the team was it's not that you need to buffer people from the intensity of the CEO it's that you need to absolutely mirror that intensity there are plenty of constituents in the business around you who will advocate for relaxing there is an infinite supply of people under you who will buffer other team members from the intensity of the demands your job is not to be one of those buffers your job is to preserve that intensity at its highest possible level and let the buffering happen somewhere else and that's the point is that entropy creeps into the system insidiously and slowly over time off your radar and you have to maintain that intensity every minute of every day to try and fight it if you wanna stay at the extreme right end of the power law that obviously governs the outcome of everything that we build.

Lenny Rachitsky:What does that look like to pass along that intensity like what does that feel like what does that look like so say Parker comes to you this bug sucks I got this broken screen you cut out like you you cut off your finger very best example okay still got them okay got all 10 I'll just.

Matt McGinnis:Give you concrete examples actually the joke that I sort of played on this one when I presented to the to the team was that the next sort of slide in my presentation was with the sound effect the Slack huddle thing and Parker's icon in Slack is just he uses the generic yellow the egg yeah I like which you know it's like it's just it's funny and so everybody knows the yellow egg is like is Parker and so the next slide in the presentation was boop boop boop boop boop boop which is the sound that Slack makes when someone calls you and it was Parker Conrad is inviting you to a huddle and then the next slide was Parker Conrad is modeling personal intensity and the idea is like if you know you know like if you've ever been dragged into an like I wanna talk about this fucking problem right now and whatever you're doing unless it's an interview like I want you to come and have a conversation with me that intensity is one place where it plays out every product team at Rippling and we have a lot of them now have public feedback channels I am in there up side down on everything I find when I use those products and I just model for everybody that this is how it's this is how at least I wanna do it which is I don't like this I don't understand this tell me why this is this way you know boom boom boom boom boom and people jump in and and respond the factory inspection process that I mentioned which is where at the end of the assembly line I jump out with the pickle and we talk about all of the elements you have to record a Loom of every major flow through the product I personally review every one of those flows I got a backlog I gotta catch up on today and and provide feedback to people always in a public channel so that every other product manager and engineering manager can jump in and see you know how the process has worked for other teams it's about modeling the intensity publicly so that other people can say okay this is how we do things around here and it gives the reaction the reaction from the team that received the message that that you have to you have to inject that energy every minute of every day and that there are no exceptions was not like oh that's exhausting the reaction is oh that is so invigorating it's so it's like so wonderful to hear that we're gonna achieve these great outcomes or at least we have a shot at doing so and that you're empowering me to follow my instinct which is to really like push for the best result the reaction universally is is like ugh what a relief that I get to go be intense because nobody in a position of leadership wants to be chill you know and like what's worse than a chill boss no don't work for a chill boss don't be a chill boss it's the most pejorative label I could give you chill boss or chill PM don't be chill chill doesn't accomplish shit be intense be good be respectful be intense don't be chill.

Lenny Rachitsky:And again this advice comes from where we started which is this is what success looks like because somebody that is less chill than you is gonna find that crack and come after your your market is that is that the gist for sure

Matt McGinnis:I mean again if you're chill and you move the x axis down 10 or 20 points the y axis collapses it doesn't just drop 10 or 20% the y axis collapses and this is just kind of true in everything we we do so yeah if you want to win you should probably should probably try

Lenny Rachitsky:This is what I always say to people trying to build lifestyle businesses there's always this idea I'm gonna build a side business I'm gonna make recurring income it's gonna be amazing and I in my experience anytime there's a market or something shows up that's juicy and there's ways to make money somebody's gonna come at you and work harder raise more money and there's only so long you can maintain that

Matt McGinnis:Well man there's a whole other podcast episode on the concept of leverage if you sell your time you've only got twenty four hours a day to give but if you can create a product that that scales you know the the the marginal cost of a unit of that product to zero like software it's going to be competitive man sell your time it's not gonna be super competitive but like sell that know achieve that level of leverage it's just gonna do it's a pretty efficient market

Lenny Rachitsky:To close out this threat of intensity and adding energy to everything something I've heard about you is you're big on escalating you're a big fan of escalating issues and also you always tell people to never not give you negative feedback to always share feedback to not hide anything

Matt McGinnis:Well fundamentally the most selfish thing you can do is withhold feedback from someone who are you optimizing for when you do that what are you optimizing for when you think a thought that would help someone improve and you avoid giving it to them because it would make you uncomfortable well you're optimizing for your own comfort and it's fundamentally selfish it's the most selfish thing you could possibly do is withhold feedback that would otherwise be useful to someone because you don't wanna be uncomfortable well that's not how high performance teams operate so I demand feedback and I give it and doesn't mean that when I give feedback it's not open to being questioned or discussed I mean of course is but like when I observe something I try to say it that's the feedback topic the the part of this that that has been interesting to me is that people withhold escalate the customers withhold customers don't wanna escalate to me as an executive even like the the founders in whose businesses I've invested who use Rippling are reluctant to hit me up when something goes wrong because they don't wanna bother me but it's literally my job literally my job to find things problems and make them better and by virtue of making those specific things better to iterate on the processes so that the system that builds the system can get better there's no greater gift to me as a product executive than receiving an escalation from a customer we have an escalations team at Rippling which sounds weird but it's people who are just particularly skilled at pistol whipping other people in the company to get to real root causes real root causes not like throw away the word root cause like oh we fixed the data error and shut the ticket down like no you went and you found the software that created the data error and then you found the system that created the software that created the dare data error and you solved all of that back to the to the to the top escalation seems extremely good at that at Rippling so we have sort of a dedicated little team that does this for us escalations are a gift and I and I was like if you're a listener right now on this podcast and you are a Rippling customer and you have shit that you think we should know the fact that I might already know it is not a reason for you to withhold the gift of your feedback so it's an attitude that I take to this every day I've got a little queue of some stuff that I've you know minor things that are from the last couple of days from people who who had some nits and issues that I'm just like I've got them queued up on my to do list today and I'm gonna take them to the product teams directly like I'd like to understand what happened here not in a negative way I just think we'll all get better if we study this one and so yeah escalations are a gift feedback like that is a gift and nobody is ever inconveniencing me when they do it

Lenny Rachitsky:For people that are listening to this and feeling like man this is so stressful and intense and just like I I don't know if I wanna work this way give them a sense of just how successful Rippling is I think a lot of people may not even heard have heard of Rippling a lot of people are like yeah it's doing great what are some things you can share that are public or not public that give people a sense of just how massive this business has become

Matt McGinnis:People look at Rippling from the outside think they think of us as like payroll and HR or whatever which is cool like it's it's a bit like saying Microsoft is a desktop operating system company or you know it's like every every company starts from somewhere and grows out from there we see ourselves as building the most successful business software platform in history in fact that's the mission statement of our product organization under the umbrella of the mission statement of the company which is to free smart people to work on hard problems and like when you translate that from where we are today to where we think we're taking things it's like we really do believe that like the the core of every workflow and everything that a company has to do be it AI or manual traditional GUI based software is like is who's doing stuff who owns it who's accountable and so the people record is a really important component of that you can argue that the customer record is also very important and of course some big businesses have been built on that primitive as well but we think the people primitive is actually much more important the and only thing that hasn't been done here is like somebody hasn't been ambitious enough to build a good business on top of that primitive Workday is terrible software everybody agrees on that I think Workday agrees on that good luck to them but like they have failed actually despite their success to build a really broad general purpose software platform for business software on the foundation of the people primitive so we're gonna do that and we're successful because we deliver on that promise at the scale we're at today like the fact that you can do and this is not this is not a sales pitch or sort of like an an advertisement for Rippling I just think it's important to sort of contemplate that when you bring together a bunch of disparate business processes into one system on a common business data graph an object graph a data lake with a consistent interface you can do some pretty magical things so we do payroll we do HCM we do IT we do spend we are about to launch a new product in the category of business intelligence and data management and there's a whole bunch of other stuff coming beyond that and then then you layer in AI on top of this where we alone where we alone have all of your business data organized into this nice neat package with a beautiful semantic layer on top of it the AI can work magic and we have shipped nothing nothing yet in this category that I would say gets anywhere near what we're gonna show next year and it is going to set the standard it is going to be the most like the backflips that the AI is doing reading and writing data for the user just on our internal use cases at Rippling is jaw dropping so I'm super excited about the tailwind this is gonna create for us you ask about like sort of what can I share about the success of the company what I can say there are tens of thousands of companies that now run on Rip lane we're less than 1% of the market and so the you know and like the market cap at 16,000,000,000 I think now undervalues where we are from a revenue perspective by a long shot there there is just so much upside to to do what we're doing and SaaS might be dead ish in terms of point solutions but long live SaaS in terms of what we're building

Lenny Rachitsky:Let me follow that thread in in AI there's been a lot of talk about AI is gonna replace SaaS as you maybe just said

Matt McGinnis:Yeah people are gonna vibe code their way to their payroll system which I you know good luck to the employees of those companies

Lenny Rachitsky:And so what I'm hearing here is the the that you actually do believe a lot of SaaS companies that are selling individual solutions are in big trouble the answer is implied here is this kind of compound startup idea of you need to do a lot of things for people for them to continue to pay for your software is that is that the gist

Matt McGinnis:No I think the gist is is a really good quote I forget who it's attributable to but it's yeah there's two ways to make money in software bundling and unbundling and you just gotta get the timing right so this is a this is a period of bundling points so here's the problem point solutions don't have enough data in the age of AI to be useful you gotta be able to provide the AI with a lot of context about a lot of data so it can do things it can do joins it can do correlations and so if you're a point solution you're in you're in hard you're in hard water because you've gotta now rely on data from other sources you've gotta integrate to third party systems and when you integrate to a third party system even the best ones are still sort of drinking their data through a straw which is a real problem I mean I you know there are the the biggest HCM software company you can think of integrates to the other biggest payroll software company you can think of through flat files via s t sftp like what are they gonna do what are they gonna do this is never gonna work it's just no way and so I it's like literally have no idea what they're gonna do they're just not gonna build AI software I guess like point SaaS is is sort of in a in a rough salute in a rough spot especially when you cleave two really important systems apart and say they have to integrate it's very very hard the other thing that I would say about the world of even just like not SaaS but AI software is that point solutions in the AI world are also in a rough spot for the same reason it's like if you're selling the shovels like OpenAI and and Google with Gemini you can make money and if you own the mine like Rippling with the data you can make money if you're somewhere in the middle building sorry building AI software that then tries to use the shovels from the shovel provider but then also needs to rent out the mine or get the ore out of somebody else's mine and start refining it like you are in you're in a very difficult place from an economic standpoint because you're not gonna be permitted by either of those parties to build a big business on their backs this is not how it's gonna work they're gonna demand value capture that crushes your unit economics so I look at the the like landscape of AI companies that I've seen and I think you have to have a really durable interesting insight that gives you a shot at viable unit economics to be an interesting business and that is gonna kill off 80 or 90% of the stuff that I I see right now as stand alone AI businesses

Lenny Rachitsky:So what I'm hearing here I love that you correct me when I get these things wrong and that's exactly what I want what I'm hearing here is it's less about how difficult it is to build the SaaS product it's about do you have first party data that allows you to build an incredible AI product on top of what you've got

Matt McGinnis:Yep because look SaaS software is a bit flipping all SaaS software applications are bit flippers like it's a it's an interface changing yeah changing values in the database it's what it does it's really hard pro like Rippling one of Rippling's superpowers is we're a coin sorter you dump like let you know 20,000 for an employee in the top of the coin sorter and it figures out what goes to the government what goes to health insurance what goes to your four zero one k what goes to you and it has to move all that money very very reliably and seamlessly very challenging software to build and manage what's it doing even that is just flipping bits in a database and so AI is a new way to flip bits AI is just a new way to flip bits hopefully a way that like abstracts us a little bit further from having to think because our future is Wall E it's gonna be great

Lenny Rachitsky:Speaking of Wall E actually I I I have this Matic robot do you have one of these mm-mm it's a it's like a it's a like a human it's like a self driving car robot basically a self driving car people build this robot that cleans your your house it's maybe I didn't mention that it's like a a house cleaning robot that just like goes around

Matt McGinnis:It's like a Roomba.

Lenny Rachitsky:You should get one they're they're expensive but incredibly cool and actually in Wally if there's a scene where they actually have what basically what these things look like so it's not so it's not so far fetched

Matt McGinnis:I have

Lenny Rachitsky:A movie with the director

Matt McGinnis:It's actually quite prescient perhaps with the exception of the gravity defying daybeds yeah

Lenny Rachitsky:I don't know but that's not good news you've seen that movie oh man so on this AI stuff which is which I'm hearing is you're probably we're gonna see a lot more consolidation where these point solution companies realize they need this data this is existential and they're gonna combine and and merge and bundle as you described

Matt McGinnis:It's possible I am not a part of an investigator on this stuff I think like there's some really interesting investors out there who who I think are thinking quite deeply about this and in particular like I the conviction which is like Mike Fernal and Sarah Gua

Matt McGinnis:Like I think those are two investors who are hyper focused on AI when they made the decision to sort of take that approach at the time I thought like as that's kinda narrow now I'm like no no no that was the right move and and like they it just means that they like they have a very deep deep deep set of hypotheses that they've formed over the course of of kinda seeing every AI deal in the valley and you know there are better people to ask this question of than I am and I and I think if you're an entrepreneur I recommend them to you because I think they're really smart

Lenny Rachitsky:Mhmm

Lenny Rachitsky:Awesome I I love those guys also Sarah and Ilot have a podcast called No Priors that I'd also recommend we'll point to you in the show notes so on this AI note I guess is there anything else that you think would be really helpful for founders that are working in this space building an AI startup to hear they think you're seeing it like here's how you need to here's what you need to do to win in an AI company so

Matt McGinnis:Much like I actually think that if I were to give you an answer to this question right now it would be bullshit yep I don't have anything back to my point earlier I don't have like I don't have enough relevant experience in the abstract to like dole out on a podcast on that topic but I you know I wish them luck

Lenny Rachitsky:I love that the the circling back to your advice don't ask for advice ask for a relevant experience and I love that that's what your mind immediately went I'm gonna take us to AI quarter which is a recurring segment on this podcast and the question is just what's one way you've found AI to be useful in your work day to day is there something that you found it unlocked in

Matt McGinnis:Having it's not a super exciting thing but I'll say like where I use so I like of the most important functions that I perform as an executive is the synthesis of ideas and the ability to communicate those ideas very clearly to people so when I talk about like the product quality list and the pickle as something that we've come up with internally I do turn to to AI ChatGPT and Gemini where I I take like a really let's say angular view of some topic and I give really I write the essay for the AI and I'm like look this is the crisp idea I wanna communicate help me come up with pithy ways to articulate these things and 80% of what it outputs is trash it's just like sort of middle of the road average low alpha junk but it is a thought partner a nonjudgmental thought partner where like in 20% of the stuff it comes out with I'm like it's pretty good that's a new word I didn't think of that does kinda hit the nail on the head for this concept and so if you if I believe that my job is is to sort of bring brains along on the journey for some sort of change that I'm trying to bring about then the most important tool is language and I do find that the ChatGPT and Gemini do a great job of helping me refine how to articulate the concepts that I want to to articulate they are not useful in coming up with the ideas themselves

Lenny Rachitsky:That's an awesome tip. I don't know if you've played with Claude much but I actually find Claude is better at writing and words and language.

Matt McGinnis:I have not spent a lot of time with Claude. I do, I have used it but by virtue of this conversation I'll probably go give it a shot.

Lenny Rachitsky:They're all great but there's something about Claude that is just at writing specifically is much better but they're all getting better all the time. It's always there's always something new. Matt, we've covered so much ground, we've touched on everything I was hoping to touch on before we get to our very exciting lightning round. Is there anything else that you were hoping to share, anything else you wanted to touch on or leave listeners with?

Matt McGinnis:We've spent a lot of time talking about intensity and the grind and the need to just always be operating at the ninety ninth percentile and

Matt McGinnis:I think if you listen to that in a vacuum it's very easy to believe that that intensity is soul crushing that it's a negative

Matt McGinnis:That it's maybe not something that you want and I think there's a backstop for me that I didn't talk about today that I think I'd is important to share which is that life is amazing that like the fact that we all exist on this blue marble drifting through space and time that we are some weird instantiation of consciousness each of us and that you're here for such a short period of time whittling your stick doing something that like if you remember how insignificant we are and all of this is it brings this levity to what we do and and to the work we put into building this because this is like rip like Silicon Valley in 2025 is is Florence in the Renaissance it's crazy like the amount of creativity and insane invention and progress that's happening for our species right now in this place is absolutely unparalleled in all human history you gotta zoom out and appreciate that magic and so then you turn around you're like fuck I gotta work on Friday night right like I I've gotta go give it my all I gotta go compete in the arena of business just you have to you never you have to never forget that number one none of this matters and number two it is an absolutely beautiful and amazing phenomenon that we get to be alive doing this right now so like play the sport play it with everything you've got but never forget that it's just a sport and that none of it matters and it's super important as a counterpoint to the intensity that we we talked about

Lenny Rachitsky:That is beautiful. I think about Pale Blue Dot, Carl Sagan's whole thing just stunning photograph that literally

Matt McGinnis:Changed the way I think about who I am as a person when I saw it.

Lenny Rachitsky:Yeah, well going in a completely different direction with that Matt, we've reached our very exciting lightning round. Alright, I've got five questions for you, are you ready?

Matt McGinnis:Okay.

Lenny Rachitsky:Here we go. What are two or three books that you find yourself recommending most to other people?

Matt McGinnis:Okay two or three books you you give me a heads up on this so like one one book is Conscious Business. I don't have Conscious Business in front of me because it's actually at the office because we have Conscious Business reading club at Rippling and every member of my current my product leadership team is going through this right now. Conscious Business Fred Kofman, it's been used in many businesses LinkedIn most notably as a framework for thinking about effectively. It's a user manual for human beings so if you are a leader a manager an executive whatever particularly younger like people in their twenties and thirties who are just sort of getting the hang of being a CEO or a product leader for the first time this book is absolute fucking gold. It was recommended to me by Brian Shrier at Sequoia when he was on my board at my previous company I took way too long to take him up on the advice wished I had read it sooner highly recommend Conscious Business changes your life. Number two Thinking in Systems Donna Meadows I always mispronounce her name Donella Meadows she died partway through writing this manuscript her fellow professors picked it up and finished it for her it is the best generic framework for thinking about like how systems work you will extrapolate from this book to every aspect of your life after you read it and then the third is classic nineteen sixties The Effective Executive it's an anachronism it uses weird pronouns for the secretary and the executive I'll let you guess which ones but like the book itself is so chock full of simple enduring advice on how to be effective at leading teams and the good shit is the stuff that's been in print for seventy years and that's that's one of them.

Lenny Rachitsky:Beautiful. I love the first one is you don't have it because you're you're using it with your team yeah constantly you you mentioned at one point before we started recording you have like eight copies of that book that you just give out to everyone.

Matt McGinnis:Yeah and we hand it out like candy.

Lenny Rachitsky:Okay is there a favorite recent movie or tv show you've really enjoyed

Matt McGinnis:Yeah so I'm a little embarrassed by this answer but I'm gonna be honest please there's a a new series called Heated Rivalry and it's about I'm Canadian and I'm gay so it's about two hockey players in Canada rivals between the Bruins and the Maple Leafs although they don't use those names who are like just heated rivals on the ice and it's a huge thing that the the world is watching but actually they're secret secretly in love with each other and they start hooking up and it's been labeled by the media as smutty but delightful and I would say that's accurate so it might not be for everybody but it is a it is a smash hit right now it's on HBO Max and Crave and it's only six episodes but like I said a little embarrassing because it's very it's it's a little chintzy but it's a lot of fun it's also really fun to see like gay people represented in the media as though they're normal

Lenny Rachitsky:It's fun and soon to be on Netflix with the acquisition if that goes through oh yeah it's crazy amazing okay is there a favorite product you recently discovered that you really love

Matt McGinnis:My Fellow coffee maker I love my Fellow coffee maker it's got an interface that lets you like set light medium dark roast it changes the temperature it blooms the coffee it tells you how many grams of coffee to put into the basket slick interface high quality coffee it's like it's definitely awesome and so I have actually I have one in the office and one at home and one in the garage

Lenny Rachitsky:Wow that is a favorite product you have three of them in in the same yeah oh no in the office okay

Matt McGinnis:Fellow is also a Rippling customer that's like a a nice side effect when we get to

Lenny Rachitsky:Have they ever escalated anything to you

Matt McGinnis:No if you're listening and you're from Fellow I want to hear all your gripes

Lenny Rachitsky:Perfect two more questions do you have a favorite life motto that you find yourself coming back to often in work or in life

Matt McGinnis:It's a dark one and I'll share this one sort of partially for the humor of it but it's it's actually sometimes useful immediately at least it's sort of a a moment of smiling when it happens like the model comes from my dad who said Matt nothing's ever so bad in life that it couldn't get worse and it's like we're going through some shit yesterday at work and we were like fuck now that happened and I looked at the CTO and I'm like dude nothing's ever so bad that it couldn't get worse and we had a good laugh and continued to brace for whatever might come next so not not exactly uplifting but fun to use

Lenny Rachitsky:No that is it is uplifting it's an like I'm an optimist and I find myself thinking that often with my wife just like it could be worse it could be worse than this definitely it's actually worse

Matt McGinnis:And it might get there

Lenny Rachitsky:So it's in truth less worse version final question something you shared with me is that you were a DJ when you were a younger person can you just give us a little DJ DJ voice to give people a sense of

Matt McGinnis:Well it's so first of we it's not DJ Lenny it's it's radio personality and yeah I used to do the greatest hits of all time with hits from the sixties the seventies the eighties and a little bit of the nineties +1 015 the Hawk yeah this is a you can turn it on it's very inauthentic but it sounds good on the radio it's cool I did it when I was in high school I ended up doing the midday the midday segment when right before I went to college and what a gift what a huge gift in my most formative years to have developed like an ability to be in front of a microphone comfortably you know because here we are

Lenny Rachitsky:I love for people that weren't watching this YouTube like lean really close to the mic to get that to get that radio personality voice.

Matt McGinnis:Yeah, you gotta be able to hear like the saliva in the mouth.

Lenny Rachitsky:Incredible and it's like the same person talking like if you're not watching this you're like where did that guy come from that was great you nailed it Matt this was incredible I really appreciate being here I really appreciate sharing all this advice that I have not heard other people share two follow-up questions what do you is there something you wanna plug point people to and how can listeners be useful.

Matt McGinnis:To you look my life is Rippling I point people there and that's this is my life's work it's gonna be it's gonna be a banger so stay tuned and and the way that you can help me is that if you're a customer you gotta tell me when you have problems because that's how we get better.

Lenny Rachitsky:What's the way they get to you is there any place you wanna point people to.

Matt McGinnis:DM me on Twitter is easy at stay nine you can email me my last name at Rippling dot com and I'll go that far without giving out my phone number how's that.

Lenny Rachitsky:Perfect the perfect boundary yeah Matt thank you so much for being here.

Matt McGinnis:It's my pleasure thank you for having me Lenny and congrats on all the success with this podcast it's been great.

Lenny Rachitsky:Same to you it's always a good sign at the end of a conversation where like oh I gotta get me some of that stock and that gotta get into that Rippling so.

Matt McGinnis:It's a good buy.

Lenny Rachitsky:Very good.

Matt McGinnis:Yeah I but you're you know.

Lenny Rachitsky:Hard to hard to get in the balance of the company alright man thank you so much thanks thank you so much for listening if you found this valuable you can subscribe to the show on Apple Podcasts Spotify or your favorite podcast app also please consider giving us a rating or leaving a review as that really helps other listeners find the podcast you can find all past episodes or learn more about the show at lennyspodcast.com see you in the next episode.