Multiplier

Part 1

Last year I was meeting with some partners from a large venture fund that is one of the major backers behind many of the largest tech firms. We were discussing Multiplier and a partner there asked me in a slightly bewildered way: “You've spent much of your career at the apex of the software industry at places like Twitter and Stripe - you could do pretty much anything - why are you doing this?”

As I reflected on his question there were many possible answers I could have given:

This industry is a disaggregated long tail collection businesses – many of which are low NPS (more on this below) – the risk adjusted return from rolling these up and improving their scalability and margin economics is surely the financial opportunity of a lifetime.
I love hard problems and figuring out how to automate tax, accounting, and bookkeeping seems challenging and fun.
Applying AI to professional services is a great opportunity to work with the most cutting edge technology in the world while having a very crisp view on how to create value.

Part 2

Service to others

The market oriented system we live in focuses us all on serving others. This has made us wildly better off as a society in aggregate - but of course these gains have been far from evenly distributed.

There is an Adam Smith quote from his 1776 book The Wealth of Nations that speaks to this paradox of markets turning self interest into an interest in serving others:

“It is not from the benevolence of the butcher, the brewer, or the baker, that we expect our dinner, but from their regard to their own interest. We address ourselves, not to their humanity but to their self-love, and never talk to them of our own necessities but of their advantages.”

I think of serving customers (and employees!) as a high calling.

Serving customers - in my mind - creates a sort of mana-force mandate coming into our firm.

BOOK REFERENCE

The Wealth of Nations

An Inquiry into the Nature and Causes of the Wealth of Nations, usually referred to by its shortened title The Wealth of Nations, is a book by Scottish economist and philosopher Adam Smith. Published on 9 March 1776, it offers one of the first accounts of what builds nations' wealth.

BUY BOOK

"

The AI layer on top of these tools is liberating time for my staff to become proper tax consultants - not admin assistants doing a bit of tax.

Greg Trotman

Managing Director

Citrine International Tax

Part 3

Clients and Premium Service

The most successful companies in the world today are all technology companies (often referred to as the Magnificent 7) - and these companies almost without exception take a radically customer focused view of the world. These financial powerhouses were not generally started by spreadsheet people - they were started by people with a vision for how their products or services would delight their customers.

That same principle of deep customer obsession isn't unique to technology, it's at the very heart of premium professional services. Yet, mounting pressures of too few staff, too many clients, and not enough time often pull firms away from the craft of service.

If, as a company, we do three things...

a) Partner with the highest quality operators in professional services
b) Drive scalability for their services through custom-built technology
c) Focus obsessively on delivering well for our customers

...I'm very confident that we'll build a phenomenal business with long-term compounding returns.

We provide tax and accounting services to people with complex (and sometimes large!) businesses to track or tax obligations to meet.

For example - in the tax businesses - our clients often find tax to be one of the most stressful problems they solve annually. It is, for most of them, also the single largest expense they face every year. Further - their tax payments fund all the essential services the government provides. It's hard to think of a more important and fundamental aspect of our civilization.

Therefore - doing a GREAT job for our clients is extremely important (to them, and arguably to society broadly) - and it allows us to charge a premium. Our end-client is the raison d'être for our entire business.

While as referenced above many of these businesses are low NPS - there are a segment of firms that are extremely service and quality oriented - these are the ones we look to partner with. The high quality firms are usually massively overloaded on work - and the staff work exceptionally hard. As the staff work to serve the clients the tech teams work to serve the staff.

Tracing the flow of this mana-force:

[Client → Services firm] Our clients pay our firms – and our services firms strive to serve them well
[Firms → Tech Pods] Of course to serve these clients well - and serve more of them - we need both technology and operational sophistication - so, with Multiplier, we have lean, semi-autonomous tech teams called Pods that exist for the purpose of delivering a custom technology service to the service firms
[Tech Pods → Tech Platform] Our tech platform team helps our tech pods to deliver better, faster, scalable results for our services firms

As the CEO of Multiplier, I am here to do my best to make the mix of clients, service staff, firm owners, tech pod folks, and other Multiplier team members as happy, effective, and enabled as possible.

At Multiplier we created an incentive model (more on this below) that turns self interest into an interest in serving others by creating a layered organization that ensures each rung of the ladder supports the next in delivering excellent service.

Part 4

Employees and Leverage

I have witnessed and worked in both "traditional" firms and tech firms. I have seen the very large difference in culture, work environment, and compensation between these types of firms. Over and over again I saw what a difference there was between tech and not tech companies and roles.

My first full time job out of college was at an insurance-adjacent company building machine learning tools to detect medical fraud. The firm was a services heavy business with a lot of manual workload (my wife started off there as a bill reviewer - pouring over pages of medical op reports to find suspicious activity).

I left that firm to start my first startup - and then sold that company to Twitter in 2013. When I joined Twitter I was blown away by the juxtaposition of my work environment and that insurance firm where my wife still worked. Ask anyone who was at Twitter circa 2013 about the experience and you'll hear pretty wild stories of opulence - a friend of mine even created a Twitter account to catalog the absurdity of the experience.

I then saw this contrast again through my father's eyes. Born in the 1940s he started his career as a college professor, then became a US government employee where he had to insert a quarter into a machine to get coffee at his office in Washington DC.

In 2016 he came to stay with me at my house in SF to onboard to his new job at a tech company (Facebook). I'll never forget him coming home from his first day at that office, a big grin on his face. He opened up his backpack and said "Noah, you won't believe it, they had free bananas!" And pulled several out of his backpack.

I turned this puzzle over in my mind in the subsequent years: Why do some employees get such better treatment than others? Why do some companies provide such better environments than others?

I believe it has to do with the concept of Leverage.

Software engineers - and by extension other employees at companies that produce software - tend to be treated very well because each employee has such a large potential for positive economic impact to the business. This is technology leverage.

The story is similar for those who work in finance - they generally use financial leverage instead of technological leverage. My hedge fund friends are pretty well cared for.

The broad point I make here is that anywhere you find people who are able to magnify their impact on the economy through some form of leverage you'll find free bananas (and more!)

The AI platform shift provides a once in a lifetime opportunity to transform professional services firms with technology in a way that benefits clients, staff, and owners. This can deliver a lot more than free bananas for all of us (though, I'm not opposed to sponsoring a fruit bowl).

The tech industry didn't become the pampered employee promised land overnight - in the late 1990s and early 2000s it was still largely a collection of felt-cube-wall offices like those profiled in the 1999 movie Office Space. As the winners in the tech industry produced ever more cash flow - and investors caught on to the power law dynamics behind these returns - they ignited a bidding war for talent which lifted all the boats in that ecosystem.

The road ahead won't be easy (or, as my old boss used to evocatively say, an "escalator ride to success") - but I'm confident we can, through focus and technology leverage, deliver better outcomes for ever larger numbers of clients. Then, as a result we will justify ever greater compensation and better work environments for our teams.

Part 5

Leverage and Scalability through Autonomy, Alignment, Optimism, and Curiosity.

Our core values of Autonomy, Alignment, Optimism, and Curiosity (outlined on our website) are intentionally selected to help deliver these outcomes.

The incentive model we've put into place where Staff in the services firms – and the platform and application layer Tech Pods – all share in the upside of generating more Free Cash Flow (FCF) is designed to create Alignment - where everyone on the team wins together.

Focusing on a financial metric like FCF might seem arcane - but in reality it covers all corners of how we deliver and scale our services. If we generate more revenue by serving more clients better, and retain more of that revenue in the form of profits by being operationally efficient, and collect those earnings faster by automating our billing, we'll quickly multiply the cash flows generated by our firms.

I want services AND tech team members to act like owners - and that means compensating them like owners too. We do this through a mix of FCF sharing – and in some cases equity ownership grants in our technology firm. The goal is to let everyone feel the short-term and long-term upside of serving a greater number of clients to a higher standard.

Some of the better outcomes we're creating will be purely economic - cash or equity upside. That is not a sufficient incentive, though. I also want to create a company where we champion the principle of Autonomy.

Each firm that partners with us will know that we're not here to sit in the driver seat on their business – we focus on empowering the best entrepreneurs in their category with our platform. Autonomy means making team members within the Multiplier portfolio increasingly able to chart their own destiny - as AI accelerates productivity to free up time that can be dedicated to higher value work I want each of our services team members to step up to grow the business (because you are Aligned and will benefit by doing so!) in a way that is personally exciting or compelling.

For some people that might mean coaching, managing, or better caring for the more junior staff and helping them grow. For others that might mean finding ways to open up new lines of business or win customers we couldn't previously reach. For yet others it might be focusing on unearthing more compelling opportunities to drive automation with the tech pods. Or perhaps finding new ways to delight our existing customers and make them ever more loyal or excited about working with us - and have them refer their friends.

To exercise Autonomy and benefit from Alignment we will all need to approach our work with a mixture of Optimism and Curiosity. Things will be very hard sometimes - we'll get overworked, we'll have bugs or problems with our technology, we'll make mistakes and a customer will be unhappy.

Optimism means picking ourselves up after each stumble and learning from that experience, and taking the next step to create a better future for our clients, our teammates, and ourselves. Curiosity means investigating what motivates us most and finding the niche within our business where we can find that internal satisfaction that leads to better results – that ultimately delivers the external satisfaction of recognition and economic reward.

The big ask here for all of our team members - across services teams, tech teams, and HoldCo teams is to be extremely intentional about adopting these principles (and challenging each other to adopt them more effectively!)

Part 6

Human Heart // AI Muscle

I want to conclude by making a point about the specific flavor of AI future we're after here. We're standing at the beginning of what is likely the most fundamental shift in human society since the industrial revolution as AI begins to take off.

We, collectively, get to decide what sort of future we're going to create with these insanely powerful tools.

My goal is to create a human centered version of this future where machines do a lot of the heavy lifting (the AI muscle) and humans hold the relationship, conscience, and heart in the business.

We have a long way to go to figure out the right way to work, to deliver the technology we need to create. Along the way I want us to continue to focus on improving the experience for both our clients and staff.

We can't survive without our clients, and we can't serve our clients well without our staff, and we can't deliver leverage for our staff without our technology. All of these pieces must work together.

So I'll end this note on two points:

First: I want to express my sincere gratitude to the services teams at Multiplier - at every level of the organization - for delivering results for our clients.

Our clients and our front-line services team are an indispensable part of our team - and as we deliver more technology this team will only become MORE important because the a) the number of clients each team member will touch will increase and b) the value of the tech-enabled service each team member can deliver will increase.

Second: I want to encourage all of us to work together to think about what we need to do to deliver better outcomes for clients, more leverage, and better experiences for our staff.

The more we can deliver high quality results for clients efficiently the more bananas we can justify.