0:00:08 It seems like it was an insane decision to go to China with no money, no plan, no relationships, no language skills, slept in a bush, and literally build your own factory.
0:00:17 That was a disaster. When I say we were naive, I feel like that is even an understatement, but to be fair success is about teacher and in our business now.
0:00:25 I’m a huge believer in firing bullets and failing fast, and then at the bullet works, it’s a cannonball and we invest and we build the recipe around that.
0:00:27 How big is the empire today?
0:00:31 It’s a little over two out of a billion US in revenue.
0:00:33 And it’s public or it’s not a public company?
0:00:35 No public.
0:00:47 So here’s what’s fascinating to me.
0:00:56 So I have like a love language when it comes to business and my love language is self-made, dropped out of college, family business, multiple.
0:01:00 Multi-billion dollar company with no outside capital.
0:01:05 Like you hit all of the things on my little bingo card there, which is what got me interested.
0:01:07 I want to start with the origin story.
0:01:09 So here’s the bullet points.
0:01:28 I grew up on a dairy farm, started selling door-to-door hot air balloons, was in law school, then quit because he didn’t like walking up a big hill every day, and then made a crazy rash decision, moved to China with no money, no plan, no relationships, no language skills, slept in a bush, somehow turned that into a billion-dollar company.
0:01:32 So that’s the bullet points. Can you unpack that a little bit?
0:01:34 That’s quite accurate.
0:01:37 That’s quite a good way to summarize it quite quickly.
0:01:47 If I was to frame up our probably first 10 years, it’s that famous saying that success is going from failure to failure with no loss of enthusiasm.
0:01:50 I think that actually really does sum us up.
0:01:58 Grew up more or less on a farm and then we moved north for our schooling, and my brother won the New Zealand Science Fair with a model hot air balloon.
0:02:10 And then we decided, or he decided, he was 12, that we should make these kit-set balloons and sell them door-to-door on festivals when we’re at school, and I’m slightly younger than him.
0:02:16 So he kind of hired me as the, when I say “hi,” I was the free labour to help make the hot air balloons.
0:02:19 And yeah, we used to make these model hot air balloons and sell them door-to-door.
0:02:25 I used to, when I was quite young, get my friends together and backpack around New Zealand and sell them door-to-door.
0:02:35 And I can tell you that learning how to sell door-to-door is a great life lesson because you never know who’s behind that door, and you never know what response you’re getting.
0:02:42 And on top of that, selling a flying, burning plastic bag is particularly hard to sell, so it really hones your skills early on.
0:02:45 What was your technique? So knock-knock.
0:02:51 Yeah, I used to be like, “We’re just a small company trying to get off the ground, wink-wink, like no pun intended.”
0:03:00 We were young kids, so that always helped. And we’d often like, we’d sort of build theses around which neighbourhoods were more likely to buy.
0:03:05 It was usually not the richest neighbourhoods, they were all maybe a little too smart.
0:03:12 And so it was sort of somewhere in between, we’d always look for signs of children in the backyards of houses.
0:03:19 And I always remember that, one of my good friends, still one of my very good friends today, Fraser, he was always out-selling.
0:03:27 I don’t think there was a day where I outsold him, and I always thought I was a much better salesperson than him when the door opened.
0:03:35 But he just did not care about being rejected. He’d go from each house, he’d get yelled and shouted at and swear at,
0:03:39 and he’d come out laughing and he’d be knocking on the next door within seconds.
0:03:45 And I always had to build myself up after getting rejected, which was most of the time, to knock on another door.
0:03:53 And it just kind of taught me, I guess the power of just persistence, right, and you kind of keep going,
0:04:00 and if you keep going and have that level of grit and perseverance, then your chances of winning, your chances of success are much higher.
0:04:03 So I was certainly learning that at a very, I guess, young age.
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0:04:49 Yeah, from there, Matt went to university as well, and then he dropped out after a year to set up and make or develop this hot air balloon
0:04:53 through to a little bit more of a professional level.
0:05:02 And Matt said, “Why don’t we explore going to India or China to try and manufacture our hot air balloon?”
0:05:05 And given I was making them, I thought that was a great idea.
0:05:11 And so Matt actually went off to India and China, did a little scowling trip, came back and he said, “China, let’s go to China.”
0:05:14 And my licks go to China, he said, “You go to China.”
0:05:22 So I tapped up, didn’t go in my second year law, found the most entrepreneurial guy from my first year at university, a guy called Joe,
0:05:32 dragged Joe to China, and we had no money, really no contacts, we went to a little place called Shantou, it was the middle of nowhere, there were no other Westerners.
0:05:39 And we had an apartment, I think it was like probably the equivalent of $8 a month to rent, it was the 8th floor, no lift.
0:05:44 So whenever you were thirsty, you had to get water, you had to walk down eight flights of stairs to go and get water and come back up.
0:05:51 And that’s where we started, but we ended up getting ourselves into all sorts of trouble and strife and there’s a lot of funny stories.
0:05:57 The story I had heard was, you guys, first night you slept in a bush, what happened there?
0:06:00 And basically, what was the plan?
0:06:06 Were you just going to go try to find a manufacturer, walk around, what were you thinking of doing?
0:06:12 We were so naive and on reflection, I look back and it’s almost like we built a toy company from first principles,
0:06:16 because we did everything different than everyone else, without even knowing it.
0:06:23 So we didn’t know that you could go and contract manufacturer, your product, we were planning on setting up our own little factory.
0:06:32 And that’s essentially what we did, but me and Joe got into some trouble and Joe had to fly home to New Zealand, so my brother came over.
0:06:39 We ended up trying to see if we could get a hotel, but everything was way too expensive, so we decided just to sleep in the bushes at Hong Kong Airport.
0:06:46 And I remember just getting completely attacked by mosquitoes all night and we didn’t want to sleep in the airport because the fluorolights were so bright.
0:06:50 And so, yeah, we ended up sleeping in the bushes and getting attacked by mosquitoes all night.
0:06:56 It was not fun and then we fed it up to China and we set up a little factory on the side of a river.
0:06:59 It was a small kind of shed, more or less, in China.
0:07:02 And my cousin Simon came out at that time as well.
0:07:06 He was an engineer to help us and he welded a production line.
0:07:11 And we bought, we pretty much spent all of the money we had on an injection moulding machine.
0:07:14 We employed a few people on the production line.
0:07:16 We had a little old lady who used to cook for us every day.
0:07:20 I think the budget was two RMB per meal, which was about 30 cents.
0:07:28 And we started making our first product and then we started making our second product out of there as well, which was a night frisbee, which we got sued on and we had no money to defend ourselves.
0:07:32 So it’s a stupid question, but like, why not?
0:07:37 It seems like it was an insane decision just to go to China and literally build your own factory,
0:07:43 literally create a structure on the side of a river and weld it yourself together.
0:07:47 Why did you feel like you needed to be in China instead of just doing it where you were?
0:07:54 Well, we understood that most of the toys in the world were made in China, but when I say we were that naive, I feel like that is even an understatement.
0:08:04 Like, we were trying to make our hot-ear balloon, but we didn’t even realise that we couldn’t sell it to any toy chains or large retailers around the world because of course they’re meeting the regulatory standards.
0:08:08 I mean, it had a burning can under it, so we were super naive.
0:08:19 So then we started looking up products that we could maybe make in our little factory and we saw this company in America making light-top frisbee with LEDs and it could be thrown at night and we thought, oh, that’s cool.
0:08:26 So we made this night frisbee in our factory and I started hustling to try and sell this thing.
0:08:34 As in, like, I would email every buyer in the world of every major retailer in every country I possibly could.
0:08:42 And I remember I sold it to a distributor called Schilling in the US and we spent what was a lot of money at the time and I went to New York Toy Fair.
0:08:53 And we made this night frisbee and we also made this other product, or copied this other product called a money gobler, which is a money bank in the shape of an animal and you’d feed the coins into its mouth and it would go down and throw it into the stomach.
0:09:00 So we started making these two products. Matt decided to be one to set up a wooden toy factory for this money gobler and we had our production line for making this frisbee.
0:09:08 So I sold them to this company called Schilling, so I go to New York Toy Fair to be on their booth to start selling these two products.
0:09:15 And I start selling these products and this guy comes flying onto the booth and starts yelling at our distributor.
0:09:24 So he’s obviously got one that we’ve made a product that’s identical to his and he had multiple patents for how the LED connected to the fiber optics and how this all worked.
0:09:29 And of course we’re, again, we didn’t even really know what IP was.
0:09:35 So Dave comes up to me off the booth, the owner of the distributor says, “Hey Matt, we need to pull that frisbee off the booth.”
0:09:40 This is probably an hour into the New York Toy Show starting, so I’m pretty disappointed because one of our products has gone.
0:09:43 But I’m like, that’s okay, I’ll sell the money gobler.
0:09:48 I thought the first guy was crazy. About three hours later, this lady, she has a whole business.
0:09:55 She’s built over 25 years building these money animal banks and she has this big booth on the ground floor of Jarvitz.
0:10:01 And she comes up and she screams onto the booth and she’s yelling and screaming and swearing at Dave.
0:10:06 And Dave sort of, I can see this from where I am, but Dave sort of wanders over to me sheepishly and says,
0:10:09 “You need to take the money gobler off the booth as well.”
0:10:14 So it’s in the first morning of New York Toy Fair, both our products have been taken off the booth of the distributor.
0:10:20 I flew back to China, I said to my brother, I said, “Have you ever heard of this whole IP thing, this whole patent thing?”
0:10:24 I think we need to start innovating and coming up with our own ideas.
0:10:27 And then we ended up getting into a lawsuit on the night fly.
0:10:29 They sued us, we had no money to defend ourselves.
0:10:33 I remember going to Colorado because that’s where they sued us to try and find a law firm to defend us.
0:10:37 And I was going to at least firms and they were saying, “Well, that’ll be a million or two million dollars.”
0:10:40 We had maybe a few thousand dollars between us at that stage.
0:10:42 And I was thinking, “How are we going to defend ourselves?”
0:10:45 I ended up actually hiring a lawyer, convincing him, his name was Chad.
0:10:49 He later got disbarred that we would write the whole suit. He just had to put his name to it.
0:10:53 And Chad did the whole case for us, but didn’t really do it.
0:10:57 We did it ourselves, we learned how to become lawyers, so we did it incredibly cheaply.
0:11:00 But he did, he ended up getting disbarred later on.
0:11:03 But that was our only way because again, we had no money.
0:11:07 And I was so enthusiastic, we had no other choice that we had to sell this product.
0:11:13 And I remember selling the Night Frisbee to the department store chain in the U.S. Coles with the K.
0:11:15 I know we have Coles down here in Australia with the C.
0:11:18 I’ll never forget the buyer’s name. I actually still work with her today.
0:11:22 This is 19 years ago. Her name is Jen Sarah. She was the buyer at Coles.
0:11:25 And I would email her every single day.
0:11:28 And one day I got an email reply from her and it was all in capitals.
0:11:32 It said, “Nick, I do not have time for your daily email communication.
0:11:35 Please stop emailing me every single day.”
0:11:39 And then I always wrote back, “Oh, I’m so sorry, Jen, but I just think our product is really great.”
0:11:43 And at this stage, we knew we were in a little bit of legal trouble, but we had to sell something to survive.
0:11:48 So I was like pushing and pushing, and then eventually I get this email back from her.
0:11:51 It was just two words, and something else said, “Seeing the sample.”
0:11:55 So we send the sample to her, and she ends up ordering a full container.
0:11:59 I think it was 20,000 units of this Night Frisbee, so we were pretty happy at this stage.
0:12:03 It was a big celebration. We never had a full container order of any product.
0:12:08 And so we ship this full container of Night Frisbees.
0:12:15 And of course, she gets enjoined in the lawsuit as well at Kohl’s.
0:12:18 And it didn’t speak to me again for a long time.
0:12:21 The irony is today, she’s the director of Family Doll Stores in the U.S.
0:12:24 and we’re their second biggest toy supplier after Vitao.
0:12:26 So that’s the funny thing.
0:12:28 You’re like trauma-bonded.
0:12:31 Correct. But we have so many of these stories.
0:12:35 That is one of many, many, many in those early days.
0:12:40 But we really were just scrapping every day to try and survive and sell something
0:12:42 and just live somehow.
0:12:45 But we were living on this than a dollar a day.
0:12:47 Okay, I have two things.
0:12:49 One, let’s do a detour to the dollar a day thing,
0:12:52 because my guy Diego, who helps me with research, he goes,
0:12:55 “You got to ask him about the McBrook diet.”
0:12:57 And the McBrook diet, I said, “What’s that?”
0:13:00 And he goes, “Apparently they were just eating off the dollar menu
0:13:02 at McDonald’s in China every day.
0:13:06 And he had some trick about the French fries to get free French fries.
0:13:09 So what is the McBrook diet as far as the McDonald’s?
0:13:11 It was, we didn’t eat McDonald’s.
0:13:13 McDonald’s was a treat, so me and that were in China.
0:13:15 And for Christmas, of course,
0:13:18 I think my brother didn’t come back to New Zealand for eight years.
0:13:20 He lived at a factory for 10 years.
0:13:23 He had a tiny little room at a factory for 10 years,
0:13:25 which is crazy in itself.
0:13:29 But for Christmas, we would celebrate by going to McDonald’s.
0:13:31 And probably the equivalent of a combo
0:13:33 is probably $2.50 in China at that time.
0:13:35 So that’s how frugal we were.
0:13:37 We wouldn’t even go to McDonald’s.
0:13:39 But we’d go and celebrate Christmas.
0:13:41 And I always remember going, “Merry Christmas, bro.”
0:13:42 “Merry Christmas, bro.”
0:13:44 And finally eat some good food.
0:13:47 I looked like I was so skinny at this point.
0:13:51 But I’d always play a trick in order to get extra fries.
0:13:53 I’d always eat half of them.
0:13:55 And then I’d take them up to the counter and say,
0:13:57 “Hey, you only filled my fries? Half full.”
0:14:00 And then give me another one so I could get more for free.
0:14:02 But we were like,
0:14:04 even when we’d go on the train,
0:14:06 we’d use a concessionary or children’s pass
0:14:08 and hope we wouldn’t get caught because it was half the price.
0:14:10 But I looked back and it was like,
0:14:12 a fear would only be 12 RMB or a couple dollars,
0:14:14 and we’d be saving a dollar.
0:14:16 So we were getting a concessionary fear,
0:14:18 and we did that for years.
0:14:20 So what was driving this?
0:14:22 Because you lived in New Zealand.
0:14:23 New Zealand’s a beautiful place.
0:14:25 I assume you could have just had a normal life
0:14:27 that was more comfortable.
0:14:29 And I love, like, I’m a founder,
0:14:31 I’ve been a founder, but I didn’t do what you did.
0:14:33 I didn’t sleep in the factory,
0:14:35 like a mat on the floor for eight, ten years.
0:14:38 I didn’t live off of the less than dollar a day.
0:14:40 Like, were you guys just like, was it,
0:14:41 you’re having so much fun,
0:14:43 or you just felt there was no other choice?
0:14:46 So what was the mindset that kept you going
0:14:51 because it was like many, many years just scrapping?
0:14:54 I reflect back on this.
0:14:57 And it’s a little bit hard to understand,
0:14:59 in all honesty, when you reflect back on it,
0:15:02 but I think when you’re in it together,
0:15:05 you kind of hold each other accountable
0:15:08 and you push each other because you don’t want to fail.
0:15:12 And I would say, me and my brother are equally as competitive.
0:15:14 And so I don’t think you want to let the other person
0:15:17 down in a sense, and so you just keep fighting
0:15:20 because if one of you gave up,
0:15:22 you’re kind of emitting defeat.
0:15:24 So in a sense, you hold each other accountable
0:15:28 to continue to fight and push forward.
0:15:30 And as well as that,
0:15:33 I think we didn’t really have another option.
0:15:36 We didn’t understand, like back then,
0:15:39 that there was even such a thing as going and raising money
0:15:41 to build a company or…
0:15:43 You know, again, I look back at the extreme myivity.
0:15:46 I used to write emails to my mum from China,
0:15:48 and she was beside herself.
0:15:51 You know, I was so young, 18.
0:15:53 And I read these emails,
0:15:57 and to understand how little we understood,
0:15:58 even about the world,
0:16:01 but just about business and how things worked,
0:16:03 is quite scary.
0:16:05 And so I just think we didn’t know any better.
0:16:07 We just thought, we’ll just keep fighting
0:16:09 and try and get these little wins
0:16:11 and little wins and little wins.
0:16:13 And, you know, we started to get, you know,
0:16:14 a little win after little win,
0:16:16 and then we started to get a little bit more momentum,
0:16:17 and then you started to learn.
0:16:20 One of my favourite sayings is you win or you learn.
0:16:22 You lose, you never fail, sir.
0:16:24 And so connect the dots.
0:16:27 So now you’ve painted the picture beautifully
0:16:32 of the extreme naive approach, the scrapping,
0:16:35 and then somehow, you know,
0:16:37 fast forward the tape and the movie,
0:16:41 and you end up with this super successful toy company.
0:16:42 I think, you know,
0:16:44 the third most profitable toy company in the world,
0:16:46 doing over a billion dollars a year of sales,
0:16:48 plus, like, forget the other stuff you’ve even done after that.
0:16:50 I’m just saying, just the toy part.
0:16:51 So connect the dots.
0:16:53 Where did you start to really get the momentum
0:16:55 or what were the breakthroughs, the epiphanies,
0:16:59 the key breaks that got you to actually getting to that success?
0:17:02 Well, there are a few stories along the way.
0:17:06 And I remember just sitting there every day harassing
0:17:08 and thinking really big early.
0:17:10 So thinking, I’ve just got to get warmer.
0:17:12 I’ve just got to get tame out of that timer.
0:17:14 I’ve just got to get these big retailers.
0:17:19 And, you know, one story, I remember ringing Walmart every single day
0:17:21 and because of the time zones, it was late at night
0:17:23 and to month after month after month after month.
0:17:25 And I always remember all the early names
0:17:27 because I just see it in my memory.
0:17:30 And I remember one night, my brother was basically telling me to give up.
0:17:32 He was like, “You’re not going to get Walmart.”
0:17:35 And eventually, the buyer, Ryan Halford, answered.
0:17:38 And I was on the phone to the Walmart buyer from China.
0:17:41 And again, I was up with this young company, a distant child.
0:17:42 We’re trying to get off the ground.
0:17:45 And he asked me, “Do you have a showroom in Hong Kong?”
0:17:48 And I said, “I didn’t know what a showroom in Hong Kong was.”
0:17:52 But of course I said, “Yes, I’ll get back to you at the address.”
0:17:56 We started to learn that the toy industry at the time
0:17:59 revolved around these showrooms in a place called Timchastui in Hong Kong.
0:18:01 All of the companies had showrooms there
0:18:04 and all the buyers from around the world congregated in Hong Kong
0:18:07 twice a year to come to these showrooms.
0:18:10 So I got on a train the next day to Hong Kong
0:18:13 and had research where these toy companies were
0:18:16 and so knocking on toy company doors and trying to do a deal with them.
0:18:18 I said, “I’ll bring the Walmart buyer in
0:18:21 if you just give me some space to use in your address.”
0:18:24 And then hopefully you could sell some of your products to them as well.
0:18:28 And every company denied me and denied me and denied me.
0:18:31 So I thought, “Okay, we need to rent a showroom.”
0:18:32 And at the time there was a lot of money,
0:18:35 but we found these little glass cubicles in a place called South Sea Centre.
0:18:37 And they were just a few metres by a few metres,
0:18:39 like tiny little cubicles.
0:18:40 But I think there would have been like,
0:18:43 I don’t know, $2,000 or $3,000 a month to rent
0:18:44 because Hong Kong was so expensive.
0:18:47 And so at the time, we didn’t have that money.
0:18:48 We were so poor.
0:18:50 But I thought we don’t have an option.
0:18:53 We’ve got this chance to get the Walmart buyer coming in.
0:18:55 And so we just said, “We have to do it.”
0:18:57 So we rent this little tiny cubicle
0:19:00 and it kind of had cursions on the inside of it.
0:19:03 And I found some shoveling
0:19:05 that someone was throwing out from the other showrooms.
0:19:07 So I put this little shoveling in there.
0:19:09 We bought like a table.
0:19:11 And then I had a little roll-up mattress
0:19:13 and I would sleep in the showroom under the table.
0:19:15 Each night, because there’s no other room to sleep.
0:19:17 So I’d unroll the mattress under the table, sleep in there.
0:19:19 And then I’d wash in the little bathroom
0:19:22 in South Sea Centre in the morning.
0:19:24 But I had the showroom
0:19:27 and I start kind of realising that the buyers
0:19:30 come to Hong Kong in January and October every year.
0:19:33 So that was good because now I have this kind of like base
0:19:34 to like invite people to.
0:19:36 So I get Walmart to come in.
0:19:38 And I actually got a guy called Frank D’Amico
0:19:39 who is from Walmart, Canada.
0:19:41 And I’ll never forget because he came in
0:19:43 and I think he was so shocked that he’d given me a meeting
0:19:46 when he saw this two metre by two metre showroom
0:19:47 and he came with his two merchandisers.
0:19:49 I went to shake his hand, didn’t shake my hand.
0:19:51 He didn’t even sit down and he just yelled at me.
0:19:52 He goes, “Quotes” across the table.
0:19:55 And I’d filled out the quotes for around two or three products at the stage.
0:19:56 He kind of reads the quotes.
0:19:58 And I’d filled something out wrong
0:20:00 and he just throws the quotes down on the table
0:20:03 and just walks out and leaves us to Hong Kong Merchandises
0:20:04 and he’d be a steering at me.
0:20:05 I think that was my second ever meeting.
0:20:07 And I’m just like in shock.
0:20:09 I’m like, “Wow, where it’s going to be?”
0:20:10 And he just storms out.
0:20:12 And then I contacted his boss and said,
0:20:14 “Hey, I had this really bad experience.”
0:20:17 And I said, “Frank, I genuinely think he was really rude.”
0:20:21 And his boss made a meek knee again in their procurement
0:20:23 and Walmart’s procurement centre in Shenzhen.
0:20:24 So I was like, “Screw this.
0:20:25 I’m going to go up and meet him again.
0:20:26 Meet him for a second time.”
0:20:28 And he ended up ordering.
0:20:30 And at the stage we had a night ball along with our night frisbee.
0:20:33 But I think he ordered us $70,000 of this night ball.
0:20:37 It was another good example of persistence.
0:20:39 And then I remember one day,
0:20:41 I hadn’t been what came out of Australia,
0:20:43 but I was sleeping under my table
0:20:45 and the door was only about a metre from my head
0:20:47 because this is such a little small showroom.
0:20:49 And the buyer came an hour early
0:20:52 and I was still asleep under the table
0:20:54 and she was knocking on the door
0:20:55 and I’m sort of like there,
0:20:57 looking at her feet under the door, thinking,
0:20:59 “Shit, I’m still in bed under my table.”
0:21:01 So I had to wait for her to go away
0:21:02 and then message her afterwards and say,
0:21:04 “Hey, didn’t you know that Tina called me?”
0:21:06 And she says, “Oh, I thought it was 9 a.m.”
0:21:07 So I had all sorts of experiences.
0:21:09 But I used to crash buyers’ hotels.
0:21:12 I used to post samples under their hotel room doors.
0:21:14 But really we did what it would take.
0:21:17 My friends, if you like MFM,
0:21:19 then you’re going to like the following podcast.
0:21:21 It’s called Billion Dollar Moves.
0:21:23 And of course, it’s brought to you by
0:21:25 The HubSpot Podcast Network,
0:21:28 the number one audio destination for business professionals.
0:21:29 Billion Dollar Moves.
0:21:31 It’s hosted by Sarah Chen Spelling.
0:21:34 Sarah is a venture capitalist and strategist
0:21:36 and with Billion Dollar Moves,
0:21:38 she wants to look at unicorn founders and funders
0:21:40 and she looks for what she calls the Unforgettable.
0:21:42 And that’s what I’m talking about.
0:21:45 And she looks for what she calls the Unexpected Leader.
0:21:48 Many of them were underestimated long before
0:21:50 they became huge and successful and iconic.
0:21:53 She does it with unfiltered conversations about success,
0:21:55 failure, fear, courage, and all that great stuff.
0:21:57 So again, if you like my first million,
0:21:59 check out Billion Dollar Moves.
0:22:01 It’s brought to you by The HubSpot Podcast Network.
0:22:03 Again, Billion Dollar Moves.
0:22:05 All right, back to the episode.
0:22:09 The first bright we got is,
0:22:11 and this was a crazy story,
0:22:16 is I was in the UK at a company called Recreation
0:22:19 and they were selling our night sports balls at the time.
0:22:21 So we developed this other product.
0:22:23 Instead of our night frisbee, we made a night football,
0:22:25 lit up at night, and a night soccer ball.
0:22:27 So we’d sold this company called Recreation.
0:22:29 I met a guy called Sean on their booth
0:22:32 and he had developed a soccer Tamaguchi.
0:22:34 And so it was kind of like a Tamaguchi,
0:22:36 but you trained your player and then through infrared,
0:22:38 you could play against each other.
0:22:40 And he had like the Manchester United license
0:22:43 and it was selling reasonably okay in the UK,
0:22:45 but he was having troubles with manufacturing.
0:22:47 And I was like, well, we can make that for you, like no problem.
0:22:49 And he was like, great, great, great,
0:22:50 you guys can help me make it.
0:22:51 ‘Cause we were really, you know,
0:22:53 anything was sort of wink at the time.
0:22:55 We were trying to find a way to win anywhere.
0:22:57 So we’re like, Sean, we can make this.
0:22:58 And then we started talking.
0:22:59 Maybe, you know, David Beckham,
0:23:01 he’s moving to the US to play in the US.
0:23:03 What if we get the David Beckham license
0:23:05 and we can try and sell this in the US.
0:23:06 And he thought this was a great idea.
0:23:07 So we went and pitched at the time.
0:23:10 I think it was Simon Fuller, who started at Nerf and I,
0:23:13 had the David Beckham rights at the time.
0:23:16 And I’m like a super young kid, right?
0:23:20 And they said, well, we’ll give you the David Beckham license,
0:23:22 but it’ll cost you a million and a half dollars.
0:23:24 Of course, we don’t have a million and a half dollars.
0:23:28 But then we go to Walmart and Walmart, the buyer,
0:23:30 who named Danielle Primal, never forget it.
0:23:33 She loved David Beckham and he was moving to the US
0:23:35 and she was just obsessed by David Beckham.
0:23:38 And we probably blew a few bubbles.
0:23:40 But anyway, as it turned out,
0:23:44 Walmart turned around and ordered 2.2 million units
0:23:47 of this David Beckham Tamaguchi,
0:23:49 which I think they were like 14 bucks, 50 or something.
0:23:51 It was almost 30 million US dollars.
0:23:53 So keep in mind, we’d probably never had an order
0:23:55 more than $70,000 at this point.
0:23:59 And our total revenue was like in the hundreds of thousands.
0:24:02 Suddenly we get this order for almost 30 million US dollars.
0:24:05 And then we’re like, holy shit.
0:24:07 We thought we were going to make a lot of money
0:24:08 because we had huge margin.
0:24:10 We were making this thing for $3.
0:24:12 We were going to make this thing for $3 or $3.20
0:24:14 or whatever it was, it’s out for $14.50.
0:24:17 So we were sort of counting our pennies and super excited.
0:24:19 We didn’t even understand that sell through was a big thing.
0:24:22 But then we were like, oh no, we have to look at how to make this product.
0:24:25 We’ve got our tiny little factory with 20 people
0:24:28 and there’s no chance we can make 2.2 million units.
0:24:30 So we’re not first going to China.
0:24:34 I’ve been on a tour with, he’s one of the wealthiest guys
0:24:35 in Hong Kong, life in France.
0:24:37 He owns Burley Light International.
0:24:39 They’re the contract manufacturer for Hasbro
0:24:41 and Mattel and all the toy companies.
0:24:43 One of the first factories I ever toured,
0:24:45 I somehow got in touch with his tourist.
0:24:47 I see a guy called Wilson and he’d taken me on a tour
0:24:49 as an 18-year-old with their factory.
0:24:51 And you can imagine me coming from New Zealand
0:24:54 and then going to these factories with hundreds of thousands of people
0:24:57 and just being like, what this is like insane.
0:24:59 So I still had this contact with Wilson
0:25:00 from early light.
0:25:03 So I got a meeting with Wilson and I said, hey, we’ve got this huge order.
0:25:06 2.2 million pieces, can you help us make it?
0:25:07 And he said, yup.
0:25:10 And then I said, oh, and by the way, can you also pay for it as well?
0:25:12 He said, let me check with Francis.
0:25:15 He came back to me and said, yeah, if you transfer the liver of credit to us,
0:25:18 you know, we’ll help you pay for it as well.
0:25:19 Great.
0:25:21 So we start making this product.
0:25:25 2.2 million ICs, 2.2 million LCD screens, 2.2 million.
0:25:28 So they’re all the components and then Walmart turns around a tensile.
0:25:35 They cancel it from 2.2 million pieces down to 8, no, 1.2 million pieces.
0:25:37 And I was like, no, no, no, they can’t do that.
0:25:38 We’ve got a little credit.
0:25:39 They’ve made it all.
0:25:41 And then I’m flying back and forth at this point.
0:25:46 Sean’s kind of like in the background on this like, I don’t know, 20 year old.
0:25:47 And I’m thinking there’s no way.
0:25:48 But I was thinking, well, it’s still fine.
0:25:49 1.2 million pieces.
0:25:51 We’ve got so much margin in this.
0:25:53 We can still make like good money out of it.
0:25:57 But then they turned around and canceled it all the way down to 300,000 pieces.
0:26:00 Yet Francis was making all of this product.
0:26:03 And I was just like, oh, that’s where I’m going back and forth.
0:26:07 It reads like some kind of soap opera because Danielle got fired.
0:26:10 Obviously, part of this was part of it.
0:26:14 And with Francis, I was like, there’s no way I can tell Francis that, you know,
0:26:18 that they’ve canceled this many pieces and he’s paying for it all.
0:26:21 So I’m going back and forth to Walmart and I calculated that if I get the order back
0:26:25 to 800,000 pieces, we could still pay Francis off because we had so much margin
0:26:28 and still make like a million and a half dollars.
0:26:32 And eventually I convinced Walmart to get the order back to 800,000 dollars.
0:26:35 That’s 800,000 or 900,000 pieces, whatever it was.
0:26:38 And we shipped this pro light.
0:26:41 And it was a disaster.
0:26:43 Like it hit the shelf and it was culprit on the shelf.
0:26:45 Like no one would buy it.
0:26:46 I think they retailed it 30 dollars.
0:26:49 They discounted it to 25, then 20 and 15.
0:26:50 No one would still buy it.
0:26:51 Then $10 no one bought it.
0:26:53 Then $5 no one bought it.
0:26:57 And then they eventually sold it to the dollar and discount channels for like 50 cents on it,
0:26:59 like 50 cents a piece.
0:27:01 And then of course, Walmart came back to us and said,
0:27:05 you have to fund all the Markdown money from 30 dollars to, you know, 50 cents.
0:27:08 And we were like, what’s Markdown money?
0:27:13 And we were determined to keep our little bit of margin and refuse to give them any money back.
0:27:18 And so we had this, we were like, no, but you cancel these pieces and like this huge thing.
0:27:21 Anyway, we got black ball from Walmart for like five years.
0:27:24 We never did business with Walmart after that.
0:27:30 And it was not two years later that I met Danielle’s boss at New York Toy for dear Laura Phillips.
0:27:34 And I wrote this big long email of everything that happened and like,
0:27:36 and we started to work together again.
0:27:42 But that was sort of our, as crazy as it was, that crazy story was our first break to actually make a little bit of money.
0:27:49 And then from there, I started doing deals with US companies that only sold product in the US,
0:27:50 but didn’t sell internationally.
0:27:55 So I started doing deals with them because we were really bad at designing and developing toys, terrible, in fact.
0:27:58 So we needed good products so I could open up these channels.
0:28:04 So I’d do these deals with American companies like Zing or Zocca to deal with the Australian company called Yoho,
0:28:07 to take their products and sell them internationally.
0:28:11 And that kind of, and I’d tell a big story that I could get their products in everywhere.
0:28:12 They don’t have to go out and hustle.
0:28:16 So we had a product called ZDs, which became really successful in a product called Schnooks,
0:28:18 which was out of Australia that became really successful.
0:28:20 So we started kind of taking other people’s products.
0:28:22 How did you figure out that model?
0:28:25 Because, you know, did you see somebody else doing that?
0:28:28 And you’re like, oh, that’s much simpler than what we’re trying to do.
0:28:30 Or did you fall into it?
0:28:32 It seems like you didn’t use a lot of mentors.
0:28:39 You did a lot of running around with the fork, sticking it into outlets, trying to figure out which ones are working.
0:28:41 That is a great analogy.
0:28:43 That’s exactly what we did.
0:28:49 To be honest, we were making these products and the second product line we made were these night balls.
0:28:54 But the product was so bad, Matt would move factory by this stage.
0:29:01 And the engineering of them was so bad that they had these sort of foam EVA patches glued into this frame.
0:29:04 But the production, I actually was getting quite a few orders.
0:29:09 I was hustling around and getting orders, but Matt couldn’t produce them because the production was so hard to do.
0:29:13 And I get so mad at him that at one point I said, I’m coming back from Hong Kong.
0:29:16 I was living in my showroom and then from there I upgraded.
0:29:19 I was living in a dorm room with 18 people at a place with puncture mentions in Hong Kong.
0:29:21 So I wasn’t exactly living the life in Hong Kong.
0:29:23 I was getting these orders and my brother couldn’t produce them.
0:29:26 So I was like, I’m coming back to like, to China to take over the factory.
0:29:28 And I learned two words of Chinese.
0:29:31 One was Kaimon, too slow, and one was Claudia, let’s go faster.
0:29:38 And we ended up like, I was like, on the production line pushing to get these balls out the door.
0:29:41 And I remember they were coming off the end of the production line, half mangled.
0:29:45 And I was just like, ship them, just ship them, ship the balls.
0:29:46 We’ve got to ship them.
0:29:51 But I remember years later, like you’d see these things on shelves and all the air had gone out of them.
0:29:57 All EVA patches had peeled off them and they were just these shriveled up little prunes that had come to your health.
0:30:01 I love that you’re honest about it because there’s so many people because it’s a very sexy thing to be like,
0:30:05 you know, all that mattered was product and we really just built a great product.
0:30:07 And then everything worked because we built a great product.
0:30:11 And like, I know, I know I’ve been there is like, dude, the first version of all my products sucked.
0:30:13 In fact, the 10th version still kind of sucked.
0:30:19 And I think I love that you’re kind of unabashed and honest about like, look, we weren’t super innovative.
0:30:20 We saw shit working.
0:30:24 And then we were like, cool, we could do lights on a Frisbee lights on a ball like that.
0:30:27 Okay, let’s copy what works and that your product kind of sucked.
0:30:32 And you were just like, basically you just kept doing door to door sales even like at a global level.
0:30:34 You just started doing like door to door sales.
0:30:42 And literally it sounds like it was like distribution and salesmanship and marketing that was keeping you afloat at the time.
0:30:46 Yeah, well, we would sell, I would sell a product to someone and then we wouldn’t get a real order.
0:30:52 We didn’t know what a real order was because the product would sell through and then we just sell a new product to a new customer
0:30:54 and we wouldn’t get and I just held another customer.
0:30:58 And we didn’t know for probably seven or eight years what a real order was.
0:31:02 Like we had a product actually sold off the shelf and the customer came back to buy more of them.
0:31:05 But we could like continually hustle to all these different customers.
0:31:10 But we did crazy things like we like a little back on it and it was kind of nuts.
0:31:13 Like we sold this product, the night ball.
0:31:17 We got a distributor in the US called Spin Master, one of the biggest toy companies in the world.
0:31:23 Yeah, pretty similar story to our own free Canadians built this toy company, very similar to us.
0:31:28 And Spin Master had agreed to take our night sports falls for distribution in the US.
0:31:34 And I’d kind of hustled a few retailers and so it was this, “Should we sell the product to retail?
0:31:35 “Should we use Spin Master?”
0:31:39 They’ll really put lots of TV marketing on, TV marketing at the time was the thing.
0:31:42 And they said, “Well, we’ll run this test in Cincinnati.
0:31:45 “So we’ll put your night balls into all the Walmart’s in Cincinnati
0:31:50 “and we’ll run media in that city and then we’ll decide whether to roll this thing out.”
0:31:54 And whether or not it was dishonest, I think it was more desperation at the time.
0:31:57 But of course, I flew to where the test was.
0:32:00 I got to New York and I couldn’t get a fight to Cincinnati.
0:32:02 Well, I could, but it was too expensive. It was summer holidays.
0:32:04 I went down to the bus station.
0:32:06 I remember the bus station in New York at the start of summer holidays.
0:32:09 It was like nothing I’ve ever seen. It was absolutely chaos.
0:32:10 But I got a greyhound to Cincinnati.
0:32:13 I think to like 30 hours it broke down, stopped different places.
0:32:19 A greyhound to Cincinnati stayed in this absolute, like, horrific place.
0:32:23 But every day, and yes, this is a little bit dishonest,
0:32:25 but we were desperate back then. I would bus.
0:32:27 I’d get the bus schedule. I’d bus to each Walmart.
0:32:30 I’d give people cash to go buy a ball.
0:32:32 I’d go out and buy them on different credit cards myself.
0:32:37 I was so parallel that we’d get caught just to help our test sales go up a little bit.
0:32:39 And I’d buy all these night sports balls.
0:32:42 But it was a long day because the Walmart’s were all so far apart.
0:32:45 And I was taking this bus schedule to get to each one.
0:32:47 I stayed there for a month.
0:32:50 And I almost got kills in a place called Over the Ride.
0:32:54 Over the Ride, if you look it up, it was the most dangerous neighborhood in America at the time.
0:32:56 Over the Ride, it’s like wild.
0:32:58 It was over these railway tracks.
0:33:01 And I managed to walk down there in the middle of the day.
0:33:04 And it was the scariest thing in my life.
0:33:07 I had a guy come up to me and he said, “What the fuck are you doing here, white boy?”
0:33:09 And I was like, “I’m just a tourist.”
0:33:11 And I hadn’t realized I was in this, like, area.
0:33:14 And then I managed to somehow, like, weeks later walk into it.
0:33:16 I was walking back from downtown.
0:33:18 There’s no such thing as Uber back there in a taxi.
0:33:22 I was trying to walk back to where I was staying, which was very close to Over the Ride.
0:33:24 And I walked in the wrong direction.
0:33:27 I walked in there in the middle of the night and I got chased and had to hide.
0:33:29 That was very funny.
0:33:33 But, yeah, we were doing this to get our test results up, which we had a good test.
0:33:35 And then spin master rolled the product out.
0:33:37 Of course, it wasn’t a great product in terms of its construction.
0:33:39 It was the same thing.
0:33:41 But my God, did we have to hustle?
0:33:45 We had to strap and fight so hard to, like, literally just to survive.
0:33:50 But we got to a point where we were selling enough to each new customer of each new product.
0:33:53 And we weren’t getting real orders, but we were profitable.
0:33:55 And it was actually funny because after the David Beckham thing,
0:33:58 we made, like, that million and a half dollars or whatever it was.
0:34:02 We got a little bit fat and happy and we had a month where we lost $200,000.
0:34:07 And I remember sitting, we sat down and we were like, “Oh, my God, we lost money this month.”
0:34:12 And we were like, “From this day on, we will never have a day, a month, a week, a year where we lose money.”
0:34:17 Like, if we’re losing money in a month, we will, like, sit down and we will, like, eat nothing
0:34:22 or we will, like, get rid of people or we will, like, live on nothing just to ensure that we’re, like, profitable.
0:34:28 Because people wonder how do we get to, you know, a few billion dollars a year in sales now
0:34:30 and we’ve built it completely organically.
0:34:34 And the truth is we just, because we, like, we’re so frugal and we start building,
0:34:38 our business got more and more and more profitable just every year for 20 years.
0:34:42 So it was almost this cognitive process to how do we remain profitable
0:34:46 and then that’s just compounded over 20 years and we’ve just got more and more and more profitable
0:34:50 to the point where, percentage-wise, by far, the most profitable company in the world,
0:34:56 where we run at, like, 40% net profits, which is unheard of in any profit industry in the world,
0:34:59 in the product industry in the world, let alone in the software company.
0:35:01 So we just built a very, very different model.
0:35:02 That’s why I reflect on it now.
0:35:05 It was almost like we built something from first principles, the way we set up factories,
0:35:09 the way now we automate all of our production, the way we don’t do domestic shipping,
0:35:14 we do all FOB, the way we centralise all of our content and data systems.
0:35:15 We’re on marketing globally.
0:35:18 We’ve almost built this company from a first principles approach
0:35:21 because it’s so different to how everyone else does it,
0:35:24 but we did that more through naivety than through planning.
0:35:27 So you’re starting this kind of like 18 years old when you go to China.
0:35:30 Do you remember how many years it took you to get to your first,
0:35:34 where you made a hundred grand or when you made a million dollars?
0:35:35 Like, how many years was that?
0:35:39 Well, it was probably a couple of years where we started to make money,
0:35:44 but we still lived the same way because we needed that money to fund our growth.
0:35:47 Effectively, you can’t grow to billions of dollars a year in sales organically
0:35:50 without borrowing money or going to a bank unless you’re super profitable
0:35:52 to continue funding that growth.
0:35:56 And so we started to make money, but we never speed it.
0:35:58 We still lived the same way.
0:36:01 I still lived in a dorm room in Hong Kong.
0:36:04 And so for years, for probably eight years,
0:36:08 and as I said, Matt had, as we slowly moved and built big impact trees,
0:36:10 Matt would always have a tiny little room,
0:36:12 like a tiny little room in the factory.
0:36:15 And that’s where he lived in China with no other,
0:36:18 no interaction really with anyone else.
0:36:20 And we were going crazy in those first years in China.
0:36:24 Like, I looked after that and like we had some serious problems.
0:36:27 And so you take it all the way,
0:36:32 at some point you start figuring out toys that are new, novel, good products.
0:36:35 Like, I’ve bought your bunch of balloon products where you fill up,
0:36:40 I don’t know, it’s like 100 or 500 now, like 100 water balloons at once.
0:36:43 You can fill up and like it takes like 15 seconds to fill them all up.
0:36:46 So you eventually start making good products. How did that happen?
0:36:48 So we’re still in a parallel path.
0:36:52 We were taking other people’s products and that was helping us really open up distribution.
0:36:55 I would hustle and get them into all the retailers across all the countries.
0:36:59 There’s an email that I’ve sent internally that I had from like 20 years ago
0:37:02 and it kind of lists every country in the world and all the retailers
0:37:05 and distributors I was working with at the time trying to sell our products to.
0:37:07 So we’re really like pushing out to everyone.
0:37:11 And at the same time, we were starting to learn how to make better products ourselves.
0:37:16 We were sort of building a team in China and engineers and like some designers
0:37:21 and we’re starting to sort of parallel path, building our own products as well.
0:37:25 But I think our big break after Zeebies came when we did RoboFish
0:37:29 and RoboFish is still, we still sell about 8 million of them a year today.
0:37:33 And this was a Chinese in Bentay. We ended up getting sued for this as well.
0:37:36 We’re at a five-year lawsuit but a Chinese in Bentay called Xiao Ping
0:37:41 and I met a guy in Hong Kong, a French guy who had a factory in China.
0:37:45 I was running a factory in China and he was doing some brokering for some inventions
0:37:47 and he showed me this RoboFish.
0:37:49 I thought that it’s cool, didn’t think too much of it.
0:37:51 Then he showed my brother and my brother loved it.
0:37:54 He was like, we’ve got to make this RoboFish promite.
0:37:58 And part of the deal was we had to make it in their factory if we licensed it from them.
0:38:01 So we licensed this fish and it was like, it’s got little carbon sinks.
0:38:05 So it’s a very, very clever design. It has an electromagnetic coil in it.
0:38:07 So when it touches water, it’s all micro.
0:38:11 It swims and looks like a real fish swims in all directions and it’s water active at it.
0:38:15 So we start making this fish and then the guy who was the inventor
0:38:21 had worked in a U.S. company before and he had tried to sell this invention to them.
0:38:24 That said, no, he decided to release on the invention saying,
0:38:26 “No problem, you can go sell it to anyone else.”
0:38:29 Of course, RoboFish blew up, came on the best selling toys in the world
0:38:33 and then he decided that actually the inventor had designed some schematics
0:38:36 or diagrams why he was under employment and he would sue us
0:38:40 because they were still on his computer systems and so we’re in this long long war suit.
0:38:43 But even worse, we finally had like this massive hit.
0:38:46 It was like the number one selling toy in lots of countries around the world.
0:38:49 It took us to, I think we did like a hundred million U.S. dollars.
0:38:51 So this was like a big break for us.
0:38:55 But unfortunately, there’s always a curveball,
0:39:00 the factory that we were bound to make it with, weak bankrupt in the middle of production.
0:39:04 But we had to design so much specialist production.
0:39:08 Not just the tools, but all of these fish were tested underwater for precious.
0:39:12 They didn’t leak and there was just a ton of like specialized equipment
0:39:16 built to produce a RoboFish that were all slightly that weights had to be perfect.
0:39:19 So this whole factory gets shut down.
0:39:24 And of course the wars in China mean that the factory workers are the first creditors essentially.
0:39:29 So they send the army in to like stop anything or any assets being taken from this factory.
0:39:32 So we’re like peak RoboFish production, peak demand.
0:39:35 Finally, we’ve got clients that are selling and everyone’s scrambling.
0:39:38 There were retailers that wouldn’t talk to me for like seven years.
0:39:43 Actually one of my good friends today, it’s one of the biggest independent retail chains in the UK could be entertainer.
0:39:48 And the son of the owner, Stu, one of my closest friends today.
0:39:50 He wouldn’t even talk to me for eight years.
0:39:52 Like I couldn’t even get an appointment with him.
0:39:58 But suddenly when RoboFish took off, suddenly all these buyers were coming to us and hey, like that RoboFish.
0:40:03 So you’ve got to imagine we’ve finally had this momentum and then this happens to the factory.
0:40:06 And we’re like, we’re like shit.
0:40:07 And it was crazy.
0:40:09 We could not get into the factory.
0:40:15 So my brother, we had to do and this again, there’s so many of these stories, but we were like, we have no other option.
0:40:18 We have to get our tool and we have to get all our equipment.
0:40:21 We have to get everything out of that factory and really relocate it to another factory.
0:40:22 But the army was there.
0:40:23 Everyone was here.
0:40:24 You couldn’t get in.
0:40:30 So in the middle of the night, my brother got like eight trucks, got all of our team from one of our little factories,
0:40:38 filled these trucks with people in like 2, 3 a.m. in the morning when there were less people like camped out at the factory,
0:40:43 pulled up to the factory, paid a bunch of bribes to go in, took all the trucks into the factory,
0:40:48 all our people went in, ticked up all of the tooling and all of the equipment,
0:40:53 loaded up all the trucks in the middle of the night, left and we went and relocated to a new factory.
0:40:55 So we continued production.
0:41:00 So it was crazy, but that was like again, like nothing ever happens without a hiccup, right?
0:41:03 Like it was sort of like we finally felt like we had momentum and then this happened.
0:41:06 So how old are you now?
0:41:07 39.
0:41:08 Okay, you’re 39.
0:41:14 Do you still go as hard or like, are you still as nuts as the early version of you?
0:41:18 Like, do you still have the same drive or are you human?
0:41:25 And you’re like, you know, yeah, I used to really be super, you know, super driven, super resilient going,
0:41:27 going really, really balls to the wall.
0:41:31 And now I’m, you know, tired and whatever, you know, I’m an old guy now.
0:41:33 Like, do you still have it?
0:41:34 I still have it.
0:41:38 I think we still just as motivated today, if not more motivated than we have ever been.
0:41:44 We see a pretty, pretty cool roadmap ahead of where we want to get to the next 10 years,
0:41:52 particularly taking building houses on production lines and Zuri Agila.
0:41:53 So let’s talk about that.
0:41:58 So can you just summarize how big is the, how big is the empire today?
0:42:05 So there are over two out of a billion US in revenue, but we’re drawing at about 25 to 30% year on year.
0:42:07 And so that’s compounding.
0:42:11 But I think the thing with us is, is our revenue is one thing.
0:42:13 It’s just how profitable we’ve built the business.
0:42:15 And it’s public or it’s not a, not a public company?
0:42:16 Not public.
0:42:17 Okay.
0:42:19 So privately held super profitable company.
0:42:23 That’s like a billion dollars a year of profit basically out of the toy business.
0:42:25 But then you have this diaper company.
0:42:28 You started, you started buying other companies, right?
0:42:29 Not so much buying.
0:42:31 I, I actually got Crohn’s.
0:42:35 So I got sick in China and Hong Kong.
0:42:38 And I had to have my bowel, my large intestine removed.
0:42:41 This probably has something to do with living in China for all those years,
0:42:43 even incredibly poorly, I’m not sure.
0:42:49 But I had to move home to New Zealand to get surgery about six years ago.
0:42:52 And it ended up being a great thing.
0:42:54 So I was in Hong Kong.
0:42:56 I came home for the surgery.
0:42:58 I was meant to rest for a while.
0:43:01 And I was sitting at home and I was getting restless,
0:43:04 trying to rest as I had my bowel, my large bowel moved.
0:43:08 And I had a friend who had started a small darker business.
0:43:11 And he was doing like 50 grand a year, DTC in New Zealand.
0:43:12 So really, really small.
0:43:14 He’d been mapping a way out of it for three years.
0:43:16 And I thought, well, I might as well help with this.
0:43:22 But I always thought like toys is this industry where there really is a ceiling to the size of the business you can grow,
0:43:27 just because of the, you know, the addressable market, the size of the market.
0:43:30 Also, you’ve got brands like Hot Wheels, which are super hard to disrupt.
0:43:37 And I was looking at FMCG and I started to realize that there’s like nine companies that dominate 80% of it globally.
0:43:41 And when you build a toy business, you work in every material form.
0:43:44 You work at speed, like speed of innovation is your DNA.
0:43:49 You build this muscle for speed and working fast and innovating,
0:43:54 because you reinvent 40, 50% of your entire product line every single year.
0:43:57 But because you haven’t been so much of your product line every year,
0:43:59 it comes really hard to keep growing, right?
0:44:02 Because it’s a reinvent to catch up every year.
0:44:06 And so I started to form this thesis about six years ago.
0:44:08 I thought, man, we’re so good at automating.
0:44:13 And we sort of, I would classify Zuru today as more an automation company than anything else.
0:44:16 Like the product is almost secondary.
0:44:19 We build incredibly sophisticated automation.
0:44:20 We had a huge automation team.
0:44:26 So whether that’s building a house on production lines with robots or a dart blaster with robots,
0:44:28 it’s, you know, a big part of what we do.
0:44:32 So, you know, I was like, we’ve built this automation muscle and the speed of innovation muscle.
0:44:35 And I feel like these biggest companies, one, they don’t innovate too.
0:44:36 They have a lot of duopoly.
0:44:38 So if you look at pet food, it’s Mars and Nestle.
0:44:41 If you look at baby, it’s Kimberly-Clark and Procter and Gamble.
0:44:44 If you look at beauty and personal care, it’s L’Oreal and Procter and Gamble.
0:44:45 A little bit of Unilever.
0:44:46 So there’s a lot of them.
0:44:48 If you look at laundry, it’s pretty much just Procter and Gamble.
0:44:49 A tiny bit of Unilever.
0:44:53 So all these duopolies and monopolies across the board.
0:44:56 And through that, they were delivering much margin to their retail partners.
0:44:59 They really held the power.
0:45:02 And I remember mapping out Walmart’s revenue.
0:45:05 And I met that against the top eight FMCG companies in the world.
0:45:08 So Walmart did more revenue than all of them combined.
0:45:11 What’s that acronym you’re saying?
0:45:12 What is that?
0:45:14 FMCG, fast-moving consumer goods.
0:45:17 So FMCG, CPG, consumer package goods.
0:45:22 So if I looked at Procter and Gamble, Nestle, Mars, all the biggest FMCG companies,
0:45:25 collectively their revenue is less than Walmart, who does 611 billion.
0:45:28 But then Walmart makes only a fraction of the profit.
0:45:32 And the big FMCG companies make the lion share 75% of the profits.
0:45:37 So I thought, is there a world in which we can be disruptive in FMCG fast-moving consumer goods?
0:45:39 Can we deliver more margin to our retail partners?
0:45:45 Can we innovate faster, bring our speed of innovation mindset to these categories?
0:45:48 And can we reach customer in a far more efficient way?
0:45:50 And can we move at the speed of culture?
0:45:56 And obviously at the time, digital and data-driven advertising was starting to become a bigger thing.
0:46:00 And targeted advertising, and I was still looking at 80 and I was thinking,
0:46:05 well, you’ve really got a mum who’s an incredibly targeted audience or a parent
0:46:06 who’s an incredibly targeted audience.
0:46:09 How can we serve them and add every single day in a targeted way,
0:46:12 rather than just like break a media so that’s a super efficient way to reach our customer?
0:46:16 What if we do the better product, deliver more margin and position it at a better price?
0:46:18 And that was kind of my overall thesis.
0:46:19 Can we do this?
0:46:22 And can we run our same kind of first principles toy model like FOB
0:46:25 so we don’t hold products, super lean, large advertising dollars spent,
0:46:28 but in a really centralized, controlled way.
0:46:31 And I thought, okay, I can do this.
0:46:33 So I worked with my friend and I said,
0:46:37 okay, let’s launch this diaper brand in New Zealand as a test market.
0:46:42 And within one year, I think we’re taking 40% market share in New Zealand, launching a diaper.
0:46:45 And I remember meeting Greg Foren, who is CEO of Walmart at the time.
0:46:50 And he’s in New Zealand and I met him in New York and I was like, Greg, toys, it’s great.
0:46:55 And it’s been this incredible university for us because it really allows us to, you know,
0:46:59 it’s built skill sets that is very hard to build in any other industry.
0:47:01 And I said, we’re going to take on Dithers.
0:47:04 And he turned to me and he said, “Nit ever heard of coconut pepsi?”
0:47:07 Like he was saying that it was going to be that hard to crack.
0:47:11 Like Pampers and Huggies are going to be that hard to go and disrupt.
0:47:14 And I said, I get you, but I think we can do this.
0:47:15 I’m going to give it a go.
0:47:17 So we launched in New Zealand.
0:47:19 The second biggest brand in New Zealand was Treasures.
0:47:20 Treasures was number one.
0:47:21 Treasures was a local brand.
0:47:22 Their share just plummeted.
0:47:27 They ended up going out of business and having to sell the brand for pennies on the dollar.
0:47:30 And you’re spending a ton on Facebook ads or what are you doing?
0:47:32 I find Facebook and then it progressed to Instagram.
0:47:33 Now it’s progressed to TikTok.
0:47:35 Like it sort of always progresses, right?
0:47:38 Like so you’ve got to move the speed of platforms, but you’ve also got to move at the speed of cultures.
0:47:41 How do you move at the speed of trends to build content to move the speed of culture?
0:47:44 And was that a new, new-ish skill set for you?
0:47:46 Because it seems like the toy company was retail driven.
0:47:50 Yeah, well, YouTube was starting to kind of thing that it was mainly TV advertising for toys at that time.
0:47:54 So it was still TV was prominent and then it kind of switched to YouTube.
0:47:57 So today we don’t speak any money on TV and toys.
0:47:58 It’s all YouTube.
0:47:59 It’s all TikTok.
0:48:00 It’s all YouTube shorts.
0:48:03 So it really like the platforms change and how you reach people.
0:48:07 So I had this thesis, but we just quickly took all this market share in New Zealand.
0:48:10 And I was like, holy shit, we can make an incredible fight.
0:48:12 But to be fair, success is a bad teacher.
0:48:14 Like we just got the success out the gate.
0:48:15 I was just, we watched better.
0:48:17 I just took off.
0:48:19 And so I packaged up that case study.
0:48:20 We went to Australia.
0:48:23 We went to Coles and I said, hey, look at what we’ve achieved in New Zealand.
0:48:25 Look at all the margin we’re delivering.
0:48:26 Look at the category share we’ve driven.
0:48:29 We helped foodstuffs reverse their category share decline.
0:48:32 Like they were getting hammered by the competitor Woolworths here.
0:48:33 We inverted that.
0:48:34 We took them the other way.
0:48:35 We’ve been one year.
0:48:37 So Coles was like, love it.
0:48:38 Launched with Coles.
0:48:39 Same thing.
0:48:42 We won Coles non-food supplier of the year award in the first year.
0:48:46 And just help them take heaps of category share.
0:48:48 So I was like, wow, this really works.
0:48:50 Took that model, went to the US, went to Walmart.
0:48:54 Was like, hey, Walmart, we could help you disrupt your two big suppliers here.
0:48:56 And they gave us a Dallas test.
0:48:57 Same thing.
0:48:59 We became actually last year Walmart’s fastest growing brand.
0:49:02 Total box all categories with rascals.
0:49:04 We targeted the same thing with our brand Millie Moon.
0:49:06 Millie Moon actually just over to private label.
0:49:09 And Huggies is second biggest sub-brand in target in under,
0:49:11 or about three and a half years, which is incredible.
0:49:14 So it was sort of this like, wake up moment that, wow.
0:49:17 And I think last year we produced two billion diapers.
0:49:20 And this is all in under, this is all in about five and a half years.
0:49:21 We built this business.
0:49:26 So well over a billion dollars of retail sales last year in diapers in, you know, five years.
0:49:29 So from start to go a billion dollars a year.
0:49:31 Should I say, and growing incredibly fast.
0:49:33 Like this year, gonna grow 30% again.
0:49:35 So this was sort of an eye-opener for me.
0:49:38 And I thought, wow, we can do this in all FNC categories.
0:49:40 So I started testing in New Zealand and losing.
0:49:42 Like we tested infant formula, did it work.
0:49:44 We tried fem care, fails.
0:49:46 We tried like oat milk fail.
0:49:47 I did all these old things.
0:49:49 I started faking and I was like, oh.
0:49:54 But my partner at the time, Jamie, had a background in luxury PR and beauty
0:49:56 and was a huge beauty enthusiast.
0:49:57 I said, hey, don’t do that.
0:49:58 Let’s start a beauty brand.
0:49:59 And we started Monday haircare.
0:50:02 And which is the little pink bottle Forbes called it.
0:50:05 Last year the most famous shampoo and conditioner bottle in the world.
0:50:07 But we launched that peak COVID.
0:50:08 And that was the second one.
0:50:09 It just took off.
0:50:13 We, I think in Australia, we won product launch of the year
0:50:15 and we had five of the top 10 in total here.
0:50:16 Yeah.
0:50:17 We over to Pentene and sales.
0:50:19 What do you think is the difference between the ones that worked
0:50:20 and the ones that didn’t?
0:50:21 Is it categories?
0:50:22 Some categories were just more ripe.
0:50:24 Was it you nailed the packaging and the positioning?
0:50:26 And that’s actually the thing that matters most.
0:50:27 Is it luck?
0:50:30 Diapers is driven by price and performance.
0:50:33 And we’re the first one in the world to take a China diaper to the world.
0:50:35 And China’s making the best diapers in the world.
0:50:38 So in China there’s like a thousand domestic brands all competing
0:50:41 to the technology and non-wovens and substrates and SAP
0:50:43 and machine technology has just gone like that
0:50:44 because of all the domestic competition.
0:50:47 So we took the best product in the world to market at the best price
0:50:49 in a category which is price and performance driven.
0:50:52 So it’s either you got to be price and performance driven
0:50:54 in a performance driven category.
0:50:56 Or you’ve got to be innovation driven.
0:50:59 So we launched dummy um which is super innovative to victory product
0:51:00 like really innovative.
0:51:04 And that was just pure innovation that made that like take off.
0:51:05 So innovation.
0:51:07 Or it’s got to be design and creative.
0:51:09 So Monday was still a bowl of shampoo
0:51:11 but incredible design and creative.
0:51:13 And then we just owned TikTok
0:51:16 as in it is the number one here here brand in the world on TikTok.
0:51:18 And by a long way.
0:51:23 And it was just the right design, creative, positioning, branding,
0:51:25 marketing and it just took off.
0:51:28 And I think last year in the US it was second only in total growth
0:51:31 in here here to Proctor & Gamble’s total here here portfolio
0:51:32 just the Monday brand.
0:51:36 And so then I started to learn kind of which categories would work for us
0:51:38 and we’ve gone super deep in those categories
0:51:40 and we applied our same model.
0:51:42 So building all the factories and diethers.
0:51:44 We built a factory I think just nine months to reduce
0:51:46 and we’re doubling the size of it right now.
0:51:48 So we’ll have four billion diethers capacity by next year.
0:51:50 In beauty we built the whole factory.
0:51:51 Everything under one roof.
0:51:54 Injection modelling, rotor modelling, filling, mixing all of it.
0:51:56 We built all the lab in Shanghai.
0:51:59 We’ve got L’Oreal formulation specialist over.
0:52:01 You can leave a formulation specialist.
0:52:03 As soon as we found something that was working.
0:52:04 So I was out for sourcing to begin with.
0:52:06 Then we do the Zuru thing which is go super deep.
0:52:08 Automate everything we possibly can.
0:52:10 Put all AGVs in.
0:52:13 So every little part of it we want to like automate as much as possible.
0:52:15 And then pet food, I started at the same time.
0:52:19 I bought a young guy who won New Zealand’s high school entrepreneurial program
0:52:20 out at Gakut Alastair.
0:52:21 He’s incredible.
0:52:22 I said let’s start a pet food business together.
0:52:25 Actually we were at the supermarket and we said let’s do pet food.
0:52:27 And so now we’re getting a huge momentum there.
0:52:32 One of our brands I think, Bulkers, drove 30% of all cat treat growth in America last year.
0:52:36 And then we experimented in supplements which has been a little bit hard.
0:52:38 I built a brand with the Kardashians called Dosenko.
0:52:40 We ended up selling that last year.
0:52:42 It worked everywhere else in the world.
0:52:43 It failed in the US.
0:52:47 And so as soon as we don’t have the scale of the US, it sort of lets exit it.
0:52:48 And supplements.
0:52:51 We’ve sort of struggled with our brand habit which is sort of ticking away.
0:52:53 And then very much home care.
0:52:55 We’re building a bunch of brands as well.
0:52:59 So we’ve built this, what I call our five vertical strategy.
0:53:03 And we’re going very, very deep within all of these verticals.
0:53:10 And I think all of them individually can be bigger than our toy company within two or three years.
0:53:12 What’s the dream?
0:53:14 Like so why go so hard?
0:53:15 Why do so many?
0:53:19 Like you could, just off the toy company, you could be sitting on a boat you own,
0:53:23 looking at an island you own with a beautiful drink in your hand.
0:53:26 Is that just, you love the game?
0:53:29 You have some dream, you want to be a hundred billionaire?
0:53:32 What’s the, what’s driving doing more and more and more?
0:53:34 I think we love it.
0:53:36 Number one, love having a thesis.
0:53:37 Love competing.
0:53:39 For me, it’s sport, right?
0:53:42 Like it is sport, having a thesis, going into something, working it out.
0:53:49 And as we build these things, you know, toys, business, the edge business, FMCG business,
0:53:52 you know, as you become more successful, you think,
0:53:54 “How can I solve bigger problems?”
0:53:56 And the same person, Greg Forewell, I said,
0:53:58 “You got to wrap your business on a bigger purpose as well.”
0:54:01 And I thought, well, we thought, how do we solve bigger problems?
0:54:03 Because we’re almost in a privileged position now, right?
0:54:05 How do we go on and actually solve bigger problems?
0:54:07 Which is why we’ve started building ZuruTech over the last,
0:54:09 what’s actually been eight or nine years.
0:54:10 Can you explain what that is?
0:54:12 So it’s a crazy moonshot idea.
0:54:18 I think you have, you either have or are building the largest factory in the world, period.
0:54:20 What do you, what is the, what is that idea?
0:54:21 What is ZuruTech?
0:54:25 So ZuruTech, the thesis really was, if you look at the construction industry,
0:54:27 it’s been done the same for hundreds of years.
0:54:31 It’s also the biggest segment or market in the world,
0:54:33 construction and property development.
0:54:40 And the idea was, how do we build the first factory in the world that has a customized input,
0:54:44 so the design of a building and a fully automated output?
0:54:50 So how do we build the buildings for a small fraction of the cost of what you build a building for
0:54:51 today?
0:54:58 And, and we’re now, we started off, so we built a software which is called Dreamcatcher,
0:55:00 which is built on Unreal Engine.
0:55:04 It has an incredibly simple UI sort of user interface,
0:55:09 but the logic layer or the coding layer below that is incredibly, incredibly complex.
0:55:11 We’ve cataloged every building code in the world.
0:55:14 So you can drop a pin on any location in the world that maps the terrain.
0:55:15 It does the building code.
0:55:21 And then you can design your house or building or whatever building you want in our Dreamcatcher software.
0:55:26 We’ve also built our AI Assistant or our own large language model called Quera,
0:55:32 which is basically training, it’s training our model on all the great architects.
0:55:37 So you can talk to your building and it builds it in front of you.
0:55:38 You can put a 2D plan in.
0:55:40 You can decide on this room.
0:55:44 I want it to be Stockholm style and furniture and it maps all the furniture and does it for you.
0:55:47 So it’s an incredibly intuitive software.
0:55:52 Basically a 10 year old can design on Dreamcatcher and then it does all the structural side.
0:55:55 It does all the EVP, the mechanical, the electrical, the plumbing.
0:55:57 It does it all in a super intelligent way.
0:56:00 Wherever you drop the pin where you’re building the building,
0:56:05 it works out the orientation of the building for the sun that works out how many HVAC units you need.
0:56:07 It works out how many solar panels you need.
0:56:11 So basically then the software translates every part into our factory.
0:56:14 The factory builds every single part and it’s completely automated
0:56:16 and the factory is designed from start to finish.
0:56:21 So originally we built a one-fifth scale factory to test the software with the hardware
0:56:23 and how that all integrates together.
0:56:26 So it builds these mini houses that are one-fifth in every dimension.
0:56:31 And then once we got that working, we built a, it’s about a three hectare factory
0:56:33 and it’s a test production line.
0:56:38 And that right now is producing, we’re testing the software at full scale with full scale houses
0:56:42 and we’re building a house about every two weeks right now which is tested
0:56:46 and then we have like a hundred little changes and we go in software and changing it.
0:56:51 And then we bought a factory or a building that’s 25 acres in size
0:56:54 which is our first commercial factory for producing commercial households
0:56:59 and then Phase 4 will be building one of the biggest factories in the world.
0:57:01 I think second only to Boeing is the plan.
0:57:03 So that’s all planned out now.
0:57:08 But we are building a house for $500 square meter
0:57:10 and it’s the best quality in the world.
0:57:14 Erated concrete, ceramic tile, but we have innovated every single part of the process.
0:57:18 So we have the wall module, the tile module, the window module, the lighting module,
0:57:23 the smart home module and every single team I think is the best in the world at what they’re doing.
0:57:25 So it is a huge project, it is a massive undertaking.
0:57:29 I think we have about 700 software and hardware engineers working on it.
0:57:32 Are you self-funding this or did you raise money for this?
0:57:33 No, we self-fund it.
0:57:36 So we’re getting very close now to a final product.
0:57:41 We think we’re five test houses away from getting it very close to perfect
0:57:45 and then it should be transformational in terms of how the world builds
0:57:47 and anyone can use Dreamcatcher the software.
0:57:50 So you could go on to Dreamcatcher and there might be a million different
0:57:53 two-bedroom houses that have been designed by people on the platform
0:57:56 and you can look through them, you can put a price on selling your own design,
0:57:58 you can go through them in real time, you can stage furniture.
0:58:02 We’ll have a market place, IKEA could digitally scan all of their furniture
0:58:05 into our market place, artists could digitally scan all their art in
0:58:08 so you can put it in your house, you can go around in real time and see it.
0:58:15 And so the software is really incredible, you know, what we’ve built.
0:58:18 So super exciting that we’re getting so close now
0:58:24 and the houses that we’re producing each couple of weeks are really incredible.
0:58:28 I mean, this is an insanely cool idea.
0:58:32 Just to basically, it’s like, like if you go to the website,
0:58:34 it looks like you’re looking at the Sims, the video game,
0:58:39 like you could just kind of like zoom around a house, you can like move things, whatever.
0:58:42 But you’re saying there’s a button where you just basically click print
0:58:45 and then the house gets built in an automated factory,
0:58:49 which is just a kind of mind-blowing idea.
0:58:51 How much are you going to put into this funding-wise?
0:58:55 Like this must be like, you must be putting hundreds of millions of dollars.
0:58:57 Is that right or am I overestimating this?
0:58:59 We’re getting a lot for sure.
0:59:02 So the software, so we have three offices in India on the software side,
0:59:04 Pune, Cacada and Underband.
0:59:07 And we have two in Italy, Milan and Wanda.
0:59:11 The reason in Italy is we actually acquired, years ago, the software part of it.
0:59:14 It was two guys, Martha and Eliseo, they appear as both architects.
0:59:19 They decided that architectural software was built on
0:59:21 incredibly old software stacks.
0:59:26 And so they were like, well, gaming engines are going like this.
0:59:31 And so they decided to build software or architectural software on Unreal Engine.
0:59:33 And so we acquired them and that’s sort of the reason.
0:59:38 I think we have about 160 or so people sitting in Italy on the software side.
0:59:40 And then they worked with India on the software side.
0:59:43 And then in China, we built all the hardware side out.
0:59:48 So we have three sites where we’re doing all of the hardware and automation development.
0:59:52 But we’re kind of parallel to our automation team has sort of grown in parallel.
0:59:58 They automate, for example, we produce 57 million dark water blasters a year.
1:00:03 But we produce a dark blaster from a plastic granule through the finished product with no people.
1:00:08 Our competitors, like Hasbro, they outsource to factories who still produce with drills on production lines.
1:00:12 We’re now building our automation 2.0 where we’re using vision and machine learning
1:00:15 so we can actually change out any model of blaster on the same production line.
1:00:18 They can see the molds and they can see the shape and where all the screw holes are.
1:00:20 And it adapts completely.
1:00:25 So we’ve kind of paralleled our automation with building a housing project
1:00:29 but also taking all that expertise and building it across our zoo region
1:00:33 and toys business which makes us so disruptive.
1:00:37 But the big difference is when we automate a product in FMCG or toys,
1:00:40 you’re making the same product over and over and over again with robots.
1:00:44 This is incredibly complex because you’re building a tailored product
1:00:48 for every building site in the world and every building code in the world
1:00:50 and it’s different every time.
1:00:54 And so having that fully automated output with a fully customized input
1:00:58 has never really been or has never been done before in the world.
1:01:00 Dude, you’re a madman.
1:01:05 Who are your peers? Who do you relate to?
1:01:08 Do you just read like an Elon Musk biography and you’re like,
1:01:11 “Oh, that’s the only other guy in the world who I have something in common with?”
1:01:13 Is that somebody you admire?
1:01:17 We have a huge admiration for Elon with the big Tesla backers and fans
1:01:19 for a very long time.
1:01:21 Do you know him?
1:01:24 I had a chance to meet him and then I had to fly home for an emergency
1:01:27 and so I actually don’t know him.
1:01:30 My brother was very similar to Elon.
1:01:34 So my brother was sort of the driver behind ZuruTech at our building project.
1:01:38 He’s very similar in his way of thinking, I think.
1:01:41 Like, Elon calls it the Idiot Index, for example, right?
1:01:45 And the Idiot Index is when you look at the cost of a rocket.
1:01:48 Well, he looked at the cost of what a rocket used to cost to build
1:01:50 and then he looked at the cost of the materials
1:01:54 and it’s like, you know, hundreds of times the cost of materials to build a rocket
1:01:56 and he’s like, well, then he takes a first principles approach,
1:01:58 he breaks it down and he works out effectively, you know,
1:02:01 how to build a rocket at a price that makes sense
1:02:03 based on the cost of the raw materials.
1:02:06 I mean, we’re having a similar approach to how we build a building,
1:02:08 whether it’s one story or hundreds of stories.
1:02:10 It’s look at the cost of materials out of the ground
1:02:12 and look at the final cost of the building.
1:02:14 The Idiot Index is really high.
1:02:16 And so it’s the same or similar type of thinking.
1:02:18 So how do you go back to your first principles approach
1:02:21 and do it from the ground up in a completely different way?
1:02:24 Did you see the other day, I think yesterday or two days ago,
1:02:27 Boom Supersonic did their first supersonic flight?
1:02:29 I don’t know if you followed this startup.
1:02:30 I did, yeah.
1:02:34 He kind of had a similar story where he worked at Groupon basically
1:02:37 and he’s like, you know, a product manager at Groupon
1:02:39 selling coupons on the internet.
1:02:43 And then, you know, for fun was basically having a hobby of flying
1:02:47 and then gave himself a year to, from a first principles point of view,
1:02:49 understand how planes work
1:02:52 and figure out if there was some business he could build around planes
1:02:54 because he just loved planes.
1:02:57 And while he was building his spreadsheet, he was just like, I don’t get it.
1:03:01 There’s no reason we shouldn’t be flying supersonic speeds right now.
1:03:03 And then he took it to like professors and others.
1:03:05 He’s like, where’s the error in my calculations?
1:03:08 Because this is telling me we should be doing supersonic.
1:03:10 And they were like, no, there’s no theoretical errors.
1:03:12 Just no one’s doing it.
1:03:14 Like there’s no courage is the limit.
1:03:16 Not like, there’s not a materials problem.
1:03:17 There’s a courage problem.
1:03:19 There’s a entrepreneurship problem.
1:03:23 And seeing that go, you know, yesterday to doing their first supersonic flight
1:03:24 was super inspiring.
1:03:25 Incredible.
1:03:27 So you, you’re doing all this stuff.
1:03:28 Do you like have hobbies?
1:03:29 Do you do stuff outside of this?
1:03:31 What’s like, what is fun for yours?
1:03:34 This is like, my cup is full with this sport.
1:03:35 Definitely sport.
1:03:37 We love to just love competing really.
1:03:42 So anything that has a competition element is something that I get a lot of enjoyment out of.
1:03:45 So you’re certainly tennis golf.
1:03:49 Just sport in general is, is, is something that enjoy doing.
1:03:53 But yeah, as you’re older, like obviously we don’t,
1:03:56 I used to think you wake up every day with that pit of your stomach because you’re wondering
1:03:58 what’s going to go wrong today and what do we have to solve today.
1:04:01 So, you know, obviously we don’t have that, that issue any longer and,
1:04:03 and definitely get to spend more time with family.
1:04:05 I finally had my first child last year.
1:04:07 So that’s a big change.
1:04:10 It definitely changes your to speak them on things.
1:04:13 I think which is, which has been really good.
1:04:16 I always sort of kick the can delayed it as long as possible.
1:04:17 I think it would slow it out,
1:04:19 but it’s definitely been one of the best things.
1:04:21 So do you, when you start these new companies,
1:04:24 cause I always, I always find this interesting whenever you have like a serial entrepreneur,
1:04:26 people have different approaches.
1:04:30 So some people, they, you know, they have their main thing and they leave and they say,
1:04:33 I’m going to go on a sabbatical basically for a year, figure out my next thing.
1:04:36 Other people, they take some percentage of their time.
1:04:39 They’re devoting it to new ideas and they go,
1:04:43 they roll up their sleeves and they’re super like on the ground figuring out the new idea.
1:04:49 Other people, they recruit a operator and they just give the operator kind of like the idea,
1:04:51 maybe a little bit of a plan and then let the operator run.
1:04:54 And they kind of are there as more of a chairman or a board member from afar.
1:04:57 When you did like the diaper brand and these other ones,
1:05:00 were you like boots on the ground, like every day figuring it out?
1:05:03 Or did you do the operator model? What did you do?
1:05:04 Definitely boots on the ground.
1:05:07 What I would say is in our business, there’s a through line through it all, right?
1:05:11 We’re essentially making a product where there was a house, a bullish and poo,
1:05:15 a laundry pod or a dart blaster.
1:05:21 I mean, it’s essentially still making product, building factories, selling it into retail.
1:05:24 So we’ve built such a big flywheel.
1:05:28 Like if you look at our Shenzhen office, we have three and a half thousand people there, right?
1:05:34 It’s such a big flywheel that it just becomes easier and easier to plug into that flywheel,
1:05:36 regardless of what category you’re in.
1:05:41 Yes, they’re all different industries, but we’re still effectively trying to make the best product in the world at the best price.
1:05:44 We set ourselves the goal of making a product to $0.
1:05:46 I know that’s impossible, but that’s our goal.
1:05:48 How do we make it to $0 and how do we make it the best in the world?
1:05:50 So there’s a through line through it all.
1:05:52 So very much boots on the ground.
1:05:55 I believe leadership has to be on the dance floor, have to have your hands dirty.
1:05:57 That’s where you get the most insights.
1:06:02 In our business now, I’m a huge believer in firing bullets and failing fast.
1:06:04 So I always say, get an actionable insight.
1:06:05 Where’s an insight?
1:06:09 Find an insight somewhere in the world, and an insight forms a bullet.
1:06:12 And a bullet is a minimal viable investment into testing something.
1:06:17 And then at the bullet works, it’s a cannonball and we invest and we build the recipe around that.
1:06:18 And what’s the recipes working?
1:06:21 You can pull a lot more things into that recipe and build that recipe out.
1:06:24 So our mindset around fast fail.
1:06:27 We actually have what we call fast starts now in FMCG.
1:06:32 So we’re trying to build a minimal viable products to test quickly as fast as possible.
1:06:38 And so we can really speed up innovation is probably the biggest thing for us.
1:06:43 And we’re trying to test more things in these categories faster and learn what works and what doesn’t.
1:06:47 Because in my experience, things either just like hit the ground and start working or they don’t.
1:06:50 And then we have a mindset around continuous improvement.
1:06:53 So we call it 2% improvement a week, the power of compounding.
1:06:55 I know 2% improvement a week is nothing you can measure.
1:06:56 But that’s the mindset.
1:06:58 That’s what we put into our DNA.
1:07:01 And we always say to the team, we suck now compared to where we’ll be in the future.
1:07:07 So we had this relentless mindset of being able to look back on ourselves a year ago and be like, we weren’t even good then.
1:07:13 And I think that compounding improvement is such a big part of what we do.
1:07:16 And then from, you know, when I look at team members, I’m trying to…
1:07:19 People say they try and build talent density in their business.
1:07:20 Yes, we try and build talent density.
1:07:22 But for us, we’re trying to build like grit density.
1:07:28 And I say when we hire, we’re looking for grit smarts and someone with a biased action, like real doers, right?
1:07:31 People are just like, we fast-fail, we go in, we do it.
1:07:33 We are the winner we learn.
1:07:36 If it doesn’t work, we’re getting heaps of insights out of that on how to improve next time.
1:07:44 So our mindset or our DNA in the business works across any of those verticals or categories we have.
1:07:51 We have the same mindset and the same approach and the same DNA as to how we approach them.
1:07:54 If you were interviewing me, how would you figure out if I have any grit?
1:08:02 I think actually like looking back at your history is it’s kind of like we often find like people that really great competitive sports people
1:08:04 and they really love to win and are highly competitive.
1:08:09 Like I want to understand how competitive you are, how much you really want something.
1:08:13 And to be honest, it can be really hard.
1:08:17 Like we’ve built this loop process in our business, similar to the Amazon loop.
1:08:24 So we’re, you know, half we’re hiring and looking at, you know, whether you fit and can do the actual job.
1:08:28 But the other half is really do you align to our DNA?
1:08:37 And so we have a loop, we have, you know, eight people, you know, half of those people will interview or questions around, you know, our DNA
1:08:41 and really trying to go deep on understanding if that person fits our DNA.
1:08:45 And so we’re really trying to build our, you know, not our talent density, but our grit density.
1:08:48 But certainly it’s something that I find is really important.
1:08:54 All our best people have just incredible grit and incredible bi-aspiration.
1:08:57 Sure, they’re smart, but they just get shit done.
1:09:03 And, you know, we decide something at a meeting and they’re already kind of actioning it in that very moment.
1:09:06 And that’s kind of our culture.
1:09:13 It’s kind of that saying as well, right, that lazy people work a little bit and expect to be winning.
1:09:19 Whereas winners work as hard as they possibly can and worry that they’re being too lazy.
1:09:24 And I feel like that’s super true, right? Like, people that like work hard,
1:09:28 they’re always worrying that not doing enough of they’re being too lazy.
1:09:33 And it’s kind of those people that’s kind of like the mindset we’re looking for.
1:09:35 Yeah, I think Elon has a good question he uses in interviews.
1:09:38 He says, tell me about, he just starts it down.
1:09:42 He just says, tell me about the hardest problem you solved and how you did it.
1:09:48 And, you know, you could get so much from one question because what’s the hardest problem they solved?
1:09:52 You know, it’ll show you the scope and the trust they had in prior roles.
1:09:57 Like, were they just nibbling on tiny little issues or were they actually like biting into really meaty things?
1:10:02 Yeah, and like, can they talk about the details, the paths that didn’t work, the paths that didn’t work?
1:10:05 Because that’s the person who was actually doing the work.
1:10:08 There’s so much like resume lying where somebody says, oh yeah, we did this.
1:10:09 Like, cool, tell me how you did it.
1:10:12 They don’t know because they weren’t the one doing those parts of it.
1:10:14 Correct, correct.
1:10:16 Nick, this was awesome and I really appreciate you coming on.
1:10:20 I know you don’t do a lot of podcasts, but your story is honestly incredible.
1:10:31 I think as much as you’re building in the factories, I think you doing it at podcasts like this can build 10,000 new entrepreneurs with more grit, with more resilience just by sharing the story.
1:10:36 Because you’re showing, you know, what’s possible, you’re showing what you did, how it all turned out and how you approached it.
1:10:40 And so I think, you know, a simple hour like this can do a lot for a lot of people.
1:10:42 So I really thank you for doing it.
1:10:51 It was a lot of fun and yeah, I don’t often share our story all that often, but yeah, I totally agree if it can help inspire people.
1:10:56 And I always say it, right, it’s not really how capable you are.
1:10:58 It’s how willing you are.
1:11:07 And I think it’s the willing people that stick out for a long consistent period of time and continually improve that actually are the most successful.
1:11:09 It’s not necessarily about how smart you are.
1:11:13 It really is just grit and perseverance and you end up getting there.
1:11:17 So I think that’s the big lesson for any entrepreneurs out there really.
1:11:18 Right on.
1:11:19 Alright, thank you so much.
1:11:20 That’s a wrap.
1:11:22 I feel like I can rule the world.
1:11:24 I know I could be what I want to.
1:11:28 I put my all in it like no days off on the road.
1:11:30 Let’s travel never looking back.
1:11:30 Bye!
1:11:40 [BLANK_AUDIO]

0:00:04 All right. Today’s episode is special. We’ve got Matt Mullenweg. Matt founded a company called
0:00:09 WordPress, which is used by something like 45% of all websites on the internet. So it’s just
0:00:13 huge thing. And we talked to Matt about a bunch of interesting things. Sean, what have we talked
0:00:17 to him about? He had an offer to sell his company for $200 million when he was 24 years old. He
0:00:21 turned it down. We asked him what that was like. We talked to him about some of the recent drama
0:00:25 that they’ve had. We talked about how they’ve been acquiring companies. They bought the small
0:00:29 company in South Africa and how it turned out to be a huge thing for their business. Like, you know,
0:00:34 a billion dollar plus win. And he’s just a student of the game. He’s been doing it for like 20 years.
0:00:38 This guy started this company when he was 19 years old and is still doing it. And it’s become
0:00:44 this absolute juggernaut. So enjoy this episode with Matt Mullenweg. Tell me if this is right,
0:00:48 because this sounded like almost too good to be true. But I’d read that in 2008, you had an
0:00:52 acquisition offer. I think you were only 24 years old for $200 million. At that point,
0:00:55 I think you’d only raised a million dollars. And I think you raised a million dollars at
0:01:00 $3 million in valuation, something like relatively, you’re 24, you’re going to be worth nine figures,
0:01:04 something crazy like that. You turn it down. But then you talked about how you didn’t have
0:01:09 control of the company because you were young and maybe just like made some mistakes with funding,
0:01:14 something like that. What’s the conversation like with yourself when you’re like, I’m turning down
0:01:18 something that might make me worth over $100 million at the age of 24.
0:01:23 You talked about your name, the first million. It’s kind of funny. Like, I guess technically on
0:01:28 paper, my first million was that first funding round, right? In theory, I owned like half the
0:01:32 company that was now worth $4 million. But as you know, like that’s paper money. I was still
0:01:39 you know, eating ramen and, and Mountain Dew and Pizza, like living, you know, a very broke San
0:01:45 Francisco college kid life. But it was in 2008 that we had this acquisition offer. And you’re
0:01:50 right, it was about two and a half years in this company. Someone tried to buy us for $200 million.
0:01:56 And the investors at the time did something which now is quite common, but at the time was pretty
0:02:02 forward looking, which is a secondary. So they said, they said, wow, you know, we’re 20 people,
0:02:06 we’ve been doing this for two and a half years, a $200 million exit would be pretty amazing.
0:02:10 And like I said, I would walk away personally with a lot of money. But we think this could be
0:02:18 actually way bigger. So let’s, let’s build that. And so we took that acquisition, made an evaluation,
0:02:23 you know, turn that into a funding round where we put a lot more capital into the company. So we
0:02:28 could, you know, really build things out. And I sold some stock myself. So I, that was my first,
0:02:34 that was my first million liquid was kind of in 2008, I think I was 24. And that was a step
0:02:39 change, you know, was able to like pay off my credit cards and buy my mom a house. Like, you know,
0:02:43 all that sort of stuff that you want to do, that you dream of. And it sort of removed some of those
0:02:48 sort of early economic things. And I was really able to focus on just the business and swinging
0:02:55 for the fences, which is what they want me to do. All right. So when I ran my company, The Hustle,
0:02:59 I think we had something like 2 million subscribers. And we made money through advertising. We didn’t
0:03:04 actually make that much money per person reading the newsletter, because advertising in general is
0:03:09 kind of a crappy business model. And so I remember sitting down and I’m like, what are all the different
0:03:14 ways that I can make money off the hustle that aren’t advertising? And so to make sure that you
0:03:19 don’t make this mistake, Sean, me and the husband team, we went and looked at a bunch of different
0:03:25 ways to monetize your business. And we put it all together in a really cool document where we lay
0:03:30 it all out along with our research. And we call it very appropriately, we call it the business
0:03:34 monetization playbook. Go to the description of this episode and you’re going to see a link to
0:03:39 that business monetization playbook. It’s completely free. You just click the link and you can see it
0:03:46 back to the episode. You know, I hear these stories. Like, Zuck turns down a billion dollars
0:03:52 from Yahoo or whatever. This story about you at such a young age, turning down the opportunity to
0:03:58 exit and have this huge payday. I think you’re a better man than me. I don’t think I would have
0:04:03 been able to resist that. Was that an easy decision for you? Was that a hard decision? Like, what,
0:04:06 and like, you’re like, I think this could be bigger. Let’s go for it. Is that just like,
0:04:10 not blind faith, but just like an extreme amount of self-confidence and faith? Like, how do you even?
0:04:13 Or did you even want to do it? And the investors were like, nah, it’s too bad.
0:04:18 No, it wasn’t an easy decision at all, of course. You have to really seriously consider these things.
0:04:22 Also, as a fiduciary, you know, like you have a responsibility to shareholders.
0:04:27 Consider every acquisition. And we’ve had other acquisition offers and people trying to buy automatic.
0:04:32 Yeah, as recently as this year, I think you have to ask yourself with any acquisition,
0:04:39 like, will the mission that we’re doing be accelerated by this transaction? Or will it be
0:04:42 hampered? It’s like, we acquire a lot of companies like WooCommerce, I think, did a lot better
0:04:48 because we acquired it than they would have on their own. But there’s probably other things
0:04:53 that we try to buy that we didn’t buy that did really well on their own. Reddit was one actually.
0:04:58 We looked at Reddit at one point. Did you look at them in their
0:05:03 Condé Nes, $10 million valuation days? I actually really wanted to buy Reddit. I couldn’t convince
0:05:09 my board. They thought it was like two outside of our early stuff. So we never got that far on
0:05:12 the discussions or anything. But yeah, there was a point when they were like for employees and for
0:05:17 sale, kind of in the wired offices on Third Street and San Francisco. I just thought it was really
0:05:23 cool. So obviously they did so very well. But when you created WordPress, it seemed like it took
0:05:27 off like within a year. I forget which year you started it. But like I said earlier, I think I
0:05:33 was using it starting in like 10 or 11, 2010 to like pretty early on. And I at the time was like
0:05:36 a Tennessee college kid. So if I had heard about it, then a lot of people had heard about it.
0:05:42 What was the first version of WordPress like? 2003. Oh, wow. Okay. I wrote a blog post on this
0:05:47 called like meaningful overnight success. Because basically, like what people see is overnight
0:05:55 success is often a thousand days of relevance or people haven’t heard of you. At one point,
0:06:01 there was a joke that WordPress had more developers than users. The first few blogs,
0:06:06 which was ones I set up for my friends in high school, because no one was using software. So I
0:06:11 just kind of like would manually set it up for people. Early, we used to do these upgrade parties
0:06:15 where just I’d say like a new version of WordPress would come out, I just open up my apartment,
0:06:20 go to Costco, bought some booze or it’s a pizza and said, Hey, just come to my apartment and
0:06:26 I’ll upgrade your site for you. So you really, you know, the early days were very much bootstrap,
0:06:30 you know, just doing everything. It looks like overnight success later. We had some breakout
0:06:35 points, you know, when move will type change our license and other things, I think fortune
0:06:40 favors to prepare. It was because we had put in a lot of grind, a lot of work, a lot of community
0:06:45 building, a lot of contributions, a lot of code, a lot of everything in the many, many days before
0:06:51 that. But what’s crazy to me is I remember like four, six years ago, it said that WordPress was
0:06:56 used by something like 30 or 20% of all the websites on the internet. Then recently, I went
0:07:00 and looked at it. Now it’s like 40%. And like the thing that struck me, I was like, are you the
0:07:06 most under monetized business on earth? How are you not like the biggest company on earth? Because
0:07:12 I used WordPress and I used WooCommerce, which you also own at my old company. My WooCommerce
0:07:19 license, Sean, I think it was a $300 lifetime or $300 a year. And the product that I was using it
0:07:23 was making many millions of dollars. And I’ve got a friend, Sean, you and I both have a friend
0:07:29 who made $100 million off of the $300 a year license or whatever it was. It was like nothing.
0:07:35 You guys have to be like the least monetized company there is. I think the way I put it is
0:07:40 WordPress is almost like kind of the dark matter of the web. You know, when you build like a list
0:07:45 of like what’s the top website, you know, we’re not going to show up. I mean, WordPress.com will be
0:07:50 in the top 100 or whatever. The beauty of it is that the ecosystem of WordPress is probably like
0:07:57 $10 billion a year, at least revenue. Now my company automatic is, you know, 5% of that.
0:08:02 But if you add up all the companies and all the people, I’m not even counting like all the stuff
0:08:05 that you talked about, like people selling things on WooCommerce, which we know is like,
0:08:10 I think last year was over 30 billion of goods and services sold through WooCommerce.
0:08:14 But actually more than half of automatic revenue comes from things that aren’t just WordPress.
0:08:19 So we have a variety of different businesses, some really cool mobile apps like Day One or
0:08:24 Pocketcast, a new one called Beeper. Well, we’re like the top two acquisitions, right? Like even
0:08:29 Buffett, for example, if you study Buffett’s portfolio, it’s like a huge amount of the gains
0:08:33 came from like a couple of like really key acquisitions at key time, right? SeizeCandy at a
0:08:38 specific time has given them over a billion dollars, I think, of free cash flow over the years.
0:08:40 What’s the revenue number that you can say the whole company does?
0:08:43 We’ve publicly saved for over half a billion in revenue now.
0:08:46 Okay, got it. All right. So yeah, to answer the challenge question, what’s been the surprising
0:08:49 thing? What are like the crown jewel, like best acquisitions that you feel proud of?
0:08:56 Our most successful is probably WooCommerce. And so this came a lot from, you know, WordPress is a
0:09:02 platform. And so I did a lot of study of platforms. And so that led me to do a lot of deep reading on
0:09:07 Microsoft, actually. And it was funny, like if you look at some of the press around Windows 95
0:09:13 coming out, they talked about how for every dollar that Microsoft made from Windows,
0:09:20 there was $20 made by the word Windows ecosystem. By the way, that ratio is similar to what I
0:09:24 talked about earlier, where Automata makes about 5% of the money that works for its ecosystem.
0:09:29 I sort of found that platforms often do this. They create a lot more value, a true platform.
0:09:33 Have you heard that story of Bill Gates of talking about the when he meets Mark Zuckerberg,
0:09:36 he talks about the Facebook platform. Have you heard this? There’s like a quote I remember reading,
0:09:42 which was like, Gates was like, this is not a platform. He goes, a platform is when the
0:09:47 companies built on top of it generate far more value than the host platform. Whereas the Facebook
0:09:52 platform at the time was like Facebook was this gargantuan thing, all the small things on top,
0:09:56 and Facebook was just sucking a lot of the value back in. And he kind of famously was like, that’s
0:10:01 not what a platform is. I would agree with that assessment. And also that’s not a platform which
0:10:04 now a lot of businesses are built on. And there were some that sort of came up in the early days
0:10:10 like Zengar or whatever, or Spotify even, but it’s now not something that like every business
0:10:14 is built on because you can get work pulled. Like a not true platform, they might give you
0:10:17 some distribution early on when you align with their interests, but then they can easily pull
0:10:21 the rug on you, which I think Facebook ended up doing to a number of companies. So yeah,
0:10:25 I wanted to build a true platform. But of course, Microsoft famously had Microsoft’s office.
0:10:31 So they had an application built on top of Windows, which ended up being very lucrative. So
0:10:35 it was like, what’s going to be, you know, I have this platform WordPress, which is now becoming
0:10:39 like an operating system for the web. We were obsessed about backwards compatibility and auto
0:10:43 updates and things like that, learning a lot from successful operating systems in the past.
0:10:48 What’s our Microsoft office? And that ended up being WooCommerce, which was a sort of small
0:10:53 company, like I think 40 people based out of South Africa, a plugin for WordPress. It actually
0:10:59 started as a theme company. It’s called WooThemes. They developed this, actually a fork of another
0:11:04 open source e-commerce thing. And they started doing it just to sell more themes because themes
0:11:09 were kind of the big business for WordPress at the time. And this e-commerce plugin took off a
0:11:14 bit. Actually, we looked at buying it years prior. You know, can’t delete the code was really crappy.
0:11:19 And so we were like, oh, this is like really crappy code. We’re, you know, automax very much
0:11:24 like engineering led like technology R&D companies or like, oh, this is, but it just kept taking off
0:11:29 because they did such a good job like building something people want. So even though the code
0:11:33 wasn’t scalable, well organized, you know, they built something that they were really great at
0:11:38 that product market fit. So WooCommerce was taken off. So we, that was an early acquisition that we
0:11:42 did. Funnily enough, the competitor there was there were, there’s a private equity that was
0:11:47 trying to buy this plugin. So we kind of won over the private equity because they wanted to join
0:11:53 like our culture and everything like that. And Woo, you know, like I said at the time, it was 40
0:11:57 people, pretty small. They only had like four engineers, by the way. So a lot of those people
0:12:01 were like customer support or other things. We were able to take what we were really great at,
0:12:06 which is like engineering and scalability, all that sort of stuff and apply it to what they had
0:12:12 done really brilliantly, which is like great. This thing that people love to use. And that’s,
0:12:17 like I said, I think last year, I did over 30 billion of goods and services sold. So that’s,
0:12:21 that’s definitely one of our best acquisitions that we’ve done. But I also that e-commerce is
0:12:26 an incredibly competitive space. And you know, we’re blessed to have an incredible competitor
0:12:31 Shopify, which is a company I have a ton of respect for, you know, the founders and entrepreneurs
0:12:35 and the whole thing. They’re actually a really, really great company. You know, Toby and I think
0:12:38 have a lot of mutual respect for each other. You know, drive each other to be better.
0:12:44 So do you look at that? This is again, like, we’re kind of giving you a compliment and an
0:12:48 insult at the same time. So the backhand of compliment is in full effect here. So on one hand,
0:12:54 we’re saying, Oh my God, there’s 43% of the internet uses WordPress, or you know, y’all’s
0:12:59 products, there’s 500 million websites using WordPress. Like that is just such a mind boggling
0:13:05 number. And so on one hand, that’s in absolutely incredible. And on the other hand, Sam was saying,
0:13:09 are you the most like under monetized? Given that, are you the most under monetized? Because you
0:13:15 look at like a Shopify, Shopify alone right now, market cap is 150 billion. The ruthless
0:13:20 capitalists could say, Matt, you’re doing all this work. Your whole company, including WooCommerce
0:13:26 and all this stuff is going to be worth several billion dollars. But the closed source Shopify
0:13:33 variant of the e-commerce side is worth 150 billion. What should I take away from that?
0:13:36 And what do you take away from that? What meaning do you put on that?
0:13:43 There’s definitely some things that are easier in a proprietary sort of closed ecosystem
0:13:48 software model. You know, it’s easier to, you know, Shopify is really great at forcing people to use
0:13:53 their payments, for example. And WooCommerce, you know, you can use ours, but you can also use a
0:13:58 lot of other stuff. I think there’s sort of average revenue per subscribers is like 10x,
0:14:04 what WooCommerce is this. How I think about it is very much sort of short term versus long term.
0:14:10 So one, we have this philosophy of open source. I want all of the work I do, all of my creative
0:14:15 output to increase the amount of freedom and liberty in the world. I just something I believe
0:14:20 very morally. So that’s why I’ve dedicated my life to open source because open source software,
0:14:23 you sort of have bill of rights attached to it, right? The freedom to use this software for any
0:14:27 purpose, to see how it works, to modify it, to redistribute its modifications, the four reasons
0:14:34 of the GPL. To me, that’s a moral decision. The software I create, I want not to have a proprietary
0:14:43 license. Shopify is amazing. If Shopify changed their policies tomorrow, their customers are stuck
0:14:49 with it. They have no recourse on their proprietary license. We’re with open source. We could change
0:14:54 our policies tomorrow. I could become evil or whatever. And automatic could be a sell or be a
0:14:59 terrible company. You would still own all the code. WordPress, WooCommerce, etc. belong just as
0:15:04 much to you as they do to me. And that sort of freedom and liberty is, I think, better in the
0:15:11 long term. So I’d say open source has a slow burn. So it often is kind of slower to start up. But
0:15:18 then over time, it builds sort of this compounding momentum that is a bit unstoppable. And there’s
0:15:22 two things. One, it could be very successful in a zone, right? As WordPress has, you know, it’s 10x
0:15:27 the number two in the market. But two, one great thing it does is it forces the proprietary folks
0:15:31 to be a bit more open. So I use proprietary stuff myself and a lot of Apple things that
0:15:37 are proprietary. And I really love their products. I think Apple is probably a bit more open than
0:15:42 they would be otherwise because Android exists. There’s an open competitor, which is, by the way,
0:15:48 open source. And that kind of influences the market. So even if we don’t have make as much money as
0:15:53 Shopify or don’t have the market share Shopify in the e-commerce space yet, although, you know,
0:15:58 check in in 10, 20 years, let’s see where we are. We force the proprietary folks to be a bit more
0:16:03 open without they do things. The short answer there is basically, I do it because that’s what
0:16:08 I believe. I believe in open source. I just believe that the moral decision comes first.
0:16:15 And secondly, in the long run, let’s see. In the long run, we’ll see. Is that a good summary?
0:16:18 Proprietary. It’s just as easy to have a failure of a proprietary company as it is an open source
0:16:23 one. So I think, you know, being proprietary open source is a little bit orthogonal or not
0:16:28 causal to like whether you’re a successful product or not. People get really attached to it. But I
0:16:33 would say in the short term, it’s definitely usually a bit easier to monetize purely proprietary
0:16:38 stack. But over the long term, you can create a much, much bigger thing if you have this kind of like
0:16:45 flywheel of an open source, a community adoption, etc. Innovation, you know, a ton of innovation
0:16:51 happens with open source. All right, let’s take a quick break because I got to tell you about a
0:16:55 friend of the pod who’s got their own podcast. If you know Steph Smith, she is a legend. She’s been
0:17:01 on MFM many times and she’s got her own podcast called the A16C podcast. And it’s all about
0:17:06 technology. If you think about it, technology has evolved like crazy. I mean, I grew up in the 90s.
0:17:11 I had CDs, phones had cords. You couldn’t use the internet if your mom was on the phone. And now
0:17:17 there’s like 3D printers and there’s rockets that could go up into space. AI, there’s so much crazy
0:17:21 stuff going on. And you got to have a place that helps you stay ahead of the curve. And that’s what
0:17:26 the A16C podcast is trying to do. It’s a podcast from the VC firm, Andreessen Horowitz. And it’s
0:17:29 trying to give you an inside look at the trends that are shaping our future. They’ve had guests
0:17:34 like Mark Cuban and Neil Stevenson on and they talk about topics like deep fakes or the science
0:17:39 behind GLP ones or autonomous drones. No small boy stuff at all. Steph is the host. She’s awesome.
0:17:44 I think you’ll enjoy the podcast. So check it out. It is the A16C podcast. And I like this tag
0:17:48 line to say it’s like eavesdropping on the future. That’s pretty cool. That’s a good tag line.
0:17:51 So check it out. The A16C podcast wherever you get your podcast.
0:17:59 By the way, Sam, isn’t it nuts that Matt is clearly like this thoughtful, almost like soulful
0:18:05 entrepreneur who has been building this thing since he was literally like a kid, 19, 19 years old.
0:18:10 Like a guy you’d call wise when he was 21. Yeah, exactly. Like, oh, he’s an old soul type of thing.
0:18:17 Works on open source software. Like you said, it’s widely used. It’s almost free. It’s only good.
0:18:22 All I hear is like only good. And then you had this like random villain arc that people tried
0:18:26 to paint on you in the last, you know, year with this like drama that’s going on. I couldn’t believe
0:18:32 it. I was like, if I was going to put money on who’s like the least drama attracting founder,
0:18:36 it might have been you. So I thought that was nuts. Sam, quick, your reaction to that real quick.
0:18:41 And then I want to hear Matt’s thoughts on it. So I didn’t follow it too much. I’m a WordPress user,
0:18:47 but I just, and I’m friends with Jason Cohen of WP Engine. You guys had a fight, but I was
0:18:50 actually shocked, Matt. I thought that some of the stuff that you said, I was shot. You like,
0:18:55 people were insulting you and you felt like I insulted them back. I was like, I’ve read a lot
0:18:59 about Matt’s work. I don’t know Matt and I’ve listened to him. He doesn’t seem like someone who
0:19:05 would ever like insult someone. And I was actually surprised that you were going as hard as you were.
0:19:09 And I guess your perspective is like they’re coming after everything I made or they don’t
0:19:14 contribute, whatever. But I was actually surprised that you were pissed off. And I didn’t think that
0:19:17 you would be the type of guy that would come off pissed off.
0:19:21 You know, a failure mode, and I think that can kill many open source projects,
0:19:27 is when they get taken advantage of. And so just like a schoolyard bully,
0:19:31 like you kind of have to stand up for yourself. It’s kind of funny because you say you don’t think
0:19:35 of me as doing this, but actually, if you look at the history of WordPress, there has been
0:19:40 maybe four or five times in the history where I had this kind of villain arc.
0:19:46 People were like, we had a fight to protect like our principles and like the sustainability
0:19:48 and like the future of WordPress.
0:19:51 Can you give a one minute summary of what happened? Because I even half followed it. And
0:19:54 I’m sure there’s a bunch of people listening that don’t even know what we’re talking about.
0:19:56 Can you give like the one minute and try to be objective with this like,
0:20:01 like not just the your side of the story, but what happened? Can you explain?
0:20:05 You know, it’s an ongoing legal battle. So I can only say so much.
0:20:11 Basically, there’s a company called WB Engine started off like very positive in the community,
0:20:16 Jason Cohen, I think is awesome, by the way. But in 2019, they were bought by a private equity firm
0:20:23 called Silver Lake and sort of in the subsequent five years started becoming, I would say, more
0:20:28 parasitic of WordPress, also creating with how they were marketing themselves and branding
0:20:32 themselves a lot of confusion in the marketplace in a way that was threatening our trademark,
0:20:36 you know, the WordPress trademark. So people would sort of say, Oh, it’s WordPress engine,
0:20:39 and they wouldn’t correct them. And they think it was official. I even had very close friends
0:20:46 who were WB Engine customers who thought that was my company. And I would frequently get support
0:20:52 requests for WB Engine, like my sites down and things like that. You know, for a long period
0:20:56 of time, and two years prior to this fight started, I was doing our best to partner with them and
0:21:01 resolve all these things and resolve the trademark stuff. They just weren’t responding.
0:21:06 And basically, WB Engine is a web hosting service, maybe only for WordPress sites.
0:21:12 And the accusation, I believe, was that you felt they weren’t contributing to the project as much
0:21:16 as they should have been given that they make like a lot of money and also people confused
0:21:20 the two companies. On the contribution thing, is that like, I guess, like, what’s your leg to
0:21:25 stand on that? You know, for example, you know, does somebody have to contribute? Is that like a
0:21:29 rule? Or is that a suggestion, right? Is this like, you’re at church, you should put something in
0:21:34 the tray, but you don’t have to, technically, but it’s frowned upon? Like, what is the take there?
0:21:38 So WordPress, we do have this program we call five for the future. By the way, this is all
0:21:42 voluntary. It’s an open source license. You don’t have to do anything. You do whatever you want.
0:21:48 But we say that if you’re building a business on WordPress, you can allocate somewhere between
0:21:54 zero, one and five percent. Profit or revenue? It doesn’t matter. However you want to define it,
0:21:59 it could be time, it could be hours, it could be whatever. But and put that back into what we
0:22:04 call core, core WordPress, which is something that belongs in the open source project. So it’s
0:22:08 accessible to everyone. It doesn’t just benefit your company. That’s part of what’s made us so
0:22:14 sustainable and allowed us to be a open source project, which has really thrived more than,
0:22:19 you know, some of, you know, other great CMSs that were open source that came up at the same time,
0:22:24 like Joomla or Drupal or something like that, which haven’t has as much assesses us. By the way,
0:22:29 I think this is great self-interest as well. WP Engine is fairly unique in that pretty much every
0:22:34 other company in the WordPress ecosystem does this quite a bit. And in fact, if you look at old
0:22:40 versions of WP Engine’s website, they were, you know, very supportive of this. And actually even
0:22:46 say on their website, they would dedicate, you know, two or four full-time people and everything
0:22:51 like that. You know, fast forward to 2024, they had less than that on core. So I think that’s,
0:22:58 that’s a whole like sustainability health of the ecosystem, health of the product issue.
0:23:03 That’s not a legal issue at all. The trademark abuse of not just the WordPress, but also the
0:23:09 WooCommerce trademark. So you could argue that WordPress, WP, whatever, but like they’re also
0:23:13 using the WooCommerce trademark, which is fully owned by automatic. You have to protect that if
0:23:17 you don’t protect your trademarks, you lose them. And so we’re having discussions around that. We
0:23:21 have trademark licenses with other web posts, great relations with every other, and they’re,
0:23:24 they’re just a web post. They’re not a tech company. They don’t really create a lot of IP
0:23:30 and they’re a web post, which people think is the largest, but they’re actually, you know, probably
0:23:35 the sixth or seventh largest WordPress web post. There’s a lot of bigger ones. They’re a single
0:23:39 digit percentage of all the WordPresses in the world. You know, they probably have like 700,000,
0:23:44 800,000 or something. So people have made this into a bigger deal. It is, you know, some of these
0:23:49 previous controversies that got mainstream media coverages, you know, CNN, that I had this hot
0:23:53 nacho scandal in the first couple of years of WordPress, or a thesis fight, or the Easter
0:23:56 massacre of themes, like all these things I’m mentioning, you probably haven’t heard of.
0:24:02 It used to be like half my Wikipedia page. Now it’s not. Today, if you go to my Wikipedia page,
0:24:07 your other PR firm has the whole paragraph about this. I think in five years, maybe it’ll be a
0:24:11 sentence or not even out there at all. So it’s not my first rodeo. Sometimes you have to fight to
0:24:16 protect your open source ideals and the community and your trademark, by the way. I expect this to
0:24:21 resolve in the next few months. Although it’s easy to find, like if you go on Reddit or Twitter,
0:24:26 I get a lot of heat. A lot of people were pissed at you. I tweeted out that you were coming on
0:24:30 to the pod yesterday. There was a lot of angry people and I was a little surprised by that,
0:24:36 to be honest. Yeah. And, you know, some of the people are uncomfortable with, you know,
0:24:41 us having to fight protect ourselves. You know, WP Engine took some very aggressive legal action.
0:24:45 So it turned out when we thought we were sort of good-faced negotiating,
0:24:50 they were preparing a legal case to attack us because, you know, three days after I gave this
0:24:54 presentation, they launched this huge lawsuit with Quinn Emmanuel. It’s kind of like one of the
0:25:00 biggest nastiest law firms. And, you know, private equity is so famously like goes in, hollows out
0:25:04 businesses, extracts all the value, kind of kills it. There’s this crazy story. I don’t know if you
0:25:09 saw it recently where like one of the reason there was like shortages of fire trucks in LA
0:25:13 was like the fire truck manufacturers have been like rolled up by private equity
0:25:17 and they’ve been like jacking the prices. And that was like huge waiting list for like fire,
0:25:22 new fire trucks and fire truck repairs. And there’s lots of examples and not all private
0:25:25 equity is bad. There’s good investors and bad investors in every asset class.
0:25:31 Look, I didn’t follow the story in depth. I didn’t need to. I’m not a lawyer. Don’t need to be.
0:25:37 It’s common sense to me. Whose side am I going to be on? The private equity backed company that
0:25:43 sounds almost like it’s made by the by you guys, but it’s not. Or the founder who’s been working on
0:25:49 this for like, you know, 20 plus years of his life, open sourced it is, you know, used by everybody.
0:25:54 It’s kind of like a staple of the internet and, you know, captures like a tiny bit of the value
0:25:58 along the way. It’s pretty obvious to me, you know, which side I was going to come down on. So I
0:26:02 think it was, it was actually a common sense test, I think for most people. And I can’t believe how
0:26:07 many people are like, you know, on the PE side, it actually reminds me a little bit of like the
0:26:11 AI stuff right now. Wait, Sean, we did a whole podcast about the founder of this PE firm, though,
0:26:16 and how like fascinating we were with them. We do profiles on ruthless killers. And then we’re at
0:26:20 the end, we’re like, isn’t that awesome? And we’re like, yeah, do you want to be that way? Hell no.
0:26:24 Like that’s not me. But like, I’m glad that these people exist. Like you need all these people in
0:26:30 an ecosystem. Like it’s not, they’re not all bad. And there’s impressive things about how I think
0:26:34 is what Egan Durbin or whatever they like, I think that’s the guy that we talked about. You know,
0:26:38 it’s impressive in the same way that David Goggins is impressive, but I’m not going to go out there
0:26:42 and run until my toenails bleed. Like I like that he exists. That doesn’t mean I want to be like him
0:26:48 or even that I think that’s the right thing for most people to do. I think it was on, on your blog,
0:26:53 it could have been on the Tim Ferriss podcast, you wrote about how I think WordPress or automatic
0:26:58 has like roughly 2000 people. And I think you wrote about how you tried a bunch of different
0:27:02 ways to hire people. You’re like, did all these tests like Google does, like these like brain
0:27:06 teasers, and you tried a bunch of other stuff. And you said two interesting things that stood out.
0:27:12 You said what I found is that the people who are the best writers oftentimes are the best people
0:27:17 who we hire, not PhDs, not master degrees. It was a correlation between your ability to write and
0:27:21 communicate via the written word. And then the second thing you said that was pretty wild.
0:27:28 You used to hire people just by like emailing or texting, like it was like just through chat,
0:27:32 not ever face to face, not phone calls, things like that. Do you still hire people strictly
0:27:37 through text communication? You know, for some roles, we might do a Zoom if it’s a sales role or
0:27:42 something like that. You know, obviously it’s important to see how someone interacts. But
0:27:47 basically, you know, for a lot of our roles, you know, written communication is going to be the
0:27:51 primary thing. But also like people want to talk to someone like we’re not going to be like, no,
0:27:55 you can’t. Yeah, a lot of our hiring process can be completely asynchronous and completely text
0:28:00 based. And for the first thousand or so hires, I did a final chat for every single person.
0:28:05 Is your chat like slacking or g chatting or something? Yeah, it ended up being on Slack when
0:28:09 one Slack was invented. You know, before that I think it was on like Skype or aim or something,
0:28:15 you know, in the early days or IRC. I think the way you said it was we do auditions, not interviews.
0:28:19 So what does that mean? How do you how do you do auditions? Well, we do a trial project. So we
0:28:27 actually hire people on a standard sort of 25 an hour contract. And so we pay them to do and we
0:28:30 have screens with, you know, resumes and a little interview and stuff. But then we say like, let’s
0:28:36 actually do some work together. And there’s various versions of this for different roles. We’ve done
0:28:39 sandbox versions. We’ve also done it where they were actually talking to real customers, you know,
0:28:45 like a support person was actually like answering real tickets. But we’ve always been smaller than
0:28:49 a lot of the big tech, but we compete with them. And so we need to have like the same caliber or
0:28:56 better of talent. So part of I think automatic advantage is we’ve created an environment and
0:29:04 also sort of a way of hiring that finds people who might be overlooked by sort of a meta or
0:29:08 Google or something like that. And we give them an opportunity not just to be hired, but also to
0:29:12 participate in a company in a way that they can still be just as influential and have as much
0:29:17 impact. Because even like, you know, there’s other companies that might have remote workers.
0:29:20 But if you’re not at headquarters, you’re not going to be, you know, close to the sign,
0:29:24 not going to be next to the CEO, you’re not going to be able to grow or have an impact. But
0:29:27 we’ve tried to create it where our center of gravity or headquarters is really on the internet.
0:29:33 And, you know, I have colleagues in 90 countries, 90, even though we’re only, you know, 750 people.
0:29:38 And another sort of innovative thing we do, we didn’t do this in the beginning, but we moved
0:29:43 to it probably like 2012, 2013, is that we pay people the same salaries regardless of location.
0:29:48 So it’s kind of funny because we’re all like the quality DEI stuff, whatever. So much of
0:29:52 I feel like it’s virtue signaling. Because if you ask these companies and say like, hey, you know,
0:29:57 I’m not going to call anyone out by name, let’s say a big tech company, do you pay someone in
0:30:03 Pakistan the same that you pay them in California? Usually the answer is no. If they’re doing the same
0:30:09 job, you know, the same like code wrangler engineer or whatever like that. And they usually say no,
0:30:13 and they usually have some reason like cost of living or local markets or whatever.
0:30:18 But we sort of move to where we say, hey, same work, same pay. You know, it’s kind of a something that
0:30:23 you know, the past 100 years, that wasn’t always true for men and women even, you know,
0:30:28 or racial things or something like that. So I think the same more reasons why you say like
0:30:32 same work for same pay of people of different skin colors or something like that.
0:30:37 Within a country, I think you should do that globally. And I think that’s the future of work
0:30:43 actually, because to sense that you can be equally as valuable and generate as much value for a
0:30:48 customer wherever you are, you should receive the equal pay for equal work.
0:30:55 So I’m obsessed with being transparent about money, particularly with ultra high net worth
0:31:00 people. The reason being is that there’s not a lot of information on this demographic. And so
0:31:05 because I own Hampton, which is a community for founders, I have access to thousands of young
0:31:08 and incredibly high net worth people. We have people worth hundreds of millions and sometimes
0:31:12 billions of dollars inside of Hampton. And so every year we do this thing called the Hampton
0:31:17 wealth report, where we survey over a thousand entrepreneurs, and we ask them all types of
0:31:21 information about their personal finances. We ask them about how they’re investing their money,
0:31:25 what their portfolio looks like. We ask them about their monthly spend habits. We ask them
0:31:29 how they’ve set up their estate, how much money they’re going to lead to charity, how much money
0:31:33 they keep in cash, how much money they’re paying themselves from their businesses. Basically,
0:31:39 every question that you want to ask a rich person, we went and we do it for you and we do it with
0:31:43 hundreds and hundreds of people. So if you want to check out the report, it’s called the Hampton
0:31:47 wealth report. Just go to joinhampton.com, click our menu and you’re going to see a section called
0:31:50 reports and you’re going to see it all right there. It’s very easy. So again, it’s called the
0:31:55 Hampton wealth report. Go to joinhampton.com, click the menu and then click the report button.
0:32:01 And let me know what you think. Have you guys read American Kingpin, the story of
0:32:05 Ross Albright, The Silk Road? Have you read that, Matt? I think I’ve read some of the
0:32:09 long-form articles, but I’ve never read the whole book. Yeah. Oh, you’ve got to read this book,
0:32:13 man. I’m rereading it now because you just got released and it’s like the best book I’ve ever
0:32:17 read. It’s like a total page turner. The story of it for listeners, basically, Ross Albright was
0:32:21 accused and I think he did it, where he started Silk Road, which was eBay for drugs. In two years,
0:32:26 it did two billion in sales, gross sales, something like that. But what’s crazy is
0:32:31 it kind of sucks because this whole business was documented because he chatted with everyone.
0:32:37 Like he had 12 coworkers and he did two things that were interesting that I actually think
0:32:41 are going to be common. The first thing is that he obviously, because it was an illegal enterprise,
0:32:46 he never, they didn’t know the identity of the workers. It was just their username. Like one
0:32:50 guy’s name was like chronic pain. That was his username. So we just, he didn’t know this guy’s
0:32:54 real name. He just knew chronic pain as like the guy. Ross knew everybody’s name. They didn’t know
0:33:00 each other’s names or his. He made them send a license so that he could basically have that like,
0:33:05 you know, always have that in his back pocket, have leverage. But chronic pain didn’t know Ross’s,
0:33:08 sorry, I forgot that was actually important detail. That’s actually very similar to like
0:33:12 early agriculture. You know, everyone was sort of known by their username. There’s like interesting
0:33:18 merits to that. And then the other thing was that they only communicated via messaging. I was
0:33:21 reading this book, I’m rereading it now. And I was like, those two attributes are kind of
0:33:26 interesting for a company, which is like anonymous workers and, but you’re still oddly friends.
0:33:31 Like he developed relationships with his coworkers. This is a great LinkedIn post for you, Sam,
0:33:34 like 13 management lessons I learned from the Silk Road. Here you go.
0:33:41 I believe that he did murder for hire four times. He did a lot of bad shit, but he was actually an
0:33:47 inspiring leader. Like when you read like some of his like, like stuff. Well, he was very idealistic,
0:33:51 right? Like he had certain beliefs that drove him right. He didn’t intend, like he didn’t
0:33:56 necessarily intend, like for example, he wasn’t super interested in selling guns on the platform,
0:34:00 but he believed that people should be able to sell what they want. And his team was like, no,
0:34:03 no, you shouldn’t do this. This is going to increase the target on our back. Like you’re cool
0:34:07 with the drug side, but you don’t care about this. So let’s just ban it. It’s going to cause problems.
0:34:12 And he was like, well, no, that’s not the ethos of what we’re doing. Like we wrote a creed of what
0:34:16 we stand for and why we’re doing this. And therefore we got to stand by it. And they called
0:34:20 them captain. You know, it was very much just like, we are revolutionizing thing. And that’s
0:34:24 like a really interesting thing. Matt has a, you don’t get called captain, but what is your
0:34:30 like benevolent dictator for life, right? BDFL? It’s a term and open source that’s applied to like
0:34:35 Linus, Lennox, or Guido, Python or something like that. David Hammer, Hanson and Rails.
0:34:40 It’s sort of a joking thing. And one that I think none of us like really attach ourselves to,
0:34:44 just kind of like an internet lower thing. Well, you do a couple of other interesting things,
0:34:48 right? Cause you’ve got this like multi-billion dollar company used by most of the internet,
0:34:52 but you run your company in these interesting ways where remote work, I think is you’re famously,
0:34:57 we’re early and heavy into remote work. And you’ve talked a lot about that, but you do a couple
0:35:01 other interesting things. So we talked about auditions instead of interviews, but you also do
0:35:06 everybody in the company, including yourself works customer support, I think one or two weeks out
0:35:10 of the year. Can you talk about that one? Yeah, part of our hiring process is your first two weeks
0:35:15 of doing customer support for every single hire, whether you’re like our new CFO or chief legal
0:35:20 officer or, or whatever role it is. And then once a week a year, you rotate back and doing customer
0:35:25 support. By the way, lots of companies have versions of this. So it’s definitely not anymore.
0:35:29 The first to do this or anything like that. Why should a company do that? If you look at every
0:35:33 successful business, the closer they are to customers, generally the more successful they are.
0:35:38 And so it’s very easy, especially when you’re running something on the internet and distributed
0:35:44 for people to become numbers or stats or something on your look or dashboard or something like that.
0:35:49 And so, you know, getting back to like every individual, every number of your signups,
0:35:54 you might have 5,000 signups in a day, but each one of those people is like, has a story.
0:35:59 You’ve just learned a lot about your product. And it’s, I think the best way to sort of do
0:36:03 iterative customer developments. I think Eric Reeves talked about this or Steve Blank, you know,
0:36:07 the kind of like get out of the office and go meet the customers. And I’m very inspired by like
0:36:11 leaders at Salesforce. Talk to Mark Beanieoff or someone like that. They’ll typically spend a quarter
0:36:18 to a third of their time with customers, even at that scale. Is there a story or any epiphany you
0:36:23 had from doing this? You’ve probably done this now, you know, for decades. So is there like an
0:36:29 insight that came from this? Just the other day, a few days ago, I spent like 30, 45 minutes with
0:36:35 a gentleman who kind of checks expenses at the company. You know, because anyway, we have like
0:36:40 these ramp cards and people who expense things and stuff like that. You know, sometimes we like
0:36:44 say, you need a receipt for this or a question at expense. I just want to understand more about
0:36:48 this and also make sure that the way we were doing this was the most hated man at the company,
0:36:54 by the way, like, well, I had gotten some feedback from folks, they felt, you know,
0:36:59 some of the questions they were getting felt a little aggressive. And so, you know, we want to
0:37:04 talk about one, I just can’t want to see like the tools he used and how the work did and stuff
0:37:08 like that. So some of that was just shadowing. So I was like, okay, because I want to understand
0:37:13 the interfaces. This was also really helpful, like going through support. I realized that some of
0:37:18 our internal tools like don’t represent, you know, best practices and design or usability, you know,
0:37:23 sometimes, you know, so that internal stuff doesn’t get the love that your external stuff does. But
0:37:27 then also, you know, we just sort of talked about like the culture of automatic bedside manner,
0:37:32 if you will, like how can we like, you know, hold these principles, like we need to really
0:37:37 enforce our policies and make sure we do, you know, we get audited and everything. So like,
0:37:41 we need to have these things from like a good accounting principles point of view,
0:37:44 but also doing it a way that like when we have these conversations, we’re talking
0:37:50 about the principles of it. And the reason why. So it’s not just like I’m giving you Sean a hard
0:37:54 time because you didn’t have a receipt, but like, hey, if we don’t have this receipts,
0:37:58 you know, it’s sort of art of firm might question this. And then, you know, that might
0:38:03 create an issue for XYZ or something like that. When I first moved to Silicon Valley, I came
0:38:07 to work with this guy, Michael Birch, and he was he represented everything I wanted. He had already
0:38:14 built like successful tech companies, and he had made it. And I was a 23 year old kid who wanted to
0:38:18 make it. And so I’m super excited to go into the work the first day. And I’m like, I’m gonna learn
0:38:21 so much from this guy because he’s not just done it one time, he’s built like four successful
0:38:25 companies. I’m ready for him to teach me to kind of like the dark arts. I’m like, what’s the strategies
0:38:32 to growth hacks? What this like super like high level strategic thinking. And the very first week,
0:38:37 he puts me on not the new shit. Like the oldest company that he had started something he started
0:38:42 back in 2001. It’s like birthday calendar or something. Yeah, birthday alarm. Is that still
0:38:48 going? Birthday alarm? Still going. And so I as like 25 year old company now. So I at the time,
0:38:53 I was like, Oh man, like, I got to do this like whatever. And he tells me the story. So I actually
0:38:58 learned this really valuable lesson in it. I go, so what’s the I got curious, because instead of
0:39:03 just like being bored at doing like birthday alarm, which seemed like this old outdated product at
0:39:06 the time, a little curious. So I started asking him, like, where did this come from? Like, how did
0:39:11 you even come up with this idea? Why did you build this product? And what he told me was he goes,
0:39:16 my very first startup, I quit my job. I wanted to like, build a successful tech company, like do
0:39:21 an internet company. Internet was like the new thing back in 99 2000. And he quit a high paying
0:39:26 insurance job while his wife was pregnant and was like, I’m going to make it. So he tried to create
0:39:30 something really fancy. So he’s like, Oh, with the internet, he credit or create something that many
0:39:33 people have tried like Sean Parker, try to create this a self updating address book, which is like,
0:39:38 you know, I have your information, I have your name, your address, but you move Matt. Now I don’t
0:39:42 know that you moved. So wouldn’t be cool if you could just update your info in one place and it
0:39:46 updated in all your friends address books. So we now have your latest and greatest address. So that’s
0:39:51 what he wanted to build. And he’s spending like nine months heads down, like doesn’t leave the
0:39:56 bedroom coding this thing. And it’s not really going anywhere. But because he was a one man
0:40:00 show, he was also doing, you know, he was the designer, he was the developer, he was the ops
0:40:05 guy, he was the customer service guy, like he did all of it. And he was like, it’s the customer
0:40:09 service that was actually the key because he was answering support tickets. And he’s like over and
0:40:12 over again. He’s like, I spent like, you know, seven hours a day banging my head against the wall
0:40:16 trying to figure out why nobody wants to use our product. I think it’s so cool, but nobody wants
0:40:21 it. And then the hour I was doing customer support, he’s like, I noticed that a bunch of people kept
0:40:25 thanking me for the birthday reminder feature I had built in, like just the one feature, which was
0:40:29 like a throwaway idea, which was just say, if you know, forget the address, if it was someone’s
0:40:33 birthday, I would just tell you, you know, Hey, it’s our birthday today. Remember that this is
0:40:37 before Facebook existed, right? So you didn’t have Facebook or a bunch of other ways that people could
0:40:42 do this. So he just threw away the whole product and renamed the company birthday alarm.com. And
0:40:48 he’s like, I expected to go nowhere. And that was the thing that took off. And you know, at that
0:40:53 time, birthday alarm had generated for him and his wife personally, like probably $20 million
0:40:58 of pure profit by that time, because it was just every year was just generating a few million
0:41:03 dollars of profit. And it’s still to this day generating a few million dollars a year of profit.
0:41:07 Like, it’s this incredible business. That’s just the gift that keeps on giving that only came
0:41:11 because he was answering the support tickets. And he got curious, like, huh, like,
0:41:14 why are they keep talking about this birthday reminder thing? Like, is that, is that actually,
0:41:18 maybe I should do that. And he did it on a whim. And then in two days,
0:41:22 had built the product that actually people wanted, you know, that’s awesome.
0:41:26 I have one last question for you. It’s on AI. So there’s a lot of stuff you could talk about
0:41:31 with AI, but I just, I’m curious on your quick take about deep seek, because it’s also, you know,
0:41:35 they came out with this open source thing that there’s a lot of people on either side of,
0:41:40 how much they believe about the story, but like, what’s your quick reaction to what you saw with
0:41:45 deep seek deep seeks a really cool model. So, you know, every model has like kind of a vibe
0:41:50 with the way it’s tuned and everything like that. And so it’s a really fun one to play with. And I
0:41:55 would say, you know, the thing I tell people with all this AI stuff, just like use it, play with it,
0:42:01 you know, because it’s such early days. And there’s kind of a, you know, the way to prompt it,
0:42:07 the way to interact with it, there’s a skill there that you’ll learn. And the vibes of the
0:42:13 deep seek model are very cool. I think what’s I’m most excited about as an open source guy is that
0:42:18 they actually open source the model were really amazing papers about how they built it and it
0:42:27 opened weights. Like for example, at my company, I would say, don’t use like deep seek.com,
0:42:32 you know, for various reasons, that’s hosted in China and stuff like that. But like, we can run
0:42:38 the model ourselves, you know, locally. And that’s pretty cool. Or you can get it through
0:42:42 perplexity, which hosted in the US. So like, there’s, there’s lots of ways to access it.
0:42:46 It’s a, it’s a really fun model. So all these models have are like good at different things.
0:42:51 They have a coding version, they just released a cool image thing. And so think of these as like
0:42:56 little entities that you can interact with and run and spin up a boot. And you should just learn
0:43:01 the nuances and kind of flavors of each one. Matt, do you guys actually believe that they’ve
0:43:04 only taken the amount of funding that they’ve said? Didn’t they say something like
0:43:08 five or $10 million? They said that’s what it cost to run the final training.
0:43:16 That might be true for like some something, but obviously, like, I’m sure they’ve spent
0:43:22 invested a ton in other things. So, and I know there’s kind of this theory that maybe that’s
0:43:28 like a PR or PSI op or whatever like that. When I started reading about them, I got fearful.
0:43:33 It was pretty insane, right? That the market reacted the way it did. That, you know, it wiped
0:43:40 out a trillion dollars of value in 24 hours. It was pretty wild how big that announcement was. I
0:43:44 didn’t think that was going to happen. And I think you called it, Matt. Didn’t you like tweet
0:43:49 about this during Christmas time? Well, Andre Capati, you know, so full credit, like tweeted
0:43:53 about this like the day after Christmas and I saw his tweet and retweeted it. So that’s when I first
0:43:59 learned about Deepseek, started playing with it. Yeah, I think that with all these things, there’s
0:44:05 you can verify all the things. They made some amazing advancements and like how they train
0:44:09 things and how they run things and how they did memory interconnects and working with the constraints
0:44:14 that are some really cool engineering breakthroughs and they shared it. And this is stuff that I think
0:44:19 OpenAI had also figured out, but they hadn’t like shared it publicly. And so what I love about the
0:44:24 Deepseek guys is they they’re open sourcing it all. So and it’s all available under like a true
0:44:29 open source license. It’s not like the llama license where it’s free and so you have 700 million
0:44:34 users or something or I think Quinn Alibaba one, which is also a really great model that people
0:44:37 are sleeping on. So check out Quinn and some of these other models coming out of China. They’re
0:44:43 really, really good. But it’s a true open source license. So that’s awesome. Matt, thanks for coming
0:44:47 on, Matt. It’s good to see you again. And thanks for sharing everything you did about WordPress.
0:44:50 It’s been a pleasure. Yeah, we appreciate you, man. All right, that’s the pod.
0:44:58 I feel like I can rule the world. I know I could be what I want to put my all in it like no days
0:45:01 off on the road. Let’s travel never looking back.
0:45:09 Hey, everyone, a quick break. My favorite podcast guest on my first million is Darmesh.
0:45:14 Darmesh founded HubSpot. He’s a billionaire. He’s one of my favorite entrepreneurs on earth.
0:45:19 And on one of our podcasts recently, he said the most valuable skill that anyone could have
0:45:23 when it comes to making money in business is copywriting. And when I say copywriting,
0:45:28 what I mean is writing words that get people to take action. And I agree, by the way,
0:45:32 I learned how to be a copywriter in my twenties. It completely changed my life. I ended up starting
0:45:36 and selling a company for tens of millions of dollars. And copywriting was the skill that made
0:45:41 all of that happen. And the way that I learned how to copyright is by using a technique called
0:45:46 copywork, which is basically taking the best sales letters, and I would write it word for
0:45:51 word, and I would make notes as to why each phrase was impactful and effective. And a lot of people
0:45:55 have been asking me about copywork. So I decided to make a whole program for it. It’s called Copythat.
0:46:01 Copythat.com. It’s only like 120 bucks. And it’s a simple, fast, easy way to improve your
0:46:05 copyrighting. And so if you’re interested, you need to check it out. It’s called Copythat.
0:46:09 You can check it out at Copythat.com.

0:00:03 – All right, Sam, we just had an insane weekend together.
0:00:05 We gotta talk about it.
0:00:07 ♪ I feel like I can rule the world ♪
0:00:10 ♪ I know I could be what I want to ♪
0:00:13 ♪ I put my all in it like no days on ♪
0:00:14 ♪ On the road let’s travel ♪
0:00:16 – We just lived in a house for a weekend
0:00:20 with 25 other founder entrepreneur types,
0:00:23 probably five to 10 of them were billionaires,
0:00:25 a bunch of others were close,
0:00:28 and we didn’t just like talk or hang out,
0:00:31 we literally like slept under one roof,
0:00:34 sat and saw us together, played basketball together,
0:00:36 went to Walmart together a bunch of times.
0:00:40 – My Airbnb had bunk beds, so we bunked bed together.
0:00:42 – It’s as close as two men can get.
0:00:47 So we had an experience and I have in front of me
0:00:51 several sticky notes of golden lessons learned
0:00:53 and I phrased each of them, I don’t know if you do this,
0:00:56 but I phrased each of them to make it fun
0:00:58 because nobody wants to hear your vacation story,
0:01:00 that’s one of the great rules of storytelling,
0:01:02 is just never tell a vacation story
0:01:03 ’cause it’s so fun for you, but they weren’t there,
0:01:04 nobody cares.
0:01:07 But I think we should tell the biggest lessons learned
0:01:09 with the story that backs them up,
0:01:12 so it’s real, not just a generic lesson.
0:01:14 And I phrased all of mine like it’s Confucius,
0:01:18 like Bruce Lee whispered this into your ear.
0:01:18 – Yeah, I dig that.
0:01:20 And to give the background basically,
0:01:22 I think like three years ago you tweeted out,
0:01:24 “I wanna play basketball with interesting people.”
0:01:27 I think Mr. Beast like DM’d you and you’re like,
0:01:28 “Wait, is this real?”
0:01:30 You ended up phoning him and he was like,
0:01:33 “Yeah, come to my place, I wanna meet interesting people.”
0:01:36 The first year it was like you and Ben organized it,
0:01:39 it was like 19 of us in an Airbnb
0:01:40 and we were like, “What are we gonna do?”
0:01:41 So we played basketball.
0:01:44 The second year you organized it a little bit more
0:01:45 and you had like an itinerary.
0:01:48 This year you guys killed it, it was awesome.
0:01:50 It was an amazing event.
0:01:52 – I do like meeting interesting people
0:01:54 when I go to conferences or events.
0:01:56 I just hate conferences or events.
0:01:59 Like I get a pit in my stomach when I have to go.
0:02:00 And I know it’s good for me
0:02:03 and I know in the end I’ll meet some cool people.
0:02:05 I just hate the format, I hate the structure.
0:02:08 So it was like, well, instead of just complaining about it,
0:02:10 what’s the structure I would like?
0:02:11 It’s like, well, I don’t know.
0:02:13 What if it was just doing the thing I love,
0:02:15 I was playing basketball with those people.
0:02:18 We basically play ball all day and then we talk at night.
0:02:21 And that was the core idea is to use basketball
0:02:22 as the icebreaker.
0:02:24 And you broke your knee in the first two hours.
0:02:25 – Yeah, yeah.
0:02:29 So this was an event where you could tear up your knee
0:02:31 and be done in the first hour.
0:02:32 And I still had a good time.
0:02:34 That means it must have been a good event
0:02:36 ’cause normally that’s pretty brutal.
0:02:37 I did have a little pity party for myself,
0:02:38 but I feel better now.
0:02:40 – Are we allowed to say who was there?
0:02:42 – Yeah, I think we can say some of the people
0:02:43 that were there.
0:02:44 Yeah, let’s go for it.
0:02:47 – So MrBeast, who like, everyone knows him
0:02:48 as the guy on YouTube with hundreds of millions
0:02:49 of subscribers.
0:02:51 I think he’s a paper billionaire.
0:02:52 I think that’s public.
0:02:54 – Yeah, he’s one of the youngest billionaires in the world.
0:02:56 I think he’s 26 years old
0:02:57 and he’s worth a few billion dollars.
0:02:59 He’s one of the most famous people also in the world,
0:03:02 one of the most recognized entertainers in the world.
0:03:03 And when you hang out with him,
0:03:07 he’s also one of the like most intense fund to be around.
0:03:10 You know, just wants to play all in.
0:03:12 Like somebody said this once about Elon, they go,
0:03:16 he’s playing life as if the simulation theory is true.
0:03:18 You know, Elon has a simulation theory.
0:03:20 It’s gonna just be one of many simulations.
0:03:23 And so he therefore just goes all in cause, okay, whatever.
0:03:25 Let’s make this the most entertaining version
0:03:26 of that simulation.
0:03:28 I think that’s how Jimmy plays life too.
0:03:29 – So we are with him.
0:03:33 It was one of the founders of Airbnb who like on paper,
0:03:35 like according to Forbes is like the hundredth
0:03:37 or 90th richest person in the world.
0:03:40 It was another billionaire who was one of the first investors
0:03:41 in Tesla and SpaceX.
0:03:43 It was the founder of Reddit.
0:03:45 It was Jesse Itzler who’s on the podcast.
0:03:49 You, me, Al Dohn who runs like a quilting company
0:03:51 that does nine figures a year.
0:03:52 – Tons of people.
0:03:53 – David Perel and Nick Huber.
0:03:54 It was awesome.
0:04:00 – All right, so when I ran my company, The Hustle,
0:04:02 I think we had something like two million subscribers.
0:04:04 And we made money through advertising.
0:04:06 We didn’t actually make that much money per person
0:04:08 reading the newsletter because advertising in general
0:04:10 is kind of a crappy business model.
0:04:12 And so I remember sitting down and I’m like,
0:04:15 what are all the different ways that I can make money
0:04:17 off The Hustle that aren’t advertising?
0:04:19 And so to make sure that you don’t make this mistake,
0:04:21 Sean, me and the Hustle team,
0:04:23 we went and looked at a bunch of different ways
0:04:25 to monetize your business.
0:04:29 And we put it all together in a really cool document
0:04:31 where we laid it all out along with our research.
0:04:33 And we call it, very appropriately,
0:04:36 we call it the business monetization playbook.
0:04:38 Go to the description of this episode
0:04:39 and you’re gonna see a link to that
0:04:41 business monetization playbook.
0:04:42 It’s completely free.
0:04:43 You just click the link and you can see it
0:04:44 back to the episode.
0:04:51 – You wanna start first?
0:04:52 – Yeah, let’s do it.
0:04:53 All right, I got one for you.
0:04:55 Here’s one of the lessons I picked up.
0:04:57 And this is about the business ideas
0:04:59 that these guys were thinking about.
0:05:01 So if you’re out there and you’re wondering kind of like,
0:05:02 where’s the opportunity?
0:05:04 What should I be working on?
0:05:06 Here’s what I picked up from some of the most successful
0:05:07 people in America.
0:05:10 And it says, fish were the fish swim,
0:05:13 not where the fishermen stand.
0:05:14 Confucius, AKA me.
0:05:16 – Did you just make that up?
0:05:18 – You saw me writing these five minutes before we went live.
0:05:19 – I thought you had heard that.
0:05:21 Did you hear that somewhere else?
0:05:23 – There’s a scratch out on it, right?
0:05:24 – But did you get like Chinese food last week
0:05:27 and that was like a fortune cookie?
0:05:29 – Dude, I’ve had my share of Kung Pao Chicken.
0:05:31 All right, let me just tell you some of the ideas
0:05:34 that I heard from people who were in, at this event.
0:05:36 So you mentioned Jesse Itzler.
0:05:39 And I think one of the public things that he’s done is,
0:05:43 he got really into racing, like running endurance races.
0:05:45 So he just followed his curiosity.
0:05:46 – 100 mile races.
0:05:47 – 100 mile races.
0:05:48 He started to do 100 mile races.
0:05:49 While he’s doing 100 mile races,
0:05:52 he notices that the runners that are trying to do
0:05:55 these amazing physical feats are drinking coconut water.
0:05:56 And coconut water was a big,
0:05:59 like a big part of that niche, super niche community.
0:06:02 And he became a believer and spent time hunting down
0:06:04 what he thought would be the best coconut water company.
0:06:07 He ends up finding Ziko coconut water, partners with them.
0:06:09 And Ziko now is a big success.
0:06:10 They ended up selling, I think, to Coke.
0:06:12 And they’re in Whole Foods or they’re, you know,
0:06:14 it’s one of the big coconut water brands.
0:06:17 And he found it when he was small and just like,
0:06:20 just exploring these uncharted territories.
0:06:22 So here’s some other ones that I heard.
0:06:24 There was somebody there who’s making hundreds
0:06:28 of millions of dollars a year selling board games.
0:06:30 I’d never even had that on my bingo card.
0:06:31 I didn’t even know that was an option.
0:06:33 I did not even know that you could do that.
0:06:36 There was somebody there that was investing
0:06:38 millions of dollars into women’s sports.
0:06:41 Like, you know, not even just women’s sports,
0:06:43 like they’re trying to do things now
0:06:46 where you just buy a piece of a college program.
0:06:47 I didn’t even know you could do that.
0:06:49 Like that’s for sale.
0:06:51 What is that for sale?
0:06:52 Where is this listed?
0:06:53 It’s not listed, right?
0:06:55 – I went to a talk recently with this billionaire
0:06:58 who owned like the Timberwolves Mark Lazarie or something.
0:07:00 And he was talking about the box.
0:07:03 And he was talking about how he’s trying to buy college.
0:07:04 Do you buy the rights?
0:07:06 – They’re going to like the University of Alabama
0:07:07 or whatever, and they’re just like, cool,
0:07:11 we’ll give you $500 million for the Alabama sports program.
0:07:12 We want to own 51%.
0:07:15 – But it’s like, do they buy the future earnings?
0:07:16 Is that what it is?
0:07:18 – They’re basically, I think what’s going to happen is,
0:07:20 again, it’s uncharted territory.
0:07:21 You don’t know exactly how this is going to play out,
0:07:23 but I think the short version is
0:07:25 the college will spin out the program,
0:07:28 their athletics program as its own business entity.
0:07:30 They’ll sell equity in it.
0:07:33 They’ll use that equity to finance all of their sports,
0:07:34 like women’s lacrosse,
0:07:34 like things that aren’t going to be
0:07:35 the big revenue generators.
0:07:38 So they use it to fund all their programs
0:07:40 and maybe even school stuff.
0:07:43 And then those, and then the costs now are born
0:07:44 by the private equity person.
0:07:47 But now it’s this asset that didn’t even exist before,
0:07:48 like these college programs
0:07:49 could make a lot of money,
0:07:51 media rights and all the stuff,
0:07:52 but they weren’t even for sale.
0:07:53 Somebody was doing that.
0:07:55 There was somebody there that was like,
0:07:57 yeah, seven years ago,
0:08:00 I just got really obsessed with water.
0:08:01 I’m like, yeah, me too.
0:08:02 I thought my whole life is like, no, no, no,
0:08:03 like I got really obsessed.
0:08:05 Like, do you know what kind of water you’re drinking?
0:08:09 And I was like, no, like is this bad with microplastics?
0:08:10 What’s going on?
0:08:12 And he was just like, yeah, like I got obsessed.
0:08:13 And so I just started studying,
0:08:14 where’s the cleanest water from?
0:08:16 Where’s the healthiest water from?
0:08:18 And I realized that water was gonna become like oil,
0:08:20 that people were gonna more and more be drinking,
0:08:22 not tap water, but they wanted,
0:08:24 they’re gonna want basically bottled water,
0:08:25 canned water, things like that.
0:08:27 And that water is gonna have to come from somewhere.
0:08:30 And I wanted to find the best sources of water.
0:08:32 And so I went to West Virginia
0:08:34 and I bought this aquifer, this spring,
0:08:37 I bought this giant water source.
0:08:38 And he was like, you see that drink you’re drinking right there?
0:08:40 It’s like some popular brand.
0:08:42 And he’s like, that’s our water and they use our water.
0:08:44 So that’s good water.
0:08:45 And I was like, what?
0:08:47 This was just a side quest that he went on.
0:08:49 And again, it was curiosity driven.
0:08:50 – Was this one of the billionaires?
0:08:52 – Yeah, I mean, not billionaire,
0:08:54 but yeah, like whatever, close, close enough.
0:08:55 There’s a guy there, Al,
0:08:59 who started a quilting company with his mom
0:09:01 in Missouri Star Quilt Company.
0:09:04 And they sell fabrics for people who wanna make quilts.
0:09:06 His co-founder is his mom.
0:09:07 – I have a planned vacation.
0:09:09 So he owns this thing.
0:09:11 The company’s called Missouri Quilting Company.
0:09:13 And he basically bought,
0:09:15 he did a podcast three years ago with us
0:09:18 where he explained where he bought a town.
0:09:19 Is it Hamilton, Missouri?
0:09:21 He bought like an 1800 person town
0:09:22 where they own every building
0:09:24 and they’re building the Disneyland for quilting.
0:09:25 – Dude, just the thought of that.
0:09:27 So the first to go into quilting,
0:09:30 smart guy, like, you know, could have done any business,
0:09:31 goes into quilting.
0:09:32 – It’s like, what are you doing, man?
0:09:34 You’re throwing it all the way on quilting?
0:09:36 – Does a business with his mom, right?
0:09:38 Like again, independent thinking,
0:09:39 not just following the herd.
0:09:41 So then starts the business.
0:09:42 His mom does the YouTube channel.
0:09:44 He does the business side of it.
0:09:45 Business keeps growing.
0:09:47 And then it’s like, you know what we could do?
0:09:50 We could create the Disneyland for quilting.
0:09:52 And he literally goes and buys a town.
0:09:53 Again, who’s, is that for sale?
0:09:54 Can you do that?
0:09:55 How do you do that?
0:09:56 And that just kept happening,
0:09:59 which was like people who were playing games
0:10:00 that didn’t even seem popular.
0:10:03 Another lesson there is there was a person there
0:10:06 who had sold a piece of their company to Churnin.
0:10:09 And Churnin is now kind of known.
0:10:11 I first heard about it maybe like 10 years ago.
0:10:15 And Churnin is this really interesting investment work.
0:10:16 – They’re most famous for–
0:10:17 – PCG.
0:10:21 – Yeah, Peter Churnin was the CEO of Fox.
0:10:22 So he’s like a big swing and dick.
0:10:23 He’s been a baller for years.
0:10:26 But they’re most famous amongst like normal people
0:10:28 because they bought Barstool when it was nothing
0:10:29 and helped make it something.
0:10:30 – Correct.
0:10:32 And they just had this, again, independent thinking
0:10:33 where they were like, hey, I think these things
0:10:36 that other people see as small kind of toys,
0:10:38 things that aren’t gonna make a lot of money,
0:10:42 you know, media brands, blogs, YouTube channels,
0:10:44 I think these things are gonna be big.
0:10:45 I think basically, and they had this thesis
0:10:48 which was content to commerce.
0:10:50 It’s like, I think if you’re kicking ass at content,
0:10:52 you’re gonna be able to, instead of just making your money
0:10:54 through ad revenue and sponsorships,
0:10:56 you’re gonna be able to sell stuff to those people.
0:10:58 And they had this content to commerce thesis
0:11:00 and they go and they buy Barstool.
0:11:03 Content ends up being this juggernaut with commerce.
0:11:06 They buy, they bought Exploding Kittens
0:11:10 and they bought Meat Eater and they bought Surfline.
0:11:11 All these niche content brands.
0:11:13 We had a guy on the pod, the plant daddy.
0:11:15 – I met with them a couple of times.
0:11:18 There was like early discussions, well, you know,
0:11:20 three meetings that I had with the hustle
0:11:23 and I was like, what the fuck do you guys know?
0:11:24 Didn’t get that one right.
0:11:26 (laughing)
0:11:29 Turns out they know a lot.
0:11:30 They know a lot.
0:11:33 – Did he just like slide a P and L across the table
0:11:35 and he’s like, I’ll leave you three minutes alone with this.
0:11:36 – Like they told me this story
0:11:38 and I was like, you’re full of shit.
0:11:39 You don’t know what you’re talking about.
0:11:43 Like, you’re talking about my company, right?
0:11:44 It’s like, you know, like…
0:11:47 (laughing)
0:11:49 Like, but they were right.
0:11:51 I think what the premise was correct.
0:11:54 But yeah, I didn’t have that confidence
0:11:55 that we’re talking about now.
0:11:56 – And dude, they’re made a fortune
0:11:59 ’cause the market overlooked these brands.
0:12:02 These brands were not valued like high-flying tech companies
0:12:05 but they became, you know, multi-hundred million
0:12:06 dollar brands.
0:12:08 I really admire what TCG did.
0:12:09 – Yeah, they’re the best.
0:12:12 – There’s so many investors that all love
0:12:13 to sound like they’re smart and contrarian
0:12:16 and they’re all just, what’s your thesis?
0:12:19 AI, you know, AI is gonna be the future of everything, right?
0:12:21 It’s like, okay, you’re not wrong in that,
0:12:23 but like, there’s something really impressive
0:12:26 about somebody who looked at just like this magazine
0:12:27 or this blog or this YouTube channel.
0:12:29 – They did it with Doug DeMauro who was on our pod.
0:12:30 We’ve actually probably had three or four people
0:12:33 who sold their company on the pod to those guys.
0:12:34 – Right, right.
0:12:36 – And they’ve been right and they’ve been right
0:12:38 in a very, very big way.
0:12:39 So I’m very impressed by them.
0:12:40 So to me, that’s the principle.
0:12:42 Fish where the fish swim.
0:12:43 So fish where the real opportunity is,
0:12:45 not where the fish are understanding,
0:12:47 not where everybody, all the entrepreneurs are huddled up.
0:12:52 This, this Portuguese says, man does not sell chocolate.
0:12:54 He must become chocolate.
0:12:56 Okay, so what does this mean?
0:12:59 Three years ago when we did the first version of this event,
0:13:03 Jimmy, AKA Mr. Beast had launched his chocolate brand,
0:13:04 Feastables.
0:13:08 And it was like, okay, selling chocolate to little kids.
0:13:09 I had the opportunity to invest.
0:13:13 I think at a $40 million valuation was like the series A.
0:13:18 And I passed in like the beast empire or chocolate.
0:13:19 – No, in Feastables itself.
0:13:22 So it’s kind of thought about it.
0:13:23 I was like, I don’t really get it.
0:13:25 I didn’t really know much about the chocolate industry.
0:13:27 I thought his involvement was going to be like this.
0:13:31 Normal influencer brand is, I’m doing my thing.
0:13:31 I create my content.
0:13:33 Oh, my manager hands me this.
0:13:38 Hey, buy this, smile, ding, put it down, move on with life.
0:13:40 So I thought he’s just going to influence it.
0:13:42 I thought he’s just going to hold it up and buy it.
0:13:44 I didn’t, what I didn’t realize is that this guy
0:13:46 was going to go so deep into the world of chocolate
0:13:48 and end up knowing everything about chocolate
0:13:53 and running this company like an absolute maniac founder.
0:13:55 If I had known that, if I had known he was going to bring
0:13:57 his full intensity at this,
0:13:58 I probably would have thought about it differently.
0:14:00 I thought he was just going to hold up the chocolate bar
0:14:02 and see how many people clicked the link.
0:14:03 I was dead wrong.
0:14:05 So I want to tell a quick story.
0:14:07 You were there for one of the Walmart runs, right?
0:14:09 No, but I have a bunch of Walmart stories.
0:14:12 So we’re sitting there, we’re about to record.
0:14:14 He walks in, he’s like, hey, before we do this,
0:14:16 you guys want to go to Walmart?
0:14:17 Which I realized like at the time
0:14:18 sounded like a sort of a strange request.
0:14:21 Nobody’s ever asked me on a mandate to Walmart.
0:14:26 We walk in and he takes us to the chocolate aisle
0:14:30 and basically gives a like 10 minute masterclass
0:14:32 on the chocolate industry right there in the aisle.
0:14:34 And while he’s doing it, he’s not just like explaining
0:14:35 like, well, this is how it works.
0:14:36 This is how we do.
0:14:38 There’s our revenues, this whatever.
0:14:41 He’s also simultaneously restocking the entire aisle.
0:14:43 Like he pulled the cartons up to the front
0:14:45 ’cause they were like three inches recessed.
0:14:46 They were pushed back too far.
0:14:48 Some of the bars had followed over, they were crooked.
0:14:49 He straightens every single one of them out.
0:14:51 He puts the right flavors in the right spots.
0:14:53 If a bar was crinklier or broken,
0:14:54 he’d throw it to his chief of staff.
0:14:55 He’d be like, hey, can you buy this?
0:14:56 I want to have like, we should only have good bars.
0:14:57 No broken bars up front.
0:15:00 And he would basically restock the thing,
0:15:01 but his hands were moving at a speed
0:15:02 which showed you this is not the first time
0:15:03 this guy’s done this.
0:15:05 So he restocks it.
0:15:07 And one of the popular flavors was out.
0:15:09 And so he takes out his phone and he’s like,
0:15:10 oh, I have a badge.
0:15:12 And so he just badges into the back of Walmart
0:15:16 and goes and gets the box himself and restocks it.
0:15:18 And I was like, does any vendor get to do that?
0:15:19 And he was like, no, not exactly.
0:15:22 But they know like, I just do this, I really care.
0:15:25 And two things stood out to me.
0:15:28 The first was obvious, which was when high intensity,
0:15:31 obsessive people want to win,
0:15:33 they do the same things that the rest of us do
0:15:35 with the knob dialed up to 12.
0:15:37 Like they just take the knob and they just crank it past
0:15:38 even where you think it could go.
0:15:41 And for example, he was like,
0:15:41 I think you were there.
0:15:43 He was telling the story about like missing a flight
0:15:44 or something like this.
0:15:48 He like told the story about how apparently he flew to DC
0:15:50 and had a connecting flight to North Carolina
0:15:51 or something wherever he lived.
0:15:53 And he was like, you know what, screw it.
0:15:56 I’m driving from DC to Greenville, North Carolina.
0:15:58 It’s normally like, I don’t know, a three hour drive
0:16:00 or something, but I noticed that there’s 14 Walmart’s
0:16:01 in between on that route.
0:16:04 I’m gonna stop at every single one of them to learn.
0:16:06 And it turns like a three hour drive into like,
0:16:08 you know, a 20 hour drive.
0:16:11 And he told me at one point he goes, I have scanned.
0:16:14 I guess he’s got some app where you scan things in Walmart
0:16:16 and it teaches you about each skew.
0:16:18 He said he scanned every single product in Walmart.
0:16:20 And I don’t know if he was like, if someone said,
0:16:21 oh no, I’ve scanned all of them.
0:16:23 You’d be like, oh, so it’s like saying
0:16:25 it’s a thousand degrees outside, you’re just exaggerating.
0:16:27 But with him, I was like, oh, I bet you
0:16:29 you literally have scanned every single one of them.
0:16:31 – In the podcast we did, he was like, yeah, like, you know,
0:16:33 we want to do a thing where you buy every item in Walmart
0:16:35 for somebody in a video.
0:16:37 And he’s like, you know, but it’s $16.2 million.
0:16:41 It’s like, he knew the actual cost of the total inventory.
0:16:42 If you bought one of everything in Walmart,
0:16:44 like what it costs, I forgot what the number was.
0:16:46 But so, but I don’t want to make this just a jibby left fest
0:16:51 because there was another guy who was a top seller in Target.
0:16:53 – Yeah, man, I heard him nerding out.
0:16:54 It was wild.
0:16:55 – He took us to this shelf and he was like,
0:16:58 this shelf right here, he’s giving us a tour of Target.
0:17:00 And it shows you how the store works.
0:17:01 He’s like, this shelf right here
0:17:04 is the most profitable shelf in Target.
0:17:05 Is the highest profit per square inch,
0:17:08 which is how Target measures, you know, success.
0:17:10 And he’s giving us this Target Masterclass.
0:17:11 And we were like, are you also in Walmart?
0:17:12 He’s like, yeah, we’re in Walmart,
0:17:14 but we’re not doing so well.
0:17:16 I asked him, what’s exciting for you coming up?
0:17:18 And this guy runs a billion dollar plus company.
0:17:21 I assumed he was just gonna say,
0:17:23 I’ve got some board meetings to line up.
0:17:26 I’m taking the family to the Aspen.
0:17:29 And he goes, actually, I’m working the next three weeks
0:17:31 as a Walmart associate.
0:17:33 I was like, what?
0:17:35 And he goes, yeah, I’m gonna be,
0:17:37 he goes, our sales in Walmart are not the same as in Target.
0:17:39 And I’ve been trying to figure out why.
0:17:41 What I found remarkable is that you expect
0:17:44 the people who are the most busy, the most accomplished,
0:17:48 the most high net worth to be above these tasks.
0:17:50 Jimmy restocking the SKUs himself.
0:17:53 This other guy going to be a Walmart associate for three
0:17:55 weeks, you know, they don’t have to do any of this,
0:17:56 but they’re gonna do it anyways.
0:17:57 They’re not just doing it now.
0:18:00 Now that they’re successful, that’s how they got here.
0:18:03 And so that was the first really big takeaway
0:18:05 from this whole thing was the intensity
0:18:08 with which certain people play the game of business
0:18:10 and how that leads to success.
0:18:12 – That guy who you’re referring to
0:18:14 was the quietest person there, her one of.
0:18:16 And there was a point where I was hanging out with him.
0:18:18 He goes, can I get your guys’s opinion?
0:18:22 You know, I think in, I’m thinking about potentially
0:18:24 like making some type of business move,
0:18:26 which would value us at this valuation.
0:18:28 And we were like, what valuation?
0:18:30 And it was like in the billions.
0:18:33 And we were like, do you know who we are?
0:18:34 Why are you asking us this question?
0:18:37 Like, what are you talking about, man?
0:18:40 Like you, I don’t know who you asked this question to,
0:18:45 but not like, he was the most like humble person there.
0:18:47 And he was crazy successful.
0:18:50 It was pretty wild, that guy who you’re talking about.
0:18:51 All right, I have one.
0:18:54 Confidence beats IQ.
0:18:56 So, you know, there are a lot of
0:18:58 like really successful people out there.
0:19:00 Like when I read Warren Buffett’s biography,
0:19:03 he does the opposite where he was like,
0:19:04 oh, you know, I’m just this guy.
0:19:06 And it’s like, dude, you’re, you’re a bona fide.
0:19:08 – Aw shucks downplaying them.
0:19:10 – Yeah, it’s like, you’re a baby genius.
0:19:11 Like he was like, when he was like four,
0:19:15 he was like making 10 grand a month selling Pepsi.
0:19:18 But in general, the group of people who we had there,
0:19:22 there were some people for sure who are genius.
0:19:23 I think Jimmy is one of them actually.
0:19:26 I think when you talk to him, you know, he’s like brilliant.
0:19:29 But, and like Mario from Oscar was one of them.
0:19:32 Mario co-founded a company called Oscar,
0:19:33 which is a health insurance company,
0:19:34 which is one of the hardest things ever to do.
0:19:37 It’s worth publicly traded $4 billion.
0:19:38 So he’s like the man,
0:19:40 and he doesn’t even speak English or he does.
0:19:41 That’s a second language.
0:19:43 So like, you know, he’s from Germany.
0:19:45 – He’s genius.
0:19:46 – Dude, imagine going to Germany
0:19:48 and revolutionizing the German healthcare bar.
0:19:49 You know what I mean?
0:19:50 Like it’s pretty wild.
0:19:52 – Extra degree of difficulty.
0:19:52 – Yeah.
0:19:54 – Just go to someone else’s motherland and fix their shit.
0:19:56 – Yeah, which is wild.
0:19:57 But, you know, he was a genius.
0:20:00 But in general, dude, the wealthiest people there,
0:20:03 I noticed we’re not even close to the smartest.
0:20:05 And here’s an example.
0:20:07 One of the billion there guys was there.
0:20:09 He goes, man, AI is just gonna change the world.
0:20:10 You guys, I don’t think you guys get it.
0:20:12 Like I use it every day.
0:20:14 And I was like, how do you, how do you use it?
0:20:15 He goes, I can show you right now.
0:20:18 And he pulls out his phone and he talks to chat GBT.
0:20:22 And he goes, hey, chat GBT, you know, I have a question.
0:20:24 And he like starts like reading a question to it.
0:20:26 And then he’s like, now watch how amazing it is.
0:20:28 And he like, it repeats the answer.
0:20:31 And I’m like, oh, so you’re saying
0:20:33 that you just use chat GBT like all the time.
0:20:34 Like, yeah.
0:20:36 And I was like, well, like, have you like trained it?
0:20:39 He goes, train, you can train it?
0:20:42 Like, like he didn’t know that you could do these things.
0:20:43 And this particular guy, I read a company
0:20:45 doing billions of year in revenue.
0:20:49 I guess what I mean is like the percentage
0:20:52 of intelligence greater than me or you or someone else there
0:20:55 versus impact or net worth was not like that.
0:20:58 It wasn’t core totally agree with that,
0:21:00 which is that when you sit in a room like this,
0:21:01 two things happen.
0:21:04 One, you just get to sample like it’s Costco
0:21:05 and it’s new net Costco.
0:21:07 And you’re just getting to sample different life.
0:21:08 Oh, what do you do?
0:21:10 Oh, wow, you seem kind of stressed out.
0:21:13 Gotcha, like not interested in going down that aisle.
0:21:14 You seem like you’re having a lot of fun.
0:21:15 What do you do?
0:21:16 How do you think about this?
0:21:17 You got kids too.
0:21:18 How are you doing both, right?
0:21:20 And you get to sample people’s lifestyle
0:21:21 when you’re hanging out with them like this
0:21:23 for like, you know, 48 hours straight.
0:21:28 On top of that, you also get to do the measuring stick thing,
0:21:30 which kind of sucks ’cause you’re measuring yourself
0:21:32 against like some of the most creative,
0:21:34 successful, ambitious people in the world.
0:21:35 But a big part of it is you’re trying
0:21:37 to figure out the diff, right?
0:21:40 It’s like those little children’s games is two pictures.
0:21:42 What’s the difference between these two pictures?
0:21:45 And on one side is me and the other side is them.
0:21:47 And I’m always looking at what’s the difference.
0:21:48 And sometimes if it’s like a Mario or whatever,
0:21:49 it’s like, oh, cool.
0:21:52 Like his brain has an extra library in it.
0:21:54 There’s an extra wing that somebody donated to that brain.
0:21:55 All right, cool.
0:21:57 Like I can live with that.
0:21:58 I can sleep easy.
0:22:00 But there were other people where it was like,
0:22:02 oh, it just seems like they didn’t limit themselves.
0:22:03 That’s what I mean.
0:22:04 They just kind of went for it.
0:22:07 Or their courage was just on a little bit higher supply
0:22:07 than mine.
0:22:09 And you’re right that when you look at the diff,
0:22:10 very, very rarely was the diff.
0:22:12 These people are smarter than me.
0:22:15 Or they had some advantages I didn’t have coming up, right?
0:22:17 It’s like, in fact, there’s usually the opposite.
0:22:19 It’s like, damn, they had this huge chip on their shoulder
0:22:20 because their dad wasn’t around.
0:22:22 And because of this happened and they were dyslexic.
0:22:24 There’s a bunch of people over there that were dyslexic.
0:22:25 – I wish I was dyslexic.
0:22:26 – Yeah, I know.
0:22:27 – Man, all these guys.
0:22:28 – Autistic was the goal.
0:22:28 – Dude, dyslexic.
0:22:30 – Dude, every dyslexic guy there,
0:22:33 somehow was a good freestyle rapper.
0:22:34 Did you notice that?
0:22:37 – Like not only rich, but also cool in a group
0:22:39 of men held all around together, right?
0:22:43 – Yeah, I wish I was charismatic, like a dyslexic guy.
0:22:44 Like, that’s crazy.
0:22:50 It’s like if you’re blind, you’re a good like piano player.
0:22:51 And if you’re dyslexic,
0:22:53 you’re like the most charismatic guy on earth.
0:22:54 – Yeah, exactly.
0:23:00 – All right, let’s take a quick break.
0:23:02 ‘Cause I gotta tell you about a friend of the pod
0:23:03 who’s got their own podcast.
0:23:05 If you know Steph Smith, she is a legend.
0:23:06 She’s been on MFM many times.
0:23:10 And she’s got her own podcast called the A16Z podcast.
0:23:11 And it’s all about technology.
0:23:14 If you think about it, technology has evolved like crazy.
0:23:16 I mean, I grew up in the ’90s.
0:23:18 I had CDs, phones had cords.
0:23:20 You couldn’t use the internet if your mom was on the phone.
0:23:22 And now there’s like 3D printers
0:23:25 and there’s rockets that can go up into space, AI.
0:23:27 There’s so much crazy stuff going on.
0:23:28 And you gotta have a place
0:23:30 that helps you stay ahead of the curve.
0:23:32 And that’s what the A16Z podcast is trying to do.
0:23:35 It’s a podcast from the VC firm, Andres and Horowitz.
0:23:36 And it’s trying to give you an inside look
0:23:38 at the trends that are shaping our future.
0:23:41 They’ve had guests like Mark Cuban and Neil Stevenson
0:23:43 on and they talk about topics like Deep Fakes
0:23:46 or the science behind GLP1s or Autonomous Drones.
0:23:48 No small boy stuff at all.
0:23:48 Steph is the host.
0:23:49 She’s awesome.
0:23:50 I think you’ll enjoy the podcast.
0:23:51 So check it out.
0:23:53 It is the A16Z podcast.
0:23:54 And I like this tagline.
0:23:56 They say it’s like eavesdropping on the future.
0:23:56 That’s pretty cool.
0:23:57 That’s a good tagline.
0:23:58 So check it out.
0:24:01 The A16Z podcast wherever you get your podcast.
0:24:07 I have a related point, which is I just wrote these two words.
0:24:08 I don’t know if you can read this.
0:24:09 I am.
0:24:10 I am.
0:24:13 So my trainer has like a clothing brand that he creates.
0:24:14 It’s called Super Conscious Cup.
0:24:16 So one of the shirts he gave me from Super Conscious Cup,
0:24:20 my favorite shirt, it just on the side, it just says I am.
0:24:23 And then it’s underneath it says,
0:24:25 the two most important words in the English language
0:24:28 for whatever comes after them will define your life.
0:24:30 If you think you are destined for greatness,
0:24:33 if you think you belong at that table,
0:24:34 you’ll make different decisions along the way.
0:24:36 And then it becomes sort of self-fulfilling, right?
0:24:38 You’ll work at a different speed.
0:24:39 You’ll take different risks.
0:24:41 You will go for it in a different way.
0:24:43 Several conversations I had at this event
0:24:48 where I realized, damn, a lot of the downstream decisions
0:24:50 start with the little voice in your head,
0:24:54 the little director of your movie who’s deciding like,
0:24:55 what kind of movie is this?
0:24:57 Is this like an indie budget?
0:24:58 Is this a tragedy?
0:24:59 Is this a comedy?
0:25:00 Are you a joke?
0:25:03 Or is this a Marvel movie?
0:25:04 Are you the hero saving the world, right?
0:25:06 And like, I’m not saying one is better than the other,
0:25:08 but you get to decide what that little voice
0:25:09 in your head is gonna tell you.
0:25:11 ‘Cause the director says, you know,
0:25:13 what happens in the story, where you stand,
0:25:14 what you say, all of those things.
0:25:17 And I thought, damn, a lot of what I’m seeing
0:25:18 in how people are living their lives
0:25:20 and what they’re doing differently,
0:25:22 comes from the little voice in their head
0:25:24 just has a different script in mind
0:25:26 for what their life is all about, the “I am” statement.
0:25:28 – Or like, here’s a small example.
0:25:30 How about Jesse bringing his sauna?
0:25:31 Jesse, it’s like brought his sauna.
0:25:33 And he had two guys and I was like, what do you guys do?
0:25:36 He’s like, oh, we bring these saunas.
0:25:37 Like, whenever he wants to go-
0:25:38 – We keep the sauna hot.
0:25:39 – Yeah, he’s like, whenever we go,
0:25:41 when he wants to go to like a conference or something,
0:25:42 like this sauna is like a really cool way
0:25:44 to like create a bonding experience,
0:25:46 which it was, by the way, just chilling in the sauna.
0:25:47 It was freaking awesome.
0:25:49 And I was like, wait, Jesse, you got these two guys
0:25:52 who’s just like jobs like trail around this like sauna,
0:25:54 like across the country to bring to events.
0:25:55 That’s the coolest thing I’ve ever heard of.
0:25:56 He’s like, yeah, isn’t it great?
0:25:57 We get to hang in the sauna.
0:25:58 I was like, yes.
0:26:01 And that’s like another example of like intensity,
0:26:03 but like on a more relatable scale.
0:26:04 – Right.
0:26:05 – All right, I have one.
0:26:08 You could take your billions and shove it up your ass.
0:26:10 (laughing)
0:26:11 – Is that Seneca?
0:26:15 – Yeah, put that on one of those inspirational posters
0:26:16 that you’ve seen in your office.
0:26:20 There is this one guy who was one of the first investors
0:26:22 in a variety of Elon companies.
0:26:26 And presumably a billionaire,
0:26:29 like, you know, investing in Tesla
0:26:32 at a $60 million valuation or $100 million valuation.
0:26:34 You know, I don’t know what that,
0:26:37 is that like, is that like a hundred thousand times?
0:26:38 So something like that.
0:26:39 – We don’t do public math.
0:26:40 – Yeah, like a lot.
0:26:42 – It’s now a trillion dollar company.
0:26:44 – Yeah, so it’s a big deal.
0:26:48 You know, there was this funny story
0:26:51 where this guy was telling a story about working really hard.
0:26:54 And like he was grinding and his kid was sick
0:26:55 and he’s like, I had to take a week off
0:26:56 to like go and help my kid.
0:26:58 And you know, that was a big deal
0:26:59 ’cause I was working so hard.
0:27:01 And then this other guy came and he goes,
0:27:02 do you know how you guys are all talking
0:27:06 about working 16 hours a day on your companies?
0:27:10 Right now I’m doing that as well,
0:27:11 but my company is my family.
0:27:14 And I have retired from business
0:27:19 and I work 16 hours a day as the CEO of my family.
0:27:25 And when he said that, I was like, this is awesome.
0:27:27 And I imagine he was exaggerating a little bit
0:27:31 ’cause I imagine he still does some type of deal making
0:27:32 or something like that.
0:27:34 You know, I don’t know him well enough to know,
0:27:37 but I thought it was so cool when he said that.
0:27:39 And I thought like you have it figured out.
0:27:41 Same with Jesse Itzler.
0:27:44 These two guys, I can’t say the first guy’s name,
0:27:46 but Jesse also had the same energy
0:27:49 where I was like, this is the way,
0:27:52 and this is all personal preference.
0:27:55 You know, Jimmy wanted to be Elon cool, go do that.
0:27:57 But when I heard this other way of talking,
0:28:01 I was like, you know, after, this is easy to say
0:28:03 because everyone was wealthy, but after some number,
0:28:05 I don’t know what that number is, 10, 20, 30,
0:28:09 some millions of numbers, not a lot of it really matters.
0:28:11 And just like having a good time with your family
0:28:12 is something I really admired.
0:28:15 And I thought it was really cool that that guy said that.
0:28:18 And it made me realize that I was getting sucked
0:28:20 in this vortex of like money, money, money
0:28:23 and achievement, achievement, whatever.
0:28:26 But when I saw these guys talk and their energy,
0:28:29 I was more drawn to that than anyone else there.
0:28:30 Do you agree?
0:28:31 – Yeah, 100%.
0:28:33 I think when I go to events like this,
0:28:36 my instinct is to figure out, oh, how do you win?
0:28:37 Oh, how do you win?
0:28:38 How do you win?
0:28:40 What tactics, what techniques, what strategies,
0:28:42 what approaches work?
0:28:44 And instead, the better question almost every single time
0:28:46 is what game are you even playing?
0:28:49 And picking the right game matters way more
0:28:52 than figuring out how to win the wrong game.
0:28:54 – Dude, there was people there who were like
0:28:57 mini Genghis Khan’s where it’s like they want to dominate.
0:29:01 Like they get joy out of war and domination.
0:29:04 – They wanna build cities, they wanna dominate industries,
0:29:05 they wanna do that.
0:29:06 And that’s one game you can play.
0:29:08 And by the way, no judgment, great.
0:29:09 Do whatever game you wanna play out.
0:29:12 I just wanna know what the games are so I can pick.
0:29:13 And other people were like,
0:29:15 I wanna be CEO of my family full time.
0:29:17 And I’m like, eh, I’ve done a four hour stretch
0:29:20 with my kids like, I think I’m more of a 45 minutes a day,
0:29:23 45 minutes at a time, four times a day, that’s my ideal.
0:29:25 It’s okay, I’m not gonna be CEO of my family
0:29:27 ’cause I would actually be miserable
0:29:30 if I was a full time stay at home dad personally.
0:29:32 But okay, that’s a game I could play.
0:29:33 Then I talked to Jesse and I was like,
0:29:34 Jesse, what do you do?
0:29:35 Like what do you do every day now?
0:29:37 I’m training for races
0:29:39 and I’m coaching my kids sports things.
0:29:42 I do public speaking ’cause I feel like it keeps me sharp
0:29:43 and I get excited to get up on stage
0:29:45 and say some shit that lights people up.
0:29:47 He’s like, I’m selling calendars.
0:29:48 He’s like, it’s not gonna, he’s like,
0:29:49 I’m not making it a fortune.
0:29:53 I’m like, these guys, they’ll do that in a day or two a week
0:29:56 or we’ll do in a year, but I don’t know, I like doing it.
0:29:58 I’m doing what I wanna be doing.
0:30:01 And he was very at ease with that, he’s at peace with that.
0:30:03 And I think obviously some of that comes from maturity
0:30:06 but a lot of it comes from, it’s easy to be at peace
0:30:08 when you’re actually doing the thing that puts you at peace
0:30:10 when you’re doing the thing you like.
0:30:13 And if you’re kind of, I don’t know,
0:30:14 like masquerading around trying to just do
0:30:16 what you think you should be doing,
0:30:17 I think that becomes very exhausting.
0:30:20 And so I’m with you that figuring out what game to play
0:30:22 seems like the much more important question
0:30:23 at every phase of your life.
0:30:25 And the game I wanted to play in my 20s is different
0:30:27 than the one I’m playing currently in my 30s.
0:30:28 It’s probably gonna be different
0:30:30 than what I play in my 40s and 50s.
0:30:33 And I just gotta kind of reinvent myself.
0:30:33 – Dude, there was one guy there
0:30:34 he said he worked with Elon.
0:30:38 And apparently he had to do a meeting or something
0:30:42 with Elon and like the secretary told him like,
0:30:43 all right, you’re gonna do this meeting
0:30:47 but I need you to know that Elon makes,
0:30:51 his companies make $20 million every one hour.
0:30:54 So this better be a $20 million meeting.
0:30:56 – I heard a similar thing from a guy who worked with him
0:31:00 that he was like, Elon would have a meeting
0:31:03 but there would be like 40 or 50 people in the meeting.
0:31:07 And the reason why was not because that makes
0:31:08 for a more effective meeting,
0:31:10 but because it was like, if the right,
0:31:13 if the person who we need to talk to is not in this room,
0:31:16 it’s such a colossal waste of his time
0:31:18 that we’ll just fly everybody here
0:31:21 and we’re gonna have this, you know, 45 minute block.
0:31:23 And that way everybody’s here
0:31:24 because all of your time collectively
0:31:26 is not worth as much as his, his hour.
0:31:28 (laughing)
0:31:30 It’s just like such an absurd.
0:31:33 – Like it’s hard to, it’s hard to fathom this.
0:31:35 Let me tell you a really quick one
0:31:38 which is hard to work amongst this group, not universal.
0:31:41 So there was one guy, you weren’t there.
0:31:44 You were, Sean like busted his knee in the second hour
0:31:46 or something like that and had to stay at home
0:31:48 for like this whole, one whole session.
0:31:49 And there was this guy there
0:31:51 who was explaining how hard he grinds.
0:31:53 And then there was this other guy
0:31:55 who was one of the more successful guys there.
0:31:58 He was like, I work like 20 hours a week.
0:32:00 He’s like, once my companies got to be
0:32:04 like some type of like predictable, stable, like,
0:32:06 all right, if we just keep doing this for 10 years,
0:32:10 we’re gonna grow 50% a year, hopefully like it’s gonna,
0:32:12 whatever, he was like, I started to work in 20 hours a week.
0:32:15 And he’s like, I wouldn’t work Fridays.
0:32:17 And it was really interesting to see
0:32:19 that not everyone worked hard.
0:32:21 Did you get that sense from people?
0:32:23 – The thing I pulled from it was
0:32:26 some people were basically operating like monopolies
0:32:29 and other people were not.
0:32:31 Meaning there were some people playing a game
0:32:33 where the competition is so vicious.
0:32:36 Like, you know, like an easy example is YouTube.
0:32:41 If you stop uploading, the game stop, the music stops.
0:32:42 – There’s literally a million other businesses
0:32:45 in that same exact space to the exact same exact thing
0:32:46 who are ready to eat lunch.
0:32:48 – And every idea you put out there in a video,
0:32:50 somebody else is gonna copy.
0:32:52 And a lot of people do copy the exact videos that he does
0:32:53 and the exact script.
0:32:55 It’s all public information.
0:32:56 It’s all super competitive.
0:32:57 There’s no gatekeeping.
0:32:59 And then there’s other people who were like,
0:33:02 yeah, all we had to do was get to this.
0:33:04 Like, we just had to get this shelf space.
0:33:07 Like, there was one guy who was showing us a shelf at Target.
0:33:10 And he was like, basically seven years of the company
0:33:13 was just like hard work dedicated to getting on the shelf.
0:33:15 But once you’re on the shelf,
0:33:17 it’s almost impossible for anybody else to get on the shelf.
0:33:19 All we have to do now is stay on the shelf.
0:33:20 By the way, this shelf right here,
0:33:22 like this little rack you’re looking at,
0:33:24 this is $300 million a year.
0:33:27 And you’re just looking at it, you’re like, oh, damn.
0:33:32 Like, wow, one shelf in Walmart, one shelf in Target
0:33:35 is like the entire revenue streams
0:33:36 of like these online only companies.
0:33:38 But you’re extremely defensible
0:33:41 compared to other businesses where
0:33:43 the moment you take a break,
0:33:46 you have the entire internet competing with you
0:33:47 on that same thing, you know what I mean?
0:33:51 – Yeah, yeah, that was an interesting thing.
0:33:52 Do you have-
0:33:54 – I have a quick one.
0:33:55 Health is wealth.
0:33:58 In a room full of very wealthy people,
0:34:00 how many fancy clothes did you see?
0:34:02 How many fancy watches did you see?
0:34:05 How many fancy cars did you hear people bragging about?
0:34:07 – Everyone, but Joe Gebbia looks shleppy.
0:34:09 – Joe Gebbia looked great, even in-
0:34:10 – Fantastic style.
0:34:11 – Even in workout gear.
0:34:13 He was wearing some nice shirts.
0:34:15 – He looks like he should be in like a Taylor Sheridan show.
0:34:18 Like if he made an appearance on “Landman”,
0:34:20 I wouldn’t even blink.
0:34:21 – Everyone besides him.
0:34:23 Dude, do you know he’s on the board of Tesla?
0:34:24 I didn’t know that either.
0:34:26 Like he does a lot of interesting stuff.
0:34:31 Everyone besides him looked like we’re at a slumber party.
0:34:33 – Yeah, well, we were also.
0:34:35 – Yeah, but during the day.
0:34:37 – Yeah, that should be the title of the slumber party
0:34:38 with billionaires.
0:34:45 – So I’m obsessed with being transparent about money,
0:34:47 particularly with ultra high net worth people.
0:34:50 The reason being is that there’s not a lot of information
0:34:51 on this demographic.
0:34:53 And so because I own Hampton,
0:34:54 which is a community for founders,
0:34:57 I have access to thousands of young
0:34:58 and incredibly high net worth people.
0:35:00 We have people worth hundreds of millions
0:35:02 and sometimes billions of dollars inside of Hampton.
0:35:03 And so every year we do this thing
0:35:05 called the Hampton Wealth Report
0:35:07 where we survey over a thousand entrepreneurs
0:35:09 and we ask them all types of information
0:35:11 about their personal finances.
0:35:13 We ask them about how they’re investing their money,
0:35:15 what their portfolio looks like.
0:35:17 We ask them about their monthly spend habits.
0:35:18 We ask them how they’ve set up their estate,
0:35:20 how much money they’re gonna leave to charity,
0:35:22 how much money they keep in cash,
0:35:23 how much money they’re paying themselves
0:35:24 from their businesses.
0:35:28 Basically every question that you wanna ask a rich person,
0:35:30 we went and we do it for you
0:35:32 and we do it with hundreds and hundreds of people.
0:35:34 So if you wanna check out the report,
0:35:35 it’s called the Hampton Wealth Report.
0:35:37 Just go to joinhampton.com, click our menu
0:35:39 and you’re gonna see a section called Reports
0:35:40 and you’re gonna see it all right there.
0:35:41 It’s very easy.
0:35:43 So again, it’s called the Hampton Wealth Report.
0:35:46 Go to joinhampton.com, click the menu
0:35:47 and then click the report button.
0:35:49 And let me know what you think.
0:35:54 – So, but the health is well thing was very real.
0:35:58 There was a lot of flexing on stuff you’re doing
0:36:00 for your health, what you’re eating and not eating,
0:36:02 how much, who’s your doctor?
0:36:04 Who’s your, what’s your protocol?
0:36:05 – But dude, no one was like–
0:36:08 – That Jack or Rip or anything, were they?
0:36:09 Other than Joe?
0:36:12 – Yeah, I thought people were in pretty good shape.
0:36:14 If you go to other industries, non,
0:36:16 kind of like tech, internet, not our bubble, right?
0:36:18 But like, go to like a conference
0:36:22 with the wealthiest people in finance or oil or whatever,
0:36:25 like pick any industry, their body shape looks a lot different.
0:36:29 – No, everyone, they looked like a healthy 55 year old.
0:36:31 – Dude, basically our day was go play basketball
0:36:35 for three hours, like an intense basketball game, come home,
0:36:37 go into a 250 degree sauna.
0:36:40 Then when you’re tired of the sauna, go into this pond
0:36:42 that was like freezing cold in North Carolina
0:36:43 and go plunge for three minutes.
0:36:46 So then go back into the sauna, then go back into the plunge.
0:36:48 Then there’s like a masseuse doing body work
0:36:49 and myofascial release for you.
0:36:52 Then you’re eating and everybody’s gonna be cleaning.
0:36:54 Every single person’s eating clean while we’re there, right?
0:36:56 It’s like, dude, that was the norm.
0:36:57 That is not normal.
0:37:00 If you were drinking something out of a plastic bottle,
0:37:03 it’s like basically doing heroin at this event.
0:37:06 – Dude, me and Nick Huber got Taco Bell at midnight.
0:37:08 – It’s secrecy.
0:37:11 – Yeah, like we didn’t want to tell anyone.
0:37:12 – Secrecy.
0:37:15 Dude, I took like a feastable bar in my like,
0:37:17 I like hid it in my hoodie and it crouched over to my bedroom
0:37:19 and ate it like in shame over there
0:37:20 because what am I gonna do?
0:37:23 Sit here and eat a chocolate bar in front of these men.
0:37:26 He’s just 52 years old and ripped.
0:37:26 – Yeah, he looked great.
0:37:27 – I was like, wow, this guy is, you know,
0:37:31 on the Forbes, you know, self-made billionaires list
0:37:34 and also just ripped for fun as a side quest.
0:37:36 – Dude, yeah, yeah, I mean, he looked great.
0:37:37 And then–
0:37:40 – Jesse’s 56 and runs 100 mile races.
0:37:41 How many 50 year olds are ripped
0:37:42 and run 100 mile races?
0:37:45 Nobody does that shit, especially successful guys.
0:37:47 – Jimmy wanted to do like a taste test.
0:37:49 He had everyone like gather around to do a taste test
0:37:51 of like Hershey’s versus his stuff.
0:37:54 And like I like pretended like, oh, wow, Jimmy,
0:37:55 your stuff is great.
0:37:56 I’ve never had this before,
0:38:00 but like at every Airbnb in the kitchen,
0:38:02 did you see this at every Airbnb?
0:38:06 It was like literally 100 candy bars.
0:38:11 And I literally had 2000 calories per night of his candy.
0:38:13 I ate so much of it.
0:38:15 I could tell you about all of it.
0:38:18 Like I could, I did, I didn’t need a taste test.
0:38:20 I could tell, I’m already an expert on,
0:38:22 I could tell you about all the flavors,
0:38:24 the peanut butter ones, the dark chocolate ones.
0:38:26 – You don’t have to lick the wrapper for the taste tests.
0:38:28 Like, no, no, no, no, this is just how I’m thorough.
0:38:30 – Like I’ve already, I’m like, Jimmy, I already know.
0:38:32 Like I’ve eaten all of them.
0:38:35 And I had M&M’s and Hershey bars on the plate
0:38:36 on the way here.
0:38:37 Like I could tell you about–
0:38:39 – The hilarious thing is when he’s hanging out
0:38:42 with like the upper echelon of the group,
0:38:44 he’s just like, I just tried a piece of this one.
0:38:45 You don’t have to eat the whole thing.
0:38:46 But like, you know, it’s more for younger people,
0:38:47 but like whatever.
0:38:48 And I was like, it’s for kids.
0:38:49 – It’s for kids.
0:38:51 And he’s like, he’ll give you like the dark chocolate flavor.
0:38:52 – Yeah, I was like, dude–
0:38:54 – And I’m sitting there with like cookies and cream
0:38:54 all over my face.
0:38:55 And I’m like, I like it.
0:38:57 I like the cookies and cream one.
0:39:00 (laughing)
0:39:01 – It’s like my daughter just learned that.
0:39:02 – It was my favorite, Jimmy.
0:39:03 You have more of this one?
0:39:05 – Yeah, my daughter just learned how to say more.
0:39:09 But I feel like this, more, more, more.
0:39:10 – Momo, Momo, this one.
0:39:12 – I was doing this all the time, more, more, more.
0:39:15 (laughing)
0:39:18 – Can I give you some of the negative ones?
0:39:20 – How about the guy who goes,
0:39:21 at that point, I was broke.
0:39:23 I think I only had like $20 million.
0:39:24 (laughing)
0:39:25 – Yeah, he’s telling some story.
0:39:27 Well, there was a hilarious conversation about prenups,
0:39:30 which is, you know, nothing more can be said
0:39:32 except for there was an incredible conversation
0:39:33 about prenups.
0:39:34 – I wasn’t about to go outside.
0:39:37 Me and someone else were gonna go outside of the sauna.
0:39:39 And someone said, hey, can I ask you guys about prenup?
0:39:42 And we were like, oh, let’s just sit right here.
0:39:44 I just want to listen.
0:39:45 Let’s just listen.
0:39:48 That like next three hours was one of the most entertaining
0:39:48 three hours of my life.
0:39:52 Like I don’t think I’ve laughed that hard in five, 10 years.
0:39:54 Like I was literally like belly laugh crying.
0:39:57 – Some shocking set setups.
0:40:01 People are billionaires are not like you and me.
0:40:03 If you’re listening to this, billionaires exist
0:40:04 and they’re not like you.
0:40:05 They’re not like you.
0:40:09 – I would say is the mid-wit meme was in full effect.
0:40:10 I’ll give you one example.
0:40:12 So the way we played our basketball tournament
0:40:15 was three teams and we played
0:40:16 and then it was supposed to be
0:40:19 the top two teams play for the finals.
0:40:21 But all the teams finished the same record.
0:40:22 We all had one win, one loss
0:40:24 after everybody played each other.
0:40:25 So it was like, okay, well,
0:40:26 which two teams advanced to the finals?
0:40:28 And so I, but everybody’s getting tired.
0:40:29 So I had to make something up.
0:40:30 So I was like, all right,
0:40:31 we’re gonna do like a penalty kick shootout.
0:40:34 So what’s the most exciting thing in sports
0:40:36 is in hockey or soccer where they do the shootout.
0:40:38 And it’s not gonna take up a bunch of energy
0:40:40 ’cause like we’re old guys and people are getting hurt.
0:40:41 We got to like, we can’t play an extra game
0:40:43 to figure out who’s gonna go.
0:40:45 So we said, all right, everybody step up to,
0:40:47 every team, each team pick five guys,
0:40:48 they’re gonna shoot a free throw
0:40:50 and then the team that makes the least,
0:40:52 like pressure’s on, everybody’s watching you.
0:40:53 So it was interesting.
0:40:56 One team, my team was like, this is a dictatorship.
0:40:59 Like, y’all are the five best to the other guys.
0:41:00 They’re better than you.
0:41:01 These five are shooting.
0:41:03 – Who was the dictator?
0:41:04 – Well, I was a dictator.
0:41:06 I didn’t even think there was another way.
0:41:08 I was like, of course we’re just gonna pick our five best
0:41:09 and do this.
0:41:10 Like, honestly, I didn’t even consider another method.
0:41:11 And I was the coach of my team
0:41:13 ’cause I had gotten injured, I’m on crutches.
0:41:14 And I was like doing that.
0:41:17 The second guy, the second team did merit-based.
0:41:19 And the third was like kind of like
0:41:22 a volunteer voting system or whatever.
0:41:23 And in the merit-based thing,
0:41:25 a funny thing that happened was,
0:41:27 one of the guys was probably less good at basketball
0:41:30 overall, made it in the practice shot.
0:41:31 And one of the guys who was one of their better players
0:41:33 on the team just happened to miss.
0:41:35 So I was like, damn, are y’all really gonna
0:41:37 not have one of your best players shoot
0:41:38 and have this other guy shoot?
0:41:39 I was just watching, I’m like,
0:41:40 I just wanna see what happens here.
0:41:42 I wanna see what happened with the egos.
0:41:44 I just need to know, I need to see this.
0:41:45 The guy was like, you sure?
0:41:46 You wanna do it?
0:41:47 He’s like, no, no, no, you should do it.
0:41:48 You made it.
0:41:49 If you want to, I’ll do it.
0:41:51 And then the guy’s like, no, I mean, I don’t know.
0:41:52 I think I’m gonna do it.
0:41:53 He’s like, okay, go ahead and do it.
0:41:57 So the guy steps up and he shoots and he makes it.
0:41:59 The guy who’s probably like, you know,
0:42:01 one of the weaker basketball players makes it,
0:42:03 clutched it up and has this awesome moment
0:42:05 and his team advances to the finals.
0:42:06 And I feel so happy for this guy.
0:42:07 And I’m like, that was amazing.
0:42:09 I’m like, I’m glad that they kind of honored it.
0:42:11 – Real Rudy moment.
0:42:13 – He had his Rudy moment, he honored it, he made it.
0:42:14 Good for him.
0:42:15 That was awesome, under pressure.
0:42:17 I love, I wanted everybody to have like gold moments
0:42:19 during the, during the event.
0:42:21 But then after the final and this,
0:42:23 their team goes on, wins the finals.
0:42:25 Happy, they’re holding the trophy, it’s all good.
0:42:28 Afterwards, we’re all like packing up to leave.
0:42:30 And he’s like, he goes up to that guy,
0:42:32 the other guy who sat out.
0:42:34 And he’s like, hey, I want,
0:42:36 can you with me go shoot free throws?
0:42:38 I want to know if that was the correct,
0:42:40 like EV decision, statistically.
0:42:42 And the guy’s like, oh man, you already made it.
0:42:43 Like you already made it, we already won.
0:42:45 Like you’re good, did you did it?
0:42:47 He’s like, no, no, no, I need to know.
0:42:48 I need to know.
0:42:52 And he’s like, no, like it’s like, honestly, it’s done.
0:42:52 I’m glad you did it.
0:42:53 You made it.
0:42:54 He’s like, I need to know.
0:42:57 And he’s like, all right, so they go and they shoot.
0:42:59 And of course the guy who’s played basketball his whole life
0:43:01 makes more of the free throws in like the,
0:43:03 with the larger sample size.
0:43:05 And then the other guy was like kind of head down for like,
0:43:07 he’s kind of bummed out about it for a second.
0:43:10 And I was like, what a,
0:43:13 what an intelligently stupid thing to do, right?
0:43:14 Like he wanted to know, like,
0:43:16 was this a positive EV decision?
0:43:17 What’s statistically the correct move?
0:43:19 – What does EV mean?
0:43:20 – Expected value.
0:43:22 It’s like, if you’re playing poker, you can,
0:43:24 you bet your chips and even if you lose,
0:43:26 you’re still happy because you made the right decision.
0:43:27 Even if the result didn’t pan out.
0:43:28 – That’s so funny.
0:43:29 – There’s chances.
0:43:33 And so I was like, way to snatch,
0:43:36 like way to snatch defeat from the jaws of victory.
0:43:38 And there was so many of these little moments where like,
0:43:40 there’s this guy there who’s like, he’s a total catch.
0:43:42 He’s like smart, he’s good looking, he’s ripped,
0:43:45 he’s successful, all these things.
0:43:47 And he, I just thought a guy like this
0:43:50 could walk into a coffee shop and like,
0:43:52 the cute barista would want him to talk to her.
0:43:54 There’s a, I’ve always wanted to be that guy.
0:43:56 You know, like, this guy could have been that guy.
0:43:58 He could have been, it could be so easy for him
0:44:00 to just meet someone amazing.
0:44:02 And instead, do you want to describe?
0:44:05 – So all right, I think what he did,
0:44:06 what did he scrape?
0:44:09 He built a program that scraped LinkedIn.
0:44:10 – Start with the desired result.
0:44:14 He’s like, I want a beautiful, intelligent, successful woman
0:44:15 or something like that.
0:44:15 I wasn’t there for the whole thing.
0:44:18 – Whatever, someone who fit his like heritage.
0:44:19 – So he was like, cool.
0:44:21 So he built an AI bot to crawl LinkedIn
0:44:24 to then scrape all the like successful, beautiful,
0:44:26 like trained on images of women
0:44:27 that he thought were beautiful.
0:44:31 – Like every woman who was like of a certain like look
0:44:34 in New York who was between, you know, whatever,
0:44:37 22 and 30 or whatever, he had like a date of,
0:44:39 he had binders of women.
0:44:41 – He had binders of women, it was hilarious.
0:44:42 And then he had this like whole system
0:44:45 for how we could reach out to them with like, it was amazing.
0:44:47 I don’t want to go into all the details, but like-
0:44:49 – Dude, he had a dedicated iPhone there.
0:44:51 He goes, this is my iPhone.
0:44:54 And I, he goes, I have two full-time engineers
0:44:58 who have built this program that auto DMs them,
0:45:00 this particular DM on Instagram.
0:45:02 Let me send her a voice note.
0:45:03 I go, you send her voice notes.
0:45:05 He goes, I have found that voice notes convert better.
0:45:08 And like he like showed me the voice note.
0:45:09 – As he told this whole system is like,
0:45:11 what’s that thing called the Rorschach test or whatever?
0:45:12 Where you see the blot and it’s like,
0:45:14 you either see like a killer or an angel or whatever.
0:45:16 His, it was like, some people were like,
0:45:18 this is the most impressive thing I’ve ever seen.
0:45:20 And then some people like the married guys
0:45:23 who were like, you know, 50, 40s and 50s were like,
0:45:26 brother, you’re, you’re, it’s too much.
0:45:27 You’re doing too much here.
0:45:31 You gotta just like, just see a cute girl and go talk to her.
0:45:31 It’s okay.
0:45:33 Let it, let it roll organically, baby.
0:45:34 It’s going to work better that way.
0:45:36 And I just thought it was hilarious.
0:45:36 I’m really late.
0:45:37 I got to go.
0:45:38 I’m supposed to be speaking at something right now.
0:45:39 I got to, I got to jet.
0:45:40 I just realized I’m way over.
0:45:41 – That’s it.
0:45:42 That’s the pod.
0:45:44 ♪ I feel like I can rule the world ♪
0:45:47 ♪ I know I could be what I want to ♪
0:45:49 ♪ I put my all in it like no days off ♪
0:45:53 ♪ On a road let’s travel never looking back ♪
0:45:57 – Hey, Sean here.
0:45:59 I want to take a minute to tell you a David Ogilvy story.
0:46:01 One of the great ad men.
0:46:03 He said, remember, the consumer is not a moron.
0:46:04 She’s your wife.
0:46:06 You wouldn’t lie to your own wife.
0:46:08 So don’t lie to mine.
0:46:08 And I love that.
0:46:09 You guys, you’re my family.
0:46:11 You’re like my wife and I won’t lie to you either.
0:46:15 So I’ll tell you the truth for every company I own right now.
0:46:18 Six companies, I use Mercury for all of them.
0:46:19 So I’m proud to partner with Mercury
0:46:21 because I use it for all of my banking needs
0:46:24 across my personal account, my business accounts.
0:46:26 And anytime I start a new company,
0:46:27 this is my first move, I go open up a Mercury account.
0:46:29 I’m very confident in recommending it
0:46:30 because I actually use it.
0:46:30 I’ve used it for years.
0:46:33 It is the best product on the market.
0:46:34 So if you want to be like me
0:46:37 and 200,000 other ambitious founders,
0:46:39 go to mercury.com and apply in minutes.
0:46:42 And remember, Mercury is a financial technology company,
0:46:44 not a bank, banking services provided by Choice Financial
0:46:47 Group and Evolve Bank and Trust members, FDIC.
0:46:48 All right, back to the episode.

0:00:03 All right, we should talk about AI, because you used to tweet about like boring, steady,
0:00:08 any cash flow businesses. And I feel like for this one, you just ripped off your clothes
0:00:11 and you’re streaking through the pool right now. So what is your take on AI?
0:00:28 Dude, I am for the first time in a while, I’m waking up greening every single morning,
0:00:32 just like stoked to get to work. I was saying to a friend, I was like, this is like somebody
0:00:37 just invented a new internet or something. Like that’s how big this feels. And he goes,
0:00:43 no, no, no, no, someone just invented fire. Right. Like it’s, it’s freaking crazy. And the
0:00:49 best quote that I’ve heard on this is it’s like we’ve discovered a new continent with 10 billion
0:00:56 people on it and they’re all geniuses and willing to work for free. Right. And so everyone’s talking
0:01:00 about this, you know, agents, right? Agents is like a meme right now. And what we’re really
0:01:05 talking about is digital employees and digital people. And when you shift your mindset like that,
0:01:11 you go, holy crap, like not only is this an incredibly exciting time to be an entrepreneur,
0:01:16 but the implications are going to be absolutely crazy. Like, you know, that’s saying there’s
0:01:22 decades, what is it? What is it? There’s nothing happens. And then there’s days where decades
0:01:28 happen. And I feel like right now, decades are happening, you know, like crazy. And here’s,
0:01:34 here’s the way I’d put it. So if we just paused AI, we shut down all the AI labs and all we focused
0:01:42 on was just roll out of what already exists. I think probably between self-driving cars and AI
0:01:49 agents, 20% of all current jobs are gone. What can you explain examples of the way that you’re
0:01:54 using it now to save and make yourself more productive, both personally and in a business
0:01:59 level? Or is this mostly like theoretical where you’re like, it’s almost there? Well, it’s a bit
0:02:05 of everything. So I’d say like, we’re in the AOL dial-up phase right now. But like AOL dial-up,
0:02:09 it’s still pretty freaking cool if you’ve never used the internet, you know, basic stuff that
0:02:14 everybody should be doing. Like I have an agent that preps me for every meeting. So 30 minutes
0:02:20 before every meeting, I get a text and it says, “Hey, you’re meeting Sean and Sam. You were emailing
0:02:24 them about this topic. You’re going to invest in their company.” And here’s two bios on them. It
0:02:30 goes to LinkedIn and you know, just summarizes it. So something very basic that otherwise a human
0:02:35 would do. Previously, my assistant would do that. I have it monitor my stock portfolio. I have it
0:02:40 tell me about local events. For the first one, so how did you set that up? How did you, what tool
0:02:43 are you using to do the meeting prep? 30 minutes before you get a text saying, “Hey, you have this
0:02:49 meeting with these people about this.” So you guys know Zapier. It’s basically Zapier for AI agents.
0:02:56 So Zapier is freaking amazing. Andrew, you introduced me to someone who worked at Lindy
0:03:03 and her name was Lindy. And I was like, wait, you, I don’t understand this. We got 25 minutes into
0:03:07 the conversation before I realized it was just a woman named Lindy who worked at this company
0:03:11 called Lindy. Basically, they founded the company and they were like, oh, like your name is an awesome
0:03:16 name for a company. Let’s just call it that. But it’s also super confusing because she runs the
0:03:24 sales team. Yeah, I was like, wait, so you’re, are you a smarter child? Most people, it’d be like a
0:03:29 quick two second thing. It’s like, oh, Lindy, yeah, yeah, that’s cool. How funny. And then they move
0:03:35 on and get into the sales demo, whereas Sam for 25 minutes is like, hold on, are you lending or
0:03:43 this is like, would not let it go for 20 minutes. All right. So when I ran my company, the hustle,
0:03:47 I think we had something like 2 million subscribers and we made money through advertising. We didn’t
0:03:52 actually make that much money per person reading the newsletter because advertising in general is
0:03:56 kind of a crappy business model. And so I remember sitting down and I’m like, what are all the
0:04:01 different ways that I can make money off the hustle that aren’t advertising? And so to make
0:04:05 sure that you don’t make this mistake, Sean, me and the HubSpot team, we went and looked at a
0:04:12 bunch of different ways to monetize your business. And we put it all together in a really cool document
0:04:17 where we lay it all out along with our research. And we call it very appropriately, we call it the
0:04:22 business monetization playbook. Go to the description of this episode and you’re going to see a link
0:04:26 to that business monetization playbook. It’s completely free. You just click the link and you
0:04:34 can see it back to the episode. So yeah, like, so think about, think about Lindy like Zapier,
0:04:40 except you can build AI in between. So Zapier might be, when I press this button on my phone,
0:04:45 go to the internet and do this act action or whatever, but I can’t think Lindy can add thinking
0:04:50 in between. So for example, you can make a Lindy that looks at your calendar. So the way it would
0:04:57 work in this instance is look at my calendar an hour before any events starts, go on perplexity,
0:05:02 go to LinkedIn, and I want you to write me a bio and then I want you to look at my email inbox
0:05:06 and tell me what we’re talking about. So that’s like pretty basic. And what we’re really talking
0:05:14 about at this point is removing admin work, right? So the agent that I have built is basically
0:05:18 by cobbling it together with duct tape and dental floss. It’s basically doing a lot of
0:05:24 stuff. My assistant would otherwise do. And my assistant’s amazing, but the problem with a human
0:05:27 is they, you’ll give them direction and you’ll say, I want you to send me these meeting
0:05:32 briefings or I want you to write my calendar like this. And over time, there’s drift,
0:05:36 they get busy, you give them more projects, and it just doesn’t happen. And so now all those things
0:05:42 that let’s be real are not really worthy of her time are now just being totally automated. So
0:05:47 that’s like the basic level. And I can name some of the other tools I’m using to do this,
0:05:52 but that, that’s where I’m at. So I use Lindy to build these things when it’s something I want
0:05:56 that’s custom. Are you an investor in Lindy? No, I’m not an investor in Lindy. I’m just like,
0:06:02 I’d power user and I’m obsessed with it. Like here’s an example. So there’s some restaurants in,
0:06:07 in town where they still require you to call in to make a reservation. They’re not on open table.
0:06:14 I made a Lindy bot where I can type in, Hey, make me a reso around five to seven PM tonight,
0:06:19 this restaurant, and it will call and an AI voice will talk to them, book the reso,
0:06:24 put it on my calendar and invite the people I asked it to invite. And if the person says,
0:06:29 are you AI, it’ll explain that it, yeah, it works for me. And if it asks for allergies,
0:06:34 it knows my allergies, like it’s pretty cool. And then other tools. So I use this one called
0:06:40 howie.ai. And it’s basically like a, you CC it and you just say, howie, can you find time for
0:06:49 me and Sam to go get a coffee? And it’ll, you know, book all that stuff. I use fixer, F Y X E R.
0:06:54 It’s this British startup. It basically reads every single email that comes into your Gmail.
0:07:00 It sorts it based on whether you need to respond to it or not. And then it drafts responses. So
0:07:07 let’s say Sean said, Hey, do you want to get coffee? It’ll draft a rejection or an acceptance of that
0:07:13 in my language. And it gets better over time. So those, those are like three tools that I’m using
0:07:18 that are awesome right now. And they’re really just replacing basic admin.
0:07:23 This is crazy. I’m looking at this right now. Sean, where’s this land with you? Do you use any
0:07:28 of this stuff? And does this make you fearful of somewhere? No, not really. I think everything
0:07:32 just evolves, right? Like ultimately, I’ve, you know, this diagram that’s always stuck with me is
0:07:37 like a K shaped future. So what’s a K shaped future? So if you imagine the letter K and you
0:07:41 say, All right, this is where we are now. That’s the first line. And then it’s basically like,
0:07:46 there’s a fork in the road with the K, right? If you learn how to use these tools, you’re
0:07:50 going to accelerate and go up at a way faster pace than you would have otherwise. And if you
0:07:54 don’t, if you just stick your head in the sand and pretend that these tools don’t exist and that
0:07:59 your job is always safe and that your business is going to run with all humans doing all jobs,
0:08:02 then you’re going to go down because you’re going to get out competed by companies that are going to
0:08:08 do something different. I personally use it less for my personal and more for my business. So
0:08:13 basically in my business, I have must have like a my own eval. So Sam, you know what an eval is?
0:08:18 No, it’s just like, when a new model comes out, like when llama drops their new model,
0:08:23 they always post with pride, like, Oh, here’s how we do on the benchmarking test, the evaluation
0:08:28 test. And it’s like some number, you don’t really know what it’s based off of. It’s just this like
0:08:34 abstract like, Oh, we’re a 73. And the last model from GPT was a 71. So we’re the best model now.
0:08:38 And is there a standard like as an eval, like a third party standard?
0:08:44 I have my own little eval, which is in my businesses, I basically picked a few tasks that
0:08:50 I’m like today humans in my companies do these tasks. And about every sort of three to six months,
0:08:54 we go back and we run through it again, we say take the latest model, take the latest product
0:08:59 everyone’s excited about and see like, what’s the real deal? Holy field. Can we actually automate
0:09:04 that task? Can it actually be offloaded from the human being yet? And there’s basically like a
0:09:09 spectrum. There’s like, can’t do it at all. There’s, you can do it, but you wouldn’t actually do it.
0:09:14 It’s not good enough. Like the person, you know, that, Oh, you wanted to use AI photography
0:09:18 for your brand, but every model has nine fingers, you know, two mouths. It’s like, All right,
0:09:23 well, I’m not actually going to put that on my website. So like cool in theory, but not in practice.
0:09:27 Then there’s, you could do it if there’s a human on top of it. So you could train a human to like
0:09:32 be in the loop to tweak it, to work with it, to make it better. And then there’s a, we don’t,
0:09:36 we just don’t need a human doing this anymore. And so what I’ve done is basically figured out,
0:09:41 all right, here’s like 10 tasks that are real tasks that we do that have a real cost and a real
0:09:46 human doing it in my companies. And I will know for myself, as we get closer to AGI, because those
0:09:52 I’ll just go from zero out of 10, which is where we started to like three out of 10, six out of 10,
0:09:55 eight out of 10, once eight out of those 10 tasks are like, yep, we just set up an agent
0:10:00 and like, we don’t need to have a person doing those anymore. That’s when I know, oh my God,
0:10:04 this is like, we’ve had like a real, real breakthrough is because it matters because
0:10:09 that’s the real test for me versus, I don’t know exactly how these evals work, but it’s like a,
0:10:13 it’s like an abstract thing, or it’ll be like, you know, they can pass the LSAT. So it’s like,
0:10:18 that’s cool, but I don’t need it to pass the LSAT. So if the opportunity is AI agents in my business,
0:10:22 then I’m going to test it on what can these AI agents do in my business. So what’s the example
0:10:26 of one of these things that you would want to automate? The simple example I gave was like
0:10:32 e-commerce, so photography. So every month we pay photographers to do shoots, real costs somewhere
0:10:38 between let’s say $5,000 to $10,000 all in for e-commerce photography. And you have basically
0:10:41 product photography, or you can have models in it, whatever, right? So there’s like a little
0:10:47 bit of a range there. So just product or models. And so I want to know like, when can I get rid of
0:10:53 that $10,000 a month? So when can I basically just show it my product on a blank and be like, cool,
0:10:57 put this on models? Or we have other ones where it’s like photos and videos. So like, you know,
0:11:01 you’ve seen these models where you give it a static image and it turns it into a video.
0:11:06 And you see the demo on Twitter and it’s amazing. It’s just a girl posing. And then she starts
0:11:10 like strutting with it. It turns into an AI video and it looks awesome. Cool. But then like,
0:11:15 you do it in practice. And yes, she starts strutting, but then her face starts morphing,
0:11:18 like she’s like being eaten by lava. It’s like, okay, I’m not going to put that on my website.
0:11:24 Like that would be a bad thing, right? To do that. Did you see the AI meme of Mark Zuckerberg
0:11:29 staring at Bezos’ wife’s boobs? He like leads it extra hard to like smell them.
0:11:36 Do you watch that video? It’s literally his eyes. They dart bat down from microsecond.
0:11:42 Yeah. And some guys made videos of him like not stopping. It’s just continually going in. It was
0:11:48 that’s pretty badass. What are we saying? Like another example would be in e-commerce,
0:11:52 you have inventory forecasting. This seems like a data problem, right? How much inventory should
0:11:56 I order? When should I order? And let’s say, let’s pretend you have five colors of a product,
0:11:59 which color should I be ordering? Well, it looks like an AI problem. You got a whole bunch of
0:12:04 historical data. You have real time sales data that’s coming in and then you should be able to
0:12:09 forecast. And like today we employ two human beings to do that forecasting. They’re not
0:12:14 perfect at it. It’s very difficult problem to solve. Can AI make them smarter and do it better?
0:12:18 Can I go from two humans to one human plus AI? Or can I replace the two humans that just have AI
0:12:22 give us more accurate demand forecasting? And this is a problem that every physical product brand in
0:12:27 the world has this problem. Whether it’s Hershey’s chocolate bars or it’s North Face jackets. Like
0:12:30 it doesn’t matter. Everybody’s trying to figure this out. How do we order the right amount of
0:12:34 inventory and not be stuck with too much inventory? It feels like we’re talking about solar power.
0:12:38 You remember like five, 10 years ago, everyone would be like, well, I mean,
0:12:44 solar is really cool and all. But I mean, like it’s still not cost competitive. But if you look
0:12:48 at the graph, it just keeps going. Cost goes down, down, down, down, down. And if you just
0:12:53 project it and you look at the rate of progress with these tools, like we’ve been exploring for
0:12:58 Aeropress doing the same thing. Cause we spent a lot of money on big expensive photo shoots. And
0:13:03 usually it’s just an Aeropress sitting there really well lit with nice coffee in it. So we’ve
0:13:08 been looking at Flair and some of these other tools. And I’ve been pretty blown away with where
0:13:14 I can get to. And I agree there’s definitely like a last mile problem, but it’ll be there in the
0:13:21 next six to 12 months, I think. And when it does, I think it, it’s really cool for your business,
0:13:27 but it also represents competition. Cause it just becomes infinitely easier to compete in all
0:13:31 businesses. And we’ll talk about this more, but like, I think that’s what’s crazy about all this
0:13:35 stuff. By the way, the most solved one of these is meeting, meeting minutes. Like, I don’t know,
0:13:38 Andrew, if you used to this, but I used to invite my assistant into our meetings and say,
0:13:42 Hey, can you take notes, jot down any action items or followups that we’re going to need to do?
0:13:46 That’s completely gone off her plate, which for her, it basically freed up, you know,
0:13:51 four hours of time for my assistant a day on average, let’s say. And if now she’s got four
0:13:56 hours back that she can spend doing the other things, because I’m using Fathom and Fathom just
0:14:00 sits in my meeting, records all the notes, perfect transcript with highlights, with a summary,
0:14:06 with action items ready to go 24 seven, never misses a beat. And not only did it replace him,
0:14:10 it’s way better than my assistant could do it. Cause she’d be trying to keep up and it’s just
0:14:14 was not going to be good enough. The level of accountability you can get to, right? Like,
0:14:18 I, I hate that feeling where it’s like, Oh, I did a board meeting with the CEO six months ago,
0:14:22 and I swear to God, I swear to God, they promised me this one thing. And then they’re like, no,
0:14:28 no, I don’t remember that. And being able to pull that up, I just did a really, a really cool thing.
0:14:33 Actually, me and my girlfriend did a relationship offsite, which sounds really lame and nerdy.
0:14:38 Patrick Campbell actually was the one that gave me the idea, but we basically would talk about,
0:14:43 Hey, what are, what are like our big strategic goals for the year, for our relationship, for
0:14:48 family, for life in general and stuff. And we recorded the entire thing with Otter, which is
0:14:54 like similar tool to Fathom. And I was blown away. Like we just chatted for three hours and it was
0:14:58 able to spit out, here’s all the action items. Here’s all the things that need to come out of
0:15:03 this. Then we’re able to put it into Claude and it built a plan for us. Very cool.
0:15:09 By the way, I was giving you a hard time. It does sound nerdy. And also I do the exact same thing.
0:15:13 We have relationship meetings as well. You, you have the local news business,
0:15:21 the newsletter. Sean and I both owned newsletters. When I did it, AI didn’t exist. And I felt like,
0:15:26 you know, hiring writers was actually the hardest part. Like who could write in my voice.
0:15:30 Now I would hate to be in the newsletter business because I see this stuff and I’m like,
0:15:35 it’s almost ready to roll, but it’s definitely ready to roll as an editor.
0:15:39 Are you using this for your newsletter now for the local news newsletter?
0:15:44 I’m not right now, but that’s what I’m working on. So like the pieces that I’m,
0:15:49 the more advanced stuff I’m doing are like, I’ve got a social media manager agent. I’ve
0:15:55 got a marketer agent. I’ve got a tax advisor and investment analyst. And I mean, these are,
0:15:59 these are roles I previously would have hired for where I didn’t, yeah,
0:16:03 either didn’t renew someone’s contract or I didn’t make a new hire for them. So it’s already
0:16:08 replacing people that I would have hired otherwise. Can you explain a couple of these?
0:16:12 Explain the tax advisor one and then explain the social media one.
0:16:18 So social media is very simple. It’s like, I post on X all the time and I’m lazy. I don’t
0:16:23 like cross posting on LinkedIn. I often forget. I’ll tweet about something and then not include it
0:16:28 in my newsletter. And so what I’ve done is I built a Lindy bot, a Lindy bot that looks at my Twitter,
0:16:34 all my other channels, and then once a week it summarizes all the stuff I’ve been talking about
0:16:39 and asks me, Hey, what do you want to include in the newsletter? And then it can give me a
0:16:45 first draft and it’s trained on my previous writing. So it can write, and it’s, you know,
0:16:50 it’s not perfect, but it’s like 80% of the way there. And if I didn’t care about my personal
0:16:54 brand, like, you know, many people just want like a quick and dirty newsletter, it would be totally
0:16:59 sendable. And it’s completely engaging if you prompt it, right? Like you can even say, like,
0:17:05 give me a subject line that will force the person to open the email, right? And it’s really good.
0:17:07 What about the accounting thing?
0:17:14 The accounting thing is freaking like blew my mind. So basically I exported,
0:17:20 I use zero for all my accounting. And for my personal, like financials and my personal holding
0:17:26 company, it’s like a rat’s nest. Like I have like 200, 300 random investments, all sorts of weird
0:17:34 assets and stuff in there. And so I exported all, all of it as a CSV out of zero. I trained
0:17:39 a Claude project on it and I started asking it questions. Did you upload like a book,
0:17:45 like a Warren Buffett book or like what did you? No, no, this is like basically to replace like
0:17:50 right now. So I have a woman who runs my family office and I might ask her, Hey,
0:17:54 how much should we spend on software last week? It’ll be, let’s say it’s a Saturday and I’m kind
0:17:58 of bored and doing a deep dive. I’ll email her on Saturday and I’ve got to wait until Tuesday
0:18:04 to get an answer. And so I was like, Oh, I just want to be able to query Claude. And so I was like,
0:18:11 Hey, I want you to rank the top 25 things I spend money on, or I want you to look at my structure
0:18:16 and I want you to tell me if there’s any ways that I could save on tax. And so one, it was crazy.
0:18:23 I actually saved a hundred thousand dollars a year of cash taxes by moving an investment from one
0:18:30 holdco to another. Thanks to Claude, right? So it is very quickly becoming tax advisor,
0:18:35 investment analyst. I can get it to write a deal. I can get it to draft legal documents. Like
0:18:41 these, I mean, everyone’s doing this, but like it is getting, it’s getting so good that I don’t
0:18:48 hire people. Let’s put it that way. Weren’t you hiring for like an AI back office person? Like,
0:18:52 you have some role I saw that you put up there. What was that? Yes. So the woman who runs my family
0:18:59 office, she’s got a family situation. So she’s got a transition out of the role. And so me and
0:19:03 my president were like, okay, what do we, what do we really want out of this role? And when we
0:19:09 thought about it, we were like, we actually just want someone who’s like an AI nerd to automate
0:19:14 away all the accounting and bookkeeping and stuff that nobody enjoys doing. You would go, came up
0:19:20 with that? Yeah, that’s right. Exactly. I hired him right out of the office. But anyway, we, yeah,
0:19:26 we’re hiring like an AI first CFO, basically somebody where their job is basically just to
0:19:29 build automations, financial automations. You guys probably have someone who works for you,
0:19:35 who just basically manages Zapier. And like Zapier, the problem with Zapier is that it’s
0:19:39 awesome when it works. But like for some reason, shit breaks all the time, which I don’t understand
0:19:42 how like, I don’t understand enough about technology to know like, why does this shit break all the
0:19:48 time? And then the systems were so complicated that if that person left, it was like, oh,
0:19:53 fuck, what’s the stuff that we got to go uncover because they’ve automated so much shit, where it’s
0:19:58 like, we just rely solely on this one person. And it becomes actually an issue where it’s kind
0:20:01 of all automated, but it’s sort of duct tape together and the duct tape comes on done and
0:20:05 there’s so much duct tape that I got to go and pick it’s like when your Lego breaks, you got to
0:20:08 like, dude, I got to like fucking rebuild this whole shit. I don’t know where this one little
0:20:13 fucking piece goes. Totally. I’ve had the same experience like anytime I got really into no
0:20:18 code like four years ago or whatever. And you know, we build all these automations where,
0:20:23 oh, it’ll go to this one place and then a Zapier automation will move the data into air table.
0:20:27 And then you manipulate it in XYZ way. And I think the difference here is that like
0:20:34 Claude will just figure it out, right? So if you say like, hey, it’s not working. It’ll just sort
0:20:39 it out or tell you how to fix it. Whereas before I had that exact same problem and totally agree,
0:20:44 usually the automations just cause problems. How are you guys using it at Hampton right now?
0:20:50 I mean, it’s basically just like, it’s like glorified Zapier basically. So like it connects
0:20:55 air table to HubSpot, to this website, update these records in HubSpot. Like it’s basically all
0:21:00 backend operational stuff, which I think is underutilizing it. Cause like what I would do,
0:21:04 if I was you, is I would get a, um, Claude has this thing called, I forget what it’s called,
0:21:09 model context protocol or whatever. And you can basically build a database of all, all your members
0:21:14 and then just have a way to query it where you can say, Hey, we need a speaker for this event
0:21:19 in LA who would be good or who’s got a business in this space and just have like a live database
0:21:27 of people in an LLM. That’d be sweet. So, so what I’m working on though, like the next piece here
0:21:33 is actually like Sean, I’m basically lining up who are, you know, what are the roles that we can,
0:21:38 you know, not need in the future. And most of this is not firing people. It’s actually just
0:21:43 not hiring people we would otherwise would. But if you graph this out, you can see that
0:21:48 we’re all going to have virtual employees very, very soon. And that’s what’s crazy. Like I was
0:21:56 watching an interview with Dario Amade from, uh, anthropic yesterday at Davos and he basically
0:22:04 said in the next 12 months, you will have AI coworkers in Slack. Now, if you just project
0:22:08 that out right now, it’s text, right? These are not people, but pretty quick, it’ll be someone
0:22:13 on Slack that you’re messaging. Hey, can you make some new product images? Hey, do you mind
0:22:20 checking out the AdSense? Do you, can you write a report? And I think that within 24 to 36 months,
0:22:26 these will be 4K video people that are indistinguishable from a human that you’ll talk to on
0:22:31 Zoom. Now, I know that sounds crazy, but I really believe that’s what’s coming. And I think if you
0:22:37 just think about the, the implications in terms of business motes and businesses that are gonna,
0:22:43 gonna be disrupted, it’s just staggering. All right, let’s take a quick break because I gotta
0:22:47 tell you about a friend of the pod who’s got their own podcast. If you know Steph Smith,
0:22:52 she is a legend. She’s been on MFM many times and she’s got her own podcast called the A16C podcast.
0:22:57 And it’s all about technology. If you think about it, technology has evolved like crazy. I mean,
0:23:02 I grew up in the 90s. I had CDs, phones had cords. You couldn’t use the internet if your mom was on
0:23:08 the phone. And now there’s like 3D printers and there’s rockets that can go up into space, AI.
0:23:12 There’s so much crazy stuff going on. And you got to have a place that helps you stay ahead of the
0:23:18 curve. And that’s what the A16C podcast is trying to do. It’s a podcast from the VC firm, Andreson
0:23:21 Horowitz. And it’s trying to give you an inside look at the trends that are shaping our future.
0:23:25 They’ve had guests like Mark Cuban and Neil Stevenson on, and they talk about topics like
0:23:30 deep fakes or the science behind GLP ones or autonomous drones. No small boy stuff at all.
0:23:34 Steph is the host. She’s awesome. I think you’ll enjoy the podcast. So check it out.
0:23:38 It is the A16CZ podcast and I like this tagline to say it’s like eavesdropping on the future.
0:23:43 That’s pretty cool. That’s a good tagline. So check it out. The A16Z podcast, wherever you get
0:23:51 your podcast. Do your guys’ parents use it or like your 10-year-old cousins? Like how, how…
0:23:57 My mom uses it. In what way? Well, my mom’s, you know, her first language was Hindi, right?
0:24:02 So she speaks English. She speaks it well, but she, if she needs to write, it kind of stresses her
0:24:05 out. She’s like, oh, I got to write something. Got to write an email. I got to write a letter,
0:24:10 respond to something, write a note to the doctor. And she’s like kind of slow with writing and she
0:24:15 feels a little bit insecure that like her writing is going to be like well-formatted, well-granted,
0:24:21 you know, grammar’s correct and clear. And so she was early on chat GPT to just be like,
0:24:25 oh, great, I can just tell it what I wanted to write. And then it just writes a beautiful email
0:24:31 for me. And then what she does is she has to like kind of mess it up a little bit to get it back to
0:24:36 real. But my mom has been using it in that way. But that’s kind of all she used it. But I think
0:24:40 what you’re getting at is like, even though for us, a lot of these things we’re saying right now seem
0:24:43 obvious, you’re kind of right. I think if I know where you’re going with this question, which is like,
0:24:50 you know, my sister, my mom, like how much does it cross the chasm? Like my sister uses it in her
0:24:55 schools to create curriculums. So she has it do curriculums and lesson plans and gives that to
0:25:02 her teachers to to work off of, which is something like either they would do kind of either procrastinated
0:25:07 or, you know, half or she would have to do herself. And so I think that was a big win for her. But,
0:25:12 you know, it’s, it’s kind of like you find your one use case of chat GPT or, you know, you go there.
0:25:17 Another one, like my mom was giving it like her Kaiser like data test results. So like, you know,
0:25:22 you go, you get bloodwork done or you get a, you get some procedure done, you get this result in
0:25:26 your app, and you have to wait for this doctor to call you to tell you what the heck this means.
0:25:31 It’s kind of a scary gap of time. And we just upload all of the screenshots into chat GPT,
0:25:37 we’re like, what does this mean? And it gives us beautiful, perfect bedside manner explanations,
0:25:41 more patient, more thorough than the doctor, you can ask follow up questions at your own leisure.
0:25:45 I mean, that’s been another one that was like pretty, it was just like night and day. It’s like,
0:25:49 okay, I’ll never not do this anymore. This is so much better. I’ll never not do this.
0:25:54 Andrew, you had on here that software is going to be a worse business over the next 10 years,
0:25:56 what’s your like premise here of it being a worse business?
0:26:03 Let me zoom out a bit. So in a free market, the amount of competition basically defines
0:26:08 how good a business is, right? So, you know, everybody loves to shit on restaurants,
0:26:12 but if you own the only restaurant in town, let’s say that there was one restaurant license
0:26:17 given out in every major city, and you own that restaurant. So you have access to man,
0:26:22 you have no competition. That would be a phenomenal business. You could have 40, 50,
0:26:26 60% margins. Basically, as long as people don’t riot, you can charge whatever you want,
0:26:34 and the food can be bad, right? So I think that same thing applies to software businesses and
0:26:40 startups, right? So if I remember, you know, 15 years ago, I started a productivity software
0:26:46 company, and it was a terrible business because every single week, new VC back companies like
0:26:52 Asana, Monday.com, et cetera, would come out and compete with us and drive us into the ground.
0:26:59 And where there’s been a lot of wealth generated in software is in vertical markets. So what does
0:27:05 that mean? Like that’s like weird niche businesses where nobody is competing. So for example,
0:27:12 like funeral home management software, golf course management software, random like dam
0:27:18 and infrastructure software. And these are great businesses because no like amazing developer
0:27:23 wakes up and no amazing designer wakes up and is like, I’m going to go and build this software.
0:27:27 And so basically you’re the only game in town, you can charge whatever you want,
0:27:33 and nobody switches off of you. And so for the last 30 years, that’s been the best business ever.
0:27:38 You might have heard of constellation software. They built like a $70 billion behemoth public
0:27:43 company. And all they do is buy businesses like this. Don’t they buy like a hundred a year?
0:27:47 They buy a hundred a year. They increase the prices on a schedule. They hold them. They don’t
0:27:53 really, you know, do anything crazy or improve them in any particular way. And they’re buying like
0:27:59 $3 million a year software companies, three, three to 10, sometimes bigger, but they have a formula.
0:28:05 And so I believe let’s, let’s just take funeral home software, right? So let’s say that there’s
0:28:11 one developer who built funeral home software and he’s had no major competition for 10 years
0:28:18 with tools like replete, you can literally go in like, and you can reproduce basic software very,
0:28:24 very easily, right? If your software is like highly algorithmic and complicated, yeah,
0:28:29 maybe not, but something basic like funeral home management where it’s like case management
0:28:36 basically is incredibly easy to replicate in 10 or 20 minutes and replete. And so my belief is
0:28:42 basically that as more and more people don’t need to learn how to code and can build software,
0:28:47 software will become more and more commoditized. There’ll be way more competition and it’ll be
0:28:54 a way harder world for software businesses. And I think that ultimately it just comes down to time.
0:28:59 For us, all of our software businesses we’ve bought, we’ve generally bought them in a way where
0:29:05 we’ve de-risked, we’ve paid ourselves back, or we have some sort of unique competitive advantage
0:29:14 or cost advantage or something. Like for example, we own a framework, a hosting company for a framework
0:29:18 and a lot of people have standardized and built software on that framework. They’re going to
0:29:22 keep hosting with us because we support that framework and nobody else does, right? There’s,
0:29:27 there’s things like that. Personally, when I’m underwriting software deals now,
0:29:33 I am being incredibly conservative and honestly, I’m much more focused on communities and social
0:29:39 networks as a result. We still look at software when there’s like a hardware component or there’s
0:29:44 some kind of lock-in, but I’m much less enamored with software right now because of this. Do you
0:29:50 guys think I’m like out to lunch on this? Am I totally overthinking this or say the thought
0:29:56 out loud? What’s the specific thought, right? Well, I think it’s pretty wild implication that
0:30:03 we may have mass disruption in terms of jobs and mass disruption in terms of every business that we
0:30:10 know that we think of as a good business may not be a good business in, and it’s not a long term,
0:30:13 right? This is not 10 years. We’re talking about a two-year time horizon.
0:30:18 So let’s take the business side of it, right? The business side of, your argument was basically
0:30:25 software for the last 30 years has been an incredible business to be a creator of or an owner
0:30:29 of whether you’re buying or building software businesses, and you’re saying, I think that’s
0:30:36 going to change because if it becomes so easy for anybody to build software that they need,
0:30:41 then they’re not going to be buying $5,000 a year or $50,000 a year software anymore. And so maybe
0:30:48 there’s one thing, vertical software, VMS, right? Or other categories like that where it’s like
0:30:53 more of a simple CRUD database with a user interface on top of it, that those are going to
0:30:57 become less valuable. I totally agree with you that those are less appealing than they were
0:31:01 before. I don’t think it goes to zero because in reality, it’s sort of like anytime you’ve
0:31:06 actually built software, it’s the last 10% that takes, you know, you can get 90% of the way there,
0:31:11 you feel like you’re almost there, but then the last 10% will take you as much time as the first 90.
0:31:15 It’s just like a rule you see over and over and over again. And it’s the same thing with products,
0:31:20 which is that to actually make something work and solve all your problems that you need,
0:31:26 that you’re used to your current software solving, it will take time, effort, love, care,
0:31:31 and whether it’s just might just be somebody else building software that’s a competitor to you or,
0:31:35 you know, if somebody in your own company going to build that, I think it’s less likely that that
0:31:41 becomes like a major disruption to all of software. Because like you were saying, like some software,
0:31:45 like social networks or communities, the value is not the app, the value is the people and the
0:31:49 connections and the habits that they’ve formed. So you have software where there’s already habits,
0:31:52 those will be safe. Software where the value is the people or the data, those will be safe.
0:31:58 Software where the value is in the enterprise relationship, the service that’s on top of it,
0:32:04 or the like fine tuning and tailoring and the CYA, which is that if I buy enterprise software,
0:32:09 I don’t need to save 40% on this bill as much as I need to not get fired for being like, yeah,
0:32:14 we homebrewed our entire CRM and like the security wasn’t very good, right? Because we didn’t,
0:32:19 I made this in fucking Claude instead of it being software I bought from a vendor that’s
0:32:23 been doing this for 15 years and has actually like solved the security vulnerabilities.
0:32:26 And so I think that enterprise software will be safe. So I think a lot of software will be more
0:32:32 safe than software just as a category goes to zero. Yeah, I would, I would generally agree with
0:32:38 that, although I think it’s going to be a lot easier to offer incredible sport, incredible sales,
0:32:43 etc. On the other side of it, you get the, the market expands, right? Because it’s not just that,
0:32:48 oh, there’s going to be more competition in this fixed pie. It’s that now a whole bunch of software
0:32:53 that really wouldn’t have made sense to build because coders didn’t understand the problem,
0:32:57 so they weren’t working on it, or you would have need too much funding to build it. It’s not really
0:33:02 worth it. So all this new software is going to get created that was not really feasible or wasn’t
0:33:06 really easily accessible before, like I’ll give you like a stupid example. I went on Replet the other
0:33:10 day and Replet’s amazing because it’s literally chat GPT, except for when you tell it something,
0:33:15 it makes a website for you or makes an app for you. And so I had this like, you know, first
0:33:20 world selfish problem, which was that I like to log my meals. I take photos of my meals when I,
0:33:27 when I eat them to be able to send to my coach, but then my entire camera roll is just shitty pieces
0:33:30 of chicken and my kids, like beautiful pictures of my kids and then ugly pictures of chicken.
0:33:34 And I’m like, all right, this is kind of annoying that that’s there. So I just told Replet, I said,
0:33:38 make an app that when I open up the app, instantaneously, the camera is on. I don’t want to
0:33:44 like type in stuff. I just like open the camera, take the photo, show me a thumbs up or a thumbs
0:33:49 down where I can rate my own meal and then save it in a calendar view where I can see like a streak
0:33:52 of, you know, if I’ve been doing roughly good, make it green. If I’ve been doing bad, make those
0:33:57 red and couldn’t make it an app that it gets approved in the app store. So that was so immediately
0:34:02 Replet’s like, Hey, I can’t make iOS apps yet, but I can make it as a website. You could add it to
0:34:05 your home screen and you could use it on your phone, but it’ll just be a website you open up.
0:34:09 I was like, all right, deal. And then it made that up for me. And it’s like, you know, it’s not
0:34:14 perfect. Like I ran into some walls where that Replet’s like, Hey, I don’t know why it’s not
0:34:17 working. I’m like, yo, it actually is working. And it’s like, you’re, you’re just being crazy.
0:34:20 But like, you know, okay, you get through the craziness and it’s not exactly good enough. I
0:34:25 would say like, I, I’m using it every day and telling you guys how amazing this, this tool is.
0:34:28 But nine months from now, pretty sure I’m going to be able to just do that. Right. So like,
0:34:33 I can be a software creator without knowing how to code. That’s already a big, big deal
0:34:38 because of that. Any idea I have, I can make come to fruition. So a whole bunch of new ideas
0:34:43 are going to come into the market that didn’t exist. And I could do it for like other problems
0:34:47 that weren’t going to get solved, maybe through like, you know, if you look at software today,
0:34:52 it’s like a lowest common denominator. Like I need to serve the most customers who are
0:34:57 willing to pay. So I’m going to like shave off all the edges and make some product. That’s
0:35:01 what I think most people want, even if it’s not what I personally want. Right. Or what me
0:35:06 and a cluster of people like me really want. And so I think the overall market for software gets
0:35:10 bigger because you can create way more stuff. So, so that’s the other counterpoint to like
0:35:16 software being bad. It’s phenomenal for consumers. Right. As a consumer, I’m so excited. It’s more
0:35:21 if you’re buying these businesses and you’re underwriting 10 years of returns, continued profit
0:35:28 margins, all that kind of stuff. I think it’s, it just got a lot harder because before it was like,
0:35:33 look, there’s only so many programmers out there. Right. There’s only so many competent Mac OS,
0:35:38 iOS, whatever programmers. And I’m with you in terms of like where a replete is at right now,
0:35:42 where it’s like, yeah, you got to, you got to fiddle a lot to get it to a point where it’s
0:35:47 shippable. I’ve built a lot of stuff that is 90% that I can’t put out into the world because it’s
0:35:52 not there yet. But I think it’s a little bit like stock photos. Two years ago, you know,
0:35:57 stock photos generated by AI were terrible. Now I would not want to be in the stock photo business
0:36:02 because it’s perfect and it’s only getting better. I will say one other thing, like this
0:36:07 same thing happened with media, right? So like before, only people who could make media were
0:36:13 media companies. You would, there was limited TV channels, newspapers. If you owned one of them,
0:36:17 it was amazing. If you didn’t, it wasn’t right. And you’re right that like owning those legacy
0:36:23 media businesses kind of sucks in the world of social media where anybody can create content.
0:36:28 And so those businesses went down, but then suddenly new businesses, which were social
0:36:34 media based, emerged and the set of social media based businesses are way bigger than the set of
0:36:39 legacy media businesses. And if you’re interested in whatever weird niche, you don’t have to rely
0:36:43 on the Wall Street Journal to write about it. Right. So I think it nets out way ahead. I don’t
0:36:46 know if you guys heard Larry Ellison yesterday when he was like going off about AI, like people
0:36:50 like, well, what are you excited about AI? And he like did this little rant, which I don’t know how
0:36:55 well verse Larry Ellison is in like, what’s actually like possible with AI versus like
0:36:58 Masa-san, you know, showing a picture of a golden goose laying eggs and being like,
0:37:02 that’s why I’m investing. But he was like, with AI, here’s what’s going to happen in the next
0:37:08 few years. He was like, you’re going to be able to do early detection of cancer. Then the AI is
0:37:14 going to sequence what cancer you have. It’s going to be able to design a personalized vaccine
0:37:20 for your cancer and cure you of cancer. So why am I investing $100 billion? Because I want that.
0:37:25 And I want 100 other things like that. And it was just like a very compelling like rant he did
0:37:29 outside. Did he deliver it in that type of compelling way? Well, nobody’s me, but yeah,
0:37:35 he did. He did the Larry Ellison version of it, the B plus, but he did do like he was like that,
0:37:40 like he was able to dumb it down. He was basically like, it was like he was shaking somebody and
0:37:44 be like, do you hear what I’m saying? Like, do you know what this is? Like, get this in your little
0:37:49 head. It’s not about an investment for a data center. It’s we’re going to cure cancer with this
0:37:54 shit. Okay. And it’s going to save your like your mom’s life. Like, that’s what we’re going to do
0:37:58 with this thing. Okay. That’s why we’re doing this. Let’s not get caught up in Project Stargate
0:38:03 and politics and the investment amount and the infrastructure. Like, okay, all that’s a means
0:38:07 to that end is kind of the way he was saying it. Dude, this shit’s so exciting. He also,
0:38:11 I think he’s obsessed with living forever. I think he’s one of these guys who’s like
0:38:15 into that and throws it is, you know, the 10th richest guy in the world. So he can kind of throw
0:38:18 his weight behind a lot of that stuff. And I think that’s pretty badass. And that’s probably
0:38:23 a huge motivator. Andrew, can we do one more? You had this great thing in your notes that I don’t,
0:38:29 I want, I want to hear you explain. You said AI hedge. Basically, you were looking for investments,
0:38:33 given that you think, okay, software might not be the best place to be investing.
0:38:37 Where are you investing? And what, what is all the stuff I see here down below,
0:38:42 down below your AI hedge notes? Sure. So I feel like, you know, there’s a bunch of different
0:38:48 scenarios here, including that this scaling slows down and it’s a moderate disruption.
0:38:52 We’ve got a couple of years of some people being unemployed and then they reskill,
0:38:55 they go do different things. Like you said, the economy gets bigger, whatever.
0:39:00 There’s another possibility that there’s what’s called an AI fast takeoff, which is like
0:39:07 Masa’s graph of like the singularity happens and, you know, it’s crazy. And if that happens, it’s like,
0:39:13 does capitalism matter? Does the free market matter? Does the AI basically just become this
0:39:17 like communist overlord that allocates assets and stuff? But I’ve been thinking about, you know,
0:39:22 what do you want to own in a world where that happens? So you can go out and you can try and
0:39:29 buy secondary in Claude or Anthropic or open AI. Those are very expensive. You can buy Nvidia at
0:39:35 30 times earnings or ASML at 30 times earnings, some of these or, or a TSMC, but there’s the
0:39:42 Taiwan risk, all the other stuff. And so I’ve been trying to find stocks that I can buy that are
0:39:46 actually affordable, but capture AI upside. And I found a really interesting one.
0:39:52 I love stuff that’s miscategorized and misunderstood by public market investors. Public
0:39:57 market investors are very simple in the way that they think about companies. They have a series
0:40:03 of boxes and they filter you through the boxes. And there’s a saying you want to look like a duck
0:40:08 and quack like a duck in the public market. They do not like complexity. And so if you say the wrong
0:40:13 keyword, their brain turns off and they just say, I’m not going to invest, right? And so let’s,
0:40:19 let’s, a couple of those examples are cannabis, right? They just put you in a box, biotech,
0:40:24 oh, high risk. And Bitcoin is another one. There’s all these crappy Bitcoin mining companies.
0:40:29 Dude, when we sold the company to HubSpot, one of the reasons we went into the year with millions
0:40:33 and millions of dollars booked of advertising, and we were probably going to do $20 million
0:40:38 that next year. And they were like, yeah, just cancel all those contracts and give the money away,
0:40:41 give the money back. And we’re not going to do advertising anymore. And I was like,
0:40:45 but you could scale this to like a lot to tens of millions or whatever. And they’re like,
0:40:49 yeah, we make billions of dollars a year. And also we would have just have to report that.
0:40:52 And that’s a little too complicated and people will understand it. So
0:40:59 like the decision of them to not do that was worth more than the tens of millions of dollars
0:41:01 of advertising revenue they could have made, which is wild.
0:41:06 Have you ever met one of those like really ADHD young entrepreneurs who’s pitching you on their
0:41:11 business? And they’re like, oh, we do this, but we also do this. And also I’ve got a company that
0:41:17 does this, right? And we all, the older statesmen, we always are like, uh, you know, young Padawan,
0:41:21 just focus and don’t, you know, don’t do that. Or if you’re going to do that, don’t tell me about
0:41:26 all this other stuff because it just confuses me. I feel like public market investors are like that.
0:41:32 So here’s the business I found. It’s called Iris Energy. The ticker is IREN, I-R-E-N.
0:41:38 And basically it’s these two Australian guys who were infrastructure bankers,
0:41:44 and their thesis supposedly was that compute was going to be a big deal in the next 10 to 20 years.
0:41:49 So presciently they went out, they secured a whole bunch of huge data center properties that were
0:41:55 right next to mostly renewable energies. So they’d find a power plant that’s like a hydroelectric
0:41:59 dam or something like that. And they would literally just buy a massive data center right
0:42:04 next to it and build one. So for example, where I live in BC, they have one in Prince George right
0:42:11 next to like a big hydro dam. And currently the best use for these data centers they’ve built so
0:42:16 far has been mining Bitcoin. So they’ve been doing that and they’re not Bitcoin bolts. They’re not
0:42:21 like micro strategy or someone like that. They don’t hold the Bitcoin. They just mine it. They’ve
0:42:26 got their GPUs and whatever, and they sell it immediately. And right now they’re making somewhere
0:42:34 in the range of $500 million of EBITDA annually doing that. Now the stock trades at about a $2.4
0:42:42 billion valuation. So you can buy it actually quite cheaply based on the Bitcoin thesis, right?
0:42:48 And Bitcoin would have to drop by about, I believe I’m guessing based on some assumptions,
0:42:54 but I think it would have to drop about 70% before they get to break even on mining these Bitcoin.
0:43:00 So here’s what’s interesting about this business. So it’s totally misunderstood by the public market
0:43:04 because everybody thinks, oh, they’re Bitcoin bulls. They’re mining Bitcoin. There’s all this
0:43:11 risk or whatever. What’s actually interesting here is they’re going to flip, I hope, or they’ve
0:43:16 kind of publicly communicated to some degree that they’re going to try and flip these data centers
0:43:23 over to compute. So all these huge companies like Amazon and Microsoft and Anthropoc and whatever,
0:43:29 they all need data centers and they need the data centers to be centralized in one place. You can’t
0:43:35 have 10 computers here or 10 GPUs here and 10 GPUs somewhere else. For training, you need them all
0:43:41 to be in a massive supercluster. So the other interesting thing is you can’t just go and build
0:43:45 these superclusters. You can’t go build these data centers anywhere. It takes a long time to get
0:43:50 permitting and approval and it takes a long time to build. And so basically there’s a finite amount
0:43:55 of this stuff to the point where you guys have probably heard like Bill Gurley talking about
0:44:02 like trying to buy nuclear power plants and all sorts of crazy stuff. So basically if they flip
0:44:09 this business over to doing inference and to working with hyperscalers on training,
0:44:14 this could be a massively, a massive boost to the business and it could, you know, 5, 10,
0:44:20 20X, I don’t know, but very significant if they signed some deals with hyperscalers,
0:44:24 which I know that they’re actively working on. They’ve communicated as much. So basically if
0:44:30 you believe in a fast takeoff, it’s a very interesting way to kind of buy something with
0:44:35 relatively low downside and very significant upside instead of buying Nvidia or Microsoft.
0:44:41 Obviously, you sound like you’re Leonardo DiCaprio. Yeah, exactly. Do your own research.
0:44:45 This is not investment advice. I do own the stock, but I think it’s interesting.
0:44:50 How much of the stock did you buy? I only bought like a million dollars, but I look at it as like
0:44:54 a small, it’s a very small position. It’s like buying fire insurance.
0:44:57 Yeah, what is this? A position for ants? Just a million dollars, Andrew?
0:45:02 Well, Andrew, I know that was not financial advice, but I do appreciate the advice that
0:45:06 you just gave me financially. The last public stock we talked about, I think, was Weight Watchers.
0:45:12 And like there was definitely a correlation from when the episode aired and when the stock,
0:45:14 I don’t know if it was causation, but there was definitely correlation.
0:45:18 I wonder if that’s going to happen here. You said the downside is like you have this
0:45:24 Bitcoin mining free cash flow priced very fairly, right? You said like 3X free cash flow,
0:45:28 basically, is the price. And then the upside is if they make this AI switch.
0:45:33 One question. You said they, it sounds like they’re not huge superclusters, so.
0:45:38 Oh no, they are huge. So they have a massive, they have a massive site in Texas that they’re
0:45:43 working on billing. Now, here’s the, probably the reason why it’s trading lower is these profits
0:45:48 do not just go to investors. They are almost all being pounded back into building out these data
0:45:55 centers. So if, for some reason, compute stops mattering or, you know, we move to distributed
0:45:59 inference or something like that, there’s definitely a downside scenario, which is why I’d say,
0:46:04 think about this cautiously, don’t put your entire portfolio in it. But I look at it as,
0:46:06 it’s like a good one to 5% position.
0:46:13 Hey, Sean here. I want to tell you this little story about Winston Churchill.
0:46:18 So Churchill once said, first, we shape our buildings, and thereafter, they shape us.
0:46:22 And I think this is true not just for the buildings we see in cities, but also for the
0:46:26 building blocks you choose in your company. For any company that I start, I use Mercury for all of
0:46:31 my banking needs. Why? Well, it was built by a YC founder, and you could tell this is built by a
0:46:35 founder who understands the needs of other founders. Second thing is this modern, it’s clean, easy to
0:46:40 use. The design is really nice. You’d never have to drive somewhere, park, put coins in the meter,
0:46:44 get out just to do one simple task. You could do everything in just a couple of clicks.
0:46:47 They got bill pay, checking account, savings account, wire transfers, everything you need,
0:46:51 they got it. I use it for not one, but actually six of my companies right now
0:46:54 and actually even have a personal account with them. It’s kind of amazing. So if you’re ready to
0:46:59 operate in the future, head over to mercury.com, apply in minutes. Disclaimer, Mercury is a
0:47:03 financial technology company out of bank banking services provided by Choice Financial Group and
0:47:08 Evolve Bank and Trust members, FDIC. Thank you to Winston Churchill for that little ad segment.
0:47:15 All right, back to this episode. I need to look into it. That’s not how I roll, obviously,
0:47:21 but it was compelling and I’m fascinated by their entrepreneurial story. I’m amazed how this was
0:47:26 just launched in 2018 and how fast they grew. How much financing did they raise? I don’t know how
0:47:30 much they’ve raised, but I do know that they have no debt, which is quite impressive for
0:47:37 a business like this. I have a lot of interest in retail, like a lot of retail buyers in the
0:47:41 public market. And so they’ve been, every time they need to expand, they do what’s called an
0:47:45 at-the-market raise. So they basically just issue stock into the market and then they raise
0:47:50 capital to do it that way. But I mean, the way they die would be big amounts of debt. So they’re
0:47:55 avoiding that, I think. Well, I forget what that online stock market club is that like Bill Ackman
0:47:58 and all these billionaires are part of where they had got to pitch their stock and they have to make
0:48:03 a compelling argument and it’s like really hard to get into. This is like, if that and Beavison
0:48:08 bought Head Head of Baby, that’s what this is right now. Have you ever been to Sound?
0:48:12 It’s a Sound conference, right? That’s what you’re talking about? No. Yeah, that’s what I’m talking
0:48:20 about. Is it online or in person? I’ve always wanted to go, but it’s an ordeal to go. Maybe this
0:48:24 was your audition tape. Yeah, there you go. What do you think of it, Sean? I mean, I don’t know
0:48:28 anything about this company. I’ve never heard of Iran until Andrew talked about it five minutes
0:48:34 ago, but I like the, I mean, the problem is Andrew is very persuasive. This is also the problem with
0:48:40 me. I can talk myself into anything. That doesn’t mean it was a good idea. And I have done that to
0:48:45 myself many times. You have to be careful. I apply basically a discount factor. It’s like a charisma
0:48:51 discount. So the more persuasive somebody is about everything, the more I have to discount
0:48:55 to some degree. That doesn’t mean I just like throw it away, right? But I have to be careful not to
0:49:00 get overly excited. And then the opposite is true in the other case. Like when somebody’s got like
0:49:04 the David Blaine deadpan delivery of everything, and then they’re saying something that sounds
0:49:09 exciting. I’m like, wait, if that sounds exciting coming from you, that means it must be 10 times
0:49:13 more exciting than you’re actually giving it. And there’s actually like an amplifier there.
0:49:17 So you got to be a little bit careful. This is why whenever I read Malcolm Gladwell books,
0:49:22 I have to be like, wait, this is just a theory. This is just a theory. Like this is not a fact
0:49:26 necessarily. That’s pretty funny. What did you call that? The charisma? The what?
0:49:30 The charisma discount. Yeah. That’s pretty awesome. Yeah, like our friend Jack Smith,
0:49:35 whenever he tells me something, he’ll be like, yeah, that’s pretty cool. I think I like this.
0:49:40 I’m like, do you love this? Yeah, I think I love it. That I’m like, all right, I’m in.
0:49:45 There’s some people who pretty good means it’s incredible. And there’s other people who are
0:49:49 like, oh, it’s the fucking best. And that just means it’s just another thing that they’re doing.
0:49:54 You know, it doesn’t mean anything, right? You have to like, you know, it’s like an audio mixer
0:49:58 has to turn some people’s levels down and turn some other people’s levels up on their microphone.
0:50:03 You know, are you guys tracking those stock stock? You guys did that like investment episode maybe
0:50:10 like six months ago. And yeah, TKO versus Ferrari TKO one, I believe, Sean, I think it’s up like
0:50:15 19%. I think since we did that episode. So you know, that one did pretty well. But I mean,
0:50:20 it was funny that we did a stock picking episode just stock stock of Palooza. And like,
0:50:24 we just didn’t just say the word Nvidia and then stop the recording because that would have been
0:50:27 that would have been sufficient. And like, it was pretty obvious and in our face. But like,
0:50:30 when you try to be smart and make good content, that doesn’t mean you’re necessarily
0:50:35 actually making the best advice is what this is my fear of all YouTube doctors, by the way.
0:50:39 And I like your women. I like it to you. I like all that I like them. But also,
0:50:43 they’re content creators now first. And so you again, you have to apply the discount factor,
0:50:48 which is that their job is every week to come up with new things to say. That doesn’t mean that
0:50:53 I’m not saying they’re wrong either. It’s just that the best advice might have been, you know,
0:50:59 five minutes long said once and never, you know, and or just repeated 15 times would that probably be
0:51:03 more helpful than listening to the three hour podcast about how like, you know,
0:51:08 getting UVB rays in your ears in the mornings is going to help you, right? Like those might not
0:51:12 be the things that actually will help anybody at this point, but that doesn’t make for good content.
0:51:15 And so whenever somebody’s primary job is content, and I say this as somebody whose
0:51:21 primary job is content, you have to like, remember that before you, before you, you know,
0:51:26 get totally hooked and listen to everything that they say. This is the thing I remember in 2013
0:51:31 or something. I had sold a business. I was sitting on like $7 or $8 million of cash and I was like,
0:51:36 okay, I need to invest this. And I read this Tony Robbins book. I’m not a big Tony Robbins person,
0:51:40 but he had that money. I think it was called money mastering the game or something. And
0:51:45 basically the whole book is just like by index fund. I have this disease and I think most entrepreneurs
0:51:50 do where they say, well, that’s the obvious thing. That’s for the normies. I’m going to go find door
0:51:56 number three. And I look back, like I read chip war, which is like all about semiconductors. I knew
0:52:02 that NVIDIA was an amazing business. TSMC was an amazing business. I saw Facebook trading at
0:52:06 five times earnings, but it’s like, I have a really hard time going through door number one.
0:52:12 And I think going forward, I want to be more, I just want to do the thing that makes sense
0:52:16 and is obvious and then forget about it and stop trying to be clever. This is actually an
0:52:20 instance of me trying to be clever. What did you want to invest in? And then you look back
0:52:26 and you’re like, ooh, dodged a bullet on that one. Oh, where was the obvious thing, the wrong answer?
0:52:30 Yeah. Because it won’t be the right answer 100% of the time. NVIDIA was a good, yeah,
0:52:35 NVIDIA Facebook. You look back and you think, I should have known better, but where was it the
0:52:42 opposite? I don’t think I’ve ever really messed up on the one that’s obvious that slaps me in the
0:52:47 face. And I don’t, like I’m actually really decisive when I see that, but it’s interesting.
0:52:53 Mostly it happens for me in private businesses. I think that’s where my decision making is usually
0:52:59 the strongest because I usually do what’s obvious and will work for sure. But in public markets,
0:53:04 it’s very easy to get excited. Have you had one, Sean, where you’re like, I almost did this and
0:53:09 God, I’m thankful I didn’t. Well, I’ve had a bunch of those, but is it specifically where it was
0:53:15 like an obvious kind of scene pretty straightforward, but it was a mistake? Oh, I have one. So my first
0:53:20 designer was this guy named Adam St. And he’s the best, the best dude. Like he was one of our
0:53:25 designers, but also like a great friend. And he went off, he left after a couple years at Metalab
0:53:30 and he started this company called Bench. And so he comes to me and he’s like, Hey, we’re doing,
0:53:38 you know, basically AI accounting 10 years early. And I loved him. I loved his co-founder. I loved
0:53:43 the idea, but I looked at it and I was like, Oh, it’s a services business for accounting and low
0:53:49 margin. And this is going to be hard. So I didn’t invest. And for the next 10 years, I felt like
0:53:55 an idiot because over and over and over again, I’d see these big series A, series B, Bain Capital
0:54:01 buys them for, you know, huge amount of money or whatever. But it turned out that when Bain invested,
0:54:07 I don’t think they got any money off table, nor would I as a shareholder. And I think a lot
0:54:13 of people saw this, but he just posted a big post on LinkedIn about how the business basically went
0:54:18 to zero and shut down overnight and was a total disaster. And that’s an example of one where I
0:54:23 was like, man, I wish I was so badly wanted to be part of that business and I would kick myself
0:54:27 for years. And then in the end, I’m like really glad that I didn’t invest in it.
0:54:31 Well, I first want to co-sign what Andrew said. I think, you know, I have meddled in the
0:54:37 overthinking Olympics many times. And I, and more than anything, the reminder is to do exactly what
0:54:42 Andrew is saying, which is like, stop trying to be clever and just simply asking, what’s the obvious
0:54:46 here? What’s the obvious move here? What’s the obvious answer here? And if there’s not an obvious
0:54:51 answer, just move on. Like you don’t have to do anything. No action is required in most situations.
0:54:56 And I’m struggling to come up with a time just like Andrew. I’m struggling to come up with a
0:55:02 time where there was a obvious thing staring at me that I did and it turned out wrong,
0:55:07 which almost just reinforces even more how hard that is. Whereas the opposite, if you said, hey,
0:55:12 tell me a time where you kind of thought you got a little cute, you tried to be clever,
0:55:17 and it didn’t work out. Your buddy texted you at 11 o’clock at night and said, hey,
0:55:23 rounds closing tomorrow and these 10 cool people are in. And it’s this really cool founder. I can’t
0:55:29 even blame anyone. It’s even simpler than that. It’s, I was a believer in crypto early. Santa was
0:55:34 talking to you about crypto early for a long time. And then one year last year, the year before
0:55:39 something like that, where crypto had a dip, I was like, I’m a tax loss harvest. So clever. You
0:55:43 know what I could do? I could sell this shit. I could buy it right back. I still own the thing.
0:55:52 And I booked this beautiful tax loss. Oh my God, I am 900 IQ and I just, I am the guy. And so then
0:55:58 I sell the thing and I booked the loss and I tell my accountant, I say, don’t worry about this one.
0:56:02 I advised myself on this. I got it. And they’re like, okay, great. We’ll make sure we have that
0:56:07 booked for the year. And I’m like, cool. And then I’m like, I should buy back in. I was like,
0:56:10 you know, but I did just read this report. I think it’s going to go a little lower first.
0:56:17 Let me just wait. Just let it go a little bit lower. And the stupid goddamn tax decision
0:56:22 ended up costing me what probably saved me maybe, I don’t know, hundreds of thousands of dollars
0:56:28 in taxes cost me millions of dollars in gains because I didn’t just do the thing. The obvious
0:56:32 thing was sell the thing, book the loss, buy it right back. You’re exactly where you were five
0:56:36 minutes ago with additional tax losses. The getting cute or clever was thinking, you know,
0:56:40 the knife still falling. Let me let it fall a little further. And then it fell a little bit
0:56:44 further. And I just patted myself. And I said, I’m so smart. I knew it was going to go down.
0:56:48 It’s going to go down a little bit more. I was actually reading this article the other day.
0:56:51 And I saw this guy on Twitter, who’s got a picture of a fucking cartoon. And, you know,
0:56:54 he said something pretty smart. Let me just hold on for a second. Let me just wait till it goes
0:56:58 down a little bit more. And then it went right back up way past where I bought it. And I ended
0:57:01 up buying in at a much higher price. I would have been better off doing nothing. It’s like,
0:57:07 you know, Ross Ulbricht was in jail and just got freed, which is I know a big day for you, Sam.
0:57:11 Big day. And so I’m trying to I’ve got to shave my legs for our first date.
0:57:15 He’s walking out of prison, by the way, holding a plant, which I love. I don’t know what he’s
0:57:19 just got a small house plant that he had, I guess. I don’t know what that is. But,
0:57:24 you know, everyone’s like, oh, my God, you know, I’m so glad he’s free. He must have been so tough,
0:57:27 blah, blah, blah. And then somebody goes, well, government did do my favor because
0:57:32 he was basically forced to not sell his Bitcoin from 2011 or whatever when he was running,
0:57:37 you know, Silk Road and Bitcoin was like, you know, in the dollar range to now it’s $100,000.
0:57:41 And it’s like, yeah, they also did give him a gift by not letting himself.
0:57:45 Wait, is that so he still he owns some stuff? I thought that Tim Draper bought it.
0:57:49 No, that’s what they seized. Presumably they didn’t seize all of the Bitcoin that this guy had,
0:57:52 right? Like he could have had Bitcoin in multiple wallets. He could have had personal
0:57:56 Bitcoin. Like they seized what they got from the Silk Road. That doesn’t mean they had all
0:58:02 of his crypto wallets necessarily. You know how people say, like buying a home is forced savings?
0:58:08 He, he just had prison was his forced savings. Yeah, 24 hour lockdown forced savings, my friend.
0:58:12 For example, I had the opportunity to invest in Coinbase, not super early, but like let’s say
0:58:16 series A or B somewhere there. And I remember doing the math and being like, okay, I believe in
0:58:21 Bitcoin, should I invest in Coinbase, the exchange or buy Bitcoin? And again, tried to outsmart
0:58:25 my answer should have been just do a little bit of both and let it ride. And in the end,
0:58:29 I did this analysis that showed me that you should just own the underlying asset Bitcoin. It’s going
0:58:33 to grow faster than this exchange, which is going to have multiple competitors that are exchanges,
0:58:37 et cetera, et cetera. And actually, I was right, Bitcoin over performed. But the thing I didn’t
0:58:42 factor in was that I would have made more money had I just a done both, but B Coinbase, you couldn’t
0:58:47 sell your shares. So like Bitcoin price went down, you couldn’t panic sell. And so the forced
0:58:53 savings of just being a Coinbase stockholder will turned out to be more beneficial than being liquid
0:58:58 with Bitcoin, where you were now at the mercy of your own brain. And there’s been, you know,
0:59:02 tons of examples like this. I have a good one. I talked about this a little bit,
0:59:09 but MetaLab back in 20, I guess it was 2012 or 2013, we designed Slack. And at the time,
0:59:15 Slack was actually a failed gaming startup. And Stuart Butterfield was basically trying to do
0:59:20 something with the remains of it, and trying to build a chat tool. And so he comes to me, he’s
0:59:26 like, Hey, I’ve only got $80,000 budget for this. And I was like, well, we normally, you know,
0:59:32 this would cost quite a bit more, but we really, really want to work with you. We’re like big fans.
0:59:37 And so he’s like, Hey, what if we did some stock? And I’m like, no, no, no, no, no, like, you know,
0:59:42 we don’t like MetaLab would go broke if we just took stock, we don’t do that, whatever. And so I
0:59:47 said, no, and my thinking was, well, I want to get as much cash as possible so I can invest it in my
0:59:52 own businesses. And if you think about what I was investing in at that time, it was my productivity
0:59:58 software where I lost $10 million. So I instead put it into this money losing productivity software,
1:00:03 I could have made $100 million or something crazy, because it was at like a 20 million valuation at
1:00:08 that time, and it sold for $28 billion, I think sales force. That’s a good one where it’s like,
1:00:14 maybe, maybe obvious. Actually, that’s maybe not that obvious, but it’s still, it’s still a brutal
1:00:20 one. My most recent one is Justin Mayer’s true man. He was raising for it at a, I forget what it was,
1:00:25 reasonable valuation. Justin’s my friend. I think Justin’s amazing.
1:00:30 I thought he had too much going on. And I was like, no way are you going to focus on this. I pass.
1:00:33 And he just told me how things are going. And I’m like,
1:00:37 shit, like, it was so obvious that you’re a winner. I should have just said, yes, I’m in.
1:00:44 In my, my Ecom business, my, I brought in a friend into the business, gave him equity. He,
1:00:47 he knew Ecom a much better than I did. I thought, okay, my rate of learning is going to go up with
1:00:53 this guy. And I was so excited for this like value ad from this guy. And his value ad was like,
1:00:56 he’s super good at a bunch of things. One of the things he’s really great at is marketing.
1:01:00 So I was like, okay, he’s going to be so helpful with marketing. And so we closed the deal. We signed
1:01:04 the docs and I set up the first session. I’m like, oh, I can’t wait for this guy to come in and just
1:01:09 spill the beans and all the secrets that I don’t know and make, and they solve all of our marketing
1:01:13 problems. This is going to be amazing. And he comes in and he has that first, first session. And
1:01:18 instead of spilling the beans, he just opens up a Google doc and he’s like, okay, what’s the best
1:01:23 product that you sell? And we’re like, it’s this one. He’s like, cool, what’s the best photo of that
1:01:27 product? We’re like, what do you mean? He’s like, just like, what’s the best picture you have about
1:01:33 that product? And he puts it in the Google doc. And he’s like, okay, if you know, like, what do
1:01:37 people say, like, why do people buy this? And we’re like, well, I mean, the bike is great. He’s
1:01:40 like, yeah, but like, what, like, why do they buy it? Like, what do they say? And he writes down
1:01:44 the caption and then he like goes and sets up a Facebook ad of that product with that picture
1:01:48 with that line of like what people say. And he’s like, cool, let this run for like the next three
1:01:53 months. And so then he so that becomes our top performing added took him five seconds. And I’m
1:02:00 like, okay, that was cool. But like surely there’s more. And so nine months go by and I hit them up
1:02:04 and I’m like, dude, you’re right, great friend. And I was so excited for you to be in this thing.
1:02:08 But like, honestly, I feel a little disappointed. I feel like you could have done more. I feel like
1:02:12 the expectation was you’re going to do more, you know, like, he’s like, oh, I did so much. And
1:02:15 I was like, wait, what do you mean? Like, what did you do? Like, where’s the list of like, what,
1:02:17 what do you mean? When you’re saying you did so much, I’m saying you didn’t do enough. What’s the
1:02:23 gap? And he was like, oh, I stopped you from doing all the dumb things. He’s like, I didn’t do extra
1:02:27 things. He’s like, remember when you got really excited about influencer marketing? I was like,
1:02:30 oh, yeah, that was awesome. I read this article and I met this guy who was crushing with influence
1:02:33 marketing. I wanted to go all in on influencer marketing. He’s like, yeah, remember, I just told
1:02:39 you like, Hey, Facebook’s working, like just keep that going. Like, don’t have you run into a wall
1:02:44 with Facebook? No. All right, then let’s just keep doing that. Don’t get distracted. And he’s like,
1:02:48 that’s what I did. Like the second thing you wanted to expand your products and like, actually,
1:02:51 I just stopped you from doing that. And then you had this genius idea to go subscription.
1:02:56 And I told you really like, Hey, like this thing’s working. So let’s just keep doing the
1:03:00 obvious thing here and just keep it going. And basically he laid out like four or five things
1:03:06 that were all just simply like him taking the knife out of my hand as I’m a toddler and preventing
1:03:11 me from stabbing myself. And he was like, those were all super important moments that like this
1:03:14 business would have gone a different way. And I was like, I don’t know if you just yet I mind tricked
1:03:19 me into believing that you added ton of value or you actually just said something very, very
1:03:24 insightful to me. And I landed up, I think he’s actually very, very insightful and that that is
1:03:28 one of the best ways to help someone is to just simply prevent them from hurting themselves,
1:03:32 rather than solve their problems for them or give them some new tool that they’ve never seen before
1:03:36 or will solve all their problems. And this is why I love investing in private markets, right?
1:03:42 To Sam’s point about houses being forced savings with a private business, there’s so many of our
1:03:48 businesses that I’ve owned where if I could press a red button, like a sell button, just, just any
1:03:54 given day because I read something or I’m paranoid or whatever, I would have way, way less wealth
1:03:58 because I would have panicked over and over and over again. And when I look at my public market
1:04:03 track record, I’ve actually had the right call over and over and over again, but then sold way too
1:04:10 quick. Like I bought Chipotle stock when they had that health crisis. I doubled and then I just sold,
1:04:15 right? I could have made way more money. Same with meta, all these other things. So I think that
1:04:23 having a psychological lock in creates a really positive thing for people like us who are impulsive.
1:04:28 There was a guy at the event we just threw and it was like, everybody was giving their claim
1:04:32 to fame. It’s like, okay, this guy built this thing. He’s been spent 20 years building this.
1:04:36 He’s been grinding every day and he built this empire. And then this guy, he’s building this,
1:04:41 this empire. Jimmy’s building this YouTube empire and then this chocolate empire on top of it.
1:04:45 And everybody’s just like, go, go, go, go, go, go, try to figure it out. And then there was one guy
1:04:49 there and it was like, yeah, he’s one of the most successful investors in the world. He invested
1:04:54 in all five of Elon’s companies at the first round and didn’t sell. And it was like,
1:04:59 there’s one way to do it. It’s like, identify the best operator in the world or one of somebody
1:05:03 who you think is just like, absolutely brilliant and obsessed. Invest in all their things. Don’t try
1:05:09 to judge. Rockets are going to fail, but this is going to work. Just invest in the jockey. Was it,
1:05:14 was it an Antonio? No, I can’t say the name, but one of the wealthier people there in a room of
1:05:19 the wealthiest people in America, some of, and someone was like, what did you do? He goes,
1:05:24 I’m like the CEO of my kids right now. Like I dedicate my life to my children.
1:05:29 And like you guys work 16 hours a day on making money. I work 16 hours a day on making my kids
1:05:33 like happy and healthy and making sure they’re well loved and all this other stuff. And I was like,
1:05:35 you’re the greatest person I’ve ever met.
1:05:44 Yeah. And he had that like, it’s not the right way to describe it, but like a
1:05:48 simpleton mindset, like the mid-wit thing, but like where it was like, this seems simpler,
1:05:55 I’ll go that route. Whereas many other people refuse to sit still and stay the course.
1:06:02 What’s the quota Pascal? All of man’s misery arises from inability to sit quietly in a room,
1:06:08 you know? This guy did not suffer from that. Guys, this is awesome. I can keep going.
1:06:10 It was great. I just, I’m happy you’re well, Andrew.
1:06:15 Yeah. Yeah. It’s great to see you guys. I got to come back soon. It was fun.
1:06:16 All right. Thank you. That’s it. That’s the pub.
1:06:35 Hey, Sean here. I want to take a minute to tell you a David Ogilvy story.
1:06:39 One of the great ad men. He said, remember, the consumer is not a moron. She’s your wife.
1:06:44 You wouldn’t lie to your own wife. So don’t lie to mine. And I love that you guys,
1:06:48 you’re my family. You’re like my wife and I won’t lie to you either. So I’ll tell you the truth
1:06:54 for every company I own right now. Six companies. I use Mercury for all of them.
1:06:58 So I’m proud to partner with Mercury because I use it for all of my banking needs across my
1:07:02 personal account, my business accounts. And anytime I start a new company, it’s my first
1:07:05 move. I go open up a Mercury account. I’m very confident in recommending it because I actually
1:07:10 use it. I’ve used it for years. It is the best product on the market. So if you want to be like
1:07:16 me and 200,000 other ambitious founders, go to mercury.com and apply in minutes. And remember,
1:07:19 Mercury is a financial technology company, not a bank. Banking service is provided by Choice
1:07:25 Financial Group and Evolve Bank and Trust members FDIC. All right, back to the episode.