The Future of Business: Single Person Companies vs Giants

0:00Hey, everybody.

0:01Ryan Daniel Moran:Welcome to another episode of the Business Lunch Podcast with your hosts, Ryan Dice and myself, Roland Frazier. Ryan, this is the first time that we've really been able to be together even virtually in way too long.

0:14Michael O'Neal:How are you doing? Months. Great. I missed you. Yeah, we were talking. You took the entire month of February off, which is awesome. We like to take 30-day vacations. That's kind of one of our things. You took February off. and then right when you got back, it was kind of like a weak little, like there was a weak window in there and then I was basically on for two weeks and now here we are together at last. Yes.

0:40Ryan Daniel Moran:It's been a wildly crazy time. It was and I think we have a cool thing to talk about and there's a few things that are going on out there. One of the things was Elon Musk has said that he's betting that there is the first, trillion dollar single person company has already been born and we just don't know who it is yet. 19 companies that were single person companies showed up on the Inc. 500 or 5000 list in this highest ever, right? You're saying? Yeah. Yeah. Crazy. Yeah. 19. That's that's insane. And then there's this general discussion out there about the 10X company with massive scale and growth compared to the lean architect single person companies.

1:32Ryan Daniel Moran:And so I just thought it would be kind of fun for us to talk about, is one better? And what are the pros and cons of maybe targeting to be a single person company? I think another thing I just saw was Oracle laid off 30 ,000 people. And the message was Oracle lays off 30 ,000 people with a cold email at 6 a.m., which leads to another discussion that I do want to do with you on one of our future episodes about businesses aren't your family. And you're transactional. And the great resignation, you're just resigning and going to the highest bidder, which I don't blame you for as an employee. But are you supposed to get like a call from mom from the company for 30 ,000 calls?

2:21Ryan Daniel Moran:That seems incredibly inefficient. I don't know how you warmly lay off 30 ,000 people. Yeah, like, you know, hey. And if I'm the person being laid off, I kind of don't want a call. I don't want an interaction telling me why I'm useless and valueless to the company. It's just, okay, I get it. I got to go do something else. So I would like to do an episode on that. But this one is not about that. This is about the single person company. Let me just get your general thoughts on that. And then let's talk about pros and cons.

2:51Michael O'Neal:So first of all, of a single person company versus like, should you just go and pull an Oracle and fire everybody to become a single person company? So is that, is it, should you start one or is it, should you seek to become one or become closer to one?

3:06Ryan Daniel Moran:I think it's two different good frames. I think more people here will resonate with, I've got a company. What do I do? Do I move towards lean architects? So that's not a single person. That's just basically, if I can cut my labor expenses by 75%, do I do that? And if not, why not? and if I do that, what are, you know, what's the likelihood of being able to do it and sustain what I've been able to do? How does that affect scale? I know we just had to hire a bunch of people to help us with fulfillment in one of our businesses we were just talking about before we came on. So let's just kind of talk about the existing company and lean versus scale.

3:50Ryan Daniel Moran:Sure, so, you know, it's funny

3:52Michael O'Neal:because you mentioned Oracle. I guess a few weeks ago, Jack Dorsey, you know, announced that what's his holding company that has like Square and all that block, I think is what it is. I think it is, yeah. They announced that they were laying off a whole bunch of people. And I looked at the numbers. I don't know if you did, but all that their layoff did was bring them down to the same approximate headcount as like every other company, their revenue size. Yeah. Right? I didn't see that. Well, yeah, yeah. It's amazing if you go and look at it. And so with so many of these like layoffs that you're seeing, they're couched in this like well we're laying off because of ai and ai is creating these efficiencies and so we don't need all these people my theory of the case is that that's just the politically correct thing to say um that simultaneously uh is going to help your margins and help your balance sheet um while also um making you sound cool because look at us we're ai-ifying everything i don't think it's true i think most of them are just kind of shedding um dead weight so i'll tell you the approach that we've had um as soon as it was clear that ai was a thing we were we sought to implement it in all the different parts of the company that we could and the first layer of people that were cut were the people who refused to layer you know utilize ai in their business and we're not involved frankly on the marketing side Yeah.

5:25Michael O'Neal:And now what we're doing, because we have AI inside the business, is we're looking to hire more people because the people we have are efficient. We're able to get more out of them. And therefore, the business as a whole is growing. So I don't think the goal should be smaller headcount in any business. The goal should always be, wait for it, revenue and profitability, right? I mean, the goal should be, how do we increase top line? How do we increase, while increasing bottom line and distributable cash? Like that's like, that's the goal. And typically that's going to happen as your productivity goes up.

6:00Michael O'Neal:And I think productivity is going to go up when you have humans combined with technology and automation. And it's almost never just technology and automation alone, which I like because it

6:10Ryan Daniel Moran:goes to when we did our get scalable live, our big event, um, you know, four or five months ago, we talked about the, like that single metric to kind of rule them all is RPE, the revenue per employee. And so I think that this gets back to let's look at how, you know, how productive are our employees and let's measure it with revenue per employee. And while your accountant might not be able to, you know, perform at the same level as your star salesperson, it's still a great metric for you to use. and there are benchmarks that you can compare towards other companies in your industry to see how you're doing.

6:48Ryan Daniel Moran:And so if you can get an edge there, then you're getting an efficiency edge and that's a good thing. And I wanted to mention, I was listening to Gary Vee talk about this and he was talking about his business and he's like, so let's say I've got 400 employees and you decide you're gonna out-compete me because you'll be able to, you know, slash your workforce by 75%. So now you've got 100 employees and I've got 400, and let's assume they're all paid the same and our services are basically the same, then you're significantly more profitable. So you can do one of two things. You can either pocket that profit, I guess three things.

7:29Ryan Daniel Moran:You can pocket that profit, you can reinvest it in growing the business to be better, or you can lower your charges, your fees, and, you know, steal business that way. And he said, but cutting, you know, and this is me saying this, cutting your fees is always a race to the bottom, right? Perfect competition is a terrible place to be. And it's not going to last very long. Let's rule that one out. Let's say that, you know, you're either going to pocket the profit or you're going to reinvest in the future, which is, you know, they're two smart things to do. But he said, you know, but here's the thing.

8:00Ryan Daniel Moran:If I take the time to get my 400 employees completely up to speed and doing all the things that I could have done with 100, I'm probably going to be four times more efficient and better, you know, capability wise than you are. and therefore I can out-compete you that way. So is the correct move to do the cut and pocket the money or reinvest or is the correct move to get as many of your people up as possible? And obviously there's gonna be an evolutionary attrition based on people that don't wanna up-level. But I thought that was a really cool way of looking at it and I thought that was something that would be worth talking about.

8:41Ryan Daniel Moran:What are your thoughts on that concept? I think he's exactly right

8:43Michael O'Neal:because he's approaching it exactly, frankly, that the way an entrepreneur would approach it, which is so many of the people who are talking about this stuff are not entrepreneurs. You've got journalists, you've got academics, you've got bankers and like private people trying to make money with headlines. Exactly. You've got people selling AI software. I mean, it's just everybody's being hurt on this stuff except for the folks who are actually operating businesses. And so the operators of the world don't think, okay, I've got this new amazing tool. It makes my people twice as productive. Okay, then I can go from 400 to 200.

9:17Michael O'Neal:no self-respecting operator worth their salt thinks that they think oh my god so you're telling my 400 people will now do the work of 800 that's leverage yes like that's leverage and when you have leverage you don't think oh i know i'll put less in like that's stupid but that's not how math that math don't math and so but now he brings up a really good point which is the leverage, the gains don't occur immediately and they don't occur evenly. So if you have a large team, sometimes it does pay to get smaller and to then scale back up. And that is frankly exactly what we had to do. We were over bloated.

10:00Michael O'Neal:And had we attempted to implement and roll AI across in these different systems across the organization, I know for a fact we would have had significant pushback and change management issues and we would have had it from our lowest performers, right? Because in the process itself, they would have been exposed. They would have known that now the expectations of performance would have only gone up now that they were given these tools. And so they would have pushed back. And so it would have just been a hassle. But so what people do now is they'll delay rolling this out because of change management issues.

10:33Michael O'Neal:A far better thing to do is just to say, well, who are the people that I'm most worried about pushing back on change management and why? Is it a good reason? Is it merely that they've got some kind of legitimate fears about this that are worth talking through? Or is it that they're simply just an underperformer and they need to go whether AI existed or not? And that's why we just made the decision of let's use this as a time. And let's not blame AI, which everybody else did, right? We said, we're going to be letting a bunch of people go. Right? And we didn't want to disparage the people, but at the end of the day, we let a bunch of people go who simply weren't performing at the level that we needed them to perform at.

11:17Michael O'Neal:And once we actually got leaner, it was so much easier to roll out these AI initiatives.

11:24Ryan Daniel Moran:I like that you said they weren't performing at the level that I think you said that we needed them to perform at because that level is a moving target. if without AI or typewriters or computers or whatever you want, if without the thing that has come along to disrupt and make everything potentially more productive, if without that you were, if you weren't going to put that in and you were going to stay at the level that you were, you would be underperforming. It would be a terminate anyway, right? Right. So so and as a business owner, you can't you can't make it's irresponsible to make a decision to keep an inefficient person who's not willing to up level and evolve.

12:16Ryan Daniel Moran:And so it's irresponsible for the business, by the way.

12:17Michael O'Neal:It's also mean for them, because what that means is there you're allowing them to persist in a in a place where they can't be the best version of themselves either. So better to let them go and let them find a place where they can succeed. So anyway, sorry to interrupt you.

12:29Ryan Daniel Moran:Yeah. And I mean, that's to me, that's just business 101. And so I think that that like, that's a really good thing. And it goes back to RPE is is that if RPE benchmark is changing because of some technology like AI, and you need to bring that in to stay competitive in the market, and you've got a workforce that, you know, part of is not open to that, which, you know, there's always resistance to change, then then that's just the logical thing to do. It's like there's no coldness. It's just it's a business decision. And I think giving people the opportunity to embrace the technology, supporting the transition and the up leveling is a smart thing to do because good people are hard to find.

13:12But man, if they're going to do it, they shouldn't be there.

13:16Ryan Daniel Moran:Right.

13:16Michael O'Neal:Yeah, for sure. And I think there's a big difference between someone who has concerns and is reticent about something and they make those concerns known and they're still open and willing and collaborative in it. And somebody who's just flat out like, not on my watch. Right. And you can tell.

13:35Ryan Daniel Moran:It's kind of a hybrid level beneath not on my watch and disagree and commit, right? Exactly, yeah.

13:42Michael O'Neal:And so we did have some people on the team who they just were nervous. Like, they were scared. Like, it was just new technology. And they were just, they didn't get it. Like, they just weren't that technical. And so they were concerned, frankly, in one case, that they were just going to look foolish. So it's like, okay, like, let us get you some extra help there, right? And then what you could see is one, a willingness to try, like a willingness to do it. And then once they got a hold of it, they were rocking and rolling. That I'm fine with. But this is the important thing. And this is what you were saying before.

14:20Michael O'Neal:They have to already be great. I cannot emphasize this enough. We're talking about AI implementation and AI. Do you need big teams or do you need small teams? What you need is great teams, great people. that's it whether you have one or whether you have 1000 they need to be great and if they're not great then they probably shouldn't be there and if they're not great the eye is just a multiplier and and so if this person is a four out of ten okay cool like now you're gonna we're gonna assign a multiplier at them so they're gonna be double so now they're an eight fantastic but what if they were a nine they could be an 18 but they're also an eight in the new order

15:03Ryan Daniel Moran:And so the 8 in the new order is a 4 in the old order. So they are still who they are, right?

15:09Michael O'Neal:And they're even, but the gap is, like, that's the thing. The gap is even worse because now the difference isn't between an 8 and a 4. The difference is between an 18 and an 8. Like, the gap only widens as you add multipliers. So you cannot, as we begin to introduce new technology that accelerates, the worst thing in the world that you can do is to allow people in your organization to sit and to adopt these technologies because they're actually going to slow you down in the aggregate. This is what these big companies get. I promise you, they are not making these cuts because AI is making them more efficient.

15:50Michael O'Neal:They are cutting their lower quadrant of performers because they know when they make these people faster and more and yield a higher level of productivity, they need to have their best talent. And what they're going to wind up doing is just rehiring more talented people. Exactly what we're doing at a slightly smaller scale than Cisco and Block. Just slightly though.

16:14Ryan Daniel Moran:So if somebody's, you know, consuming this podcast and thinking, you know, well, I really like the idea of I've got some people that that I think I can actually. I can create apps and I just don't need that function anymore. And I've got some people that are doing that. Maybe they're order takers, maybe they're all purpose consultants, you know, some of the things that are getting clerical, some of the things that are really truly getting eaten by AI. So that person and that job title is really going to disappear off the org chart because it's just, it's been automated. How do you think, what do you think the best move is in terms of, okay, I've got that person, if they were a four, they're gone.

17:08Ryan Daniel Moran:Let's say they're an eight or a nine, but they don't know how to do the new thing. That job's gone. Literally, in our accounting company, all the people that were doing data entry for transferring the form-based tax information to the computer, they're just gone because we don't need them anymore. So how would you say and how are in in our companies you addressing that in terms of you know what do i do with those people and then what do i do with because there's usually a little bit of an overlap of the money that it costs to make that automation happen but i mean once it's done it's done and the profits are there um do you hire more people in different places what how does how do those two things work well Well, I was going to ask you if you're seeing a lot of whole entire roles going away.

18:05Michael O'Neal:You answered the question when you said that, because I really haven't seen in the companies that we're watching, that I have direct oversight over and that I'm looking at day in, I'm not seeing entire roles necessarily disappear. It makes sense, the data entry one. It makes sense that that one would go away. What I'm seeing is departments flatten. And this is something that you talked about. a year ago. I think we did a podcast on it, like the great flattening. Um, it was all your concept. What, what we're seeing is right now, at least as teams are getting smaller, um, leaner and more efficient, we're able to lose a layer of management because you just simply don't need the layers of communication.

18:47Ryan Daniel Moran:I mean, if one person talk, but let's talk about, and, and, and I think that's a good analogy. Let's talk about the, the, the function. So, so certainly, uh, well, we, we have businesses that have um sdrs right sales development reps which are also known as setters um i'm seeing those people go away a lot or being shrunk down dramatically through automation i'm seeing data entry i'm seeing customer service especially um uh so many things like that yet the i mean it's pancaking flattening you know like big time uh in terms of the people because the roles just aren't needed because the roles have been filled by better for the customer.

19:32Ryan Daniel Moran:Like, it's not just that, like, this is an evil move by a greedy, profit-seeking company. This is, you know, actually customer, you know, now when customers are calling for appointments at the auto shop, they get immediately served by an AI agent whenever they call 24-7, you know. They, the people who, are needing to get answers to this like status updates on, you know, where does my tax return sit? Now it's an immediate automated answer. And so those are truly getting replaced. Let's talk about that first. And then if you want to talk about management, we can talk about that.