MasterClass Takes a Crash Course in Frugality

0:00All right. So we're going to talk about how Masterclass takes a crash course in frugality. And Neil, you just searched this, but how much money did Masterclass raise? And do you want to talk about what they do? Sure. So Masterclass, I don't have the exact number pulled up, but I believe the last number I saw was$475 million in total, which is quite a bit of money. Masterclass is an educational-based or e-learning-based company in which you can watch a video and learn business from Howard Schultz of Starbucks or learn how to play basketball better from Steph Curry from the Golden State Warriors.

0:33They pretty much teach you on everything, negotiation from like a FBI negotiator, or they teach you how to like plant gardens and do anything. They'll have people teaching about outer space and how that works. And the courses or the classes are really short. Like I'm talking about like 10 minutes. There may be multiple lessons, but you can get through something pretty quickly, like an hour. All right. So check this out. I mean, I've checked out a couple of masterclasses. It's been pretty cool. and so do you still pay for your subscription no one of our mutual friends bought me one but like it was for like a year or whatever and i and i just i bought it once i canceled and someone bought me a present so i had another year and then it auto renewed me i'm like wait i never used it give me my money back yeah anyway so like so this article from the information says that look the masterclass had a problem with its shoots featuring its latest star instructor Walt Disney CEO, Bob Iger.

1:30And so basically they spent a hundred thousand dollars on recreating his office as a set. And then the entire shoot cost masterclass around$850 ,000. So basically masterclass shoots once had crews of between 50 to 70 people. Typical courses cost around$1 million to film and edit plus instructor fees over the last 18 months, it cut its headcount by half to around 300. So basically, Masterclass typically paid its star instructors a flat amount ranging from$100 ,000 to millions of dollars. And so it's pretty crazy spending. Company raised$335 million in two funding rounds and then added what valued the company at$2.75 billion.

2:14So what we want to talk about here is like, how does this even relate to you as a business owner or a marketing person? This is what we wanted to talk about. You go first, Neil. First off, spending more money doesn't necessarily mean you're going to make more money. And a great example of this is, you know, there's a lot of companies out there that sponsor NFL teams and NBA teams. And when they look at the ROI on it, sometimes it works out, but majority of the time it doesn't. We have a mutual friend, amazing business guy and marketer, had built a multi-billion dollar company by being bootstrapped, never raised a dollar, eventually ended up doing so, but they didn't need the money at that point.

2:50and generates hundreds of millions of revenue. And they raise money and they spent it on a lot of stuff like sponsoring sports teams and arenas and it didn't do crap for them. And all I'm getting at is spending more money doesn't necessarily mean you're going to make more. What happens when people get an influx in cash, a lot of times they spend, assuming it's going to cause more growth, but a lot of times what happens is they just spend and it causes very little growth and it's not worth what they spend. You know, well, on that particular example, he might disagree with you there. He says that he got a pretty good return on some sports sponsorships and some probably not.

3:27So when I ask him about the total money they raise in total, he's just like, yeah, we've pretty much most of it got flushed down the toilet. Oh, but that was on hiring bad people mostly. Got it. But he was saying those people made a lot of these poor decisions on like the sponsorships on the sports teams. A lot of it just got flush. So the people that he hired made a lot of bad sponsor decisions that he takes full responsibility for. It's not like he's blaming, you know, he hired the people, right? but the decisions he made to sponsor some of these football teams or basketball teams or whatever, like those worked out in his favor.

3:57But what I wanted to call out here is that the masterclass is learning that to, to, to Neil's point, you can get a lot done with a lot less. I mean, let's use a Twitter example, right? Like most people don't like it when 85 % of people get cut, but Twitter is still functioning and you can argue they've been shipping a lot more too. And so what matters at the end of the day is like, is a product or service actually providing value? that's what matters like all the other stuff is noise right so dude and it's like if you lose a twitter example i don't know where i read was it andrew wilkinson or someone was saying that maybe they only have like 20 engineers or something like that i don't know about that i highly doubt that piece i don't know exactly who was saying it i was reading tweets from him but i don't know who was saying it and i could be totally off there but either way their engineering team has just drastically gone down but yet more stuff is happening and is it either amazon or facebook that have the pizza pie rule.

4:49Amazon has the two pizza team rule. Yeah. And you end up getting more stuff done when you have too big of a team, everything just works slow. You know, most people aren't going to like to hear this and it's okay. Most people don't want to work at these types of companies, but I was listening to a podcast. They just talked about how the way Jeff Bezos works. It's like, he's calling you on the weekend. He's having you come to his house on the weekend. He's an absolute animal, right? People use the word animal. They use the word savage. And when you think about, you know, the mutual friends company we're talking about, it's like, they've gotten rid of a lot of the people and they only want animals.

5:17They only want people that work in the office. When he's on the interviews out, hey, it's like, I want you working from 7 a.m. to 7 p.m. Oh, you don't want to, you don't want to relocate? That's totally cool. Not for you, right? So, and then you hear about Elon, it's like, oh yeah, we only want people that are hardcore. And if you're not hardcore, then like, this is not the right fit. And that's okay because that is their culture. And so that's like, I'm just saying like a lot more companies that are going to this more of this, hey, this is how we do things. We want to be this way and we're not going to tolerate how other people want to tell us how to run our company.

5:46And in this case, like, Hey, if we need to make cuts, we need to make cuts. And that's how it is. And people are just moving a lot faster. Yeah. And with everything, you got to just look at things from an ROI angle. It could be worth spending a million dollars, but you may be able to get the job done for a half a million and there's not much of a difference. Or on the flip side, it could end up being where you end up spending, call it, I don't know, I'm making up a number,$2 million, and the results are much better. Yep. All right. Well, look, that is it for today. Try to be efficient, try to be frugal, and we will see you tomorrow.

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