Shopify, Slack and more on the Investing City podcast

We go deep into a discussion on Shopify and Slack, the competitive landscape with other ecommerce and collaboration solutions, and more.



Ryan Reeves:

On this episode of the Investing City Podcast, we're pleased to have Marcelo Lima. Thanks for being here, Marcelo.


Marcelo P. Lima:

Thank you, Ryan, for having me.


Ryan Reeves:

Great. Why don't we just start with a little bit of your background? Just tell us kind of how you got interested in investing and a little bit of just background.


Marcelo P. Lima:

Sure. So, I’ve always been interested in business, and I never really knew how to express that. When I was in college, I decided to study operations research and industrial engineering because it was the closest engineering course, to business, that I could find. Once I graduated, I was a software developer for several years, but always very interested in business so I'd read a lot of biographies on entrepreneurs and just tried to figure out how successful people became successful. The watershed moment for me was in 2004, when I read Warren Buffett's biography, the Roger Lowenstein one, and that's when I learned the systematic way of learning about businesses and analyzing companies and I realized that you could do that as a career, which is something that I didn't know about before.


Ryan Reeves:

Yeah, that's amazing. So, how did you actually originally find that book?


Marcelo P. Lima:

I was at a party, and we were talking about entrepreneurship and successful people and a friend mentioned to me, "Well, if you actually want to read about somebody who's really successful, you should read about Warren Buffett." And it's kind of ironic because this friend wasn't really a big fan of a Buffett and not a follower of Buffett’s at all. I bought the book, kept it on my bookshelf for, I don't know, a year or so or several months. And then one day I picked it up and it just hit me in the head. It was an epiphany. It was kind of dramatic. My friends joke that I can divide my life between before Buffett and after Buffett for that reason.


Ryan Reeves:

So, when you're reading that book, what really hit you? Was it a particular concept or something like that?


Marcelo P. Lima:

Well, I think a lot of things about Buffett's life are incredibly remarkable and it's a little bit surprising to me that even though he's extraordinarily famous, even though 40,000 or 50,000 people visit Omaha every year, even though he's in the media, I still feel that he's very misunderstood and that a lot of people don't understand the background and how he became successful. What I think is remarkable is he worked hard from the time he was a young kid. As a teenager he had the newspaper delivery routes. He used to sell six-packs of Coke to people stuck in traffic and go about town in Omaha. He would operate the pinball machines. He had a golf ball rescue operation.


He had all these little entrepreneurial activities and by the time he was in high school, I don't know if it was senior year in high school, he had been filing his tax returns for many years. He was already earning more money than his high school teachers. Very hard-working guy. He really started with nothing. The whole process of studying with Ben Graham and visiting companies, visiting GEICO over the weekend, and learning about that, I just found the whole story so compelling, and I found it very intellectually appealing that one could do something like that. Study businesses and analyze companies for a living and do something incredible, which is what he did with Berkshire Hathaway.


Ryan Reeves:

Yeah. I didn't really know all about those entrepreneurial pursuits. So, that's super interesting. So you read this book, and then what were the steps that you took after that moment to kind of put what you had in your mind into practice?


Marcelo P. Lima:

Well, oh, that's a complicated answer. Long story short is, I started devouring everything I could about Buffett. So, I guess the first step was I went back, and I said, "Well, he learned a lot from this guy, Ben Graham, let me go read everything about Ben Graham." So started reading Security Analysis, The Intelligent Investor, and a bunch of other things. And then I started Googling and trying to find out, "Well, is there a world beyond this? Is there anything out there?" And I quickly found the Columbia University CIMA Conference, it was called back then, which was the student’s value investing conference. It's always on around February of every year. I immediately signed up for that. I discovered Buffett; this is like early 2004. And I signed up for the CIMA Conference in early 2005.


By the time I got there, I had already read so much. I probably had already read every single one of Buffett's letters from the partnership years 1956 to '69. And then what I did is I printed out, remember this is 2005, this is before the iPad. So I printed out every single Berkshire Hathaway letter, I actually got a printer that does it double-sided. I put three hole punch paper in a printer, and I put it all the letters in a binder, like two binders thousands of pages. And I read every single Berkshire Hathaway letter, accumulating all this stuff from Ben Graham and Buffett.


By the time I got to the Columbia University conference I had this thing in my head. It was top of mind for me. And I just remember getting there and seeing hundreds of students and then all the practitioners. I remember I got on the elevator and looked next to me, and I realized it was Jim Chanos and like, "Oh, Jim Chanos is here." And then I get off the elevator and I walk over, and I see Bill Ackman, and I see Joel Greenblatt, and Marty Whitman. It was kind of cool for me to go and see all these people in person. I'm like, "Oh yeah, these people actually exist and there's actually a huge practice around this idea of value investing." I just had no idea until then.


Ryan Reeves:

Wow. So, you have this deep dive experience where you're just going for it and really understanding everything about Buffett. And at this point, did you have a lot of business background? Because some of the stuff about accounting and goodwill gets a little bit esoteric and all those letters. Just talk about how you really dug to understand all of that.


Marcelo P. Lima:

Yeah. Good question. So at the time I was working in the finance department of a real estate investment company. Working very closely with the folks in the acquisition department, I was modeling a lot of the shopping center acquisitions that we were making and I was also working closely with the CFO. I was always religiously reading the Financial Times every day, Wall Street Journal every day, try to angulate, again, Buffett and Munger in that respect. So, I was very much attuned to that. I didn't know accounting as well as I eventually would.


And what happened, I think it was 2005, I started going to Omaha, for the Berkshire Hathaway meeting. And I remember running into a gentleman and I said, "Well, how can I learn more accounting?" And he says, "Well, you should go study the CFA curriculum." Of course I went out and I got the books and I started studying this CFA curriculum, which is very helpful because it teaches you how to read financial statements and all that. So, yeah. By this point you could Google and find things out if you didn't know what goodwill meant and all that.


It is esoteric, but Buffett keeps things reasonably simple in his letters, although he does have digressions into these more exotic topics. It was a learning process. I'm pretty sure I've read some of the old letters since. I'm sure that if I read them again today, it would be a completely different experience because of the background that I have now compared to what I had back then.


Ryan Reeves:

Totally. So, you mentioned that you were in software development before this, then you read all this Buffett stuff. So, you kind of have this juxtaposition, internet background and Buffett, which historically he's kind of strayed away from technology. Just talk a little bit about those two sides of the coin.


Marcelo P. Lima:

I feel that having studied Buffett so deeply and then being brainwashed, I say brainwashed in... I don't say that in a bad way. I think it's a good thing, but there's also a negative side to it, which is, you become a little bit too much a part of that community and you stop questioning things. For example, as you mentioned, Buffett historically has been very much against investing in technology because it moves very fast. Sure, that's true but that's also a shortcut into not looking at technology at all. I feel that a lot of us value investors, myself included, during those years failed to appreciate the incredible businesses being built in technology.


I also started attending the Value Investing Congress around the same time. I attended almost every single one of them because I wanted to learn so much more. I remember I saw one, might've been two short pitches on Salesforce. The story if I recall was similar, "This company is trading at a price to earnings multiple that's 100X, some crazy number.” I don't remember the details of the short pitches, but they were all very skeptical and basically valuation driven.


Of course, today we know those pitches were completely dead wrong and there was this lack of understanding of the economics of software as a service. There was also, I think, an overemphasis on financial statement analysis and under emphasis on the more qualitative and big picture aspects in terms of the size of the market, the growth ahead, the ability of these companies to keep growing for very long periods of time, and then to eventually generate tremendous free cash flows, as is the case for Salesforce today. But that's just one example. It was a long period until I started eventually coming out of that fog, if you will, of not believing that technology can be a phenomenal way to invest.


Ryan Reeves:

Yeah. Just talk a little bit about kind of your process of coming to that point of coming out of that. Like you said, when you steep yourself so deeply in value investing and Buffett, you kind of have this mindset that internet is this thing that maybe valuations are unsustainable. Just talk about the steps you took to see things in a different light.


Marcelo P. Lima:

That was a long and painful process. What happened was several years later, there's been this narrative of everything is getting disrupted. And I didn't understand what exactly that meant. If you've been to Omaha and read Buffett's letters, he's never mentioned Clay Christensen, and he's never mentioned Innovator's Dilemma. He's never mentioned LTV/CAC, lifetime value of the customer, to customer acquisition cost. All these things are more technology things. So, that whole framework and way of looking at the world was, I think, severely lacking from the stuff that we were learning from Buffett and the whole community around there.


So, I started, "Let me try to figure out what this stuff means." So, I got on Twitter, and I started following every venture capitalist. I started listening to all their podcasts and really trying to understand what's behind all this. I would read the Clay Christensen books as well, the Innovator's Dilemma and Innovator’s Solution. What I realized is, and this might be a little bit over the top, but I truly believe is, that a lot of the venture capitalists, the more successful ones out there are, I believe, much better business analysts than some of the best business analysts that I had met up to that point. I just felt that VCs really understood, and especially this is true about not only the internet world, but they also understand traditional businesses very well, because those are the businesses that are being disrupted by the companies that they're funding.


This was very surprising to me. I clearly remember one interview with Marc Andreessen, where he says, "Warren Buffett bought Heinz ketchup because he's making a bet that ketchup is never going to change. And we're making exactly the opposite bet. We're making the bet that the companies that we're funding today will go out and disrupt all the incumbents out there, and that change is going to happen." It's kind of scary to hear that. I wasn't invested in Heinz back then or Kraft Heinz. But when you think of the world that way, if you don't understand what's being funded that's going to disrupt you, it becomes very risky to be an investor. So, I decided that at that point, that I really had to become an expert in all the things that were up-and-coming in new technology.


Ryan Reeves:

Got you.


Marcelo P. Lima:

So that was the genesis of that.


Ryan Reeves:

Yeah. That's great. Just as you talk about that, I'm thinking first, you did a really deep dive on Buffett and understood everything there and then technology, and really understanding the venture capitalists, ecosystem, and how funding works. What are the things that you're digging into right now?


Marcelo P. Lima:

Well, just before we started recording this, I was watching the keynote for... Salesforce is having its Dreamforce in San Francisco right now, I was watching the keynote. My process is really trying to understand what both the enterprise software companies, and the consumer internet companies are doing and who are the emergent competitors? What are the startups out there that are still not public that are being funded? Which companies are the large companies betting on? A lot of them have investment funds and they'll fund a lot of these different startups.


As you know, a lot of these companies are platforms. It's where they have enormous ecosystems around them: applications, application developers, systems integrators, partners. Understanding all of that, understanding the competitive landscape, understanding what's new that's getting funded by all the different VCs, all that is extremely time-consuming and is a full-time job and then some. So that's how I'm investing my time right now, is really trying to understand the landscape so that I can have a view as to where the world is going towards, and I can invest appropriately.


Ryan Reeves:

Yeah. I totally hear you on, it's a full-time job in itself. Just understanding the competitive landscapes of these companies. Let's actually just break down an example. Is there a company where you've really been looking at the landscape and you feel like you have a decent understanding of it?


Marcelo P. Lima:

One, I think good example is Shopify. Shopify is a disruptor in a way. If you look at the market for ecommerce software, there are many large players out there. Demandware was acquired by Salesforce. It's now part of their commerce cloud. There is Magento, which was acquired by Adobe. There's Big Commerce, and WooCommerce. There's a number of these hybrids, et cetera.


Shopify started out, as most people know, Tobias Lütke was trying to sell snowboards. He built his own software for it and then decided that the software was really the product and not the snowboard shop. Shopify is very interesting because it seems to me that their playbook is textbook low-end new market disruption, Clay Christensen's Innovator's Dilemma idea. Low-end disruption, because he starts out with a lower price point, a product that is inferior across many vectors but eventually the product gets better and it's good enough for a cohort of users. It starts getting better. It starts earning revenue and investing in R&D and then it moves up-market.


What Shopify has done is, they have this idea that if you are an accountant, you cannot stay in one platform throughout as you grow as a business. So you might start on Excel and then you maybe move to QuickBooks and then maybe move to Oracle financials. And they want to prevent that replatforming. They want you to start on Shopify as a small store, and then when you become huge and you're selling a billion dollars of merchandise, you can still be on Shopify, you don't have to move anywhere else. And that's what they've done.


They've also created their business in a way that has this enormous partner ecosystem dynamics, an entire economy built on top of Shopify. They are, by all accounts, taking share from the incumbents. It's a very interesting situation where they seem to be the only publicly traded independent ecommerce software company of consequence today. Everybody else is either privately held or part of some conglomerate. They are really focused on solving merchant paint points and putting their merchants first. That, along with the rest of their strategy, seems to be an enormous competitive advantage.


Ryan Reeves:

Yeah. I love this company and I've followed it very closely since the IPO and actually was talking to a friend recently. It was an interesting point. If you look at Chinese ecommerce companies, there's one out there named Baozun, and a lot of people say, "Oh, it's the Chinese Shopify." Even though the business model is fairly different, but Baozun works with very large merchants.


And if you look at the take rate on total gross merchandise volume for Baozun, it's about 8% to 10%. And if you look at Shopify, actually, even though there's not really like a full on take rate something where with like Amazon third party, but if you look at the subscriptions and merchant solutions on a basis of GMV, Shopify is only around 2%. So it's pretty interesting that they could really expand that. Anyway, that was just something that I was thinking about as you brought up Shopify. So, the obvious thing that is brought up when you talk about these companies is valuation because Shopify, I don't know what the market cap is right now, maybe 40 billion. Just talk a little bit about your thoughts around that. [Editor’s note: Shopify’s current market cap is over $180 billion.]


Marcelo P. Lima:

Yeah. That ties into your previous comment by the way. My understanding, and correct me if I'm wrong, is the Baozun brings customers to their merchants in T-mall. Is that right?


Ryan Reeves:

Yeah. That's definitely a piece of their business.


Marcelo P. Lima:

I'm not super familiar with Baozun at all. If that's the case, I would imagine that part of the reason why the take rate is elevated is because they attract a lot of customers to you as a merchant. For example, if I go and sell on Etsy or eBay, the take rate will be, I think either high single digits or low teens or somewhere like that, depending on how you look at it. On Amazon, it's even higher than that. And the reason is those are marketplaces where you have a lot of liquidity and you have a lot of customers.


When you start a Shopify store though, you start with zero customers. You have to invest a lot of money in customer acquisition, whether it's Facebook ads, Instagram ads, email marketing, et cetera. There's this big delta there in take rate and I think a lot of it is what people call demand generation. So, the way I see it, and this ties into your question about valuation.


I think the two key variables in my mind for Shopify are GMV growth, how big can their base of GMV gets? Then the second variable is how far can their take rate go? Their take rate right now is almost exactly 2.6% of GMV if you count all the revenue line items and divide that by GMV. It's been around 2.6% for a few years now. And this is even though they've added things like Shopify capital, Shopify shipping, et cetera. And it's probably because they've kept Shopify plus at a very low price. It's 25 basis points. I'm assuming you're a big merchant at that point. It's 25 basis points of your GMV and that's a lot lower than the competition. Demandware, I think it starts at 100 basis points of GMV. So it's like four times more expensive.


I think there's a few drivers of take rate over time. One could just be pricing power. They could raise their prices over time as they've done historically a little bit, not too much, but they have raised prices over time. And then they could also segment their Shopify plus offerings, this has been mentioned previously, where perhaps the very largest merchants get to pay a little bit more and Shopify gets the share in that success a little bit more, which is the business model from some of the other platforms. But then they can also just keep on developing more solutions to help these merchants run their businesses. And as they do that, they will be compensated for it. So, if they develop fulfillment, Shopify Fulfillment Network, that's going to increase the take rate for merchants who take on that solution. And this is just pure speculation on my part. But for example, Shopify is an early customer of Twilio Flex, which is a fully electronic staff-based call center solution, which is just phenomenal. It's just a phenomenal advance over traditional call centers. You have real-time sentiment analysis transcription. You can design your own IVR visually. It's really cool.


Now imagine if Shopify turned and said, "Listen, we've figured out a way to productize this. Now we're going to sell this Shopify call center product to all our merchants and we're going to help you provide phenomenal customer service to your customers and we're going to have these economies of scale because we have thousands of agents, and you pay us and we'll allocate certain number of agents to your store, and we'll train them with the script. It's going to be integrated with your customer data so whenever your customers call in, the agents see all the information and the order history and all that." And again, this is pure speculation on my part, that's something that they could potentially offer down the road that would increase the take rate. So there's a number of things that they could do.


When I think about Shopify’s valuation, they've talked about aspirationally having an operating margin of at least 20% over time at maturity. Those are the parameters that I use to value the company. I think about how big can it be in terms of GMV? What can the take rate be, and that'll determine the revenues. How do they get there? Both in terms of GMV and in terms of take rate. That's very important. You can't just wave your hands and say, "Well, they'll have larger GMV”. You must think about how they do that. And then can they reach that operating margin? When you do that, and you build a discounted cashflow model, does the current price makes sense relative to that future value of the business?


Ryan Reeves:

Yeah. Love that answer. Let's get into some of the specifics around GMV and take rate, just to kind of understand where you're thinking about this. I don't know, GMV is maybe 50 billion for the last 12 months and take rate is 2.6%. Just talk about where you think that those can get.


Marcelo P. Lima:

Yeah. I would be very surprised if take rate doesn't rise over time. The reason I say that is, I think it just makes a lot of sense that if you have a platform like Shopify that is becoming increasingly more feature-rich and solving more and more pain points for the merchant. And I'm just talking about the basic platform, not even the add-ons, like capital and shipping and things that they charge money for. But as they keep on improving the basic product, they should be able to raise prices or at least segment the pricing list and create different tiers of pricing to get more value, get a better take rate from merchants. So I would be very surprised if take rate doesn't grow over time.


And then as far as GMV... I'm reminded of Barry McCarthy, he used to be the CFO of Netflix and then the CFO of Spotify and now he's going to retire and stay on the board. He used to joke that, "The question I hate the most is the question of TAM, total addressable market." Because a lot of times in new markets, this is also by the way textbook Clay Christensen. He says that, "When you have a disruptive innovator who's doing new market disruption, by definition, that market doesn't exist." In this case the market does exist. It's commerce, but there's also a piece of it that does not exist, which is...


Shopify is making it so easy for people to become entrepreneurs and open a shop online that not only is the market enormous, and I think big enough for Shopify to realize its full value. But they are also expanding the TAM, if you will, with every feature that they add because they are making it easier and easier. They're lowering the barriers to entrepreneurship. There's a recent example. I'm going to pull this up as we talk here because I just think that this is absolutely remarkable. There's a recent example of a store, this was a YouTuber who has a makeup shop. When he launched it on Shopify, it crashed the whole thing because the volume of demand was way above anything else that they've seen. Do you know what I'm talking about? [Editor’s note: the YouTuber and entrepreneur I had in mind here was Jeffree Star Cosmetics.]


Ryan Reeves:

Yeah. I've heard about this. I can't remember the name. But, yeah. I heard about that.


Marcelo P. Lima:

Yeah. I'm trying to find the thing that I saved here. But in any case, this was just remarkable and this is not a traditional shop. This is not something that already existed that's just moving to Shopify. This is a completely new phenomenon that wouldn't have existed. And the same thing is true by the way with Kylie Jenner and Drake and all these other folks who are selling things that previously... We're not talking about Ben and Jerry's here or Nike. We're talking about this whole new cohort of folks selling merchandise who never would've sold merchandise before, perhaps if it weren't for Shopify making it so easy.


Ryan Reeves:

Totally. So, when you saw the announcement for the fulfillment network, what were your thoughts about that?


Marcelo P. Lima:

Well, I thought it was extraordinarily exciting. I was wondering how the market would react to it because there's an element of, "Hey, we're going spend a billion dollars to do this, and it's going to take several years for it to be profitable and markets can either reward you for it or punish you for it." I'm firmly in the camp of Tom Russo’s idea of, "I like the companies that can burden their income statement in the short term and can withstand the pain for the benefit of long-term strategy.”


I think from a strategic standpoint, it's absolutely the right thing to do because it solves an enormous pain for merchants. It's very merchant-first. I think it builds this enormous competitive advantage over time. And same thing with the 6 River Systems acquisition, the robots that they're going to put in the fulfillment centers. So I think it was absolutely brilliant and we'll see how it plays out. But the idea is, I think, very, very smart.


Ryan Reeves:

Great. Let's back up a little bit and just talk about when you first found out about the company, how you found out and then how you went about researching it. I think it's really interesting just learning about somebody's idea generation process, and then how they attack a company.


Marcelo P. Lima:

Yeah. Honestly, I don't remember how I found out about the company. I've obviously heard about it for a long time. It's a little bit like going from not looking at software to looking at software as an investible asset class, if you will. Several years ago, you're always hitting yourself in the head thinking, "I'm so dumb. Why didn't I look at this before?" When I finally came around to studying Shopify deeply, what I typically do is I just try to be a sponge and absorb everything I can. I try to read all the transcripts, historically, and the IPO prospectus. I try to attend events by the company and listen to interviews with the executives.


And then of course get a big picture view and not to have this silo mentality but try to really understand the class of organisms that we're dealing with. I think of this like an ecological term like, "This is a certain type of predator. Let me look at who else is there in the jungle trying to eat the same prey and try to understand who those competitors are and how those organisms are interacting in this ecosystem."


So, who are the competitors? What are they doing? What are the strengths and weaknesses in their constraints? What are the business model differences? And really try to get this holistic picture of the industry. I think only then can you reach a conclusion as to whether this company has a good strategy, a bad strategy, a sustainable path to profitability or not, et cetera. I think that that's the general approach.


Ryan Reeves:

Yeah. If you were to give somebody advice who is looking to start investing in software, what would be kind of the thing that you'd let them know?


Marcelo P. Lima:

I think this point about having a holistic picture as much as you can is an important point. I think this is true about investing in general. It's very easy to have that first conclusion bias. Where I'm looking at this one company and I fall in love with it, and I study everything I possibly can about this one company and then you forget to look at the big picture, the industry, the competitors, and really take a dispassionate view of the whole competitive landscape. It might be that there is a competitor of the company that's actually a better investment than the one you're looking at. It might be that if you studied the competitors, you'll realize that your company isn't as well-positioned as you thought it was, or it's not doing something that is as unique as you thought it was. So I think really having that broader perspective across other companies as well, that are in the same business is very important.


Ryan Reeves:

Yeah. I think that's a really important point. Are there any other companies that you've been digging into lately?


Marcelo P. Lima:

Well, I think one that's interesting is Slack, and I think it's interesting because the company is phenomenal. But I think it's also very interesting because it's a little bit up in the air. There's obviously this overhang of Microsoft and Microsoft Teams and whether that is going to destroy Slack or whether it's a much larger market where more than one company can exist. I tend to think it's the latter. This is a very large market and you can have more than one player, it's not going to be a winner-take-all situation.


But it's a bit of a battleground right now. Microsoft recently announced that it has 20 million daily active users. And then there's all this argument back and forth as to whether those are real daily active users or not, and how engaged those users are relative to Slack users. There's an interesting interview with Stewart Butterfield, one of the founders of Slack. He says that he believes, and this sounds grandiose, but given the industry Slack is in, which is workplace collaboration, he says, "Eventually we could become larger than Microsoft." It'll take decades to get there for sure. But if they do a good enough job, and survive, and adapt, and build their products right, and make the right acquisitions and all that, that could eventually be true. [Editor’s note: here is a link to that statement (2-minute video)]


Ryan Reeves:

Wow. Yeah, I haven't heard the interview. But I think it would be an interesting thought experiment to kind of go through Slack in a similar way where you're talking about Shopify and how they might kind of integrate call centers through Twilio's infrastructure. Are there any things that you can kind of foresee Slack doing in terms of like that optionality?


Marcelo P. Lima:

Well, I think what is misunderstood about Slack, and this is just from me talking to folks who haven't really done a deep dive into it and are not necessarily investors, but are perhaps just users is, most folks will say something like, "Well, I've used it. I don't understand why it's better than WhatsApp." At least a lot of folks that I know, are using WhatsApp on the desktop and they have WhatsApp groups and they actually use WhatsApp for work. What I try to explain is that the chat functionality is maybe 1% of what Slack does. To really understand the value of Slack, you must understand the integrations that it offers for very large enterprises and the workflow improvements.


What it really does is it leverages your time, and it leverages your investment in technology. If you have $100 million budget for IT and you're a large enterprise, Slack might be 2% of that budget, but it'll leverage the other 98% because it'll connect all these different applications inside Slack. You don't have to do context-switching. You can quickly access information and update information inside all those other apps that you have. Whether it's your HR system, your ERP system, your CRM system, et cetera, all within Slack, once you see it in action, and you understand the use cases for very large enterprises, and the adoption of large enterprises.


Most people forget that large enterprise segment of Slack, the growth in that customer base was 75% year over year in the last quarter. Large enterprises on Slack are growing much faster than overall Slack users. Then you see how compelling this is.


They could go in many different directions. They could go, for example, in the direction of Atlassian, where they will acquire and build and integrate different applications over time, to strengthen the offering and create a bigger bundle of office collaboration.


Stewart Butterfield talks about this vision of eliminating email internally, inside each company. He thinks that in the future every company will have Slack or something like it. Once you see it in action, I think that is absolutely a no-brainer. Really, if we agree that that is the future, and I personally believe it is, then it really is Slack's prize to go and grab.


Ryan Reeves:

Yeah. It's really interesting that there is this big dark cloud over Slack when Teams comes out with more information. So, how do you think about breaking down Teams versus Slack? Is it the integrations mainly? Is that what you've been trying to understand?


Marcelo P. Lima:

Yeah, it's tricky because there's a lot more information, I think, on Slack than there is on Teams. So, it's a little bit nebulous when it comes to what exactly are the users on Teams using Teams for. There's not that much that's out there. The way I see it is, obviously, Teams has this home court advantage. Because if you have a certain tier of Office 365 subscription, Teams is bundled in and it's essentially free. You can double click on it, open it and make a quick video chat or audio call and it's very easy to do that. I know companies that use both because they'll use Teams for that type of use case, but then they'll use Slack for everything else. And Slack has a lot more integrations than Teams does.


I think the way that I believe it'll play out is that there's going to be room for more than one company. By the way, we haven't even talked about Facebook Workplace, which is a surprisingly successful Slack and Teams competitor, it's an enterprise software as a service offering from Facebook. I've also heard that that product is used in parallel with Slack. It's also not a substitute for Slack. It has different use cases from Slack. It might be the case that folks will end up using more than one of these.


All these large enterprises that Slack has been growing into, they are all Office 365 users. We don't know what that Venn diagram looks like, the overlap between who uses Teams in those companies and Slack. I would believe that there's a big overlap of usage and that these products maybe complement each other because they are used for different things.


Ryan Reeves:

Yeah, that's super interesting. Hey, don't want to keep you too long. Just one last question to end. Are there any things that you do on a daily basis that have contributed to your success?


Marcelo P. Lima:

Woof, I don't know, Ryan. I think just reminding myself of this idea of “strong opinions, loosely held”, “it's always day one,” “perpetual data”. This idea that “in the beginner's mind there are many possibilities and in the expert's mind there are very few”. I guess, try to stay humble with your opinions, because I'm very willing to change my mind very quickly and be convinced of something 180 degrees removed from what I believe today. If I find new evidence and new information... Try to have that mental flexibility to change your mind quickly if you find new information. I love this quote that most people when faced with the choice between changing their minds and proving that there's no need to do so, most people get busy on the proof. Being able to change your mind I think is probably an underrated thing.


Ryan Reeves:

100% agree. Yeah, it was great chatting, Marcelo. Thanks so much for coming on.


Marcelo P. Lima:

My pleasure, Ryan, thank you so much.


Note: This episode originally aired on the Investing City Podcast on Nov. 25, 2019.