Transcript

Chris Losacco We talk a lot about, are we headed for a recession? Are we in a recession? Right? Someone in a meeting the other day called it the big R, which I loved. It’s like Voldemort, you can’t—

Gina Trapani Can’t actually say the whole word.

CL Right. The word that should not be named. [Both laugh.]

GT Right. 

[Intro music fades in, plays 10 seconds, ramps up.]

CL Hi, everyone. Welcome to the Postlight podcast. I am Chris LoSacco, the president of Postlight and I am joined by my business partner, Gina Trapani, the CEO of Postlight. How are you, Gina?

[0:38]

GT Hey Chris, I’m doing well. How are you doing?

CL I’m doing great. Today we have a very interesting and timely topic to discuss, which is how do you plan your business in a down economy? [Both laugh.]

GT Yep. It’s peacetime CEO versus wartime CEO.

CL That’s exactly right.

GT Something happened in the past quarter, Chris, economically—things changed a little bit. Did you notice, I dunno if you—we haven’t talked about this at all, by the way.

CL Right. There were a few signs. There were a few, yeah. I also drive my car past gas stations and see what’s happening out in the world. [Gina laughs.] Yeah, I mean, it’s a little wild right now. Inflation is off the charts. We are seeing a lot of red in our 401ks right now. We are seeing hiring start to contract, which has been really interesting after the past few years. I’m seeing layoffs on LinkedIn. It is a very different state of affairs right now when you think about building and running and growing a business. And there’s a really interesting concept that you pointed out to me, which I found fascinating, that is so important and so relevant at times like this, which is how do you build in a margin of safety? So talk about that for a second.

[1:59]

GT I mean, this is something that I’ve been thinking about. This is the thing. We have been on this like decades-long bull run. Like if you do any sort of investing, you’ve seen up into the right green, incredible performance. I mean the candidate market, we felt this because hiring is hard, it has been so hot, especially in our industry. Recruiters have been very aggressive, big tech has been hiring really hard. And that all basically changed. And because it’s been such a long time of really good times. And in fact, in our industry, in the technology industry, the pandemic was very good to us. It’s felt like such a complete 180 and I’m watching, especially some of the younger folks who I’m friends with, it’s kind of the first time that they’re like, oh, I logged into my 401k account and saw red. Like I lost money. This isn’t how it’s supposed to go. You know?

CL That’s the thing. There are a lot of people who are experiencing this. I mean the younger generation who are experiencing it for the first time, they look at this and they’re like, wait a second. Things can go down?

[3:00]

GT That’s right.

CL Prices can rise? Like they are right now. What’s going on? How do I deal? And some of these folks, they’re at the VP level or the director level at their company. And they’re also starting to think about, oh, this is going to change how I structure my group. How I think about investing, quote unquote, in my business when times are tough.

GT Right? I mean the emphasis shifts from investment and innovation and growth to like, oh, oh, oh, we’re not seeing the performance that we used to see. So now we have to shift to risk mitigation, cost savings. Making sure that we can get stuff done with just the right amount of people. When hiring freezes happen at big tech, that all kind of filters down right to everyone else. Right? Because there’s less competition for talent. And I think it means, you know, fewer choices for candidates and offers get lower. It’s all related. When things are so good for so long, you don’t have that mindset of like, anything can go wrong at any moment. Right? And it affects the way that you plan and you start to create whether that’s a project plan or a financial plan or a business plan, you plan for everything going right. Like a happy path. Right?

CL Oh my God, yes.

GT And this is a mistake. I think it’s that famous Warren Buffet quote, you know, it’s only when the tide goes out that you see who’s been swimming naked, right? [Both laugh.] When things go wrong, that’s when you know who’s plan wasn’t ready to withstand any sort of problem. And you can’t foresee every problem. We could have never foreseen the Russian-Ukraine war. We could have never foreseen the supply chain and inflation the way that happened. No one knew that COVID 19, in January of 2020—none of the predictions by all the finest economists in the world said that we were about to get hit with a global pandemic. Things happen that no one expects for sure. So you’re never going to be able to plan for every eventual outcome, but you have to plan for kind of some outcome. It’s funny. I’ve been watching The Sopranos. 

CL I know. 

GT [Laughs.] You know, cause I’ve said I’ve started a bunch of—

CL You’ve shared the Youtube clips. [Both laugh.]

GT Chris, I’ve been watching The Sopranos and this thing happened. I know I’m 20 years late. It’s my first time watching it.

CL Oh, it’s such a good show. I’m jealous that you’re having this experience for the first time.

[5:04]

GT Very good show, pretty violent, mixed feelings about the portrayal of Italian Americans. But let’s set that aside. There’s this amazing scene between Svetlana and Tony. Svetlana is a Russian woman who’s in the United States who has lost a leg. So she has a prosthetic. And Tony is this mob boss. And Sventlana says to Tony, you know, Tony, Americans only expect good things to happen when the rest of the world expects only bad and they are not disappointed. That line just, just struck me. Right? Because when your expectations are that things are going to be sunny. You know, I have everything that I want. I mean, right? Like as Americans, we’re incredibly privileged, we have access to many things, we’re the richest country in the world that creates a mindset of just expectation. And even to some degree entitlement in some ways.

And this means that we plan for a sunny future. So when rain comes, it catches us in a vulnerable spot. So this is why I’ve been kind of obsessed with this idea of planning with room for error or this safety margin. I want to give credit. There’s an incredible book called The Psychology of Money, it’s by Morgan Housel. And this is where I sort of was introduced to this idea. He brings up this idea of like, assume that things are going to go bad and build into your financial plan a cash cushion, for example, that feels a little uncomfortable. Like you should look at it and feel like I have so much money in cash here. Or like when you take on debt, take on just a little uncomfortable, as little as possible, right? Because assume that something could go wrong, that you could get laid off, that there could be a health event. This is a personal finance book. So it’s his lens, but it’s such a good point.

CL And it applies to so many things. I think this is something Housel also says, planning is important, but the most important part of the plan is that not everything is going to go according to plan. And it’s so true. And it certainly applies to finance. I think that’s the most direct line you can draw to say, listen, why are we being frugal in our budgeting? Why do we have policies that make sure that we are not overspending, even when things are good. And the answer is exactly this, because you need this safety margin, right? This room for error in your dollars that allows you to say, okay, when times are good, I’m going to stock a few extra bucks away so that when times are tight, I have that cushion to fall back on. But what’s interesting to me is that this kind of thinking applies to a lot of different things, right?

[7:24]

CL the world of software development, it can apply to how you structure your roadmap, what your timeline looks like, what your resourcing plan looks like. You know, maybe you think something is going to take one engineer, but you actually staff two engineers, or you put an engineer with a little extra oversight on it because you recognize that things are probably not going to go exactly like you predict they’re going to go, especially with the size of the effort that you are thinking about undertaking. The bigger the platform, the bigger the approach, the longer the timeline, the more you have to think about what is a comfortable safety margin, what room for error do I need to build into my thinking, my plan, my timeline, my roadmap, my approach. Sometimes I’ve seen this kind of thinking actually influence software architecture to say, you know, I’m trying out a new technology here, but I need to know that I have a plan B or I’m going to use this new technology in a non-core service so that if things don’t go exactly right to that happy path, like you were talking about Gina, then I’ve got a more solid, more stable, more known core effort that I can fall back on.

[8:39]

CL You know, now that we’ve talked about this and you brought this up to me, I feel like I’m seeing this kind of thinking in a lot of different places. And listen, we talk a lot about, are we headed for a recession? Are we in a recession? You know, in this kind of environment, having this room for error that you can fall back on is critical. It can be, for a startup, it can mean the difference between life and death for your business. Right? You may go out of business if you’re not thinking this way, but even in a large company, you have to be smart about where you’re putting your energy and more considered about what bets you’re placing, because you can’t place as many bets.

GT Yeah. I mean, I think when you apply this kind of thinking to say managing scope in a project and keeping that minimum viable product definition to the point where it is truly minimal, to the point where it feels uncomfortable. I think particularly in a client services context, when a client really wants a nice to have, you know, your instinct is I want to service my client, I want to make my client happy. And it’s easy to say like, oh, no problem. Like we’ve got that, right? But this kind of thinking, which is like, I know that things can go wrong and I want to commit to the least bit that I know that we could deliver on time. Right? And truly separate those nice to haves. It’s a better way of managing expectations, it’s the better way of ensuring success. But here’s the thing.

And this is what Tony says to Svetlana in this scene. He says, well, that’s a grim outlook. And it’s a really good point, right? Like, are you going to spend your whole life imagining that things are going to go wrong and planning for failure? Like, isn’t that depressing and terrible. I mean, I could see the point there. Right? But here’s the thing: in the long term, like you could have an optimistic, long-term outlook. I know that over time, the line is going to go up into the right. But I also know that along the way, there are going to be painful and unexpected dips, like, and that’s the kind of thinking. So you can be both optimistic and defensive and build in that room for error and that safety margin, but still know that over time things are going to be good.

[10:43]

The world is going to be a better place. I mean, whatever, this is a bigger philosophical discussion because there’s a lot going on in the world. But let’s say you choose to believe the world is going to be in a better place in 10 to 20 years from now. But along the way, there are going to be some really bad dips and that’s normal. That’s completely normal. Like that isn’t a comment on you or your business or doomsday, you know, that just is part of the ride. And I think this is the really important balance between optimism and thinking very defensively about what could go wrong.

CL Welcome to Gina’s investment podcast. It’s an offshoot of the Postlight podcast where we normally talk about technology and business. Now we’re also talking about just good, solid financial advice. [Both laugh.]

GT But I also just think that this applies to project plans. I think it applies to business plans.

CL It completely does.

GT I think it just applies to every situation. The other thing about this for leaders who are going through this particular moment and other really tough moments, this is character defining, like this is a formative, when things are hard, the way that you lead and the way that you, the decisions that you make and your posture, this is where the growth happens. This is where you become a more resilient and more adaptable and more wise and more seasoned leader. Right? Because you’ve seen things. You’re going to come out of it on the other side and be like, wow, that pandemic was something, you know?

CL Yeah. Also you figure out in these moments what you’re made of.

GT Absolutely. And your team.

CL Yes. This makes me think of a blog post that we’ve been talking about by the CEO of Tercera, they’re a private equity firm focused on the cloud. And the post is written by the CEO named Chris Barbin. And he talks about one of the lessons of dealing with business in a tight economy is being decisive and sticking with your values. And I think it very much relates to exactly what you’re saying, Gina. Like you have to think about what do you care about and what are your core decision-making principles and stick with them. And you’re going to find out when you’re tested, like how you make some of those tough calls and you may not get all of them right. But you should think about how you bring the people whose opinions you trust close to you and look at your plan ahead.

[13:00]

CL And you may have to rejig some things. But if you’re thinking about the fundamental principles that frankly don’t change, regardless of the environment, and you let that drive your decision-making and you don’t get paralyzed by not knowing, do I make a left turn or a right turn because I’m trying to predict what’s going to happen in the environment around me. You know, that is a recipe for paralysis and not going in the right direction. So sticking to your guns and making good calls in the way that you would when times are better is a hundred percent the right advice. Chris also says something else in this post that I wanted to highlight, because it really sticks with me when it comes to thinking about business growth in this kind of environment and how you think about what your customers want.

So he says, and I’m quoting, “Rethink your offerings to what customers need now. When tough times hit customers tend to shift buying decisions from long-term impact to short-term ROI (return on investment). Reducing risk, increasing efficiency and saving money suddenly become more urgent than transformation and innovation. Do your current offerings address these new priorities?” I love this because you know, we often at Postlight we think big, right? We want to think about the next 2, 3, 5 years of your roadmap. We love those kinds of challenges and having those sort of big business problems to go attack with good sound software architecture and software experience. But the horizon gets shorter when you’re in an environment like this. And so making sure that we align with where our clients needs are and how do we make sure that we are having an immediate impact, a short-term impact and making their businesses run more smoothly and show a bigger return immediately. It’s affecting how we are talking to people. And I think it’s broadly applicable. And I think Chris hits the nail on the head that you have to think about what’s going to inform where your customers want to invest and how do I make sure that my business, my group, my whatever is oriented around those needs?

[15:00]

GT Absolutely. I mean, I think about in the beginning of the pandemic, restaurants were hit so hard and businesses, like there are particular restaurants who just so quickly pivoted to to-go and outdoor space. There was a woman in my neighborhood who was literally opening her new pasta restaurant, like in March of 2020, and it never opened. And she started selling homemade pasta from literally her stoop and created this incredible to-go business. And then, you know, when things opened, I think it was late last year or maybe at the beginning of this year that she finally did open the place, like being able to adapt to the environment. It’s great. It’s great for her. Pasta Louise in Brooklyn. I highly recommend it.

CL Welcome to Gina’s Italian food podcast where— [Both laugh.]

GT There’s a lot of themes going on here. I mean, seeing businesses pivot to meet their customers,where they are in a very, very tough, tough environment. A lot of restaurants that we’ve loved didn’t make it, but it’s such a good point. It’s such a good point. Going to your customers, thinking about priority shift, and I think, for the leaders, the digital leaders that we talk to, often you’re thinking about the future and the platform that you really want, the product that you really want. You look at your competitors and what they’re doing with their apps and their user experiences. And you feel like we’re just getting killed here. But the truth is right now your executives are worried. They’re worried about cash flow. They’re worried about hiring. They’re worried about spending. And you can shift your messaging and your proposals toward paying down tech debt more efficiently, paying for fewer services or servers, centralizing multiple sun legacy systems. Like this is the transformation work that can lay the groundwork for the more innovative stuff that will happen when things come back, and they will. We just don’t know if it’ll be 6 months, 18 months or 24 months. We don’t know. That’s just where we are.

[16:54]

CL We’re thinking long term, like you said. Our optimism is long term.

GT Absolutely. And for those of you who are sort of experiencing this for the first time or feeling like ah my job’s at risk or our plan failed. I mean, look, lots of companies adjusted their projections from very optimistic to not very optimistic recently in the sort of last quarterly earnings call, as well as Postlight. If you’re feeling like, oh, this is a failure and the thing that I thought was going to happen didn’t happen. And now, like, this is a bad look. It’s all about how you react. Right? And how you adapt. I think that these kinds of experiences are truly formative. They are one of the most formative experiences in my career. I was like, in my mid twenties, I knew nothing about business.

GT I was a web developer at a startup in downtown Manhattan. It’s the year 2001 and two planes flew into the world trade center, which was, of course, an incredibly horrific and tragic event that changed all of us as people, the entire nation. It was absolutely horrible. And then within a year we had a very cool startup, open plan office, but I watched the giant layoff happen. And I watched my coworkers with the legal boxes, walking to their desks, packing up their stuff and walking out the door. And that was an incredibly formative experience for me. Like as a person, I was like, oh, I didn’t know that this was coming. I don’t like that I didn’t know. I didn’t get laid off, but I felt very, very vulnerable. And I made this decision, which is like, I am going to be in more control of my life and my work. And this is sort of when I went on my journey of being like a freelancer and being, you know, sort of an entrepreneur and starting my own companies, because I wanted to be closer to that. It was a horrible experience in the moment. I didn’t even really know how to process it, especially on top of everything that had happened. But it changed who I was. And it changed the entire trajectory of my career. And so whatever, I don’t want to be Pollyanna and sit here and be like, Hey, y’all this recession you’re going to come out of this better person. Like, that sounds too simplistic.

[18:58]

CL No.

GT But I do believe it. I do believe that these hard times are what make people stronger and better and smarter.

CL Yeah. I think it is such good advice to the people listening right now, even though you may not feel like it moment to moment, you are learning through these experiences. This is something that we try to remind ourselves of. Like every week, every day. What are the lessons that we can take from this and apply in the future? I have a similar story from early in my career, although it’s not as dire, but it really stuck with me, which is that the very first roadmap I ever wrote for one of our clients, I remember that I sort of—and it was long. It was like 9 to 12 months, which is, you know, long in our world. And I remember because when I laid it out, I had worked with the team and I put everything, you know, exactly—it was the happy path case.

It was the best case scenario. And it felt, I think, really good to everybody involved because the team was rallied around it and the client was rallied around it. And it seemed like we had clear expectations and everything was great. But guess what? There was no room for error in this roadmap. Everything had to line up perfectly. And you know, when we’re sitting here on day one or week one, it was like, of course everything’s going to line up. We are golden. And sure enough, it didn’t take long. I mean, I want to say it was in like the first few weeks. When things start to go in different directions and it’s not because it’s anyone’s fault or anything. It just, things don’t go according to plan. And so we were late on our first couple of milestones and I resisted revising the roadmap because I was like, no this is what we committed to.

GT We’ll catch up! We committed to it and we’ll catch up!

[20:28]

CL Which is a hundred percent the wrong move because it should have been very clear that like it needed to be reset and reforecast. There was no scrutiny of the plan. Once the plan was written, it was basically like carved into a stone tablet. And then we were just marching toward—it was bad. These are mistakes that I learned from and adjusted early in my career. But I still remember how it was like, you know, we were all looking at the plan and the whole team knows that it’s fantasy. It’s never going to happen this way, but because we had originally set it and because we had committed to the client and set their expectations, it was like, well, you know, put on your working gear and, and start—

GT Grind it out.

CL Grind it out. Like let’s just keep going, which was ludicrous in hindsight. So it’s something that I think people are going to make those mistakes still. You know, I love that Svetlana scene, because it’s like, you can’t assume that everything’s going to break your way. And so you have to acknowledge that there are going to be unforeseen circumstances, and that may mean, again I’m repeating myself, but like the timeline may need to change. Your client expectations may need to be reset. And you should acknowledge those things and communicate about them. Frankly, you probably need to be more communicative when things are shaky. Even though your instinct is going to be well I’m going to hole up and just try to catch up, resist that. And in these times of stress, talk more, get ahead of things more and revisit your plan when you need to.

[21:59]

GT Yeah. I mean, I think this is something that more and more when I’m looking at project plans or when I’m looking at timeline or staffing plan, that question, where’s our room for error? Where’s our safety margin here? What if someone get sick? What if the client goes outta the office for a couple weeks and we can’t get that thing? Like where’s the wiggle room, right? Look, we all want to deliver great news. We’ll be able to get this done in three months. If everything goes right, and everyone works continuously and every single dependency falls on our plate, it’ll be no problem. There’s no reason why we shouldn’t—that’s just a fantasy. It just never happens that way. And here’s the thing. If you say the bad news up front, here, this is going to take longer, and then you deliver it and everything does go right, because sometimes everything does go right, and you deliver that early?

CL Yahtzee!

GT I mean literally no one delivers software early. I mean, you get a trophy for that. [Both laugh.]

CL You get knighted. Thank you for your early delivery. I’m now going to, you know, touch your shoulders with a sword.

GT That’s right. That’s right. Yeah.

CL Cool. One more analogy we wrote down from Housel that I want to just touch on is the pilot analogy, because I think that this is just a great visual and perhaps something to leave people with. There’s an old pilot like quip that the job is hours and hours of boredom, punctuated by moments of sheer terror. [Gina laughs.] And I think that is kind of a scary picture, but I think it’s also an apt metaphor when it comes to how you have to think about your business planning sometimes, which is you need to think about not how you respond just when things are on cruise control, but also how you’re going to respond when you’re in those moments of terror. And that’s where perhaps an outsized amount of your training in quotes, but also your planning, your discussions, your whatever, need to think about making sure you’ve got that margin of safety so that when things go wrong, you’re still fine.

GT That’s when it matters. Right? How you react in that moment. That’s right.

[24:00]

CL That’s when it matters. Great. Well, if you are listening to this podcast and thinking, I’m running across some of the same challenges and I would love to get an outside piece of advice, we would love to hear from you. We build big, beautiful software platforms on the internet at Postlight. Customer experience is critical for us and we pair it with top-notch engineering to build premium products that get put in real users’ hands. We love shipping software and we love business problems in all kinds of industries. We have insurance clients, finance clients, gaming clients, consumer-facing apps. We are all over the place. And we would love to hear from you if you’ve got a challenge that you’re having trouble figuring out. So Gina, if someone wants to reach out, how do they do it? 

[Outro music fades in, ramps up.]

GT Send us a note. Hello@postlight.com. We read and enjoy every single one, Chris and I personally, most of the time.

CL Most of the time.

GT So please, please reach out. Send us an email. Hello@postlight.com.

CL Thanks everyone. See you next week. Bye.

GT Bye.