Oura’s Tom Hale: What People Don’t Tell You About Being CEO

20:56Brian Halligan:Thank you very much. No cap. So... Stuff just slows down. Yeah. And like the to-do list for HubSpot, like it just got shorter. Like the bigger you get, the less you get done. You have tricks on how to keep the pace going. Yeah. Yeah. Okay. I got a couple of tricks. I don't know. I think they work, but here's one. Okay. So the first thing is you keep as few layers between the top and the bottom, meaning, you know, you don't have senior directors and directors and VPs and senior, like you just try and kind of resist that for as long as possible. I think this is famously a flat organization if you can do that.

21:34So I think that's one way to do it. I think the second one is when you think about middle management, I often favor promoting people internally in the company into middle management as opposed to hiring them. Now, I don't always do that. But one of the reasons you do that is because you're able to identify both the kinds of people who might be good at it, but also you're able to identify are they true blue believers, and do they have the passion and the mission? Because the worst thing you can have is somebody who's in middle management who has no ambition. Because that's actually the Dilbert.

22:01The Dilbert is like, I don't want my life to be complicated. I want my work life to be as manageable as possible. And I'm going to manage everything to be managed. And that's the definition of an empty suit, right? What you hire is an ambitious middle manager whose ambition is to be a CEO and know that at some point they're going to leave because they're going to have to. But that ambitious middle manager is one of the most effective prophylactics against sort of the propagation of bureaucracy. I think the other thing that you do is you say, listen, we really are going to empower for you, and we're going to hold you accountable.

22:31And then you make that true. You can't hire a dog and then bark for them. You have to hire somebody and say, like, you have got to do this. And I'm going to hold you accountable for it. And I might have some advice for you, and I might have some guidance. And like, but you've got to do it. And I think it comes back to sort of a variation on ambitious middle management. But it's basically, we're going to give you the keys to the car. So drive fast, but don't crash. And I think that the last piece of it is you create a company culture that reinforces that. It's like risk taking. you know we're gonna we're gonna let you take some risk and um but we're gonna support you through that and we're gonna give you the best advice we can it goes back to this asymmetry thing where if you have enough time and energy to talk to people in middle management you can one root out the people who are the Dilberts because you're talking to them and then two you can find the ones who are not the Dilberts and you can encourage them and model and say hey do what do

23:20Brian Halligan:what Sal's doing Sal's doing an amazing job okay related to this this is more in b2b than b2c and you worked in a bunch of B2B businesses. As the layers come in, the distance between the CEO and the customer increases. Do you have any hacks for, okay, now you've got a bunch of layers. How do you stay in touch with the customer? How does that customer's voice propagate through the org? Yeah, well, I worked at SurveyMonkey for a couple of years. I know. This was one of the things that we did was to make sure that the voice of the customer was sort of both programmatically pulled into the company and then distributed without the company.

23:55So I think the ways you do that are like, you know, NPS surveys and sharing the verbatims. And you have rituals and meetings where you do that. And I can't remember, was it HubSpot where they had the customer at the table every time? We did. Right? You always had like... We still do. At the board meeting, we invite a customer. We do a customer panel. And I think that's what you do. You set a culture that says it is part of your job expectations that you're going to have customer interactions. If that's cruising Reddit or talking to people on airplanes or going to B2B, going and talking to customers, you are just going to do that.

24:27That's part of the job expectation. And you create both the time and the expectation that you do that so that you end up with more customer input. And then you say, by the way, this is how you're successful in this organization. You're successful when you're framing things in terms of customer needs and solutions for customers and customer narratives and customer values. And in health in particular, it's actually really easy because the customer stories for us are things like, you saved my life. You got me pregnant. You saved my father's life. You helped me change my life for the better. And those narratives, by the way, are incredibly motivating.

25:05Those kinds of narratives, like people wake up in the morning at Aura and are like, man, I could save someone's life today. What am I going to do to make that better? And the thing is that that flywheel of like both customer understanding means you do a better job, but also customer empathy for something that's important. It just drives like, I don't know, extra 10, 15, 20, 30 % of performance because people believe in what they're doing.

25:31Brian Halligan:Okay. A lot of founders are asking me about this, the kind of the missionary to mercenary ratio. And the mercenaries start showing up around 200. Yeah, yeah. Talk to me about. Hey, listen, if you're in sales and you're not a mercenary, and so, I mean, it's different by different companies, right? I mean, some companies are more sales driven, some are more marketing driven, some are more product driven. So I think that that ratio, by the way, you need both. You need missionaries and mercenaries. I think if you have mercenaries in your product and engineering work, probably not the right place for mercenaries.

26:01You want people who want to build beautiful things that are amazing, that express who they are.

26:05Brian Halligan:What do you do if you're building something boring? Same. You find the people who are passionate about it, you know? I mean, you find the people who care about what it is that they're doing. Or you find a way to make them care. I mean, SurveyMonkey, it's interesting. SurveyMonkey, we translated the mission into giving a voice to all the people who don't have voices. And the thing is like, okay, sort of true. But the reality is the people who came to work were like, yeah, I'm amplifying the voices of employees or customers or whatever. And that was a reason for them to be committed to their mission.

26:37So I think you've got to find something that does it. But I just, I think it is so important to have missionaries in the company and to elevate them. At the same time, you know, if you're going to market, you want people who have commercial instincts. And commercial instincts are correlated highly with a mercenary viewpoint. Now, I think mercenary is also a caustic term. It basically implies that you're willing to kill for money. And I don't think, that's what that term means. And what you really want are people who like, they want to solve customer needs and drive a commercial outcome. And that's what, you know, the thrill of the chase, the sense of victory when you have a customer win.

27:19And, you know, it doesn't have to be a zero-sum game where like the customer loses if the company wins. And by the way, that they get their jollies out of seeing the numbers and putting them up. And I just think you need both.

27:29Brian Halligan:Yeah. Maybe it's 80-20. I don't know. Make it up. Okay. Yeah. You've been through some dramatic moments in your career. And I want to get to that. But one of those dramatic moments was you made a business model shift. Historically, you just bought the ring and that was it. Typical hardware model. You introduce a$6 a month subscription service. And it was controversial. Your customers were not happy. Just take us behind the scenes of that decision. Was that kind of percolating in the org in your head? Was that the first thing you did when you came in as a CEO? Was it contentious within the leadership team?

28:11I think the answer is it was the strategy. and the strategy was in order to be the most competitive hardware company in the world you needed to be a really great software company and to be a really great software company you needed a business model and a way to deliver periodic software value the problem with the hardware model is that you ship your hardware and it's fixed and that's it and you might ship a you know a little bit of a software update or a firmware update but like really you're not really changing the value proposition for that product with new capabilities. And the reason why is because when you ship the next version of the hardware, you want all that value to go in that next version of the hardware so someone moves from their iPhone 13 to their iPhone 14.

28:55So you're disincented actually to provide value to your customer over time. The power of a subscription model is that you got to kind of earn your stripes with your customers every month. Every month. Now, by the way,$6 a month for Aura is kind of a low bar, whatever, two cups of coffee. And if we're delivering information that helps you with your health, the value of that is so priceless. Like the two times, you know, that like we help you get to bed early or we predict that you're going to be sick or we tell you when to, you know, procreate in order to have a baby. Like the value of that is so high that the ratio of V to P value to price is measured in multiples.

29:35Brian Halligan:Was it contentious inside the org? Okay. So I'm getting to that, right? So I'm saying it was our strategy. Yeah. It was our strategy. You brought that in as your strategy from what I understood. Well, no, actually, it was already there. And I think there were things that I did maybe to sort of tune it a little bit. And I don't even say I. I'd say the team did this. But was it contentious? It was contentious. And partially it was contentious because going against the grain of expectation, hardware should be a single price, was contentious. And this idea that, like, I don't know, you probably have some subscriptions that you would be really sad if you stopped paying for them, right?

30:10Like Netflix and Spotify or something like that. You probably use those things. And if you were forced to give them away, I'm not spy. And if you were forced to give them away, you'd be really sad. Yes. Right? So the idea is like, well, if you can do that, then you probably have a right to charge for subscription. Now, that being said, there are lots of subscriptions that you probably pay for that you don't get any value from. And you continue to pay because of either inertia or whatever. And those things, we used to call them in the back of the days, we call them zombie subscriptions. And the customer who used them were sleeping bears.

30:36And you know what you don't do with sleeping bears? Poke them. Yeah, you don't poke them. And so as a result, what you want to do is avoid the situation where you've got a bunch of customers who are not getting value, but you're still collecting price, in which case the value is low and the P is high. You want to avoid that. So I think we felt that that was the strategy and that was going to be okay. So that controversy part actually was relatively easy to kind of navigate because we said, listen, one, there's a reason that we're doing this. We're creating a business model that will allow us to invest in software value and deliver feature value and analysis value on your health over the periods of time and then and like the product will get better every month and like sas you're getting a new release every time and by the way it turns out that worked we don't we have some of the like literally the best retention i have ever seen in my 30 years of working in subscription business at aura and that's because the value that we deliver is constantly a multiple of the p the price that we take so that was that was that part the second part of it was but what about all our customers who bought a product how can we introduce a subscription for them and that was easy.

31:36That was give them a pathway to get to effectively what they had before. And so in the, in the, in our version of it, if you were a Gen 2 customer, if you wanted to get a Gen 3 and you paid to get a Gen 3 and we gave upgrade discounts, which is crazy. Who gives upgrade discounts on hardware? If you, if you did, you would be a lifetime subscriber. And it was to make that transition in business model as smooth as possible. And so in doing that actually tremendous value because if you're a lifetime subscriber for the, you know, committing to just the next version, you were going to get free software for the rest of your, you know, time that you wore an or a ring.

32:11Great deal. In fact, some of our most loyal, highest retaining customers are those customers because they have no disincentive to churn. So that was the second thing. And then the third thing, and this was a little bit like the genius of it. Can you buy a HubSpot in a, like a perpetual license model?

32:26Brian Halligan:No, no. Why not? Because that's how it's sold. Same thing. I think people have an expectation about subscriptions that it's the freemium business model. I give you 50 % of the value for free because I want you to try the application. And then if you pay, you'll get the other 50%. And we did something very different. We said it is a subscription product. And if you pay, the product will be as functional as it is. And if you don't pay, it'll collapse down to be very minimally functional. It's not, it won't work, but it's not 50 % of the value. And so as a result, So interestingly, when we rolled out the subscriptions, what we saw was that some people were like, oh, I'm not going to pay.

33:02Brian Halligan:A lot of people. Well, actually, less than you would think. Oh, I remember hearing it. It was a lot of agita. It was a lot of agita. For six months a month, it was a lot of noise. It was a lot of noise. And I think, you know, you make a bargain with your customer. It's hard to change that. There's no question about that. But what would happen is like someone would see the product and then they'd stop paying for whatever reason. Sometimes it's just like their credit card died and you didn't update it, whatever. And it would collapse down to sort of its non-subscription kind of experience. And then they'd be like, 24 hours later, they would renew.

33:33Because they would see that the value that they were getting was to absolutely work that price. And I think that is the key. If you can keep that value over price ratio north of 1.5 or 2, then you're doing it right. And your customers are going to reward you with retention and loyalty.

33:49Brian Halligan:OK. When this rolled out, it was noisy. You were newish. Yeah. And you were catching hell on the internet. Yeah. What did that feel like inside your body? Did that bother you? Did it roll out? Like that kind of thing bothered me when that happened. It did. And I'm, you know, I don't know if this is something that everybody does. But like I spend a lot of time reading Reddit and interacting with customers. And I respond to people who, you know, connect with me on LinkedIn. And people were flaming us. And I would argue with them, not argue, but like be like, hey, let me tell you what this means is that if we can invest in this, we can invest more in science and we can invest more in research and we can deliver you more value.

34:26Brian Halligan:When you explain, you lose. I'm not sure that's true. Because sometimes I would win. And when I won one argument like that, that person would become an agent of making that argument 10 times to 10 other people without me in the room. And the reality is, if you think about that transition, it's been an unqualified success. Unqualified success. At any point during the very noisy parts, did you and the team say, maybe we shouldn't have done it, maybe we should roll it back? Or inside your belly, after a couple of rough Reddit threads, did you think maybe I should roll it back and then talk yourself out of it?

35:06I think once. I think once. And I can't remember the exact moment, but I do remember where I was when I was having the conversation. I was in the garage in Salesforce Tower.

35:14Brian Halligan:Okay. And I was talking to someone on the phone and I was like, oh, this is like this painful. And what do we, and I thought, God, you know, the only way out is through. The only, because if we do roll it back, then everybody would have been right. And we would have been wrong. And there's no recovering from that. So we went through. And by the way, like, I think it was the right, it was the absolute right way to approach that problem. Yeah. You have to get, maybe this is a good CEO lesson from a person who has been a CEO now for, you know, some number of years. is you got to be comfortable being uncomfortable.

35:47That is the key. That is the nature of it. You can feel that discomfort and you got to let that discomfort and sit with it because like that's actually where the magic happens. When you're doing something that either no one else has done or doesn't feel like it can be done. We were defining a new way to think about hardware and like a business model around these kinds of products. No one else was doing it this way. It was just us.

36:09Brian Halligan:Okay, I'm a customer. I believe you've got one subscription level. I have a lot of conversations with founders about pricing. Like a lot. By the way, that's great. Everyone thinks about pricing. We should talk about that more. And there's entropy and there's gravity in the world where over time the pricing just gets more expensive for everything almost. And over time it gets really complicated. And I think there's a big cost to that complication I also think there's a cost particularly for startups for making their product too expensive it creates friction slows down the sales process it creates an advertorial relationship with the customer and my thinking is that gap between what they would pay and what they pay there's goodwill in there that pays itself back over time I agree um why don't you introduce another tier with more stuff in it do you have these conversations what's your what's your pricing every time we bring a new feature and we decide to put it into the product for free, I think about that value over price ratio and keeping that value over price ratio north of 1.5 or 2.

37:18And new features is part of the promise that we've made. Now, there might be something that's completely nonlinear, right? Some value. An example, we partner with a company called Natural Cycles. They make a FDA, clear digital contraceptive. If you use aura in concert with natural cycles, it's a way to not have to do hormonal birth control or have a surgical IUD and have a way to not get pregnant. Wow. Interesting. Should that be free inside of a$6 a month subscription? Probably not. And why not? Oh, well, because the value that you're getting from that, much, much greater than the value you might get from some advice about your sleep or your health or how many steps you took or whatever, all the things that you do value.

38:00And so in that case, there is kind of a tier.

38:02Brian Halligan:Yeah. Because you're buying Aura and you're paying an Aura subscription. Then you're adding natural cycles on top of that. And that natural cycle, I think, is like$20 a month. So you understand that value. So the key is, is that, and I think your premise is really the right one, which is the delta between what they pay and what they might pay is goodwill. And thinking about that in the right way, you're thinking about, like, what is the optimal? What's the optimal price point? I also think to you, and maybe to underscore what you said, but worth repeating, complexity kills. It does. Complexity kills.

38:34And I know some people are like, well, it gives our salespeople a lot of ability to understand how much value we're delivering for the customer and then price into that value. For consumer products or products where like it's a single decision and there's a low, you know, like people can turn off or click the button and they're out. you've got to make it simple so that they can do the equation in their head. Am I getting enough value for this$6? And the answer is yes.

39:00Brian Halligan:Okay. Another question that a lot of founders and CEOs I coach ask is about doing big partnerships. Yeah. You've got some interesting ones, very interesting ones. Gucci, I believe, is one of your partners. Gucci was one. Fascinating. Great stories with Gucci. I'll tell you that much. Okay. I want to hear that. Yeah. Most partnerships fail. over the long haul? If the incentives aren't aligned. Okay, so talk about that. Tell me about how the Gucci partnership happened and tell me about the incentives. Well, let's zoom all the way up. I think you have to be selective about who you partner with. And maybe one of the criteria for that selection is do you have mission alignment and do you have incentive alignment?

39:44Because if you do, then you're building something that probably has more durability than a very commercial transactional partnership, which is just about if you make money, I make money. And there's more to it than that. And that alignment, by the way, will get you through those rough moments when your partnership might dissolve.

40:00Brian Halligan:OK. Like a marriage or something like that, right? So I think that's really important to recognize that there are different classes of partners, too. There are people who are on your platform. And your obligation to them is to provide that platform and have it be robust and performant and scalable. But you don't have to do a whole lot for them. And then there are ones that you are like, you're, you know, Natural Cycles and Aura, great example of a really, really close partnership. And if one of us got into a bind, we would come to each other's aid in a second, in a hot second. So different scales of partnership.

40:29Now, the question is, like, how do you make that decision? I actually think if you're a vertical product with a narrow customer ICP, actually, guess what? Service that customer really, really well. And if you're a broad, horizontal product and you need to service a wide range of ICPs and a wide range of customer needs, then partnership is literally your best way. Because it turns out you're going to need that both to build a complete solution or product for a customer and go to market. Because you need that go to market. Maybe in famously an enterprise software, going to market in all these different categories, you need partners to do it.

41:03This is why Salesforce had, you know, force.com and like every platform company in the world does this. So it's really important to understand what it is you're trying to accomplish. All right. So that's that. So with Gucci, what was interesting is they were both.

41:14Brian Halligan:How did it start? You know. Who called? Did they call you? You call them? You know, it's a good question. I'm not sure. It wouldn't have been on my short list of. No, I'm not sure. Well, you know, we sell a lot to women. Of course. And, you know, one of the sort of critiques from women is like, can you make it more appealing? Can you make it more beautiful? Can you put diamonds on it? We actually for a while had an Oura ring with a diamond in it. And people loved it. I mean, and what that sort of tells you is that there's utility value that we deliver, but there's also kind of like this intangible fashion value.

41:46you. So when it came time to partner with Gucci, they had the design. They had a design that was a successful design. It was a black ring with sort of what's called a gold torchon.

41:57Brian Halligan:Wait, what do you mean they had a design? They brought you? No, they already had a design that was successful in the market. It was a non-tech ring. It was just the design part. It was the fashion part of it. Okay. They had a ring that worked. Yeah. And then they sold lots of rings. But this one was particularly successful. It was black with gold and the interlocking G's. And it was kind of like, I describe it as the kind of ring you might wear if you were a Roman emperor at a gladiatorial contest where you were about to decide whether or not like someone was going to live or die. It was like that kind of vibe.

42:26Got it. And it was, I mean, it's beautiful.

42:29Brian Halligan:It was boss. I mean, you felt like a Roman emperor when you wore this thing. Okay. I need, I need some more boss in my life. Yeah, of course we all do. So, um, you know, we, the, the two things that I remember so distinctly about that was one actually goes to pricing and we were like how much do you think we should price this for and like we charge her$2.99 is what we charge and they were like$9.99 and I was like no way we can't charge that much this is this is the Gucci team which person um were you dealing with the CEO of Gucci? Marco Bazzari okay and he's a genius I love him he's no longer the CEO of Gucci um but he said look$9.99 it's a no-brainer and I'm sorry for the accent But it was amazing because he had so much confidence.

43:12And we said, well, wait, is that because of Gucci? And he says, no, because of Aura. You don't know how valuable it is. And so we priced it at$9.99. And I remember being like, my jaw was on the floor. And I was terrified that it was not going to work. And when we launched it, literally, we sold through them in like five weeks. And the thing is, it's because, again, the power of non-utility value, it's an intangible. But it's one people care a lot about. Who sold it? Did you sell it or did they sell it? Well, so that was the other observation. Remember how I said partners can be distribution and they can be value?

43:42So they gave us this sort of value. Their value was the design and the Gucci brand and the power of their collaborations and a customer base who loves Gucci and all that stuff. They also had distribution. They had retail distribution. So they sold it. We didn't even sell it on our website. You had to go to Gucci's website or to a Gucci store.

43:59Brian Halligan:Okay. So they were your channel? They were our first channel partner. And the thing is, it was like hotcakes. Of course, Japan and the Middle East, top two markets flying off the shelves in the Japan and the Middle East. And what we learned was, oh, my God, this thing, it's a piece of jewelry. It expresses something about you. And you want to look at it. You want to put it on your body. And you want to look at it and say, oh, does it look good? Is my fingers, how the shape of my finger? And we were like, oh, insight. Retail is a critical channel for us. And that gave us the confidence to enter retail.

44:32Now we're in Target, Best Buy, Costco. You know, we'll be everywhere. And that insight was critical because what it did is it put this object of desire in the focus of people in a way that we couldn't do that on the website.

44:47Brian Halligan:Wait, and how did the, don't give me anything confidential, how did the terms work? Did Gucci pay you$2.99 for everyone they sold? Yes. That's basically the way it worked. Yeah. They were our distribution partner. There were other elements of it that had to do with the way the subscription worked. Because, of course, we had to solve that problem. But effectively, yeah, they were a distribution partner. And Gucci's famous for doing collaborations. So, of course, that's part of what they knew how to do that really well. Scarcity, by the way. That's the so what of that. We just had the Ferrari CEO on talking about scarcity.

45:27Brian Halligan:Okay. When I was growing up at HubSpot in the early days of HubSpot, Salesforce.com was a terrific partner. They sold sales software. We sold marketing software. They were the older, bigger player in the space. I would go to the Salesforce conference every year, Dreamforce. Waiting to see. Sitting there like, please, please. Here's our new, it's called SalesSpot. And then 2012. Yeah. We used to say, Salesforce is the sales's hubspot, it's the marketing. And under our breath would say, until Salesforce says. And anyway, they did it. And that was painful, but we pivoted. It all worked out great.

46:10Brian Halligan:I mean, and don't spin me on this one. Why would I spin you? What is there to even spin about? Apple. Yeah. They have their big announcement. Yeah. you're sitting there watching the announcement. Do you have the same feeling in your stomach I had when I was at Dreamforce that they're going to come out with a ring and blah, blah, blah, blah, blah? You know, I mean, that's obviously, you know, one of the things we think about is like who and which major tech platform is going to come out with it. But I'll give you a couple of reasons why actually I sleep soundly, okay, about that. And I'm not spinning you.

46:46I'm just going to tell you how it is. So the first one is you might be surprised to learn this, but really two thirds of Aura Ringwares have a second wearable. Yep. And most often that second wearable is an Apple Watch. Yep. And that's because in a weird way, they're complimentary. We measure at night. During the night, your Apple Watch is usually on your bedside stand charging. They provide a lot of utility during the day with notifications and alerts and a screen to display it on. We're kind of a quiet in the background, check engine light for your body. That's sort of so kind of complimentary.

47:21I think the world is going to be one where you're going to have a bunch of different, you know, things that deal with you and your health. And those things are going to talk and they have to talk. That's the second reason. And so in a world where you have an Apple Watch or a Garmin or whatever, like your Oura Ring, which is measuring over time, long periods of time, measuring at night when your body's at rest. And so the data quality and signal is very, very clean and very, very clear. And by the way, the accuracy of measuring on the finger is very different than measuring on the wrist. Our signal strength is 50 to 100 times stronger there.

47:51And so as a result, more information is stored. We can derive more things from it. All sort of interesting. So that kind of complementarity still exists. And then maybe the last one, and I think this is maybe more specific and germane to Apple, is that like, I think all of this stuff is, data is kind of the oil for the predictions, the inferences that an AI might make. And in order to do that, you need to collect a lot of data. And we have a huge advantage in that.

48:19Brian Halligan:Yeah. A lot of people talk about hardware these days. Any advice on getting into the hardware business? And is there different ways to think about the business model and how it works? Because you kind of grew up in the software business. Yeah, I grew up in the software business. And so I think I always tend to think in terms of software. But advice I might offer for hardware folks, I think the barriers are interestingly lower now. But you have to maybe resist some of those shortcuts. So for a long time, famously, we did not manufacture in China. And for a lot of different reasons. Today, actually, we are opening up a factory in the United States to serve one of our customers who cares a lot about security and privacy.

49:00So we made a decision that was maybe not the easy decision. The easy decision is like find a factory and manufacture in China. It's the cheapest, fastest, and they do an amazing job. And we for a long time really kept control of that. By the way, that was a competitive advantage for us. It allowed us to build the art and science of building our rings in a way that not everybody could copy and gave us a lead. So resist that shortcut. That might be one. I think the second one, and this goes to your business model question, is to think about the power of hardware and software and how you think about those business models having interplay.

49:30We don't say, oh, it's a piece of hardware. And if you want, you can buy the subscription. No, it's a subscription product that's integrated hardware and software. And that is the value proposition. That's the business model. By the way, I think that's really, really useful. And then maybe the last one is you think about what are the constraints in hardware, which are like, I don't know, the laws of physics and cost and the fact that you have to have physical inventory and all those things. And find ways to get really, really good at those. If you're going to build hardware, you have to be really, really good at those things and you have to be really good at forecasting.

50:00And so make sure you are good before you try and scale up or spend too much money. The last thing I'll say, and this is inspired by being here, is that I think AI is changing the game. AI is changing the game for how you do this. The ability to iterate over a thousand different designs and to test them and model them, that's unprecedented. And so if you're doing anything in hardware, think about that.

50:21Brian Halligan:Okay, last question. A lot of people listening to this podcast are, let's say, a VP at such and such a company. And they want to be a CEO someday. What advice would you give them? Maybe they don't want to start something. They want to become a CEO. I think, again, this is sort of reflecting on my own experience. And so it's an N of one. But I was very intentional in the middle part of my career about operating every function. So, you know, I've run call centers. I've been on a sales team. You know, I was a product person by training. You know, I did a bunch of time in the field. You know what?

51:00I was an M &A executive. I did internal startups and I did like, you know, running big businesses. So I think it's about that diversity of experience as a CEO that one gives you empathy for all the different functions that you are ultimately going to have to oversee and maybe even assess the leaders that you choose for those functions. And then maybe more importantly, you start to see how the interplay works inside of a company because you have an appreciation for each one at a finer grain than you might otherwise.

51:25Brian Halligan:Interesting. I just interviewed the CEO of Goldman Sachs, who obviously isn't the founder of Goldman Sachs. He said the exact same thing. Is that right? Yes. That's interesting. I appreciate you. Thanks for coming on the pod. Brian, thank you. You're fantastic. Congrats on all your success. Thank you. I'm a happy customer. Thank you. Stay healthy. Thank you. Okay, I hope you like that chat with Tom. I'm going to give you some of my takes on it. He's a first-time CEO, and I spend most of my life these days coaching first-time CEOs in really great companies. And I kind of added up the things that surprise first-time CEOs.

52:00Brian Halligan:So if you're a CEO wannabe, these are some of the surprises. The first surprise is it's actually way more stressful than you thought when you started it. And for me, where it got really stressful wasn't so much like 10 employees. When we hit 100 employees and I just started thinking about, man, all those employees are counting on me. Their spouse and their kids are counting on me. A lot of times their parents are counting on me. And so my stress level really cranked around 100. I started getting help for it. I got on an SSRI, I was having panic attacks and kind of calmed myself down. But the ironic thing is the bigger the organization gets, kind of the more pressure is on you.

52:41Brian Halligan:The other thing that seems to surprise most first-time CEOs is really you're constantly selling. You're selling to accounts, customers. You're selling to potential employees. You're selling to investors. You're selling to partners. You're just always selling. And that surprises particularly technical founders. The third thing is just like the sense that no one's coming to save you. Like in my previous jobs, I always had a boss or I had all these resources around me in a bigger company. But like, it's really on you. Your VCs aren't going to save you. Your co-founders are not going to save you. The responsibility is much, much bigger than being an exec in another startup.

53:19Brian Halligan:As part of that, like as a CEO, you get plenty of complaints. You get complaints about your VCs, complaints about your employees, complaints about your customers. You get a lot of complaints if you're like me. There is nobody to complain to except your co-founder. You can't really complain full hog here, VCs. You can't really complain to your employees, so it's pretty contained. Almost every one of the 10 CEOs I've interviewed has been through some kind of really hard crisis, like Parker from his first startup blowing up to his big drama with Deal. Almost all of them have really traumatic crises, and that can kill a company quite easily unless you're quite thick-skinned.

54:00Brian Halligan:So the thick-skinnedness is really important. The problem when you hit those crises is you think like you're floundering in the wire, you're in the middle of this crisis you think it will never end, and people on X and people on Reddit will dunk on you and tell you what a moron you are. That surprised me. It shouldn't have, but it did. The hours are brutal. Whether your company's 996 or not, you're 996, especially in the early days. Firing people is worse than you thought. Never gets easier. The other thing that kind of happened to me is the larger the company got, I noticed that the company and I, like my brand kind of merged with the company.

54:43Brian Halligan:And everything I said and everything I did, all the employees, everyone was watching everything very carefully. And they may not have pretended they were listening to that carefully. But if I said something in the hallway, like, wouldn't it be great if it was this feature? Five minutes later, someone was coding it. So you really can't think out loud that much as a CEO. Those are some of the surprises of first-time CEOs. He talked about a couple of those. A bunch of the other ones I picked up from the CEOs I work with. Hopefully, you're avoiding some of them. Tom is an expert in going from 200 to 2 ,000 and not losing your mind on the way.

55:16Brian Halligan:And typically what happens from 200 to 2 ,000 is things really start to slow down. and lots of companies kind of die in there. A couple things to avoid that quagmire. One is there's an old expression, hire slow and fire fast. It's very old and it's very true. Now it's easier said than done. Lots of founders tell me the first time I thought I should have fired somebody, I should have fired them because I always end up firing them. I say that same thing, but I never really did it. I was always more patient than I should have been, but I'm also a homo sapien and it was hard for me to do that. The second thing I would say is you hit 200 employees and maybe get some VPs.

55:56Brian Halligan:That's when the director layer shows up. And particularly when you hire that director layer from the outside, they're kind of a professional middle manager. And so push that director layer off as long as you can. Keep the span of control. Maybe it's not Jensen Huang 60, but keep it wide and avoid that middle layer. The thing that really helped HubSpot is we talked about EV, enterprise value, versus TV, your team's value, versus MeV, your own value. And the thing that happens inside of companies is that as they get bigger, people don't solve for themselves as much. They solve for the team. When they solve for their team, they kind of sub-optimize the team next to them.

56:42Brian Halligan:So that TV is where a lot of execs and a lot of companies fall down. So I recommend that. I wrote on whiteboards all over the place. EV greater than sign, TV greater than sign, me V. And I kind of pounded that into the company. Anytime someone in a meeting was talking very TV, I would push on the EV. I don't think you should have all been there, done that, folks. I think you should have 50 % been there, done that, and 50 % homegrown. That institutional knowledge for the homegrown is super useful. People underestimate the value of homegrown and how people can grow and learn. So I like that ratio.

57:17Brian Halligan:And the last thing I would just say is Elon, this is a big Elon thing. I was at the Sequoia's base camp event. It must have been 10 years ago where he did this vector alignment thing. And he described all his employees as vectors. And there were different sizes. Some people were more powerful than others. But they were kind of all pointed in different directions. And he said the key for him is no matter how big or small the employee is, how do you get them all pointed in the same direction and get stuff done? And vector alignment and a little tiny bit of lightweight planning can help you a lot with that.

57:49Brian Halligan:Those are some of my tricks to not fall into the 200 to 2000 trap. Okay, Tom had some interesting thoughts on pricing. I do too. You know, when Moses came down from the mountain, it's well known. He had 10 commandments, five on one tablet, five on the other. It's not as well known that there was a third tablet with an 11th and a 12th commandment. The 11th commandment was over time, your product's pricing will go up. The 12th was over time, your product's pricing will get more complicated. Now, your sales organization loves that. Your products don't. What I liked about what Tom did, he shifted his business model to subscription, but he kept it relatively cheap at six bucks a month.

58:41Brian Halligan:And, you know, he didn't overcomplicate it. It was quite simple. And I think a move for founders is like if the supply and demand curve looks like this, people very quickly rush to almost perfectly match that supply and demand curve, the willingness to pay with their pricing model. And that encourages the pricing model to get more complicated and more expensive. I think that's fine when you're 15 years old. But in startup mode, I think you want a gap between those two things. You want a less adversarial relationship with your customers. you want to be delivering maximum value so you get word of mouth.

59:15Brian Halligan:And that gap is goodwill, and that goodwill pays itself back in spades. So don't maximize that supply and demand curve with me, my advice. Okay, those are my thoughts on Tom. Some really good tips in there, I thought. I hope you enjoyed it, and I'll see you on the next episode of Long Strange Trip.