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On this episode of On The Tape Guy and Dan are joined by Peter Boockvar of Bleakley Advisors to discuss to the Jobs Report (1:05), risks to the stock market (7:13), and earnings season (11:55). Later, Peter talks to Ian Siegel, co-founder and CEO of ZipRecruiter about the founding of ZipRecruiter (19:10), the rapid growth of the company (25:30), the journey to a direct listing IPO (36:50) and some predictions on where his industry goes next (42:35).
With ZipRecruiter having a front-row seat of the push and pull between employers, employees and wages, Peter and Ian also discuss the changes brought on by the pandemic, what changes could be permanent, and debate where employee leverage, wages, and the economy may go next.
And as always we want to hear your feedback. Please hit us with any comments at [email protected], and follow us at @OnTheTapePod. You can always tweet us individually @RiskReversal, @GuyAdami & @DMoses34.
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Show Transcript:
Guy Adami: [00:00:28] CME Ad. iConnections Ad. Welcome to a bonus episode of the On the Tape podcast. Dan Nathan We’re joined by Peter Boockvar. You know him? He’s a stud. Peter spoke to Ian Siegel, the co-founder and CEO of ZipRecruiter $2 billion company, about $1,000,000,000 in revenue. They clearly are front and center in terms of what’s going on. Peter. Welcome back to On the tape. [00:01:43][75.3]
Peter Boockvar: [00:01:44] Thank you, Guy. Thank you, Dan. Always fun getting on with you guys. [00:01:46][2.3]
Guy Adami: [00:01:47] Peter, before we get into it, obviously on Friday we saw a job number that listen, if you’re a citizen of this country, it’s great news. Unemployment rate continues to go lower, a trend in the right direction, theoretically. But in terms of your Federal Reserve officials, it’s doing exactly the opposite of what you want it to do. The market reacted in kind, and they find themselves in this real predicament that things are starting to go a little pear shaped. But the numbers that they need to sort of acquiesce and go their direction are doing anything but. [00:02:14][26.9]
Peter Boockvar: [00:02:14] I mean, you can just sense almost every day over the past couple of weeks, the markets just sort of begging and hoping and wishing with their fingers crossed that they would get some sort of hint from all this Fed speak, that they would give a little wink, that maybe they would slow the pace down or we would get some weak data point that would give the Fed license to do that. And outside of Brainard a week ago, where she hinted at that, she’s focusing on international impacts of what they’re doing. The other Fed presidents and some governors, they spoke very tough. And with respect to the payroll number, we know that the Fed focuses on lagging data. There’s nothing more lagging than payrolls. And seeing an unemployment rate of three and a half percent is just another data point that the Fed thinks gives them license to continue to raise rates. Because that’s their cushion in their eyes, is that we can’t continue on with this rate hiking cycle because we have the favorable labor market backdrop that they’re relying on. [00:03:17][63.1]
Dan Nathan: [00:03:17] To Peter, you said the favorable labor market backdrop. And so when you think about it and Guy, I like the way you framed it there is listen, if you’re a citizen, that’s great. But if you’re a central banker who’s trying to combat inflation and you have limited tools in which to do it, I mean, the last piece of this puzzle really feels like you need wages to moderate and you need, I guess, a bit more slack. But here we are, man, and we’re about to go into what is probably a seasonally pretty decent time for hiring here. So is this going to be something that is going to continue to give the Fed the cover, I guess, that they want to finish the job on inflation? And is there are also a scenario where maybe we don’t see unemployment tick up meaningfully in the near future? [00:03:59][41.8]
Peter Boockvar: [00:04:00] Well, to the latter point, I think it’s very possible even if the unemployment rate goes to four and a half to five, that would put us into a recession. But historically speaking, a 5% unemployment rate is really low. I mean, there used to be a time when getting below 6% unemployment rate. The Fed was playing with fire with having rates too low. So it’s not going to take much of a rise in that rate to matter. I think the issue with the Fed at this point is the velocity at which they’re hiking. They overmedicated us to such a dramatic extent that now they’re putting us through shock therapy. So I’m okay with the destination at which they want to get the Fed funds rate, call it for four and a half, but it’s the speed at which they’re doing that is, I think at this point, extraordinarily dangerous. And you heard Kashkari last week saying I’m seeing no evidence of any relief on inflation, even though there is growing evidence coming from someone like me who’s been talking about inflation for two years, I’m seeing plenty of evidence of it calming down. And then you hear Waller talking about the rental component and how it’s going to continue to accelerate, which, yes, in CPI it is. But in real life, the pace of increases are slowing dramatically. So it’s still the same pattern of monetary policy looking in the rearview mirror, which then threatens the economy because of the way that they’re conducting policy based on that. [00:05:28][87.8]
Guy Adami: [00:05:28] I want to get into the Ziprecruiter conversation because it dovetails nicely. And this is not, again, dogpile on the rabbit. I think everybody by this point knows my feelings, Peter. And I think you’re pretty outspoken as well in terms of your view of the Fed. But you mentioned Neel Kashkari. I mean, that, by the way, the same guy that sees no slowdown in inflation is the same guy a year ago that thought the whole inflation thing was blown completely out of proportion. So he zigs when he should have zagged, no pun intended. I get people on my Twitter feed and this is a legit question. They say, how can this Federal Reserve that was begging for inflation and now it’s got inflation that is crushing the lower and middle class now is begging for unemployment to go higher. That’s going to do what crushed the lower and middle class. I mean, what is their mandate other seemingly than to screw everybody over except the ultra rich? And I know that’s a bit of a leading question. But you know what? It’s not that far fetched. [00:06:21][52.5]
Peter Boockvar: [00:06:22] Well, for what supposedly are smart people they view the world in a very narrow lens. The reason why they were so easy for the last couple of years is because they said we will maintain this policy until the jobs lost because of COVID come back. And that was their only focus. Not paying attention to having inflation flare up or just the unintended consequences of having policy that extremely easy for that long. And now they’re looking at through a narrow lens and let’s block out everything. And we need the inflation rate to get down to its path of 2% as fast as possible. And it’s just a bull in a china shop on the easing side and one on the tightening side. And I was okay at speed at which they were hiking up until now, just as a stock price doesn’t go straight up. It has a rally after earnings and it consolidates or on the downside, it sells off in the consolidates and then it takes a look around in rest. But there is no such thing with that when it comes to monetary policy. It’s a one way freight train in either direction, and that creates the biggest risk, more so now than the risk that inflation is creating itself. [00:07:31][68.9]
Dan Nathan: [00:07:32] Yeah, when you’re talking risk here, you’re talking to the economy, the potential for a recession, and obviously how deep, how long? All of the above. But let’s talk about risk to the stock market and what we’ve seen here. We are less than an hour after the opening on Friday. As we’re recording here, we have that data and the knee jerk reaction for investors is to sell the stock market. So we had the S&P down about 2% right now, the Nasdaq down about two and a half percent. And Guy and I were talking about this a little bit last night, which would be Thursday, as we’re trying to guess what’s going to happen, isn’t that the fun game that we all do the day before a big jobs number and I think both of us Guy were in agreement that if we have a hot number and if that unemployment number does not move higher, we are going to fill in that gap that we saw Monday morning into Tuesday where we had, what, a 5%, two day rally, which was pretty extraordinary. And here we are. We’re on our way to doing that. What’s your thoughts here? We have CPI next week and then next Friday we have, I don’t know, I think, four or five names in the actual half that make up maybe 30, 35% of the weight of that. And the last piece of this look at the way rates have been moving. Just in the last week, we had the ten year above 4%. It got as low as 3.6. It feels like it wants to go back towards four. As we’re recording right now, it’s at 3.9. This is not setting up well for stocks, especially as people were getting their arms around. Okay. Well, maybe we get a little counter trend rally. We’ve had a bunch of them this year. The last one was nearly 20%. This one was only 5%. [00:08:59][87.5]
Peter Boockvar: [00:09:01] So a couple of days ago, after we had that massive two day rally, I looked again at the multiple in the S&P. And again, this is the E part that I think is hugely at risk when we look out over the next 6 to 7 weeks as we digest earnings. But we were back to about almost 17 times earnings and 17 times is very high and still even though it’s below where it was. So the pendulum is going to swing in the other direction in terms of the multiple. So I expect something below 15 before we bottomed out. And getting back to that E part, that’s really going to be the major task, of course, for the markets through a good part of November. And I think it’s there are two components to that. The revenue number is at risk, especially for companies that don’t have pricing power and especially for companies that have a lot of international exposure and dollar affects exposure. And then, of course, on the profit margin side, getting to your point, Dan, earlier that we may be in a recession where the labor market still hangs in. Well, that means that labor costs are still going to remain elevated for a lot of different companies. And labor costs are the by far biggest contributor to the direction of profit margins. And what we’ve seen in terms of the large expansion of profit margins over the past ten years with low labor costs that is now moving in the other direction. So there are multiple risks on the P and the E side of the equation, and that creates its own hurdles going forward. [00:10:29][88.6]
Dan Nathan: [00:10:30] Yeah, we had Mike Wilson on the pod on Friday, so people check that out if you haven’t listened to it. He is the head strategist and CIO over at Morgan Stanley, Guy and I’ve known him for a very long time. And I think Peter, you know him too, and he really put himself out there last year. He was a little early on a very bearish call as far as what the Fed was going to do or need to do to tamp down inflation. He just came out with his 2023 S&P earnings estimates. The base case, Peter, is 212 bucks and he thinks the S&P crossed 13 or 13 and a half times or so. He obviously thinks that the markets will snip that out ahead of time. He’s in front of the pack here and we’re starting to see some of these bullish strategists throw in the towel a little bit. So thoughts on that idea that the street is going to come around to a negative revision for 2023? And then where do you think the S&P troughs on a multiple basis and where do you see the S&P going? [00:11:26][56.0]
Peter Boockvar: [00:11:27] I can’t disagree. I think 13, 14 times could be a trough multiple. I just think that the still over $200 earnings estimate, it could be tough. I mean, the average recession takes down earnings by 20% and that would be a below 200 estimate. But I think now with the FX component on top of profit margins that got so extended, I mean, the major contributors to profit margins looking out over the last 20 years, I mentioned labor costs. It was lower interest expense. It was the cut in the corporate tax rate at the end of 2017. Those are three major contributors, well. Obviously, the corporate tax rate is still low, but the interest expense and labor costs are going in the other direction. So that’s my issue is profit margins here. That has below 200 all risk in my eyes. [00:12:12][45.3]
Dan Nathan: [00:12:13] Yeah well, Peter, let’s just talk about what we saw over the last couple of weeks. We have seen some negative preannouncements thursday night after the close AMD a massive $1.1 billion revenue miss for the quarter on a 6.7 billion estimate. That is a number that the company guided to and reiterated in early August. It’s pretty astounding. The gross margin miss astounding here. Guy and I were talking about this the other day. We’ve been around, we’ve seen these sorts of cycles and they don’t fix themselves in one quarter. So these companies have kind of been piecing out the bad news little by little. But now we’re starting to see some really big misses. We haven’t even seen Q4 guidance. We know that full year 2023 guidance will be coming from companies, let’s call it in the next couple of months or so. Maybe they wait until late January when they’re going to report their Q4 results. But this seems like this could be a really dicey earnings season where. Q2 earnings season that got started in mid to late July, we rallied out of it because it wasn’t as bad as expected expectations were coming down. We’ve seen some FactSet data from John Butters who said that the rate in which analysts are getting in front of the guidance, lowering their own estimates is increasing at a pace that’s higher than the average over the last five, ten, 15 years or so. So talk to us a little bit about this earnings season that we’re about to enter here because it really feels like this could be the thing that really wakes up investors to the fact that those 2023 S&P earnings estimates are kaput. [00:13:46][92.4]
Peter Boockvar: [00:13:46] Well, I think to your point about AMD, I think it reminded us also that and the three of us that were around certainly in the nineties of the semiconductor industry is as cyclical as it gets. And they’re going to ride the wave of global economic activity, just as many commodity stocks do, just as Alcoa or an energy company does. And while tech is high, you think that trend is going to last forever. And you people run numbers and the global demand for semiconductors are just going to be a straight line up. And yeah, but it’s still very cyclical. It still goes into a lot of things that we use every day, but we don’t repeatedly buy every day. So a lot of the money that people spent in 2020, 2021 on things took up a lot of semiconductors and some of that stuff is just not repeatable for the broader earnings landscape I think we’re going to get reminders also from those mega-cap tech stocks that are going to remind us that their businesses are cyclical too, and that if you’re selling books and stuff like Amazon is or you’re selling advertising like Google is and you’re selling over $1,000 phones like Apple is, you’re still sensitive to the whims of the consumer and the ebbs and flows of global economic activity. And so when we talk about where the S&P goes, one thing we know in the markets is we don’t top out at the same time, we don’t bottom out at the same time. The meme stock craze, the euphoria was the peak was February 2021. The S&P didn’t top until January 2022. The NASDAQ topped in March 2000. The S&P almost hit a new high in September 2000. So there could be stocks that have bottomed. But the determining factor on where the S&P goes very well could be those big cap stocks where we know there’s still a lot of money hiding in that. We could get a reminder again that they’re cyclical, just like a lot of other businesses. [00:15:37][110.8]
Guy Adami: [00:15:38] The road to price. Discovery is not a straight line. And in the environment that we found ourselves in for the last 13 years, that road becomes extraordinarily difficult to navigate. And I think that’s what we’re dealing with now. And Peter, you’ve taken a lot of heat over the years for your views and your stance in terms of the Fed and some of their policies. I know personally I have and not that there’s vindication or validation or whatever it is, but I take some solace in knowing that you’ve been so far in front of this for so long, and it’s been great having your voice not only on fast money, but with us on the tape, mkt call, all those different things that we do. So thank you. But let’s get into the interview that you had because Ian Siegel co-founder and CEO of ZipRecruiter, a company that over the last year or so, a series of accelerated stock repurchases. They’re doing everything right. Seemingly, they’re going to have $1,000,000,000 in revenues next fiscal year, company that’s trading with about a $2 billion market cap. And the world that we find ourselves in to me is tailor made for everything that they do. Can you speak about the conversation you had? [00:16:40][62.1]
Peter Boockvar: [00:16:41] So Ziprecruiter is really a fascinating business in what is sort of like an old school industry of just recruiting and matching up employers and employees. But they’ve taken the technology angle to such a great level that the process in which they can sort of marry the employers and employees, where the candidates of employees to the needs of the employers to such a refined state, it creates a much more efficient, more frictionless process of getting the people that the employers are looking for and then let them figure out who they’re going to hire and going from there. It’s a cost free model for the employees. It’s the employers that pay for this service. It’s the marketplace for work. But the technology has allowed it to be so much more efficient and Ian Siegel, very dynamic guy. He started the company with three other people, and I think this is going to be one of the interesting business models. And again, marrying employers in a very efficient way to find the employees that they need. And we know in this kind of a labor market where there has been a shortage of employees in many areas of the labor market and certainly the tech area that’s been shedding, I think they definitely have their place in the labor market. And one interesting point that he made and what listeners listen to the rest is you talk about jobs where you have to show up. If you’re going to work at a restaurant, if you’re going to be a flight attendant on a plane, you need to show up for work. You can’t be a virtual flight attendant. Those people will have pricing power in terms of their wages for a long period of time where the average white collar person will still be subject to the cyclicality of the economy. [00:18:25][104.2]
Guy Adami: [00:18:26] When we come back, Peter’s conversation with Ian Siegel, co-founder and CEO of ZipRecruiter. CME Ad. iConnections Ad. [00:19:09][42.5]
Peter Boockvar: [00:20:05] Hi, I’m Peter Boockvar this is another episode of the Boock Report CEO podcast. Today we have Ian Siegel, who is a co-founder and CEO and chairman of Ziprecruiter. Ian thanks for joining me today. [00:20:17][12.7]
Ian Siegel: [00:20:18] It’s my pleasure to be here. [00:20:19][1.0]
Peter Boockvar: [00:20:20] So Ian what I do with our guests first is just try to get a sense of how you got to where you are today. What experience is built on itself from a career perspective, and what was sort of a light bulb that went off in your head. And I know you had three other co-founders. What did you see that the market needed that you felt that you can fill? So from a tech perspective, because I know that’s sort of your main background. How did you develop that? [00:20:47][26.9]
Ian Siegel: [00:20:48] Well, I left college with a sociology degree and a minor in English, so nothing computer science related. Didn’t know what the Internet was. And I was in one of those right place, right time situations where, through a series of unfortunate events, I wound up in tech working as both an engineer and as a product manager. And I worked my way very quickly up in these companies, got tagged at a very young age for leadership. And as a result of that, by the time I was probably 25, I was a leader of not just a team, but of teams for multiple early stage Internet startups. And what was true of all those companies is that when you were recruiting, you didn’t have a HR team that was big enough to do the recruiting for you. So you were your own recruiter. And over and over again, when I had multiple roles to fill, no matter what my title was or which company I was at, my full time job became recruiter because it was so time consuming to take a job description. And mind you, this is the same job and post it on Monster, CareerBuilder, Hot Jobs, Craigslist, etc. etc.. And then not only did I have to repeat the posting process, but then as candidates came in, each of these sites had a different mechanism by which you to access the candidates. So I did what everybody would do, which is I would print out all the resumes and make stacks on my desk. And this literally went on for a decade. And I was dumbfounded because I felt like the Internet was built to solve exactly problems like this. And so I had had the idea for Ziprecruiter for a long time before I finally worked up the nerve to pull three of my friends together who became my co-founders. And we built it as a side project where all of us had full time jobs. And what we did was we just built the tool we’d always wanted, which was a magic button you could push that would send a job to all job sites at once, basically turn the entire Internet into a job board. Then having all the candidates from all those different job sites come into one easy to review list. [00:22:54][126.0]
Peter Boockvar: [00:22:55] Now, with the three colleagues that you started this with, you had worked with them prior or they were high school or college buddies. And how did you sort of divide the labor when there’s four people starting a company? [00:23:07][11.8]
Ian Siegel: [00:23:07] It’s such a great question. I love answering it because they hate it when I talk about this. But my three co-founders were three individuals who had all worked for me previously as a member of my teams. But I always ran flat teams very much someone who you work with rather than someone who you worked for. And so one of them was an elite designer, and two of them were elite engineers. And when we built the company, the designer did the design, the engineers built the code, and I did product marketing, buisdev, sales operations, customer service. Like I did everything else. I was the jack of all trades. And in fact, I probably worked seven days a week from 5 a.m. to 11 p.m. for more than a year and a half before we made our first hire. And our first hire was a customer support rep to just take some of the burden of the daily task of managing the business off my plate. [00:24:01][53.1]
Peter Boockvar: [00:24:01] Wow. So this was, what, 2010 when you guys came together? [00:24:04][2.9]
Ian Siegel: [00:24:05] 2010 yep. [00:24:05][0.1]
Peter Boockvar: [00:24:07] Okay. So you create the website. You obviously have this broad idea of being this general marketplace for work. Call it. Now, one of the important things of developing a site like this is a network effect is the more people that join, the more opportunities there are for employers to hire and obviously more opportunities for employees to find jobs. How did you start that networking effect that allowed it to build on itself? [00:24:32][25.7]
Ian Siegel: [00:24:33] What you say is absolutely true. It’s definitely a marketplace business where network effects are key. And when I looked at the category when we first launched, we just felt a product we would use. And then once we allowed employers to start posting jobs, obviously they were getting distributed to all these different job sites. But it turns out there’s different levels of visibility available in these job sites. And if you pay for visibility, you get more visibility. And so we were paying from a very early stage for some of the traffic that we were getting. And I think our philosophy was when we looked at the category, every other company in the job space had started by trying to aggregate job seekers and then sold them to employers. And there were over 40,000 job sites when ZipRecruiter was founded. And so I looked at that and I said, okay, everybody else has aggregated the job seeker, so we can just buy them like a commodity and basically just constantly be finding more sources of traffic that we pay for. And what we’ll really focus on is aggregating the employers, because that’s the part that no one had managed to do. We were heavily focused on small and midsize businesses prior to us. Basically, all the companies that are famous that you knew of the monsters, the career builders, the LinkedIn’s, they’d focus on the enterprise customers, which makes sense because enterprise customers have never ending needs for more hires and large deep pockets. So that’s where everybody started. So we went after the the 5 million small and mid-sized businesses. And like I said, we were buying job seekers while we invested in building brand with employers. And that strategy proved highly effective. [00:26:14][101.1]
Peter Boockvar: [00:26:15] So it seems that technology and the quality of your algorithms are a key part here because you’re getting millions of resumes, you have millions of jobs to fill. So essentially a computer that is analyzing each incoming resumé and a computer that is matching that with the needs of that employer. So is part of what separates Ziprecruiter from your competition is the quality of sort of that matchmaking ability? [00:26:42][26.7]
Ian Siegel: [00:26:43] Yeah, I mean, there’s really been two eras in Ziprecruiter history. Initially we did distribution, which is where we took a job and we put it on over a thousand different sites, and that was job boards, aggregators, talent communities, resume sites anywhere job seekers might be. That would see a job we would distribute there. And we were basically a super sourcing tool and we kept finding more and more places to distribute a job. And guess what happened? Instead of getting 30 candidates, employers would get 50 and then 70 and then 100 candidates. And it turns out when you send employers three times as many candidates as they’re used to, they’re not three times as happy. They’re three times as frustrated because the ratio of good to bad candidates stayed constant. So it felt like they were wading through a sea of chaff, trying to find those candidates that were worth talking to. And we realized that that was an end of life strategy for us and that we had to pivot. And that’s a big part of the reason why after four and a half years of bootstrapping the business and we had gotten to north of 50 million of revenue with literally millions of free cash flow. We finally raised to Series A, we finally took outside capital, and the primary driver of that was a desire to move into a world of not quantity but quality. And in order to go into quality, you had to utilize these advanced algorithmic techniques called either machine learning or deep learning or metal learning. Everybody likes to call them AI. They’re really very good at using the wisdom of the crowd. That’s what these algorithms do. So they don’t just say, I’m going to match the keywords in resumes to the keywords and job descriptions. They say, I’m looking at you and I’ve seen a thousand people who look like you before. And regardless of what your resume says or what the employer says they want, I know what kind of employers like you or people like you. And so I’m going to match you to those employers because you have a high probability of being positively responded to if you do apply to those jobs. And that’s where we really changed our ethos from being a job board to becoming very much a match maker. And this technology is sufficiently advanced that it honestly feels like magic. I mean, the first version of it we deployed doubled the thumbs up rate from employers in terms of how satisfied they were with the candidates they got. And we’re more than eight years on in continuous training of these algorithms with ever more data. And they’re so smart, they do things that are amazing. Like you don’t tell these algorithms, all these niche rules. They discover things like, Hey, if you post a technology job in L.A., it’ll show it to candidates in New York because it learned that L.A. Tech employers like New York engineering candidates. That’s the kind of thing we never told it to do. We just discovered it was doing. So those are the kinds of insights these algorithms can derive and successfully deploy. [00:29:31][167.9]
Peter Boockvar: [00:29:32] And it’s pretty amazing. And I’m assuming that the AI technology, it builds on itself in terms of it just gets better and better because of all the lessons that it has previously learned. [00:29:42][10.0]
Ian Siegel: [00:29:43] I mean, I would say it is both awe inspiring and scary to see how fast these algorithms improve. And you have to be so careful because they’re very good at giving people what they want. And we have a responsibility to make sure that. We’re not perfecting problems like bias, age discrimination. Right. Like it’s there. The algorithms are very, very good at this stuff. So you can’t just deploy them and set them free. You have to monitor and carefully measure what they’re doing and then tune them to make sure that they’re maintaining a meritocracy. [00:30:19][36.0]
Peter Boockvar: [00:30:20] So once a match is made, when I say match, I’m talking about an introduction where both parties are open to each other. Does Ziprecruiter then leave the process and that applicant then interviews with the employer and then they leave it to themselves? Or do you sort of go along within the process until an actual hire or a decision is made? [00:30:42][22.5]
Ian Siegel: [00:30:43] We are moving ever deeper in the process, is how I would describe it. So I’ll give you an example. We match a candidate to an employer and they’re engaged, and then that candidate applies to another employer at the same time and is now engaging with two employers. We’ll tell both employers that they have to act fast because this candidate is now talking to multiple parties. So there’s all kinds of ways you can play that. Our philosophy is share as much information as possible with all parties because that creates the best potential outcome for all parties where everybody has perfect information so that they can act appropriately. Like you would hate to be the first company who’s slow rolling that candidate, not realizing that they’ve actually engaged with another employer. And if you don’t act fast, you’re going to lose it. Similarly, if you’re the new employer, knowing that they’re already talking to somebody else is going to compel you to go fast. At the end of the day, that’s how hires happen. This fear of missing out. It’s this trying to get to certainty and remove all of the questions around the edges. And that, I say, mashing is table stakes. The new battlefield in the labor market category is not going to be around these advanced algorithms. Those are going to be what everybody has to do. The new battleground is going to be around the social psychology of how do you get two parties to engage and agree that one’s going to take the job and the other is going to make the hire as fast as possible? [00:32:09][86.0]
Peter Boockvar: [00:32:10] Yeah, it seems like it adds a lot of fluidity to the process and takes away some of the friction of the hiring process because sort of in a way, everyone’s chips are on the table and there’s not a piece of information that’s just not part of the process that delays these type of decisions. [00:32:26][15.8]
Ian Siegel: [00:32:27] Well, I would contend right now and we should do another follow up in ten years to see if I was right that the recruiting sites that our parents used and that we used and that probably our children are going to start using, I’m old enough that my kids are gonna start using, are not going to be used by their children. They’re going to bear no resemblance to that because effectively we’re all using the same paradigm that existed in 1900. Like job boards have fundamentally not changed. Job seekers come back to this, do it yourself. Search to find the right jobs to apply to. And then there’s this asynchronous process where employers take time to review and then they reach out and the job seeker tries to remember who they apply to and then they respond. And all that is nonsensical and unnecessary. Now, because the matchmaking is so good that you can say you are the two parties, you are the employer, and you are the job seeker who should be talking to each other. And you can be right between 75 and 90% of the time right now. And within about 6 to 10 years, you’ll be right 99% of the time. At which point, what is recruiting? The act of recruiting stops being this asynchronous process and very likely becomes this real time experience where like, I’m ready to talk to candidates and all you’ll do is talk to people the computer matches you up with. So I think that’s where we’re heading right now. It’s just taking time for the market to realize the power of these algorithms. [00:33:48][80.4]
Peter Boockvar: [00:33:49] So the revenue model for ZipRecruiter, if I’m an employer looking to fill a few spots, do I pay you a monthly fee to feed me candidates or do I pay you when you fill a spot? Do I pay you a bonus if I have a great employee, how does that work on your end? And I know the employee sort of uses a service for free. It’s the employer that creates the revenues. [00:34:11][22.2]
Ian Siegel: [00:34:12] Correct. So ZipRecruiter never charges job seekers never has and doesn’t currently plan to. We make all our money from employers. There’s a variety of payment models that different size and different need employers use. But the predominant one, the one you’d sign up with when you first came to ZipRecruiter is pay per day per job. Now why don’t we charge per month? We used to charge per month and you can still pay monthly. But it turns out that these algorithms are so good that when we deploy them and tune them we move the time to hire from 39 days on average down to 16 days. And so employers were filling jobs so fast that once they use the service, they felt they didn’t want to buy a month. So then we deployed per day pricing to reflect the appetite of our employers because they were aware now of how fast we can fill jobs. And yes, to some extent, the faster we fill jobs, the less money we make we charge per day. And what I keep saying is I hope we get it down to one day. Because if you get it down to one day, it’s my belief that 100% of employers in America and probably across the world will use your service. Because what would you pay for certainty? So for me, that’s the right model. [00:35:26][73.6]
Peter Boockvar: [00:35:27] Yeah, for sure. Because you would make up in volume in the rapidity of the hiring that would then offset the shrinking window of that hiring process. Now, is there any human touch involved in your model in the sense that, let’s just say I’m a very big company and I just have a constant need for people. Can I call ZipRecruiter on the phone and speak to a salesperson that can hold my hand in the process? Or is it all automated? [00:35:54][27.1]
Ian Siegel: [00:35:55] 100%. We have account managers who are available for companies who have persistent hiring needs. And here’s the truth. The average employer writes a job description by going to Google and typing in the job title and then the word job description. And they copy whatever they find and they edit it modestly. And then it doesn’t really matter what they wrote. Because job seekers, on average spend less than 10 seconds reading the job description before they decide whether or not to apply. When they do apply, it doesn’t really matter what’s on their resume. Because employers spend on average less than 7 seconds reading the resume and they’re basically scanning it for keywords. So what we’ve discovered is job descriptions do a poor job of describing who will actually get hired and the expertize to write a job description that signals to a job seeker that they should apply is not something most employers possess innately. So we have become very good at coaching employers through the process of not only writing job descriptions that full, but identifying best practices. One easy tip, for example, you want to double the number of candidates who apply to your job. Are you ready? Here’s what you got to do. Put the salary that you’re willing to offer or the salary range in the job description. It doubles the number of candidates, but most employers think they want to maintain flexibility. So they love to put their salary. And it’s so ironic because of how badly it hurts them in the recruiting process. So yeah, we absolutely will handhold you and offer expert guidance all the way through for employers. [00:37:33][97.9]
Peter Boockvar: [00:37:34] Yeah, that wage thing is very counterintuitive and I want to actually circle back to the broader wage discussion now. You guys went public in 2021, so we were coming out of COVID. We were in the midst of rolling out the vaccines, the economy slowly opening. But it was still an unusual time in our lives, in human history that we had to live through this. But the markets were vibrant. Monetary policy was easy. You had the meme stock craze that saw like peak euphoria in February 2021, and the broader tech markets seemed to ride that wave through the rest of the year. What was that like? And I know you guys did a direct listing instead of an IPO. What was that process like for you guys? [00:38:13][38.9]
Ian Siegel: [00:38:14] The three years from 2019 through today I’ve said those were not the years for a novice CEO to be tackling their first job in leadership. Because you had everything. I mean, you started with COVID, but you go back to a contested election. Black Lives Matter, the COVID virus, massive climate events, wars, I mean, like so much is happening. And in spite of all that, and in part because we had spent more than a decade investing in our brand and we had spent more than 700 million over that decade building a brand that 80% of people in America would recognize, which is very rare air for what it’s worth. You know, when you think about there’s probably less than 500 companies that 80% of America could name on site when they see them. So it’s rare up there. What we learned was the strength of brand amidst all crises. And by that I mean when COVID hit, we turn marketing all the way down. And yet new customers and old customers kept coming to the site, meaning that new customers were signing up and old customers reactivating. Even though we weren’t prompting him to, we’d become synonymous with the idea of recruiting. As a result of that, we are substantially profitable and so we didn’t have to do a traditional IPO. We did what’s called a direct listing where we basically only let insiders sell their shares. And we went public. We were the eighth company in the world to ever do a direct listing, and I learned quite a bit about what that entails. And I understand all the positives, which is effectively don’t create an unnecessary dilution of that. And I learned the negatives, which is it’s very hard to get the attention of the investors in the market when you do not follow a traditional process. However, here’s what I would say. Part of the lifecycle of a company is finding liquidity for both investors and employees. So box checked, strategic options expanded because now our stock is a currency. But how I really feel is I am more excited for the next decade than I was at any point during the last decade, because to me, we’re at this threshold where the technology has outstripped the interface and we have an opportunity to build something brand new that’s completely disruptive, that changes the way people do recruiting and the way people look for work. And it fundamentally makes it more human, faster and more satisfying. So I feel very good about the challenge, and I’m less worried about the company’s stock performance than I am about the company’s product performance. Honestly, as a leader, it’s like the greatest place you can get to. My favorite thing about startups is first they ignore you, then they mock you, then they try to kill you. Then they try to buy you. That was my journey. And now I feel like we escaped the atmosphere of that truth. And now we’re able to, like, design our own future. And I couldn’t be more excited about it. [00:41:21][186.9]
Peter Boockvar: [00:41:22] And it sounds like your transition from also a private company executive going to a public company executive. I’ve been on two publicly traded boards, so I know what it’s like to deal with obviously the quarterly statements and registering with the FCC and just the different sort of scrutiny that you would have versus a private company. But it seems like that transition was pretty seamless for you. [00:41:45][23.2]
Ian Siegel: [00:41:46] And to give you a piece of advice that you’re not going to hear from anyone else ready, if you’re running a company and you’re thinking about IPO and you’re going to go talk to a bunch of people about it, and 100% of them are going to tell you not to do it. That’s going to mess up your culture. It’s going to get everybody focused on the stock price instead of the product, that it’s going to change who you are fundamentally as a business. And it’s going to be a completely different job. And whatever that job is, you’re not gonna like it as much as the job you have now as a leader. That last part about the job changing is true, but I’m going to tell you honestly, going public was the greatest decision ziprecruiter made in spite of what’s happened to the market subsequently, because it releases some of the tension from long term employees and from investors who now have the opportunity to generate some liquidity. It means that the work that people do, they get rewarded for in the form of the stock price appreciation in the quarterly cadence, honestly made us a better company, not a different company. It forced us to become very good, not at what we said yes to, but at how clear our nos were. No, we’re not going to do that, and we’re not going to do that. And we’re not going to do that because these are the things that matter in our business. And I honestly feel like every company, if they can, should go public. [00:43:00][74.6]
Peter Boockvar: [00:43:01] I think that’s great advice. I think being public creates a whole level of discipline that while you still may have it as a private company, it elevates it as a public company in terms of the financial side, the operating side, and having that. While it may be annoying to have that investor scrutiny, it really tightens the operation in the few minutes we have left. I just want to talk a little macro because the labor market is so interesting in the sense that right now we’re seeing a lot of the investment dollars the last 5 to 10 years went into the tech space. So a lot of tech companies that raised a lot of money, there was a lot of hiring. There was competition for employees, particularly high skilled ones. And now that economy is slowing down, there’s some rationalization. There’s one that’s on hiring. But on the other hand, the airline industry can’t find enough people. The leisure and hospitality industry, broadly speaking, can’t find enough people. Are you seeing just the paradoxes within the labor market that is sort of an outgrowth of this post-COVID world we’re in? [00:44:02][61.1]
Ian Siegel: [00:44:03] I mean, let’s just recalibrate where we’re at at this moment. There’s still over 10 million open jobs, which means there are still roughly two open jobs for every active job seeker. And I expect that to change over the next six months. But this is peak employment. We’ve never seen this like we thought pre-COVID when we were at four and a half percent unemployment, that we were already at peak employment. We had not even had a whiff of peak employment until we got past committed that the economy reopened. There are industries that are forever changed. Leisure and hospitality is a great example. Medicine is another one. And particularly with the nursing, I mean, we had a shortage of nursing pre-COVID that was dire. And then COVID happened and every nurse became a COVID nurse and it burnt out a double digit percentage of that workforce. That said, the public is awful. I never want to be a nurse again. And so suddenly our dire shortage became like a crisis level shortage. And there are multiple industries where. You are used to a certain level of service and you will never get that service again. Whether it’s at a hotel, on an airplane, on a cruise, it doesn’t matter because the talent is in too much demand. There is also a sea change that has happened in the minds of the labor force post-COVID. So pre-COVID, less than 2% of jobs were either fully remote or hybrid. Post-COVID, 62% of the people looking for work say they want either fully remote or hybrid work. 62%. This is unprecedented. We essentially did a grand social experiment where everybody tried working from home and the overall consensus was overwhelmingly, I like it and I wanted to stay. There’s been a ton of research on this. There’s an economist over at Stanford who has figured out that the average person saves 70 minutes a day in the combination of commute time and grooming by not going into the office which they love. The flexibility is valued at the equivalent of a 12% raise for most people, so that’s how much value they ascribe to it. And a huge part of what has been this dominant theme, post-COVID, which is a record level of resignations. You’ve had a tsunami of people quitting their jobs, 22% more people have been quitting their jobs every month the last 18 months than they did pre-COVID. So, yeah, the market is in turmoil and it’s out of balance. And I think you’re going to see macro wise a tilt back to level. But what level looks like, nobody knows. Are we ever going to see everybody back in offices again? I highly doubt it. [00:46:51][168.4]
Peter Boockvar: [00:46:52] Yeah, I think that’s going to be an interesting dynamic from here as companies are trying to encourage people to come back into the office. But getting pushback, I know some are being more forceful with those requests than others. I saw a GM, I think it was a few weeks ago that said that some of their back to work plans were going to be halted because there was a lot of pushback. And I’m wondering whether there is sort of a happy place, that equilibrium level, that employees can be happy with their balance and employers will be happy that you’re in the office enough to the extent that they want you to. [00:47:29][37.3]
Ian Siegel: [00:47:30] I’m going to be direct and say, I don’t know, because there’s so much tension in the market right now between what the current most senior level executives and managers want, which is people returning to office, because generationally, those are the individuals who prefer to work that way. Those are also the individuals who ascended through an office culture and are now at the peak of the pyramid, if you will. And so this is the moment they get to walk the halls and revel in the fact that they’re in the mentor leader role. And suddenly there’s nobody to mentor a leader and they’re using tools they’re uncomfortable with, like, say, slack or video chat. This is not the period of their life where they thought they’d be late stage learners. So I think they’re fighting it. On the flip side, I think there are so many companies that have already committed to either allowing hybrid or fully remote that it’s going to be very difficult for the market to go back to the way it was because historically whenever there is a recruiting or retention advantage, you see things like signing bonuses for one case, college tuition reimbursement, continuing education allowances, like you see these perks pop up in these industries and they become the norm because if you’re not offering them, you’re no longer competitive for the best talent. And you see what’s happened at companies like Apple and Tesla and Goldman Sachs, where these famous companies are trying to draw really hard lines about return to work or you don’t have a job and their bluff is immediately being called and they are all immediately backing down immediately. So I think the jury is still out. The early win went to the employees. But let’s see what happens if unemployment goes back to 9%. Let’s see what happens then. [00:49:27][117.5]
Peter Boockvar: [00:49:28] Right. Well, that’s actually leading to my last question and I’ll let you go. So I think it was either 2015, 2016, when you look at the profit pie for all of corporate America, that labor slice was the smallest since World War Two and the years since. Labor has been getting a slightly bigger piece of that profit pie. And now we have wage growth, call it in, ranging in the aggregate of 4 to 6%, obviously still below the rate of inflation, but it’s a higher level of wage growth. The sustainability of that obviously will depend a lot. On, as you said, where the unemployment rate goes. But you see it at least for a period of time, that that labor is going to continue to gain some more leverage and those wage growth type figures are sustainable. [00:50:13][44.8]
Ian Siegel: [00:50:14] Well, I think what’s true is where are you seeing the biggest wage growth? I’m going to make it really simple is in jobs where the individual doing the job is required to interact with the public. It’s a job you have to be in a physical location to do. And in places like that and opportunities like that, wage growth is here to stay. It’s not going backwards because, as I said, more than half the population is averse to those jobs. The pool of candidates has materially shrunk. So the leverage will remain with the employees versus the employers. When you look at white collar or highly compensated career type jobs, those are going to be really interesting because they’re the employers have a lot of leverage and brands carry weight. So Apple and Tesla have brands that are so powerful that if you work at those companies, your name is changed. You are forever an X Apple employee or an x Tesla employee, right? That becomes your brand. So, yeah, they may be able to insist on policies that other companies can’t get away with, but I don’t think we should use the outliers on either side to try to figure out what’s going to be the norm. I think the norm is going to be a messy middle where you’re going to have a lot of companies practicing a lot of different strategies. [00:51:35][80.8]
Peter Boockvar: [00:51:36] Some great points. And it’s not just the homogeneous labor market. There are a lot of interesting startup personalities within, but I can’t thank you enough for taking out the time. I really enjoyed our conversation and I wish your company only the best of luck. [00:51:48][12.2]
Ian Siegel: [00:51:49] And pleasure to speak with you, Peter. [00:51:50][0.9]
Guy Adami: [00:51:52] Thanks once again to CME Group and I connections for sponsoring this episode of On the Tape. If you like what you heard, make sure you hit, follow and leave us a review. It helps people find our show and we love hearing from you can also email us at on the tape at risk reversal. Dot com any time follow and connect with us on Twitter at on the tape pod and we’ll see you next time. On the tape is a risk reversal media production. This podcast is for informational purposes only. All opinions expressed by me and Nathan Guy, Danny, Danny Moses and any other participants are solely our opinions and should not be relied upon for specific investment decisions. [00:51:52][0.0]
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