Invest Like the Best with Patrick O'Shaughnessy - Joey Levin - Building an Anti-Conglomerate - [Invest Like the Best, EP. 264]

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Starting point is 00:01:09 and it was the only product that has ever made me willing to log food. If you want early access to become a member of their private beta, where the waitlist is currently 150,000 people, use this link, levels.com slash Patrick. Hello and welcome, everyone. I'm Patrick O'Shaughnessy, and this is Invest like the Best. This show is an open-ended exploration of markets, ideas, stories, and strategies that will help you better invest both your time and your money. Invest like the best is part of the Colossus family of podcasts, and you can access all our podcasts, including edited transcripts, show notes, and other resources to keep learning at join colossus.com. Patrick O'Shaughnessy is the CEO of O'Shaughnessy Asset Management. All opinions expressed by Patrick and podcast guests are solely their own opinions and do not reflect the

Starting point is 00:02:01 opinion of O'Shaunsi asset management. This podcast is for informational purposes only and should not be relied upon as a basis for investment decisions. Clients of O'Shaughnessy asset management may maintain positions and the securities discussed in this podcast. My guest today is IAC's CEO, Joey Levin. IAC is a unique business in that it's a holding company which builds world-class digital businesses. Since Barry Diller created IAC, it has produced 11 public companies, including Match Group, Expedia, and Live Nation. Today, the business is comprised of category leaders like Angie. Dot Dash, Meredith, and Care.com.

Starting point is 00:02:39 Joey joined IAC in 2003 and became CEO in 2015. We talk about why he tries to avoid centralization between businesses, what he's learned from Barry Diller, how he approaches capital allocation, and so much more. This conversation serves as an excellent reminder that there is no one formula to company building. Everything is idiosyncratic and requires its own best decisions. Please enjoy this great discussion with Joey Levin.

Starting point is 00:03:05 So, Joey, I think this conversation has to begin with a high-level description of the unique nature of IAC. It's this anti-conglomerate conglomerate. Those familiar with it tend to be obsessed with the model and really into it. But for those that aren't, I think a neat opening question would be how you think about the operating system of the business itself. It's quite distinctive and unique. How would you describe the OS of IAC to a professional investor that is not. familiar with the business yet. We are in the business of building businesses, and everything that's part of IAC supports that. And there are others every business is in the business of building their

Starting point is 00:03:41 business, and some are in the business of building multiple businesses. The best ones have to be in the business of building multiple businesses. Two things that are pretty unique about IAC is number one, our time horizon, and number two, the reality that we don't try to keep all of our business is under one umbrella. We take our best and most successful businesses, and instead of saying what many do, which is let's hold on to that business, we say, okay, it's ready and we give it to our shareholders, which doesn't mean we get rid of it. We give it to our shareholders through a spinoff, and then those shareholders get to own it directly and be a part of that business directly and continue or not on their own directly. And those two differences together are pretty unique

Starting point is 00:04:28 in our operating model. Investing on a forever timeline is a very different structure than a lot of capital is organized. Most capital is organized with a finite thing. You go in in this period and you come out in that period. And with those incentives, people are organized to do things. What are you doing the in the end period and what are you doing in the out period? For us, there is no out period. Even when we're spinning something off, it's not like we say, okay, well, we got rid of it at just the right point to get rid of it. We're only giving it to ourselves. It has to be doing well and has to be doing well forever. organizing on that timeline is unique. And then the ability to say with the leaders of our businesses,

Starting point is 00:05:04 you can grow up here in this house and hopefully learn a lot and grow up well in this house. And then at some point, you probably get too big for the house and you want out of the house. And maybe we want you out of the house. And that's okay too. And you can have a thriving life outside of the house as families do, as teenagers do, et cetera. It's a very natural thing. What was the first thing spun out? And did the philosophy around spin-outs itself grow out of that incident, bottom-up, or was it more of a top-down thing? I'm just curious how you came to this philosophy of spinning out the mature assets. All things for us pretty much have been bottom-up. Expedia was the first, and when we spun Expedia, it was the right decision for Expedia that time, but there was not a decision which is, oh, let's start doing this as a model.

Starting point is 00:05:53 In fact, it probably wasn't until after we had done several that we said, this is a model and this makes sense and this is something for us to continue to do. We try stuff and we say we're opportunistic. We say we're always willing to try something new. We're not wed to one sector, category, business stage, whatever, and we're also not wed to a structural thing. But then when we saw this working, we said, okay, this makes sense. This is the right thing to do.

Starting point is 00:06:21 It's not just learning from what we did. it's also learning from what others did or didn't do and seeing what's happened there, meaning that you see businesses stay under the umbrella for too long, and they start to no longer be optimized for their own success. They're optimized for other things and cataprophy in that context. What are the biggest differences in how the home office itself looks as a result of this philosophy relative to, let's say, some other holding company that's maybe the most similar, but keeps the operating assets under a single umbrella?

Starting point is 00:06:51 How does the difference manifest in the way that I see the company in the home office looks? People a lot of times ask us, it's a related question about synergies or what's centralized or things like that. And I think that when you say, okay, the businesses are staying in this one umbrella forever, then you do seek more synergies. And some people view that as a good thing. And there's some people have succeeded very well with making that a good thing, which is, well, we always have accounting or we always have pick a function where we're, we're,

Starting point is 00:07:21 very good at that. That's centralized and then things can grow off of it. Because we know that things tend to come in and out, now that does happen over a very long period of time, but things do tend to come in and out. We don't centralize very much. And we don't do that for the reason I just said, but we also don't do it because that's usually not the right way to optimize the business, meaning the cost side, and we're vigilant on the cost side. But the cost side of a business by definition is finite. Each business has, and that's finite. The revenue side is infinite for all those businesses. And so if you say, okay, we're going to take away this control or this flexibility or we're going to centralize this marketing or sales or technology or whatever it is, you remove some

Starting point is 00:08:06 level of accountability from the leader of that business and you remove some flexibility of the leader of that business. When we can save on an accountant or a centralized function, we like to, but I would much rather be a little bit inefficient there for the ability of the business and the business leader to have absolute accountability and be able to go for the biggest upside in their business. So those things go well together, meaning we can't centralize because at some point we uncentralize, but also we philosophically don't really believe in optimizing the centralization as much as we believe in optimizing the business for its cleanest and clearest and most accountable path forward. we also are structured for accountability in ways that maybe other organizations are less so. To compare it, a business within IAC compared to, say, a public company with a public board or even a private company with a private board made up of investors or whatever, our ability to execute change and hold accountability is much, much swifter than those other alternatives.

Starting point is 00:09:14 I've been part of those alternatives. Public companies, controlled public companies, uncontrolled public companies, private companies, all that. There's a level of group think. There's a level of politeness. There's a level of things that just by virtue of being a group move much slower. Because of the way we're organized, we can drive accountability much sharper and much swifter. And I think that that also works very well in that structure. Agility is such an interesting concept for a business like yours. And I think if you were to add a third really important attribute on top of the first you highlighted it's your history of respecting the change the internet and digital represents

Starting point is 00:09:50 for just core functions like most of the businesses that people will be familiar with that came through or out of IAC are things that people have done forever but just brought into the digital world maybe say a little bit about just that as a piece of the IAC story maybe starting with Barry's realization that this was something powerful put some flesh around that concept because it seems to be a defining characteristic of the story itself very philosophizing and IAC as a result has always embraced change. Think about his theory in his career and how many different categories he's been a leader or part of a leader and it's exceptional. And most people get very good at one thing and you're exceptional at one thing and then move on to retirement or

Starting point is 00:10:31 philanthropy or something else. And he's on multiple industries. And that is an important part of what we do with embracing change and also that intellectual curiosity. So embracing change can mean a lot of things. it can mean, for example, challenging your own businesses, competing with yourself. That's something that we've done multiple times. We believe in a category. We have a bet in a category of business that we're backing.

Starting point is 00:10:56 And we might also back a direct competitor to that because we know the category is going to work. We don't know whether we've got the product right. We don't know whether we've got the team right. Or we just want more exposure to what we think is an obvious future. And we'll do that and we'll challenge ourselves. or we've been in something for a while and there's something that can disrupt it. We'd rather, of course, disrupt ourselves than have somebody else disrupt us.

Starting point is 00:11:20 And that's also kind of central to the philosophy. Another piece, I'd say, is I alluded to this a minute ago, but I talked sometime about where are we going with our capital and you alluded to this too a minute ago. It's where the future is obvious. It's not so much seeing around corners. When you see something, it's saying, okay, is travel going to happen this way? in the future or is travel going to happen where people can access an online travel agency and have access to all the data? Are they going to use travel agents and the way they're using

Starting point is 00:11:51 travel agents or if they have all the data in the world and they have it at their fingertips and they can make the decisions for themselves, what are they going to do? That future is definitely obvious. Is it Expedia that's going to win or Hotcom is going to win or Hotwire? We ended up with all three of those, but the point is definitely where the future was going was clear. And where we find those things, we just like to make sure we have enough exposure to that and enough angles on it that we can participate in that change and help affect some of that change. There is probably a time where people might have been doubtful of travel. But I think if you look at these things, when you see what the new product looks like

Starting point is 00:12:27 relative to the incumbent product, you know that the new product is going to be meaningful. You just don't know who's going to deliver to any new product. How much of it can be simplified down to faster, larger, choice digital experiences. Is that the, if I had to boil it down, maybe oversimplify it? Do you think that that's the fair oversimplification of the secret sauce of what's made so many of these things successful? I think that was one phase. Actually, the current phase is the exact opposite of that, meaning you could take Google as the example or Amazon and how amazing those businesses are and continue to be, but also where they're vulnerable. You would remember the

Starting point is 00:13:05 first time you used Google and it was like you search for something trivial and it was three billion results for this. And I was like, holy cow, there's three billion results for this thing. You rarely got past the first page, it's the first 10 links, but nonetheless, there's a billion results for this thing. The platforms today, and especially with different interfaces with platforms like voice, a billion results is obviously useless. I mean, it speaks to the power of the platform, but it's obviously practically useless for the end user. And even 20 results to the second page or even 10 results to the first page or even three results is not that helpful. If you actually can technologically say and expect, just give me the one that works. If I can trust you to be

Starting point is 00:13:43 fair price, to be reliable, to be ethically consistent with the things that I believe in, just give me the one. And that's a better solution for me. Then I don't have to look at 10 and I don't have to figure out which one's better. Have you know my preferences and you know I think about it and I can trust this brand thing. Just give me the one. And that's a better solution. You can think about it for our businesses, Angie is probably one of the best examples of that. And the evolution of how that category went. That category started as Yellow Pages, which is at a list of everything with no information. And then there was a great innovation, which was Angie's list, which was a list of everybody

Starting point is 00:14:20 with grades and with reviews, as you could sort through that list much better. And then Home Advisor came along. We own Angie's List and Home Advisor. Home Advisor came along and said, well, we're going to match you with up to three. So you give us the information. You need the house or you need the roof. It's this kind of shingles and you need it on this date. And whenever you give us the information, we'll give you three people who can definitely

Starting point is 00:14:40 do that job when you want the job done in the time frame. You want the job done. They're available. Where we are now with the product and we've combined Home Advisor and Angie's list into a brand now called Angie. And what is now the fastest growing solution is one where somebody says, here's what's wrong with my house. And we say, okay, it costs $250 to fix that.

Starting point is 00:15:00 they say, okay, here's the credit card and you've figured out from there. And that actually, that's so far the highest customer satisfaction product we've ever seen in the category by an order of magnitude. You realize that some homeowners want to negotiate, want to make sure they've looked somebody in the eyes and whatever. But many say, if you're going to stand behind this and you're going to make sure it gets done, then you just get it done for me and find one person. And I alluded to it a minute ago, but some of the UI now demands that on voice.

Starting point is 00:15:27 Say, I want this. The voice can't say, well, here's 10. possible responses to this, the voice says, here's the answer. I think that'll be increasingly true of the way user interfaces work. So maybe technology and digital and internet is the wrong way to think about this and really the right way is convenience. Technology enables the next layer of more convenient. And when you say obvious, the thing that's the arbiter of what's obvious, is it more convenient for the customer? Is that maybe the right summation instead of technology focus? With that in mind, I'm curious then how you think about the shared characteristics

Starting point is 00:16:00 of the incubations and the investments that have worked versus those that haven't. So obviously, there's always lessons to learn from winning and from not winning. How would you categorize some of those concepts? Is there a through line to the situations that have worked really well versus those that haven't across IEC's history since you have a pretty decent sample size? It is so hard. I think about this question all the time. And every time I think, okay, I've got the alchemy. Now I've got a perfect example for why that didn't work. A lot of people say, back, the best teams. Of course we want to back the best teams. Of course, we want to back ambitious people. Of course, talent is amazing. But we have some of our most successful businesses of all time,

Starting point is 00:16:39 where the very early talent spark was unequivocally the wrong talent for the next phase or some of the later growth phases in there. Then we have examples of the opposite of that. Again, not at all to discount the importance of talent, but there's different talent at different phases. And it's not one thing that says, okay, the biggest winners are when we found some amazing human so early in their lives. But of course, we do have examples of that. One for sure is large addressable markets. What are you going for? If you're going for something very small, then you can succeed and then you be very small. So what are big addressable markets and how do you have big ambitious vision? That's an important one. But again, I could actually come up with exceptions to that, which is you start

Starting point is 00:17:23 going after something very, very small and you are so good. Probably Shopify is a great example of that. When Toby built Shopify, he was building some of his snowboard shop and did a great job with that. And I don't think he thought he was going to take over the world of e-commerce then, but he was so good at that and such an exceptional person and he got so good at so many things, they built that. So it's very, very hard to come up with the rule. I guess probably the most important, which is maybe consistent with that point, is the ability to change. the ability to keep adapting, the ability to keep looking bigger, looking for bigger opportunities, and the ability to keep changing with the market as necessary or changing with the product as

Starting point is 00:18:05 necessary. Change is also tactical things like, when do you start monetization? There's times to do it, there's times not do it, there's times that it's absolutely essential because you have to control your own destiny to be able to continue to innovate. So it's very, very hard to say what is the same, the only thing that's the same is change. Maybe to zoom in on to bring some of these ideas to life, to zoom in on match or something like that. You also said earlier, sometimes you'll compete with yourself.

Starting point is 00:18:31 And there's been a lot of different situations where with Tinder, with match, with other assets, you've been in the same theme multiple times at different points or rolled them together. And obviously, that's another example. Like people are going to date. That's a highly addressable market. Maybe walk through the lessons learned from that segment specifically. What did it feel like to have a competitive product at the same time? How did you differentiate between the submarkets, if you will, in the online dating world?

Starting point is 00:18:56 How does that stand out in memory? There's a ton of great lessons in that one. And going back to the future's obvious part, not just the people will date, which of course they will, but also more importantly was the way that you found people was happenstance or being set up by somebody. Or if you wanted to, there was a thing called personal ads. That was a big market. People wouldn't even imagine that this would possibly be true. You put a little blurb of text in the back of a newspaper to meet somebody.

Starting point is 00:19:25 And that was a very large category of advertising dollars in newspapers and magazines. So we said, okay, there's this static thing that doesn't do any matching or you can have a dynamic thing that does do matching and puts people together. So that was the first turn of that. And it evolves a lot. But I do remember talking about mobile at match and how hard it was for Match group, which is a parent company which spun off of IAC. And within Match Group, there's multiple brands. There's the original brand, which is still a successful brand called Match.com. And then,

Starting point is 00:20:00 as you say, there's Tinder and OKCupid and Hinge and a bunch of international brands, many other. What I remember talking about at the time was how hard mobile was, how hard it was for Match.com now to make the transition to mobile and how there was some fundamental flaws in that. So for example, going into the app store was a big challenge for Match.com because for Match to go into the app store was to give up 30% of revenue to Apple or to Android at the time. And there was, for good reason, a lot of resistance to that. And then came Tinder who never knew you could have that other 30% of revenue, essentially. And so it could play in that and building that up.

Starting point is 00:20:44 And here came Tinder, built mobile native and never even built a desktop. top product. And that became so much more easily and so much more naturally there, I think that it's very hard for an institution to change itself dramatically. It is definitely easier to take the learnings that you have from the one product and then apply it to something that builds a native in whatever the new medium is or the new platform is. Those things were totally separate. In fact, Tinder was built in an incubator in IAC, not even an incubator in Match. The goal of incubator in IAC was to build multiple businesses in mobile, and one of them happened to be this, and then eventually it moved into Match, which made sense. But building it outside of there was really helpful to, I think, its early success.

Starting point is 00:21:34 You mentioned the only constant being changed. The world of digital and Internet has changed so much in the period that you've been operating and incubating, investing in these businesses. One of the biggest ones is customer acquisition cost. It's been a big, big topic in the last two years. Just taking that as one example of a really important systemic change, how have you navigated something like that? How does that impact the way you think about the existing businesses, the candidates for the next incubation or investment, using that as an episode to drive home.

Starting point is 00:22:04 Okay, change is constant. Here's a change. How do we deal with it? Not that long ago, sort of the prevailing wisdom, and maybe it still is in some ways that actually customer acquisition is something that only bad businesses spend money on. If your product is good enough, then you don't need any customer acquisition costs. And that was the thing in Silicon Valley for a time period. And I never believed that.

Starting point is 00:22:28 I thought absolutely a better product is necessary. And the better the product gets, the easier it is to distribute and the more viral it is and all those things. But actually, if you can have this wonderful product and then you you can accelerate it meaningfully with customer acquisition, that's an even better thing, because you have some tools in your control to add more fuel to the fire. We've always believed that's a really important thing. And I think now every pitch deck you see on every company is LTV to CAQ, lifetime value

Starting point is 00:23:00 to customer acquisition costs and all kinds of charts around customer acquisition costs. For us, staying ahead on customer acquisition costs, it's a huge portion of, if you aggregated IAC's P&L, huge dollars spent billion dollars. We're in a world where a lot of dollars are concentrated in a few platforms, making sure that you are ahead of the game on those platforms, understanding how those platforms work, and understanding how to navigate those platforms, and then being early on the new platforms to understand those to make sure that you're staying ahead of the game there. Of course, everything is product first, and there's a lot of creative things you can do around brand, important stories you can tell to differentiate around brand, and that's really important. but the tactical blocking and tackling of making sure you know how to work in those platforms and optimize those platforms where many, many users spend substantial portions of their day or begin their day or begin their inquiry or whatever, that is a very, very critical skill

Starting point is 00:23:58 to every major successful business, I think. What is great look like there? Obviously, there's rigor, there's experimentation, there's obvious things. but what separates the elite people at being good at customer acquisition in your experience from the very good or the good? There's two approaches to it. And we don't always get to the more successful approach, which I'll explain, but there's two approaches to it. One is you do what you said, which is a lot of experimentation.

Starting point is 00:24:26 You say, okay, we're going to try and market here and we're going to push the limit of what's possible and how do we get to profitable marketing, et cetera. We're going to go, go, go until we hit the wall. and then we're going to say, okay, that doesn't work. Let's push our dollars elsewhere. That's a totally reasonable, financially sensible approach. But the best have a very different approach. What they say is, this channel needs to make sense for us as an acquisition. And we've pushed and pushed and pushed and we can't get to profitability here. What do we change about the product or what do we change about our supply dynamics or whatever to make it so it works?

Starting point is 00:25:06 Think about it in the context of Angie, where we continue to get better every day, but we've gone up and down in our skills here. But you say plumbers in Indianapolis, okay, we're trying to market to people who need plumbers in Indianapolis, and we can't do that profitably. Well, forget that. Let's do roofers in Indianapolis and figure out of do that. Okay, roofers in Indianapolis works really well. Let's focus on roofers in Indianapolis. The alternative is to say, plumbers in Indianapolis, we can't get that working. well, we only have 25 plumbers on the platform in Indianapolis. We need 50. So you go to sales and say we need 50 plumbers in Indianapolis. That doesn't work. Okay, we need 100. That doesn't work. Okay, we need 200. How many do we need until we do it? Because the one thing we know we need is it can't be possible that we can't

Starting point is 00:25:50 reach customers profitably who are looking for plumbers in Indianapolis. And when you invert that, that is when it starts to really sort of scale infinitely. Maybe the way to interpret that is the great ones aren't siloed in the marketing function. They're willing to bleed into product, into sales, into other parts of the organization to solve the problem. Absolutely, yes. One is get 100 more plumbers. The other is, change this page. This page doesn't convert well. That didn't work. Change it again. Okay, that didn't work. Change it again. And keep going because we're not stopping to be successful on this particular area and this particular thing. How do you get people to do that? That seems like organizations tend to silo. The Facebook ad is like one point of a whole big chain.

Starting point is 00:26:32 It goes all the way deep back into product. How do you foster that kind of mentality in a business? Different people have taken different approaches. We spun off Expedia in 2004, I think, or 2005, to four or five. I'm suddenly forgetting. And I joined IAC in 2003. And I was a Pipsqueak, so I was not involved in much of that. But booking.com was probably the most successful scaling search marketing business maybe ever.

Starting point is 00:26:58 There's others, I guess, that are closed. but that could be the top. And they always, as I understood it, again, I had never part of the organization, but as they did it, they divided into tiny teams, three-person teams to go after this, where everyone was optimizing for the same thing, conversion. Everyone knew that whatever you were doing, you had to optimize for conversion. So they did reset the whole organization to do that. That is a very hard thing to pull off.

Starting point is 00:27:23 And if you're built from the ground up that way, that works. I think it's very hard to transition an organization to something like that. split the whole organization into Little PATH. But you can move accountability. So, yes, is marketing just receiving inputs and then doing the best they can, or is marketing creating inputs and reversing that? And you can organizationally change that direction. I love the concept. And I love the idea of Pipsqueak early on. What most explains the move from Pipsqueak to CEO for you? Presumably you were part of a class of Pipsqueaks. And here we are today. What do you attribute that to? Why do you think that happened?

Starting point is 00:27:59 probably a lot of things, luck being a big one, but really believe this. I always tried to speak my mind clearly and candidly and think about what is best for the business. What is long-term best for the business? People talk about trying to act like an owner. I always felt like I was acting like an owner. That's the way I thought about it. I couldn't really think about it any other way. And I think that makes a difference. I always had a point of view on where I thought we could go, what I thought we were doing right or what I thought we were doing wrong. And I always was willing to push on that point of view. Again, I wasn't always right on my point of view, but I did have one, which is how you make progress on things. And also very early on, I always tried to be the most

Starting point is 00:28:48 prepared person on something. If we were looking at a deal, I wanted to make sure I know as much as could be known about that company as anyone could possibly know, that I was prepared for whatever the question might be or whatever the challenge might be and be able to do that. And the other thing, I guess, is having an open mind and being able to communicate. I do this all the time. I just did this again yesterday on something, but I think some solution is the right answer to a problem. And I want to communicate that that solution is the right answer to the problem. I write a note to the group about why I think that solution is the right answer. And I'd say a significant, portion of the time, I sit down and I start to write that note to the group explaining why it's the

Starting point is 00:29:28 right answer. And by the time I get to the end, I've reversed my position complete. Because as I put it down, and I organize the thoughts, I don't think they're going on anymore. And I go to the opposite. And being capable of doing that, I do think is an important trait in helping an organization go forward. I love the idea of knowing the thing in discussion better than anybody else. And I'm really curious how that's continued today in terms of how you digest a new business. So if you're seeing a new business for the first time, what is the process by which you get to know the critical aspects of that business? First of all, it's so far from true anymore, knowing more than anybody else and everything I'm in, I know less than everybody. And I guess that's inevitable, but it is the

Starting point is 00:30:06 reality. We look at so many businesses, our own successes, our own failures, our own failures, our own failures, our own failures, our own failures, our own failures, our own failures, and we look at so many businesses, and in those, there's successes and failures in the sense of we saw something and we knew it and we didn't act on it or we saw something and we were wrong about the action that we took on it and the business went out to succeed or the business went on to fail, et cetera. You do see patterns in people. You see patterns in metrics and you definitely do learn from those patterns. One pattern in people is there are businesses or business leaders or entrepreneurs or whatever who say from the get go, here's what we're going to do and

Starting point is 00:30:50 here's how we're going to exit. And by the way, this company is at that amazing multiple and we're going to multiply that multiple times this thing and we succeed, then we have that. That usually is a bad sign because they're coming in with a plan to get out. For our investment horizon, we're coming in with a plan to take over the world with this business and this product. And there is a difference, I think, between the best businesses that are built with one mentality and the other ones that people make money on. It's a successful strategy.

Starting point is 00:31:20 I don't want to say it's not. There's tons of businesses, I'm sure, who have said we're going to go in and we're going to get out. And then they've actually done that. But for us to build category changing businesses, I think, requires one personality and not the other. And it's the one who says, I love this. I believe in this. I want to build this. And sometimes that's not a binding statement.

Starting point is 00:31:39 Sometimes their interest change or something becomes less appealing or something becomes more appealing. And the reality is things change all the time. But there is a difference in how you build and how you think about your approach. If you say, I think this can go on forever versus how do I exit and start planning for the exit before you even enter. What are some other negative indications that perhaps the leader you have is no longer the appropriate leader, even if they were the appropriate leader for some stage of the business? There's all kinds of different signals. and we're always too late on making these changes. Everyone is, it seems.

Starting point is 00:32:12 Exactly. You talk to everybody and say the same thing. Whenever you make it change, you wish you made it six months earlier, or two years earlier or whatever. It is similar when some get overly obsessed with what's happening on the outside as against what's happening on the inside,

Starting point is 00:32:27 saying this business is doing that or there's a lot of interest in people doing that other business or whatever. So maybe we should do that. As against saying, how do we move what we, we have forward. I've seen this many times where that obsession moves from the internal to the external. It doesn't mean you shouldn't pay attention to the external. You have to pay attention

Starting point is 00:32:48 to the external. But the thing you have to be obsessed with, deeply obsessed with is the intern. What are you doing for your customers? What are you doing for your category? What are you doing for your employees? How are you changing that? Where is your product failing? That obsession. And then, oh, by the way, here's what's happening externally. And you can't be blind to that, but you can't be obsessed with that. You've got to be obsessed with the interim. When you think about a new category where you get interested or you want to build something or maybe buy something, we'll call it a vertical market, what characteristics are you generally looking for to begin with? You've mentioned huge market as one obvious one, maybe something that

Starting point is 00:33:26 doesn't change a lot over time like dating. Are there other common characteristics that always need to be there for you to get interest in a vertical in the first place? I'm sure we'll talk about new co and crypto and some of this newer stuff as examples. But are there defining category characteristics that matter most to you? No, I don't think so other than a good value catalyst usually is significant change underway in that category or significant change necessary. Although I go certainly more towards underway than necessary. You could have said in healthcare, significant change necessary for a very, very long time

Starting point is 00:34:01 and still made no progress because it's so hard to change. If you think about opportunities for incubation, I love the idea of you're a factory that creates businesses. What are the stages at the earliest point of an incubation? How standardizes the process of, okay, we've got an idea, maybe then we get a team, maybe then we do these five things. Walk me through the life cycle of something that's homegrown at IAC. We are now in our second iteration of an incubator. And our first incubator was called Hatch Labs, which was tremendously successful in that Tinder came out of Hatch Labs. And it was the dumbest thing anyone's ever done

Starting point is 00:34:42 or the smartest things anyone ever done, which is we shut down Hatch Labs after Tinder. Tinder was a one and a million success. We said, okay, great, we went one for one and let's avoid the next 999,000 failures. Or we said we somehow cracked the code and changed the formula and we know how to make the one and a million successes one in six. No one will never know the answer to that question. But we shut it down and it would shut down for a while while we were focused on other things.

Starting point is 00:35:08 And we just recently, within the last couple of years, built back the incubator and all the businesses coming out of the incubator now are so early stage that it's impossible to say whether we are succeeding or failing. But we have a system now where companies can come from two places. One, internal ideas, which is all IAC companies or just the people who are focused on the incubator called NUCO. And then we go and try and find a quote unquote founder or a CEO or a leader of that business. And then there's the alternative, which is somebody comes to us and says, I have an idea and I want to build it and I could use your help building it. We have engineers at NUCO who can

Starting point is 00:35:50 build and who can build things quickly and marketing people and legal infrastructure and other things like that where we can test things and get things off the ground with relatively little capital. And then if we have signs of momentum, then we can put more capital and everything in there is iterative. And it's not yet clear that that's the right solution, just to be fair. Some people would say, actually, the right thing to do is not be iterative to give great people a pool of capital or give lots of different groups of great people a pool of capital and just say figure it out because their first five ideas are going to be wrong or their first five approaches are going to be wrong and then they're going to get lucky on the sixth. And that'll be the one that works. And when you

Starting point is 00:36:31 it iteratively for us, we say, is there a sign of success here? No, okay, pull the capital and move it to something else. You might need to give each little team or each little an idea more at-bats to be successful. So we still don't know whether that's the right answer. But what we are doing is in each of these businesses that we're trying to start, we go out and build a little bit of product and do a little bit of marketing to see what kind of engagement we get. And if the response on the marketing is above a certain threshold. And if the product resonates enough, which is evidence in the marketing, but it's also evidence in some of the UI and things like that, then we say, okay, let's keep going more capital and then let's organize it for it to go off on its own.

Starting point is 00:37:17 That one can start with whether it's an internal idea or an external. We have one that we just, I think, announced yesterday or maybe we're about to announce called Orr, which is in addiction medication. And the guy who founded that named Jonathan Hunt Glassman, he is, is a person who had an addiction issue and that was solved with medicine. And he thinks not enough people have access to this medicine or are aware of this medicine and not enough doctors prescribed this medicine and also there's a view towards creating digital therapeutics. So we just started experimenting in that.

Starting point is 00:37:48 We started in one state. We built the product. We started shipping the product. We shipped it in ugly boxes of terrible packaging with whatever, but just to see. And people appreciated it. And so that we've got beautiful boxes. starting to ship in more states, and then we go from there. And that kind of pattern can exist in a bunch of different businesses at once, I think. There's an interesting growing idea around

Starting point is 00:38:10 if crypto and Web3 are going to be super successful, as concepts, they're going to fade away. Consumers aren't talking about AWS when they're making a buying decision or something. The infrastructure behind enabling something cool and new disappears if it is really an enabling technology. How do you think about that in the context of Nuco? I know you've been experimenting and thinking about crypto and Web3 and making it fade away and really just enable some unique new consumer experience. Do you think that that's possible in the near-term future? Seems to be what the system wants. It happens everywhere. Think about the other big phases of web and mobile. No one says anymore, oh, is this a web product or is this a mobile product? It's just Tinder. Uber. It happens to

Starting point is 00:38:50 exist on mobile or whatever. That's absolutely going to be true of Web 3 and crypto. There's been a lot of debate. I'm sure you've participated in or watched on these things lately of what is centralization, decentralization, and how much of the espoused principles of Web3 are actually being truly adopted by the players or the successful players in Web 3. The big innovation that happened, and that will be an innovation for years and years, decades, at least a decade, is that a unique digital thing can exist. The fact that a unique digital thing can exist, one unique digital thing can exist,

Starting point is 00:39:34 is really profoundly transformational. Everyone could imagine one unique physical thing existing, but no one could ever imagine one unique digital thing existing. And now that one unique digital thing can exist, that will change lots of industries and open up new opportunities. Some obvious ones, I think, like ticketing or, fan clubs or ways that a consumer interacts with a brand, they can do that in a unique digital way where they have a representative of one thing that they own with that brand. I think that concept

Starting point is 00:40:09 of a unique digital item has enormous change potential. How do you start to vector on where that could be deployed? In some sense, it seems to be such a big idea. Every business should spend a little bit of time. What if the demand curve was much more filled up because we can be so discriminatory up and down that curve with our product or service or whatever and appeal to the superfan all the way down to the just barely fan or whatever? How do you even approach, okay, it's a big idea. Let's narrow it down to something tangible that we could put dollars behind and get excited about. This is by far the hardest thing and goes back to the match analogy. We've asked all our businesses to think about it. One thing we do,

Starting point is 00:40:51 every year as we get top leaders of IAC businesses together once a year and someplace nice and we hang out and do fun things. We go through annual plans, which is a bit of a grind, but the purposes get together and get to know each other. And at the end, we have always given a gift of some relevance to the participants. And usually the gift has timely relevance. A couple years ago, we gave everybody a Bitcoin and we said, do something with this, sell it, buy something with it, hold on to it. But now you have one. and tonight, you know what it is to play with it. Bitcoin was three years ago or something like that. It was when Bitcoin went up to $15,000. I remember our CFO was very upset, rightfully so,

Starting point is 00:41:32 which is we gave it to everybody at $10,000, I think, and it turned out we were naked, short Bitcoin because we hadn't bought them yet. So the liability just kept going up, and we had no idea where it was going to stop. We eventually purchased it at 15 or something like that. This year we did NFTs, and so we tried to get people to experiment. We want everybody thinking, about it because I do think it can transform a lot of businesses. But again, long-winded, going back to the match analogy, I do think it's more likely, frankly, that there will be new things that we start that compete with our businesses that are more successful in experimenting with these things than it is likely that our existing businesses make a big transformation among your product to

Starting point is 00:42:13 suddenly turn into a Dow or suddenly distribute an NFT that changes the trajectory of the business or something like that. What do the conversations between you and the other decision maker, senior leaders at the firm feel like around the topic of capital allocation? So if you look at IAC's outlay of capital, sometimes very large, like the MGM or Angie's List or Meredith or something, and then sometimes you're starting something brand new and buybacks are always an option in capital allocation. IAC, the central stock moves around. How do you deliberate between the different options of how to allocate the company's capital and what's sort of the nature of those conversations? I grew up in IAC. I had one job briefly out of college before IAC for a year and a half. It's been my whole

Starting point is 00:42:58 career. And so I take this for granted. But when people come into IAC for the first time, they're always surprised by the candor in our conversations and relatedly the rigor in our conversations. Capital allocation is the most important thing that we do. And it is every week we are sitting down and talking about that. And that process always has everything on the table. And I think that is, I've come to realize, not first hand, but second hand, that that is, I guess, unique. But when we're looking at things to say, well, we could do this or we could buy back stock. We could do this or we could buy this other thing. We could do this. And which one makes the most sense over a long period of time, which one is the most strategic value, which one has the greatest use of a finite amount of capital?

Starting point is 00:43:46 And we have that discussion. And I think sometimes people don't believe that either. Questions I always get from shareholders are, for example, when are you going to spin off X? And sometimes they get angry with that question. Why haven't you spun off X yet? And I say, well, we do think about it. We think about it all the time. And I say, well, you haven't spun off.

Starting point is 00:44:06 Well, we spun off another business. So we are willing to spin off businesses. But you haven't spun off this one? Yeah, we haven't spun off that one yet. But we do think about it. And it's true. We go back all the time. we say everything's on the table. There is no sacred item in here. We say, well, we can't

Starting point is 00:44:21 possibly do that. We'll never do that. It's on the table. And the opposite is on the table, too. People will say to me now, why haven't you spun off Angie or why haven't you bought in Angie? Angie's a publicly traded subsidiary of IC. IEC owns 85%. The public owns 15%. At one point, at one point said publicly we were thinking about spinning it and then we decided not to. And we get these questions all the time. But when we think about our capital and capital allocation, we think, okay, should we be spinning Angie or should we be buying Angie back in or should we be doing nothing? But all those things are on the table and they do get regularly reviewed when we're thinking about the priorities for our capital. And that is an important component of how we do what we do that we

Starting point is 00:44:59 won't eliminate those options because they can come back and they can make sense. And how much of that is quantitative versus qualitative analysis and insight? Is it a blend of the two? Is somebody there running models on one thing versus the other versus just knowing this is a huge opportunity that we can't stick into a data set yet, but we know it's there. What's the blend of qualitative and quantitative in the capital allocation decision-making process? Obviously, a mix of both. In every conversation, most of the people around the table, I have a general sense of how the

Starting point is 00:45:28 financials work. So we're not running a model every week on every alternative that we could do. That would be a big computer to do that. So we're not getting deep into the numbers until we've made, I'd say, the qualitative decision. I'd not say the numbers aren't relevant because they're in our heads and we're thinking about them for sure. But we're not running a model until we're pretty far along in the decision or until we think we have a strategy that we think makes sense. And then we're looking at the numbers to verify and challenge and see whether that'll make sense or not. But in the end, you could say this is true of acquisitions too.

Starting point is 00:46:03 The way that we're thinking about acquisitions and businesses that we want to buy were rigorous on price and we fight for the last dollar. but in the end, no deal we've ever done, the success has hinged on whether we've spent 10 or 20 or 30% more or less on the price. It's qualitatively, do we think this has a huge future? Are we right about this huge future? And if we are, then that difference in price isn't ultimately going to make the difference. And if we're wrong qualitatively on that, then we're wrong. And provided we haven't bet the company, that's also not going to make it a huge difference. Of course, you'd rather have lost less money than more.

Starting point is 00:46:39 but it doesn't feel much better to lose $270 million than it feels to lose $300 million. Of course, you'd rather have $30 million more. What idea or even company or investment felt the most right and exciting when the decision was made that turned out to be a disaster in your memory? Many. I can answer that question. I'll just do one, get his top of mind. But about.com. When we did about.com, now that's turned out in the end to be a very different business and a great business for us for reasons that are totally unrelated to our original acquisition. But when we did About.com, it was going to be integrated into Ask.com, and there was an entire strategy, and there's an entire sheet of synergies on like the executability scale

Starting point is 00:47:23 to be like eights or nines out of 10, not like stretching, very, very easy. And we were right about a lot of that synergy. We were wrong about a lot of it, too, but we're probably right about more than we wrong, but we were way wrong about, one, the fundamentals about business and how that would endure over time, and two, related, how those synergies would endure over time. So we crushed the synergies in the first year and delivered all that, what we thought, but we absolutely missed that the world, Google specifically, but the world did not want horizontally focused information side. The world wanted vertically focused information. And after that first year, I forget the exact

Starting point is 00:48:11 timeline, maybe it was two, maybe it was a year and a half. It just went straight down and really disastrous. We bought the business, I want to say it had 30 million of profit. That first year, we took it up to 60 million of profit. And shortly after that, it was losing $20 million a year. It was a complete reinvention by Neil Vogel and his team that brought it back to a really good business, which we now significantly put more capital into with. a big acquisition. But that's dot dash now. And then we just did this acquisition, Meredith. That was absolutely disastrously wrong. We went from Kiro to zero on that one very, very quickly. What was that change? Like just finished that story to dot dash. I think investopedia is like maybe an

Starting point is 00:48:51 example in that portfolio. Did you just flip it from horizontal to vertical and then apply some of the same ideas? What was the strategic transition? We started with Neil had an idea. And I remember when we had some inkling at some point where we hired Neil, he and I went out to drinks, and I said, you're going to look like a hero for the beginning because we've got all these synergies and there's going to be a lot of profit and then you're going to have to figure out where to go from there. And I didn't, at the time I said that, I believed that, but I didn't know how pressing it was. I mean, I didn't think it would just fall off a clip. And he said, okay, we're going to try this. And I can't remember what the first thing was, but when things

Starting point is 00:49:29 were going bad. So we're going to try this. And I said, okay, that makes a lot of sense. And so he went after it for however it was three months, six months, nine months or something like that. And it didn't work. Was it some change to about.com? And I said, okay, well, that didn't work. He said, I know we know exactly why that didn't work. We're going to try this other thing. And here's why it's going to work. And they put together this whole thing. And it made a lot of sense. And he said, okay, go do it. And he tried that for six months. And that didn't work. That happened a third time. And the fourth time, he said, he said, we have to break it up because we've tried every version of horizontal and horizontal doesn't work and we have to go vertical. So we're actually this thing that we bought that

Starting point is 00:50:07 was valuable. It's a well-known brand called About.com. No one knows it anymore, but it was at one point about.com. We're going to just basically get rid of that and we're going to create, I can't remember what it was, six or something new brands from scratch. And we're going to move all the content to these new brands and we're going to clean up all the content and we're going to have less content and we're going to have better, less content in these verticals. We had one for health called Very Well and one for home called the spruce and so on across a bunch of verticals. And I said, okay, this plan also makes a lot of sense. I said, but we're not going to have a fifth meeting like this. So I hope it works. Sure enough, everything went and this happens when you change a brand

Starting point is 00:50:46 online, your URL becomes forgotten for a period or you go to an unknown URL and so you have no traffic and then you build it back over time. And the curve for dot dash, what was about.com, became dot dash and all these different verticals was pretty sharp V. Maybe it was a U, but it was straight down and then boom, it went up and it just kept going up forever from there. And it was really the bottom of that U or V, whatever it was, was very uncomfortable. But we hung on and it went up and went up forever. And that's really credit to Neil and the team that he built there to keep trying, not giving up, and build something amazing. It seems like a really interesting common theme here is brand roll-up versus brand consolidation.

Starting point is 00:51:30 You've just given an example of it. Matt was another example of it. Angie's been a consolidation of brands. How do you know which is the right strategy when? Angie's a great example of we took too long on that. There's a big debate between Barry and I where he was right in the end that we had moved too slowly to make this. He was pushing to make this change sooner and I was resisting making this change. But we had Angie's list and we had Home Advisor. And at some point, we were saying to

Starting point is 00:51:59 ourselves, okay, what do you get at Angie's list versus what do you get at Home Advisor? At some point, we didn't have an answer for that. Who would do one versus the other? And we were spending a fortune on market. There are also, I think, some fundamental weaknesses in the Home Advisor brand, like notwithstanding spending a billion dollars, we couldn't get brand awareness above a certain level. and you would have a conversation with people. I talk about this all the time, but you'd go to the cocktail party and you'd say, oh, we have Home Advisor and they'd say, what does it do? He'd say, oh, you matches homeowners with service professionals.

Starting point is 00:52:29 They'd say, oh, Angie's List. And you go, well, no, it's Home Advisor. And notwithstanding, at that point, we were probably spending 10x on Home Advisor what Angie's List was spending when it's brand. There was some fundamental flaws in that brand. But in the end, we couldn't distinguish between the brands. We were spending a huge amount of money. we said, well, let's concentrate all of our money in one brand.

Starting point is 00:52:49 There are times we've had exactly the opposite conclusion, which as we said, this brand serves this demographic, this brand has similar content, similar supply, might have identical supply base, but serves a different demographic. So it needs to be positioned in a different way, and so there should be multiple brands there. We've done that multiple times. That Dash does that today now with Meredith, where you talk about what's the right vacuum cleaner for a certain crowd is different than the right vacuum cleaner for another crowd, but you want to review all the vacuum cleaners and test them all out in one place.

Starting point is 00:53:19 And then you can write different angles for why that's better for one demographic versus the other. It really is situation dependent, but you need a reason for the second brand to exist. And more shelf space can be a reason, but I don't think just more shelf space in and of itself is enough. Because if you can put your power behind something and say, we want to transform the category, we want to be the leader in this category, we want to have the best product in this category, you'd say, then you should really put all your firepower behind that thing. It starts to be different, maybe when something's more mature and the shelf space game's a little bit different. But I think with Angie, we said there's not enough difference here. And we want to transform the category and we need

Starting point is 00:53:59 a brand to do that. I think one of the most interesting things in business is the mind of the consumer and working backwards from it. And very quickly, you get to category definitions, marketing versions of product positioning. And it sounds like what you're saying is you need to have a really good sense of what is a category and what isn't. And if it's one category, you consolidate. If it's multiple categories, you expand or you hold multiple assets. So what are the acid tests for, yes, this is a category? Is it personas? Is it a specific use case? What have you learned about category definition and positioning? Sometimes we're very surprised by this. We think we're getting into one category and we end up with a new category. I'll go to the origin of Angie. Angie going back

Starting point is 00:54:41 was Home Advisor, a combination of Home Advisor and Angie's List. And before that, Home Advisor was called Service Magic, which is a business we bought in 2004. We bought Service Magic more or less as part of City Search, which no longer exists. We spent a huge amount of money unsuccessfully in City Search over a period of time trying to build a local business. And we said, okay, service magic is in this category, which at the time were calling local. And the local category, is huge. It's the yellow pages, and this part of the yellow pages is big, so that's really interesting. When I think about Angie today, I don't think about us as going after what was then the Yellow Pages advertising dollars and what is now whatever advertising dollars. Those are dollars that we go after

Starting point is 00:55:31 and are important dollars that we go after. But what I think about it today is the home. And how are we transforming homeowners journey? How are we transforming what is it means to own a home and the hassles of owning a home and all that. I don't think about it as what is local and how do you find a phone number, how do you find a contact or how do you find a contact in this thing? Where Angie goes in the future is what are you spending on your home and how can you make the amount of money and time and hassle you're spending on your home easier? And that's a totally different category. There's overlap in those categories, but that is a totally different definition of the category in the way we think about today versus the way we started,

Starting point is 00:56:12 that I said surprises us. It shouldn't be that surprising, but it is, it was not the original way we thought about the category. And I can make that example in other ones too. Is there anything major about just like how you think generally that's changed the most from when you took the job as CEO to today? Over that period, we embraced what we are and what we do well, which is being a multi-business business, being an anti-conglomerate.

Starting point is 00:56:36 You talked a little bit about how this evolved. We said, well, what are we good at? What have we done? What have we done well? Let's lean into those things and communicate on those things. There were times where he said, well, should we present IAC's earnings on a consolidated basis? Well, we never thought about it on a consolidated basis. So why would we present it on a consolidated basis? We should own the fact that we're a multi-business business and we should lean into that. One of our directors earlier this week said, I bet not a single one of our directors could accurately say what IAC's aggregate earnings per share is. And I think that's true. And I think that's something that I'm proud of, frankly, because that's not the way we think

Starting point is 00:57:15 about the business and operate the business. And we embrace that. We embraced that in the way we started communicating very clearly that we're a multi-business business and that we know we're allocating capital to different businesses. And here's how we're thinking about it. And the first letter I wrote to shareholders was very much that. It was, here's, I think, what we are, and here's how I think we're going to operate going forward. And it is very much about being a multi-business, business, and allocating capital and looking at a sum of the parts. And we know we understand the responsibilities that puts on us to treat it as a sum of the part. And embracing that, I think, is different than where we started. And getting comfortable with that is different than

Starting point is 00:57:55 where we started. We've talked so much about deploying capital in the unique anti-conglomerate holding company structure, really haven't talked about where the capital comes from. So sourcing and cost of capital for any holding company is really interesting through time. Berkshers had its float and Henry Singleton at Teledyne had his share issue and share buyback, extreme strategies. How do you think about the different tools in the toolkit for sourcing capital and the strategy for doing it? We look at everything in the toolkit, but some of the principles that we've generally tried to uphold consistently and probably one theme from this discussion is there's not a lot of things we do consistently. But one is when we are

Starting point is 00:58:34 spinning something out, we try to at least get our basis back. Our basis just means basically what we put in it, but it's more of a tax term because we get that tax free so that we can essentially recycle the capital. So in all the examples of businesses we've spun off, and I think basically every case, we have gotten our basis out, or sometimes more than our basis, but generally our basis out, tax-free, so that we can recycle that capital. And then the thing that gets fund of the shareholders is pure profit, essentially. It's incremental. So that's one component in replenishing the capital.

Starting point is 00:59:08 The other is, as you said, to use everything in the toolkit. So the range of things in the toolkit is issuing stock and repurchasing stock, which are in opposition. But when we're talking about raising capital, it's issuing stock. We've done that. We acquired Ask Jeeves. We did that for stock. But we also at the same time said we were going to buy back half the stock that we were

Starting point is 00:59:26 issuing because that was what made sense for the seller wanted stock and we wanted to issue some stock but not that much stock. But we said we can issue stock. We can issue public stock. So I see parent stock. We can issue subsidiary stock, public or private. So in the case of Angie's List, we had a private subsidiary called Home Advisor and we used that currency to buy Angie's List, meaning we merged Home Advisor into Angie's List and ended up with 87% of that company in that transaction. So we use private company currency. We've used public company currency. After that, we used the public company currency to buy handy, which is where we got a sheen, who's the current CEO of Angie. We took public currency and issued that to public currency of the subsidiary and issued that to us. We've done converts,

Starting point is 01:00:10 which is to say, we don't like selling stock, but maybe we can get comfortable selling stock at a 50 or 100% premium to where we are right now. And that's a convert, and we don't mind giving the downside protection exchange for that. We've used that. And then another important one is, well, how do those instruments, and we've used debt to straight debt also, and how do those instruments of debt or debt like securities travel with our companies? So sometimes when we spend companies off, we spend that debt or other things with it so that we can start over. But the whole toolkit always has to be available for us, and it gets the same capital allocation discussion. In that discussion, we are thinking about, okay, where do we put it,

Starting point is 01:00:47 but also where do we get it and what are the things we can use to go get it? It seems like the big lesson is don't do capital allocation by policy, do it by circumstance. Respect the toolkit and every situation is different and you've done it all. That's totally right. And I think you can apply that statement and you just made to almost everything we do. What brings you the most personal joy in all of this? This is sort of this open business playing field in a kind of unique way. It really isn't a company like IAC.

Starting point is 01:01:15 It's really not one of its size and its track record. And it has one of the best objective track records, whether that's shareholder or return. return on capital, whatever. Where do you find the joy in all of that personally? I only realized this recently in the last few years, but absolutely the things that bring me the most personal joy is when the people around us are doing well, are succeeding. In other words, when our shareholders have done well, when our employees have done well, that brings me more joy than not that I don't like to do well or do well financially or whatever, but I just vested into some stock or exercise some options. It's not like the happiest day ever, like a big

Starting point is 01:01:57 celebration for me personally. I'm very grateful for it and I'm not unhappy about it. But it's not a thing that brings me the same amount of joy when somebody else does. And you can see the impact that it makes for them. Those are the ones that absolutely bring me the most joy. People a lot of times don't believe that because I could also be difficult at maybe an understatement and giving it away in the first place and challenging on how to do things like compensation and how to do things like what to pay for things and issuing stock. We're not easy on those things, I should say. But in the end, when it works and it succeeds for people, that absolutely brings me the most joy. It's kind of fun that just yesterday random juxtaposition, I did one of these with Peter Ternan, and I asked him a question

Starting point is 01:02:41 about Rupert Murdoch and what he learned from him, working with him, et cetera. And he told this funny story about how he was arguing with Barry Diller, who gave Peter his first job, or major job, I think. And Peter said to Barry, you're the most stubborn like paid in the ass I've ever dealt with. And Barry said, no, it's Rupert's more of stubborn paid in the ass than me. I'm fascinated to know what you've learned working with Barry all these years that makes him so distinctive. I think he rightfully is in some sort of Mount Rushmore, depending on the Mount Rushmore of what, but he's on it, whatever it is. And it's just such an intriguing business person and investor hybrid through time that's

Starting point is 01:03:16 fairly singular. So I'm very curious, what is that distinctiveness in your eyes, having worked with him for so long that you'll remember most? One is pushing me and others to always think bigger and more ambitious. I use the example all the time. You come in and you say, okay, I think we got this thing. It doesn't even exist yet. And if we do everything right, whenever we can build it up,

Starting point is 01:03:39 100 million of revenue or even 100 million of profit. Why bother? That's what you're going for? Why bother? Why would you aim for something so small? It's like, and being able to reframe everything, and that goes across all areas that you see Barry do this personally, and I see him do this with the business. He's always raising the bar, and that's hard on some people, always raising the bar. People joke about the pencils in the conference room are always sharpened. And that's because at some point, Barry said, well, why aren't the pencils sharpened? And you could say, well, what kind of jerk, pain in the ass makes sure the pencil sharpened? But you could also say, what kind of idiot wants to be in a conference room with a bunch of dull pencils all the time? Just sharpened

Starting point is 01:04:25 the pencils. Those things turn into legend and people say it's silly and whatever, but you have to continue raising the bar. You have to continue to not be satisfied with what you have. And you have to continue to figure out how to push to make it better, make the product better, make it aesthetically better, make the service better. If you don't challenge the thing that's not working, then you won't get it to work. So some people don't like to be challenged. Well, it's not that big a deal that this thing doesn't work. We don't even use it that much. Okay, well, then get rid of it. But don't have a thing that doesn't work here, either make it work or get rid of it and don't tolerate a thing that doesn't work being here. That thing of constantly raising the bar and

Starting point is 01:05:05 relentlessly raising the bar. It's a big challenge, but it is an important lesson on how to go for excellence. And then the other one, which has been a bit of a theme today, is being open-minded, being willing to be challenged and being willing to challenge others. And that candor and transparency is something I learned very much from Barry and very much a lesson in the company. Like, if you're not talking about what the issues are, you're not going to solve the issues. If you're not raising the issues. If you're not challenging the decision, then you may be not getting to the right decision because you're not raising the issues that come with that. That's definitely been a thing. I love what you said earlier, just to put a final point on it of maybe what started as an

Starting point is 01:05:47 opportunity to reveal inventory digitally in an OTA or something. Now is the, just give me the one. That's the best in work. Go from collection to curation and completely change the model. That is the theme I'll take from this, that everything's idiosyncratic, everything's the result of constant change. And if you're going to win, you've got to constantly improve. And it seems like IEC has been one of the companies to study for investors out there just because the number of experiments you've run and done to learn that lesson. Really, really interesting stuff. And evolution, by way, is important too, because you need all those hotels or all those flights or all those whatever in there to pick the one. You couldn't otherwise get there.

Starting point is 01:06:24 It evolves. So it's the next available convenience jump, not the ideal. You have to respect reality. That's exactly right. That probably. process of building can be hard and messy and different, but that's going to be necessary. Joey, I've had so much fun doing this. I ask everybody on the podcast the same traditional closing question. What is the kindest thing that anyone's ever done for you? When Jack Welch was an advisor for IAC and he became a very close friend and mentor, and I distinctly recall this, but he didn't have to do this. But he held my hand in a way and brought me. with him to a bunch of people and to a bunch of things in ways that he said that were

Starting point is 01:07:08 welcoming and validating in ways that he didn't need to do that with his personal brand, which was the sort of greatest in the world from business and his personal capital, which is exceptional with everybody who knows him well. And he did that in the most gracious and the most generous and the kindest way possible. and I'll never forget that he did that and how well he did that. Many people have done many nice things for me in my life, but you think about kindness is like kindness requires some level of self-sacrifice and putting yourself at risk or stepping out in a way.

Starting point is 01:07:48 And I think that Jack really did that with himself in ways or he just didn't have to, but he did for me. And I deeply, deeply appreciate it. I'm so pleased to hear your answer. My cousin did the same thing for me. effectively like giving me his social capital. This was at college. And he, as a result, introduced me to my wife, my best man, another groomsman. He went way above and beyond. He didn't need to do any of that. He needed to take me out for one beer or something. But I love the sacrifice and the spending of

Starting point is 01:08:15 capital, the social capital to benefit somebody else. I mean, it's a beautiful thing. And I love the definition of kindness. So what a cool place to end. Joy, it's been so much fun. Patrick, thanks a lot. I really enjoyed this too and love what you're doing and love the whole concept of the intellectual curiosity behind your podcast here. Thanks so much. If you enjoy this episode, check out join colossus.com. There you'll find every episode of this podcast complete with transcripts, show notes, and resources to keep learning. You can also sign up for our newsletter, Colossus Weekly, where we condense episodes to the big ideas, quotations, and more, as well as share the best content we find on the internet every week.

Invest Like the Best with Patrick O'Shaughnessy - Joey Levin - Building an Anti-Conglomerate - [Invest Like the Best, EP. 264]

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