Shane PearlmanCEO at Modern Tribe
Jon PenlandCOO at Kinsta
What’s a good life? No one knows, but we all have a vision of it. For Shane Pearlman, the CEO of Modern Tribe, a good life is when you are in a balance. He says balance is the combination of the four F’s: family, fitness, finance, and faith. Peter, Shane’s business partner and the co-founder of Modern Tribe, adds a fifth F: fun.
In this episode of Reverse Engineered, Jon Penland and Shane Pearlman discuss business success. According to Shane, success is the combination of strategy and luck. What can appear to some people as an overnight success is really 15 years of practice.
Shane also talks about the many aspects that go into growing a remote agency, from flexibility, hiring and paid trials, and finding new projects.
- Success is the combination of strategy and luck. People say everything happens for a reason. Two decades ago, Shane went to a coffee shop and saw a man with, as Shane explains, the tiniest laptop. ”We started geeking out, and I found out that he is a contract CTO.” The man asked Shane why he doesn’t try freelancing. ”I’d never even heard of it, didn’t know it was a thing. I basically just started begging him and anybody else I could find to let me do stuff for them. And those are a few years of hustle.” After a while, Shane met other freelancers, and they started collaborating on projects. It was between 2000 and 2006. ”We were better together than we were apart, but nobody owned a business. Peter was one of those. We eventually merged our efforts, and that’s actually how Shane & Peter was born, which is the original name of Modern Tribe.”
- We’ve always been an organization that focused on flexibility. Modern Tribe is a unique company. They’ve intentionally abandoned traditional ways of organizing the work and experimented with methods that have proved to be fruitful. ”We’ve never had working hours, we’ve never expected people to be anywhere, and we’ve never cared where you worked. We never even cared when you worked, as long as you met the deliverables of your projects and supported and communicated well with your team. We have a handful of things that really matter.”
- Successful people think alike. Shane says there is a noticeable difference between people who are ‘killing it’ and the ones who are struggling. Shane concluded that the most successful ones share similar characteristics. ”The people who were really succeeding within our environment were happy. They were helpful. They understood that we were a service business and our entire reason for being was to add value and make things better for other people. They were extremely curious. They pulled on threads; they explored things. Accountable to me was the most important one. And by accountable, I don’t necessarily mean you do what you say you’re gonna do. What I mean is that you have the experience and maturity to read a situation and recognize that reality and expectations are not aligning.”
Today’s Guest: Shane Pearlman, CEO of Modern Tribe
Shane has been working in the digital web product space since the late ’90s. Today, he runs an organization that has varied between 25 people in their young days and over 140 at their peak.
- Company: Modern Tribe
The Plan Was to Commoditize Our By-Product
”Whatever we create for our customers, we’re going to mine that for product opportunities. We’re going to see what we can create. We don’t have the money in the budget to have our own R&D arm, but we’re basically getting paid to do everybody else’s R&D. We could work on our contracts to get it to the point where we have the legal right to use some of the IP that we’re generating. So, we started putting stuff out into open source, and some of the stuff took off. One of the projects we did allowed us to create a mobile app. We created a surf app using some people’s IP, and that was successful.”
Our Mission Is to Live Well and Do Good Work
”I think 60% or 70% of our workforce is part-time. The way we approached it was simple. People came to us, and we’re like, ‘Dude, I want a long-term path in a relationship.’ We realized, for us, our cultural priority has always been flexibility.
Today we have international, full-time contractors. We have part-time employees, part-time contractors, and US full-time employees in the US subcontracting company. We have every model you can imagine because our priority is to provide organizational flexibility for individuals, for them to live well and do good work, and therefore for us to do the same.”
A Lot of Remote Work Is About Generating Empathy
”The whole world is about to figure this out over the next year because they all got forced to go remote. And they’ve been writing off the historical, emotional connections people have generated beforehand. But as time passes, especially when people are under pressure working hard, have life situations, it’s hard to assume the best in people. The natural default for the average human is not to assume the best in things. So you got to spend a lot of work as an organization, to connect with people, helping them find empathy, and coming to a conclusion—we’re in this together.”
Benefits of a Business Retreat
”If you’re a team of one, make a business retreat every quarter. Yeah, you by yourself. Take the time to work on the business instead of in the business. If you don’t have a mentor or somebody to be a mirror, pick a spouse, pick a friend, take somebody on retreat with you. Have somebody ask those tough questions. We would start every single retreat with the same question, my partners and I, and it would be: is the business lined up to create the outcomes that you want?”
The Balance Between Strategy and Luck and Success in Business
”They’re like, ‘Oh, you’re an overnight success.’ You’re like, ‘Yeah if you don’t count the 15 years I practiced.’ How did you guys get some of these huge brand names? How did you get Boeing or SAP? The answer, honestly, for almost all of those was through a personal connection. I wasn’t sitting around waiting for someone to be like, ‘Hey, you want to work with Nike?’ That never happened. I called every single person.
I had a goal of meeting a new person every day because I knew that was one of the things that were going to be required in order to have a successful company. I didn’t have a network and found a mentor early on who told me, ‘You got to build your network.’ It doesn’t have to be everybody. If you meet a new person every day, over a few years, eventually somebody is going to know somebody.”
[00:00:04] Jon Penland: Hey everyone. My name is Jon Penland and Reverse Engineered is brought to you by Kinsta, a premium managed hosting provider. In today’s episode, I’m speaking with Shane Pearlman, CEO of Modern Tribe. Shane, welcome to Reverse Engineered.
[00:00:18] Shane Pearlman: Hey y’all!
[00:00:18] Jon Penland: So to get us started, Shane, can you introduce yourself to our listeners?
[00:00:24] Shane Pearlman: Sure. So, hey everybody. I have been working in the agency and digital web product space for our own products for other people’s since the late nineties and today and for quite a while now I’ve been the CEO of Modern Tribe, which means I run an organization which has varied anywhere between 25 people in our young days and 140 some on at our peak, a fully distributed team.
[00:00:56] So actually December was 20 years since I started the first iteration of this company, that merged and ebbed and flowed and changed shapes and forms over the last two decades. Yeah. And I’m in the Canary Islands. So I live on a small group of islands off West Coast, Africa.
[00:01:15] Jon Penland: So CEO of Modern Tribe living in the Canary Islands, but I was looking at your background a little bit. You do a lot of different things. Tell us a little bit about some of the other stuff you’re into. Like I know you’re a real estate investor and I know you have a family. So tell us a little bit more about yourself.
[00:01:30] Shane Pearlman: Yup. So on the family side, my wife and I have been together longer than we were apart. So we’re coming in that long period of time. We got two two kids, my son is six, my daughter is eleven. And I have a bunch of stuff.
[00:01:52] My wife and I really enjoy… We started our real estate thing as a weird hobby because back when I was early in my business, we were in debt. We had no money, I couldn’t afford dates, but we found out that people who own multi-million dollar mansions sell them every often, still have open houses. So we would pack up a picnic and we would go find like these $16 million chateaus doing an open house and we would picnic on their lawn and hang out during the open house sales.
[00:02:25] So we got into real estate investing as a weird hobby. Then eventually like we bought and fixed some stuff up. I also, in January, we started a new company personally with a friend here in the Canary Islands catering to remote workers and ex-pats, we saw a huge influx of people heading out here and realized that it’s really hard to relocate here unless you know what you’re doing. And there’s not a lot of real estate rental options if you want to stay longer than a month or less than a year.
[00:02:59] Jon Penland: Okay. Longer than a month, less than a year, okay.
[00:03:00] Shane Pearlman: Yeah. So if you’re you want to just come down here for the winter for six months, bring your kids, work remotely, figuring all that out is actually like Spain has just made that really hard. And so we’ve got a business that’s essentially co-living long-term. So that’s been fun.
[00:03:16] Jon Penland: That’s interesting. I stumbled on that yesterday or the day before. I think I found something on Instagram perhaps, or maybe it was on Twitter where there were pictures of people doing yoga in some kind of group setting, it looked very idyllic. Is this, that, that this project?
[00:03:32] Shane Pearlman: Pretty much. Yeah, exactly.
[00:03:32] Jon Penland: Very cool. So it’s like a, it’s like a co-living, co-working space set up for, like you said, longer than a month shorter than a year.
[00:03:42] Shane Pearlman: Remote workers. Exactly.
[00:03:43] Jon Penland: That’s awesome, okay. That’s awesome. So I am going to come back to some of that a little bit later, but I do want a focus in for the bulk of our conversation into Modern Tribe. This has, I think, been your primary focus over the last 15 years for the most part anyway. And so if my research is correct Modern Tribe was founded back in 2006, which is a lifetime by internet standards. A lot of businesses have come and gone in that time. How has Modern Tribe managed to stay relevant over these last 15 years?
[00:04:17] Shane Pearlman: Well, by being flexible. To be real fair, some of it was strategic and some of it was luck. Like, just being in the right place at the right time. For the first decade of our business… So I started freelancing in 2000 and that’s because I was in the dotcom bubble burst and I lost five jobs in two years. And so everybody, you go to college, if you’re lucky enough to have the support to go to college and you’re going to get great grades and then I was going to follow in a career path, just like my dad’s cause my dad ended up being chief scientist for Boeing and they took care of him forever. And he was like, if you do the thing, you’re going to get the results son. And that thing fucking didn’t work at all. It was a disaster. And so I eventually went to my dad and I asked, I was like, “Okay, I followed the plan and the plan’s bust” and my dad and I started looking and he’s ah, the world really is changing a little.
[00:05:17] There’s not a lot of company loyalty going on here and the industry’s turning over, pensions are gone. And so we put together a plan. He’s like, why don’t you do some research, figure out what you want out of your life. Figure out honestly, like what you want to have, do and become. What are the things that you value?
[00:05:35] So I made a list with my wife of a hundred things you want to have, do and become. Some of that stuff was like, I want to travel to other countries. Some of it was like, I wanna be respected in these ways. I wanna try speaking in front of a bunch of people. I never wanna worry about socks. Like all these things that like, came together to form what I thought is a good life that I would be stoked with if I died. And then dad was like, why don’t you go find somebody who has that stuff where you think that plan has legs in the way the world’s going. That’s legal moral and ethical, to be clear.
[00:06:10] And so I found that. I was at a coffee shop and I was hanging out and I saw this guy with the tiniest laptop I’ve ever seen. This is in 2000. So even then laptops are giant and clunky and he has this tiny little thing and we start geeking out and I found out that he is a contract CTO. And then he surfs during the day and he had a house in Santa Cruz, California, where he could see the ocean. I was like “I want your life. What do I do? How do I get your life?”
[00:06:42] And he was like “You can code and why don’t you try freelancing?” I’d never even heard of it, didn’t know it was a thing. And I basically just started begging him and anybody else I could find just let me do stuff for them. Let me build your website, let me convert your audio to digital, let me do your ad, I don’t care. I’ll design. I just like whatever it is, I just hustled.
[00:07:03] And those are few years of hustle. Like I.. And during that, I started leaving, started finding other people doing the same hustle. And maybe I was good at one part and they were better in another part and so we would start collaborating on projects. And so between 2000 and 2006, I slowly built up. It’s sort of an unofficial cooperative of freelancers collaborating on projects. We were just better together than we are apart, but nobody owned a business, no official… And Peter was one of those. So, in 2006, we started having arguments over whose customer it is because we were doing so much work together as opposed to apart, that we eventually merged our own efforts and that’s actually how Shane & Peter was born, which is the original name of Modern Tribe.
[00:07:57] So from there that freelance co-op went another five years in 2010. We’ve been about 20, 25 people for a long time. And then in about 2010 Reid managed to talk his way into some ownership and then by 2014, we could see that we would just turn over people every few years.
[00:08:22] Like it’s just three, four, years was normal and somebody would go to their next career, priorities would change. They were freelancing and we decided to change the way of business structure to create more longevity for people. People wanted a career path. They wanna know what’s next. And so there was a lot of those like kind of iterative changes from a freelance co-op to a larger agency. And then, we went through some recessions, man. 2000 was no fun. 2008 sucked. That was bad. Except for last year, the only time I ever didn’t pay myself for a while, because it was hard when Corporate America went sideways. So we came out of ’08, we all looked at each other and I was like, I don’t want to experience that again. Like how do we make sure we’re not entirely dependent on Corporate America? So we decided to focus on the plan that we came up with, was to commoditize our by-product.
[00:09:25] We’re like whatever we create for our customers, we’re going to mine that for product opportunities. We’re going to see what we can create. We don’t have the money in the budget to have our own R&D arm, but we’re basically getting paid to do everybody else’s R&D. If we could basically work on our contracts to get it to the point where we have the legal right to use some of the IP that we’re generating.
[00:09:50] And then we, so we started putting stuff out into open source, and do some of the stuff took off. One of the projects we did allowed us to then create a mobile app. When the iPhone came out and we created a surf app using some people’s IP and that was successful and eventually got acquired by a Surfline, which was cool. I learned a hell of a lot about how not to be successfully acquired in that, we got reamed.
[00:10:24] Jon Penland: It didn’t go so well?
[00:10:25] Shane Pearlman: Oh god, no. And I remember being on this call and we had our family lawyer on there and they had their lawyer and we got off the call and our family lawyer was like, “That lawyer is so mean.” And I was like “Oh yeah, we’re so screwed.” We got reamed. So I learned, okay don’t use your local family lawyer to negotiate large acquisition deals. Got it, check.
[00:10:48] Jon Penland: Yeah, yeah, yeah. If your lawyer’s scared that the other lawyer’s being too mean, that’s not a position of strength you’re negotiating out of right there.
[00:10:58] Shane Pearlman: No, we got reamed, so we learned. But eventually, we put a lot of stuff into the open source because we believe that… We’re deep in the WordPress space and some of the things got traction. And then we had fun. I did a lot of writing for years around freelancing. And I knew the crew behind Envato cause we were writing together for a decade. And when Collis and Cyan were like “Hey, we want to do a marketplace.” I was one of the people they came to and they’re like “Hey, Shane, we know that you have a bunch of products in the open-source, do you think we can commercialize any of those?” And so we are like, “I don’t know can we?” It’d be real helpful because maintaining open source stuff for free is really a drain.
[00:11:42] So we threw some stuff into there and that produced revenue streams. And then realized that their model didn’t scale really well and didn’t offer a lot of ways to provide really excellent customer service. So eventually we had to branch out and go solo and that grew and then, we ended up at about 140 people last Christmas. So it’s been a wild ride. There’s tons of nuance in there, but that’s the gist.
[00:12:12] Jon Penland: Yeah. That’s one of the things, as I was looking at Modern Tribe, it’s almost hard to wrap your arms around what it is, because it’s been so many different things over time. It’s been an agency, it’s been a product, in the events calendar I think has been the most visible product that I’ve seen anyway, for a long time.
[00:12:32] And then you’ve reached out on all these different ways and one of the things that you said that really struck me was this statement of you decided to commoditize your byproduct, right? So this is the idea that you’re doing this work for a customer, and then in the past, you just handed it off and that was it.
[00:12:52] And you said how could we derive additional value out of this work that we’ve already done. And I’m curious as you’ve made these types of transitions, where you’ve decided to… you’re doing one type of work and you’re going to add on something different, you’re going to commoditize this by-product into a different revenue stream. Have you found that to be difficult to maintain focus, like difficult to maintain your progress on this client work? Because now we’re working with the by-product and said, how have you managed to balance those two competing interests over time?
[00:13:25] Shane Pearlman: Yeah. So when our products, when we first had some success, right? It wasn’t just a side hobby you did in the evening or whenever. We really noticed a set of challenges early on, and they’re around focus. Cause agencies, for any of you who are in an agency, you’re going to know what I talk about.
[00:13:47] If you aren’t, understand that agencies are like a hungry dragon. They will eat everything you feed them because when Disney, when you got a contract with Disney, you want to deliver and they’re demanding and they’re loud and deadlines are always tight and there’s so much drama and therapy involved in being a good agency operator.
[00:14:08] And product life cycles are completely different there. They’ve got their own customer support journey and their own development journey, but there’s no external force driving it. And so it’s really easy for the agency to eat all your focus and products always be the afterthought. So for a while, when we were trying to figure out how to solve that, like I tend to solve my problems the same way almost always.
[00:14:33] As soon as I realize what it is, I run around and I interview anybody I can get my hands on, who’s dealing with it to see how they solved that problem. It doesn’t mean I’m going to do what they said, but at least it gives me data points so I’m not in the void. Half the time it’s just to make myself feel better, that I’m not crazy.
[00:14:47] And so we interviewed a ton of people and we ended up talking to this crew that ran a multi-billion-dollar org that had both a service arm and a products arm. And I had a chance to sit down with their CFO over coffee. It was one of the advantages of being in Silicon Valley, to be honest, at the time. I had access to people through relationships that made a difference.
[00:15:12] And he looked at me and he’s you can’t cross the streams, man. This is like Ghostbusters, right? Never cross the streams. If you can have a products company and an agency and a service company under the same umbrella, no problem. You can share back offices, you can share HR, you can share things to create cost-effectiveness, but the actual execution teams can’t be the same crew.
[00:15:35] It’ll fail. They’ll just burn up. And so that was a thing we figured out really early on. We’re like, okay, don’t cross the streams, like have separate teams working on this. Like the one side of the business can financially subsidize another one. We did that all the time. Sometimes agency carried products during a growth period, and sometimes products carried agency during a bad market like that.
[00:15:59] Like we had a vision for a long time. We called it the three-legged stool. We wanted three completely independent income streams that were affected by different market sources. That way, if one was weird, the others could keep on trucking. That was longevity.
[00:16:16] Jon Penland: Yeah, yeah. So you’re in this space where you’ve got, you’ve got the product arm, you’ve got the service arm. And so just to get practical, when you talk about having different teams that, you’re really talking about like engineers, designers, developers, the folks who are putting the product out or put or doing the service, providing the service.
[00:16:34] Shane Pearlman: You got it.
[00:16:35] Jon Penland: So you’re not going to have a developer that’s going to be working for an agency one day and then also have some product responsibilities.
[00:16:41] Shane Pearlman: Which is unavoidable when you’re small and getting going. Like the the cost reality of having separate people is hard, but we use part-timers like we were mostly freelance, so somebody could be five hours a week on a project and that was fine. If your model is only full-time labor, that gets much harder and it’s probably unrealistic.
[00:17:00] Jon Penland: Yeah, yeah. Yeah, I did want to talk a little bit about that freelancer full-time or freelancer traditional employee divide because it sounds like that’s a transition. If I understood correctly, you guys really made that jump sometime around 2010, where before then it seemed to be a kind of a consortium or a, an organization of freelancers. And then at one point you said look, freelancers go through this three- or four-year period where they are strong and then they… I was a freelancer for about three or four years, myself, and I burned out, right? Like I got tired of bringing new business in the door all the time and I needed this, I wanted the stability of a regular paycheck. And so I made the jump from freelancer to full-time contractor but from freelance income. So I’m curious about that transition. How did that come about? Did you guys just grab the 25 folks, you had them said “Okay, you’re full-time now”? How did that process look?
[00:17:56] Shane Pearlman:: No, even today I think 60 or 70% of our workforce is part-time. Really, the way we approached was real simple. People came to us. People came to us and were like, “Dude, I want a longterm path in relationship.” And we realized for us, our priority, like our cultural priority’s always been flexibility.
[00:18:21] That is we met her. WordPress as a project and Automattic in part is about democratizing web publishing. They were like, we think anyone should be able to create great content on the web. They have what I call an externally focused mission. We don’t have that. Our company has an internally focused mission.
[00:18:40] Our mission is to live well and do good work. That’s it, I wanted a vehicle. I never wanted to be stuck in one particular mission cause I have about a two to three-year attention span. And if you lock me in anything, like my team has a joke, they say “If Shane doesn’t have a new adventure to go on every few years, he will just make one for all of us.”
[00:19:02] Jon Penland: Nice.
[00:19:02] Shane Pearlman: Modern Tribe has always been, it is a vehicle for the life that I want. That’s what it is. Our staffing model needed to represent that. For a long time, my understanding was that the only way to give people flexibility was to let them be their own owner. And then I grew up a little. And we, to be honest, our industry got older, and I got kids, I started to be like “Oh, not everybody wants that.”
[00:19:30] Maybe we need to upgrade our staffing models so that it can meet people wherever they’re at in their own personal journey. So today we have international full-time contractors. We have international part-time contractors. We have part-time employees, part-time contractors, and US full-time employees in the US subcontracting company.
[00:19:53] We have every model you can imagine because our priority is to provide organizational flexibility for individuals, for them to live well and do good work, and therefore for us to do the same.
[00:20:03] Jon Penland: Yeah. Yeah, since I wear the operational hat at Kinsta and so we’re a distributed company, we deal with a lot of the same dynamics where we’ve got folks all over the world. And one of the things that immediately jumps to my mind when I start thinking about having a mix of dramatic mix of part-time and full-time people is managing things like vacation and time off and those types of things. Have you found that to be a challenge? Is that something you guys have to think through regularly or have you just pulled the rug out from under those things and said… How do you approach those types of things?
[00:20:38] Shane Pearlman: So we have always been an organization that focused a little bit… Anchoring onto that flexibility idea, we’ve never had working hours. We’ve never expected people to be anywhere. We’ve never cared where you worked. We never even cared when you worked. As long as you met the deliverables of your projects and supported and communicated well with your team.
[00:21:06] And so those were the two to me fundamentals. So a lot of those traditional structures a lot of people had, we never had those in the first place because they didn’t make sense for the way we worked. We have a handful of things that really matter.
[00:21:22] We have found over years of experimentation, that for a team to gel and connect and be highly effective, they need to talk every day, at least every few days. And so to do that… And we also found that async doesn’t communicate culture. You can work asynchronously perfectly effectively, but you will never feel good emotions about the people you work with, unless y’all hang out together, and to do that, we’re like OK, you need to have two to three hours a day overlap time-wise with your team.
[00:21:57] Which is why we ended up drawing a line at the West Coast of the US and one somewhere around the Middle East and said “Look, that’s about as far as we’re going to go.” Any more than that and people end up totally async and we lose that cultural connection. Like a lot of remote work is about generating empathy, that is the cultural challenge.
[00:22:14] The whole world is about to figure this out over the next year because they all got forced to go remote about a year ago, last February, March. And they’ve been writing off the historical emotional connections people have generated beforehand. But as time passes, especially when people are under pressure working hard, have life situations, it’s really hard to assume the best in people.
[00:22:39] The natural default for the average human is to not assume the best in things. So you got to spend a lot of work as an organization, connecting with people, helping them find empathy, and ultimately coming to the conclusion we’re in this together. That’s, those are the challenges, sorry that I deviated from what is classic HR because it just doesn’t apply to us in the same way.
[00:23:05] Jon Penland: No, that’s totally fine. And I actually really appreciate your answer there talking about async versus synchronous and the need to build empathy and that it’s so hard to build asynchronously. I have somebody that I work with closely that we tend to butt heads. Like I love this guy, I think he’s fantastic, he likewise thinks I’m fantastic.
[00:23:37] When we get into a pressurized situation, we have to get on a call, right? If we try to hammer it out in Slack, we’re both going to be furious. But if we get on a call within 30 seconds, we’re laughing, right? Like it’s just such a completely different dynamic.
[00:23:42] Shane Pearlman: And even the nuance of written language is complicated, especially when you start crossing language boundaries. Like we operate in English as a global company, but there was a guy on our crew for years who would always finish messages with ‘Have a nice day’. And which was nice, except he didn’t track the idea that when you send somebody a nasty message and finish up with “F you and have a nice day”.
[00:24:13] Jon Penland: That does not land right.
[00:24:15] Shane Pearlman: Ah, and so there, there is a lot of nuance to understanding how to connect successfully.
[00:24:21] Jon Penland: Yeah, yeah. Do you guys have any regular practices that as a company, you try and get folks to engage in, to try and build empathy in like a synchronous communication fashion?
[00:24:34] Shane Pearlman: Yeah there’s a ton of stuff!
[00:24:35] Jon Penland: What are some of the things you guys do? And I can talk about some of the things you guys do?
[00:24:37] Shane Pearlman: So, the most obvious and the one that we’re hurting the most from is the lack of retreats. There is magic that comes from just spending time with people in a place. So every year we had company-wide retreats, they’ve been in the Dominican Republic, Costa Rica, all over the place.
[00:24:55] We also do group retreats. That’s a really important part, not having that is super noticeable. Like we have seen a deterioration of culture as a result, unavoidable. Digitally, we have all kinds of practices. One of the ones that Reid hates and I love because… Everybody my business partner is Reid. We built an internal Fiat currency called Tacos. You can give somebody a taco for…
[00:25:23] Jon Penland: Yeah. This is a Slack integration, isn’t it?
[00:25:25] Shane Pearlman: It is.
[00:25:26] Jon Penland: Did you guys put that together?
[00:25:27] Shane Pearlman: Yeah. And so we put it in and all it is like we don’t actually tie it to performance reviews. We don’t tie it to money. All it is, is when somebody does something that you want to recognize, you can give them a taco. You are limited to five tacos a day. There’s a taco leaderboard. And in our case, what’s really important is not random tacos, but we have a set of cultural values. We believe that… For years, Peter and I in our early days were like, what’s the difference between the people who are fricking killing it and the ones who are struggling and eventually were able to boil it down to five things.
[00:26:06] The people who were really succeeding within our environment working in our types of projects were happy. And I don’t mean like Pollyanna happy. I just meant that like, when you spend time with them, you walk by going “Ooh, that felt good”. They were helpful. They understood that we were a service business and our entire reason of being was to add value and to make things better for other people, they were helpful by nature. They were extremely curious, like nothing was a given. They pulled on threads, they explored things. Happy, helpful, curious, and accountable. Like accountable to me, it was the most important one and by accountable, I don’t actually necessarily mean you you do what you say you’re gonna do. Bonus, good thing! What I mean is that you have the experience and maturity to read a situation and recognize that reality and expectations are not aligning.
[00:27:04] Jon Penland: Yeah, yeah I love that. Some something that I have said, I can’t even say how many times, is that you can either be frustrated because you operate with the expectation that the world will be a certain way, or you can be realistic and recognize the way that the world is and operate within the way that the world is.
[00:27:32] And there’s a lot of frustration in saying “But this is the way things should be” and expecting them to be that way. But you really just need to take things the way that they are and approach just, I just think that’s being realistic and you’ll be more effective and happier.
[00:27:47] Shane Pearlman: So from an HR perspective, we track every person who doesn’t work out. And we track why, cause we just want to know for learning. I can tell you that about 70, almost 80% of the people who don’t make it past a year, is because of accountability challenges, not technical skill, and not anything else.
[00:28:07] They, in a remote environment, they’re not good enough about self-management, setting expectations, recognizing where projects are going and where their understanding of it and aligning them. And that’s, it’s hard, man. That is a gift and a skill but as one, as a remote team, we’ve had to cultivate and train.
[00:28:27] So back to tacos, we aligned tacos with these values. We think every time you should give a taco, you should say why. Hey, I’m giving this taco because this person was helpful and they did this thing, or wow man, mad taco for getting up at 6:00 AM and taking on this sales pitch that you didn’t have to, but man, I really appreciate that. That was above and beyond. Like creating value and surfacing culture from being a little intangible and abstract to being spoken, so that it’s real and people recognize it.
[00:29:04] Jon Penland: Yeah. One of the really hard things that I, at least the things that I’ve found difficult, is trying to surface these types of traits in an interview. Where I’m doing a job interview with somebody and they may meet all of the requirements of the role, but what I’m trying to get at is are they going to be a good cultural fit? And what I found to be really challenging is making sure I’m not just doing a personality test because I don’t want to disadvantage an introvert. I’m an introvert myself. I don’t want to disadvantage that personality because they’re not, maybe giving me quite the energy that I’m looking for. But I’m curious, as you guys have clearly defined these values, how do you approach those in the interview process to try and seek those out?
[00:29:57] Shane Pearlman: So there’s three, three key things we do, and this is a constant journey. The first thing we realized really early on, is interviews aren’t that great to start with. But remote interviews for engineers are a crock of shit. Like very few engineers went into their industry because they love people.
[00:30:21] So we realized the best way to figure out if somebody is going to work well on our team, is to work on our team. And so we started trials. And that’s actually mostly how we test people. We do a quick interview to figure out if you even have the capability and to weed out the people who really just shouldn’t even get the opportunity.
[00:30:42] But then we do paid trials. We pay for them. It’s throwaway work, but we figure if you’re going to take time away from family or work, you may need the financial support so that everybody gets a fair playing field. And then we do anywhere between a day-long and a week-long project, depending on what it is with flexible hours, where you get to work with somebody on our team on something.
[00:31:03] And that person has a rubric to measure and test against how the work went, how did they communicate, what did they think and ask questions about, did they even show up or were they accountable? Cause task testing accountability is the hardest part. And the only way to do that is to just try working with them and see how they do it.
[00:31:20] So that’s one and we have a pretty good budget for that. Like I’d say two-thirds of our recruiting budget is actually our trials budget. Just to try working with folks, it’s a big journey to get from application to trial cause I think last year we had 12,000 applicants and we ran 80 trials. So I’m not.
[00:31:40] Jon Penland: That’s quite a few, yeah.
[00:31:42] Shane Pearlman: Yeah. So I, I don’t, but so step one is trial. To Peter, my other business partner, is a huge advocate of… Oh my gosh, he has a name and I just blanked. He likes to get people to tell us stories. He’s like “Don’t ask yes/no questions, don’t ask if they had a scale.” He’s like find… He has a whole list of these questions whose entire purpose is “Tell me a story about when this kind of happened. Tell me a story about when you, when your team delivered a project and it failed.”
[00:32:20] And we want to hear, and I want to hear how they talk about it, who gets accountability, how they talk about what they learn. Because honestly, if you haven’t had a project that failed, well then you’re early in your career, just wait, it’ll happen to you any day.
[00:32:36] And it’s normal. And so I want to see how that happened and what they didn’t see. Those kinds of stories to me surface personality traits, surface a little more truth. And then last, this is something that we actually have a blind committee that does the final decision, so it’s cool for the interview team to get into personality and whatever. We know within HR approved boundaries and nondescript, all this stuff.
[00:33:07] But at the end of the day, what we really wanted was, and this is a challenge because sometimes it flies… Sometimes it helps with diversity and sometimes it hurts. But if you hand five candidates’ worth of trials and interviews to a blind committee, these blind committees, by the way, are not abstracted people. It is the team they’re going to work with. So we’re like “Hey, we got five candidates for your crew.”
[00:33:38] Jon Penland: Pick your next team member.
[00:33:38] Shane Pearlman: Pick your team member. Here’s the matrix, here’s the rubric, but you don’t know their gender, you don’t know their race, you don’t know where they’re at. We’ve removed all those things. It helps remove some of those biasing behaviors where people will naturally choose people who are like them. On the other hand, unless you’re able to create a diverse enough pool of people going into the blind thing, it can exacerbate, so that’s challenges.
[00:34:04] And so one of the things we’ve done is we’ve created a diversity score as part of the things that goes in, which is “Hey, this person will push our diversity forward or won’t”. It’s not the only thing, but it’s just part of the picture in the way that we bring it.
[00:34:20] Jon Penland: Yeah, that’s interesting that you guys pull diversity into like actually the rubric as it were. One of the things that we found challenging as a globally distributed company is that diversity can mean so many different things in different places. I think one of the things that was most eye-opening to me is back last summer when there was a whole lot of stuff around race happening in the United States, I was talking to some of my European colleagues and some of them genuinely just didn’t understand it. And because from where they, from their background, the issues with whether it’s an ethnicity or race or cultural background, they had nothing to do with the color of skin.
[00:35:05] They had to do with these, these, these historical differences between people groups, right? Whereas an American, I would look at these two people and say, these are demographically identical people. And they would look at each other and go “Oh no, we’re not”. Right?
[00:35:19] Shane Pearlman: To the point, it’s a real challenge. We actually hired an HR consultant who specializes in DEI, diversity, equity, and inclusion this year to work with us, to explore a process. Cause we were having these arguments internally nobody could solve. I like I would make the argument that geography is part of diversity.
[00:35:42] Cause I was like, look, you could have two Black people, two white people, whatever. But if one’s coming from Botswana and one was in the UK, their whole life, they’re enormously diverse. As far as I’m concerned, even though from a checklist, they may look the same from a DEI. And even right now the biggest struggle we’re having, it’s really, I’m even curious where you’re at.
[00:36:07] Are we an American company with global staff, or are we a global company that happens to have a headquarter in America?
[00:36:13] Jon Penland: Sure.
[00:36:13] Shane Pearlman: Culturally it’s really different answer how you behave.
[00:36:19] Jon Penland: Yeah. Yeah. I can tell you our answer to that. So, we were founded by a team out of Europe. And so it is important to our… So while we are a US company at this point, we were founded out of Europe and it’s really important to our CEO and to our founding group that we not become too American centric.
[00:36:44] Shane Pearlman: Too Yankee. Sure.
[00:36:44] Jon Penland: Yeah. So exactly, yeah. So that’s exactly where we get into the question of how do we measure diversity? Where there’s an American answer to that. And we’re saying there’s value in understanding that answer, but that answer doesn’t work for us because our team, I think probably 30 to 40% of our team, I’d have to look at a list, 30 to 40% in the US and the rest is everywhere else. And so that answers, that answer doesn’t work in a lot of places. And so it is an ongoing challenge, but we do intentionally try to think of ourselves as a global company, not as an American company. That is a very intentional choice on our part.
[00:37:23] Shane Pearlman: Yup. I as an American living abroad, who’s always been flexible, tends to feel the same way but we’re still trying to navigate that answer and understand what it really means.
[00:37:35] Jon Penland: Yeah. It is difficult. It is a bit of a: what is the personality of this company? Because there is really no such thing as a global personality, right? There is no… If you’re an American company that has certain connotations, if you’re a UK company that has certain connotations, if you’re a Hungarian company, whatever, there are certain you can get at what that means culturally and these sorts of things. But there is no overarching global answer.
[00:38:09] Shane Pearlman: Well, It gets even weirder not to put you on the spot if you can, if not, we can edit it out. But what’s Kinsta’s mission? Like, why are you all… Like you as a group, what’s the purpose? Your raison être? What’s your purpose of being?
[00:38:26] Jon Penland: So that’s that answer evolves over time. So it’s a lot like yourself where we are not an externally focused company. So we do have an internally focused mission around providing a vehicle for flexibility for our own owners or founders, shareholders. And we have a set of five values that we’ve delineated and they include things like providing an exceptional customer experience, that’s always been core to what Kinsta has done.
[00:39:03] It includes things like recognizing that our team is our most valuable and our most important asset. It includes things like recognizing that we are running a marathon, not a sprint. I think the way we’ve expressed that, because that’s been said that way a lot of times.
[00:39:21] So we said it a little bit differently. I think we said we take the long view, which is this idea that we’re not operating on a quarter by quarter or even on a year by year basis, right? We’re sitting back now and looking at what’s coming down the road three years, four years, five years down, down the road and how do we position ourselves today to be ready for that, eventuality for that future. So we are very much focused on building a business that works for our founders’ financial and lifestyle goals. And that also provides an exceptional experience for the people who work here, because it is really important.
[00:39:59] Something that Mark, our CEO talks about a lot, is treating our team members like adults and giving them, providing a good life, providing a good life to the people that work for us. Yeah, we talk about that a lot. Like we don’t micromanage, we don’t hire people whose hands we’re going to have to hold.
[00:40:17] We don’t tell people what to do. Our goal is to bring in people who are better at our jobs than we are, and then let them do it and to tell us what needs to happen. So we have marketing people, PPC people, content writers, support people, engineers.
[00:40:35] These are things that the founders or that, I joined Kinsta we were a team of 15 that I joined in support. There are people who are so far ahead of me now, in support then than I was when I was there. And that’s exactly what we want is we want to bring in those types of people build that type of company where we’re constantly bringing in high-quality people, getting out of their way, treating them with respect, providing a good work experience for them, and then building a vehicle to achieve the financial and flexibility goals of the founders and to provide a good life for our team members.
[00:41:10] Shane Pearlman: And so when you have that, like when you have a North Star, although like that North Star for you and ours are very similar, like to me, the only reason to own business is to have a vehicle for the life that you want.
[00:41:22] Where it gets interesting is your definitions change. Like you asked early on you’re like 15, 20 years, what’s that mean? I’ll be honest. When at 25 or 23, when I started this, my answer was, I want to surf when the tide is low.
[00:41:42] Tide moves 40 minutes every day. All you suckers at work, I want to be in the water when the surf’s good.
[00:41:46] Jon Penland: I want to be in the water, nice.
[00:41:47] Shane Pearlman: How do I do that? So shaping a business that answered that need until I got older and I got married and we had kids and my wife wanted a certain set of things and I had desires for stability.
[00:41:59] And so then, my personal needs for adventure, my personal values for how I worked shaped outcomes of the business. And then organizationally, how did you design, like how does the act of designing an org? So we did an owner’s retreat and I would encourage y’all listeners. If you’re a team of one, do a business retreat every quarter. Yeah, by yourself. I get it. Take the time to work on the business instead of in the business. And if you don’t have a mentor or somebody to be a mirror, pick a spouse, pick a friend, take somebody on retreat with you. You have somebody ask those tough questions. So we would start every single retreat with the same question, my partners and I. And it would be: is the business lined up to create the outcomes that you want?
[00:42:53] If it’s not what should we change? As part of that, and I borrowed this, I can’t take any credit for it, but I couldn’t tell you who the hell I borrowed it from cause it was a long time. Maybe, Mark Victor Hansen, I don’t remember, but I was trying to figure out how to answer this really hard question, because if you’re building a lifestyle business whose ultimate outcome is to create a good life, what’s a good life? Like I don’t even answer that.
[00:43:22] That’s really hard to answer. And how do you know if the business is on track? Like I’m a KPI kind of human. And so it was really weird, and so ultimately we came up with five keys. Peter adds a sixth. He and I don’t agree on it, but I humor him and we’re basically like a good life is when you’re in balance. I call it the five Fs. Friends, family, fitness, finance, and faith.
[00:43:51] Anytime you run into somebody, who’s obviously struggling in life, who’s unhappy, sometimes they know why, sometimes they don’t, you can always narrow it down to one of those areas. there’s always, you’re out of balance something’s wrong. You can be intentionally out of balance. My wife went to graduate school and got her PhD in genetics. Promise you, family was not imbalanced during that time.
[00:44:14] Jon Penland: Yeah unbalanced during those 4-5 years.
[00:44:15] Shane Pearlman: Marathon training doesn’t put you in balance. So there are times where it’s like riding a bicycle where you go in and out of balance of these areas intentionally, but when something is grossly out of balance… And so a lot of times we would start a retreat we’d go, is the business contributing successfully to these five areas or is it causing problems? And do we need to change something to make sure it’s not at odds. Peter eventually added fun. He’s all five of those can be great and you can have no fun. And I’m like, “I don’t agree with you.” Yeah. I think if all five of those are awesome, I’m by definition having fun.
[00:44:52] Jon Penland: I’m gonna be happy, yeah, yeah. If the other five are in sync, I’m going to be having fun.
[00:44:48] Shane Pearlman: So that’s sorta one of those, but and to clarify on faith, for all of you who aren’t religious and discounted that one instantly, neither am I. And my definition of faith is your understanding and model of the world in line with your experience of the world.
[00:45:18] Because sometimes you’ll run across, like you, I saw this whole article by Jim Carey. About how everything can look great, but you can be super depressed. And when you picked it apart, what it basically came down to was, he didn’t have anywhere to go. He had no goals, nothing he was passionate about and his understanding of what a good world looked like and his reality weren’t in line and so he was constantly stressed that can really happen.
[00:45:43] And so ultimately, if you can get your business to line up with these fighters and if not be intentional, be like OK, time to retreat. What do I need to change about the business so that it does support my family life, if that’s my priority, or my physical health? There was a couple of years ago where we were talking. I was like, I sit too much, man. It’s like starting to cause me back- like real medical issues. And I, my partner and I were like can we change it so that I can work while walking. And it wasn’t a walking desk, that didn’t interest me, but I started moving most of my calls to be, I was walking three, four hours a day. I would just do my calls on my headset and it was like a small tweak, but it was a tweak that was transformative for my life.
[00:46:31] Jen Penland: Yeah. No, I actually really love that I, where I, the walking while calling specifically is very appealing to me. I’m I don’t know if you can tell I’m standing and for our listeners I’m at a standing desk right now and I do stand most of the day, but I live on this, I don’t know about a kilometer long or road.
[00:46:53] That’s a dead-end road and there’s six houses out here. Just a perfect road for plugging in a headset and walking up and down in the, when it’s nice out. So I’m at that, that’s an idea I may have to steal. So I wanna be, I want to be thoughtful of time. So I do have one more question. I want to get back to something you said really early. I’m going to ask you this question. Then I have a couple of really quick kind of wrap-up questions.
[00:47:16] So, the one question I want to go back to something you said. Right at the beginning. I had asked you a question about, how has Modern Tribe stayed relevant over the last 15 years? And you said something like, part of that’s been strategic and a part of that’s been luck. And that actually jumped out to me because I’ve long held that any person’s success is a combination of factors and luck is a contributor. And I think to deny that it’s a contributor is hubris. And I’m just curious what’s your take on that balance between strategy and luck and success in business?
[00:47:58] Shane Pearlman: There’s a lot of really famous quotes that it’s when preparation meets luck. Yeah, they’re like “Oh, you’re an overnight success.” You’re like, “Yeah, if you don’t count the 15 years I practiced.” So there’s luck. You and I were chatting early on you’re like, how did you guys get some of these huge brand names? Like, how did you get Boeing or SAP? And the answer, honestly, for almost all of those was through a personal connection.
[00:48:28] Jon Penland: Really? Wow.
[00:48:30] Shane Pearlman: But yeah, I wasn’t sitting around waiting for someone to be like “Hey Shane, you wanna work with Nike man?” Cause that never happened. What happened was I called my dad, I called every single person I knew I, every time I was out doing something, I would be meeting new people. For years, I had a goal of meeting a new person every day because I knew that was one of the things that was going to be required in order to have a successful company, because I knew I was fairly introverted. Didn’t have a network and found a mentor early on, who told me your network is going to be required to succeed at this, you got to build your network.
[00:49:08] It doesn’t have to be everybody. If you meet a new person every day, over a few years, eventually somebody is going to know somebody so we got SAP because Peter knew somebody who got a new job at SAP. We, literally today, I’m trying to sign a contract with Salesforce because somebody who worked for us 15 years ago, just got a role there and called me up.
[00:49:30] Like after I congratulated her, I was like “awesome!”, and she’s dude, we could use your help. But if I hadn’t reached out and said “Awesome”, I know you, what an amazing thing you just did. Now always be selling and in not a creepy way, but in a, like always be nurturing your relationships, such that they can lead to outcomes and not be afraid to ask “Hey, man, I really miss working with you, got anything cool coming up?”
[00:49:59] Jon Penland: Yeah. Yeah. Do you make it a point to… I know some folks who have a similar emphasis on relationships, they make a point to invest, X amount of their day or X amount of their time in building relationships. Do you have any kind of rules of thumb or any practices that you stick to try to nurture your network so to speak?
[00:50:17] Shane Pearlman: Oh, I come and go for years, my goal was to meet a new person every day. Like I really put a lot of work into that. And then my role changed such that I wasn’t the only person contributing to pipeline and I had other more important ways to contribute in the org so that eased off.
[00:50:35] But for years I still send out at least one or two emails a day to somebody just to congratulate them on a new job, see how they’re doing, share something cool. And it’s not… Two-thirds of the time… It’s not trying to do a thing as much as understand that as long as I’m them adding value and keeping a relationship warm, at some point, I’ll be able to add value. And if I can help them, then they will eventually help me.
[00:51:07] Jon Penland: Yeah, one or two touchpoints a day. That’s over that’s 500 a year, probably when it’s all said and done. That’s not a big daily investment, but that over the course of a year, that would really add up. And I’m curious, meet a person today. You’ve said that a couple of times, how in the world did you do that? Like how do you, how did you interact with enough people to meet a new person every day?
[00:51:27] Shane Pearlman: So one of the things, this was like a weird one that was really important because I’ve been a remote worker since 2000 and it is really easy to get super isolated and end up in your home. And so that was as much a mental health play as it was a business strategy, but what it really meant was had to get out of my house. I had to leave my house and go somewhere and work in a coffee shop, or go to a co-work when co-working eventually showed up eight or 10 years later. Go to, and it was just gone out and like meeting people and also was online. It’s like, I would write and then have conversations with people.
[00:52:05] Today, social media, but it’s not like a light touchpoint, it’s trying to build enough of a relationship so that somebody has a warm reaction when they see your name, like a meaningful connection.
[00:52:18] Jon Penland: And I think I can safely say this. This was not a sales outreach, right? Because if I check my DMs on LinkedIn, they’re full of folks who want to meet me, but they don’t actually want to meet me. And that’s not what you’re talking about.
[00:52:32] Shane Pearlman: That’s not what I’m talking about.
[00:52:34] Shane Pearlman: Absolutely. Cool. All right. So, as we wrap this conversation down, I do have two close-out questions for us here. So the first is, do you have a go-to resource you would recommend to our listeners, this could be a blog, newsletter, a person you follow. Is there something that -a conference, a book, whatever – is there a resource you would say listeners of Reverse Engineered should check this out.
[00:52:58] Shane Pearlman: Oh, gosh, there are so many different. Let’s see where to go. I’ll go books cause I’m a voracious enough reader. Kindle just told me that last year I read 82 books.
[00:53:09] Jon Penland: Okay. Wow! Nice, yeah.
[00:53:10] Shane Pearlman: There’s a handful that I read in the last year that I loved and some of them are revisits. There is a group called the Arbinger Institute that wrote a book called Leadership and Self-Deception that every time I’ve read it, still fucks with my head.
[00:53:33] And so for a book every five or 10 years for me to go back to it and be like “Oh God, yeah again, I can’t believe I’m still…” It’s such a powerful book for anybody who’s starting to make that transition from working alone to teams. Like it’s such a, and even if you run teams, I’m such a fan. There’s another book for people running slightly bigger teams that I really like. Oh my God, what’s the name? It’s a guy who was the Admiral of a submarine. They give him like the worst submarine in the whole Navy and basically like, you need to figure out how to get this thing working. And he realized in the military where everybody just jumps to orders, he had to teach people to think for themselves. And it’s a really interesting book about how do you create self-managed teams, it’s called Turn the Ship Around! There we go, I love those. Yeah, yeah. So the dissent… you said that…
[00:54:35] Shane Pearlman: Leadership and Self-Deception.
[00:54:35] Jon Penland: Leadership and Self-Deception and Turn the Ship Around. Okay, we’ll make sure and include those in the show notes so folks can check those out. And then my last question, where can folks go to either connect with you or to learn more about Modern Tribe?
[00:54:51] Shane Pearlman: Sure, our website is tri.be, just the word tribe dot between the I and the B. And me personally, I’m harder to find these days than I used to be. So you always send me an email, but I’ve mostly moved my ass out of social. I’m still on Facebook every so often. But, I’ll throw a thing.
[00:55:15] Here’s a particular context, if you want to hang out. Probably my biggest hobby and where I spend a majority amount of time is in collectable, like whiskey, bourbon, brandies. I have just an enormous passion for distilled juice. So if that’s a thing you’re into and you want to chat, find me on Facebook, I will, you can gladly build a relationship with me through my hobby, and if there’s ever a point to talk business, fine.
[00:55:44] Jon Penland: Okay, very good. Yeah. And I actually, got that impression as I was preparing for this episode, you don’t seem to be as active on social media and I’m not either. I think in the last, I feel like, in the last year, I think a lot of folks who have been involved in the internet for a couple of years…
[00:55:59] Shane Pearlman: It’s a mental health play.
[00:56:01] Jon Penland: Exactly. It’s just a need to pull back and focus on real-life a little bit. So that’s good but sounds like bourbon and whiskey on Facebook and you can build a connection that way.
[00:56:13] Shane Pearlman: Yeah, there you go.
[00:56:14] Jon Penland: Okay. Shane, thank you so much for spending some time with us today and letting our listeners learn a little bit more about you and about Modern Tribe.
[00:56:23] Shane Pearlman: Cool man. Is that good? And thanks Jon.
[00:56:23] Jon Penland: And thank you to our listeners. That’s it for today’s podcast, you can access the episode show notes at kinsta.com/podcasts. That’s K I N S T A.com/podcast. If you enjoyed this episode, don’t forget to subscribe to Reverse Engineered and leave us a review on Apple Podcasts or the platform you’re listening on right now, see you next time.