[David Senra]
Did you read Ari Emanuel's new book?

[Nikesh Arora]
No.

[David Senra]
You've heard that you're in it, though?

[Nikesh Arora]
No, I didn't know that.

[David Senra]
Okay. He says the way he met Egon Durban was that he got introduced to Marc Andreessen.

[Nikesh Arora]
Yeah.

[David Senra]
And Marc Andreessen told Ari that him, Nikesh, and Egon had this affiliated group of essentially angel investors-

[Nikesh Arora]
Yes

[David Senra]
... that were working together.

[Nikesh Arora]
Yes.

[David Senra]
Tell me a little bit about that.

[Nikesh Arora]
So I met Egon when Egon had just come to Europe, and

[Nikesh Arora]
he was a Silver Lake partner there, and he reached out to a common friend saying, "Listen, I want to hang out with some people, get to understand the tech scene over here, and see if he can advise to Silver Lake." And I was early 30s. I used to run Google Europe. So, Egon and I had lunch, and I said, "Listen," I said, "Why are you so reluctant on this conversation?" And I said, "Look, I'd die to do this. They really don't want advice. They make you come for a two-day offsite. They present a whole bunch of stuff to you. The last thing I need is more PowerPoint in my life and free coffee." He says, "You know what? This resonates with me. I'm going to call you, and if you tell me that's a good idea, I'll obviously independently consider if it's a good idea or not, because I have to make the decision. If you tell me it's a bad idea, I'll think about it similarly. But don't worry, you'd add as much value in telling me what to invest in and what not to invest in, so then we'll have fun." So I said, "Sure," and I did that for about 15 years. So that's when I met Egon, when he was in Europe.

[David Senra]
You're just investing your personal money?

[Nikesh Arora]
Yeah, of course. But I'll tell you, there's a funny interesting incident. What happened was, one time,

[Nikesh Arora]
I flew back from

[Nikesh Arora]
CES with Marc Andreessen, because Marc rarely travels, but when he does, he goes to CES and he hosts a dinner. And he had me come, we spoke. I spoke a little bit over there, and I flew back and I sent him an email note saying, "Hey, Marc, is there any cool company that you're working on right now that I could put some money in?" He says, "Oh, the guy who spoke at dinner at CES," this was Oculus.

[David Senra]
Palmer Luckey?

[Nikesh Arora]
Yes. Well, Brendan, to be fair.

[David Senra]
Okay.

[Nikesh Arora]
Brendan Iribe, and Palmer Luckey, of course. I said, "Great." So I

[Nikesh Arora]
said, "Give me a number." So I text Brendan and say, "Hey, we met at the dinner. I'd love to make an investment." He's like, "Great, but you have to come see this stuff. This stuff's real cool." I said, "Okay." So I'm in LA, and I said to Brendan, "I'm coming to LA. Can we take a look at your technology?" It's me and my wife. We go there, he says, "Yeah, but you have to drive an hour outside of LA because we have this industrial park." I go, "Let's fuck it." So I take a car, I go to this industrial park. The lights are out,

[Nikesh Arora]
so nothing's going to work. So we're kind of hanging out, waiting for the lights to come back on. We go in, he puts this contraption on our face, and it's got this little virtual reality type situation going on. I said, "This is really cool. This is very cool. What's going to happen?" "Well, it's going to be cool because, you know, all the promise of visualization, all the promise of gaming, et cetera, et cetera." I said, "Great. Can I write a check?" He's like, "Sure." He's like, "It's you

[Nikesh Arora]
and

[Nikesh Arora]
Blake Krikorian

[Nikesh Arora]
and Divya Narendra, and I have room for one more." I said, "Well, Egon and I do this together," and Marc was already in the company.

[David Senra]
Mm-hmm.

[Nikesh Arora]
So I said, "Okay, so me and Egon."

[Nikesh Arora]
So we agreed to do the deal. He sends me some docs. Oh, he sends me an email. He says, "Work in the docs."

[Nikesh Arora]
Doesn't

[Nikesh Arora]
respond. Egon says, "What's going on? Why haven't we heard from him?" So I send him an email. He says, "The docs are just coming. They're going to be here with you anytime soon." No docs, and boom, you wake up one morning and he's just been sold to Facebook.

[David Senra]
Before you were able to invest.

[Nikesh Arora]
All right.

[David Senra]
So this group that Ari writes about.

[Nikesh Arora]
Well, we ended up being the technology advisory board to William Morris when it was acquired by Silver Lake.

[David Senra]
Okay. So-

[Nikesh Arora]
Marc and I.

[David Senra]
Okay. Well, I don't even know about this. So what were you guys advising on?

[Nikesh Arora]
Whenever he had a question on technology. The advisories around Egon and Ari are very straightforward. Ari does the 15-minute phone call. You give Ari the-

[David Senra]
Fifteen? It's like, now, I did the episode with him. Now his book is called "Rolling the Calls."

[Nikesh Arora]
Yeah.

[David Senra]
Now he does it to me. So I get a call and it's like, "Hold for Ari Emanuel." I'm like, "You're calling me."

[Nikesh Arora]
Exactly.

[David Senra]
And then that, sometimes they're like 25 seconds and there's no goodbye.

[Nikesh Arora]
Yeah, but you know what? I'll tell you what's fascinating. So we would do that when we had something to talk about. And, no, I understand his shorthand. He's trying to get something done.

[David Senra]
Yeah.

[Nikesh Arora]
He's a man on a mission. But there was a time when I had

[Nikesh Arora]
left SoftBank, and he reached out and said, "What are you doing now?" I said, "Nothing. I'm just trying to figure out what I'm going to do." He said, "Why don't you come by and come see me, and then we can talk about it." I said, "Okay, I happen to be in LA. I'll come see you." And my assistant's like, "Ari's office says you're having lunch. What time should I schedule your departure?" I'm like, "Listen,

[Nikesh Arora]
it's probably going to be 15 minutes. Why don't you schedule half an hour, and then we'll get me to the airport and get me on a flight back?"

[Nikesh Arora]
And that was the only time I spent an hour and a half with Ari. So you can tell, like, he actually wanted to get into what I was going to go do next, and he actually spent time and invested time in that conversation. So, he does have a soul. When it's really important to you, he's going to spend a lot of time, but most of the times, he's actually transactional when he wants to get something done.

[David Senra]
One of the things I love about Ramp is their mission is easy to understand. They want to help your business save time and money, and that is why they have built Router. Do me a favor, while you're listening to this, go to router.com. Router was built to reduce your company's inference costs by matching every request to the most efficient AI model. Router automatically balances cost, speed, and quality of output. Router is built for CTOs and loved by CFOs. Your engineering team gets the best model for every workload, and your finance team gets lower inference spend. One customer of Router has the perfect description of why your company should be using Router. "Choosing the right model makes a meaningful difference to our AI spend. We run billions of tokens through Router and have reduced our model costs by 92%." Tokens are money. Save both. And you can do that by going to router.com. Deel is how the best founders turn the world into their talent pool. I've been studying how history's greatest founders operate for a decade, and one thing they all have in common is they understand that recruiting and hiring the very best talent is your most important priority. A players recognize other A players, which is why top companies like Ramp, Shopify, ElevenLabs, Uber, and DoorDash all use Deel. Many of the top founders I know have personally invested in Deel after using their product. And what they discovered is that Deel is the best company in the world at building infrastructure for global hiring. Deel will help your business hire, pay, and manage any worker anywhere in the world so you can retain the best talent anywhere and spend the rest of your time focusing on what you do best, delivering value to your customers. The founder of ElevenLabs has a great description of the value Deel can give your company. He said, "We built ElevenLabs to break down language and communication barriers. With Deel enabling us to hire and support exceptional talent anywhere, we can accelerate our innovation and bring more voices, stories, and ideas to every corner of the world." Deel is trusted by over 40,000 companies and growing fast. Learn how they can help your business by going to deel.com/senra. That is deel.com/senra. We were talking a little bit about some of the people that we either know jointly or know of, and you were saying some of the people

[David Senra]
jump around a lot. They have an idea, and then they're working on it for a little bit, and then they almost like they have ADHD.

[David Senra]
How do you think about you? Because you seem to have had these jobs for a long time. You were at Google for 10 years. You've been at Palo Alto Networks for how long now?

[Nikesh Arora]
Eight.

[David Senra]
Eight.

[David Senra]
I like to focus on one thing for a long period of time. How do you work?

[Nikesh Arora]
Well, the good news is, even at Palo Alto Networks or when I was at SoftBank or I was at Google, Google went from 2,000 employees to 60,000 employees when I was there, and it went from

[Nikesh Arora]
2 billion dollars in revenue to 62 billion dollars in revenue. So, you realize even though you're at one place, you're actually doing so many different things. At that point in time, we went from search and YouTube and DoubleClick and buying tons of businesses, thinking of all kinds of stuff. So, I think it's not what you do at one point in time, it's how much your brain can get challenged, how many different problems can you get involved in. So, you can

[Nikesh Arora]
swap from problem to problem, solve many things in the same space, and as long as you get the right environmental structure right, right? If the opportunity is big enough. Palo Alto, when I joined, that was eight years ago, we were a firewall company. Today, and now we have 70 plus products. We're in every aspect of cybersecurity. We're all over AI, trying to make sure we pivot hard on the AI stuff. So, you can always keep yourself challenged as long as you get the right platform in front of you.

[David Senra]
I just talked to Nick from Revolut, and that was his thing. He's like, "There's no way I was going to run a company with one product." He's like, "That would be boring." He's running 20 different experiments at all given times. I think he's in 30 or 40 countries. He wants to get to 100 different countries. When you got recruited to become the CEO of Palo Alto Networks, they had essentially one product, right?

[Nikesh Arora]
Yes.

[David Senra]
The firewall.

[Nikesh Arora]
For the most part, yes.

[David Senra]
Okay. This expansion that has since occurred in the last eight years, did you come in with that plan, or you're just like... What was the conversation?

[Nikesh Arora]
I didn't have a plan when I came in.

[David Senra]
You had a hilarious line where you're just like, "I thought cybersecurity was two words," or something.

[Nikesh Arora]
Yeah, honestly, in my interview, I ended up talking a lot more about executive security because I thought that was an important topic, and then I realized it was a very small market. But, sitting talking about how each of us need to be secure, it's like, "No, that's a consumer business. You don't want to get involved in that. That's a lot of marketing, not enough ARR." So,

[Nikesh Arora]
I came in with more of an enterprise framework study than I did a cybersecurity framework study. I sat there and looked and said, "Which are the largest companies that exist in enterprise?" And you look at them and say, I don't know, Cisco or Salesforce at that point in time, these were hundreds of billions of dollars market cap. We were an 18 billion dollar market cap company. I'm like, "How do I go from an 18 billion dollar market cap company to north of 100?" That was the original expectation. I sit there and say,

[Nikesh Arora]
if you look at the P&L of any enterprise company,

[Nikesh Arora]
most companies spend 15 to 18% in product development. That's kind of where R&D sticks around. Everything else, the administrative is 6 to 10%. So, the entire difference between your operating margin

[Nikesh Arora]
and your gross margin is sales and marketing and customer support.

[Nikesh Arora]
If you can find a way of taking 60% of your costs, which typically live in sales, marketing, and customer support, take them down to 20, you could be a 40% operating margin business. That was my insight.

[Nikesh Arora]
I'm like, "So, how do I get sales and marketing amortized over time?" And you figure out the biggest expense in enterprise is customer acquisition. That's the maximum. That's what costs the most. So, if you have a

[Nikesh Arora]
low revenue product, which you can only sell one product to a customer, it's really hard to build a big business. And if you look at the largest businesses, there's Microsoft Enterprise Business or Salesforce or, take your largest businesses, they sell a lot to the same customer. That was the insight. I'm like, "Well, if you're going to be big at Palo Alto, we got to find a way of selling a lot to a customer." You only have one thing to sell. So, you go knock on the door, you knock on 20 doors, you spend all the time, and 15 people say, "Sorry, don't need it. I already have it." You're stuck with five. If you knock on a door, you have a truck behind you saying, "What do you want? Do you want this? You don't want this? You want this? You want this?" It's like, the world's your oyster. What can I get you?

[Nikesh Arora]
Armed with that insight, I'm like, "Well, we need to figure out a way that we can find adjacencies to our business, which the customers will trust to buy from us, so that we can keep expanding what we sell to customers, so we can go serve the top 10,000 customers in the world and increase the amount of money you can get for them." You only get that if you earn their trust. You only get that if your shit works. You only get that if it's kind of best in class, because nobody wants to buy the second-best product to cybersecurity. It kind of sucks. So, you want to buy the best, then our need was you got to be the best. Now, that's kind of one part of the insight. The other part of the insight is, which is still true, it takes four to seven years to build a good technology product. It doesn't matter who you are, what you are, where you are. You look back and say, "Hmm, this thing was not fully ready. It's been seven years. This thing looks closer to being ready." Whether it's an Uber, it's a YouTube, it's- Facebook, it's Google Search. It took four to seven years, sometimes longer, to build a useful product that the customers found exciting and interesting. And that's true in enterprise as well. So I sat there and said, "Holy shit. I just joined this company. You don't have a large product pipeline. It's going to take me four to seven years to build your products. What am I going to do?"

[David Senra]
You're going to acquire them.

[Nikesh Arora]
That's right. But you got to be careful about it, because generally,

[Nikesh Arora]
history is littered with bad acquisitions, and companies destroy acquisitions for the most part, whether it's enterprise or consumer. So you got to figure out and say, "Should I spend the next time, next sort of part of my life studying that?" Like, what makes for a good acquisition and what makes for a bad acquisition?

[David Senra]
What were you studying? Like, how are you learning about this?

[Nikesh Arora]
You go back to look at patterns, right? Like, how many companies did company X buy? How many did company Y buy? Why did they work? Why did they not work? Which ones worked? What are the key characteristics? Was it a failure of the market? Was it a bad idea? You shouldn't have done it. Was it bad execution? Was it bad leadership? You go and figure out and say, "Great, these are the seven reasons why they fail. How can I minimize the risk of failure?" And you minimize that by saying, "Okay, let me control five variables in a different way." And then I only have two risks. I have risk of I picked the wrong idea. So I bought the right company, the market didn't show up, right? We had one of those. We bought a company, we thought the market was going in this direction, market ended up going there.

[David Senra]
What was that company and how much did you pay for it?

[Nikesh Arora]
That company was called Operetta. We thought the world was going to go to IP-based segmentation, but it never went there. But we bought it, and we cut our losses quickly. Once we decided it wasn't going to go there, we moved on. So it's kind of like almost like portfolio business, right? It's like marginal venture capital. It's like product development, because the pharma companies do it, right? They try a whole bunch of drugs, they take them to a certain phase and say, "God damn it, it's not going to work." Got to do the same thing.

[Nikesh Arora]
I've been in companies where

[Nikesh Arora]
somebody says, "Oh, you know what? We should do this. We should build this. We should buy this." And it's like, "No, we can't buy it. We can build it." I was at Google when I said, "Let's go buy Netflix."

[Nikesh Arora]
And I was like, "No, we have YouTube. We can build the same capabilities, same thing." So video serving platform, we started to get professional content instead of consumer content. That's easy to do, technically. Great, give us 10 million dollars, give us 20 engineers, we'll solve it. Never works like that, right? So, I had the same thing at Palo Alto. If I tell my team of engineers, saying, "Come, we need to buy this." They say, "No, we can build it."

[Nikesh Arora]
Once you build it, you have two or three problems. One, the guys we're seeing succeed, they're already a year and a half ahead of us. They have a functioning team of 50 to 75 people who are working on it. You want to go hire 50 engineers. By the time you hire the right people, get your shit together, you start building, you'll have version one, and they'll be two years ahead.

[David Senra]
Why do you think so many other CEOs make the mistake? Is it like an ego thing where it's like, "No, I can build this?"

[Nikesh Arora]
I don't think so.

[David Senra]
What is it?

[Nikesh Arora]
I don't think it's an ego thing. I don't think CEOs set out to make mistakes. No CEO stands up saying, "Let me try and make a mistake this morning." They believe whatever they're doing is right, and they most likely identify the right company. I think often M&A fails because of bad execution. Your tendency is, you're too busy, you're doing a lot of stuff, you buy the company and say, "Great, I have a guy or gal who manages this topic. Okay, this person does video streaming. He or she's been trying to do video streaming for the last five years. I want to buy a video streaming company and give it to him or her."

[David Senra]
And you instead put the founder of the company.

[Nikesh Arora]
Yeah, I'm like, "Whoa, wait a minute. This person just got their ass kicked with all the resources and all the money we had." To that guy who got funded by venture capitalists and who went out and lived in a crummy warehouse, hired people, blood, sweat, and tears, built something that has product market fit, and he or she should work for the empire? That's not going to work. He should be part of the empire.

[Nikesh Arora]
So I switch it. I say, "Okay, this person did really well. This person is now going to be the head of video streaming. Everybody can learn from him. He can work for him." That sometimes doesn't go down well with some of the people who have to end up working with him.

[David Senra]
In the existing organization.

[Nikesh Arora]
Of course not.

[David Senra]
They wind up leaving or whatever.

[Nikesh Arora]
It doesn't matter, right? They were the ones who were chartered with winning. They had access to resources.

[David Senra]
And they didn't.

[Nikesh Arora]
And they didn't. You can't reward that behavior by giving them a prized asset and run the risk that they destroy the prized asset. So that's kind of one failure mode. The other failure mode, people saying, I always say this, like, "My innovation is my genius. Theirs is pure dumb luck." Right? Which means I'm a founder, I created something cool. These guys are not smart. I'm just going to buy number two or number three. I'm going to spit and shine it, make it look like new, and I'm going to kick their ass. That never works. I want to buy number one.

[David Senra]
Well, and you talk about this a lot. Why is number one and number two so important to you?

[Nikesh Arora]
If you look at most markets,

[Nikesh Arora]
number one and number two end up with disproportionate share of the profits in the category.

[David Senra]
This is what you were trying to get out of me before we started recording.

[David Senra]
Which we'll talk about after.

[Nikesh Arora]
Okay, fine.

[David Senra]
That's exactly what's happening right now.

[Nikesh Arora]
Right. So, number one and number two end up with disproportionate share of the profits. Three gets close sometimes, but never. So if you're going to go win, you want to be number one and two in the long term. If you're not going to be number one and two, you got a problem. Now, if you go buy number two or number three, remember, number one still exists. More than likely, you're going to slow down whatever you buy because you're still a large enterprise and you can't control every variable. There'll be somebody from finance saying, "I'm here to help." Somebody from HR saying, "I'm here to help." Some guy says, "Dude, let me go build the product." And you have this whole onslaught of people who show up saying, "I'm from the mothership and I'm going to help you." So,

[Nikesh Arora]
you have to figure out how to keep, maintain momentum for number one.

[David Senra]
You don't have an acquisition team, right? I read somewhere that it's just like, "It's fuck me."

[Nikesh Arora]
Well, no, there's a set of people who are very good at what they do, and they work with me, so it's not like I work alone. But, no, eventually every acquisition ends up with me being involved.

[David Senra]
Let's say you figured, okay, we want to extend to this product. You look at both one and two, right?

[Nikesh Arora]
Yes.

[David Senra]
Can you get into the difference? Like, from the outside, maybe two looks similar to one.

[Nikesh Arora]
Yes.

[David Senra]
I think when you get deeper and closer, like, do you notice, can you explain, like, what you typically find?

[Nikesh Arora]
Sometimes there are small differences between one and two, right? And sometimes, we've had a situation where we bought what we thought was number one, and number two went around us and became number one because we screwed up the execution. That happens too. We buy 35 companies, not everything works out as per plan. But-

[Nikesh Arora]
Typically, both wanted to have product-market fit. And if you think about product development and you say, "This is what the end product will look like in four years," number one could have started with this as their primary thrust, and number two could have started with this part as their primary thrust. They both look like they're winning

[Nikesh Arora]
in the product category. But it sometimes becomes apparent later that you should have started here because that's the primary need, and the customer wants this to work really well before they take the second half. But it's hard to tell in the early days when both of them have about 30 or 40 customers that have effectively proved product-market fit. So you'll find it's a strategy question, it's an execution question, it's a product-market fit question, it's a business model question. All those things

[Nikesh Arora]
are somewhat different, but they're hard to project how they're going to pan out over the next two or three years. So you have to sit back and look at both their positions and say, "Which one is more likely to succeed?" Then you have to add to that, which one is more likely aligned with our product direction? So, I made a mistake early. The first company or second company I bought, ended up spending six months trying to debate product direction after we bought them.

[Nikesh Arora]
And I said, "Whoa, wait a minute, this is a problem." So these guys started a company, and rightfully, the founder's like, "I started the company with this vision in mind." "Well, we sold the company.

[Nikesh Arora]
Now it's my vision."

[Nikesh Arora]
It's like, "No, but-"

[David Senra]
What did you think the money was for?

[Nikesh Arora]
Exactly. It's like, "No, no, but I sold the company, but I still want to build what I wanted to build." I'm like, "Doesn't work like that." But it took me a while to get to realize it doesn't work like that. I felt like, "Oh my God, I'm going to cripple a founder." But I had to sit down and say, "Dude, it doesn't work like that." So then we changed our model. So what I do now is when I sit down with a founder, I agree a deal, and I insist on agreeing the deal with the founder. I don't involve bankers and others because I'm like, "You are going to work with me for the next four years. Do you really want somebody else in the middle negotiating on our behalf so that there's eventually, 'Oh, but that's not what was sold to me?'" We just have the conversation. We have that. The moment we agree to deal, I tell the founder, "Listen, let the finance guys, let the legal guys, let the lawyers figure out all the paperwork. Go figure it out. Your job is now to sit down with me and my product guys and design what our joint house is going to look like, and we have 30 days to do it." So we literally go back and forth on product direction, product vision-

[David Senra]
Before the acquisition is closed?

[Nikesh Arora]
Before the acquisition is closed. We don't sign the definitive-

[David Senra]
I don't think I've ever heard that idea before.

[Nikesh Arora]
I don't sign the definitive term sheet until I get the founder to sign on a joint product roadmap.

[Nikesh Arora]
I'm like, "If you don't want to build what I want to build, then we shouldn't do this."

[David Senra]
It's natural for a founder to want autonomy and to think that they have the right answers.

[Nikesh Arora]
Right.

[David Senra]
So how difficult do you find these conversations?

[Nikesh Arora]
You'll be surprised when there's a large check hanging on the other side of 30 days, how much more amenable founders are to aligning their product vision than after they've got the proceeds. It's unbelievable. It's night and day.

[Nikesh Arora]
And by the way, they have the choice to pull the ripcord. They don't have to do it.

[David Senra]
How many have backed out at that stage?

[Nikesh Arora]
Nobody backed out.

[Nikesh Arora]
We backed out twice.

[David Senra]
Why?

[Nikesh Arora]
Because in the process, we figured out it'd be hard to get consistent alignment of the product. We figured out it would be hard to manage the founding team thereafter because they had a very strong opinion on where they wanted to go. We could sense that they were playing ball because they knew that they had to play ball-

[David Senra]
To get the money

[Nikesh Arora]
... to close the deal. And we just didn't feel that that was going to be the right outcome. In one case,

[Nikesh Arora]
as in the 30 days, as we kept digging deeper and we kept pushing harder, we figured out that the substance was not as

[Nikesh Arora]
strong as we had sensed in our diligence early. So as you dig deeper, you start looking at architecture, saying, "Look at the combined architecture," saying, "Oh my God, wait."

[David Senra]
Do the founders typically stay on long after?

[Nikesh Arora]
Some do. So one of the other things we do is, because when you buy something like this, you're buying a team. You're buying a team, you're buying the vision, you're buying the execution. So it's very hard if a founder says, "I'm out." So we don't buy companies if founders say, "I'm out." If you're out, you should go, which means you could kill the company anyway if you're going to be done. So you got to want to be around.

[Nikesh Arora]
What'll happen is typically if there are two or three founders, one will slack off because they're doing biz dev. So maybe we don't need biz dev, we do better biz dev. Once we go to market, we don't need that. So you'll find founders fall off depending on the function that they bring in. But it's never the product guys or engineering guys who fall off because that's what we're buying. We need them. We still have many founders who work at Palo Alto. Some have converted to just continuing to work at Palo Alto. Some have the founding itch, and after three years, they leave. But the other thing which we always do is when we buy a company, we reinvest the founders for three years, ideally four.

[David Senra]
Why is that so important?

[Nikesh Arora]
We want continuity. We want the continuity from the execution of vision perspective, right? Because they built something, as I've said, it takes four to seven years to build a great product. Typically, we buy these product companies three years in, two years in, four years in. We think there's another two, three years of consistent product development that needs to be done, and we want that consistency and continuity of the founder and the founding team to keep driving that. So if they're not there to lead it, then there's disruption. Disruption could cause us to lose the lead as the number one in the category. We want them to continue to execute in that direction.

[David Senra]
I spent the last decade reading more than 400 biographies of history's greatest founders, and if I had to distill what I learned down to a single word, it would be focus. The best founders spend all their time on the thing that makes them great. They spend their time building products, serving customers, and growing their companies. The greatest founders would not spend time rebuilding authentication infrastructure. That is why more than 3,000 of the fastest-moving and most important companies in the world use WorkOS. Companies like Anthropic, OpenAI, and Cursor all use WorkOS. WorkOS makes it easy for you to sell your products to enterprise customers. If you build software and you want to sell to the largest companies in the world, there are some requirements that you cannot ignore, like single sign-on, SCIM, role-based access, audit logs, and more. You could spend months building all this yourself, or you can use WorkOS. WorkOS provides the infrastructure to make your software enterprise-ready. Go to workos.com and get started today. That is workos.com.

[David Senra]
I want to go back to this idea of looking at the number one and number two, and then you get really close to them. And is there anything else that you're surprised- But again, they may look similar from the outside, but the more you dig in, you see why number one is in the position they're in.

[Nikesh Arora]
You know what's interesting is, the hardest thing to put your arms around as a larger company is sometimes number ones also win because the sheer will of the founder.

[Nikesh Arora]
Right? Some founders are just,

[Nikesh Arora]
what do you call them? Alpha killers or whatever they are.

[David Senra]
What are you talking about?

[David Senra]
We need context here.

[Nikesh Arora]
Yes. Oh, you don't want to be... Okay, good.

[David Senra]
No, no. We've run into each other a few times.

[Nikesh Arora]
Yes.

[David Senra]
And I've watched a lot of your interviews, and I just think there's like a no bullshit... The reason I asked you to be on the show is because I like these founders who seem to be like minimal bullshit.

[Nikesh Arora]
Yes.

[David Senra]
Like, "We're here to fucking win."

[Nikesh Arora]
Yes.

[David Senra]
"And that's what we're doing."

[Nikesh Arora]
Yes.

[David Senra]
And

[David Senra]
I think you've already alluded to this a few times, and I was shocked when we were talking before we started recording, you were kind of like playing that down a little bit. I was like, "No, no, no. I'm pretty sure I know what's sitting across from me." And I was naming some other founders that

[David Senra]
remind me of you and the way that you operate.

[Nikesh Arora]
It's one thing to be that as the leader of the entity, it's one thing to have people within your team who are that way. If you acquire a company and the founder is like you described, they're going to break glass, and it's okay. But they also have to find a way of coexisting with the larger entity, because what you get with working with a Palo Alto, for example, and if you're a founder, "Hey, founder, I have 6,000 people in the field. You have eight." You got to find a way of leveraging 6,000 people. They're not all bad. They're amazing, right? And sometimes when you're a founder, you take on this point of view that everybody's stupid, "I'm smart, I'm going to get this shit done. Anybody who comes in my way is basically slowing me down, is not competent enough." You got to change, you're going to need a mental reset if you're going to survive and succeed in a larger ecosystem. You got to be able to balance, say, "I get it. I get 6,000 salespeople. My job is to motivate 6,000 people to go out there and sell my product, because if they do, my vision of wanting to make this an amazing product is going to be realized because these 6,000 people are going to be my amplifiers." Sometimes founders who are used to doing small team stuff and going and being the underdog don't realize you went from being the underdog, now you're part of the overdog.

[Nikesh Arora]
And that's the only risk that one has to watch out for.

[David Senra]
But tie that, what you're saying right now, to the will of the founder. So you're saying, like, the will of the founder running, they're succeeding in a smaller company, largely built due to the will of the founder. They have to modulate their behavior.

[Nikesh Arora]
Yes.

[David Senra]
Is that what you're saying?

[Nikesh Arora]
You have to make sure that they can modulate their behavior and succeed in your environment.

[David Senra]
Got it.

[Nikesh Arora]
If they can't modulate their behavior and succeed in the environment, then I lose their

[Nikesh Arora]
leadership on the product part because they're going to rub people the wrong way, and then they're going to get frustrated. So that's what I have to watch out for. Sometimes the one and two

[Nikesh Arora]
has to be adapted by us for who's going to be a better fit in our environment.

[David Senra]
I'm kind of like personally obsessed with this idea of like there's usually a gap between one and two and-

[Nikesh Arora]
Yes, I heard that the third time. Yes.

[Nikesh Arora]
So keep going. You can ask it again.

[David Senra]
No, no, no, I'm not asking.

[Nikesh Arora]
Maybe I'm not smart enough to answer it.

[David Senra]
No, no, I'm not. Again, this whole show is for my personal education.

[Nikesh Arora]
But I see that. But remember, one and two is also a judgment call. It could be one and two. You could have one, you could have this one, A call one and B call two, and I could have B call one and A call two because I'm looking at a different set of criteria to measure it. There's no obvious criteria who's one and two. They both have 30 customers, they both have the same amount of ARR. Which one is one and two?

[David Senra]
Are you a tennis fan?

[Nikesh Arora]
Yeah.

[David Senra]
I'm not really, but -

[Nikesh Arora]
But sure. Why didn't you use a tennis analogy?

[David Senra]
But I'm going to tell you now, because I had dinner, it was really interesting.

[Nikesh Arora]
Oh, great.

[David Senra]
I had dinner one time with a... He's a mental coach to some of the top tennis players. And when he says mental coach, he's like literally like, they got other people to help them with their swing.

[Nikesh Arora]
Yes.

[David Senra]
My conversations are all about what's going on in their mind. And he said something that was very fascinating. He's like, "Take the top 200 tennis players." He's like, "The difference between one and three is negligible." He goes, "The difference between four and 200 is smaller than the difference between four and three." And he was explaining like what appears from the outside, like, "Oh, that person's number four, that person's number three or two." He's like, "That seems the gap is like really small." He's like, "It's actually a lot bigger when you get deeper and you actually understand what is going on in their..." Like, in his case, he's like, "What's going on in their mind is actually counting. It's not like a physical... It's not like number three and number four are that different physically. It's like a lot in their mind." So I like these like, this personal fascination, whether it's sports, business, or otherwise, of like, "Oh, kind of from the outside, this kind of looks similar." And I've run across a ton of founders, and then you spend time with them, you're like, "Oh, this is why this person is... The gap between them and their next competitor is so large."

[Nikesh Arora]
As you said, the criteria differs, right? Like, some could have clear company attributes which made them one or two. Somebody's got twice the ARR than the other one. Yeah, we get it. They could be deemed as one much easier. Sometimes they have similar starting grounds, or they started from the same place, one came at it from a different angle. Then it becomes then which founder is going to lead this to success or the other, and that's where you're getting into the mindset of the founder and the leadership team. And that's what, you know, we say it differently. I say, "My job is to fund... Once we identify one and two, remember, they also have to be willing to sell."

[David Senra]
Which the people we were talking about before we started recording are not selling for any price.

[Nikesh Arora]
That's right. Yes. So there's also that.

[David Senra]
Yeah.

[Nikesh Arora]
You know, you got to reanalyze that from the vantage point of saying, "Well, these could be alpha founders, they could be winners, but dude, they're also sending you a signal by saying, 'I'm willing to sell.'"

[David Senra]
Have you talked to Hock Tan about this?

[Nikesh Arora]
Have I talked to Hock Tan about selling?

[David Senra]
About acqui... He does a lot of acquisitions.

[Nikesh Arora]
He does it very differently.

[David Senra]
I know, but have you talked to him about this? His mindset's a little extreme. So we were, me and you were together-

[Nikesh Arora]
Educate me, yes.

[David Senra]
Okay. Well, me and you were together at Dale's house, and this is where I heard this story where he was advising a younger founder that was also there, and he was just like, "Just make sure that on day one of your acquisition that the

[David Senra]
acquired company knows that you are the conqueror and they are the conquered."

[David Senra]
And then I asked him-

[Nikesh Arora]
That's a slightly different philosophy, but yeah.

[David Senra]
I know you. Then I asked him, I was like, "Hock, why don't you do any podcasts? Do you want to do my podcast?" He's like, "Oh, no." He goes, "My wife forbids me to do podcasts." I go, "Why?" He goes, "She said I'd get canceled."

[Nikesh Arora]
See, I say the opposite. I tell my team, "When you're starting a negotiation with a company, remember, they're going to be your colleague." Don't treat them with disrespect.

[David Senra]
He's obviously an extreme character. I wasn't taking it as disrespect, but like-

[Nikesh Arora]
So which one's right? Which one's one?

[David Senra]
No, I said-

[Nikesh Arora]
Which one's one and two in your mind?

[David Senra]
How does he know that? Think about it. There's no way you could think of it like he does because you just said, "No, this guy's coming in and now he's your boss."

[Nikesh Arora]
No, but look.

[David Senra]
Yeah.

[Nikesh Arora]
My point is that I see it differently. I cannot win if 20 people around me don't feel they're winning.

[David Senra]
Mm-hmm.

[Nikesh Arora]
And for them to believe that they're winning, they have to believe they're a first-class citizen. They have to believe that they're part of the team and their winning matters, and their winning is as much for themselves as it is for me.

[David Senra]
Has there been any acquisitions you did too early?

[Nikesh Arora]
When I walked in, we had just bought a company called Evident.io. Palo Alto had bought it before I got there, and then we ended up buying a company called RedLock, which was the same space. The difference was one only worked on Amazon, the other one worked on all three clouds. And I suspect the one that had been bought early was too early, which was bought by my predecessor, but it didn't matter. The company bought it too early, and then we bought the second one, which was in the same space, just further along. So, sometimes you can buy stuff too early. It becomes a question of price,

[Nikesh Arora]
stage,

[Nikesh Arora]
and conviction, if you marry the three, right? Am I convinced this is going to be a big space in the future? Okay. If I'm convinced a big space in the future, I need to have a footprint in that space. Sometimes I can go spin up my own team and then go charge it down and go make it work, or I can go out and acquire something. The question when I go acquire something, and how long have they been around in that space, and how expensive is it going to get? And I think the current times are most sort of representative of the risk. Today, companies are getting funded at valuations I don't understand, right? Now imagine if I wanted to acquire a company today, the same company I'm trying to acquire today would be one-third, one-fourth the price three years ago in a different funding environment as compared to today. They're probably as early, but three times or four times more expensive today.

[David Senra]
So what do you do?

[Nikesh Arora]
You buy them if it makes sense on your strategy. Look, M&A is not a strategy. M&A is a mechanism to validate or to amplify your strategy or to execute your strategy. And people come and always ask me, "What's your M&A strategy?" I don't have one. I buy companies when I believe I need to go win in a category and I don't have my team at the place I'd like them to be at this point in time. I got to go look for another team that's got it figured out and has the right people in place, so you go buy it. If something's worth 200 million dollars, it's worth 800 million dollars, because my job is to take the 200, 800 dollar asset and turn that into a 5 to 10 billion dollar asset.

[David Senra]
If something's worth 200, it's worth 800. What does that mean?

[Nikesh Arora]
As a 300 billion dollar company, I should be buying things which I believe in the next 5 to 10 years will be worth 5 to 10 billion dollars for us.

[David Senra]
So you're not going to remember the other 500 million. This is Egon Durban. So,

[David Senra]
there was one of the most memorable parts of Ari Emanuel's book. They're buying IMG.

[Nikesh Arora]
Yes.

[David Senra]
And I think they wanted to pay 1.9 or 1.8, and it went to 2.2, something like that. And, I think maybe it might have been Ari's team that was kind of fucking up the deal. And Egon comes in, who has way more experience with this, he goes, "You're never going to remember the 400 million."

[Nikesh Arora]
Yeah.

[David Senra]
And he's like, "This is an asset we want or not? You're going to remember fucking up the deal, but you're not going to remember the 400 million."

[Nikesh Arora]
Yeah.

[David Senra]
And,

[David Senra]
they obviously closed the deal and it's been way more valuable today.

[Nikesh Arora]
Well, Egon and I bought a cricket team together in London.

[David Senra]
I thought you did that with Devesh.

[Nikesh Arora]
No, no. Egon and I are the equal owners. He and I came up with this together, and he called me. I was about to go play golf at the AT&T, and he called me and says, "How's the auction going?" It's like 6 o'clock in the morning because it's in London. I said, "The last auction went for two rounds. We are in round number 24."

[Nikesh Arora]
He's like, "I know you're going to want it cheap

[Nikesh Arora]
because you like value. It's in your upbringing. This is sport. Welcome to sport."

[Nikesh Arora]
"Don't stop bidding. I will stay on the phone with you to give you moral courage."

[David Senra]
Wait, how many more rounds? You were at 24. How many did you have to go?

[Nikesh Arora]
We went up at 29 rounds.

[David Senra]
But once he said that, you're like, "Fuck it. We're getting this."

[Nikesh Arora]
He was like, "Yeah, what's the worst that could bring? Half of it doesn't matter because this thing's going to be a huge success or it's going to be a failure."

[David Senra]
So he did it to you too.

[Nikesh Arora]
No, but I did the same thing, but I was trying to be cute on the other one. And he just reminded me that, you say that in your professional life, think about it in your personal life too. So that's what we did. I saw him at the range at 7 o'clock and he said, "Do we own the team?" Like, "Yeah, we own the team now."

[Nikesh Arora]
It happened. So yeah, he's consistent in his

[Nikesh Arora]
point of view.

[David Senra]
I've heard this phrase differently before. I'm curious if you agree with this characterization. You're not buying companies, you're buying founders.

[Nikesh Arora]
You're buying teams. You're buying teams, you're buying their point of view, you're buying their strategy, you're buying their execution, right? A company is just a construct that is around the team that allows us to be held in some legal entity, protect IP, and eventually turn that into sort of a go-to-market capability. But effectively, what is a company? When you come up with an idea, your first instinct is not that I'm going to start a company. Your first instinct is, I'm going to go build something amazing.

[David Senra]
Yeah.

[Nikesh Arora]
When you go build, you call yourself a builder, you go find like-minded people who share the vision, and then you're the most charismatic person in the room because you're trying to convince people to get on

[Nikesh Arora]
the bandwagon for your story, because you had the idea, and it's typically one or two or three people. So, you're doing everything. You're a builder, you're building, you're

[Nikesh Arora]
validating your strategy every time you hire the next person. You're looking in their eye and telling them, "This is what we're going to build." The person gets excited. And if you're hiring smart people, they also have to buy into it. So, you're basically building a team. You're building a team of like-minded people. You're bashing out the edges, you're aligning the strategy and getting to the point and say, "Okay, now we all agree we're going to build this. Now let's go to warp speed and build this shit because you're going to beat everybody else to the punch." That's what you're doing. The company is just a legal entity. Think about most of these guys. They probably have one administrative person who does HR, finance, facilities, and brings coffee. So, I mean, the company is a construct in which you organize, but you're actually buying a well-functioning, cohesive team. That's what you test for. Can this team execute better than other teams out there? And when you think about it like that and say, "I'm going to compete with that team that's spent a year and a half getting together and training together, and they're on the field every day, they live in the same house, they work 80 hours a week," and say, "I'm going to beat them by hiring a bunch of corporate people."

[David Senra]
You don't want them.

[Nikesh Arora]
"By going through my HR team, going through four interviews, and going through internal process." It's like, "Holy shit, you're never going to beat them." They're far ahead.

[David Senra]
There's a couple things that are popping in my mind while I'm listening to you. Have you ever heard of this guy named Henry Singleton?

[Nikesh Arora]
No.

[David Senra]
Okay. Henry Singleton, essentially like the proto-Buffett. He ran this very successful conglomerate called Teledyne

[David Senra]
in the 1960s. I found him because I read, when I'm interested in somebody, I read every single thing they've ever written about them or written by them, and they will all tell you the people they studied. And so Buffett and Munger kept talking about the same guy named Henry Singleton. Munger said that Henry Singleton was the single smartest person he ever met. Buffett said it was a crime that American business school students didn't study him. His returns were utterly ridiculous. And a lot of the ideas that I thought that Buffett used for Berkshire were actually, he learned from Singleton for Teledyne. But he grew by acquisition just like you did, and at one point, he... I think he does like, I should know this, I just did another episode on him. Let's say 135 acquisitions. I think at one point he owned 130 companies, 129 of them were profitable.

[Nikesh Arora]
Right.

[David Senra]
So he bought really well. But then he changed his strategy and he stopped acquiring, and then from there, he never acquired another company for another 15 years.

[David Senra]
I'm thinking about him while you're talking. Is there a chance where Palo Alto Networks stops acquiring?

[Nikesh Arora]
Possible. As I said, it's not an existential strategy for us. It's a way we can maximize the value for the business. It's a way we can maximize the outcome for our customers. At some point in time, if we believe we've reached a point where the marginal value to accrete to the customer is through us making sure all of our stuff works at a customer, maybe we focus on that. There's no hard and fast rule that we have to keep acquiring.

[David Senra]
Is anything going on in AI changing how you think about acquisitions?

[Nikesh Arora]
Yeah.

[David Senra]
Can you say more about this?

[Nikesh Arora]
This is the most transformative technology we've ever seen in our lifetimes, and possibly will be. So, if you look at the impact it's already having, it's fundamentally changing how everybody works. Can I say this differently? When I was at Google, we democratized knowledge or information. This is democratizing intelligence, right? We all have in our back pocket something that gets more and more intelligent over time. So, we basically have access to intelligence we never had. And I'm pretty sure two, three years from now,

[Nikesh Arora]
AI will get to a point of reliability where we will trust it as much as a human being who's an expert in the topic. You talk to your nutritionist, you talk to AI and say, "You know what? My nutritionist is not smarter than my phone giving me nutritional advice, or my physiotherapist, or my trainer." So you suddenly find that AI is going to get to a point where it's going to have so much data, so much tribal knowledge, that it's going to be able to decide. You'll be able to torque it, saying, "Listen, give me advice which is at the frontier, which has got a little bit of risk, or give me advice down the mainstream." You'll be able to torque, saying, "How much intelligence do you want? How much differentiation do you want in the intelligence that you're going to get?" So if that's going to be true, it is going to fundamentally change the way we work. It has to, right? A lot of organizations are structured in work that is being broken down into silos, right? Even the process of product development is spread across eight different teams. You have documentation people, you have testing people, you have coding people, you have product people, you have UI people. So you've got eight different sets of people who combine together to build a product, which makes no sense. The only reason we did it, because we sort of created specialization, because nobody could be great or amazing at everything. But if you believe that you can harness all this intelligence in a way that one person could master all these eight crafts because they have very able assistants which will do 90% of the work for them, it fundamentally changes the way we get shit done, the way we build things, the way we do anything in our lives, the way companies are created. So if that's going to be true, the shape of a company, the shape of the organization that we run today is going to be fundamentally different five years from now.

[David Senra]
I found one of my all-time favorite quotes when I was reading the book "Zero to One." The quote says, "The single most powerful pattern I have noticed is that successful people find value in unexpected places, and they do this by thinking about business from first principles instead of formulas." That is exactly what AppLovin has done with their advertising platform. AppLovin connects you with over a billion potential new customers in mobile games. AppLovin allows you to capture undivided attention. AppLovin ads are full-screen videos that are watched for an average of 35 seconds. That is retention that blows other ad platforms out of the water. And you can launch on AppLovin in minutes. You set the goal, and AppLovin achieves it. No complex setup, no expertise needed. And AppLovin scales quickly. They can put your ads in front of over a billion potential customers. Other businesses have seen immediate results, scaled to hundreds of thousands of dollars of spend per day, and increased their revenue by millions. So you want to get started quickly before all of your competitors are on AppLovin. And you can do that by going to applovin.com. That's applovin.com. Doesn't AI make cybersecurity companies more valuable?

[Nikesh Arora]
Yeah. I think even more so, more technology, more interconnectedness makes cybersecurity companies more valuable. Look, cybersecurity didn't exist 25 years ago because there was no connectivity. You had a mainframe, you logged in, it was secure. There was no problem. The problem is now David can log in from here into his bank account. Now that becomes an attack vector. So the more people who can log into shit from everywhere just expands the attack surface. I saw this morning, Facebook says 3.65 billion people who are daily users. There's 3.65 billion people getting into their infrastructure every day. Every door into their infrastructure is a potential cyber attack surface. You do that across the world, I don't know, between the eight billion people we have, you must interact with hundreds of consumer applications. There must be

[Nikesh Arora]
trillions of interactions every day which are on a line that allows you to interact with some enterprise infrastructure. The more you do that, the more likely that you need security across all those vectors. The more technology changes, you need more capability around security. For example, the products that will secure AI don't exist fully yet, because AI is so new. So yeah, it's good for our business the more you connect things up.

[David Senra]
You're like a, I don't know, like more of like a stoic kind of person. So you seem like you don't get stressed, or you said, like, I read something like you said your business doesn't stress you, which is very unusual-

[Nikesh Arora]
Yeah

[David Senra]
... thing to say for somebody-

[Nikesh Arora]
Life shouldn't stress you. You should wake up every morning, do the best you can, and then... Remember, if you grew up sort of in India with Hinduism, it was like there's a strong sense of fatalism. All you can do is you do your best.

[David Senra]
Okay, I don't know about this. Explain it.

[Nikesh Arora]
The rest is-

[David Senra]
Explain how you grew up in this fatalism thing.

[Nikesh Arora]
Remember, you've got 1.8 billion people in the country. You've got to make sure that they all understand that they can do their best, and eventually there is a hand of God which dictates what eventually happens, or it's the notion that it is uncertainty. You can't create full certainty. Things will happen to you which you can't control. The only thing you can control is what you do, and if you do what you do really well, then you should sleep well, because you can't get worried about everything that can happen to you from an uncertainty perspective. That is a sense of fatalism. That is what keeps society somewhat orderly.

[David Senra]
But you do understand it's easy to say that and very hard to apply for a lot of humans.

[Nikesh Arora]
Well, look, it doesn't stop anyone from trying, right? We try and control every outcome that we can around us. We try and minimize risk around us. We all do that. But at some point in time, we've got to say, "I've done my best."

[David Senra]
Did you have this

[David Senra]
ability when you were younger and early in your career?

[Nikesh Arora]
No.

[David Senra]
This is like-

[Nikesh Arora]
This is recently found in the last five years, yes.

[David Senra]
You're saying this is the last five years. So, you're working at Google. High stress?

[David Senra]
More anxious person?

[Nikesh Arora]
No. Google's the best business. The search business keeps going.

[David Senra]
Yeah, but that was the greatest... That seems to me, and maybe I'm wrong, is

[David Senra]
you had a lot of success before that, but you know you're working on a once-in-a-100-year company at that point.

[Nikesh Arora]
Yes.

[David Senra]
You had, and you were young. You were in your 30s, right?

[Nikesh Arora]
Yeah.

[David Senra]
Like, I-

[Nikesh Arora]
It can get to your head.

[David Senra]
Yeah.

[Nikesh Arora]
It can.

[David Senra]
But I feel like the pressure to, like, "This is a huge opportunity. This could be a once-in-a-lifetime. This opportunity will change my life."

[Nikesh Arora]
It's funny, it didn't feel like that when you were there.

[David Senra]
Okay. Say more about this.

[Nikesh Arora]
It just felt normal. You just felt, "Wow, this is this great rocket ship that's working." And remember, you're 34. You've never actually worked in any other company of a similar ilk. You're now the center of attention of technology, and you're like, "Great, everybody's searching around you." Every morning you wake up, there are more searches. Every morning we wake up, more people want to advertise. So it's an execution problem. It's like, how can I get... When I joined, people were spending money at Google in Austria with an American credit card. That's the only way you could buy advertising in Europe. Can you imagine? Can you imagine? He comes like, "I'm so sorry, I can't collect your money. You got to go get yourself an American credit card in US dollars and then pay me."

[David Senra]
And they're doing it.

[Nikesh Arora]
"Wait, let me do that." I'm looking, it's like, "We're making 10 million dollars in Austria. We don't accept local currency. How the hell is this happening?"

[Nikesh Arora]
That's a different business problem, right?

[David Senra]
Yeah.

[Nikesh Arora]
You're just basically, it's like, "Let me see if we can get out of the way." So you're trying to eliminate friction and trying to create scale, which was great learning for me. And I said, "Great, that I can do. I can eliminate friction and create scale. I don't have to worry about demand." I used to joke, I used to go to a customer saying, "What are you here for? What do you do?" He said, "I'm the head of sales for Google Europe." It's like, "What does that mean?" Said, "Well, I sell advertising." "Great. So, how much is it?" I'm like, "I actually don't know. Depends on what the last guy bid. Just got to bid more than that." "So you can't tell me what it's going to cost me?" I'm like, "Not really. It depends on how much you're willing to bid." "Great. How much can you take a day?" "I don't know. It depends on the number of people who search, because we can only serve ads when somebody searches." "So, you don't know volume? You don't know price?"

[David Senra]
Yeah.

[Nikesh Arora]
"What kind of sales guy are you?"

[Nikesh Arora]
Think about it.

[David Senra]
Yeah.

[Nikesh Arora]
I'm selling ads. I don't have control on the volume. I don't have control on price. Price is controlled by bidders.

[David Senra]
Yeah.

[Nikesh Arora]
And volume is controlled by people who search.

[David Senra]
Mm-hmm.

[Nikesh Arora]
I can tell you, when it rained in France, we used to get a lot more revenue because people sat home and searched. That's good.

[Nikesh Arora]
So you got to go to customers saying, "Listen, the way it works is you work out an ROI. Every search is worth something to you. If I send you a search, look at your conversion rate. If you convert that into an insurance sale or into an e-commerce transaction, you figure out how much you're willing to pay for a lead. My lead becomes conversion." So we used to sit and do ROI maths with our customers so they can understand what their maximum bid should be. And then we'd say, "Now go give us all your money, and just as long as it hits below your bid, take as much searches as you can." That was my job.

[David Senra]
It's pretty straightforward. I'm friends with Adam Furui, the founder of AppLovin, and he's just very simple. Like, "I sell revenue. If they're giving me a dollar, I have to give them back more than that."

[Nikesh Arora]
That's right.

[David Senra]
And it's very easy to sell as long as I can give them back more than that. We'll come back to Google in one second. So I want to get to this, though. From the outside looking in, it seems like because of the proliferation of AI, the fact that it... I think you were just on my friend's show. I'm friends with John and Jordy from TPPN.

[Nikesh Arora]
Yes.

[David Senra]
And I caught a clip of that today, and there was some kind of...

[Nikesh Arora]
Yeah, there was a discovery of a vulnerability called PHP, which is used 22 and a half million places, which is being used right now.

[David Senra]
Yeah, and so my point is, you've got to be waking up every day hearing more crazy shit. It's only going to get crazier in the future.

[Nikesh Arora]
Yes.

[David Senra]
And you seem to not

[David Senra]
allow yourself to be stressed by it, which from the outside, at least it seems like this would be the most intense, stressful part of your entire career. Why am I wrong about that?

[Nikesh Arora]
But I can't do anything about it. And we all have to go figure this out. We got to go fix it. But stressing is not going to change the outcome.

[Nikesh Arora]
The outcome is going to be changed by us getting on and getting

[Nikesh Arora]
something to do with it, right? We all discovered this morning. I found out about it yesterday in the morning. Our teams went and looked at everything we have to make sure we don't have the vulnerability. We found it, we blocked it. We found the patches, we patched ourselves. Said, "How do we go protect our customers?" Team worked overnight, built a patch.

[Nikesh Arora]
When it came out this morning, they announced their patch, we announced our patch. We put it out in the public domain. We're getting on the phone to any customer who has a problem and solve it. That's all we can do.

[David Senra]
So how do you describe this philosophy, though?

[Nikesh Arora]
I'm just saying, wake up every morning, do the best you can to the best of your ability, leave no stone unturned, and then let fate do the rest.

[David Senra]
Is this real?

[Nikesh Arora]
Yeah.

[David Senra]
Well, okay. When were you the most stressed or anxious in your life?

[Nikesh Arora]
When I was the most anxious in my life, when I had to give a speech at my daughter's wedding.

[David Senra]
Is this the daughter that just started the fund?

[Nikesh Arora]
Yeah, this is the daughter who got married in February in India.

[David Senra]
What's her name?

[Nikesh Arora]
Aisha.

[David Senra]
Congratulations.

[Nikesh Arora]
She used to work in marketing in Brex and-

[David Senra]
Wait, she used to work in marketing for Brex?

[Nikesh Arora]
Yes. Kids don't take advice from parents for the most part, but I'm blessed that once in a while she'll listen to something and she'll go process it differently. And I said to her, I said, "You know what excites you?" She said, "Dad,

[Nikesh Arora]
it's exciting, but marketing doesn't seem to be the most important function in the company, so I'm working in marketing. What should I be thinking about?" I said, "Look, if you look around here in Silicon Valley, the most exciting jobs are people who get to talk to founders, people who get to understand what they do, get excited about business. If you're excited about business, you got to think about venture capital." So, she thought about it. She did her own research, figured out that she's going to go work, and she worked with Bill Maris at Section 32, and then she's getting married this year, and she's like, "I think I should start my own fund." I said, "That sounds like a great idea. You should." So, she's been through the motions. She's done a lot of research, figured it out, and she started going around thinking who would be people who'd invest in her, and she said, "Will you be my advisor?" Now, this is the best thing a father can get. And she calls me once or twice a day. We talk about companies. We talk about what she's thinking about. It's a blessing. It's great.

[David Senra]
That's beautiful, man. When you think about your own childhood,

[David Senra]
this innate drive that you had to achieve, largely internal, I would imagine. Did you get a lot of pressure from your parents?

[Nikesh Arora]
No.

[Nikesh Arora]
My parents didn't tell me what to do.

[Nikesh Arora]
I used to come home from school, do my homework. My mom would be happy that I did it. She'd be chasing my sister around, trying to get her to find out what homework she had. I got my shit done. My dad didn't know how I got into university. He didn't know how I got into business school in the US. I just went to him and said, "I need 2,000 dollars." He's like, "I don't have that." I said, "Can you give me 200?" He's like, "Yeah, I'll take 200." I took 200 and showed up here. Then he sent me 2,000 afterwards to pay part of my tuition, and that was it.

[David Senra]
You don't put any pressure on your kids?

[Nikesh Arora]
No.

[David Senra]
Like, how different are you as a parent than your parents were to you?

[Nikesh Arora]
Look, that was a different era. At that point in time, parenting was different. Parenting is different now. Parenting in India is different. Parenting in the US is different. So, you obviously have all those differences that come into play. I have two younger kids who are 11 and 10, so more involved in their lives than I was with my 29-year-old.

[David Senra]
Why?

[Nikesh Arora]
More time. I consciously try and take out time, and I'm sure my kids will say it's never enough, and my wife will say it's not enough, but I try and take out time as much as I can. So it's different. No, I don't believe in putting pressure on my kids. The kids have to be able to express themselves and do what they believe is best. Look, I have seen... Say I do some bizarre thing.

[Nikesh Arora]
I don't know how many

[Nikesh Arora]
people have been born since humanity started. Must be in the tens of billions, right?

[David Senra]
No, I think it was... I mean, we read about this a long time ago. It was like over 100 billion.

[Nikesh Arora]
Okay, 100 billion people have been born. It's a well-known problem. Every kid has a parent by definition.

[Nikesh Arora]
And even now, we struggle with parenting as a problem because there's probably so many variants of parenting that most people can get it wrong. So, I just want my kids to be happy in their lives. If they're happy, my mission is accomplished, because I've seen so many scenarios where kids are not happy, and it's not clear where things go wrong. It's not clear from a parenting perspective, or it's in the DNA, it's in circumstances. So, I just want to make sure my kids are healthy, happy, and balanced. If I can achieve that, they can do whatever they want.

[David Senra]
I love the framing you just put on there. It's like everybody's had a parent. Parenting is a known thing, it's been around, and we still don't have it figured out.

[Nikesh Arora]
No, you show me where's the ultimate guide to parenting.

[David Senra]
I'm particularly interested in this because most of the biographies I read, obviously the person usually starts out... There's some people that are born into wealthy families and they wind up achieving a lot.

[David Senra]
Obviously, most of humanity is not wealthy, so therefore, like most of the people you're going to read about weren't. And there is something that they almost universally struggle with, which is basically, "I was the son of a poor man, now my kids are the son of a rich man. What do I do about this?"

[Nikesh Arora]
Nothing.

[Nikesh Arora]
You created a distinction by yourself. When you were the son of a poor man, there were somebody way poorer than you.

[David Senra]
Mm-hmm.

[Nikesh Arora]
And from their vantage point, you were the son of a rich man.

[Nikesh Arora]
Right? So, I think we all get born into a circumstance.

[Nikesh Arora]
And I think it's very dangerous to take that circumstance and keep reminding your children, "Remember, I was poor. You should be more grateful." That's what happens, right? Especially for people who are very, well, not very, who are poor relative to where they are today. They feel this notion where they have to keep reminding their kids, "Well, it wasn't like this when we were born. You know, we used to do this and we used to do that." I'm like, "Dude, get over it." They're born in this. Figure out a way that they can enjoy this and make sure that they learn how to yearn for more, how to go have drive, how to go get achievement, right? You got to be careful. So,

[Nikesh Arora]
I think you have to be blessed if you can find a way that your kids want to achieve, they want to build, they want to make things happen on their own, and they just don't take their circumstances for granted. That's the hardest part in parenting, is to make sure that your kids have drive, your kids have ambition, your kids want to achieve. My son is obsessed with basketball. Great. Go for it. Let him follow his passion. My daughter wants to be a gymnast. She's got tremendous work ethic. She's great. He's extremely sort of friendly. He likes people. He likes hanging around people. He knows a lot about what he wants to know about. That's great. If my kids can have passion, they can go chase their passion, they can show ambition and drive, I don't care if he becomes a basketball player, a basketball commentator, as long as he wakes up every morning and is happy and felt that he gave it his best.

[David Senra]
I completely agree with this perspective. Out of all the examples I've read about, I love what Sam Walton said in his autobiography, which he wrote when he knew he was dying, he had cancer all over his body. And he says, "I know I'm a fairly overactive fellow," which is the most understatement of the century. He's like, "I don't put pressure on my kids." He's just like, "Let them do."

[Nikesh Arora]
Exactly.

[David Senra]
"Why would I want them to be like me?"

[Nikesh Arora]
But it's kind of interesting.

[Nikesh Arora]
If you do it the right way,

[Nikesh Arora]
your kids will watch your behavior. They watch more behavior than you think. They know more about how we are, who we are, than we possibly can ever understand. And sometimes they will want to do certain things like you. But if you try and force them to do certain things like you, you're never going to get there. I can see my kids would like to do certain things like me, and that's great. I'm very happy that they want to. And I'm sure sometimes they're looking and saying, "I never want to do that thing that my dad does." So, that's fine too. As long as they can find out what parts of what I do they like to do and what parts of what I do they don't like to, they're fine. I'm okay with that.

[David Senra]
I'm thinking back to all the other people I've had on the podcast, and I'm like, I just feel, yes, AI is changing every single business. Toby Lukey was on this show earlier this year. I'm going to see him again in like two weeks to record again. And his whole point was like, we're going to look back on the year 2026 where because of AI, like every business is up for grabs. So, every business is being transformed somewhat, right? But I feel like yours might be the most out of anybody else I've had on the show.

[Nikesh Arora]
No, no, no. So, let's break it down, right? Cybersecurity is- Because I don't come from that, and I told you, it was two different words in my mind eight years ago, so I'm still going to treat it like that.

[Nikesh Arora]
It's somewhat straightforward, right? Cybersecurity is the idea that bad actors trying to get into your infrastructure and exfiltrate something important. Let's take that for premise.

[Nikesh Arora]
If I know it's bad, I can stop it at the perimeter, right? Bad guy shows up at the door, we know he looks bad. He's got

[Nikesh Arora]
a hood, he's got a gun. This is bad. We know how to stop them. So,

[Nikesh Arora]
half of cybersecurity is stopping bad guys at the perimeter, bad things at the perimeter, okay? That's half of cybersecurity.

[Nikesh Arora]
10%, 20% is analytics, how to get hygiene right once they're inside your house to make sure shit's sorted. The remaining 20%, 30% is, if somebody gets in, what do I do? Things will get through your perimeter, inside your infrastructure. How quickly can I find the bad guy, and how quickly can I eject them out of my infrastructure before he or she can do harm? That's cybersecurity in a nutshell, okay? How does AI impact this? Okay, well, let's start with your comment about vulnerabilities. AI says, "I can find holes in your perimeter faster than anybody else in the world." Okay? It used to take days to find it, today it takes forever. I can find holes to enter your perimeter. Okay, great. My perimeter just became more porous, right? Now, AI is not going to patch the perimeter. I have to still go look through the infrastructure, find where the porous parts are, and patch them, right? I could be a software company, I could be a infrastructure provider, because everybody's IT stack is made up of tens and thousands of vendors. So, vulnerabilities exist in our software and the software that's written by our customers themselves. So, that's kind of step one. That's what we're seeing right now. The likes of Mythos, the likes of the new models that OpenAI has, the likes of GLM 5.3, they have immense capability of finding vulnerability, and bad actors can rent them cheap and throw them at you and find everything that you have vulnerability around. So, what is the call of the hour? The call of the hour is to find a way to patch these things swiftly so these bad guys can't get in, okay? Guess who's building the service? We're building a service, it's called virtual patching. We write signatures, we put bandage around the entire perimeter, we know where the holes are, these people can't get in. Over time, our customers will patch the underlying systems, and they'll be fine. So, that's kind of

[Nikesh Arora]
one problem. Good news is, our business has gone up since Mythos came in.

[David Senra]
That's what I mean. That's what I'm trying to get to.

[Nikesh Arora]
Holy shit. Can you help me patch it? Now, guess what? Yes, I can help you patch it. I inspect everyone's perimeter. So, you've got a laptop somewhere, I live on your laptop, I charge you 25 bucks a year, and I watch

[Nikesh Arora]
150 megabytes a day, give or take, on your laptop to make sure nothing bad's coming in.

[David Senra]
You told me you're hacking my phone calls.

[Nikesh Arora]
I was just kidding. I wouldn't know how to do it. Anyway, remember, cybersecurity is two words. So,

[Nikesh Arora]
the marginal cost of inspection of traffic in laptop by me is zero, right? I don't charge you more the more traffic that goes through.

[Nikesh Arora]
AI is set up to charge you

[Nikesh Arora]
every time you run traffic through AI, in terms of tokens. So, if AI tried to do my job at your endpoint, it would cost you 5,000 dollars a day.

[Nikesh Arora]
Or pick a number, right? 500 dollars a day, or pick 50 dollars a day. They can't do what I do at 25 dollars an endpoint. If you go back inside, and if the bad actor gets in, what happens? Yes, AI can help you analyze all the anomalous behavior quickly, but you still need harnesses, you still security expertise, you need data ingestion, you need infrastructure. So, in a nutshell, our business is not at risk.

[David Senra]
Yeah, from the outside, that's what I was assuming was the case. That was like the-

[Nikesh Arora]
You always assume that CEOs are trying to maximize their businesses from the outside. Generally, that's a good rule.

[David Senra]
Yeah, but we talked about no one wakes up wanting to lose, but-

[Nikesh Arora]
Exactly

[David Senra]
... a lot of people lose every day, so-

[Nikesh Arora]
That's right

[David Senra]
... this is what I was trying to get to. Who do you go to when you want to learn about the frontier of AI?

[Nikesh Arora]
Who do I go to when I want to learn more about AI?

[Nikesh Arora]
There are different people. I spend,

[Nikesh Arora]
I want to say, at least four or five hours a week

[Nikesh Arora]
with AI founders of some sort, because these kids are young. They possibly worked at OpenAI, they probably worked at Google somewhere. They've got these companies. They're very kind. They spend time with me, they try and tell me what they do, how it works. So, I learn about open weight models, I learn about training, I learn about training data, I learn about guardian agents. I go around, I talk to tons of people. I talk to probably five or 10 cyber startups a month, maybe 15, because I'm trying to absorb how they're thinking about it. Because

[Nikesh Arora]
in a bizarre way, this is a new and developing science, for lack of a better word. There are no real experts. People know how to do their shit. Everybody else is trying to imagine the implications to everything else around them, and they're trying to build a mental model so they can build product and go win in this category, right? There's no concept of data labeling before you started having self-driving cars, people have to label data. Now, that's turned into reinforcement learning, simulation models, neural networks that are trying to simulate data so we can train AI. So, you literally have to stay

[Nikesh Arora]
in the conversation with tons of people to understand and absorb what people are talking about. So, you just have to spend a lot of time on Twitter, spend a lot of time talking to people, spend a lot of time reading stuff. You kind of like, half I understand, half just gets through the other side. I can't absorb everything. That's how I learn.

[David Senra]
Oh, you brought up another thing I wanted to ask you about. What's behind your new presence on X?

[Nikesh Arora]
Well,

[Nikesh Arora]
I think I said that

[Nikesh Arora]
I was giving shit to one of your fellow podcasters.

[David Senra]
Harry?

[Nikesh Arora]
Yeah. I was giving Harry shit, saying, "This is great for you. You keep bringing all of us in, you build your own brand. All of us are effectively props for your brand."

[Nikesh Arora]
He's like, "Well, that's your fault, not mine." I'm like, "What do you mean?" He's like, "Well, you get the right to build your own brand if you want to. You just don't." I'm like, "How would I do that?" He's like, "Well, go tell people on X what you think. You have a lot to say in a podcast. Why do you wait for me to ask the question?" That's a good point. So then he told me to tweet every day. I'm like, "Okay." And then-

[David Senra]
I'm enjoying your tweets. You are tweeting almost every day.

[Nikesh Arora]
No, no.

[David Senra]
Are you not?

[Nikesh Arora]
It's a lower frequency now. I listen.

[David Senra]
Oh, you can't listen. You're really good at it.

[Nikesh Arora]
But you can only put your foot in your mouth if you say something too often, because you almost have to not feel the pressure to do it every... So I like that advice. Don't feel the pressure to say something all the time. You'll end up making it a job. I don't want to make it a job. I want to do it when I have something I want to say. So, I think I say stuff when I want to say stuff. People ask me how much time I spend. Who writes it? Actually, I do. I just write it in the back of the car.

[David Senra]
Oh, it's obvious that you write it. Come on. People-

[Nikesh Arora]
You know, once I had it checked by Claude or something, and it made some grammatical edits, and people just gave me so much shit.

[David Senra]
Oh, I saw that one. You're like, "You're writing AI."

[Nikesh Arora]
It's like, my ideas, I had AI check it, and I'm never going to do that again.

[David Senra]
No, you're really good at this. In fact, there's a guy that's always on this camera that gives me a heads-up when we hit a certain time, and he just gave me the heads-up, and I was fucking shocked at how fast this time went. So that's usually a good-

[Nikesh Arora]
It's a good sign.

[David Senra]
It's a good sign, man.

[Nikesh Arora]
Okay, fine.

[David Senra]
I really appreciate you doing this. This was awesome. We got to do this every few months.

[Nikesh Arora]
Sounds like a plan.

[David Senra]
All right, thanks for the time.

[Nikesh Arora]
All right.

[David Senra]
I hope you enjoyed this episode. Please remember to subscribe wherever you're listening and leave a review, and make sure you listen to my other podcast, "Founders." For almost a decade, I've obsessively read over 400 biographies of history's greatest entrepreneurs, searching for ideas that you can use in your work. Most of the guests you hear on this show first found me through "Founders."

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