No Priors Ep. 122 | With Rippling Co-Founder & CEO Parker Conrad

1. 0:00 – 0:33

   Introduction to Parker Conrad

   1. SGSarah Guo0:00

      (instrumental music plays) Hi, listeners. Welcome back to No Priors. Today, I'm here with Parker Conrad, co-founder and CEO of Rippling. Parker needs no introduction, as one of the most admired founders in Silicon Valley. We'll talk about his founder redemption arc, why the conventional wisdom is wrong and the biggest companies are actually platform companies, the future of the SaaS industry in the age of AI, leading teams with ownership, how he thinks about going public, and why you should only start a company if you have no other options. Welcome, Parker. Thanks so much for doing this.

   2. PCParker Conrad0:32

      Yeah, thanks for having me.

2. 0:33 – 1:54

   Lessons from Zenefits to Rippling

   1. PCParker Conrad0:33

   2. SGSarah Guo0:33

      I think there's a very apt phrase that's, "The best revenge is massive success." What do you think you got wrong at Zenefits that you've done differently at Rippling?

   3. PCParker Conrad0:42

      You know, in some sense, there, there are kind of some superficial things. Um, but I think, like, mostly, like, Zenefits failed for, like, dumb reasons. And so, I, you know, I don't think there were, like, a, a ton of lessons. Um, you know, there are, obviously, there were sort of some of the specific things that kind of, you know, led it to not work that, you know, you, you wanna make sure not to repeat. I mean, we're, like, ex- we try to be, like, really extremely, extremely careful about compliance at, at Rippling, and regulatory compliance in particular. And then I think at, at, at Zenefits, we, we prob- we leaned way too much on, on ops. And I think, like, Rippling has, as a result of that, you know, maybe just, like, a deep aversion to, to that, and may- maybe actually to our detriment in some cases, um, you know, where we perhaps should be willing to, you know, do things that don't scale, um, a little more. But we tend to go just really deep with, with software at, you know, and, and sort of not take on, um, sort of, like, operational, you know, builds and overhead. Um, so those are, those are probably, like, the biggest differences. I think there are probably some other things that, like, I, I took away from the experience, um, but they're, they're much more general. I mean, like, I think,

3. 1:54 – 7:56

   The Psychology of Founding a Company

   1. PCParker Conrad1:54

      um, you know, for a long time early on at, at Rippling, like, w- uh, you know, I, I felt like it was just much easier to manage, like, my own sort of psychology on this stuff. I mean, it's, it's just really hard. I always found it personally, maybe I was just sort of not cut out for this-

   2. SGSarah Guo2:09

      (laughs)

   3. PCParker Conrad2:09

      ... but always found it personally, like, very hard to sort of deal with kind of the psychology of running a company, like the big ups and downs. And, um, you know, at Rippling, it was, it was a lot easier, because no matter how bad things got, I, I sort of always had this thing where I'm like, "Oh, man. This, like, just pales in comparison to how bad things were," y- you know, right at the end and just after I left at Zenefits when things got, like, really very dark. And so there's this sort of, like, idea in Silicon Valley that you should learn a lot from failures, and I, I, I'm not sure that I agree a lot with that. I mean, I think that actually people probably learn a lot more from their successes. And, you know, companies fail for, like, many dumb reasons, and, like, it's really hard to sort of take a lot of lessons away from that. Um, and actually, you probably learn a lot more by being at a company that's working and seeing, like, how, how it works.

   4. SGSarah Guo3:01

      I remember talking to you during that period and when you were just starting the company, and I think you said something to me like, "Starting a company sucks," especially when you were, you know, not in Silicon Valley and, you know, the, uh, social sphere's good graces at the time. You were sort of fighting a big reputational battle, and you described it as, like, well, you're just, like, sitting in your parents' basement again and, like, nobody believes in what you're doing. That sucks. What, what made you do it anyway and start over?

   5. PCParker Conrad3:27

      I felt like I didn't have a lot of choices, to be honest.

   6. SGSarah Guo3:31

      You weren't gonna work at Google?

   7. PCParker Conrad3:32

      I mean, I didn't have an offer.

   8. SGSarah Guo3:34

      (laughs)

   9. PCParker Conrad3:34

      You know, like, I think I was personally, like, probably pretty radioactive, and, and I, and I think it would've been hard for me to get, get a job. I've started three companies, and I think the first company I started because I was naive and didn't know what I was getting into, and the second company I started because I sort of looked around, and I'd been at the first company for, like seven or eight years and kind of it was sort of worthless from a resume perspective and was sort of, like, totally unqualified for, you know, any job that wasn't sort of, like, entry level, other than, like, maybe starting another company. And so I felt like, "Oh, crap." Like, "This is" (laughs) "I guess I'm doing this again."

   10. SGSarah Guo4:13

       (laughs)

   11. PCParker Conrad4:14

       Um, and then the third time around, it really felt like y- you know, this was kind of, um, there weren't really a lot of other options. And also, this was kind of, like, the one path that, that I sort of saw that maybe there was this sort of narrow ray of light when, when sort of it felt like I was being buried reputationally that, like, okay, if I, if, if I could, like, build this specific company and make it really successful, you know, maybe there was some future world where, um, y- you know, there would be, like, a different story or a different narrative or, you know, a chance to kind of, like, um, you know, sort of tell my side of the story on it.

   12. SGSarah Guo4:51

       So, in learning from, you know, the success, um, and as, and as far as, uh, Rippling's scale today, what have you learned about founder psychology, um, for yourself beyond perhaps, uh, well, you could go through, like, a really bad crucible and just assume it's not gonna get that bad again?

   13. PCParker Conrad5:09

       I mean, I generally, sometimes people come to me and, you know, say, "Oh, you know, starting a company, like, do I have any advice? Like, what do I think about it?" And my advice is, is pretty much always, like, "Don't do it." And it's because-

   14. SGSarah Guo5:18

       (laughs)

   15. PCParker Conrad5:18

       ... there are a number of reasons. I think that, like, your, your...You're- you're- most people are likely to fail. Um, and I think that failure gets glamorized inappropriately, um, or- or just incorrectly maybe. Um, that y- y- you know, you don't actually usually take away a lot from failure and it's extremely destructive. It's destructive... it's destructive to your psychology, it's des- destructive to your- your marriage, to your relationships. You know, it's like... it- it's really hard. And so like, there- there are a lot of costs to doing this that I think are generally in most cases, like, not worth it. And that's, like, why I- I tell people they probably shouldn't do it. Um, nobody ever follows that advice, of course. You know, if anything, it sort of like redoubles everyone's resolve. But, um, but I- I do think that that's the case. And so I don't- I don't have an answer for why for the sort of psychology piece. I think there are some people that are just, like, better at it, um, than- than, like, I have been in- in my career.

   16. SGSarah Guo6:15

       I think of you as one of the nicest angry people I know. Um, but I remember I- I saw you, it was maybe a year back, and you told me that you were, uh, hopefully this is okay to say, you told me you were worried you weren't angry enough anymore to make Rippling as successful-

   17. PCParker Conrad6:31

       (laughs)

   18. SGSarah Guo6:31

       ...as it should be. And I just burst out, like, fucking laughing and said like, "Well," (laughs) "like, my friend, don't worry about this, no one else is worried." Um, do you think being angry is important?

   19. PCParker Conrad6:41

       I don't know if being angry is important, but I think that there were, at least in the- in- early on, for the first couple years of Rippling, um, this sort of like, um, for me personally, um, this sort of idea that this was, like, the only way and this was the only thing and, like, this- this sort of focus of that, um, you know, is the first thing I thought about every morning when I got out of bed and it was the last thing that I thought about when I went to sleep and it was the thing that got me up in the middle of the night. You know, and- and I- I think that that was extremely motivating, like not... maybe not, like, super healthy. It sort of got me through a bunch of, like, difficult years and a- and a bunch of- a bunch of sort of grind, 'cause it is a grind-

   20. SGSarah Guo7:26

       Mm-hmm.

   21. PCParker Conrad7:26

       ...for a number of years. And- and I think, like, since then, um, I don't remember this conversation by the way, but I think, you know, since then, like, there are a lot of other, like, motivations, you know-

   22. SGSarah Guo7:36

       (laughs)

   23. PCParker Conrad7:36

       ...that are- that are there. Like I- I really l- love the product that we're building, I really like the people, um, that I work with. So there's a lot that I enjoy about work. There are a lot of other sort of, like, positive motivations. Um, um, but yeah, you know, the nature of, like, some of that other stuff is it- it starts-

   24. SGSarah Guo7:53

       Mm-hmm.

   25. PCParker Conrad7:53

       ...to kind of fade over time. You know, that's just the reality.

4. 7:56 – 10:41

   Rippling's Ambitious Vision

   1. PCParker Conrad7:56

   2. SGSarah Guo7:56

      You, um... has the ambition of Rippling changed over time? It was always like a wildly ambitious company. You're like, "Oh, well, don't worry, we're gonna take HR and IT and identity and, you know, do all of it all at once from the beginning." And I remember talking to one of your early engineers in the first... I don't know if it was, like, the first real office or the first office, but he was just like, "Yeah, this is like... we're gonna do Salesforce." And I'm like, "Salesforce took a long time to get there." And he's like, "We're gonna do it all now."

   3. PCParker Conrad8:23

      Yeah. (laughs)

   4. SGSarah Guo8:23

      Um, do you... (laughs) I'm trying to remember who this was. Do you- do you, uh, feel like the ambition is the same or is changing ambition part of that?

   5. PCParker Conrad8:32

      We've probably gotten better at articulating, like, sort of how we think about it. And so it started out with just this, like... this belief that, like, actually y- all the- all of this- these ideas that people had that the way to build great products were to, like, focus, you know, really narrowly w- was wrong. Um, and that actually the- the right path was to try and build, um, like a coherent product suite, um, of seamlessly integrated and- and interoperable applications. At first, it was just like, "No, no, no. We're gonna do, like, HR and IT, and there are these other things on the roadmap," like, you know, sort of finance and stuff like that. Um, and I think over time, uh, we- we probably got, like, a little bit better at articulating sort of why that- why that was. And I think the- the best way to express it is that I think that what- what people get wrong about software is historically, w- we've been building software in this way where if you fo- you focus really, really narrowly on a very specific domain or application area, um, and people think that you can sort of craft these artisanal products and experiences that way, the problem that you run into is that ultimately companies end up having a lot of different applications and that creates a lot of problems for them. But also these artisanal software companies really can't afford to invest in a set of underlying capabilities that are ultimately what make these applications powerful for their customers, um, and that end up being repeated across a lot of these different application areas. So, things like permissions and reports and analytics and workflow automations and approvals and... Like, there's a set of underlying capabilities in- in business software that end up being repeated and relatively conserved across this just broad array of domains and if you're building a lot of applications, you can afford to invest much more deeply in those areas and make what are ultimately much better experiences for customers because of that. Um, and you simply can't afford to make that R&D lift if you're building just one thing. And that's also, like, if you sort of look back, like, this isn't... it's not really a new idea,

5. 10:41 – 15:05

   Building a Platform Company

   1. PCParker Conrad10:41

      it's sort of an old idea that- that's come again, which is that you... you know, this is the way, you know, Oracle and SAP and Salesforce and Microsoft were built was that sort of idea of, like, building y- you know, what- what they would call platform, you know, that... this underlying set of capabilities that you then, you know, use in sort of assembling all these different applications. Um, and that- that kind of articulation came later, but I think the sort of... the fundamental idea was, like, the company was deeply committed to building software, religiously committed to building software in this way, like, right from day one.

   2. SGSarah Guo11:17

      So that's not been, as you mentioned, like, the conventional wisdom in building software startups for-... maybe a decade and a half now. Why do you think people miss that? Because as you say, like some of the biggest software companies of our time, and I'd, I'd add like Epic to that list, right? Some of the biggest and most powerful companies, like the reason they are so powerful is because they work in an integrated way, and they have a lot to sell their customers. But, um, I, I have a hypothesis. I was wondering if you do.

   3. PCParker Conrad11:43

      I think it's because of like the platform shift from like on-prem to cloud-

   4. SGSarah Guo11:48

      Mm-hmm.

   5. PCParker Conrad11:49

      ... created a bunch of opportunities for like a bunch of kind of like base hits, um, y- y- you know, with SaaS, where you can sort of peel off like one, one sort of application area from these sort of big on-prem providers that, you know, just took a long time to move to the cloud and, and get that really stood up. And you could, you could very easily actually get a lot of traction with something that was extremely narrow, and that was like good enough for a period of time. And I think what happens is over time, the bar goes up in terms of what you need to be able to do for clients, and it's like no longer enough to have like, you know, a standalone SaaS application. Y- you start needing these other capabilities or these, these deeper capabilities, and that, that sort of forces things like back together. Um, and I think like that's, you know, sort of, you know, where, where we're going right now. It's, it'll be interesting to see, y- you know, with, with AI, like how AI... 'Cause some people would argue like, well, AI is sort of like a similar kind of shift from like on-prem to cloud, and I, I, I probably don't agree. I think it's actually probably more centralizing as a technology. But that, you know, that's, that's kind of my view on sort of what, what triggered that, at least for a period of time.

   6. SGSarah Guo13:04

      I think that's right. I also think that there... I mean, you know, the latter half of the SaaS revolution has coincided with like a massive bull market, right? Through like the '22 period, right? And I think that, um, if you had internet distribution of software to like mid-market companies that could buy online and rapidly, then, uh, Rippling might be the exception to this, but selling point solutions was a faster thing than getting people to shift core systems, um, and you could start selling with much less product. I think you guys worked on Rippling for a while with a lot of people before you really had something to sell. Um-

   7. PCParker Conrad13:44

      Yeah.

   8. SGSarah Guo13:44

      And so I think it's also part of the investing cycle of like how quickly people expected progress from the investing community.

   9. PCParker Conrad13:50

      I think it... That's... Some of that is like the nature of like the, the sort of bar-raising, where I think there was a period of time where, you know, yeah, if there was no sort of SaaS application for, I don't know, whatever, like time-tracking or expense management or something like that-

   10. SGSarah Guo14:07

       Yeah.

   11. PCParker Conrad14:08

       ... you could build a standalone thing for that, and it would get like very rapid uptake, but as soon as you start to get the sort of bigger core systems that now just that comes standard in a SaaS or, you know, this SaaS way in, you know, in the cloud, not on-prem software, suddenly it's like that's not good enough anymore. Um, and so there's like a window of opportunity that kind of closes over time, but eventually you need to find sort of new islands of product market fit that are a little bit further out and sort of maybe over the edge of the horizon. Um, and, and I think that tends to be sort of something that solves a, a, a bigger and broader class of problem for customers that usually requires you to take on a lot more in order-

   12. SGSarah Guo14:50

       Mm-hmm.

   13. PCParker Conrad14:50

       ... to solve problems that are often, often about, um, sort of like internal business process coordination that, that, that do cut across a lot of these different applications, and it's a lot less work for customers ultimately to be using one

6. 15:05 – 30:36

   Challenges and Strategies in Scaling

   1. PCParker Conrad15:05

      thing.

   2. SGSarah Guo15:05

      How do you... Uh, I'm sure this has changed over time, but given platform and broad application service area, like how do you organize at Rippling given you don't have like contemporary, many contemporary companies with a similar strategy, um, and you can't be like, "I'm gonna do what Microsoft does at this scale"?

   3. PCParker Conrad15:23

      I mean, I think we try and, um... I mean, we have, we have teams that build capabilities, you know, that are kind of the, the platform teams, and then we have application teams that are building, y- you know, sort of hopefully out of the underlying platform capabilities applications, and I think it's like it's really important to have like the right leader for these application teams, like former founders are great. Um, but also you need people that can like scale over time, um, as, as the product grows. Um, and so I... You know, ideally, in an ideal world, you want someone with just like real ownership of those areas who can drive it because otherwise you get this, um... You get this sort of bottleneck at the level of executive attention where, you know, if I have to drive it, it's just like, I can't do that. I can only do that for so many things, and then inevitably a lot of balls get dropped. And so you need people like in seat who can like really own it and run like the business holistically, who can think about the product roadmap, the marketing, um, you know, the sales elements, you know, the competition, you know, like the whole thing and kind of, you know, and synthesize it down to like, okay, here's what we're gonna do. Um, and that's, that's always sort of the most challenging thing is to find those people. I mean, we, we try and hire a lot of founders at Rippling to make it work, um, but that's always ultimately the bottleneck.

   4. SGSarah Guo16:41

      I don't know a single founder who doesn't feel like they could use more owners at their own company. Like do you... Um, do you have any advice on how you filter for this?

   5. PCParker Conrad16:50

      No, in terms of filtering, I think it's hard. Like people who have had that experience before, um, I think it's, uh, some- sometimes it just, you know, having a conversation with someone, you know, are they kind of naturally, you know, jumping to, you know, sort of conclusions and implications about the business and kind of getting there on their own or, you know, how much do you kinda need to lead them there? It's hard, and I think the difference is like it sort of comes out in, um, in like planning, in like quarterly planning. Like some people show up to quarterly planning and there's like, there's a list of-They're like, "Here are the things that we kinda need to get done from a product perspective," and the list inevitably is sort of like, you know, you unfurl it and it kind of goes, like, down the hallway. And, and some people are like, "Okay. Well, you know, we're gonna do about one-quarter's worth of work. We've prioritized the list, and one-quarter's worth of work is, like, this much of the list, and that's what we're gonna get done. That's my job." And the problem is it's like now it's, like, my job to kinda make the ends meet 'cause, like, that part, that's not gonna cut it. You know, it doesn't... Y- you know, we actually have to get a lot more done to make things work. And so now it's, it's sort of my job to figure out, like, how do we sort of bridge this gap? Um, and what you really want is you want people who are going to find a, find a way-

   6. SGSarah Guo18:06

      Mm-hmm.

   7. PCParker Conrad18:06

      ... sometimes through seemingly impossible constraints, where they're like, "This is..." The reality is, is like it's not, it's not like the CEO of the company who's, like, giving me this impossible task. Like, the problem is, like, this is fundamentally the situation that we're in. Like, this is the market reality. Um, you know, we're here. We need to be here. We can't win unless we get there. And it's, it's... A lot of that is like, you know, it's what you see at a startup, because you're sort of doing a startup is somewhere between completely impossible and very, very hard, and there's this just kind of very slim sort of, like, uh, window between those two to make it out. And, y- you know, companies often have to find early on ways to do seemingly impossible things, and you need someone in, in these roles who's gonna, like, find a way to make it work.

   8. SGSarah Guo18:52

      So there's the innate. There's, like, finding people with that, um, mentality and ability and, you know, recruiting them, and then there's, like, trying to get people to act more like this, which I'm sure you do. I know that you do across Rippling. Uh, when I was looking at the... I think it was the series A, I called 20-some people that used to work for you, and one of the things that was, like, most universally loved was, uh, like, "I would follow Parker to the ends of the Earth because he got more out of me than, like, I knew how to give in terms of my own capability, and I got more done." What advice would you have for founders on making that happen? It's a, it's an amazing skill.

   9. PCParker Conrad19:28

      I'm not sure I'm great at it, and that's, and that's wonderful that, that you've played... you've, you've sort of couched it-

   10. SGSarah Guo19:32

       I didn't say it. (laughs)

   11. PCParker Conrad19:33

       There are probably other people that are like, "Fucking asshole, like, you know, just as- drives everything way too hard."

   12. SGSarah Guo19:39

       Totally unreasonable, yeah. (laughs)

   13. PCParker Conrad19:41

       Totally unreasonable. So I, I have, like, two thoughts on this. One is I, you know, I genuinely believe that people are usually capable of so much more than they believe themselves to be capable of. People sort of grumble about the kind of, um, the work culture in Silicon Valley being sort of about this sort of grind kinda culture. And I think what that, what that misses is it's not... I think it's important to understand, like, it's not that I'm like, "Well, why isn't everyone in the office, like, seven days a week?" Or something like that. It's, it's like, "Look. This is the situation that we're in, and it sucks." And, like, the reality is, is like, this is, you know... We need to kind of find a way to bridge this gap, and I can kinda lay out the gap. And it's not be-... You know, I didn't create the gap. You didn't... Maybe you didn't create the gap either. It's just... But it, like... It's there, and we can either give up and go home, or we can, like, try and find a way. Um, and sometimes when you kind of lay it out for people, they can really accomplish incredible things. Like, like Patrick Collison has this great site that talks about these different organizations and how, how, like, you know, teams of people that, like, you know, did the, the moon landing in four years, or like, the sort of Van Ness Bus Lane in San Francisco in, like, 12 or whatever it was. And, like, just the, the discrepancy between how some organizations are able to do so much in such a small amount of time and some organizations are not. And, and so I think the difference between, like, working really hard y- y- you know, you know, some people think it's like, "Well, if I sort of kill myself, it's like an extra 20%." And, and actually, like, the difference between teams that can really accomplish a lot, it's, it's not like 20% on the margins. It ends up being, like, an order of magnitude in terms of what you can do. Um, and so I think you've really gotta, like, ask for that and ask for people to try and find that within themselves. Like, one very concrete example of this is I, um... A lot of times, sort of I get, um... People like to come to, to CEOs with, with what I call, like, CEO in the box options, where they say, "Look. You can have A or you can have B."

   14. SGSarah Guo21:45

       Okay, yeah.

   15. PCParker Conrad21:45

       Like, "Which one is it gonna be? You, you tell us, like, what the priority is." And it's this sort of illusion of choice where, you know, the important decision has already been made, because the important decision is like, you know, A or B versus like, you know, A and B. And so reflexively, I try, whenever I get choices like that, to sort of reject the premise and, and be like, "I want A and B." Like, why can A and B not co-exist? Is... Does it violate, like, the second law of thermodynamics? Like, what... Um, and some, you know... One way of looking at that is like, "Oh my God. You know, this guy, like, asking for something impossible," but sometimes it's really just about the solution is to just, you know, think a little more deeply about the problem, and like, you know, is there some third path? Is there... You know, like what k-... you know, what's the sort of creative approach, because often there is a real cost to making those trade-offs. Um, uh, that if you can find a way around it, um, y- y- you know, it, it, it can mean the difference between success and failure.

   16. SGSarah Guo22:41

       Yeah. One thing that's striking to me is, uh, there are a lot of very talented people at Rippling, but, um, I think most people would be like, "Well, they're not all Parker Conrad," except that you are treating them like they should be. Right? Like, you're saying, like, "But I think you can figure this out." I tend to expect a lot of people, but, you know, in reaction, I think I, like, see people do amazing things. And I, I wonder if, like, more founders shouldn't try, actually, to, like, have real belief that their people can figure more out and will get a lot more from that.

   17. PCParker Conrad23:14

       You know, for me, it, it co-... I mean, it comes from like, you know, some, like-... like, sort of deep reservoirs of, like, panic and insecurity about, you know, sort of, like, the, the company and sort of the, the, uh, looming... You know, there's sort of looming failure constantly when you're building a business. And so the way to, I think, channel that productively is, is to sort of really push it down into the org and sort of lay out for people, you know, "Here are... Here is the situation," you know, when you're, when you're facing, um, sort of, like, tough situations. And, you know, see if you can't get people bought in to, like, "Oh, man. Like, this is like... Okay, we've gotta, we've gotta bridge the gap between point A and point B," versus, like, you know, "I've gotta, like, do this, like, task for the next month or the next quarter." You know, it's like, it sort of... You can get people to take more responsibility for, um, you know, where you need to get to.

   18. SGSarah Guo24:07

       I guess I would just posit that many leaders, they don't necessarily push that problem down into the organization because they don't really believe other people can solve it, right? And I, I think if they do, I think they'll, they'll get more back. You have capabilities teams and then you have these, um, application teams. Like, what is the cadence of communication and coordination there across such a big product surface?

   19. PCParker Conrad24:28

       You know, I think that's, that's an area that, like, candidly, like, we always, we don't always get that right. Um, I think there's, there's constant... You know, anyone that's, like, trying to build in this way, there's constant tension between, you know, people building at the application layer and people building at the platform layer 'cause you get, you know, the interface there is not always clean and, and, you know, you get an application team and they don't wanna build on the platform team stuff. And, like, you know, they're, you know, they, they need something slightly different. And so a lot of, I think, the really kind of meaty product decisions end up being around that kind of stuff. Like, when, you know, when do you allow teams to disconnect from the underlying systems? When do you reprioritize the platform team to build the stuff that they need? You know, when do people have to sort of, you know, eventually migrate back onto, like, the core underlying platform capabilities? You know, I don't know that there's, like, a good... That there are good rules of thumb about this, um, because it's one of these problems where locally people would almost always, like, prefer to disconnect. Like, it's easier for them to just, like, build their own thing. But ultimately and long term, you know, it's the worst thing for the business and, and even the worst thing for their application because, like, you lose the benefit of shared investment in the underlying capabilities if you do this. Like, you know, as the underlying systems get better and better because you're continuing to... You know, every, every, like, dollar of R&D that I spend on the underlying stuff, it pays off 35X because it, you know, it hits, you know, every system in Rippling that gets, like, a little bit better because of the new capabilities I built in the underlying systems. And that's the dynamic or that's, that's really the underlying math that I think makes this approach to building software work better than building sort of, you know, narrow focused point solutions. And so you gotta, you gotta hold onto that, um, which means that you've gotta ultimately build on the Lego blocks that you have.

   20. SGSarah Guo26:23

       It's very interesting to me. I was talking to Olivier, the, uh, you know, co-founder, CEO of Datadog, which I think is one of the other true platform companies of this era. And they bought a company that I was on the board of in a new space and then made them rewrite it over the first, like, year and a half onto their platform, which I don't think I'm, like, exposing any secrets to say was a painful process. And yet, like, exiting that, all of the people from the acquired company screen were like, "We believe," right? Like, th- you know, there's, there's religiosity in that. It's very interesting to me that if you look at companies from, um... That at least got to scale in the last era that are still very dominant, like Workday, people tend to make fun of these companies that have the, like, you know, "We have our internal language, we have a bunch of development frameworks, we have a bunch of components, we have a platform team, we have applications," as very insular. Um, and yet, like, this is how some of the most dominant platforms are, are built.

   21. PCParker Conrad27:21

       I mean, Workday obviously won in, i- i- you know, in the HCM industry, but also, like, I think there's a lot... You know, a lot of the thinking around this, like, comes from, like, Microsoft, you know? Like-

   22. SGSarah Guo27:31

       Yep.

   23. PCParker Conrad27:31

       ... you know, it's certainly the way they think about the world. Um, so I think there are a lot of, you know, um, sort of big and even kind of, like, multi-category companies that, that sort of think, think about the world in that way.

   24. SGSarah Guo27:43

       Rippling. I mean, we've been talking about, uh, a bunch of principles that are very specific to, to Rippling doing its own thing versus listening to conventional wisdom. How much do you think about beating incumbents in HCM or payroll or identity or whatever it is versus capturing greenfield and, like, your strategy internally?

   25. PCParker Conrad28:02

       The two things are related. Like, a lot of the time, y- you know, we can, we can, we can beat incumbents because of the, the sort of... We've, we've sort of pushed the envelope a little bit into new horizons. And so that allows us to solve problems for customers that incumbents can't solve. Um, and even, like, sometimes, like, it's, like, not always clear to me internally, like, what the difference is for customers between, like, new applications versus existing, uh... You know, and, like, new features versus bug fixes. Like, a lot of times, like, whether we categorize something as, like, a fix or, like, a new thing is about whether we internally believed that this capability was part of, like, the original spec. But from the customer's perspective, it's always just like, "I wish it did this thing and it doesn't do it." Um, you know, so to them, like, everything's a bug. We're building a variable compensation product right now and, like-In some sense, it's a new thing, it's a new application, a new SKU, but it also like, you know, really helps, um, you know, if you're, if you're an existing customer, it's an existing problem that you have.

   26. SGSarah Guo29:08

       You just wanted Rippling to do this.

   27. PCParker Conrad29:09

       Yeah, you're kind of like, oh, yeah, like, this makes, like, payroll easier because I have people, whether it's like salespeople or like other, other people that are on simpler kind of, you know, variable compensation structures. A lot of businesses end up having, you know, bonuses, commissions, uh, y- you know, things like that, that, um, you know, are just kind of tough to manage, that if you did it in one place, it would be a lot easier. But to answer your question, I think, um, more, more directly, you know, if you look at the headcount of the org, like over 80% of the engineering headcount is really focused on the existing stuff. Very little headcount is focused on building the new things. Like most of it is just in continuing to develop and sort of extend all of the existing applications and the underlying platform, um, of the system. And some of, I think, why that is, is like you need fewer people when you're building something new, um, and you don't, you don't have any existing customers yet, and you get to build on a lot of these underlying applications. Like you can make it very far with a very small team. And so the, you know, we always kind of have like, you know, four or five, like, new things in the works, but collectively, the teams that are building those are, it's, it's not that large. It's, you know, it might be, y- you know, five to seven engineers on each one, you know, out of an engineering org that's now, you know, I don't know, over a thousand

7. 30:36 – 42:06

   AI's Impact on Software Development

   1. PCParker Conrad30:36

      people.

   2. SGSarah Guo30:36

      I'm gonna use this as a, a chance to talk about AI because we're not gonna get away without that, but we'll start with engineering. Approximately 1,000 person engineering team, right? Um, do you, do you believe in the premise of like, do a lot more with many fewer people over the next two years in engineering?

   3. PCParker Conrad30:54

      I like am very skeptical that AI will be employment conserving, um, 'cause I just think that like in basically every area, like we have not seen, and I think most large engineering orgs have not seen, like a huge number of efficiencies from these sort of like, the, the sort of coding assistants that, um, you know, they're, they're very popular with the engineering team. There are clearly some ways that they, you know, that they help. Um, but it's not like we're like, "Oh man, we need like so many fewer people-"

   4. SGSarah Guo31:25

      Yeah.

   5. PCParker Conrad31:25

      "... to kind of do this." And, and I think that, I mean, that, you know, it could be that we're just like not very good at using them, but like in talking to like a number of other kind of late stage companies, I think that, that's been true for most of the organizations that I've spoken with. Um, I don't, I don't know like quite why that is and maybe it will come, but even then, I think like if you make it easier to build software, I think the demand for software will go, actually go way up. Um, and, and I think by the way, I, I actually think the same, like I believe the same thing is gonna be true for customer support. I think as you, um, which is the other major area of product market fit here that, you know, as you make it easier for customers to access something that feels like support where, where the experience is really good and it's instantaneous and it's not, you know, it's not frustrating because like, you know, it takes a while to communicate something and there's a lot of back and forth and maybe the person doesn't know, you know, what, what you're asking exactly. Um, I think people will use more of that, not less. Um, you know, even as like ticket deflection rates go up, you know, we see like at least internally at Rippling, um, like, you know, a lot more use of like our sort of like AI enabled support tools, um, where it's clear that people have just found that like, hey, actually, it's like this is an easy way to sort of get things done quickly in the product. And so they start, they start using it a lot more. And, and like with on the engineering side, like one sort of theory I have is that I think that as, um, you know, if and when it gets to a point where it's just much, much easier to build software, um, because, you know, l- like eng- engineering, engineers are so much more productive, I think what will happen is rather than needing like way fewer engineers, what's gonna happen is a lot of these like core software systems are gonna end up getting like highly verticalized. Um, you know, like you're gonna end up having Rippling for ophthalmology clinics where there's gonna be a lot of specific capabilities of the system, like just for like ophthalmology clinics. And that's gonna be possible because, you know, it's like a lot easier to build an application much more quickly because the cost has come down. Um, and, and unlike sort of people that are building like independent vertical software, like if you're a company that's actually building like, "Hey, we're Rippling for ophthalmology clinics," the challenge is I think it's like, it's really hard to have all of the underlying platform capabilities that you need in that system. And so, you know, some of the challenges with vertical software historically have been that you have this choice between like heavily customized for the industry, but missing a lot of like core underlying capabilities. And so if you're, as a company that needs something like, you know, serious, you eventually need to go to like, you need to move to Salesforce or something from like the, the thing that's like very industry focused. And I think what will happen is that like actually as the cost of software building applications comes down, it will let the sort of core companies build a lot of like industry specific ver, ind- ind- industry specific vertical applications. And so this is just kind of a long way maybe, maybe of sort of giving an example of like why I think that like, look, if, if you and your small team can like vibe code an application that gets a lot of distribution very quickly, so can a lot of other people. And so inevitably what's gonna happen is like the bar will go up and like what, what customers expect, um, and it might not happen immediately, right? Like you might get, you might be able to get for some moment of time a lot of distribution very quickly, but eventually...... they're, they're gonna be competitors and, like, the, the expectations are gonna go up. The pricing's gonna come down. You know, you're gonna need to, like, the frontier is gonna move out and you're gonna need to be there, and that's gonna take people. It's gonna require more engineers, more investment, you know, at the sort of bleeding edge of whatever's possible. And the same thing I think will be true on the go-to-market side, that, you know, that it w- it will become harder to make progress through the market and you're gonna need to have teams of people, um, that can, like, interface with the world, that can talk to customers, can talk to decision-makers. Um, and, like, yes, those people, maybe they're, they're more productive because, like, some of those interactions are, you know, handled or, or enabled by AI, but you're still gonna be competing against a set of businesses that also have all of those efficiencies. And it's gonna be, as a result of that, like, that much harder to cut through the noise. Um, and so there's always gonna be this sort of, like, l- leading... There's gonna be this frontier that you're gonna need to play out and that's usually gonna require investment and headcount.

   6. SGSarah Guo35:56

      I think I see the race the same way, and then for some set... You know, there's gonna be some set of industries that have, like, different enough workflows, maybe not around people but around go-to-market. Like, pharma's the classic example, right? If you're designing around a c- uh, a regulatory regime, like, maybe that is different from Salesforce enough. I think there's one version of, like, more verticalized companies that, like, you know, they ship something that won't work for customers forever and then they're investing backwards in capabilities, and i- in a race against, um, companies that are more horizontal. I think the other version, and now I'm talking my own book because I think there, you know, we have portfolio companies that are doing well in this direction, is, um, uh, they don't really look at themselves as much as software companies in the traditional category sense. Um, they look at themselves as doing more work that people used to have done. The horizontal players, like, will clearly see this too but, you know, the specialization may be useful in some verticals.

   7. PCParker Conrad36:53

      Yeah, that makes sense.

   8. SGSarah Guo36:54

      I wanna go back to something you said at the very beginning about, um, being allergic to ops because of Zenefits or, you know, from, from that experience. Uh, I'm, I'm sure you've heard about a bunch of, um, these ideas of, well, you know, we, we believe we're gonna need humans doing distribution, um, they own the distribution, these verticals are not a- uh, adopting AI technology as quickly as they logically should. We're impatient for that as technology people, let's go buy distribution and roll services companies up or whoever has access to the customer. What is your perspective on that given those are, like, operationally intensive businesses?

   9. PCParker Conrad37:33

      Yeah, I'm, I'm not sure that, like, w- we fundamentally disagree 'cause it sounds like they're also saying, "Hey, we don't wanna be in the ops business. Like, we wanna, we wanna be in this."

   10. SGSarah Guo37:40

       Yeah.

   11. PCParker Conrad37:40

       So, so it's about replacing the ops with software. I think it's hard to replace ops with software. Or at l- at least I found it difficult. Um, you know, maybe AI changes everything but, like, you know, at Zenefits we kind of had this, this theory that was ultimately, I think, part of, like, the downfall of the company, that, you know, we could move through the market more quickly by doing a lot of things manually and then, y- you know, we would just replace it with software over time. And, like, it sort of turned out that it was actually very hard to replace ops with software, like, after you'd scaled it up. Like, it's a lot easier to start small with automation and gradually grow over time, even, hopefully grow quickly but, like, the point is, is like you, you sort of start with sort of a simpler set. You know, you start with a small set of customers. I don't really think that there are, like, customers with simple needs. I think all customers have sort of, like, ul- ultimately have a bunch of, you know, edge cases and long tail things that they, that they require. But just a smaller set of customers is easier to deal with than a larger set of customers. And if you start with that, I think you can gradually expand the capabilities over time, and if you start with, like, like, a really large group, it's, like, hard to even capture the requirements, like the superset of all of the requirements that you need the system to do. Um, that was, like, sort of the problem that we found is, like, we thought we were gonna automate everything and then the automation was just much harder and it was constantly delayed. And so we were in this situation where the automation was constantly coming but, like, never there, and that, that caused a lot of issues. So, you know, I don't know if people will be more successful at that with, um, with AI but I think it's, like, really, probably important to understand if you're in an area where things have to be deterministically correct or not, and that's obviously the place where, um, y- y- you know, it, it gets, like, harder to do that reliably with AI, particularly when you have just, like, a really large complex space of edge cases and long tail scenarios and things like that that need to, like, definitely work correctly every time, um, which is sort of, like, the space that we're in. If your payroll's, like, not correct, you're super pissed and like-

   12. SGSarah Guo39:53

       (laughs)

   13. PCParker Conrad39:53

       ... you know, and, and so y- you kinda need... Like, there are deterministic rules about how this needs to work and, and so you need to just make sure that that rules engine is, like, programmed in and it, it can't be, y- you know, the sort of entropy of some of these AI systems.

   14. SGSarah Guo40:10

       Rippling is one of my favorite examples of, like, software companies that I think are very durable to, um, everything that's happening with AI. Does it change anything about your strategy fundamentally?

   15. PCParker Conrad40:20

       It definitely, um, makes us a lot more focused on data, um, uh, like a lot of other companies obviously and, and capabilities around data. What I think's gonna be very durable with, with AI is, like, everything that I've seen is, like...... building the, the applications is like, uh, I mean, I don't wanna say it's, like, tr- trivial. I mean, obviously everything's hard.

   16. SGSarah Guo40:42

       Yeah.

   17. PCParker Conrad40:42

       But what's much harder than building AI applications are building, you know, governance and permissions and data pipelines and things like that. Um, and so, uh, you know, tha- those are the areas, like, you know, that w- w- we spend a lot of time on because they, they tend, they tend to be, like, our core strengths, particularly because, like, permissions and governance are very tied to an understanding of the org, you know, understanding... You know, u- usually permissions are about job and role and function and org chart relationships, and so if you understand that deeply, you could be opinionated about who should have access to what, you know, who can do what in the system. And ultimately, I think, like, all of these AI agents are going to need to inherit the permissions of a person. Like, some people would say, "Well, you know, maybe it can be, like, a service account that has distinct permissions," and the problem then is, like, well, ultimately, like, people are gonna be interfacing with it, and if it has different permissions than they do, there's just this leakage problem. Um, and so I think you always need to ensure that the agent inherits the permissions of the person that it's, like, working with directly. And then when you do that, you need to understand, okay, what, what permissions does th- does this person have across all these systems? And you start getting into, like, identity and job function, um, and governance and, and things like that that tend to be, I think, like, some of our, like, strengths from a platform

8. 42:06 – 44:19

   Public vs. Private: Rippling's Future

   1. PCParker Conrad42:06

      perspective.

   2. SGSarah Guo42:06

      A last question for you. Rippling is already at, you know, public company scale, but at the same time, you know, companies are staying private for much longer. Um, how do you think about this choice?

   3. PCParker Conrad42:16

      I don't have any, any religion about it, and, and I'm not sure that, like, I am, like, the, the world's expert on it. Um, it, you know, it seems like, um, y- you know, historically, one of the big advantages of being public is, is, is liquidity, and, and, and what's happened over the last couple years is obviously there's just a lot more liquidity in the private markets, you know, whether it's for employees or early investors. Um, and so, you know, if you can, if you can do that in the private markets, you know, there's a lot of upside to staying private. I mean, certainly I think you look at, like, Databricks versus Snowflake, and it, it seems like Databricks has had some advantages by not being public, um, you know, in, in that, in that fight. And, and, and then you also have this dynamic in, in the public markets where the public markets have kind of become something of, like, a retirement community for, you know, very slow growth but very profitable companies. You know, just everything is sort of structured around that. You know, like, when, when research analysts are talking about, like, high growth versus low growth public companies, they're like, "Are you growing more than 20%?" You know, because it's not more than 30 anymore 'cause it doesn't exist in the public markets. And so, y- you know, if you're a company that is growing a lot more quickly than that, there just aren't comps in the public markets, and so the- I think there's actually a lot of risk as a result of that, um, because, um, y- you know, there aren't, there aren't clear comps on, like, what the multiples will be, what the valuation's gonna be. Um, that could change though. I mean, like, you know, we could, we could look at this in a couple years and, you know, suddenly, you know, it's very clear that public markets, like, do value fast-growing companies, um, like, more than, than slow-growing ones. And you also may have, like, you know, maybe there isn't as much capital in the private markets anymore, and suddenly, like, all, you know, the entire kinda calculus changes on this. Um, so, you know, like, we, w- we've decided to be private for now, um, but that doesn't mean, you know, forever. So, you know, you kind of get to make that choice again every year. Um, um, and, but obviously if you go public, you know, that, that's a, you know, it's hard

9. 44:19 – 44:43

   Conclusion

   1. PCParker Conrad44:19

      to undo.

   2. SGSarah Guo44:19

      Awesome. Thanks so much, Parker. This is great.

   3. PCParker Conrad44:21

      Cool. Thanks, Sarah.

   4. SGSarah Guo44:24

      (instrumental music) Find us on Twitter @nopriorspod. Subscribe to our YouTube channel if you wanna see our faces. Follow the show on Apple Podcasts, Spotify, or wherever you listen. That way, you get a new episode every week. And sign up for emails or find transcripts for every episode at no-priors.com.

Episode duration: 44:43