James Reinhart Lessons in Process Power [Founders Field Guide, EP. 32]

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It pairs dynamic cooling and heating with biometric tracking to offer the most advanced solution on the market simply. Add the pod cover to your current mattress and start sleeping as cool as fifty five degrees or as hot as one hundred and ten degrees. It also split your bed in half so your partner can choose a totally different temperature. I was so impressed. After using eight. Sleep that i became an investor to embrace the future of sleep. And get one hundred fifty dollars off your new mattress go to eat sleep dot com slash patrick or use the code. Patrick hello and welcome everyone. I'm patrick shaughnessy and this is field. Guide founders field. Guide is a series of conversations with founders. Ceos and operators building greek businesses. I believe we are all builders in our own way in. This series is dedicated to stories and lessons. From builders of all types founders. Field guide is part of the colossus family. Podcasts and you can access all of our podcasts including edited transcripts shouts resources to keep learning at join colossus dot com. Patrick o'shaughnessy is the ceo of a shaughnessy asset management. All opinions expressed by patrick and podcast. Guests are solely their own opinions and do not reflect the opinion of o'shaughnessy asset management this podcast for informational purposes only and should not be relied upon as a basis for investment decisions clients of shaughnessy asset management may maintain positions and the securities discussed in this podcast. I guess today is james reinhart founder and ceo of threat up an online thrift marketplace threats. Online store is distinct in how company touches every product processing every piece of clothing at their own facilities instead of focusing solely on being a marketplace connecting buyers and sellers. We talk about the competitive advantages of building processing plants from the ground up. How james turned threat up from having negative gross margins to very strong economics and the future of retail more broadly. I hope you enjoy this. Great conversation with james reinhardt. James so i think the best place to begin. Our conversation is for you. To level set the audience by describing what threat does specifically just paint us a quick picture of the business. Because i think many won't be familiar some marketplace for secondhand clothing. So we kind of do two things one is. We help consumers buy and sell high quality secondhand clothing. Just women kids today through manage marketplace. I e we touch all the goods so you can send us the threat up in our clean out. Kit will process all that stuff but it online and then sell it to buyers what we think. Is this incredible. Resell experience online. This thing to do is we're starting to destroy brands. We have a platform called repeal service. Is we now work with more than a dozen brands walmart. Reformation gap companies abercrombie and fitch throwback from my childhood were power next generation resell experiences for them. So this gonna things you do quarter marketplace and sales service. Talk a little bit about how you came to this market this idea twelve years ago. Yes so the true founding story is i was in business school at the time since late. Two thousand eight. And i was a teacher in an educator before that which leaves linked to business school and i had no money and i went to try and sell my clothes at the local consignment store on mass adding cambridge. Second time around. They wouldn't take them. They said just do luxury. And i could you not i was like holding j. crew cashmere sweater Has got to be worth. Some are so that went home that day with the same stuff i brought with me and i thought man. I've got a thoughtful both that aware of other people have this problem line. There's gotta be a better way and now it's really like kicked off. I remember going to school the next day asking my classmates anybody listen. We're planning on closing your causes. Don't you wear and nobody ever said. I wear more than fifty percent. Everything i don't know a third. And then i would say like what are you gonna do with all that shit. And they're like i don't know eventually just give it away. That was really like what got me. Fired up what did other people think of the idea started. I think generally people were really kind. They said to me. Oh that sounds like a good idea for other people which is code for like. That's a terrible idea. I think generally people thought while james's smart he must be onto something but consistently the feedback was honesty. How this is gonna work. Who buys us clothing. Nobody does this. I got a lot of resistance. But i can't believing that there was a big opportunity there because seventy percent of what people buy been ansel man. There's a lot of great stuff out there. That's ending up in a landfill so i just kept going on that thread. What was it like in the early days. Getting your first customers. This sounds like we talked a little bit. About the difficulties of selling low priced goods on the internet. I love to rip that threat apartment. Understand it because it seems like the lessons you've learned might be very broadly applicable. I had this thesis from the very beginning that to build like really big long term twenty five fifty or businesses. You have to do incredibly hard things. Because i think if you do easy things other people can come into your market. Thanks the strategy of starting with low price. Good obviously like a big amazon fan. I remember being based on saying we started with books because if we could sell books on the internet for seven eight nine bucks we could sell anything on the internet. And i was like man i could sell like ten dollars pieces of clothing and at the time we just launched with kids up. Eight dollar pizza kids calling on like a figure out how to make that. Were i get all kinds of stuff. I was obsessed with this idea of solving the hardest problem at the beginning and just getting conviction. Because if i had done that thing and i get that going be very to compete with us. My co founders. Chris and over time. We were just obsessed with working that hard problem and so we started with just like a classic marketplace we just connected buyers and sellers ebay style. It took about eighteen months. We were slow learners about eighteen months to figure out that the real opportunity was not connecting buyers and sellers but like a first principles approach to reinventing how people bought and sold secondhand. Ebay was famously. We don't touch that. I'll never forget at the time. I just kept telling anybody. Listen but would you rather be amazon or ebay. Amazon approach was we'll touch stuff. We'll do the really hard thing and that will put us on this new trajectory when we pivoted the business really focusing on ingesting all that stuff. The philosophy was man. Let's do the really hard thing. They may not work but if we get to. Were going to be massive. That was kind of early days around thinking about low price goods in the work involved. I mean this was a negative margin business for years trying to convince investors. Yeah we'll get there. Can you talk us through the evolution of the gross margin so what made it negative gross margin to begin. I'm just fascinated by like what the line items were in how it progressed as he scaled in the beginning had this thesis around supply so the idea was people. Send us their stuff. Jake my j. crew sweater right which we don't do men's today which of course the irony is not lost on me that we've not yet solved my problem but take this j. crew sweater. Somebody bought for hundred twenty bucks right off one hundred twenty bucks new cashmere sweater in a retail context. We would price it for twenty five bucks and in the beginning. We gave the customer twelve or thirteen dollars that we gave him half of what we saw for. And then it costs us ten or twelve bucks. The process the item then. It costs us you bucks in overhead logistics and like that is run out of dollars but then we had so much people sending us stuff. We could not get people to stop sending us stuff. We still can't stop sending stuff what we realized. It's not really about the money. You're not going to get rich selling your used clothing. What people really wanted was. They wanted convenience. They wanted this effortless way to do this annoying job in their life. Which is i got a whole bunch of crap. In my closet aware anymore we started to change the payout rates that we give people so in that twenty five dollars sweater or we used to give you twelve or fifteen bucks how to give nine. We'll find with that okay. You're still not getting rich will give you six. We just started tease out. Where was the value creation happening in the marketplace. What we started to really appreciate that buyers regenerating tremendous value because they were getting a cashmere sweater. Twenty five bucks a brand name kashmir sway over twenty bucks in sellers You've solved a really big problem for me. I now don't have a closet full of clothes. I don't wear. I actually liked opening my closet and finding things that i like. Not all the crap that i don't like so he just started to like really tweak. The value proposition so that's gradually proved the margins on the outside. The second piece is we opened operations. We started processing goods. You no playbook for this. Everything is a snowflake. everything's a single skew. there's no barcode on a shirt you're wearing. It's not as though you just scan something like oh. This is a banana republic. Buttoned-down retail forty four nine strike. You have to create that data operations just got smarter and smarter about how he did this. My co-founder chris. Probably one of the smartest guys i know. We built the whole operation in the beginning on the iphone. Eleven two thousand twelve. We ran our whole first distribution center. Like one hundred thousand square feet on the iphone ipod touch because the hardest thing at the time was getting photos of stuff on the internet without buying really expensive cameras and hardwiring everything together and chris was like well. Why don't we just use the camera on the iphone will take pictures and upload it and then we'll do some date on ipod touch and we'll connect that data in the back end and that's like chris a couple of guys built in a weekend you the image of Grab this was. We had all these ipod touches on all these iphones hardest. Prominent time with keegan Charge barely evacuated. Suck with this great photo of this shoebox chargers people just running in their plugging in iphones. Economic new iphone ops innovation. How do we process the goods and then payouts and obviously we didn't know anything about pricing about self throws maybe that jacob sweater shipments so that twenty eight dollars and not twenty five c get smarter about willingness to pay. That's the margin sip it more about the hounding of making it more convenient for the person that sounds like really what they wanna do is just get rid of their stuff. Not just throw it out. The dollar amount doesn't really matter. So what does that look likely what became more and more convenient. How did you think about that as star. You have a bike. We bought a bike for eight hundred bucks or nine hundred bucks. You don't use that anymore. You go to sell it on time. Craigslist or something like that or or ebay or even today facebook marketplace. You can get two hundred bucks for that bike. It actually seems worth it to take a photo of your by and be like it's schwinn two thousand eighteen and it's got twelve years and you can describe the by because you're going to get two hundred bucks for it. Takes an hour to do all that. You're cool take that same analysis and do it for yourself for twelve bucks. Oh okay well now. This is a big waste of my time. Because i value my time more than i value of return on this twelve dollars. What we identified was that for more expensive things. It makes sense to sell them on your own. But when have individual units that are twelve fifteen twenty dollars the actual right organizing principle is to get rid of them in bulk so when we invented the threat up. Clean out kit east. This was holds a laundry basket where to stop the average bagged. Twenty five eight senate into the idea was well if you could pile like of stuff in there and threat up with picking up at your house comes with prepaid label to take it anywhere. Do anything all the sudden. Those twenty five items might turn into fifty seventy five hundred bucks and then you're like oh okay the roi on my time across twenty five items makes a lot of sense. And so i think people started to be like wow historically. I've just given the stuff away. And i found it annoying to do now. Threat of sends me a bag with prepaid label on it. I send it. And then i just leave it wherever my mail gets sick. Leave and pick it up your house and people like wanna seems like pretty easy show anyway. That's kind of how it got started. It was all about stripping out the friction on us vice. I'd talk you through like the working capital. And all of this. So i'm presuming. You don't pay the person who's sitting in the clothes until you need to eat off to finance it with working capital. Just talk me through what you've learned about working capital inventory in this part of the business. Now run a business. The high sixties low seventies gross margin so from negatives that seventy roughly and the working capital piece of this is yes when people send us their stuff we put it online and then it's on consignment. We don't have to pay you until it sells and the way works. And we're very transparent seller around essence. You send us items we sell your items. We then wait. Fourteen days to make sure your items. Don't get returned and then we just put the money in your account we say. Hey we sold your j. crew. Cashmere sweaters can beat on j. crew. All jake cashmere sweater you earn five dollars for it and it goes into your threat of account. You're not going out to dinner on five bucks. What ends up happening is people just let loose items cell and that money accumulate so take a little slush fund women i would just let it accumulate in my little slush fund. And then i get so point. And i buy new handbag and the effect of that obvious. All those dollars are sitting in working capital. The working capital is negative by immune. Inform out that's kinda secret weapon at a business and then people tend to not appreciate how good the gross margins are but also they i get working capital. That's a fascinating model. I really love it. How much of the dollars. In a seller's account do they typically spend on the platform versus taking off the platform anywhere from probably fifteen percent expand on the platform to twenty five or thirty over the years. Some people think like oh that should be higher but one thing that we've been really religious about is we don't incentivize you to spend on the platform we say like. Oh we'll give you ten percent or twenty percent more because i think it creates these unnatural platform lock ins make people feel like it's not really cash and if you think about like the human dynamics of that if you're going to spend it on threat up you're already gonna spend on giving you an extra ten percents just taking money out of our pocket and if you're going to spend it on threat up chances are give you ten percent more isn't gonna push you over the edge actually think you're destroying margin when you do that. Historically people done what's been interesting is now consumers are cashing out with our partners. So as i mentioned our resale as a service can power retailers so now when you go to cash out your earnings say your fifty bucks. There's a whole bunch of places where you can get more money. So one of the most popular ones is rent. The runway which is become like. Oh i have fifty dollars in threat of credit. But i could get fifty five or sixty dollars or sixty five dollars at rent the runway because our brand partners are now paying you more. Talk me through the evolution of the operations peace so you decided to do the hard thing by keeping the physical goods yourself building warehouses etc. What are the first warehouse. Look like how has that evolved. What did you learn about when to invest in capex and new technology. Not just the one warehouse with iphones and an ipod touches. Talk me through what you've learned about that evolution on the side we got started in our first disability in twenty eleven than into twenty twelve and this was way out of my comfort zone. We didn't know anything about us in a classic way. What we did was we. We need find the smartest person we can find to help us solve this problem so we went out and hired somebody named john. Boris still chief systems officer today in. John spent seven years at netflix. Helping build out there. Dvd business building out their facilities in prior between netflix. And when he came to threat up he at spacex actually working on replicating a rocket program. John had this incredible wealth of experience around. How do you scale operations in the beginning. It john. show yours how we're going to build out the first facility which was in california right close to our office in san leandro to be close to it and it was one hundred twenty thousand square feet very very manual. We migrated off the iphone. We built custom stations around how we do for taga fy and then it was just john and his team just their big brains. How do we aggregate this whole process. Every single activity that we do in the value chain. And how do we do it better. How do we save money. How do we do it faster. We just became obsessed with all the individual pieces in the value chain. Give an example when we started using the iphone is taking the photos. We weren't taking any photos on mannequins at the time everything was a wage flat photo. Gotta take photos on mannequins. Because that's how women want to shop. They wanna see it on a form. We started taking photos on a mannequin. And then john realized that processes slow. You have a person who is putting items on the main mccain in then you have a different person taking a photo. We built a new process to essentially continuous flow of taking photos. So then all. We started bill to take photos. Much faster put them on an economic faster. The problem with that was that then we were like destroying mannequins left and right because no mannequins that are built at that time were built to have thousands of photos taken on them. Every day. the mannequin is designed bespoke photo. Shoot so then we had to like figure out how to make your own man against and so we started working to develop our own mannequin. They were custom molds of fiberglass. We could build that. Were light that we can repaint mutation. Ten thousand votes on day on a mannequin panic. It starts to look a little worse for wear. So how can we finish the mannequins. And i remember walking into the district. Centre one day and like a mannequin. Graveyard we were throwing out so many man again. It was like a horror film arms and bodies and heads everywhere and then we figured out like okay. Well how do we improve the lighting. So we built new reflective lading shields that allowed us to take a photo and then cut that photo out of its background so that it will just amazing online. That's where we were in san leandro and then we got the process to a point where it made some sense start automating which took probably three years or so running the business dane day out getting the process to a point where john team and the board and i felt we should start to build some steel in this building and build some structure. We started to a bunch of the processes in the facility because we felt like we really understood them in. John's flosse was consistent with everything that i've ever been told which is much easier to tell a person to do things differently than it is to tell a machine to do things differently so when we got to our next. We started to build these carousel systems. So now today. We run some of the largest carousel and conveyor systems in the world. We think of the largest in the world though. That's a hard thing to prove. But our facility today in atlanta which are newest which is dc oh six holds three and a half million items on hangers in dynamic storage but imagine to plus or so football fields full of carousels in conveyors then put two football fields on top in two football fields on top not gives you a sense of what the atlanta facility looks like and the woman working on now is could be bigger than that one. Would it be fair to reframe some of that knowing when to transition to machine from a person as you sort of need to prove the method with humans and unsalable way for some acceptably long period of time and then once zero variance or low variance only then build a new machine or a new machine driven process. I think that's right. Yeah and i think the time to prove out that you've got it right. It was variable on the process right. Now we're actually transitioning to a next generation photo studio where even automated a big part of the last photo studio. We had strong. roi and fishing cap. Beck's build. We had like a new breakthrough now until like the next generation. Those photo studios in the lighting strategies. It's a constant ablution. But i think the first big step from manual to some level of automation to be the biggest one but there is a continuous curve of pat. We make this more automated right now. We're on photo matching technology that will allow us to take any garment and see. Have we ever seen that garment before. Getting every item on threat. Ups snowflake where we've processed more than one hundred million unique items so we've seen a lot of product so when we see that dress from reformation and it's whatever the design of that drafted that comes in the door and one of our clean out gets and we start to look at it as there's something we can do on it with using a and using our camera technology to oh we've already seen that reformation dress and these are its characteristics and that helps us reduce all the rest of the inbound processing overtime amused amazing example after example of process power. And there's that great. What's the name of the book. I think it's called innovation stacking from one of the founders of square where they talk about. It's not one thing. It's like a hundred things in their path dependent. And you don't figure them out until you get to the roadblock and then you just solve a problem integrated on it and there's like no replicating that it's such an interesting operational story. We really rely on. I've been obsessed in the very beginning around. How do you build competitive advantage sustainable competitive advantage over time to your point about the hundred things is. It's not that we do people will say like what's two things that you guys do amazing and i said it's like the wrong question. The question is what are the hundred things that we do. That are each a little bit amazing. And because it's the classic michael border famous book. He's like competitive and gets built. Like compounding the unique activities that you do and so if you do three things uniquely well when a competitor has a ninety percent chance of copy each of them. It's point nine times point nine times point nine. That's the probability that they can copy you. If you do a hundred things that are unique and valuable defensible. It's point nine to one hundred. We really live by that idea of. How do we wide in the moat with all of the unique activities. That we do i think. That's the way the ops team is just wired. We haven't talked a ton about the buyer side of the equation. We've talked a lot about sellers in the convenience you provided them talk through that journey and that set of learnings. What would have been the difficult hurdles that you've had to clear to make make people aware that you exist in the first place and then the strong repeat customers the second hand market the thrift market was always bigger than people saying every time i like hell bibo they recognize. There actually is a few thrift stores in my town and a few consignment stores in my town and it turns out there. Twenty five thousand drifting consignment stores in the us. So that's a lot of stores. So there's a lot of volume offline going through secondhand the way we've approached the buyer in the beginning was was. How do we take the person who might be shopping. Secondhand offline and bring them online was very much the net flicks approach while. How do we take the guy at blockbuster. Put them in our. Dvd's by mail system so we had the same a lot of netflix dna at threat with a number of executives who were executives there in the beginning there was very much of the. How do we get the buyer from offline and online what evolved in twenty fifteen twenty sixteen through. Some of our survey were was these. Were not people who were shopping. Thrift off line now had found brought up. These are people who shopping off price or shopping. Discount retail who now like. Oh well now. I can just by secondhand than it's even cheaper and i feel good about it so it's really evolved in our customer acquisition journey and our customer make up is is. It used to be the person about used and it was buying used and bringing them online and now as people would never bought used before but who really see value proposition. that sort of integration happened in twenty two thousand sixteen. And i think what's happened since is what you're seeing with. Young people gen z and millennials. And they're buying behaviors their attention to climate change conscious. Consumerism has just rapidly accelerated this such that. You're seeing young people buying secondhand pretty astonishing rates. It's something like half of gen. z or forty percent. Agenda and forty percent of millennials have bought a secondhand. He's a clothing item in the last year. Really profound acceleration in interest. So i think there's a bunch of big tailwinds for us in the consumer market as far as like engaging them. I think the thing that people love about coming to threat up is there's always something new every day in your size and it's fun you go to the website. We don't take ourselves too seriously. Designed to be sort of the fun direct slightly reverend brand but anytime a woman wants to find a new dress or a new pair of shoes or sweater you go to sped up. There are millions of items for you to browse every day. Were refreshing that catalog. You think about the traditional retail environment w compete against they might change collections. Six or eight times a year or even like a fast fashion retailer might be twelve times a year or changing the assortment in the store quote unquote every day. I was reminded this story from one of our customers. Who's a teacher. And i remember. Just good. I was a teacher or brought up. She said oh. Always check threat of inbetween. My periods to mike lasts have like five minutes. And i know you guys are always listening new stuff every hour. I have my set of filters that. I have set up and refreshed and i add stuff to my cart all day long. That's the type of behavior that we see drives engagement. It reminds me to my favorite little concepts. One was the story of how business insider the website was successful. Which was nothing more complicated than at the time when it launched wall street journal in new york times only updated their websites once a day they just updated the more often and the second is amazing. Concept abound the internet if you make information readable to the internet that artistic doorman otherwise like uber and airbnb the popular examples in your case secondhand clothing magical things to start happening. I just such a neat combination of ideas in such a simple category. That people probably overlook. Most investors probably. I'm curious actually had this problem. I guess is many investors. Certainly in the vc world. Probably don't buy a lot of secondhand clothing. And i'm curious if that was an issue for you early on and what it was like raising money and how you did that in a pretty unique category. That's caught less sexy at in the early stages. I'm sure sexy now with the numbers. Look it was super hard in the early days because this is changed a lot not far enough yet but certainly a lot more women investors today than there were ten years ago. You can imagine what it's like to walk into a venture capital firm full of forty fifty year old men and tell them that you're selling used women's clothes on the internet for fifteen dollars. A may not have ever bought used clothing before so there have no concept of that and then be to our unit economics conversation. It's like there's just extended disbelief round like well. How could this ever work. And then there's just like a lack of awareness around not there's the personal behavior but just how big the market is and so it was really challenging. But what i have found over the years raising money in our first investor was from trinity ventures partition the costs. You now the chair of my orange wonderful woman. She just sorta got it right away. It wasn't just because she a woman and then a mom she was just like a really savvy investor around where consumer trends were headed. So what's happened over. The many years of fundraising is people. Sort of a funny thing. I've spent time with a bunch of esters recently and they had this moment when i'm telling the story here's what we built. Here's why it matters like you can literally see their eyes light up. I get this. And they start to relate to their experience of cleaning out their closet and then of these folks investors now you have kids daughters who are shopping secondhand in ways that they never imagined. I love that comment. Books like miami with investors. I totally get s. My daughter like she only shops at thrift shops. Okay well how much would you like to invest. So it's really changed a lot in the last five years but it was definitely challenging in the beginning. But i think it's made us today as i reflect back over the past ten years. It's made us just a much more resilient company with really high conviction of like where we're trying to go and what we're trying to build because i think there's that period was it fifteen sixteen where that's when it really start where everybody's raising money and that trend continued and i think founders who start off where their series a. is done at like a forty million pre narrates ten million bucks. I'd only they know what it's like to really grind through that hardship. And i think our team having run through the grinder multiple times over the last ten years has put us in this position. Wear literally nothing gets us down. We relish the hard things. We put more chips on our shoulder every time. And i think that that resilience you have to of live through it. I don't think it can be taught intellectually each be resilient now you either learn to be resilient or not and you really don't know if you have that resilience in that staying power but a long-term until you're like repeatedly tested got the business out of the recession. He was really hard to raise money. Two thousand ten. But i think we're better company or at twelve years a long journey and it always looks so rosy at the end when the numbers are stacked football field automated ourselves working like a charm and what was the most psychologically difficult period for you especially doing something that is sort of contrarian and different and takes a long time to build just psychologically was there an episode that stands out of the most difficult as that resilience built up. I think everything really came to a head in late. Two thousand eighteen where we were out to raise some money and we had a couple of term sheets they basically got retreated at the end and now is really hard because we had put so much time and effort and still to this day really like those investors but those deals basically fell through and i remember being like this might not work. We might run out of money. Keep the coffers full to do the investments that you wanna may side remember that period being really really hard the end of eighteen and we totally got ruined and ultimately came out on the other side in nineteen with a strong investor syndicate. But that kind of six month period in between where as a founder like as this all been for naught. Kinda think like dark. But i think it's the resilience built over the prior eight years where i was sort of like all right. Well gotta get up tomorrow. Big boy pants on and go back to work. It sounds like you've studied the classic competitive advantage literature. You mentioned going to business school. How do you think about as leader about capital allocation and getting better at that time inside the business around here familiar with eric. Reece's not the lead story but startup way which is a second book but in that i think that book had some real influence on me because he started to talk about as your business grows up you start to think about capital allocation and you start thinking about innovation. How do you think about giving dollars to run. Experiments within the organization in he talks a lot about metered funding. What is metered funding. Look like the way we think about capital allocation. These days is is very much in a meter funding approach. Which is can we invest these dollars this capital in take an example like in a new notifications platform up. What's like okay. Well what are we going to do with it. Well we're going to build a whole new system of notifications across push and email and onsite and physical mail and like big landforms engage or casper. Okay well what the cost what are. The milestones are waypoints. That's going to help us understand. Are we meeting those objectives such that we want to continue to fund that investment. Let's probably closest to the sort of philosophical way that i think it which is around metered funding. We are definitely not a shot company. We don't bet the company on anything we don't take flyers were constantly to use the basis and we're constantly planting seedlings were constantly doing new things and seeing how they might generate good strong outcomes and watch how much money we're giving them in. Are we really clear on the milestones in the feedback. Loops i think eric. Recent is book has a think phrases abandoned or persevere. Point do we keep going with this notification thing or is it time to be like we tried. It probably should just keep doing what we were doing before. Let's talk a little bit about the industry in which you operate so clothing as it sounds obvious like it's a big thing. Walk us through a survey of the clothing landscape. What would be surprising to people. About where close get made the businesses behind them the impact that they have on the world anything that you find especially surprising or interesting about clothing writ large and then we'll map that back onto what you do today and kind of what you plan to do in the future. It's going back one hundred years the first department store fields in chicago and it was the first time that they were bringing the sort of mom and pop or individual italia a into a big department store. So it wasn't that you went to the bootmaker a hat maker or the shirt maker. You came to a place where you could get all these things in one. Big department store like multi-floor experience that really dominated the growth of retail for the next fifty sixty seventy years. And then you had the growth of individual branded retail where example that today be the gap companies. You had gap and banana republic and were relatively the same age right. It was like the heyday of eighties and the nineties. The gap khakis campaign. You had like a lot of these individual brands in what will be considered your store formats of the last twenty twenty five years and then what happens. Is the department stores in. You have random retail all of a sudden. They're sort of this inventory that they can't sell because they bought wrong or something happened so in the eighties. You actually see the rise of what i think has been the biggest structural change in retail ever. Which has since the advent of the department store which is off. Price guys tj maxx. It started in the mid eighties. They start small and they build this compelling store format of discount retail and off price retail fast forward. And then you start to see in the early mid two thousand two thousand six. You have the founding of guilt. It's hard to be that fifteen years ago but if a guilt and rule allah flash sale companies which were the rage for awhile. Which were how do i take the off price model and do that online through flash elsewhere map. And you kind of get through that. I've learned from department store brands retail off price flash sale. There's obviously a bunch of steps in between covering one hundred years of retail. But you get to the point. Where benefits really direct to consumer. Okay now i'm going to cut out the middleman on ever lane and i'm going to go straight to the consumer. Now you're in a position today where you have this great flowering of Sumer brands it's easier than ever. Frankly to starter brand harder than ever. I think to scale brand given the competition what all of this has been. Incumbent upon is improvements in how clothing gets made and the supply chains around the world the cost of manufacture. Quoting pretty much has gone down every year for like thirty years. It's cheaper than ever to produce stuff and the cost that that's having on the planet is meaningful and i don't think consumers really appreciate. How bad fashion is the planet today. It accounts for eight percent. Though global greenhouse gas emissions it takes hundreds of gallons of water to produce a single t shirt. So i think we're in a world today where that starting to become more visible to the consumer citing young people in particular have really shined a light on this and i think the fast fashion world has been put on notice around. This and i use fast fashion. Not in ancient am forever twenty one forever twenty one whose file for bankruptcy not just them but any manufacturer retailer is producing clothing that they can sell report by bucks because that has a real cost on the planet. Until i've been really concerned around where's ultimately going to take us that if you look at the data from the ellen macarthur foundation which does a bunch of work in sustainability around this by twenty fifty. We just keep doing what we're doing. The fashion industry is gonna count for twenty five percent of global greenhouse gas emissions five percent. And it's a big number on the issue is like really by all these brands that are making all this stuff so if you take that backdrop of proliferation rise of this stuff lowering cost of manufacturing increasing impact on the environment etc that backdrop of the retail space. How do you think about your own future and your own roadmap from here. It seems like you have almost like a costco like devotion to iterating on one thing that you do extremely well is it fair to extrapolate that. You're just going to continue to do those hundred things really well. And stay in this specifics. Obviously going to men's and there's other places to go. How do you think about your future from a business standpoint but also against the backdrop that you just laid out for us. We're a mission driven company from the very beginning. There has to be a better way where my change a lot of time is what do we want the world to look like ten fifteen twenty years from now and i think we want the fashion industry to continue on this much more sustainable circular path. I'm not sure that we can get the fashion brands of the world to produce stuff more sustainably whether that means using water or environmentally friendly dies or the types of wool. The sustainable will they use. They're coming around to the idea that we need to start to treat these resources more carefully and i think a lot of incredible work being on there especially by great new emerging brands. All birds was a good example. Rossi's is a good example. Everyone's a good example. I think our job is to get the fashion industry off. The linear path in the linear path. Is we make stuff. We sell it to you as best we can. We discount stuff we can't sell to you. You wear it and then you put it in. A landfill dot has banned the path the fashion industry for a very long time. What that means is that seventy percent of what people stop wearing and giveaway ends up in a landfill seventy percent. It's just crazy and the thing that i'm obsessed about is okay. Let's break that pack. Let's go from yeah. Let's produce stuff. I think we should produce less than we need to produce much stuff as we produced today. Let's produce stuff in a more sustainable way. Let's have brands sell it but said themselves in a way where the margins get better not worse because discounting and markdowns and everything else which is crushed the fashion industry for ten years. So let's stop doing that. But people aware it and then when people don't wearing it let's loop it back and i think we're right up. Sits in that is really in a powerful place. Okay you're dominant thing. Let us take it back. Let's put back online for somebody else to buy. And we live in a better or circular future. Is there anything else that we missed. That's interesting about the supply chain in this space. You mentioned the unfortunate byproduct of eight percent of greenhouse emissions or gases coming from this space. What else have you learned. That's most surprising or interesting about. I'm thinking all the way down until like the raw materials that might go into clothing. Give us a little bit of extra meat on that bone around what that looks like. And how you think might get better. There already is a lot of great work being done in textile material recycling the same ways that we made tons of progress in recycling plastic recycling glass. These types of things. I think fashion has been a little late to that game. But i think i think it's catching up is working on. By a number of companies to take any piece of clothing and break it down to its constituent parts strip out the cotton and strip out the polyester about medal. and signing you're gonna see rule breakers over the next few years around garment recycling. And i think the biggest challenge is we need to get to a point in the fashion industry where producing clothing from recyclable materials is the scene cost or potentially lower than it is to produce from new materials because i think the margins in the fashion industry writ large amazing every brand would love to be more sustainable but they have to pay twenty five percent more for ganic cotton or twenty five percent more for recycled. The math just doesn't work everything in these industries. It needs to be driven by the fundamental economics. So my hope. Is that a lot of the innovations being done in. Recycling will help us get there and i think the development of materials that are made to be recycled. I think adidas was doing this very very well of thinking the full cycle of their products. I just signed up on the running company dasher. Cool guys like. I don't have any pairs of their shoes. I love what they're doing. But i just signed up for their think. It's called the site crown. Or i can't even remember what it was but it's like a shoe subscription in the ideas that the shoe literally every single part of the shoe can be broken down recycled and made into a new shoe. And i think you're going to start to see things like that. Come to marketing ways. That i think we'll lose us for vasan space. I mean so big something you wear every day. Don't think too much about fascinating to hear the issues. I think the other final topic that we'll cover. That is unique and interesting about threat up. And how you run. The business with your partners is the nature of work itself for your employees. Had a really popular episode dustin moskovitz at asana couple weeks ago i was amazed by how much inbound i got of people frustrated by interested in what work looks like. Even though we've all gone remote. Which i think the reason why people are questioning this in the first place. We haven't changed that much in a very long time of the five day. Workweek nine to five blah blah blah. What you're thinking here. Why do you care about this topic. And what have you done about. How much time do we have all sorts of things when i think about why people work. Why do we work zoom way up like well. What is the point. You start to think hard about like the type of culture that you want wanted the company the type of people that you And i think the the shared values of a workforce of a culture of the company are really really important. And i think the commentary right now around future of remote were distributed workforce's. I'm very much in the. We all need to go back to the office camp. Because i just think that atomization dehumanisation that happens when everybody sitting alone at their houses i think can be really destructive especially with given the amount of time that people will spend at work sitting behind their computers and i think in the short term people will think it's fine. I think over the long term. I think he just another way race down the fabric that binds us together. I think the office is like another place for you to like meet interesting and unique and different evil and i think not having that space. I actually think it's really bad for like the body politic. Just bad for the country. I think it's bad for us. Citizens do not have places where we collaborate. It feels like a dystopian future when we're all just sitting at home reading our own news. Strict reading our own news gets delivered to us talking to the same people in our circles. And so i just think it's another step breakdown so i'm like not a big fan of the distributed forever workforce our culture in the beginning we. We really tried to be innovative around. How do we help. People do their best work about five years ago. Six years ago now we started with a. Let's create this thing called beggar days. I remember reading the concept of a maker of a maker in an organization at somebody who make stuff designers engineers. Don't spend their time in meetings. It's really like independent work. And i thought well shit. I'm the c o. I do a lot of that too. I have to do a lot of seeking and a lot of independent work. I spent a lot of my days and baker. how do we then create constructs in an office environment where people have dedicated time to do work. Real hard work came up with the idea of. We're going to create this nacre day phenomenon some days. We're going to be on wednesdays. Monday and tuesday were normal office days. Thursday friday normal upstairs but on wednesday it was a maker day and the idea of the maker day was that there could be no standing meetings. The idea was that this would be the time for you to head down and solve the hardest problems confronting the business or work on developing plans for your team that requires three four. Six seven eight hours of heads downtime. That went so well over the next couple of years that couple years later we were getting feedback from the company week persistently were hearing men. I am so productive on maker day. But i get so much done. I do my best work. I just had more maker daytime but we can solve bad so if that's the thing that plays want to do their best work. Let's go to make your days so we moved to a schedule where monday wednesday friday was in person meetings at the office. In tuesday's thursdays were maker days and the switch on that was also remembered as you didn't need to come into the office. You should go wherever like you do. Your best were and some. That is the dna of from me as the founder. Because when i was in college. I always do my best work in the coffee shops the love sitting in a coffee shop full of people writing or reading or studying or thinking and that was always like my safe place to get stuff done. Do my best work the idea of the makers as being like you kind of work from anywhere you want to come in the office rate. You wanna stay at home great. You wanna go to a cafe. Great and i think that carried us pretty far around building this construct around baker days of meeting days. The added as we added an early sabbatical policy. Once you've been at dreaded for three years you get two months sabbatical we pay you and the idea was. We need people to constantly be refreshed in recharged warnings. I loved about being a teacher when i was in. My twenties was the summers off to travel. I wife and i got to travel. All kinds of amazing stuff came back to school year in your like fired up and i thought well why is the business world. I can't we have some similar contract. We built sabbaticals into threat up and the only thing we asked you on your sabbatical was that you liked. Didn't sit around and do nothing. You had to do something meaningful. Like go travel go do something gets the pistons firing your brain expands the universe for all of us and so part of this about when you came back is you get a little fifteen minute. Slide show q. And a. with the team we who went to the great barrier reach going to scuba diving like repair the great barrier reef man. That is awesome the last thing we did very recent which is the beginning of the year. We moved to a four day workweek. Which i spent a lotta time thinking about the manage thinking about we came to the decision bat. People do their best were when they're fresh and they're recharged they're like fired up about coming into work. There's something about the three day weekend. We've all experienced it. Where having that extra day you come back into the office your man. It was great to have monday. It was great to have friday. You're kinda ready to hit it hard again if you just had that extra day recharge so we're experimenting. Now we're in the middle. It's a six month. Experiment will kind of review it in june so far the feedback is really positive. I think we're going to build a cycle of four days on three days off. It's gonna create superior output overtime when a fascinating progression of new things to be tried. It's cool how your theme is reassessing. Large important things that people have slipped into the background and not thought too much about right at twenty. Five thousand thrift stores workweek. It's neat first. Principles approach to building a business. What you most excited about the future just period. When i think about the future like the best day for like our country. I think they're ahead of us. I have an enormous sense of optimism about where we're headed. I took such great pride. Live images of mars coming back. We can still do like amazing stuff. Some pretty like inspired around where technology is taking us. there's going to be pitfalls and we're gonna make mistakes and they'll be negative derivative outcomes of the progress analogy starling satellite internet the ability to deliver internet all over the world to rural places. That don't get it today. There's such incredible progress being made so many parts of life that i really do think the future is pretty bright. But i think it's gonna require entrepreneurs and politicians in elected officials and work more collaboratively. And i think that's the rubber right. Does the thing that i'm like. We need to get back to a more civil collaborative politics ending. Government has a role to play in second hand. I talking to some of the other day if you think about the real acceleration in solar and electric batteries and things like that. It was when government started to create subsidies. We really want the fashion industry to stop the cycle. That it's on and we want people to make better decisions like what's the role of government incentives to do that. So you know. I'm spending a lot of time. Thinking about what that looks like overtime with the carbon tax equivalent in the fashion industry wants us. Fashion companies have to really internalize the fact that seventy percent of stuff ends landfill. Things change. i asked same closing question of everybody of loved talking about your businesses so unique and my favorite themes in business are applied. Here especially fun for me. Since i hadn't really experienced the products. I love hearing about it for the first time the last question i asked everybody is to ask. What is the kindest thing that anyone's ever done for you. All the things that my mom did where she would always give me the confidence. That i could do anything. There were all these failures in child. Childhood life formative years. Every time that i would like mess up she would just be like doering. Mom be like get yourself back up. You're going to be good. You can kind of do anything you want. And i think if you're an entrepreneur you're always ask entrepreneurs where resilience comes from. I don't think it calms necessarily from any one thing. But i think having somebody who no matter what always picks you back up. I think that's probably the kindest thing and it's probably kindness over over many moments in my life. That's probably the best thing. Fantastic is so much fun. James so great to meet you in this format. Thanks so much for your time. Yeah likewise thanks patrick. This episode of founders field. God was brought to you by dell technologies dealt. Technologies in windows can help you upgrade your business. Tech with these small businessmen specials save up to forty five percent on. Pc's with windows ten pro plus business docs monitors and more work anywhere with windows. Ten pro cordell technologies advisor at eight. Seven seven addow. That's eight seven seven. Ask del you can also check out the lincoln. Our show notes to see deals that dell has today. Thanks for listening if you enjoyed this episode. Checkout join colossus dot com there. You'll find every episode of this podcast complete with transcripts show notes and resources to keep learning you can also sign up for our newsletter colossus weekly where we condensed episodes to the big ideas quotations and more as well as share the best content. We find on the internet every week

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