20 Episode results for "pets.com"

Go For Broke: Inside the Dot-Com Bubble

Nice Try!

41:02 min | 10 months ago

Go For Broke: Inside the Dot-Com Bubble

"Hello. Dear listeners of Nice try. I just wanted to hear one more show that I think you also might enjoy gopher broke is a new podcast from the vox media podcast network about the biggest bubbles history and what happens when those bubbles pop. The first season, which is right now explores the DOT com bubble of the late nineteen nineties. The season digs into the true story of the venture capital, aggressive marketing, and irrational hype that led to the big market crash of two thousand and how the bad decisions in those early years of the Internet still affect how our economy works today. You'll hear the inside story of some companies. You may be familiar with like netscape and pets.com. You'll also hear from some of the lesser known stories of the companies left behind in the headlines like black planet, the black owned social media site that Wall Street overlooked. The, series is hosted by Julia for lawn who you may know from her work on MPR and buzzfeed she and the gopher broke producers have been working on the show for over a year and they're very excited to share it with you. So we're GONNA share the first episode with you right now give it a listen, and then if you like it, go subscribe to the Gopher broke feed. Bill for broke is brought to you by Agian the future proof payments, platform Agian and makes it simple to accept all kinds of payments in APP online in store touch free and beyond with a single solution globally stick around to hear more about how Agian is helping brands shape the future of retail and learn how to keep your customers happy and your business growing with Adnan business not boundaries visit AGIAN DOT COM to learn more at in dot. com? For wasn't. Crazy. pets.com slot. If there's one voice you may recognize from the early days of the Internet. It might be this one for me. It's like the Voice of a very beloved and distant relative calling from the past. He's got a scope. Thank. Things that is the Pets.com sock puppet. This homemade sock puppet with button eyes microphone became the Voice of a company that sold pet products online like way before that was a thing and like magic eye posters and beanie babies, the sock puppet was everywhere on magazine Covers Parade Floats Morning TV talk shows you name it. And then almost as quickly as it appeared, pets.com went under along with a whole lot of other dot com companies in the DOT com crash of two thousand. And the sock puppet wound up in the trash can of history a punchline for everything that was wrong about those early Internet days. But as you'll learn, there was a lot more going on with the Pets.com sock puppet than you would expect. In, a lot of ways the puppet is an emblem of why we're here and an excellent place to start. Off. John Hello and welcome to go for broke. I'm Julia for Line Gopher broke is a series that examines historical moments when everybody went a little bit overboard financially culturally whatever they bet real big. And then it didn't go so well. This season I invite you to lace up your doc martens and tell your mom to get off the phone. So you can log on because we're talking about the DOT com bubble of two thousand. A time when the promise and excitement of the Internet, lead to some really wild investments that eventually cost the stock market almost two trillion dollars. It's a story about idealism and money that is also the foundation of the Internet and the Tech Industry we know today. And we're starting the series with pets dot com because if you're going to be a super flop like a total and complete failure. You gotta get real big first. And that is what pets.com did. It's nineteen, thousand nine and the Internet is poised to change how people shop how they plan their travel how they socialize. Everything feels like it's about to change and all of this means new jobs and a whole new economy used to be either had a blue collar job or a white collar job. Nowadays, some of the highest paying jobs don't require collar at all. Revolution will create one million new jobs in the next year and tech skills can help you get everything. Suddenly every single industry is like Oh shit. Instead of just selling stuff to the people we've always been selling to, we can access anyone with an Internet connection. Buja editorial note they may have in fact actually said Boola. Millions of dollars pouring into silicon valley companies that were trying to strike gold on the Internet and that meant hundreds of thousands of people were moving west to work in tech banking on the promise of the DOT COM boom. People like Oscar you on who was a couple years out of Stanford and excited to work at a fast paced startup back in nineteen ninety, nine in two thousand and was an assistant marketing manager pets.com. So I was in the first twenty, thirty employees were there till the Very, very end Oscar and the marketing team where at the beating heart of pets.com, because when you have a new company and you only exist online, the first step is letting people know you actually exist. So this was a time where the way that you built your business was by advertising and by building brand awareness by creating as much buzz and excitement about your business. As you could deborah, Williamson was one of the founding editors of a magazine called the industry standard. It was based in the bay area and it was designed to be the news magazine of what was being called the Internet economy. The most important thing again, with all these DOT COM businesses was to build their brand name. The belief back then was that if you had a strong brand name strong brand recognition if people knew about your product or your service for your website, then eventually the revenues would come. But you had to build that brand awareness I. And the more brand awareness you had the more investors were interested in. Possibly investing in your company whether Your Business or in the public markets, and so the cycle began, but it all really started with the marketing and the public awareness of the company using marketing was one of the ways that these companies were going to beat out the competition and we knew we were defining and industry as e commerce became a thing. None of us knew where exactly it was headed but there was this really powerful energy that kind of to it but the energy that drew Oscar to pets.com was also trying a lot of other people to online pet business by the time Oscar joined there were already at least four other online pet stores trying to be the main place where people bought their cat food and their dog sweaters. Why were there so many companies trying to sell us pet food online if there's one thing that was true in one, thousand, nine, hundred nine and is still true today people love their pets were talking Guana food and cat birthday cards, hamster obstacle courses, and snake furniture. The US market for the pet industry was twenty, three, billion dollars in one, thousand, nine, hundred, nine. The pet market was bigger than books bigger than toys and on top of all that this was also the point when it started being more common for people to have a computer at home in nineteen ninety, it was actually pretty rare like fifteen percent of households. But by the end of the decade, there was a computer in more than a third of US homes given the massive pet market and the potential for people to change the way they shopped. Why wouldn't you get in on the ground floor? So pets.com wasn't alone. I. Think we all. Knew that the market couldn't support three. Headed websites what everyone understood at the pets.com office was that the company needed to be a category killer the one brand that dominates the market. And that idea drove the company's strategy. So the objective was to be. The last man standing right and so the last man standing is the one that has the most traffic, the most revenue, the most unique visitors like all of these metrics that you had to. Push, towards INC, which is what drove. kind of all the ambition that we have. Oscar was hired at pets at a key point in the company's history it started as a sort of diy endeavor by early. Internet entrepreneur named Greg mclemore who had the unusual foresight to by the URL pets.com. But in order to grow into a big time business, pets.com needed big time money. Enter Julian. I was top of my class in high school I graduated high up at Purdue I got the job I wanted I. Did this I had I mean it was sort of one freaky success after another. This is from talk she gave in two thousand twelve at the University of California at said, and by the time I got two pets I'd made millions and pets I did because I thought. Okay one more. This'll be a blast Julie was kind of a celebrity. CEO and hiring her meant that investors would be interested in taking pets from Greg's home in Pasadena into the big leagues. So Greg stepped back from the day to day and focused on being a board member and Julie ran the show. Within her first month as CEO Julie secured a very important investment from a little company may know called Amazon and another from a venture capital firm to the tune of ten million dollars. Julie wanted pets to be the household name for pet supplies in the same way that Amazon was the Go-to for books at that time. This is what she told Bloomberg News in twenty eleven. Honestly if there wouldn't have been an Amazon there wouldn't have been in the ECOMMERCE company so We to me, they were the proof point that impact consumers would transact. So really they were ground breakers. Julie knew that one of the best bets she could make to beat the competition was with a marketing campaign that made sure people knew about pets.com so pets went for the big guns at a firm called T. w. a. shy it day. By Day, was a much in demand agency in the eighties and nineties and had done a lot of breakthrough work from apple to Taco Bell to a lot of different things. He hoped they were responsible for the very famous Apple Nineteen, eighty-four AD and the cute. But Pretty Racist Taco Bell Chihuahua. In one, thousand, nine, hundred, nine, Rob Smiley was one of their creative directors and right away rob could tell that the pets.com folks were a bit of a hurry. What was unusual about pets.com is they immediately awarded us the business normally, it might take a week and a company will review a bunch of different proposals we walked in. We made a presentation they asked us to sit in the room for fifteen minutes they went out and came back in and gave us our assignment instantly. To move really fast to compete in this environment, which is why they made the Sherbet and gave their money to shy day. So quickly because pets wasn't the only company betting on marketing in one thousand, nine rob said that lots of dot com were banging down shy at days. Door was a pretty wild ideas of how to make sure that they were visible in that rush to try to outpace other competitors. Many companies wanted to be as outrageous as they possibly could to get the attention and the eyeballs of consumers. So, that was a very that was a big difference from previous generations who were more calculated more strategic. More measured in their. To advertise marketing, and this kid's is how the sock puppet came to life. And his colleagues were baking on a simple but revolutionary idea that went against the instincts of basically all of pet advertising that came before it as we developed it I think we started to create a world where we showed the pets.com understood that pets have lives. They have they have. They have things they love they have things that make them. Sad. The pets.com marketing campaign was going to tap into that part of pet ownership where you break into a weird voice or you make up an elaborate fiction around your pet like I, for one and pretty sure that one of my cats is running a radio station out of our bathtub and the other cat was her intern before she was cruelly fire. I don't know maybe it's just me. Shy Day and pets weren't GonNa do commercial with some prissy cat eating from goblet or some Westminster ass looking dogs running around pets was going to let the sock Puppet v this imperfect individual wants and needs but became this very homemade puppet with homemade props with a wristwatch for a dog collar with a button for an I with a goofy microphone made out of cardboard with a pets.com logos stuck on the side slapdash in a manner the agency also wanted to steer clear of the super scripted way that commercials usually sounded so they hired Michael Ian Black. A member of the comedy troupe the State to basically do Improv as the puppies. Before we shop the first thing, the first commercial I remember in executive. Saying something along the lines of this has to be a home run, and then I also remember like the Ad Guys Scott and rob having a look of. Projecting, confidence and emoting terror like I. Didn't know the whole thing was like hanging in the balance about whether I could make a good joke about a Frisbee I didn't know. Thank God, I didn't know I would I would have blown it. So on the set of their first commercial executives from pets.com from day actually stood around to see what was gonNA happen. They were taking a moonshot with a wildly different concept and they were paying a lot of money for it. Rob The creative director remembers that day really clearly. So the first shot we did was the sock puppet with the delivery driver. I'm overseeing some deliveries for bets. Dot. COM purely in an advisory Role Robin in the other exacts, we're supposed to watch Michael and the delivery driver from a feed and unfortunately the video tap broke. So we couldn't watch what what was happening. In real time they just drove away and for thirty five minutes we sat there clients creative director waiting for them to come back wondering what was happening what Goes Zip Down Spinning. Round in routes dot com the pets.com exerts nervous because remember remember their whole plan for getting customers to visit their website instead of toby dot com or the local supermarket was a comedian riding around in a van doing loose Improv with a sock puppet if this very, I shoot was a bust and they didn't like what they saw. The suits were ready to pull the. Plug on the whole thing they came back laughing got out of the van said, it's great. It's great. They popped at what was then a tape into a tape player for us to see the takes and we saw just the most hilarious improvisational takes between the driver and the sock puppet we knew at that moment this was absolutely going to be brilliant I like your shorts. Looking fellow. So they have their first commercial Oscar who was on the marketing team was thrilled. Yeah. So the mean the first coolest thing is when you're just watching TV at home and then the ad comes on right and you're sitting there and you're like, wait a minute that's the company I work for and wait a minute I've seen a preview of this ad and wait a minute. I know the people who are doing that right and I think. It's it's what happens very often the first TV ads with sock puppet hit the airwaves in September nineteen, ninety nine and they quickly get some buzz. The ads are funny and memorably weird but there's a catch here. The whole motivation behind this ad campaign was not simply to get people to log on and buy their dog a new caller it was to demolish the competition, and by the time, the first ad aired the field of competitors was getting bigger. POPEY DOT com website had just launched and they had the backing of the brick and mortar company PETCO but it seems like the Pets.com ad campaign, which would eventually cost twenty million dollars is keeping them ahead of the competition. In July wainwright's autobiography, she writes about how valuable the sock puppet was. Could the other companies sell dog collars yeah, shirt. But did they have the cutest little rascal in all of puppeteer and sitting on the end of Michael Ian Black's arm they did not. Julia writes that he realized how much of an asset the sock puppet was when macy's asked the sock puppet to be in their annual Thanksgiving Day parade free of charge usually, it costs something like two hundred, thousand dollars to be in the prayed. And now Alan, jd here's one who is a VIP. That's one very important. Pat Out this your favorite television commercial largest. Bernie's by pets.com you may have seen this sock puppet on television singing spinning wheel you know. GOES UP MAS tom down this boots goes up to the top of four story building and Al Roker wasn't the only fan of the South Puppet Deborah Auto Williamson the marketing generalist who heard from before says that this kind of stuff was helping pets.com pull away from the pack of online pet retailers and let me just be real with you because I spent a lot of time watching commercials. The competition wasn't doing anything riveting at this moment at best the commercials for the competition look like stock footage the sock puppet was so engaging and so unique and the way that it was incorporated not only. INTO TV advertising but in two integrated marketing opportunities such as being a balloon in the macy's parade I mean these were things that really made that brand stand out among all the other brands that I can remember thinking about and writing about back in that day pet CEO Julia wainwright didn't speak to us for this episode but like let's just get in her head for a moment. Okay. What is the number one place you go if you WANNA be flashy and cool advertising like what is one of the few moments of every year where people actually talk about ads where people actually look forward to the? Tennessee Titans Square off with the Saint Louis Brand. Super Bowl thirty four. Like, what is what is the one thing we can do to one up at that rate and it's like Oh super bowl they. Wheeled in. Be on a cart with a VCR with the and then they they played the first few cuts of the commercial and we all loved it and then the next thing you know as you see. On TV and a super bowl AD free so Thirty two, thousand the day of the game eight point five, million people are glued to their. TV's and in between watching Kurt Warner, lead the rams to victory that massive audience sees this. The commercial opens of the dog looking really sad while its owner drives away. Okay Beano I got. To get when you like. So. Remember how the whole idea behind pets.com was pets have lives and feelings and everything. The super. Bowl ad was all about. A spotlight comes on and Pets.com sock puppet appears singing if you leave me now by the band, Chicago, one of the folks we spoke to from Shaya Day told us that the band had never given permission for the song to be used in a commercial before but their lead singer Peterson Tara just love that damn? Puppy. A please don't go. There's a crying turtle and angry looking cat. And a goldfish. For Oscar and the employees of pets.com, the Super Bowl was a huge public sign that their hard work was actually paying off I started in May and in. Maine. It was just starting by November, we were in the macy's Thanksgiving Day parade right by January were in the Super, bowl? So just to be clear in under eight months, pets.com went from barely existing to one of the biggest stages in the world and it just happened. So quickly that it is a little bit of a blur for pets and many other dot com companies, the Super Bowl was their big coronation assigned that they were ready to play in the big leagues. Seventeen different dot. com took out ads in the Super Bowl that year and all that demand drove up the price for a commercial slot by thirty one percent. Super Bowl thirty four is known as the DOT COM Super Bowl. And for creative directors like Rob Smiley, well, it's everyone's dream to be have a incredibly successful campaign and a super bowl ad. Float in the macy's Day, parade. You dream those things but you don't know if they'll really happen for most people it is. It is a once in a lifetime moment. So this campaign is all markers a huge success. The pets dot com website actually crashed because so many people went on it after the AD. But, the thing is pets.com is far from dominating the market. If it wanted was to be a category killer. It's actually more like a category mosquito. When we come back as the sock puppet prophesied would go. down. This is advertiser content. It used to be that when you heard the word subscription, we were talking about magazines or newspapers. Not New clothes. Dog Food or Bacon. Of. The month clubs. The reason we love subscriptions is that they give us ongoing access to a lot of things without ever having to leave the house. So you probably won't be surprised to hear the subscription economy is up over three hundred and fifty percents it. And those numbers are climbing even higher while your customers are hunkered down at home like have streaming services ever been so important. Clearly subscriptions are great for customers. It's also true that they can be great for your business. Subscription. Companies are particularly resistant to the challenges of covid nineteen a little more than half the company's a recent survey didn't see big hits to their subscriber growth during the pandemic. A quarter even grew their subscriptions. SMART companies are pivoting to a subscription model is your business ready here's the thing the key. To gaining and keeping subscribers is a seamless sign up process and an equally seamless payment system. But all that ease requires a platform that's global end Nimble, enough your customer's needs and your unique business. That's where Adkins, all in one payments platform comes in Atkins global reach and seamless checkout process. Help you build your subscription base real automatically and maintain customer loyalty so you can create more and boxing moments. And fewer payment frustrations learn more AT AGIAN DOT com. That's Eighty Y. E. N. dot com. Agian business not. Boundaries. Hi. I'm Julia Furlan this gopher broke. In this episode we're telling the story of pets.com and its battle to establish a successful e commerce company at a time when buying things online still felt kind of like science fiction and the fate of pets.com set squarely on the small stuff shoulders of the sock puppet. Two weeks after the super. Bowl pets.com is about to have its IPO, its initial public offering on the Nasdaq Stock Exchange it's a big moment for the pets team over the years. AFTER DOT com go public with skyrocketing stock prices. Today pets was up. Oscar you on remembers that morning fondly. Early. Because obviously the market opens in New York, we're in San Francisco. I remember it was a celebratory. It was a positive mood. The top pets executives have flown to New York to be there for the opening bell but Oscar and Co workers are holding down the fort. So it was almost a little bit like the parents away the kids are going to play and and it was it was it was deliberately like I said it was the first time I had tried dom perignon kind of exciting. But as the trading day start, the celebration doesn't last very long and then I remember kind of as the day wore on our stock price stuck I remembered the number of very well, it was it stuck at eleven, dollars and I. Had Friends who are bankers and I remember getting call. We didn't have text messages at the time. Right thing. You guys are still eleven. You know what that means. That means the bank is buying up all the shares to keep you. I said eleven and I wasn't quite sure what that meant at the time but I remember thinking that they had a little bit of like i. told you. So tone in their voiced by the end of the day, pets is exactly where it started at eleven bucks a share, Oscar and his co workers are happy that the company went public, but it's not the raging success that they'd been hoping for. So it was kind of A. Okay, well, this is this is how how it turned out. The next day we went back to work and kind of things move forward from there. This was the point in two thousand when the stock market starts to lose momentum but you know what was still going strong the SOCK PUPPET Pets.com knows that they need him out their shilling for the company. He's their best hope of making money. He's The star and like any true Celeb- He needs a publicist Hi Melissa Mentor I was publicity at pets dot com. And it was great. Melissa job was to help get press coverage for the puppet and pets hired her because she was the perfect person for the job. So it was in a job that didn't really love somebody told me about a head hunter And I sent my resume and the next day she called and she said this pet food company wants to talk to you. That makes absolutely no sense. I have done publicity for the muppets and she goes that's exactly what they WanNa talk to you about I mean you might say Melissa Mentor was born to be a puppet publicist. In fact, she still wraps a white and black dog today this time it snoopy. After the Super Bowl Ad Melissa Mendez phone was ringing off the hook. I picked up the phone. It was like a week after the super bowl and it was the producer from Good Morning America. She was like we really want to have the puppet doing interview on Good Morning America. It's absolutely bizarre in retrospect, but the pets.com puppet was so popular that in March of two thousand, the puppet actually did Oscars coverage for Good Morning America way how you doing. Charlie. I'm here to Big Oscar Party in Hollywood California now I wasn't exactly invited and technically I'm not supposed to be here but I'm GonNa. Try to interview as many celebrities about their favorite movies and favorite bags and we were getting news coverage mean for publicity person getting news coverage is like a high. So you know I would get these really great hits and I would just go home and feel excited about that I was succeeding at my job. The sock puppet is everywhere people love that little buddy so much that they're dying to get their hands on a sock puppet of their own. Oscar remembers this time as an absolute frenzy. I'm the customer service was fielding inquiries all the time for like can I get a puppet? Can I get a puppet? What's going on sale? So, they did it. They started turning out sock puppets and selling them for twenty bucks a pop, and honestly they couldn't keep them in stock. They were so popular. Ten thousand puppets were sold in the first week that they were available. It's great. So something that that we build his become such a cultural touchstone driving so much interest that people are buying it. You know. So fast off the shelves, we can't even keep it. Stock but lots of people were just buying the puppet and nothing else. So, sales were up, but maybe not it exactly the way that the business plan meant them to be I mean it's sort of like if people weren't really interested in big. MACs. But they were hype to buy a Ronald McDonald all the question rose like are we moving stuff away from what our core business should be? You know we want to be the best pet product company out there and so. I think there was a tinge of that, but it was not a huge. At least from my perspective wasn't a huge thing it was kind of like okay. Well, let's just have to move more pet food. So number check pets.com at this point had spent twenty million dollars on the marketing campaign that created the sock puppet but the problem is they weren't making enough money you add that to their other operating expenses and they were almost sixty two million smackers in the whole. Omar Merlo is a professor of marketing at Imperial College London and he did a case study on the marketing strategy used by pets.com and other retail companies in nineteen, ninety, nine and two thousand. They spent millions on Super Bowl ads, TV radio magazines, and you know it's it's expensive to create something like the sock puppet and ingrain it ahead of every single American caused a lot of. And at one point it was spending. Four dollars on marketing expenses for every dollar they made in sales site that this is a massive investment and eventually the customer acquisition cost was about four hundred dollars per customer. So he takes you four hundred bucks to get your customer in look if you're selling helicopters or Yasser Fancy Shit four hundred dollars to get your customer in the door is worth it. You'll make that back on your first sale. But when we're talking about Christmas hats for your Guana, it means that the company is spending a ton of money on you in the hopes that you'll spend even more over the long haul. I gotta say those numbers don't really add up especially because pets.com wasn't necessarily connecting with customers. So. One thing is to be known needs to be a way to have customers that are aware of your brand that is familiar and other sexually connecting a meaningful way and the way you do that is I by building a value proposition that is meaningful and then advertising comes later to reinforce what you've done but I think in this case, there was there was was really a rush to roy very quickly. In this rush to grow very quickly pets.com wasn't the only ones spending millions on marketing without building the business muscle to back it up before the business really took off you had companies like hotjobs, dot com computer, DOT COM last minute travel dot com that all about super bowl ads in two thousand everybody wanted to make a big splash i. mean we were told about this one company that had a big marketing idea to build a smiley face Emoji that you could see from space. That's that was their entire idea. Omar. Remember another DOT COM company with a marketing campaign that went too far I. think it was called outpost the calm. The head is terrible advancements with this guy shooting gerbils out of a cannon. At and everyone knew them and it became very popular because of these advocate for all the wrong reasons, people remember the advertisement limited brands possibly in a negative way because they add foul but nobody even knew what what these there were selling what they stood for Omar says pets spent so much money building up the puppet, but they weren't offering customers anything different. Even if you loved the sock puppet, it didn't mean that you were going to be a loyal customer we spoke to so many people who actually a sock puppet but never purchased anything regularly from pets.com. pets.com was offering wasn't that enticing even to the sock puppet himself Michael in black I didn't use pets.com. Didn't. I had a dog. I had a dog I adored. Did, I ever buy dog food from. Pets.com for that dog. nope. Never even never even entered my consciousness that I would do such a thing. Even though you were. Selling the puppet even though you were the central figure of the marketing campaign. I know stupid, right. But I didn't know anybody who used the service that feeling where you're like Yeah like this this this could all come crashing down fairly quickly. That was definitely the feeling that I was getting. People had absolutely heard pets.com and people were absolutely not using pets.com turns out pets was fighting to be the number one pet website, but people were still buying pet supplies the same way that they always had at the store. And this was one of the many big problems that pets could never solve. They spent a lot of money making people aware of the company, but they couldn't convince them to buy enough stuff to be profitable in nineteen, ninety nine. There just weren't enough people buying things online and PS shipping huge heavy bags of dog food across the country isn't exactly a high margin proposition to do it. Well, you need a whole supply chain of trucks and planes and warehouses and workers that didn't really exist yet. Maybe pets.com could have figured out their business model eventually. But they ran out of money and they ran out of time. In one, thousand, nine, thousand, nine pets.com loses sixty, two, million dollars and in the eight months after it's super bowl ad, it loses an additional eighty, five million dollars for its investors. It wasn't clear that the company was ever going to be profitable so they start jumping ship. In those eight months, the share price falls to under a dollar. In November of two thousand pets.com CEO Julie wainwright decides to pull the plug. Here is NBC's Tom Brokaw with the bad news other economic news. There is a new victim of the falling fortunes on the new economy pets.com which made its mark with a sock puppet. Is. Closing down, I'm January sixteenth, two thousand and one shareholders approve a plan to liquidate the company's assets. For failing to find a buyer, pets.com will sell off the majority of its assets and lay off two hundred and fifty five of its three hundred and twenty employees, Oscar and Melissa, and the other pets.com employees walk in on their last day of work past a bunch of news cameras. A big group of them just go to a bar nearby drink their sorrows. Twelve days later, super bowl thirty, five rolls around. It's the Baltimore Ravens against the New York giants this time only three dot com companies from the previous year are running ads and one of them is for trade. It features their signature chimpanzee. Don't ask just go with me here, and the chimp is riding a horse through what looks like an abandoned town. By this point, dot com had lost nearly two trillion dollars in value. Some people had their entire retirement savings wiped out. Many people lost their jobs. The chimp passes by an empty office building for a tie class dot com past the sports car with the LICENSE PLATE DOT COM. And then something hits our little Tim Friend in the foot. It is as you may have imagined a tattered dirty shell of the beloved sock puppet. Tears run down little champions cheek as the commercial closes. Oh, how the mighty little cutie, the sock puppet represented so much promise and momentum it had fallen. In just over a year, the company was being sold for parts. Actually the sock puppet did have another life. Pink car financing the call one, eight, hundred bar none the puppet ended up schilling low budget car insurance without Michael Ian Black though. Melissa Oscar, and actually a lot of the employees that we spoke to from pets.com were really bummed out by that if you need co-financing even if you have bad credit been divorced and you. Know Gopal or have no credit at all you deserve a second chance to. It was so depressing to see that ad I'm really that's the physical stock with the button is the microphone I get it, but it wasn't. It wasn't us and I. think that's what was really sad, right I don't think there was the whole. Energy and the people behind it and Committing to building something. They were just using it. Without any of the any of the history behind it. WHO SAYS PETS CAN'T? Drive. I know it's bad to the extent that you can be heartbroken by a sock puppet. I kind of. This season on gopher broke we're going to bring you heartbreaks and big wins. We're going to make it so that the DOT com bubble isn't just this footnote in history, we're going to examine the forces that created the bubble and what caused it to pop. And we're going to figure out how the early Internet challenge the world that we live in today right now next episode, we're going back in time to nineteen ninety-five the start of the DOT com bubble. The moment when money transforms the nerdy idealistic early Internet it was wild, we're running in and out of the fountain in front of the old netscape. On metal filled road and drinking champagne out of bottles and there's balloons everywhere. We're GONNA see what convinced. So many people in the early nineties to chase their dreams only to lose it all. Thanks to Michael Catano Hideo. Hit Baba John Ketcham Sarah Sarasin and Todd Whitney for their production support on this episode. Special. Thanks to epics Molise to suray archival clips from sports NBC Nightly News, and the macy's Thanksgiving Day parade clip of Good Morning. America courtesy ABC News. This episode was researched and fact checked by Charlotte Silver. Go for broke is produced by Bridget Armstrong Meghan Kinane and Zach. Is. A KASTENBAUM OUR EDITOR Neil Dash has our editorial consultant for the series Gotham Freakish engineered this episode and composed are wonderful theme song art. Chung is our show runner are executive producers are Nishat Kirwa and Joshua Behrman go for broke is a production of ethic and the VOX media podcast network. If you like this episode which I really hope you did please leave us a rating and review on apple podcasts and Tele friend it's a popularity contest and I would like to win and subscribe for free to the series on your favorite podcast APP. I'M JULIA FOR LINE AND I guess my tagline is. Blue. This episode was brought to you by in the future payments platform. Agian makes it simple to accept all kinds of payments in APP. Online in store touch free and beyond with a single solution globally keep your customers happy and your business growing with at yen business not boundaries visit AGIAN DOT COM to learn more at yen dot com.

pets.com Melissa Oscar Bowl pets.com Oscar macy Michael Ian Black pets.com. pets.com director CEO vox media DOT COM Julie wainwright Julia Baba John Ketcham Sarah Sarasi
Go For Broke: Inside the Dot-Com Bubble

Land of the Giants

41:05 min | 10 months ago

Go For Broke: Inside the Dot-Com Bubble

"Hey Ronnie. Mola. While you're waiting for the next seasonal end of the giants. I. Wanted To tell you about another new series. You might like from the Vox media podcast network it's called. Gopher broke. Gopher broke is a podcast series about historic bubbles and the irrational enthusiasm behind them. The first season which is out right now takes a close look at the dot com bubble of the late nineteen ninety S. that's when everyone and their mother was buying stock and Internet companies. If you could sell something online people were doing it and investors were eating it up no matter how unprofitable. So well, Linda, the giants covers the winners of the DOT COM era go for broke looks at the other side of the coin, the company's crashed and burned. When the bubble popped, you'll hear about companies like netscape browser, that Microsoft eventually crushed and also hyped up web companies like pets.com remember pets.com. Where does he might also here for my co host Peter Kafka even though many of these companies are no longer around if had a huge and lasting impact on today's ECOMMERCE companies and the Internet as we know it, and maybe if you listen to this podcast, you'll understand how to avoid the next big bubble if we're not already in one. We're GONNA share the first episode. Go for broke with you right now. Give it a listen. Then go subscribe. Bill for broke is brought to you by Agian the future-proof Payments Platform. Agian makes it simple to accept all kinds of payments in APP online in store touch free and beyond with a single solution globally stick around to hear more about how Adian is helping brands shape the future of retail and learn how to keep your customers happy and your business growing with Agian business. NOT BOUNDARIES VISIT AGIAN DOT COM to learn more at Yen darcom. Book. pets.com. If there's one voice you may recognize from the early days of the Internet, it might be this one. For me, the Voice of a very beloved and distant relative calling from the past. He's got a scope stink. Love Stop things that is the Pets.com sock puppet this homemade sock puppet with button eyes and a microphone became the Voice of a company that sold pet products online like way before that was a thing and like magic eye posters and beanie babies, the sock puppet was everywhere on magazine. Covers parade floats morning TV talk shows you name it. And then almost as quickly as it appeared, pets.com went under along with a whole lot of other dot com companies in the DOT com crash of two thousand. And the sock puppet wound up in the trash can of history a punchline for everything that was wrong about those early Internet days. But as you'll learn, there was a lot more going on with the Pets.com sock puppet than you would expect. In a lot of ways, the puppet is an emblem of why we're here and an excellent place to start. Hello and welcome to go for broke I'm Julia for Line Gopher broke is a series that examines historical moments when everybody went a little bit overboard financially culturally whatever. They. Bet Real big. And then it didn't go so well. This season I invite you to lace up doc martens and tell your mom to get off the phone. So you can log on because we're talking about the DOT com bubble of two thousand. A time when the promise and excitement of the Internet lead to some really wild investments that eventually cost the stock market almost two trillion dollars. It's a story about idealism and money that is also the foundation of the Internet and the Tech Industry we know today. And we're starting the series with pets.com because if you're going to be a super like a total and complete failure. You gotta get real big first, and that is what pets.com did. It's nineteen, ninety nine and the Internet is poised to change how people shop how they plan their travel how they socialize. Everything feels like it's about to change and all of this means new jobs and a whole new economy used to be you either had a blue collar job or away collar job. But nowadays, some of the highest paying jobs don't require a collar at all the revolution will create over one million new jobs in the next year and tech skills can help you get everything. Suddenly every single industry is like Oh shit. You mean instead of just selling stuff to the people we've always been selling to, we can access anyone with an Internet connection. Blue Ya editorial note they may have in fact actually said Boola. Millions of dollars were pouring into silicon valley companies that were trying to strike gold on the Internet, and that meant hundreds of thousands of people were moving west to work in tech banking on the promise of the DOT COM boom. People like Oscar Yuan who was a couple years out of Stanford and excited to work at a fast pace startup back in nineteen, ninety, nine, two, thousand, I was an assistant marketing manager pets.com. So I was in the first twenty thirty employees and we were there till the the very very end Oscar, the marketing team where at the beating heart of pets.com because when you have a new company and only exist online, the first step is letting people know you actually I? So this was a time where the way that you built your business was by advertising and by building brand awareness by creating as much buzz and excitement about your business. You could Deborah Agha Williamson was one of the founding. Of A magazine called the industry. Standard. It was based in the bay area and it was designed to be the news magazine of what was being called the Internet economy. The most important thing again, for all these DOT COM businesses was to build their brand name. The belief back then was that if you had a strong brand name strong brand recognition if people knew about your product or your service, your website, then eventually the revenues would come. But you had to build that brand awareness I. And the more brand awareness you had the more investors were interested in. Possibly investing in your company whether as venture business or in the public markets, and so the cycle began but it all really started with the marketing and the public awareness of the company using marketing was one of the ways these companies were going to beat out the competition and we knew we were defining and industry as ECOMMERCE became a thing. None of us knew where exactly it was headed but there was this really powerful energy that kind of drew me to it. But the energy that drew Oscar Pets.com was also drying a lot of other people to the online pet business. By the time Oscar joined. There were already at least four other online pet stores trying to be the main place where people bought their cat food and their dog sweaters. Why are there so many companies trying to sell us pet food online if there's one thing that was true in one, thousand, nine, hundred nine and is still true today people love their pets were talking Guana food and cat birthday cards and hamster obstacle courses and snake furniture. The US market for the pet industry was twenty, three, billion dollars in one, thousand, nine, hundred, nine. The pet market was bigger than books bigger than toys and on top of all that this was also the point when it started being more common for people to have a computer at home in one, thousand, nine, hundred, it was actually pretty rare like fifteen percent of households. But by the end of the decade, there was a computer in more than a third of US homes given the massive pet market and the potential for people to change the way they shopped. Why wouldn't you get in on the ground floor? So pets.com wasn't alone. I think we all knew that the market couldn't support three head websites. What everyone understood at the pets.com office was that the company needed to be a category killer, the one brand that dominates the market. and. That idea drove the company's strategy. So the objective was to be. Though the last man standing right and so the last man standing is the one that has the most traffic, the most revenue, the most unique visitors that all of these metrics that you had to kind of push towards nick, which is what drove. kind of all the ambition that we have. An. Oscar was hired at pets at a key point in the company's history it had started as sort of diy endeavor by an early Internet entrepreneur named Greg mclemore, who had the unusual foresight to buy the URL pets.com. But. In order to grow into a big time business, pets.com needed big time money. Enter, Julie Win Right I was top of my class in high school. I graduated high up at Purdue I. got the job I wanted I did this I had I mean, it was sort of one freaky success after another. This is from a talk she gave in two thousand twelve at the University of California at Moore said, and by the time I got two. Pets, I'd made millions and pets I did because I thought. Okay one more. This'll be a blast. Julie was kind of a celebrity CEO and hiring her meant that investors would be interested in taking pets from Greg's home in Pasadena into the big leagues. So Greg stepped back from the day to day and focused on being a board member and Julie ran the show. Within her first month as CEO Julie secured a very important investment from a little company, you may know called Amazon and another from a vendor capital firm to the tune of ten million dollars. Julie wanted pets to be the household name for pet supplies in the same way that Amazon was the Go-to for books at that time. This is what she told Bloomberg News in twenty eleven. Honestly if there wouldn't have been Amazon there wouldn't have been in the e ECOMMERCE. Companies? We to me, they were the proof point that impact consumers would transact. So really they were the ground breakers. Julie knew that one of the best bet she could make to beat the competition was with a marketing campaign that made sure people knew about pets.com? So pets went for the big guns at a firm called t TB W A shy day. Day, was a much in demand agency. In the eighties and nineties and had done a lot of breakthrough work from apple to Taco Bell to. A lot of different things yet they were responsible for the very famous apple nine, hundred, four ad and the cute but pretty racist Taco. Bell Chihuahua. In Nineteen Thousand Nine Rob Smiley was one of their creative directors and right away rob could tell that the pets.com folks were in a bit of a hurry. What was unusual about pets.com is they immediately awarded us the business normally, it might take a week and a company will review a bunch of different proposals we walked in. We made a presentation they asked us to sit in the room for fifteen minutes. They went out and came back in and gave us our assignment instantly. To move really fast to compete in this environment, which is why they made the Sherbet and gave their money to shy day. So quickly because pets wasn't the only company betting on marketing in one, thousand, nine, hundred, nine, rob said that lots of dot coms were banging down shy at days door was some pretty wild ideas of how to make sure that they were visible in that rush to try to outpace other competitors. Many companies wanted to be outrageous as they possibly could to get the attention and the eyeballs of consumers. So that was a very that was a big difference from previous generations who are more calculated more strategic. More measured in their approaches to advertising and marketing, and this kid's is how the sock puppet came to life rob and his colleagues were banking on simple. But revolutionary idea that went against the instincts of basically all of advertising that came before it as we developed it I think we started to create a world where we showed that pets.com understood the pets have lives they have they have they. Have things they loved things that make them. Sad. The pets.com marketing campaign was going to tap into that part of pet ownership where you break into a weird voice are you make up an elaborate fiction around your pet like I for one am pretty sure that one of my cats is running a radio station out of our bathtub and that the other cat was her intern before she was cruelly fired. I don't know maybe it's just me. Day and pets weren't going to do a commercial with some prissy cat eating from a goblet or some Westminster ass looking a running around pets was going to let the sock puppet be this imperfect individual with wants and needs. It became this very homemade puppet with homemade props with a wristwatch for a dog collar with a button for an eye with a goofy microphone made out of cardboard with a pets.com logos stuck on the side slapdash in a manner the agency also wanted to steer clear of the super scripted way. The commercials usually sounded. So they hired Michael, Ian, black, a member of the comedy troupe the State to basically do Improv as the puppet. Before we shot the first thing, the first commercial I remember in executive. Saying something along the lines of this has to be a home run, and then I also remember like the Ad Guys Scott and rob having a look of. Projecting confidence and emoting terror like I didn't know like the whole thing was like hanging in the balance about whether I could make a good joke about a Frisbee like I didn't know. Thank God I didn't know I would I would have blown it. So on the set of their first commercial executives from pets.com and from day actually stood around to see what was going to happen they were taking a shot with a wildly different concept and they were paying a lot of money for it rob the creative director remembers that day really clearly. So I shot we we did was the sock puppet with the delivery driver. I'm overseeing some deliveries pets.com purely in an advisory role robin the. We're supposed to watch Michael and the delivery driver from a video feed and unfortunately the video tap broke. So we couldn't watch what was what was happening. In real time, they just drove away and for thirty five minutes we sat there clients creative director waiting for them to come back wondering what was happening what goes up must come down spinning. Round in routes dot com. The pets.com exacts were nervous because remember remember their whole plan for getting customers to visit their website instead of pet topiary dot com or the local supermarket was a comedian riding around in a van doing loose Improv with a sock puppet. If this, very I shoot was a bust and they didn't like what they saw the suits were ready to pull. The plug on the whole thing they came back laughing got out of the van said it's great. It's great. They popped what was then a tape into a tape player for us to see that the takes and we saw just the most hilarious improvisational takes between the driver and the sock puppet we knew at that moment this was absolutely going to be brilliant I like your shorts. You. Looking? So they have their first commercial Oscar who was on the marketing team was thrilled yes. Oh the. coolest thing is when you're just watching TV at home and then the ad comes on right and you're sitting there and you're like, wait a minute that's the company I work for and wait a minute. I've seen a preview of this ad and wait a minute i. know the people who are doing that rate and they think it's It's also be what happens very often the first TV ads with sock puppet hit the airwaves in September nineteen, ninety nine and they quickly get some bus. The ads are funny and memorably weird. But there's a catch here the whole motivation behind this ad campaign. It was not simply to get people to log on and buy their dog collar it was to demolish the competition. And by the time, the first ad aired the field of competitors was getting bigger. Dot Com website had just launched and they had the backing of the brick and mortar company, PETCO. But it seems like the pets.com AD campaign, which would eventually cost twenty million dollars is keeping them ahead of the competition. And Julia Wainwright's autobiography she writes about how valuable the sock puppet? was. Could the other companies sell dog collars? Yes. Sure. But did they have the cutest little rascal in all of puppeteer airing sitting on the end of Michael Ian, black's arm they did not. Julie writes that she realized how much of an asset the sock puppet was when macy's asked the sock puppet to be in their annual Thanksgiving Day parade free of charge usually costs something like two hundred, thousand dollars to be in the prayed. And now, L. and Katie Beers one who who is a VIP? That's one very important pet out this your favorite television commercial. Oh Yeah. largest furnished by pets.com you may have seen this sock puppet on television singing spinning wheel. You know what goes up must come down this goes up to the top of a four story building men Al Roker wasn't the only. Fan of the puppet, Deborah Williamson, the marketing journalists who we heard from before says that this kind of stuff was helping pets.com pull away from the pack of online pet retainers and let me just be real with you because I spent a lot of time watching old commercials, the competition wasn't doing anything riveting at this moment at best the commercials for the competition look. Like stock footage, the sock puppet was so engaging and so unique and the way that it was incorporated not only in two TV advertising. But into an integrated marketing opportunities such as being a balloon in the macy's parade, I mean, these were things that really made that brand stand out among all the other brands that I can remember thinking about and writing about. Back in that day pet CEO Julie Wainwright didn't speak to us for this episode but like let's just get in her head Vermont Okay what is the number one place you go if you want to be flashy and cool and advertising like what is one of the few moments of every year where people actually talk about ads where people actually look forward to the? Tennessee titans swear off with the Saint. Louis, Rams. Super Bowl thirty four. Click what is what is the one thing we can do to one up that rate and it's like Oh super bowl that they we old in? Can you be on a cart with a VCR? With the and then they played the first few cuts of the commercial and we all loved it, and then the next thing you know as you see it on a super bowl ad. So on January thirtieth two, thousand, the day of the game eight point, five, million people are glued to their TV's and inbetween watching Kurt Warner. Lead the rams to victory that massive audience sees this. The commercial opens the dog looking really sad while its owner drives away. Okay. Dino I gotta go to a lot of stores together with. So remember the whole idea behind pets.com was pets have lives and feelings and everything. The superbowl ad was all about that. A spotlight comes on and the Pets.com sock puppet appears singing. If you leave me now by the band Chicago, one of the folks we spoke to from shy told us that the band had never given permission for the song to be used in a commercial before but their lead singer Peterson Tara just love that. Damn puppet. Please don't go. Crying Turtle and angry looking cat a parakeet, a goldfish. For Oscar the employees of pets.com the Super Bowl was a huge public sign that their hard work was actually paying off. I started in May and in Maine you know it was just starting by November we were in the macy's Thanksgiving Day parade right by January were in the Super Bowl. So just to be clear and under eight months pets.com went from barely existing to one of the biggest stages in the world and it just happened. So quickly that it is a little bit of a blur for pets and many other dot com companies, the Super Bowl was their big coronation a sign that they were ready to play in the big leagues. Seventeen different DOT com took out ads in the super. Bowl. That year and all that demand drove up the price for a commercial slot by thirty one percent. Super Bowl, thirty four is known as the DOT COM Super Bowl. And for creative directors like Rob Smiley. Well, it's everyone's dream to be have a incredibly successful campaign in a super bowl ad. Float in the macy's Day parade. You dream those things but you don't know if they'll really happen for most people it is. It is a once in a lifetime moment. So this campaign is by all markers a huge success, the pets dot com website actually crashed because so many people went on it after the AD I. But the thing is pets.com is far from dominating the market. If what it wanted was to be a category killer, it's actually more like a category mosquito. When we come back as the SOCK puppet prophesied look. Look down. This is advertiser content. It used to be that when you heard the word subscription, we were talking about magazines or newspapers. Not, new clothes dog food or Bacon of the month clubs. The reason we love subscriptions is that they give us ongoing access to a lot of things without ever having to leave the house. got. So you probably won't be surprised to hear the subscription economy is up over three, hundred, fifty percents. And those numbers are climbing even higher while your customers are hunkered down at home like have streaming services ever been so important. Clearly subscriptions are great for customers, it's also true that they can be great for your business. Subscription. Companies are particularly resistant to the challenges of cove in nineteen. A little more than half the companies in a recent survey didn't see big hits to their subscriber growth during the pandemic. A quarter even grew their subscriptions. SMART companies are pivoting to a subscription model is your business ready here's the thing. The key to gaining and keeping subscribers is a seamless sign up process and an equally seamless payment system. But all that ease requires a platform that's global and Nimble enough your customer's needs and your unique business. That's where Adkins all in one payments platform comes in. Advance global reach and seamless checkout process. Help you build your subscription base rebuild automatically and maintain customer loyalty. So you can create more and boxing moments with me treatments. And fewer payment frustrations learn more AT AGIAN DOT com. That's eighty Y. E. N. dot. com. Agian business not, boundaries. Hi, I'm Julia for line and this is gopher broke in this episode were telling the story of pets.com and its battle to establish a successful e commerce company at a time when buying things online still felt kind of like science fiction and the fate of pets.com sat squarely on the small stuff shoulders of the sock puppet. Two. Weeks after the Super Bowl pets.com is about to have its IPO its initial public offering on the Nasdaq Stock Exchange, it's a big moment for the pets team. Over the years they've seen DOT COM AFTER DOT com go public with skyrocketing stock prices. Today pets was up. Oscar you on remembers that morning. Fondly, it was early because obviously the market opens in New York we're in San Francisco of. It was story was a positive mood. The top pets executives have flown to New York to be there for the opening bell but Oscar and his co workers are holding down the fort. So it was almost a little bit like the parents away. The kids are GonNa play and and it was it was it was celebrated like I said it was the first time I had tried dom perignon. It's kind of exciting but as the trading day starts, the celebration doesn't last very long and then I remember as the day were on our stock price stuck I remember the number of very well, it was it stuck at eleven dollars and I had. Friends who are bankers and I remember getting call. We didn't have text messages at the time. Right thing. You guys are still eleven. You know what that means. That means the bank is buying up all the shares to keep you eleven and I wasn't quite sure what that meant at the time. But I remember thinking that they had a little bit of like i. told you. So tone in their voice by the end of the day, pets is exactly where it started at eleven bucks a share, Oscar and his co workers are happy that the company went public, but it's not the raging success that they'd been hoping for. So it's kind of A. Okay. Well, this is how how it turned out. The next day we went back to work and things move forward from there. This was the point in two thousand and when the stock market starts to lose momentum but you know what was still going strong the sock puppet. Pets.com knows that they need him out their shilling for the company. He's their best hope of making money. He's The star and like any true Celeb-, he needs a publicist hi Melissa. Mentor I was publicity at pets dot COM and it was great. Melissa's job was to help get press coverage for the puppet and pets hired her because she was the perfect person for the job. So it was in a job that I didn't really love somebody told me about a head hunter. And I sent my. And the next day she called and she said this pet food company wants to talk to you. That makes absolutely no sense. I have done publicity for the muppets and she goes that's exactly what they want to talk to you about. I mean you might say Melissa was born to be a puppet publicist. In fact, she's still wraps a white and black dog today this time it snoopy. After the Super Bowl Ad Melissa, Mendez phone was ringing off the hook. I picked up the phone It was like a week after the super bowl and it was the producer from Good Morning America she was like we really WanNa have the puppet do an interview on Good Morning. America. It sounds absolutely bizarre in retrospect but the Pets.com sock puppet was so popular that in March of two thousand, the puppet actually did Oscars coverage for Good Morning America how you doing? Charlie Diane I'm here pig Oscar Party in Hollywood. California off. Now I wasn't exactly invited and technically I'm not supposed to be here but I'm GonNa try to interview as many celebrities about their favorite movies and their favorite bags and we were getting news coverage. I mean for publicity person getting news coverage is like a high. So you know I would get these really great hits and I would just go. Home and feel excited about that. I was succeeding at my job. The sock puppet is everywhere people love that low buddy so much that they're dying to get their hands on a sock puppet of their own. Oscar remembers this time as an absolute frenzy armor the customer service was fielding enquiries all the time for like can get a public and I get a puppet when it's not be going on sale. So they did it. They started turning out sock puppets and selling them for twenty bucks a pop, and honestly they couldn't keep them in stock. They were so popular. Ten thousand puppets were sold in the first week that they were available I. It's Great Right? So That we built his become such a cultural touchstone in driving so much interest that people are buying it. You know. So fast off the shelves, we can't even keep it. Stock, but lots of people were just buying the puppet and nothing else. So. Sales were up but maybe not exactly the way that the business plan meant them to be I. Mean it's sort of like if people weren't really interested in big MACs but they were hype to buy a Ronald McDonald, all the question rose like are we know moving stuff away from what our core business should be with? You know we want to be the best head product company out there. And so I think there was a tinge of that, but it was not a huge. At least from my perspective wasn't a huge thing. It was kind of like okay. Well, let's have to move more pet food. So number check pets.com at this point had spent twenty million dollars on the marketing campaign they created the sock puppet. But the problem is they weren't making enough money. You add that to their other operating expenses and they were almost sixty two million smackers in the whole. Omar Merlo is a professor of marketing at Imperial College. London and he did case study on the marketing strategy used by pets.com and other pet retail companies in nineteen, ninety, nine and two thousand. You know they spent millions on Super Bowl ads, TV radio magazines, and you know it's it's expensive to create something like the sock puppet and ingrained head of every single American. That's caused a lot of money and at one to think we're spending. Full dollars on marketing expenses for every dollar they made in sales. So this is a mess investment, and eventually the customer acquisition cost was about four hundred dollars per customer. So he takes you four hundred bucks to get your customer in look if you're selling helicopters are yachts or fancy shit four hundred dollars to get your customer in the door is worth it. You'll make that back on your first sale. But. When we're talking about Christmas hats for your a Guana, it means that the company is spending a ton of money on you in the hopes that you'll spend even more over the long haul. I gotta say those numbers don't really add up especially because pets.com wasn't necessarily connecting with customers. So one thing is to be known needs to be aware to customers are aware of your brand that is familiar another other actually to connect in a meaningful way, and the way you do that is I by building a value proposition that is meaningful, and then advertising comes later to reinforce what you've done but I think in this case, you know there was there was really a rush to grow very quickly. In this rush to grow very quickly pets.com wasn't the only ones spending millions on marketing without building the business muscle to back it up before the business really took off you had companies like hotjobs dot com computer, dot com last minute travel dot com that all about Super Bowl ads in two thousand. Everybody wanted to make a big splash. I mean we were told about this one company that had a big marketing idea to build a smiley face Emoji that you could see from space. That's it. That was their entire idea. Omar remembers another DOT COM company with a marketing campaign that went too far. I think was called outpost the COM. At the head is terrible at various moments where the guy shooting gerbils out of a cannon. was just the worst at and everyone knew them and it became very popular because of these advocate for all the wrong reasons, people remember advertisement limited brand possibly in a negative way because they add foul but nobody even knew what it is they were selling what is they stood for Omar says pet spent so much money building up the puppet but. They weren't offering customers anything different. Even if you loved the sock puppet, it didn't mean that you were going to be a loyal customer we spoke to so many people who actually owned a sock puppet but never purchased anything regularly from pets.com and what pets.com was offering wasn't that enticing even to the sock puppet himself Michael. Ian. Black I didn't use pets.com. You didn't. I had a dog I had a dog I adored. Did I ever buy dog food from pets.com for that dog nope. Never, even never even entered my consciousness that I do such a thing. Even though you were. Selling the puppet even though you were the central figure of the marketing campaign. I stupid, right. But I didn't know anybody who used the service that feeling where you're like Yeah like this this this could all come crashing down fairly quickly. That was definitely the feeling that I was getting. People had absolutely heard of pets.com and people were absolutely not using. pets.com turns out pets was fighting to be the number one pet website but people were still buying pet supplies the same way that they always had at the store. And this was one of the many big problems that pets could never solve. They spent a lot of money making people aware of the company, but they couldn't convince them to buy enough stuff to be profitable. In one, thousand, nine there just weren't enough people buying things online and PS shipping huge heavy bags of dog food across the country isn't exactly a high margin proposition to do it. Well, you need a whole supply chain of trucks and planes and warehouses workers that didn't really exist yet. Maybe. pets.com could've figured out their business model eventually. But they ran out of money and they ran out of time. In, one thousand nine thousand nine pets.com loses sixty two million dollars and in the eight months after it's super bowl ad, it loses an additional eighty five million dollars for its investors. It wasn't clear that the company was ever going to be profitable so they start jumping ship. In those eight months, the share price falls under a dollar. In November of two, thousand, Pets.com CEO, Julie Wainwright decides to pull the plug. Here is NBC's Tom Brokaw with the bad news other economic news. Tonight. There is a new victim of falling portions on the New Economy Pets.com, which made its mark with a sock puppet. Is closing down on January sixteenth two, thousand and one shareholders approve a plan to liquidate the company's assets for failing to find a buyer. Pets.com we'll sell off the majority of its assets and lay off two hundred and fifty five of three, hundred and twenty employees. Oscar, and Melissa and the other pets.com Lynn plays walk in on their last day of work passed a bunch of news cameras. A big group of them just go to a bar nearby to drink their sorrows. Twelve days later, super bowl thirty, five rolls around the Baltimore Ravens against the New York giants this time only three dot com companies from the previous year are running ads and one of them is for e trade. It features their signature chimpanzee. Don't don't ask just go with me here, and the chimp is riding a horse through what looks like an abandoned town. By this point, dot com had lost nearly two trillion dollars in value. Some people had their entire. Savings wiped out. Many people lost their jobs. The chimp passes by an empty office building for Tie Clasp Dot com pass the sports car with the license plate dot calmer. And then something hits our little Tim Friend in the foot. As you may have imagined a tattered dirty shell of the beloved sock puppet. Tears run down little champions cheek as the commercial closes. Oh. How the mighty little cutie, the sock puppet that represented so much promise and momentum it had fallen. In just over a year, the company was being sold for parts. Actually the sock puppet did have another life. Pink a car financing. Then call one, eight, hundred, bar none. The puppet ended up Schilling Low Budget Car Insurance Without Michael, Ian, black though, Melissa, and Oscar, and actually a lot of the employees that we spoke to from. pets.com, were really bummed out by that if you need financing even if you have bad credit been divorced. Exigent. Bull or have no credit at all you deserve a second chance to. It was so depressing to see that Ad. That's the physical stock with the button is the microphone I get it, but it wasn't. It wasn't us and I think that's what was really sad i. don't think there was the whole. Energy and the people behind it and Committing to building something. They were just using it. Without any of the. History behind it. WHO SAYS PETS CAN'T DRIVE? I know it's bad to the extent that you can be heartbroken by a sock puppet. I kind of am. This season on gopher broke we're going to bring you some heartbreaks and big wins. We're GONNA make it so that the DOT com bubble isn't just this footnote in history we're going to examine the forces that created the bubble and what caused it to pop, and we're going to figure out how the early Internet change the world that we live in today right now next episode, we're going back in time to nine. Thousand Nine, hundred, five, the start of the DOT com bubble. It's the moment when money transforms the nerdy idealistic early Internet it was wild we're running in and out of the fountain in front of the Old Netscape on mental fill road and drinking champagne out of bottles, and there's balloons everywhere. We're GONNA see what convinced. So many people in the early nineties to chase their internet dreams only to lose it all. Thanks to Michael Catano? Hideo Higashi Baba John Ketcham, Sarah Sarasin and Todd Whitney for production support on this episode. Special. Thanks to ethics me to stay archival clips are from ABC sports. NBC Nightly News and the macy's Thanksgiving. Day Parade Clip of Good Morning America courtesy ABC News. This episode was researched and fact checked by Charlotte silver go for broke is produced by Bridget Armstrong Meghan Kinane and Zach Mak Isaac cast and bomb is our editor. Neil. Dash our editorial consultant for the series Gotham Freakish and engineered this episode and composed are wonderful. Theme Song Art Chung is our show runner are executive producers are Nishat, Kirwa, and Joshua. Behrman? Go for broke is a production of epic and the VOX media podcast network. If you like this episode, which I really hope you did please leave us a rating and review on apple podcasts and tell a friend. It's a popularity contest and I would like to win and subscribe for free to the series on your favorite podcast. App I'm Julia for Lawn, and I guess my tagline is boo. Boo. This episode was brought to you by in the future proof. Payments Platform Adian makes it simple to accept all kinds of payments in at online in store touch free and beyond with a single solution globally keep your customers happy and your business growing with Adnan business. Not Boundaries Visit ADIAN DOT COM to learn more at in dot com.

pets.com Oscar Oscar Pets.com macy Rob Smiley Vox media CEO director Gopher Melissa Michael Julie giants Deborah Agha Williamson Julie Wainwright
Come over to Geopats.podbean.com

Changing Scripts: Conversations about Mandarin Chinese with native speakers and learners

02:12 min | 2 years ago

Come over to Geopats.podbean.com

"Hey everybody I just wanted to do another. Quick announcement were still in the middle of reshuffling three independent podcasts that I do that three interview ones which is what you're listening to right now changing scripts <hes>. <hes> virtual experts and bookish experts they're actually all going to be combined under one podcast called Gio pets and they are now well there by the end of August. They will all be at Gio pets dot. pod Bean Dot com the link in the show notes below but it's Gio Pats G._A._O.. P._A._T. S. DOT POD BEAN DOT COM so I've already moved over a some of the actually two of the three podcasts. CERVITTI over there and the third one will be over there so this changing scripts pod beam site will be down by the end of August so and I won't be adding the newer episodes that come out well. We're doing shuffling. They're only going to be on the new site. Eight so I will leave this here for a few weeks so that you know what's happening and you can come join us. Please over at Gio pats again. All three of these podcasts had a very very strong cultural curiosity seem and. And two of them were published monthly was published bimonthly so I thought combined it will be a weekly podcast. I'll still labelled them so you can see which of the three it is and you. Can you know make your choices what you WanNa. Listen to them what you don't. I really hope you come over to Gio Pets.com Sorry D._o.. PATS that's wishful. I really hope you come over to Japan. Stop Balogh Spot Jeez. What am I doing Gio Pants Dot pod bean dot com? It's ninety seven degrees Fahrenheit.

Gio Pets.com Gio Gio WanNa Japan ninety seven degrees Fahrenhei
Go For Broke: Inside the Dot-Com Bubble

Vox's The Weeds

38:01 min | 10 months ago

Go For Broke: Inside the Dot-Com Bubble

"Here on the weeds, we try hard to focus on rational arguments, thoughtful nuance points of view apart we all know that people are not always all that rational S. we won't get excited by big shiny ideas that don't really have much substance and send him says ideas get so big that eventually implode and that's what a new podcast series from the Vox media podcast network is all about it's called Gopher broke its podcast series but historic bubbles the irrational enthusiasm that creates them. What happens when there's financial bubbles pop the first season which is. Outright now explores the DOT com bubble of the late nineteen ninety s one of my favorite episodes in sort of economic and social history is a great show. So the season digs into the true story of the venture capital, the aggressive marketing, and the irrational hype that led to the big market crash thousand and how the bad decisions of the early years of the Internet still impact us today as we're gonNA share the first episode of Gopher broke with you right now give it a listen and then go subscribe wherever you get your podcasts. Tracy. Whatever pets.com. By. If there's one voice you may recognize from the early days of the Internet it might be this one. For me, it's like the Voice of a very beloved and distant relative calling from the past. He's got a scope thing. Things that is the Pets.com sock puppet. This homemade sock puppet with button eyes microphone became the Voice of a company that sold pet products online like way before that was a thing and like magic eye posters and beanie babies, the sock puppet was everywhere on magazine covers. Parade. Floats Morning TV talk shows you name it. and. Then almost as quickly as it appeared pets.com went under along with a whole lot of other dot com companies in the DOT. com crash of two thousand. and. The sock puppet wound up in the trash can of history a punchline for everything that was wrong about those early Internet days. As you'll learn there was a lot more going on with the Pets.com sock puppet than you would expect. In a lot of ways, the puppet is an emblem of why we're here and an excellent place to start. Hello and welcome to go for broke I'm Julia for line. Gopher broke is a series that examines historical moments when everybody went a little bit overboard financially culturally whatever they bet real big. And then it didn't go so well. This season I invite you to lace up your doc martens and tell your mom to get off the phone. So you can log on because we're talking about the DOT com bubble of two thousand. A time when the promise and excitement of the Internet lead to some really wild investments that eventually cost the stock market almost two trillion dollars. It's a story about idealism and money that is also the foundation of the Internet and the Tech Industry. We know today. And we're starting the series with pets.com because if you're going to be a super flop like a total and complete failure. You gotta get real big first. and. That is what pets.com did. It's nine, hundred, ninety nine, and the Internet is poised to change how people shop how they plan their travel how they socialize. Everything feels like it's about to change, and all of this means new jobs and a whole new economy used to be you either had a blue collar job or a white collar job. But nowadays, some of the highest paying jobs don't require a collar at all the revolution will create over one million new jobs in the next year and tech skills can help you get everything. Suddenly every single industry is like Oh shit you mean instead of just selling stuff to the people we've always been selling to we can access anyone with an Internet connection. Bhutia. Editorial note they may have in fact actually said Julia. Millions of dollars were pouring into silicon valley companies that were trying to strike gold on the Internet and that meant hundreds of thousands of people were moving west to work in tech banking on the promise of the DOT. com boom. People like Oscar you on who was a couple years out of Stanford and excited to work at a fast paced. Startup. Nineteen, ninety, nine in two, thousand, I was in assisted marketing miniature, pets.com. So I was in the first twenty thirty employees and we were there till the. Very very end. And the marketing team were at the beating heart of pets.com because when you have a new company and you only exist online, the first step is letting people know you actually exist. So this was a time where the way that you built your business was by advertising and by building brand awareness by creating as much buzz and excitement about your business. As you could Deborah I williamson was one of the founding editors of a magazine called the industry. Standard It was based in the bay area and it was designed to be the news magazine of what was being called the Internet is. The most important thing again with all these dot com businesses was to build their brand name. The belief back then was that if you had a strong brand name strong brand recognition if people knew about your product or your service, your website, then eventually the revenues would come. But you had to build that brand awareness. I. And the more brand awareness you had the more investors were interested in. Possibly investing in your company whether Your Business or in the public markets, and so the cycle began, but it all really started with the marketing and the public awareness of the company using marketing was one of the ways that these companies we're going to beat out the competition and we knew we were defining and industry as e commerce became a thing. None of us knew where exactly was headed but there was this really powerful energy. The kind of drew me to it but the energy that drew Oscar. To pets.com was also drying a lot of other people to the online pet business by the time Oscar joined. There were already at least four other online pet stores trying to be the main place where people bought their cat food and their dog sweaters. Why were there so many companies trying to sell us pet food online if there's one thing that was true in one, thousand, nine, hundred nine and is still true today people love their pets were talking Guana food and cat birthday cards and hamster obstacle courses and snake furniture. The US market for the pet industry was twenty, three, billion dollars in one, thousand, nine, hundred, ninety, nine. The pet market was bigger than books bigger than toys and on top of all that this was also the point when it started being more common for people to have a computer at home in one, thousand, nine, hundred, it was actually pretty rare like fifteen percent of households. But. By the end of the decade, there was a computer in more than a third of US homes. Given the massive pet market and the potential for people to change the way they shopped wide wouldn't you get in on the ground floor? So pets.com wasn't alone. I think we all Knew that. The market couldn't support three head websites. What everyone understood at the pets.com office was that the company needed to be a category killer the one brand that dominates the market. and. That idea drove the company's strategy. So the objective was to be. The last man standing right and so the last man standing is the one that has the most traffic, the most revenue, the most visitors like that all of these metrics that you had to kind of push towards, which is what drove kind of all the ambition that we have. More. Oscar was hired at pets at a key point in the company's history it started as a sort of diy endeavor by an early. Internet. Entrepreneur named Greg mclemore who had the unusual foresight to buy the URL pets.com. But in order to grow into a big time business pets.com. Needed big time money. Enter Julian, right? I. Was top of my class in high school I graduated high up at Purdue I got the job I wanted I. Did this I had? I mean it was sort of one freaky success after another. This is from a talk she gave in two thousand twelve at the University of California at Murr said and by the time I got. To pets, made millions and pets I did because I thought okay one more this'll be a blast. Julie was kind of a celebrity CEO and hiring her meant that investors would be interested in taking pets from Greg's home in Pasadena into the big leagues. So Greg stepped back from day to day and focused on being a board member and Julie ran the show. Within her first month as CEO Julie secured a very important investment from a little company, you may know called Amazon, and another from venture capital firm to the tune of ten million dollars. Julie wanted pets to be the household name for pet supplies in the same way that Amazon was the go-to books at that time. This is what she told. Bloomberg News in two thousand eleven. Honestly if there wouldn't have been an Amazon there wouldn't have been in the e commerce. So. We to me they were the proof point that impact consumers would transact. So really they were the ground breakers. Julie knew that one of the best bet she could make to beat the competition was with a marketing campaign that made sure people knew about pets.com so pets went for the big guns at a firm called TB w. a. shy it day. By Day was a much in demand agency in the eighties and nineties and had done a lot of breakthrough work from apple to Taco. Bell to. A lot of different things yet they were responsible for the very famous Apple Nineteen, eighty-four AD and the cute but Preeti Racist Taco Bell Chihuahua in one thousand, nine, hundred, nine robs smiley was one of their creative directors and right away rob could tell that the pets.com folks were in a bit of a hurry. What was unusual about pets.com is they immediately awarded us the business normally, it might take a week and a company will review a bunch of different proposals we walked in. We made a presentation they asked us to sit in the room for fifteen minutes they went out and came. Back in and gave us our assignment instantly pets needed to move really fast to compete in this environment, which is why they made the Sherbet and gave their money to shy a day. So quickly because pets wasn't the only company betting on marketing in one, thousand, nine, hundred, nine rob said that lots of dot coms were banging down shy at days door with some pretty wild ideas of how to make sure that they were visible in that rush to try to outpace other competitors. Many companies wanted to be as outrageous as they possibly could be to get the attention and the eyeballs of consumers. So that was a very that was a big difference from previous generations who are more calculated more strategic. More measured in their approaches to advertising and marketing, and this kid's is how the sock puppet came to life rob and his colleagues baking on a simple. But revolutionary idea that went against the instincts of basically all of advertising that came before it as we developed it I, think that we started to create a world where we showed that pets.com understood that pets have lives they have they have they have. Things they love they have things that make them. Sad. The pets.com marketing campaign was going to tap into that part of pet ownership where you break into a weird voice or you make up an elaborate fiction around your pet like I for one and pretty sure that one of my cats is running a radio station out of our bathtub and that the other cat was her intern before she was cruelly fire. I don't know maybe it's just me. Shy Day and pets weren't GonNa do a commercial with some prissy cat eating from a goblet or some Westminster ask looking dogs running around pets was going to let the sock puppet be imperfect individual with wants and needs. It became this very homemade puppet with homemade props with a wristwatch for a dog collar with a button for an eye with a goofy microphone made out of cardboard with a pets.com logos stuck on the side slapdash in a manner. The agency also wanted to steer clear of the super scripted way. The commercials usually sounded. So they hired Michael Ian Black a member of the comedy troupe the State to basically do Improv as the puffs. Before we shop the first thing, the first commercial I remember in executive. Saying something along the lines of this has to be a home run, and then I also remember like the Ad Guys, Scott and rob having a look of. Projecting confidence and. Terror like I didn't know like the whole thing was like hanging in the balance about whether I could make a good joke about a Frisbee like I didn't know. Thank God. I didn't know I would I would have blown it. So on the set of their first commercial executives, from pets.com, from day actually stood around to see what was going to happen. They were taking a moonshot with a wildly different concept and they were paying a lot of money for it. Rob The creative director remembers that day really clearly. So the first shot we did was the sock puppet with the delivery driver. I'm overseeing deliveries for bets, Dot Com Purely Advisory Role Rob in the other exacts we're supposed to watch Michael and the delivery driver from a feed and unfortunately the video tap broke so we couldn't watch what what was happening. In real time, they just drove away and for thirty five minutes we sat there clients creative director waiting for them to come back wondering what was happening what goes up must come down spinning. Round in routes dot com. The pets.com. exacts were nervous because remember remember their whole plan for getting customers to visit their website instead of Toby Dot Com or the local supermarket was a comedian riding around in a van doing loose Improv with a sock puppet. If this very I shoot was a bust and they didn't like what they saw. The suits were ready to pull the plug on the whole. Thing. They came back laughing. Got Out of the van said it's great. It's great. They popped at what was then a tape into a tape player for us to see the the takes and we saw just the most hilarious improvisational takes between the driver and the sock puppet we knew at that moment this was absolutely going to be brilliant I like your shorts you'd be looking fellow so they have their first. Commercial Oscar, who was on the marketing team was thrilled yeah. So the I mean the first coolest thing is when you're just watching TV at home and then the ad comes on right and you're sitting there and you're like, wait a minute that's the company I. Work for and wait a minute. I've seen a preview of this at and wait a minute. I know the people who are doing that right? And I think it's It's also be what happens very often the first TV ads with a sock puppet hit the airwaves in September nineteen, ninety nine, and they quickly get some buzz. The ads are funny and memorably weird but there's a catch here. The whole motivation behind this ad campaign was not simply to get people to log on and buy their dog a new caller it was to demolish the competition. And by the time, the first ad aired the field of competitors was getting bigger. Dot coms website had just launched and they had the backing of the brick and mortar company. PETCO but it seems like the pets.com AD campaign, which would eventually cost twenty million dollars is keeping them ahead of the competition. And Julie Wainwright's autobiography. She writes about how valuable the sock puppet was. Could the other company sell dog collars? Yeah shirt. But did they have the cutest little rascal in all of puppeteer and sitting on the end of Michael Ian Black's arm they did not. Julia writes that she realized how much of an asset the sock puppet was when macy's asked the sock puppet to be in their annual Thanksgiving Day parade free of charge. Usually, it costs something like two hundred, thousand dollars to be in the prayed. And now Alan Katie here's one who VIP. That's one very important album your favorite television commercial largest one furnished by pets.com. You may have seen this sock puppet on television singing spinning wheel. You know what goes up must come down this boots goes up to the top of four story building. Al Roker wasn't the only fan of this out puppet. Deborah Auto Williamson the marketing who heard from before says that this kind of stuff was helping pets.com pull away from the pack online pet retailers and let me just be real with you because I spent a lot of time watching old commercials. The competition wasn't doing anything riveting at this moment at best the commercials for the competition look like stock footage the sock puppet was so engaging and so unique and the way that it was incorporated not only into TV advertising but. into an integrated marketing opportunities such as being a balloon in the macy's parade I mean these were things that really made that brand stand out among all the other brands that I can remember thinking about and writing about back in that day pets CEO Julie Wainwright didn't speak to us for this episode, but like let's just get in her head for a moment. Okay. What is the number one place you go if you WANNA be flashy and cool and advertising like what is one of the few moments of every year where people? Talk about ads where people actually look forward to the. Tennessee Titans Square off with the Saint Louis Rams. Super Bowl thirty four. Like what is what is the one thing we can do to one up? Rate and it's like Oh super bowl they wield in you be on a cart with a VCR. With the and then they played the first few cuts of the commercial and we all loved it, and then the next thing you know is you see it on TV and a super bowl ad. So on January thirtieth two, thousand, the day of the game eighty, eight, point, five, million people are glued to their TVs and in between watching Kurt Warner. Lead the rams to victory that massive audience sees this. The commercial opens the dog looking really sad while its owner drives away. Okay Dino I gotTA gotTa Lotta. So remember how the whole idea behind pets.com was pets have lives and feelings and everything. The Super Bowl ad was all about that. A spotlight comes on and the Pets.com sock puppet appears singing. If you leave me now by the Band Chicago one of the folks we spoke to from Shah told us that the band had never given permission for the song to be used in a commercial before but their lead singer Peterson Tara, just love that damn puppet. Please don't go. There's a crying turtle and angry looking cat a parakeet and a goldfish. For Oscar and the employees of pets.com the Super Bowl. was a huge public sign that their hard work was actually paying off I started in May end in Maine. It was just starting by November. We were in the macy's Thanksgiving Day parade right by January we're in the super bowl. So just to be clear in under eight months, pets.com went from barely existing to one of the biggest stages in the world and it just happened. So quickly, it is a little bit of a blur for pets and many other dot com companies super bowl was there are A assigned that they were ready to play in the big leagues. Seventeen different DOT dotcoms took out ads in the Super Bowl that year and all that demand drove up the price for commercial slot by thirty one percent. Super Bowl thirty four is known as the DOT COM Super Bowl. And for creative directors like rob. Smiley. Well, it's everyone's dream to be have incredibly successful campaign and a super bowl ad. Float in the macy's Day parade. You dream those things but you don't know if they'll really happen for most people. It is It is a once in a lifetime moment. So this campaign is by all markers a huge success. The pets.com website actually crashed because so many people went on it after the AD. But. The thing is pets.com is far from dominating the market. If what it wanted was to be a category killer. It's actually more like a category mosquito. Come back as the SOCK puppet prophesied. Buso. down. Hi Julia for line, and this is gopher broke. In this episode, we're telling the story of pets.com and its battle to establish a successful e commerce company at a time when buying things online still felt kind of like science fiction and the fate of pets.com sat squarely on the small stuff. Of. The sock puppet. Two weeks after the Super Bowl pets.com is about to have its. Its initial public offering on the Nasdaq Stock Exchange. It's a big moment for the pets team. Over the years they've seen DOT COM AFTER DOT com go public with skyrocketing stock prices. Today pets was up. Oscar you on remember that morning fondly, it was early because obviously the market opens in New York we were in San Francisco. I remember it was a celebratory was positive mood. The top pets executives have flown to New York to be there for the opening bell but Oscar and his co workers are holding down the fort. So it was almost a little bit like the parents away. The kids are GonNA. Play and and it was it was it was celebrated like I said it was the first time I tried Dom Perignon Kind of exciting as the trading day start the celebration doesn't last very long, and then I remember as the day wore on our stock price stuck I remember the number of very well, it was stuck at eleven dollars and I had friends who are bankers and I remember getting call. We didn't have text messages at the time right thing. You guys are still eleven. You know what that means. That means the bank is buying up all the shares. To keep you I said eleven and I wasn't quite sure what that meant at the time. But I remember thinking that they had a little bit of like I told you. So tone in their voice by the end of the day, pets is exactly where it started at eleven bucks share Oscar and his co workers are happy that the company went, but it's not the raging success that they had been hoping for. So it was kind of A. Okay, well, this is how how it turned out. On the next day, we went back to work and things move forward from there. This was the point in two thousand when the stock market starts to lose momentum but you know what was still going strong the sock puppet. Pets.com knows that they need him out their shilling for the company. He's their best hope making money. He's The star and like any true Celeb- He needs a publicist Hi Melissa Mentor I was publicity at pets, Dot Com and it was great Melissa's job was to help get press coverage for the puppet and pets hired her because she was the perfect person for the job. So it was in a job that I didn't really love somebody told me about a head hunter. And I sent my resume and the next day she called and she said this pet food company wants to talk to you. That makes absolutely no sense. I have done publicity for the muppets and she goes that's exactly what they want to talk to you about I. Mean you might say, Melissa Mental was born to be a puppet publicist. In fact, she still reps a white and black dog today this time it snoopy. After the Super Bowl Ad Melissa Mendez phone was ringing off the hook I picked up the phone It was like a week after the super bowl and it was the producer from good. Morning America she was like we really want to have the puppet do an interview on Good Morning America. It sounds absolutely bizarre in retrospect, but the Pets.com sock puppet was so popular that in March of two thousand, the puppet actually did Oscars coverage for Good Morning America. How you doing? Charlie Diane, I'm here to big Oscar Party. In Hollywood, California now I wasn't exactly invited and technically I'm not supposed to be here but I'm GonNa try to interview as many celebrities about their favorite movies and favorite back, and we were getting news coverage for publicity person getting news coverage is like a high. So you know I would get these really great hits and I would just go. Home and feel excited about that. I was succeeding at my job. The sock puppet is everywhere people love that low buddy so much that they're dying to get their hands on a sock puppet of their own Osprey remembers this time as an absolute Francey, our customer service was fielding inquiries all the time for like can I get a public? I get a puppet when it's not big on sale So they did it they started turning out sock puppets and selling them for twenty bucks a pop. and honestly, they couldn't keep them in stock they were so popular. Ten thousand puppets were sold in the first week that they were available. It's great right. So something that that we build his become such a cultural touchstone driving so much interest that people are buying it. You know. So fast off the shelves, we can't even keep. Stock. But lots of people were just buying the puppet and nothing else. So sales were up but maybe not exactly the way that the business plan meant them to be I. Mean it's sort of like if people weren't really interested in big MACs but they were hyped to buy Ronald McDonald, all the question rose like are we? Moving. Stuff away from what our core business should be with. You know we want to be the best head product company out there. And so. I think there was a tinge of that, but it was not a huge. At least from my perspective wasn't a huge thing. It was kind of like, okay. Well, let's just have to move more pet food. So number check pets.com at this point had spent twenty million dollars on the marketing campaign that created the sock puppet. But the problem is they weren't making enough money. You add that to their other operating expenses and they were almost sixty two million smackers who's in the whole. Omar Merlo is a professor of marketing at Imperial College London, and he did a case study on the marketing strategy used by pets.com and other pet retail companies in nineteen, ninety, nine and two thousand. You know they spent millions on Super, Bowl ads, TV radio magazines, and it's expensive to create something like the sock puppet and ingrain head of every single American. That's caused a lot of women and at one point two. was spending a full dollars on marketing expenses for every dollar they made in sales so that this a massive embarrassment and eventually the customer acquisition cost was about four hundred dollars per customer. So he takes you four hundred bucks to get your customer in look if you're selling helicopters or Yasser Fancy Shit four hundred dollars to get your customer in the door is worth it. You'll make that back on your first sale. But we're talking about Christmas hats for your Guana. It means that the company is spending a ton of money on you in the hopes that you'll spend even more over the long haul. I gotta say those numbers don't really add up especially because pets.com wasn't necessarily connecting with customers say one thing is to be known needs to be aware. Customers. That are aware of your brand that is familiar another essentially to connect in a meaningful way and and the way you do that is I by building value proposition that is meaningful and then advertising kind of comes later to reinforce what you've done but I think in this case, there was there was really a rush to grow very quickly. In this rush to grow very quickly. pets.com wasn't the only one spending millions on marketing without building the business muscle to back it up before the business really took off you had companies like hotjobs dot com computer, dot com last minute travel dot com that all about super bowl ads in two thousand everybody wanted to make a big splash. I mean we were told about this one company that had a big marketing idea to build a smiley face Emoji that you could see from space. That's it. That was their entire. Omar remembers another DOT COM company with a marketing campaign that went too far. I think it was cold outpost the calm. The head is terrible at various moments where the head this guy shooting gerbils out of a cannon who was just the worst add and everyone knew them. It became very popular because of these advocate for all the wrong reasons, people remember the advertisement limited brand possibly in a negative way because they add site foul but nobody even knew what it is that they were selling what it is. They stood for Omar says, pets spent so much money building up the puppet, but they weren't offering customers anything. Even if you loved the sock puppet, it didn't mean that you were GonNa be a loyal customer we spoke to so many people who actually owned a sock puppet but never purchased anything regularly from pets.com and what pets.com was offering wasn't that enticing even to the sock puppet himself Michael Ian Black, I didn't use pets.com. You didn't. I had a dog I had a dog I adored. Did I ever buy dog food from pets.com for. That? Dog. nope. Never even never even entered my consciousness that I would do such a thing. Even though you were. Selling the puppet even though you were the central figure of the marketing campaign. I stupid right. But I didn't know anybody who used the service that feeling where you're like Yeah like this this this could all come crashing down fairly quickly. That was definitely the feeling that I was getting. People had absolutely heard pets.com and people were absolutely not using pets.com turns out pets was fighting to be the number one pet website, but people were still buying pet supplies the same way that they always had at the store. And this was one of the many big problems that pets could never solve. They spent a lot of money making people aware of the company, but they couldn't convince them to buy enough stuff to be profitable. In one, thousand, nine, hundred, nine, there just weren't enough people buying things online and PS shipping huge heavy bags of dog food across the country isn't exactly a high margin proposition to do it. Well, you need a whole supply chain of trucks and planes and warehouses and workers that didn't really exist yet. Maybe pets.com could've figured out their business model eventually. But they ran out of money and they ran out of time. In one, thousand, nine, thousand, nine pets.com loses sixty, two million dollars, and in the eight months after it's super bowl ad, it loses an additional eighty, five million dollars for its investors. It wasn't clear that the company was ever going to be profitable so they start jumping ship. In those eight months, the share price falls under a dollar. In November of two thousand pets.com CEO. Julie Wainwright, decides to pull the plug here is NBC's Tom Brokaw with the bad news other economic news Schneider. There is a new victim of the following on the economy pets.com which made is mark with a sock puppet. Is closing down on January sixteenth two thousand and one shareholders approve a plan to liquidate the company's assets. For failing to find a buyer pets.com, we'll so all the majority of its assets and lay off two hundred and fifty five of three hundred and twenty employees, Oscar and Melissa and the other pets.com employees walk in on their last day of work passed a bunch of news cameras. A big group of them just go to a bar nearby to drink their sorrows. Twelve days later, super bowl thirty, five rolls around. It's the Baltimore Ravens against the New York giants this time only three dot com companies from the previous year are running ads and one of them is for E. Trade it features their signature chimpanzee don't don't ask just go with me here and the chimp is riding a horse through what looks like an abandoned town. By this point, dot com had lost nearly two trillion dollars in value. Some people had their entire retirement savings wiped out. Many people lost their jobs. The chimp passes by an empty office building for a tie clasp. Dot Com passed a sports car with the license plate dot calmer. And then something hits are little. Chin friend in the foot. It is as you may have imagined a tattered dirty shell of the beloved sock puppet. Tears run down little champions cheek as the commercial closes. Oh how the mighty little cutie, the sock puppet that represented so much promise and momentum it had fallen. In just over a year, the company was being sold for parts. Actually, the sock puppet did have another life. Pinkett car financing then call one, eight, hundred bar none. The puppet ended up Schilling Low Budget Car Insurance Without Michael Ian Black Though Melissa Oscar, and actually a lot of the employees that we spoke to from pets.com were really bummed out by that if you need financing even if you have bad credit been divorced and you. Noise, Gopal. No credit at all you deserve a second chance to. It was so depressing to see that ad I'm really that's the physical sock with the button is in the microphone I get it but it wasn't. It wasn't us and I. think that's what was really sad right I. Don't think there was the whole. Energy and the people behind and. Committing to buildings dumping. They were just using it. Without any of the. History behind it. Who says pets can drive? I know it's bad to the extent that you can be heartbroken by a sock. Puppet. I kind of am. This season on gopher broke. We're going to bring you some heartbreaks and big wins. WE'RE GONNA to make it so that the DOT com bubble isn't just this footnote in history we're going to examine the forces that created the bubble and what caused it to pop. And we're GONNA figure out how the early Internet changed the world that we live in today right now next episode, we're going back in time to nineteen ninety-five the start of the DOT com bubble. It's the moment when money transforms the nerdy idealistic early Internet it was wild we're running out in and out of the fountain in front of the Old Netscape on mental filled road you know and drinking champagne out of bottles and there's balloons everywhere. We're GONNA see what convinced. So many people in the early nineties to chase their internet dreams only to lose it all. Thanks to Michael. Catano Hideo Higashi Baba John. Ketcham Sarah Sarasin and Todd Whitney for their production support this episode. Special. Thanks to ethics Molise to Suray our cable clips are from ABC Sports. NBC Nightly News and the macy's Thanksgiving Day parade clip of Good Morning America courtesy ABC News. This episode was researched and fact checked by Charlotte silver go for broke is produced by Bridget Armstrong Meghan Kinane and Zach Mac Isaac Casten Bom is our editor Neil Dash editorial consultant for the series Gotham. Tree cushion engineered this episode and composed are wonderful theme zone. Art Chung is our show runner are executive producers are shot Kurla and Joshua. Behrman go for broke is a production of ethic and the VOX media podcast network. If you like this episode which I really hope you did please leave a rating and review on Apple podcasts and telephone, and it's a popularity contest and I would like to win and subscribe for free to the series on your favorite podcast App I'm for Lawn and I guess my tagline is blue. Blue.

pets.com Dot coms Melissa Oscar Michael Ian Black Julie Wainwright macy Julia rob director America Gopher CEO Vox media Oscar Toby Dot Com
The Lessons Of Pets.com

The Indicator from Planet Money

09:58 min | 9 months ago

The Lessons Of Pets.com

"N. p. r. is cardiff busy is indicated from planet. Money and today. I am joined by julia for lawn. The host of the gopher broke podcast from fox. This is a series all about the late nineties tech bubble. Julia i cardiff. This story is all about the rise and fall of pets.com. Which is the company everybody thinks of when they remember the dot com bubble because it was humongous and then it was over. I remember it happening so fast. And when i think i remember about pets.com was it. It made no money. It was all hype lost money. Yeah pet sacramento one of those companies. That was able to get money from investors not because they were actually profitable but because they were flashy it was time when people could basically like put dot com at the end of any noun and suddenly they were supposed to be a company. Profits didn't matter. A functional business model was just like an afterthought it was all about marketing and growing really big and it helps to have a famous sock puppet. That was the lesson in the nineties. so juliet we are going to run a condensed excerpt of gopher broke. Which is your new podcast. So today on the show wild story of pets dot com and how it relates to the tech companies of today. That's right after a quick break. This message comes from. Npr sponsor the capital. One venture card. Right now you can earn one hundred thousand bonus miles. You can actually use when you spend twenty thousand dollars in your first year. What's in your wallet. Limited time offer terms apply see capital one dot com for details support for npr and the following message come from fund rice fund. Rise makes it easy for anyone to invest in high quality real estate by building you. A portfolio with their more than one billion dollars in assets get started at fund rise dot com slash indicator to have your first ninety days of advisory fees waived. If there's one thing that was true in nineteen ninety nine and is still true. Today people love their pets. Were talking guana food and cat birthday cards and hamster obstacle courses. The us market for the pet industry was twenty three billion dollars in one thousand nine hundred nine. This was also the point when it started being more common for people to have a computer at home given the massive pet market and the potential for people to change the way they shopped. Why wouldn't you get in on the ground floor. So pets.com wasn't alone. What everyone understood at the pets.com office was that the company needed to be a category killer. The one brand that dominates the market and this kid's is how the sock puppet came to life. Pets went for the big guns at a firm called. Tb w. a. Shaya day in one thousand nine hundred nine rob smiley was one of their creative directors. We started to create a world where we showed that pets.com understood. The pets have lives. They things they love. They have things that make them sad rob and his colleagues were banking on a simple but revolutionary idea that went against the instincts of basically of pet advertising. That came before it. Pets was going to let the sock puppet. This imperfect individual with wants and needs but became this very homemade Puppet with a wristwatch for a dog collar with a button for an eye with a goofy microphone made out of cardboard with the pets.com logos stuck on the side slapdash. The pets.com exacts were nervous because remember remember their whole plan for getting customers to visit their website instead of tokyo dot com or the local supermarket was a comedian riding around in a van. Doing loose improv. With a sock puppet. Your shorts you'd be looking the first. Tv ads with a sock. Puppet hit the airwaves in september nineteen ninety nine and they quickly get some buzz. The ads are funny and memorably weird. But there's a catch here. The whole motivation behind this ad campaign was not simply to get people to log on and buy their dog. A new caller. It was to demolish the competition and by the time the first ad aired the field of competitors was getting bigger. So what is the number one place you go if you want to be flashy and cool advertising like what is one of the few moments of every year where people actually talk about at super bowl. Thirty four. so on january thirtieth two thousand eight point. Five million people are glued to their tv's and in watching kurt warner lead. The rams to victory that massive audience sees this. The commercial opens the dog looking really sad while its owner drives drives away okay. Dino like a spotlight comes on and the pets.com sock. Puppet appears singing if you leave now by the band chicago one of the folks. We spoke to from shah told us that the band had never given permission for the song to be used in a commercial before but their lead singer peterson. Sarah just love that damn puppet blue. Please don't go. There's a crying turtle and angry looking cat a parakeet and a goldfish. He's won't use the sock. Puppet is everywhere. People love that little buddy so much that they're dying to get their hands on a sock puppet of their own. Oscar yuan was an assistant marketing manager at pets.com. I'm the customer service was fielding inquiries. All the time. I can get a puppet. Can i get a puppet. What is going on sale. So they started turning out sock puppets and selling them for twenty bucks a pop and honestly they couldn't keep them in stock. They were so popular but lots of people were just buying the puppet and nothing else question rose like are we moving stuff away from what our core business should be so number check pets all come at this point had spent twenty million dollars on the marketing campaign. That created the sock puppet. But the problem is they weren't making enough money. Omar merlo is a professor of marketing at imperial college. London and he did a case study on the marketing strategy used by pets.com and other retail companies in one thousand nine hundred nine and two thousand expensive to create something like the sock puppet an ingrained head of every single american deaths caused a lotta then eventually. The customer acquisition cost was about four hundred dollars per customer. So he takes you four hundred bucks to get your customer in. Look if you're selling helicopters or yachts four hundred dollars to get your customer in the door is worth. You'll make that back on your first sale. But when we're talking about christmas hats for your a guana it means that the company is spending a ton of money on you in the hopes that you'll spend even more over the long haul. I gotta say those numbers don't really add up especially because pets.com wasn't necessarily connecting with customers. So one thing is to be known needs to be aware of customers that are aware of your brand. That is familiar. Another essentially to connect in a meaningful way. And the way you do. I by building a proposition that is meaningful and then advertising comes later to reinforce what you've done but i think in this case there was really a rush to grow very quickly turns out. Pets was fighting to be the number one pet website but people were still buying pet supplies the same way that they always had at the store and this was one of the many big problems that pets could never solve. They spent a lot of money making people aware of the company but they couldn't convince them to buy enough stuff to be profitable in nineteen ninety nine. There just weren't enough people buying things online. Maybe pets.com could've figured out their business model eventually but they ran out of money and they ran out of time. Okay forget everybody and back year with juliet. What a story julia. Also i want to close with a kind of intriguingly positive spin on these tech companies. The nineties that you have these companies that did not make any money and crashed spectacularly. I mean i don't know if it's positive vibes in the long term. But i can say one thing for sure. A lot of the dot com companies were actually great ideas that were just way ahead of their time so like there was a grocery company called web. Van dot com. That delivered groceries to your house. Like freshdirect does today and cosmo dot com had a lot of similarities to instacart and good old pets.com pets.com. Today i'm thinking it's chewy exactly and chew. We just had an ipo that valued the company at eight point seven billion dollars though he again. I guess joy this is fascinating because suggests that even though these companies were kind of a joke in hindsight like they flamed out so amazingly a lot of them actually had pretty good ideas for where the economy would end up heading eventually. Yeah and technology and infrastructure had to like grow around it so now is a much better time than then juliette. Thank you so much And tell our listeners. Please where they can hear you. Tell more of these wild tales from the dot com ninety eight. It's the gopher broke podcasts from box media and epic studios and you can buy it wherever free. Podcasts are sold. It's actually free. Nice this episode of the indicator was produced by britney cronin in fact check by. Sean donya our editors patty hirsch and the indicator is a production of npr.

pets.com cardiff twenty thousand dollars one billion dollars twenty three billion dollars Shaya rob smiley four hundred dollars juliet julia ninety days Oscar yuan Julia twenty million dollars Npr sacramento Omar merlo npr fox Tb
The Pets.Com Implosion (2001) w/ Julia Furlan

This Day In Esoteric Political History

20:22 min | 7 months ago

The Pets.Com Implosion (2001) w/ Julia Furlan

"This episode is brought to you by simply safe. Everyone wants to keep their home and family safe whether it's from a break in a fire flooding or medical emergency simplisafe home security delivers award winning twenty four seven protection order from simplisafe and they will send you high quality equipment that gets great camera. Footage takes about thirty minutes to set up and it's very easy to use. And then simply safe's professionals takeover monitoring your home twenty four seven ready. Send help the moment. There's an alarm right now. You can get free security camera when you go to simplisafe dot com slash this day. That simply s imp l. is safe dot com slash. This day you also get a sixty day risk-free trial so there's nothing to lose once again. Simplysafe dot com slash. This day. This episode is brought to you by sunset lake. Cbd's cbd is a component of the hemp plant. That you can use to ease your mind while you're trying to get through your next big project or just your next few hours sunset lake. Cbd is a hemp farm in vermont that embraces regenerative culture and creates nourishing products designed to promote calm and clarity. They offer dozens of handcrafted products and they ship directly to your door. I recently got a box in the mail with some cbd oil some sour gummy a hemp. Arna kosov. I will confess that. I'm pretty new to using this stuff. And that's what i like about. Having a variety of things try you can find what feels right for you so give it a shot head over to sunset lake. Cbd dot com and enter the coupon code this day to get twenty percent off sitewide once again. That sunset. Lake cbd dot com. Hello and welcome to this day. Esoteric political history from radio toby. My name is jody aggregations. This day january seventeenth. Two thousand one. The company pets dot com stocked. Treating on the nasdaq stock extreme. If you were holding pets.com stock hit not been a good few months and today was definitely not a good day for many months at this point. Pets.com was imploding. It was the highest profile company to go bus. During the two thousand one dot com bubble the liquidation of the company would be complete. Just a couple of days later january eighteenth. So let's talk about pets com the two thousand and one bubble and some lessons about the stock market economy. And lots more here as always is nicole. Hammer of columbia aleki. Hello jody and our special guests. This episode is julia for lawn. Podcast host and producer and she was the host of the series. Go for broke. Which is a new podcast series from. Vox about the dot com crash of two thousand Juliet's really nice to have you on. Thanks for doing this. Hi it's my pleasure. I assure you. I love talking about this stuff really fun series and i also should say that i guess it's a series that will look at other bubbles and crashes in theory and features picture. Yeah yeah yeah so one. And i think pets.com is the most defining crash of it all so give us a sense like before. We talk about the implosion. Give us a sense of the ascension. I mean how big was was. Pets dot com. There are lots of different versions of big that pets.com ended up getting to be I would say the most significant way that pets.com was big is that it was absolutely everywhere. There was this Sock puppet that most people remember basically like this poor sock puppet took the fall for like the entire bubble the sock puppet was this emblem of pets.com that like absolutely propelled the company to the largest stage in the advertising world which was the super bowl but pets.com basically it got up to two hundred and fifty ish employees total it got to the size of spending eleven million dollars on advertising just over half a million dollars in revenues and it only existed for eighteen months. So it's pretty significant in that sense. you know. It really was a flop. It seems like they were playing to their strengths. I mean the thing that they seem to be very good at was branding and the thing that they seem to vary bad at selling pet supplies right. I mean it's one of these things. It's a different moment in time but there was this hope that the internet was going to transform everything which obviously it did but there was this belief that if you just put dot com at the end of something then it was going to be huge and to a certain extent. Pets.com had a really solid idea. I mean i don't know if either of you have pets but we dot com is a home. Delivery pet products service however shipping logistics. There were a lot of things that were not figure it out in one thousand nine hundred nine two two thousand and one that made it almost impossible to turn a profit on pet food and pet products. Well this is. This is something i think about a lot because with pets.com because when you think about we can get into some other examples when you know when you think about disruptors in dot com disruptors a lot of them do sometimes address like big parts of our life like even airbnb is like travel and You know uber is about transportation like these sort of more fundamental things and to me. It's always been in the back of my head like pets.com like it's just pet food or it's like a chew toy like why. Why did people say that. This was the big unicorn disruptor. But i will also say just to complicate it. In listening to your episode julia. I think you make a pretty good case that actually like pets are really a big part of people's lives and that actually you know when you build a product. You want to do something that connects to something that people really impassioned by. And so maybe pets.com was the thing to kind of drive. This massive new wave of internet disruption absolutely. I mean it was a twenty three billion dollar industry. The pet product industry. So like of course you would want in on that there were a lot of there was a lot of room for growth to be clear and it's not a terrible idea. People didn't want to hauling cat litter up four flights of stairs is not like i would love to not have to do that. You know but it also the company they were flying the airplane as they built it which I don't know anything about aerodynamic engineering. But it doesn't seem like a great setup you know what i find interesting is. That amazon was pretty heavily. Invested in pets.com. And you look at both of those models and you can imagine as an outsider who knows nothing about economics which is me Thinking that those are basically the same idea by one was massively. Successful in one wasn't right. I mean it's important to remember that amazon. At that time was mostly books. It was mostly competing against barnes and noble and borders and it was mostly shipping books. I mean the only thing that i can think of. That's different is that there's not as much markup in a pet supplies and so there wasn't really the room to make the kind of money that jeff bezos was making over there at amazon. The margins are razor thin on pet products and the products are very heavy. Which if you're shipping from. I don't know if you're shipping from indiana where they had a warehouse to hawaii. That's pretty expensive. Shipping wise amazon. Just had more money. Like amazon had more time and they were super hyper focused on customer happiness so they would ship free replacements all the time if and that's a pretty expensive thing to do if a customer was unhappy so they kept getting repeat customers and one of the the marketing experts that i spoke to in the production of of this show basically said that like pets.com did not have a lot of repeat customers. People were using pets.com they were. They had a magazine that was like super glossy and beautiful but like it was basically being used to give twenty five dollar off coupons. So they kept giving discount and discounts and discount but they didn't have a lot of repeat customers. And that's a real problem at the beginning of a business and also jeff bezos. Just got to hang around a lot longer clearly. But you do get that sense with pets dot com that you know that maybe the people who ran it were more interested in having a dot com. Then you know providing people with pets supplies and like yeah. I a cat. I got my stuff that you e- and like the one of the things they do right well first off. You know they turn you into really customer very easily because you can do like recurring default but then also like it just has this vibe of like we're into pets and this is about pets whereas pets.com had this vibe of like we're going to ride this rocket ship internet thing and it just so happens to be the pet thing and i feel like often. That's the place where the red flag goes up. Yeah exactly that makes so much sense. I mean chewy. The main difference between two dot com and pets.com is like ten years of logistics and internet improvements and also that like recurring order function allows them to plan revenue. In a way that pets.com was not able to plan their revenue also pets.com ultimately they really invested in the thing that they were good at and the thing that they were good at was marketing and and it was a time when many many companies were just like. Okay if you want to get to the moon. You're gonna like the rocket you're gonna ride is tv advertising and having a really clever ad and getting it everywhere was sort of like the number one technique for trying to get the word out there. It just kind of points to the limits of the mascot as a form of branding like it's a great form of entertainment. An ice certainly still remember the sock puppet. Even though it's men like two decades but companies like amazon and companies like chewy. I don't think they have mascots right but they managed to stick around nonetheless because they were actually able to deliver goods. They were actually able to meet a need in a way that they weren't so was brilliant. Advertising it had this kind of stickiness that very few mascots actually do but it doesn't turn into business so i think we've effectively thrown the sock puppet under the bus and i think we've painted a picture of You know the mismanagement within pets.com. But i do also think the the real lesson here and the real story here is about as you explore julian. You're serious you know the larger bubble and the people who were willfully inflating it kind of knowing that it was a bubble in pets.com. I think was in many ways just willing to go along for the ride so start to paint that picture especially for people. Who are you know alive at. The time are aware at the time you know what exactly it was to have that first. Internet fervor bubble. And who was artificially. Inflating it yeah. I think it's hard for anyone to really picture what it was like. Because we are We're are are are bending differently because of our phones but like it was as if the internet was going to make every thing a massive business so like when you used to have a business you would sell to the people who were physically near you and the internet. All of a sudden was going to make it possible for you to sell to like the whole world and that amount of potential. I think it cannot be understated and pets.com was there for a really particular moment They were not alone. There were a lot of other companies who all of a sudden. We're like okay. Let's do this to everyone every it's all going to be possible but not everybody had the internet. It wasn't that fast. It took like sixty seconds for a webpage to load. It was still so new that like people were skeptical of putting their credit cards online. There was a lot that felt a little bit uncertain about the internet and its potential but pets.com and the economy at large wasn't wrong about the potential ultimately fundamentally here we are you know when i think there's also a some blame to placed on financial institutions who were helping to rapidly inflate this bubble so an institution like merrill lynch is continuing to find and keep afloat pets.com long after it made sense because they were collecting all of these investment banking fees. And so. here's this little mini lesson from one thousand nine hundred ninety two thousand two thousand one where you learn about. All these shady finance and investment practices inflating a huge bubble and watching that bubble pop and fast forward six years and everyone has learned their lessons and nothing bad has happened. Yeah exactly. I think it's important to shout out like there was a huge scandal surrounding now somebody who people would think is a media person but then he was an analyst named henry blodget if you turned on the tv in a bar in new york in two thousand two thousand and one. It was totally possible that you would be watching. Cnbc and they were. They made a choice to cover. The stock market like it was football and so you would see analysts becoming stars. there's a punk. Rock song featuring maria barreda romo because joey ramone washed cnbc so it was a time when there was a lot of hot air pumping this bubble and it was getting bigger on purpose and there were a lot of practices that made it so that it was in the financial interest and not necessarily the ethical interest of these big banks to take companies public. And of course nikki deer point him. You know in two thousand and eight. We see so. Many similar dynamics of jim cramer kind of pumping stocks for much longer than he actually should and we have You know people double-dealing invested in various ways that cut against each other So you know as we start to wrap up. I guess that's julia one of the things. I'm curious where where you're at in terms of you know what lessons are. They're both in terms of bubbles. But also this question. I've been thinking a lot about in this year. In two thousand twenty and you know what counts is basically the third half of two thousand twenty minute but you know Like this disconnect between the stock market and the economy and this was a year in which obviously gotta stop crash but then quickly just rose and you know the the stat you hear about billionaires. Make more money than ever this year. and and some people are like jumping into the stock market and playing it. Like it's a game or other. People are standing inbred lines. Where where's your head. And what lessons from one thousand nine hundred nine about that. Seemingly fundamental disconnect. I mean i think you just said it very perfectly but like if it feels wrong it probably is like if it feels like something is too good to be true or if the economy is doing something that seems a little bit weird it probably is weird. I spoke to an economist named ron through har- who basically laid out the fact that right before the pandemic hit many of the tech companies that we are now relying on. Were really getting a little bit wobbly here. In terms of their valuations you saw like absolutely skyrocketing valuations. You know we work as an emblem of this where it had a less than ideal ipo situation. I mean it's very complicated. But in a basic way but then the pandemic hit and the economy went entirely digital and it really transformed a lot of things that i think. We're going to still see in the next months and years the there obviously we'll see the reverberations and you know you couldn't have planned for that. But i think that if there's a lesson to be learned it's that like planning his fake. You don't know what's coming and if it feels weird there's a reason for that. It's because it's weird and it's not. Okay probably yeah. I would add just a couple of lessons to that. One friend of mine said on twitter that the stock is the mood ring of the plutocracy. And that i think is a pretty good description of what it is and it is not the economy and the disjuncture between the two of those are confusion about the two of those things. has led us down a a very bad path on more than one occasion. Yup and i would also say like banks don't learn you've got us set rules so that they don't continue to chase just like the most profitable venture because we've been through so many bubbles in the past several years and we keep rolling back those regulations. Just they come back and make more money and it seems like really bad idea because it always ends in the same place so those are at least two lessons. That you can scrape from the pets.com buckle. Yeah i would add only one more or less than which is like maybe learn your history that maybe you listen to really good podcast. You can maybe not do the same thing that you already did. Contribute to the podcast bubble. Exactly yeah talking about man you know i will ride this one But you know in the political dimension here too. I mean we're you know we're coming off of a presidency in a president who was obsessed with the stock market willfully ignorant of the difference between the economy and the stock market and that is incredibly dangerous as well. but like we were imploded. Some other places like airbnb had this massive. Ipo just a couple of months ago and those keep happening and be very curious to see Which is to say. I think you're going to have plenty of future seasons. Fortunately i will. I will be here writing these wild moments when people really like lose the plot and you know i hope it doesn't happen again but it probably will probably the series is go for broke. Its podcast from. Vox and julia for lawn is the host. So thank you for doing this. Thank you so much. I really appreciate you and nicole hammer. Thanks to us this day in esoteric. Political history is a proud member of radio. Tokyo from pr x. A network of independent listener supported. Artists owned podcasts. Are researcher and producer. Is jacob feldman. Our producer is deep brown color. Nicola helps transcripts which you can find at this day. Pod dot com. Thanks to everyone who gets in touch with questions or comments or potential topics. You can email us at this stage pod at g mail dot com one last thing next episode. We have a very special very exciting announcement. So if you're still listening to the credits at this point thank you very much and you get to know that there. Something really cool coming up next episode so be sure to tune in for that. We're very excited about it. I think he will be to. My name is jody avirgan. Thanks again for listening. And we'll see radio x.

pets.com sunset lake amazon Arna kosov jody julia jeff bezos toby Juliet vermont nicole columbia maria barreda romo nikki deer barnes hawaii
381. TWE MasterClass|On Investing

The Working Experience

16:18 min | 10 months ago

381. TWE MasterClass|On Investing

"Welcome listeners to another episode of the Working Experience podcast. We've created a new audio series. The working experience masterclass focused on advice to master skill, improve your life and conquer work. Each podcast is short roughly ten minutes of actionable advice to push you forward in the game of life. Are you ready to hustle to an enlightened full life? Then buckle up and let the value pour into your ears the working experience. Ninety three north is almost at a standstill. He had so rough one out there the scorning snow and sleet. Snow Service on and clear of the closing doors. going. To, be few minutes man traffic. Make sure Elaine. Johnny that report. Presentation Charlotte to. Give. A. Team meeting at Ted. Thanks. Bye. Work makes the dream work. Moving. At. After the meeting, we'll have a breakout session. Where am I hot five microwave Nil were asking. Him Very welcome to another episode of the working. Springs Cast high-caste a masterclass, Maddie K. and John masterclass on making. Trying time to drop some knowledge on some tips for investing get your portfolio started. Coaching cash money cash money. That's what happens. Baby Okay. Number one assess your financial situation have little or no debt especially credit card debt. Six months worth of living expenses in an emergency savings account you should probably calculate depending on the size of your family that emergency savings account. That is not a debit card account is not a checking account is money. You don't touch six months. Well, you've just eliminated our entire audience they've stopped the podcast cancel. Now, what you WanNa do is you do if you do have credit card debt and its high interest you want to start paying that down I you want to work up to six months worth of living expenses you want a little bit of. A cushion. I mean, we learned it with covert. I mean people were kind of caught with their pants down. Yes. All right number third. Okay and then. Number two is you think in terms of risk versus reward. So higher returns are normally your stocks, your equities. May carry more risk. Lower risk lower returns would be more like debt and treasuries buying corporate debt a municipal bonds. So you WanNa, have you know typically you won't have like a balanced portfolio even higher risk than equities would be like crypto currencies like bitcoin theory him and the like those would be super high risk. So you would only have maybe one to two percent of your portfolio in that. and. Then maybe forty percent stocks and the rest in bonds but it all depends on how old you are. If you're young, you can take more risks. If you're older, you can take less risk and also really look at these things right now because there are some. Some things like CD's and whatnot which used to be very secure and you a return on those and that is all thrown out the window. Some things like money markets used to be very. Safe and secure, and you'd get a good return I was reading recently. That is not true. So John said typically were not in a typical situation right now. Well, interest rates thanks to the Fed are. Historically low. So a money market in bonds You're you're going to get almost nothing for your money right now I guess you could see it as like luck. It's a safe place to park mummy a guess but. In any way in any case, higher the risk. Or higher the return more risk. A lot of people played a little more conservatively as John said, as you get older which brings us to tip number three diversify the smartest investors do not buy all one type of stock. They diversify portfolios by putting money into different types of funds with different volatility, some of their portfolio We'll have risky stocks. John was saying maybe one to two percent, and then you know maybe the bulk of Ed in more conservative stocks for example, people who put all of their money into tech stocks in the ninety s lost all of their money in two thousand when that dot com bubble burst I remember that very well. That was me I had everything on pets.com, everything the house. Tell gene the kids. It's. Time to move out. Under there was a simpsons episode where. One of them goes into one of these dot com places and the guy goes yeah. Yeah. You can just get some stock over there and it's basically on a paper on a roll. It's like a roll of paper towels just peel off as much. As you want. I mean, we we have a mutual friend, this guy named Mike. He went to work for one of these places and he had the job for about three months the play just. Tanked so. Like a cheap tent. All right. So number four is assessing a stocks volatility. This has to do not only with the stocks volatility, but also market volatility you WanNa look at an average performance over about ten years, which is called the standard deviation and it's normal for a stock to increase or decrease in value by seventeen percent anything more than that is risky and you can actually look at the options. Markets with calls and puts to determine Howell volatile stock is again a stock could be extremely like Tesla. You know it could be very volatile but. It still could be a great stock or something like an Exxon Mobil. Now, this is all we're in a new area right now with like bank stocks and energy stocks because the market's been flying all over the place. So volatility is actually up, but typically the banks in the energy sectors are more like your dinosaurs just kind of moving along, and then you're you like Tesla like electric cars or your high fliers or your tech industry. What's snapchat or institute Graham or facebook or Google those of your high flyer grow stocks yeah I mean I had stock and solar city. Then, they were bought into Tusla. So on stocking tesla than Elon Musk was having twitter meltdowns he was the SEC was on them. So I sold that like now it's doing quite well, but again with that guy. You know talk about volatile. You want I think Tesla's a by I think Alon Mosque is is brilliant I mean the guys juggling multiple I mean you gotTa Watch what he says but he's got spacex his Tesla, his that boring company his got solar city. Dow is doing that like. That battery factory that Giga whatever it's called. Yeah. Well. Look. Okay. So number where we on number five. Is that yours. Or is that I just did stock volatility. Cheers. Okay. understand how market expectations work. Now, this is something I had to kind of wrap my head around stock prices not based on performance but on how investors think it will do meaning the company and its stock. We hear about people getting rich by investing in some little known company that Hits Beg and that does happen. But, it's not enough to invest in a company that will have above average growth. You need to find the company that will grow more than the market expects it to this would involve doing a better analysis accompanies future growth rate than all of the industry experts, which is difficult. I. Mean there are people they spend all day every day looking at these. So I mean you take a company like starbucks twenty years ago might say why would I invest in? This is just another coffee shop well, boom facebook bang. But for every facebook and starbucks, there are thousand companies that went belly up. So yeah, and you're you're valuing the company. or The stock market is valued the company based on future cash flow. So it's future earnings future profit, and if a company is a startup, it's very difficult to ascertain of how much are they gonna make whereas if it's a starbucks on our facebook, you have a performance record of how this company performed in the last ten years and you know there's multiple analysts on Wall Street analyzing what this company is going to earn per share, and if they earn more than that, the stock price goes up if they earn less than that, stock price goes down and it's all based on what they think is going to happen in the future. Right So again I mean you can make a ton of money. You know if you invested an apple on day one, I mean good Lord. Oh but facebook Amazon right? I. Think if you invested ten thousand dollars in Amazon on day one, it's like worth like sixty mill or something like that. But who knew I mean means for every Amazon? Again, they're all kinds of package delivery services that went. Nowhere. So you know I remember while I'm sorry let's move on point number sucks. Okay so you want to invest in well managed companies So this is management C. Level You know the CEO, the COO CFO and you know past performance no guarantee of future results. It's true but it's a pretty good indicator. So you WANNA. Look for reputation you really WanNa look for the people in the team and then you want to look for consistent performance and looking for new opportunities. I. Mean. That's really what venture capitalists do they look at what this team is, what industry they're in and what their future prospects are, and they're writing much bigger checks than you. By the time a company goes public all that stuff is kind of been vetted out and there's a ton of information and you can still make money in the stock market. But if you want to take the risk of investing early stage startup, it's like one thousand, but you could hit a massive homerun. Yeah I mean again with some people are very risk adverse more conservative. You know over a long period of time then you have your day traitors, you have your short term people who are trying to make. Money right away and yet if you pick that stock if you picked that, Amazon. More. Power to Ya I. I'm day trading with my my son's college tuition fund. I would say what you might call. That's how do I like to rural? It's not even trading with you. It's gambling. It's just pretty much roulette looks can't Oh there's there's no research. And our last point number seven, buy low sell high now this sounds obvious. Okay. You should do that. But sometimes, people don't look at if a stock and you have to do some research. If a stock has dipped but you look in the past and you see it's done pretty well, we'll. There may just be a blip there. So you may want to get in I up that stock while it's low because if it's average performance has been fifteen percents, you know either way it's pretty safe. Now again, if a stock just really tanks because the CEO was arrested for fraud than, yet you can take a bath on that and again there's some risk to it. But if you gotta take some rescued, you have to put some money in there. I thought you like to buy high sell low Mattie ks what I'm going to be doing more videos on my investment strategies right? A flip. Flip. Flip. There's actually there's actually a hedge fund is very successful Hedge Fund, and this guy just loses money. He he it's a black swan event. So he's shorts the market. So he loses a little bit of money each day but then if a black swan event happens like Covid, he makes a bundle yeah. Yeah and a lot of its time and you know things depend well again, it's sort of like. Not Exactly. But you know a piece of art is only worth what somebody's GonNa pay for it and sometimes I think stocks Kinda work the same way like is there any inherent value here and I maybe sometimes that's where the danger can come if stocks. That's your area in the penny stocks hears about you get a couple of your buddies you buy up hundreds of thousands of shares, and then you get on your soap box right pump touting this pump pump and dump pump and dump. Let me wrap this up by saying history is not a subject that is respected in education. But it seems to me if you want to do well, you gotta do your research. You got to look at the history of these companies and not just throw it all on red in the casino. brancaccio style of investment. He's the guy call you what role. He's cold calling. Yet costantly. Things selling anything. The whole thing goes belly up and he's on the phone again with the new hip Oh yeah. That was and it was always Oh that was a black swan event. You know these guys apparently Warren Buffett in a couple of other heavy hitters didn't experiment one time where they put up the chart out know all these stocks whatever you would call it. They threw darts at it. And they basically invested in those days and they kind of broke even did about as well as they might have. In any other, well, it's a, it's a very well known statistic that the index funds, which is just basically like a fund that just like buys the market outperforms. Eighty five to ninety percent of all hedge funds and mutual funds out there. Yeah. I would also recommend maybe kind of dated now that Liar's poker by Michael Lewis I was quite excellent book really just a great book. He's a fantastic author anything didn't he? Do? He do moneyball? He. He's done so many great books. All right. Thanks a lot for listening. We'll be back with more tips are. Series Yeah Hope, you're enjoying the series. Let us know emails at work at the work inexperienced dot com, and thanks everyone for listening. Thank you everyone for listening to this episode of the working experience. We'd like to thank our sponsors, one circle media, and the still believe APP the only APP that delivers video proof of the tooth fairy and Santa by simply taking a picture. Download the APP at still believe dot co today in a major kids. And if you work for a studio networks startup or corporation and are looking for a partner to create media that will build engage in entertain your audience reach out to me at John at one circle media. Dot Com. I would love to hear from you. And that's it. The end the sweet and Until our next audio encounter.

John facebook Tesla Amazon starbucks CEO scorning snow Elaine Johnny Charlotte Exxon Mobil pets.com Giga Michael Lewis Fed apple
House Speaker Nancy Pelosi, First Horizon CEO, Medallia CEO

MAD MONEY W/ JIM CRAMER

48:41 min | 1 year ago

House Speaker Nancy Pelosi, First Horizon CEO, Medallia CEO

"Are you still using your trip for the rest of your body landscapes law more three point zero was specifically the to make manscaping. Patriot, fans gifts they technology. Won't make our snack. Water pufus up resistant, so you can train them in the south. Over the Mass Gay Dot Com, they get yourself the law. More three-point use code audio toward a limited time. Get a free pair of boxer briefs. Free travel bag, if free accelerate sipping. My mission is simple to make you money. I'm here to level the playing field own investors. There's always work at summer and I promised to help you find. Money Starts, out. John! Crater, walk limit money. Walk Okay Mark. France is trying to make some money. My job is just entertained. Educate and teach you, so call me at one, eight, hundred, seventy, three CNBC or tweet me. Action, Kramer. What could really derail the big stocks in this market? Enter Sedate Day, or the Dow gained hundred sixty five points as to be advanced point five seven, the Nasdaq climbed one point four percent. What would make us want to dump? The red hot stocks that have been leading US higher. I don't see this rally clapping under its own weight, which is what happened the last time we had exposed of tech rally in two thousand back then. We've gotten ahead of ourselves. We saw the potential of the Internet. The actual technology wasn't there yet. These we all laugh at the DOT com Catholics back then like the pets.com the infamous space. The truth is they were head of their time. pets.com could have been chewy. Infamous space could have been global. There is real good. They were just very premature. But I WANNA take one the hateful nine hundred ninety nine allergy, when of course member shot up and in two thousand. I would take it on directly because you need to understand why it's misleading. Weitz constantly brought up and whether it makes sense to do so because they are. Let's say surface level parallels that much otherwise back then we had to markets, the PASSAIC, S. and P., five, hundred and the go go Nasdaq, which is a little like today. Only one of those markets was real. The SNP and I think that that's a major difference. This time round I'm more confident today's tech companies, even if the valuations seem stretched and the size, he's large. I, ask yourself are the Cup prison in leading this rally profitable or they saying it's better to lose money now, so they can dominate industries later. We had a ton of money nineties I started the the coming nineteen ninety-five. The venture capitals I met with also the same thing, the opportunity is to being for an online stock. The care about profitability spend spend spin suggests as measured by Balsam and pays clerks. Underneath revenues that turn out. Right there were nearly three hundred Internet IPO's nine, hundred, ninety, nine, alone, losing money was their mantra. Only a handful of them survived because of that mantra now though most of the leaders are making fortunes. This general's apple facebook. Alphabet Amazon and Microsoft are some of the most profitable companies in history. Sure Microsoft failed to deliver a blow out on some of its profit line tonight, but the entire numbers were good, and some are worried. I would say needlessly about a slowdown in their cloud division I think that that will be. Let's say. Debunked twenty four hours from now still the top twenty companies in the Nasdaq none that one of them today's winners second, some of the larger operators from the DOT COM era turned out to be either ethically challenged or outright fraudulent with made up financials. I! Don't see anything like that right now. I know tests had some accounting issues, but nobody's really question those numbers anymore. Especially, if there's magnificent -nificant series of numbers, top and bottom line this very evening, there real cars being sold. If they could manufacture workers, they'd have more sales, which is not something for GM could claim they need less capacity tests us all the capacity yet. Out seaworld here, the kiss forging numbers, not even sure it would be possible to kind of scan now. Just too much scrutiny third during the dotcom period, there were tons and tons and tons of insider selling the executives in early investors couldn't wait to hit the Ring Register. They knew they do see. You have secondary offers pretty much every day of the week when online gross butter, the largest dot new there days where numbered? Numbered imagine can sell the whole company. They at least sold what they couldn't get it done. You think could not merge. They sold all their holdings. Oh, it was horrible again. There's nothing like that now. Sure there'd been a few companies that got acquired for big premiums, but almost all this deal's failed think Time Warner AOL and I'm not seeing a lot of dumping of stock from insiders these days tech acquisition said to be. Be Few and far between, but in the happen. They're pretty darned successful. I want you to think facebook buy. INSTAGRAM achieves move mark slow snapping of Lincoln Google Youtube the only real questionable decision Amazon's curious purchase of whole foods, but that's the exception that proves the entire, because hopefully foods, a supermarket, not a Tech Company fourth and finally in Dhaka mayor was a broad coalition among analysts investment bankers. Fast Bunny Clients Hedge Funds Venture. Venture capital to bring just about anything publicly. Get off the sheets. The deals came fast and furious so fast that we had double the number of companies we have now, and many were simply set up. They weren't even set up to survive. Unless everything went perfectly, they needed smartphones and streaming video, five or ten years ahead of schedule. The participants in this Fogo rush made absurd profits on the backs of you the individual. Who financed? It all got stuck holding the bag. Which is why so many people left the market? Regular people were lured into casino by the promise of instant bitchiness and ended up with long-term poverty. The huck Shire's. They made out like bandits again. We don't have anything like it now. This is twenty, twenty, two, thousand, the smartphone as ubiquitous, and it's point a collection of successful industries high-speed broadband everywhere we now the cloud, the migrate to replacing expensive on premise software. These are real companies making real money. I don't see a lot of huckster member. When he law must be Huckster, I don't know to me. It looks like did he deserves what he's gotten? which is a lot of money? That's why I don't see these tech titans collapsing under their own weight in the current environment. I think they can keep running. Yes, NAT includes stock Microsoft where I. I'm pretty sure. Numbers will be raised in price. Targets moved up what what could change things we what am I worried about? The first pick contain the pandemic meeting more testing more mask-wearing and a new stimulus package. The big cap tech stocks will become a lot less enticing money will flow back into the roughly three hundred copies. DSP Five, hundred hundred down for the the three hundred. A reopened economy all right. We'll be going out traveling. And that means the money from the framework cove in nineteen winners will rotate the cove at losers. It's just what happens. People doesn't. The companies aren't going to change the shareholder base. Will I see this as inevitable because sooner or later will get a seat, but inevitable does not necessarily mean now or even in the next three months, or even the next six months to the governor next week, third congressional hearings where the heads of Apple Amazon Google facebook wants to testify about market concentration, anticompetitive behaviour, meanwhile slack just fouled in any trust complaint against Microsoft for legally. Stifling competition allegedly. If there's an antitrust crackdown on big tech, you'll see some real declines here. Because a lot less visibility into their future earnings, troops shares. Some of these are worth more broken up, but that's a long convoluted way of thinking third is China at the White House goes into full bore a Cold War with China, and it does look like we might many of these companies will lose a major chunk of their sales, especially apple, if president trump presses too hard, then apple stock gets hammered. That's the largest company and it can drag down the rest to Fang. Even though they have mostly let much less China exposure and that's because of the problem of. Fs they all are joined fourth inflation. Nobody was to pay for growth. Stock with inflation is raging. The Not Index owners will dump them because inflation destroys the value of those big in the out years finally. Let's just say what Wall Street. See well most. Wall Street fear higher taxes for capital. Gains Joe. Biden's leading in the polls. He's proposed tax capital gains as ordinary income, which is a real possibility at the Democrats also take the Senate whether or not. You think this is good policy. It would be extremely bad for stock prices, and I'd expect a lot of people WANNA sell now. To get out ahead of it, the bottom line I don't see this market collapse you evaluation or Cellular inflation which cone? But it can't be or by the government to anti-trust or taxes or new Cold War with China, and most importantly. If we get the pandemic under control, the economy comes roaring back extension of stimulus. Big Tech will go out of style as people rush for the recovery stocks. That's that recipe for underperformance and I don't see it. Being made just yet Keith in Indiana Keith. Buddy. How are you? I'm good. How about you? Good question for the gym at starbucks. Does in wavering between a little bit above eighty three like mid April laugh told the for gain at about seventy five fifty, you know. Would it be the moved by it back in its current price? Jump in the news requiring that. I put. We own starbucks for excellence plus my. Wife is part of the barbell along with Disney that we think if the economy were to reopen successfully, they would do well, but without that and without a big comeback in China. You expect. That that starbucks is going to be stalled here I. Don't mind that I WANNA wait. I think that we can Kevin Johnson bills out his network of smaller stores, and China comes back. That stock goes to a hundred so I. Want you to hold on Mike and South Carolina Mike. Hill. You all the time. All that's fantastic. Thank you. Interested in a long-term thirty year COMP- commercialization based play typically aerojet Rocketdyne. Why why? Just bothered me tremendously. This stock is is low. It is 'cause I. Think it's a terrific company. I by the way I was recommending very hard, Lockheed Martin I. Don't remember that because Jim take. That's been fantastic. This one I got look to more because I think at Aerojet, Rocketdyne is a great company had known those companies I remember rocky time from the sixties when I studied. Robert N- Ohio please Robert. International Company. Called Lindy land. Related. We think Wendy is amazing. We liked air products, and we like windy recommended Linde and air products when they were allowed when air products was allowed to merge. With another company that had been one of our favorites. The next thing you know you got really F- slot, pappy. Duopoly between the actually, there's like three companies that make. I remember also plug power. But Lindy's great do not worry about investigation. Just get ready to buy more than any decline. It is so good by the way air products, too. But Linde was our favorite. We did the okay. There are some parallels, but. Here's the nineteen ninety nine list. This is not in keeping with what we see now. Tonight what else? Short short-term extension of unemployment benefits while Congress debates, water stimulus package them going straight to the source. Has the House Speaker Nancy Pelosi for uptake that a little, no rule that could put retail investors on the back foot, our what it means for your money, and why should be put in place and I? There is become one of the largest banks in the south. Thanks that we should period back from New Orleans, but it's still can't get any love this Martin despite a six percent yield tonight, I'm sitting down with the CEO to find out if now being targeted by this game with Roemer. Don't miss a second of that money. Follow ask Jim Cramer on twitter. Question tweet Gramer Hashtag. Mad tweets send Germany mail to mad money at CNBC DOT COM or give us a call at one, eight, hundred, seven, four three CNBC. Missed something, ed! Tha Mad money DUTT CNBC DOT com. Today, every answer matters were than ever before. Because whether it's about health deliveries or finance. Some things just can't wait. That's why IBM is helping. Businesses manage millions of calls texts and chats with Watson Assistant. It's conversational. Ai Designed to help your customers find the answers. They need faster, no matter the industry. Let's put smart to work visit. IBM Dot Com Slash Watson Assistant to to learn more. There's one major reason this economy is doing okay. It's government life support, normally double digit unemployment would be devastating for the country, but thanks to the cares act people who lose their jobs getting six hundred dollars per week in unemployment benefits so needed. Unfortunately, that expires at the end of the month last check actually go out this week and the Cova cases a terrifying. Terrifying levels we need another stimulus package that to the Democrats Republican Congress big deal, not a sure thing. This may be the single most important issue for the stock market right now, so let's go right to the source with Nancy Pelosi the Democratic Speaker of the House get a better system. Her priorities and we're stand with negotiations speaker policy. Welcome back to make money. Thank you? Speaker. What happens next week? What happens when we don't get to six hundred dollars for the men and women who are unemployed? Matsu their fault because they're just their jobs are over. Well. Let's just hope that we will let. Small many few days left in this week. At that taught during that time, we hope to see a proposal in writing. From the Republicans as to what their priorities are, and how much they're willing to invest in the being of the American people, so we we have ours for two months in one week we had the Heroes Act on the table, and that's our heroes Zach to open our economy testing testing testing A. On our heroes, that's why it's named that way. tell state and local governments. Healthcare workers, educators transportation sanitation workers. The list goes on on on the payroll. Many of them are risking their lives to save lives and may lose their jobs, and the third pillar is to put money in the pockets of the American people employment insurance direct payments a the employment Some tax credits in the rest in order to. Keep the economy going again. It's all a health issue. If we keep it, we just defeat. The virus we can open up our schools and our economy. Our Own Kayla Taus reported earlier today that the Republicans are net had now lowered the amount of. You set to four hundred dollars a month. That's one hundred dollars a week. Is there any way that's acceptable to you? Well. No, we don't I don't know that they have gone to that. Place and six hundred dollars is relative in some places. It's a matter of economic survival and other places. It makes it's a sweetener. So, but we have to have the same amount in the whole country, because otherwise it's an administrative headache, but let's go to the heart of the matter of the stock market. There's a floor there. You know that the Fed another are pounding ways to. Minimize the risk in the stock market, and that's a good thing is for our economy, and we think there should be a floor for America's working families, and that we should not be firing those for meeting the needs of the American people because we don't want to spend the some Republicans on the Senate side, don't want to spend money, and we should not be quibbling over to four hundred or six hundred, when people are in desperate need and have great uncertainty, not how the markets and the a business community doesn't like uncertainty. We shouldn't inject uncertainty. Their into lives of 'cause working I couldn't agree. Agree more I've been the reason why the stock market which is what I this is doing well is because we have people who otherwise would be I think on food lines that able to have dignity and get some money from the government for for jobs that they lost now I am concerned about certain, say fifteen million jobs in the rest. Fifty million jobs in the restaurant business hospitality is going away because the need for social distancing. Is there any way in particular to help? The people kind of like a business interruption insurance for those workers whose companies that they faithfully served? That are just closed. Who Shit you're pointing at the hospitality industry because there's you know hospitality industry is a source of community, engagement and involvement, so it's not just about an. About jobs it's about a sense of community, but the jobs are what are essential, and I do believe that. In the course of the unfolding of the PC, the paycheck protection program that we have improved the opportunity for the restaurant industry. That's what they tell me anyway. Of course, we're not there yet. Because you can help. People stay open pay the rent. Pay The utilities all the rest of that even pay employees, but if you don't have people coming into doors, you're still. Having a problem, so that's why we WANNA. Put money in the pockets of the American people so that they can in this consumer economy and spend Jack Demand into the economy create Johnson. Demand Speaker Unit or Great Sports Fans Unfortunately, your Baltimore. Aiden Fan, the pretty good, but in order to get these teams to play. We're going to have to have testing testing testing to the point or I question how athletes professional athletes get so much more testing than the rest of us and get rapid fire answers, and the rest of us don't instead. We're quarantine at home with out being without being productive citizens. Is there a point where the NFL NHL The NBA get too much tessie in the rest of us. Don't get enough. But first let me say I love. The Ravens but the San Francisco Forty niners are my home team. Now the testing. Let's not begrudge the athletes their test. Let's just have more testing for everyone, and that's a decision that this administration has ruled against a they have they just keep insisting? They're not test with more tests than this that Nielsen. We don't and the reason we don't have enough. Test is because we don't have enough equipment and the reason that. that it takes a week or so to get the results of the test is because we don't have enough equipment. If we had the equipment, more people could be tested three times as many people could be tested and the the return the results of your test. Could you go from one week to one day, and that's why we call upon the president. implemented. Japan's production act so that businesses will be making this equipment equipment, and then the personal protective equipment that is necessary and our health, serving institutions as well as in our schools in every place where people come in contact with each other equipment, if put equipment enables us to test trace treat. Socially distance and assault there so again. I think. I. Don't want to begrudge anybody the tests that they have because I know we could do much better. It's not as if they're taking a test that somebody else should have. They're having a test. Somebody should have been. the trump administration has has decided for a long time that we did not need to have that test because you know if you have tests than you'll find out. What the rate of infection is but Abbott lives largest tests maker has told me that they have more than enough machines, and that no one's buying that there's just been this gap. I think it's the government's fault I. Don't know why that is. Abbott labs the biggest test creator has spare tests manufacturing capacity that no one's topic. Well, of course, there's also the question of the billions of dollars that we have given this administration for testing. And what isn't that? There's this disconnect. It's a distortion about what the? Rate of infection is and that more testing shows more. People who are infected and they don't want that bad news, but you've been putting that aside. Let's just go forward. Whatever avid has we still nude? More underserved communities communities of color, rural communities and the rest are just not having the outreach that they need to have, and then the tracing that goes with that is buried essential as well, but you have to have also the equipment that Ernie to test by to evaluate positive or negative in a short period of time. I do WANNA. Go back. And look for one thing, which is the the legacy of of a representative John Lewis person who is a stalwart who understood the the way that we need to adjust in this country to bring ourselves up to where everybody is equal and I. Thought I should give you a chance to say something. When I appreciate your calling attention. To John Lewis for all of us in Congress. It's like the death in the family. The immediate family I served with him for thirty three years. In the House and we look forward to paying tribute to him as we lay him to rest. Within, the next several days as the family gives us earn instruction. But this is a person who many of us think was almost Christ like in his. Values and his demeanor, his respect for other people. He believed in a more perfect union. He was a super patriot in that regard because he wanted to. He worked in peace and love. Nonviolence was central. Central to how he Operated and recommended that the rest of us do so again. We've lost a great patriot. We've lost a person of of goodness who truly lived a his beliefs and his beliefs came. From his date. And his faith of course gave us all hope so we will miss him. You'll beautiful tribute to him in the days ahead. His family did not want any of his services to begin before. Reverend Vivian was put to rest. That will be tomorrow. But he was fighter, he was a fighter and he was a fighter on what those corona virus and we all agreed that we, as a nation should be doing more and being more for every person in our country that with John Lewis was about everyone. We do it for his legacy. You so much to house speaker. Nancy Pelosi. Always Baked Avenue show. My pleasure and Nearby packing! Still using your beard trimmer for the rest of your body mass gates law more three point was specifically designed to make manscaping yeezy featuring advanced. Technology Trim won't make us. Name waterproofing shock resistant. Tremendous out over the mass, Dot com get to self the law more at three point use code audio toward for a limited time. Get a free pair of boxer briefs, a free travel bag free. Accelerate SIP. Talked about this, but the Security Exchange Commission getting ready to push through what I regard as outrageous will change, they will make the market a lot less transparent. I didn't even know myself. Kramer faith gave Khasan the chief. Equity Strategist Kobe. Sachs pointed out. Don't list product. So what's happening? Right now every institutional money manager with more than one hundred million dollars in assets. has this closest positions points per quarter in the thirteenth one? That's been the wolf for more than forty years. I think it's terrific. It means we have some insight into what big money magic are doing. Et gives us those learning it. It's really a learning experience. If you believe Wall Street is important Yooglie businesses important. If you believe the Marcus important in the public deserves to know who owns what? But now this cease proposed rule. They want to raise the reporting threshold from one hundred million to three point five billion in other words ads from with only three billion assets under management would not disclose its holdings every quarter. They can fly under the radar and that's just that's most hedge funds someone at the SEC. The bright idea that what we really need is less transparency and less disclosure. This is a needless. Needless giveaway to mid the war size moneymatters almost textbook example regulatory capture with government agencies, doing the bidding of the industries. It's supposed to supervise and regulate and the SEC's press release we can half ago. They argued that there simply updating antiquated rule and providing much needed relief for smaller money managers burdened by excessive compliance costs I'm not convinced. Jesse adopted one hundred million dollars disclosure threshold Nike seventy, if want to just. Just that number for inflation they'd be talking about a four hundred million dollars threshold instead they want to adjust for thirty five fold increase in the size of this hot market, which is where they get that absurd three point five billion dollar number I mean that's some real intellectual acrobats. This argues that they're doing this to help smaller money. Managers who struggle with compliance costs also get hurt by copycats. Look at these. These quarterly disclosures mimic their strategies. Spare me. I ran a hedge fund for fourteen years. Nieces goes requirements never stopped us from compounding at twenty four percent Anglia tool fees maker partners of fortune by today's standard. We were on the score side. Never have more than half billion under management about last year. Because I like stay nimble. There were plenty of burdensome regulations, but they need to disclose holdings four times a year. That was not one of them first of all. You're allowed to wait forty five days after the end of the quarter before you file. Many short-term secrets are safe second. You don't actually have to disclose everything. You'll have to reveal your longs if there's a problem. Thirteen requirements is that they're not stringent. Enough I want to see this shorts third. Come on a billionaire hedge fund is. Is Not a sport. Breyer's take nothing of the three billion dollars when it's nuts. I think these guys need help. Especially when that help comes to your expense now what's happening here is very simple. The SEC under the leadership Jay Clayton cares more about helping institutions than protecting or helping individual investors being able to look up. What most hedge funds actually own is course are sure is. Is Great for home gamers. These thirteen forms are treasure trove of useful information. Now they want to take a big chunk of away just because we will make life a lot easier for the some portfolio managers were actually I. Think a little easier, the good news. The proposal chains has happened yet. We're only about twelve days of the sixty day. Comment period where regular people can tell. Tell the sec what they think and hopefully persuade them to back off from this very bad idea. Something SEC chairman Jay Clayton should take back as early as tomorrow and squawk box so silly, who the heck defends opaque behavior these days. Don't they have anything better worry about? Yes, he sees the fight for transparency. Now is not the time to rule against it David in California David. Jimmy the chiller man. On what's happening? Chill Napoli midst you out here in the bay area. Become out four times a year spy. Happiest time of the every time is always the best. Sorry, kick it after because of the Pan Damyean, we will get out there. Demine That's. Forward to. Thank you? Yeah. Well Jim I'm a long term investor in a long time fan. And five years ago, I bought to healthcare stocks. One has been great and what I'm wondering about they are thermo, Fisher and Novartis now. Jim Up in reinvesting dividends, so I'm getting paid to wait, but do you think Novartis is worth holding onto for? Giving up. A Nevada state made too many mistakes one mistake after another after another after another I. think the stocking go higher. I'm not saying that but I think that it's one of the. Great Drug Companies Thermo Fisher is one of the best companies on Earth More Fisher was on TV earlier today. Very Self effacing gentlemen. They're not in the same league. I would prefer you. Actually, it's hard. I'm hard pressed to find a drug company. The inteva than I like less than Novartis `wow, sorry Chris and New York Chris. crispell now. And how are you today? I am good. How are you good? Thank you. Thank you for helping to make me a better doctor? I'm a member of your action alerts, plus your charitable and you've made me a lot of money. Hear that I'm glad you're a member of action. Words Pasta that's terrific. Thank you. My elderly mother bought a week back in two, thousand, eight or two, thousand nine, and this company had had some issues. There were many that they offered. They merged three wreath together, and there was a class action lawsuit that would sell a thirty, two million for shareholders. The name of this is apple hospitality kicker at now. It not liked it pretty much since the show began I. Don't like it now. I don't like the hotel business. I think that it said I own restaurants I can tell you. Hotels and restaurants are the ones that taking a right on the Chin and I. Don't think you should be in that stuff all right. The public deserves to know who owns what if you believe the is important and you gotta fight for transparency. Transparency yes, he seems to be our friend about this issue. Which one man money hit as coldly confused to the South and southwest could one of the reasons top banks be impacted. Don't Miss my sit down with First Horizon Ben? Looking for some cloud control this market I'm lying under the radar player in this space that could be considering and all your calls rapid fire tonight's dishes. The lighting ramp to stay with Kramer. It has zero up for the bank stocks. I mean whether we're talking about the sport money centers JP. Morgan is the world or them more focused regionals take one of my favorites first horizon national which come onto the water space in the south. Thanks, it's merger with Beer Bank when the pandemic hit this stop punch from sixteen dollars to six over the course of four weeks, since cents rebounded to nine as of today, but it hasn't been able to get any lift since the latest major covert outbreak that occurred in the South and southwest some of Of the hardest hit places in I rises backyard just probably the Puerto he's, but mostly stronger than expected quarter within line revenues, three cents earnings beat off seventeen basis dividend well-covered, however like we saw with the DIG Money Center banks I rise in stock, actually got dinged on the news. Because Wall Street's terrified of potential losses, so the stocks pretty darn cheap, and even better Scott -Chusetts six point, five percent yield expect us one very enticing as long as you believe, they can keep naked number so candidate. Let's check in with Brian, Jordan the presidency of. In national get better sense. The quarter his prospects. Mr Jordan welcome back demand money. It afternoon. Thanks for having me all right, so Brian I'm a little confused. She bought Iberian very good price. It's trick fan and growth theory country. You've managed already. Take some costs that you had very good loan loss ratio. You've done everything right in a very good area and your stock is down. Seven dollars since I've seen you. Can you make any sense of this I can't. Think it's A. It's an interesting time to be trading bank stocks and I will give that anybody who's trying to do it i. think there's a combination of things I think most particularly. It's driven by the impact of Covid nineteen impact on the economy, and and I think for a period of time there we had some of the arbitrage trades in and out of the stock, but I think long term the most important thing again sprint. It is not a marathon. It is is that we're going to create a tremendous amount of value. The cost savings that you referenced are starting. Starting to be realized, we gotTA leverage in this environment that others don't have taken out. One hundred seventy million dollars cost will create a great deal of shareholder value, so I think over the next several months we to see much better performance now even when I look at all that criticized loans of Iberia and I at the loans that you're worried about I, still come up with a fraction of the market value that you lost now I know bad loans can continue we can. We're not done this crisis, and we continue to get more people with cases of Kobe, but It is hard for me to think that you're going to have to say to three billion dollars a most out of nowhere. Yeah I agree with you I think we have reserved substantially. All of of the losses would occur in in our severely. Adverse stress testing I think we built very very strong reserves. I think we've got a portfolio that will perform as well or better than most I think. The other contributing factor in addition to credit is a zero interest rate policy particularly for long clearly is GonNa impact margins in financial services and I think that gets factored in, but as you and I and have you and I've talked in the past we. We have a couple of of two or three. Really countercyclical businesses that are doing very well in this business in this environment, one is our fixed income sales and trading business in the other, our our mortgage, related businesses mortgage warehouse lending business in a mortgage origination business, so I think we have some offsets to that, and as as you point out I, think the credits going to hold up well our revenue. pre-provision at revenue continues to be strong I'm optimistic about the back half of this year now how `bout loan creation before the pandemic, obviously Tennessee one of the best, but also Florida fantastic Louisiana. is good a slowdown in loans, and is there a concern that if we lose to six hundred dollars per week, extra unemployment that things are going to look not so great a month now. Yes I think that's a real concern. If you, if you set aside the obvious growth from the PPO triple pay program that Treasury SBA setup loan growth has been reasonably modest Jan. for example we originated on a standalone basis about three hundred million dollars or so loans. That's mostly to existing customers. We're not seeing people who were really asking for much other than line, increases or availability, so it's fairly benign environment in terms of demand I think everybody is is worried a little bit about what we don't know. Know about what we don't know, which is how this environment plays out, particularly related to the health care crisis that we're facing, and what does that mean to the economy I'm optimistic that the Congress and the administration will get together on a package that will help bring a further bridge to the economy. I, helping people get from where we are today to a place, pass the pandemic when the economic recovery can start uninhibited and when this question Louisiana I think, there's an unbelievable state and commend trending state. was various and. King Down there when you've gotten I mean. Are you going to spend more time? In Louisiana I mean to me it is the these state that has the most growth opportunities of the fifty states in the union right now. What are you doing down there? Yeah, we're excited about it. Our regional banking headquarters in New Orleans Louisiana is a very important state to us. I am so anxious to get back on the road and spend time, not only in Louisiana but forrest, Georgia, all of these markets were excited about the opportunities. We see Louisiana. We think it's going to be a great story and and a big part of our future, so I'm excited to get there and really get back out on the road. Well, you should be I think the stock is kind of a classic mispricing. Because you've been such good banker Ryan Jordan's presidency. Oh, I rise national great to see you sir. But you, thanks for having by six percent yield symbol F eighteen. How do now teams will keep? Talking. It is. Five. And then the leading round over. Are you ready, stieg The light rain. Here's money. Let's start with marking Tamar. Jim from one man to another, it's a pleasure to speak with. You always gotta wear masks. That's how we Tampa. That's how we can't, but what's going on well. My questions about a stock seven weeks ago two days after I bought it, they lost lawsuit and it went down quite a bit I thought an equal amount to average down, and for the next six weeks went up and up and up unbelievably kept going up. Two days ago, emergent bio solutions was headed from the small cap hundred to the mid cap, four hundred, and it plummeted a third of the Prophet was going. Don't worry about that. This is a very good company. I think you're really good situation. J. Likes Him I. Like Okay. Let's go to Jeff in Massachusetts, Jeff. Hey Jim Twenty thome's Stephen would a question for you sure Nikola more guarantee becoming available, and the price of draft is the time to buy supply overwhelmed demand, which is not a good sign. Most of the good stocks are like Tesla. We're demand is overwhelming supply I. think that you should stay away. There's much better places for you to put your money and I'm gay just starting early. Let's Alexander New Jersey Alexander. Dr Chill Y'all. Thanks for the guidance you give up investors three steps for years to come all right. Thank you, thank you. So I'm trying to get some exposure to the new digital industrial revolution. That's they referred to as industry four point Oh. Yes, I thought on industrial software company P P did thank you. I think you should by Autodesk. Debt is much better than PC PC. Go for Autodesk I know it just better run company. Let's go to David in Florida David. Earlier. All right how about you? Go okay questions so with everything that's taken place here. A fire background checks are hit a record in March and then broke that record in June addition with Cova. We have record demand on chlorine and bleach products the largest producer Ole in Trading at all time lows. One bit from this I mean it really is David is not going to suddenly start benefitting here this disappointment and I know that if you WanNa, Chemical Company, the only one that I'm recommending right now. If you're dowse had it's big. Run is Dupont, but owens been disappointing. I don't WanNa. Put you in that house of pain. Let's go to Steven in Florida Stephen. AGEM, yeah, time and great program one of the best. Thank you also read all your books and get into my mum lineal children, so I have a pick and shovel play the biotech industry gene sequencers are the key to develop. New Therapies genetic and other diseases as well as for developers that technologies for vaccine development. We wouldn't know what we know today about the corona virus without companies like I L M N. Alumina sensationalist going to say I hope he says either aluminum or Thermo Fisher or Danner. All three of those aluminum is a great company. I can't believe that nobody snap that one up when they had a chance to go to Britain California breath. But Bugaboo. Daddy Reverend. Jim Bump paper. How are you? Hi Good? How are you? Doing Great Hey I'm a twenty eight year old Invest Robin Washing your show since I was eighteen and I bought my first stock as a high school senior there you go because you made a ton of money and I relented forever day. mytalk have over five years down twenty five percent does pay dividends, but I wanna not by diller volt arcus Cam I- kinder- Morgan entity but I. don't like the pipelines I'd care whether it's. Seat Corp I just think the pipeline business was a once great business without a lot of growth and I do not think you should own. That stock is doing well. The ones demanding once again our pioneer, because his Sheffield Parsley, because they have a great environmental footprint, and yes Chevron, because Mike Worth is a smarter. They get Teresa in Ohio Theresa. And that lays Dublin's inclusion about lady. Unlikely. Round is sponsored by to the American dream. Quite problem most the crater faith clouds stocks soared so high there practically in orbit. Okay, still a lot of them up here, but it's undeniable that the easy money's already been made witnessed Microsoft tonight, so we need to search for new cloud based software stocks have as much experience me company. This is a company with customer experience management. That's their platform. They harness the power big data artificial intelligence to help clients forget where their customers are going what they might or might not want to buy, and what makes them stick ramp according to software so effective. That is a six full returner investment in three years me effectively pays for itself in less than six months now. This became public here. You're going into Roy. Higher right out game spent the next six months. Come back, earth socket sorta stabilized, but then it got clobbered again during the covy collapse while medallion rebounded off slows. down. Dear maybe getting credit early this month battalion much better than expected quarter twenty percent. Profit at the stock sold off anyway. These magic gave you a conservative album. Great, so many other companies turns out. That was fabulous buying opportunity, so could this cloud stockman ready to play? Catch up with the rest of the group. Let's say close with Leslie stretch the president. CEO Medallion to more company. Where does headed boggling their money? Thanks very much for having Jim. Great to be here all right. So this is your first appearance on mad money I'd like you to explain to people what experience management is and how companies are able to get a full return bringing you in. It's all about the proliferation of digital technology now in the capture of a massive signal field of customer feedback putting into our platform, understanding it creating actions, barring those actions back out to people in the field that can actually make a difference in doing the securely a massive scale, and it's not just survey. It's video his voices, all kinds of signals that we omit as we consume. Services in the day. I work for comcast this obviously. CNBC is owned by comcast. You are. You handle some of this experience, management and Comcast is a client. So what do we as comcast users see? That might be powered by Gallia. Really in the background, but what it's doing is it's monitoring that work connections is looking at satisfaction of content is looking at Adam, it consumption of content, and it's putting all of that information platform, so the comcast make million dollar ten million dollar billion dollar decisions based on what customers are doing and having some estimate of where they will move next great customer by the way it's. Of course now, Dick Sporting goods store like very much in the management is very forward-looking. They're always trying to figure out what people want. They also did take guns out after Parkland are able to give them a sense of whether it's time to switch to a particular kind of close kind of offering I e commerce. which channels are those things that diet can help. Think sporting goods are super user, feedback, highly intelligent user feedback, and they're looking at customer patterns. You mentioned a gun decision so. They're looking at customer partners and consumption patterns, and also feedback also safety. In this time you know I can enter the store safely. They have a pleasant shopping experience in a safe manner, and what do they want from the future as they open up more and more so great example offer a super intelligent user realtime user of A. Data set win some client. Come to the guy say listen. We want to make it so that. We pass routes since everybody has to wear a mask. Will we lose X NUMBER OF CLIENTS? Will people stop going here versus another place? Is that the kind of query that medallion can handle? That's precisely the kind of query that Madonna can handle and it can setup that dialogue, so they can talk to their customers in a secure way, but also analyze millions of customer pieces of feedback, not just end on a small focus group interaction. That's exactly right now. How do you integrate? You've got many different of the partners that we talk about all the time. Do they bring you in? With salesforce spree medallion to say this, we gotta get despite sport right, or would they say listen? We Tableau data. We don't need medallion. Do is leave toddlers. A great associated technology in honor of ice to salesforce author and customer service now aren customer, and we do content hung with those companies. salesforce is just the best in gloss company. That's all about. The customer is especially with their customer free sixty initiative. We're about what the customer is doing and thinking and what they want to. To do next? It's a perfect complement, and we are the open partner of for them, the feedback partner and many large prices around the world that they served so in the end when people think boy. That company is so smart. How they know that I might like that. A lot of what they are doing is dependent upon what medallion does for them. I think if you look across the spectrum of different industries. It doesn't matter whether it's financial. Services read settled commerce, whatever it may be It's with their about who I'm whereabout watts and how the customer is thinking, and it's a really nice marriage of technologies that delivers more than twice. The value I think customers when we offer. Wow, that's terrific I'm glad you on, you know when I first started to die, said I've gotta learn about this company. Doing many things that we need companies do during a period where we might be in a bad recession, Leslie stretch presidency of medallion. Thanks so much, sir. Intriguing companies. We gotta go to work in the foul look at the last few cores last few copies. Of Calls and make a decision I thought it sounded darn interesting secret. I Tesla was perfect say the serves up Microsoft. Okay, not absolutely perfect, but because Microsoft has spoiled US huge. Huge as you're not as fast as people thought, but still incredibly fast, I think audibly analyst were raised numbers, lower numbers and raised price targets, not lower price targets, so the dot comes in at all I think. What can I say? Dot by the stock of Microsoft Tesla Look I say no. I. Like says always a bull market approach trying to find a just for you right here money I'm Jim. Cramer and I will see you to morrow. Still using your ear trimmer for the rest of your body, mascots law more three point was specifically done to make manscaping yeezy featuring fans gifts. They technology best drama won't make us name waterproof shock resistant, so you can trim in the South Bend over the man's game. Dot Com get yourself the law more at three point. Oh use code audio twin, and for a limited time get a free pair of boxer briefs, a free travel bag have free accelerate sippy.

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Turning a Product Into a Platform by Expedia Group Principal PM

The Product Podcast

23:22 min | 1 year ago

Turning a Product Into a Platform by Expedia Group Principal PM

"This podcast is made possible by a small approach to product analytics lent everything about your users run rapid experiments and it's rate quickly hypothesis driven product managers. There's no better to learn more at heakd. Buyout welcome to the product podcast brought to you by product school. The podcast where you get fresh insight from leaders atop tech companies and startups remember you can learn product management in person at our fifteen campuses worldwide or study with US online visit products school dot Com to learn more about our forces. You can also hang out with the leaders from these. Podcasts are hundreds of annual events and catch US at product con the world's largest PM conference that takes place every year across the United States and in London. What I'm doing today is I'm presenting about platforms also talking about my journey. And then we'll also describe how you actually can word a product into a platform and what that entails and how some successful companies have done that really well as a product manager traditionally. I've seen three types of products one is and this is based on my experience. Talk about the upcoming slights. Number one is marketing products. Where it's very easy to see focus. It's very consumer focused. The second one's I worked on his speed data speak so like data products understanding insights coming out of data so I worked for Discovery Channel and I did a lot of that and then recently. I've seen a wave of platform products. What that means is the very infrastructure heavy and they opened the doors for other companies to come in and collaborate with you so the definition which I like about platform is banned. Economic value of everybody contributing to the ecosystem is actually more than the company which creates it or more than the company which facilitates it. That's when it actually truly becomes the platform. And what does that mean if you think about Uber or even if you think are some of social media? Companies all of these companies have facilitated conversation between producers and consumers producers being who produce the content which could be a youtube content or social media content consumers could be who actually consume that a contract which is tailored for that audience and as you actually build this ecosystem. The value which you'd get out of this ecosystem is more for the audience. Then the company which facilitated now you could argue is are you talking about value? Are you talking about the content which I see on on you? And I think we'll get into that detail later on. But this definition to me is is the definition of a true platform because product a traditional product. Which is not a platform might have closed boundaries and might not open producers to come in and produce whatever the value they want out of the platform so the next light is what comes before the product or is it. A platform spotted manages. Why do we care about platforms? And I think this question is important because it's like a chicken and egg situation back in the late ninety s the DOT com bubble. Every company was thinking product from a very traditional point of view. What that means is if I'm building a product I want to build a brand whether that's pets.com or whether that's dot com. I want to build a brand new one customers to come in and drive value out of that brand but as you actually went into thousand five two thousand eight especially apple started realizing that if he open their specific products for other players to come in and contribute that actually drive more value and I think a very good example of that is an ipod which was a product and then your apple iphone which is a platform because it opened the APP store for other other companies and other developers to come in and actually build apps so to me like product traditionally came first and had a very specific philosophy of building a brand and getting customers out there. Platform is slowly transitioned into a motor for democratic society where they want to open these products and let other people's coming innovate. Obviously there are challenges as you do that because other companies might might specify requirements and it might not with your principles and that's why there are some challenges as you transition from product platform so I use snapchat talk with us on twitter. And it's quite fascinating specially like some of the some of the things you can do there but yeah I think that's becoming more of a platform for sure so I'll talk about my journey to product management and how I entered into the platform world. This is by Scotland where I was hiking and I almost fell in a bog and died. It took me two minutes to come out of the bog. But that's that's very Scottish problems. I guess in a in a highland and these are all the companies I worked for. I started as an engineer with wasn't Atlantic and I all I had was to build tickets so I was writing. Xml and accessibility to essentially figure out where the boarding pass number should be where the gate number should be. Where does the Igor when you actually look at your boarding pass? If you're going for your next holiday to Europe I had to think from a consumer standpoint of when they look at the boarding pass Beta the actually look I should get number should be. What would the fault of that gate number should be so things like that? Those gave me really good insight into how the customer things and then I moved into more of mortar for Business Analysis Role Lotus formula. One if you don't know that's a Formula One company Quite popular in Europe and essentially what I did. There was a business analysis between the race engineers and the people who make decisions so. I don't know how many of you know Formula One but the decisions could be. When do you want your car? When do you want to repeal the car for example and those decisions made of Stash Board so it was quite demanding and I was I think the climate from from race engineers? I was working with engineers to build those dashboards and then coming back and then so I was almost like a waiter. Where if the food was good? I used to get the tip and if something went wrong. I took the blame as well. And then slowly transitioned into product roles for oil and gas which is on the bottom left Which is quite fascinating. Because now that I've done in engineering role and I've been an intermediary between engineers and business folks. It was a smooth transition to become a business product person and the products I worked on was data product essentially so. Etl I don't know how many of you know. Etl But data cleansing transformation building visualization dashboards. And then recently I've also launched but I said he's not I mean five years ago. Time does go fast. I launched my own fashion startup shoe company in the UK. I've sold ten pair. Shoot ten pairs of shoes a day which was quite big even me. I know it's a small number and I did that for a few years and then moved to discovery channel and the product. I'm managing discovery channel was useful player. So it's like Netflix for sports If you will in Europe not everywhere and they bought Discovery Channel Eurosport player and was based out of Paris and I was based in the UK and essentially what we did was. We looked at subscriber data. So people who subscribe from Netflix Sports. We looked at content data so the content was Bundesliga which is jumping soccer in American terms and and also looked at what drives them to watch eurosport player and that product was quite fascinating and then recently. I've been with hotels conscious part of Expedia Group in London and I've just moved to Seattle and I'm working on platform product so I've kind of done full journey from data marketing do platform product management. So and. That's what I'm talking about today. I'm assuming you might have seen product lifecycles I'm not talking about. Mvp and how. Typical product life cycle works. But still. Before I jump into things you have to take off as you're building platform product as a product manager. You need to understand how you build traditional products and by traditional products I mean products which are not platforms so product which doesn't facilitate external can accelerate produces to come in and enhanced the ecosystem products which doesn't allow any co creation of value with between producers and consumers and those traditional products could be an ipod which I talked about. And what do you focus on? Is You focus on a fee. Just said an IPAD could offer hundred songs to begin with if it's ipod. Classic or ipod Classic ipod Nano ipod. It could have a value proposition that could target people who want to listen to music and two thousand one and still have something in their pocket Which they can reach out to whenever they want and you could think of the pricing And I think it's not just poured pricing could be when I worked for Netflix sports which I called and Discovery Channel which was player. They had a fee model. What that means is they offer free subscription in the beginning and then they offer premium subscriptions based on your usage based on what content rights you want so that is also very product centric strategy. It's not a platform strategy. Because that could saturate really easily people might take the fee subscription and then after they might cancel it or they might come back so it's not there's no like network effects where people stay on your ecosystem because as a platform the member. The number one thing is you increase the value of your producers and consumers becoming becoming part of the ecosystem and it doesn't statute that quickly there's a level of stickiness product you try and understand your addressable market. You understand the need of customers. You understand what channel you promote your product through. So that's already traditional linear approach. You build something people come and use it You price it in a way that your addressable market and then you rely on people like your brand for example even some of the shoe companies are realizing that just by building brand you can only reach to a level of growth and beyond that you really think of how to open your product to the external market to make it more innovative and to me. That's where the linear pipeline model of the product is changing more towards platform products. The next night I have is one civil companies. Now they're platforms. What does that mean? And how companies shift from products platform so in the previous slide. We talked about the addressable market. We talked about what features you want to develop for your customers. I think from a platform perspective. You think of being a facilitator you want to facilitate conversations between producers and consumers you WanNa let the producers of the infrastructure to develop as as they see fit and then consumers to find things which they're looking for and I think some of the matchmaking APP really good example of that even uber is a really good example of that where they let produce come in Which produces who provide value. And then you've got consumers who want to use that right over for example or lift as example as an example as grows you see more and more network effects what that means is as more and more produce come in you see more consumers obviously a chicken and egg problem and you have to start from somewhere but as more content is created and video streaming platform for example or as writers. Come on in Newburgh or some of these companies. You see more confused coming in. Because they know the wait time would reduce They don't have to wait for the car because there's more writers they don't have to queue up and they don't end the pricing also there's a monopoly in pricing because now you control the market so now you control the pricing as well which to me is is a very good perspective of how you can grow the ecosystem and that's what I think. Platform infrastructure is really important because when you facilitating these conversations you need to understand what infrastructure looks like. You need to understand where they're operating system looks like and that's where being a platform product manager. You have to be technical because you're essentially building infrastructure but you don't what you're doing is you're facilitating the conversation. And that's what you get signals. You get a lot of data. An example could be a food company. There's one company in the UK called delivery. And I'm sure there's door dash and other similar companies in the US but they have so much data they know what people order from. What restaurants at what time and I think that's very powerful because ultimately as more and more people order from these apps they understand the behaviors and they get right signals of what products or what content. What restaurants would make more sense on this APP for what audience? And that's where they start getting network effect. Well this Metric which. I took from a book called from plot from revolution and how Netflix markets are transforming the economy. It's it's quite good because as a product manager if I'm developing platform products What am I actually measuring and I think this answer that question imagining the participants in from who are the folks who are participating see customers and not just people who consume your product but people who produce whatever you want to produce in that ecosystem and I think measuring the number of participants and how they how they produce value is very important and obviously the second one is what is the value unit. Which dry for so for facebook valley unit would be all all the all the feed. You see on the facebook page for twitter. It could be the tweets you see on twitter. What are the value units for your platform so understanding that valley unit is really important as a product manager and then lastly what? Algorithms officials you have to apply for that unit to be consumed by consumers as an example. If you open your twitter feed. They'll go the might be designed just for you of what you want to see on twitter and to me that's an Al Gore them a filter which is applied to the consumer. That gives a really good. Starting point for a platform product manager to take off to facilitate some of the platform interactions. And that's how you can grow your platform as well in a marketplace where where you have a supply and demand side of things you have to. I build a brand or at least offer something to one of these. I think paypal is a good example. Where and pave our started this struggle because they didn't get into the door of big banks and and I think they quickly realized that if you want to grow the they have to offer something free to the customers and this started offering ten dollars if he joined paypal and ten dollars and then even dot com saturated after a while because you can get so many customers by that and then they realize if they do partnerships and that's why they partnered with Ebay where people became one of the payment company with partner with Ebay and that kind of worked really well for them and slowly obviously ebay acquired paypal. So I think it's hard for somebody start as a platform company. Maybe maybe as as a lot from gets more and more more and more decentralized and they don't have any any controls maybe that might change the world and I think you've seen some of that and blockchain companies where even though they're struggling to monetize some of the ideas but if you look at the core principle they start as decentralized where they give you tokens as as you proof. The as you provide proof of the work essentially. I don't know how much you know about Brockton. But some of the concept and blockchain does start fundamentally from a platform perspective rather than a very product. Centric way the next topic I had was. We talked about to see companies. But how do you think of platforms from A. B. Two B. point of view and I did give some examples of dealing assets from value? And what this allows you to do is and I think I gave a farming example. Farmland is your acid and the could be the crop harvest or anything you grow on that farm and if you're dealing both of them if you treat asset value independently that's where the valley grows exponentially because you get more and more. People contribute and find the most efficient way to harvest most efficient way to figure out what crops should be planted and then obviously collaborate with other companies. I think there are some B. Two B. companies have done that successfully well but it's quite hard and the B- to be worried because your customers could be developers. Your customers could be another company. Your customers could be internal developers So it's really hard to figure out who the customers Auden. That's been the biggest challenge when you think of B. Two B. Platinum products in a traditional product world. You try and capture the market. You still do that trying to convert your product into a platform understand the market and build your branded and then opening the door to third party and I think. Wsb talked about that briefly. How as Amazon opened the doors for third party to come in and collaborate and increase the value of it and then treat both producers and consumers customers because I think traditionally companies their products just for consumers and that has changed now and find a way to connect not just your customers but connects products to customers and I think social media companies have done that really well. Some of some of the other companies such as Uber delivery food delivery tech companies have also done that really well. They connect not just customers but they'll start have started connecting Some of the product offerings some of the different products within that ecosystem. And I think that's where to me is becoming more of an operating system in life So in future if if everything becomes more ambien computing and what I mean by that is in your home. If your table has sensors your Chad has centers you could instantaneously get signals and and you could improve not just your home setting but he could improve your are gonna mix and improve how you said. So that's like an extreme example of like coming from coming into into your world if you will and it's not just a product it's just embedded everywhere that could be the end game with like Embedding platforms in our day to day. Life and improving them based on. Just your specific needs producers and consumers could be actual people living their life so as a plot from product managers. Say for example. You're product manager. Who's responsible for a platform? These are really important question. We should ask ask yourselves so. For example number one is building products to be. Externalised are the values and principles to adapt to would allow me to make the sparked open source. And I think there's a lot of challenges there because you could have a PR data in your product or platform which you can't expose to accelerate customers or your product might not be modeled enough to expose it to the customers. And I think the other one is how do I build a community of producers and consumers is the last one Because that's very important if you don't have a community or a sense of sense of value is to get out of your ecosystem. It's really hard to grow your platforms. I think there's a really good website. Call Mum's net in the UK which has build a community for the MOMS in the UK to ask questions would be another example. Where you trust core of it's like asking questions and it's almost like these companies are building communities in the olden days you had a barter system and then you had these tribes and I think tech is now trying to replicate some of that by building communities and trying to open the barriers of who can come in and onto those questions and Vicky. There's another example where you could curate content and you basically build a community of contributors and people who trust reading the article would be accurate and lastly the flywheel concept Y. Platforms are important. How they give you. Could I think this this flywheel example with Amazon follows is really good example where you have sellers obviously have buyers and you get selection from the silos to give a good customer experience based on the traffic you have on your platform and then as you get more and more buyers and sellers that actually does is it provides you leverage to have lower cost structure drive lower prices and then the fly will goes on again so? I think that's a really good example of how from Dr Network Effects Rather than traditional products and. That's what I think. As soon as a platform company Understands the market and getting to domain. They easily beat a traditional company because product company doesn't have that much leverage to keep growing by leveraging some of the network effect and then lastly the skill set so as a manager if you are managing platform products what skill sets do you need and I think it varies from what kind of platform it is. But I found personally. These these five listed here have been really important for me because I started as an engineer. At least having some background in engineering does help. That doesn't mean you have to be an engineer. But I think it's good to US could engineering questions as you're building platform infrastructure especially and having some information on microeconomics is really good from a supply demand point of view. I love my economics not macroeconomics because I think micro-economy more basic and the laws are not the laws but the fundamental principles. Don't change but micro microeconomic. It's hard to predict but this Wallet Island Man. What's going to happen from demand and supply and then obviously operations like. How do you build a safe environment? We can facilitate the conversation between producers and consumers. I think some of the media companies are facing an issue where are responsible for certain content. And it's hard to like build that safe environment to me like that operational stuff is really important because you might lose values and principles. You want to drive out of your platform if you keep it safe. And then obviously marketing is really important on Sunday channels through which you can target your customers whether that producers or consumers and lastly I think this has been helpful for me is understanding some sort of infrastructure concepts because a lot of platforms that essentially becoming what we traditionally nose noise infrastructure rather than just applications. Because they're not traditional parks they are building ecosystem for producers and consumers to come in and contribute. So I think one thing we've talked about platform does bring stickiness and platform also gives you network effects and because as you join stay for example facebook or twitter as more and more friends join it. It's really hard to leave any of these social media channels so to me like does drive stickiness but I firmly believe that as more and more companies are starting to become platforms. We don't offer the stickiness do From from a dystopia in point of view and I think there's a song which comes to mind which is Hotel California and I hope as you become platform product managers. You also think of the humane side of things and and make sure that stickiness which you offer does not make people addicted in a bad way. Thank you this. Podcast is made possible by heat. Smallter approach to product time Olympics data driven hypotheses to product insight. He office product teams a clip from data to decisions. Learn more at heat the CYA. Thank you for listening to the product. Podcast if you like this episode. Don't forget to leave a review on itunes for more product insights head over to product school dot Com.

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The Strategy Behind PepsiCos Challenger Brand Approach w/ Todd Kaplan, VP of Marketing

The GaryVee Audio Experience

41:21 min | 2 years ago

The Strategy Behind PepsiCos Challenger Brand Approach w/ Todd Kaplan, VP of Marketing

"If you ask respectfully if you're the one that you listen to you rock email times. There's people who on inappropriately stand outside my office and other things. That's not gonna work if you're making the person uncomfortable if you're not bringing them value but if you respectfully ask you're putting yourself in a position. This is the gary v audio experience so we continue our series of interviews. Here can thank you for listening on the podcast anybody watching on video. It's been a good start brin date almond day to here and we continue the process with a gentleman that i admire quite a bit as most of you. I rarely have individuals on my show that i'm actually actively doing business with because i always think it's a tough spot for them. It's tough but for me for the audience but what i've noticed over the last year or two when you go macro acro or or micro with it at the end of the day what i'm most passionate about is educating the audience giving them insights and sometimes there's a huge advantage of being up close and personal. I've i've seen this gentleman pushed the envelope in the short period of time. We've been in the trenches. We've known each other for a long time. We've worked with pepsi co. With mountain don't do with pepsi in different ways now very involved with pepsi blue kaelin digital side and the show is at the helm todd. Why don't you tell the nation who you are what your title is and then <hes> <hes> we'll get into the show yeah sure <hes> i'm catholic and i had the pepsi brain to north america and and yet and i've been working at pepsico for number two two years in a variety of different functions we rotate around in the market then everything from mountain dude a brave entertainment sports to most recently our water portfolio where i created and launched brands life water and bubbly and then now on acid. It's it's really exciting. A lot of people watch and listen to my content are entrepreneurial but as my career's evolved into the marketing landscape i get way more d._m._z. Emails and lincoln's about hey i you may want to run a brand or you know. I think you know this personally. When i talk about buying orphan brands long-term still working a mug loopier. We'll talk about that off camera <hes> up. You know people are like hey i want to do that. I want to be involved. How did that happen for you. Let's go all the way back we're reborn and from southern california originally so west coasts guy grew up in so cal. Not a surfer definitely grew up skiing. I do sports. I played tennis dennis. I do like oriels fan definitely not like i'm a i'm a i'm a huge lakers fan and angels. I know that our a._d. Duke like just super bowl super pump for that. They did give up the farm by the way i think there are a couple of free agents away from a couple of other pieces. They need to make things much like they kept coups. They got they got brown. I think they need someone on the point. Though the jimmy butler is coming i i've heard butler. I've heard kemba variety of things. I don't know where you're excited. I'm excited. At least that's your squad. That's how how old are you. I'm forty right so magic without magic. Raymond shack will do like basketball's number one for you as far as viewing yeah and then yeah basketball and then i'd say any second favorite team is the angels and so i grew up about fifty minutes stadium and so you know growing up again because i was a bit of a tougher fans would be it was fun hiking emphasize. I can have anything jets and knicks fan so you literally couldn't write a script of clay dread getting hurt leading into the whole. It's gonna be crazy. What how bad for the warriors beat. I mean k. d. This was i you mean the knicks. Fan blows up everything so you grew up in so cal. You're into those sports things. What else are you kind of about. Yes so i'm biggest got student memorial so entrepreneurial. It's funny you talk about that like actually you probably don't even know any of this stuff. I have a very entrepreneurial neck as well. That's actually the one of the reasons why i think as i look at now i see your creativity yeah. They can like out of all the people who work with the level of creativity that is obvious to me which a lot of times. I do associate with entrepreneurship so it doesn't stunned me. Go ahead but it's not as excuse connecting it to just getting shit on moving making it happen and so <hes> entrepreneurially so i grew up in southern california <hes> you know good grades you know topic like all that kind of stuff but went to north western fringe grad which was an interesting case you know going from you know eighty degrees on the beach all the way like you know subzero temperatures on lake michigan chicago that ended up happening. I wanted to go to a big school but not too big. It was like one big ten rob and it's still a very good school that was around the time they'd been in like the rose bowl gary and sound like you know i i think the rosebowl check that out and it was it was a great school and so recent and it was just go away for college and get out from california northwestern and it was interesting as i've always had this passion you know one of the reasons i'm in marketing is just really interested in the consumer psyche kind of she was intellectually and also just how people connect and i've always just been interested in creative as you said kind of wired a little bit differently and so i they got really into marketing also been really into sports and so that's where i get into my background is worth spreading but when i was in college the ironic thing is that northwestern is the school that that is esteemed from an m._b._a. Standpoint for marketing and kellogg and all this kind of stuff but as an undergrad the closest i could get was like i was an econ major right which i didn't care much about economics but it was one of these things that i wanted to really get more experience in that space and so i said you know what i'm gonna start a business. I see a couple of needs. I actually to start a business. When i was in college as an undergrad northwestern love it's called at shop and basically it was connecting the dots between <hes> there. Was this need on campus. If this is now going to totally but if you go back to one of these college campuses around the time when i was in college you'd have papers plastered all over the fricken student union for shows here this. They're taped to the ground. You know it's the marketing for student groups sucked yeah basically at the same time you have people who are interested in marketing and getting into advertising marketing and people i want to say what's your portfolio. What have you worked on connecting those dots together saying there's probably some people here who want to get their feet wet. There's also a need to kind of do be more effective in targeting and so we started this thing is kind of the first advertising agency for student groups on campus thing just blew up and started growing by the end by the time i graduated had a number of of people in this organization are written up by the chicago. Sometimes we had clients and local became a thing and so that we pass it on and became a thing and and then <hes> and then separately you know i'm kinda getting interested this idea of just leading an aunt being in my senior year. I did kind of a more of a for profit if it was this thing to campus pipeline was about kind of targeting college students with advertising with local businesses things like that so definitely needed on top at the original idea yeah you just take a kind of spin us sort of thing and so <hes> but it also gave me a lot of experience and just kinda you know league teams. I've always been kind of very involved even again in highschool leading groups that kind of stuff and so as you think some of those things formative lii and then also just as the type of experiences that led to my career as a junior. I interned at the u._s. Olympic committee you know as sports marketing was kind of my passion and so i was very your life. What did you think you were going to do. You're gonna run good morning for the lakers like more matter of yet like i knew sports something us passionate about marketing. I really started to really hone and all that and i'm like in this was again unlike the about today's internet the way that the job sites like it wasn't as as easily accelerate. I'm older than you but so literally and it's funny. If you were asked my college roommate he always tease me but like my senior year i sent out about about three hundred like resumes the article that was sent out to every sports team agency this kind of sponsor and we'll say casting nazi what's proactive ness and then i got the orioles sorry nick but no but i got i got a ton of interest and offers and that's kind of going through it and it was just a really good experience and so i ended up getting offers for variety. You know we were talking to me. I m g all the way to the every sports team in a lot of coming got a college. It's like where do you want to move or. Do you want to yeah going back to my so cal already like i was freezing my ass off this expand. They have to get ah -fornia yeah and so one of the really interesting ones that came up was a sports marketing agency that was in the bay area where mill sport at the time and visa international was there <hes> their clients and so basically lead visas olympic games and all the global sponsorships so move back to california after undergrad lives in the bay area in two thousand yeah so yes dot com before so you thought you were going to pave streets of gold old a little bit yeah right. It was april. Two thousand one in milton was the two thousand one. I always try to remember. Do you remember you you graduated in that class of two thousand com bubble already person just because there was a lot of people boohoo recumbent dot com people were reaching out at the time similar sports. Dot com were truly house. This is that that was what was it the pets.com saw uh-huh and so so literally so so as you're kind of on your way to graduation the world is unbelievably frothy online online. Oh it's like right now like yeah. I'm thinking dude. Go get this thing and also thousand dot com bubble bursts. Yeah you're going to ah you go to the bay area right as everyone's like frowning right. This is kind of like yeah what's going on out here and <hes> yes. We started with with visa working. I worked in house. N visa's headquarters down in fos scottish accent. It was really cool getting exposure so doing everything from working on you know worked on the sydney salt lake olympics and the athens olympics were the main ones kind of getting ready to hand did everything from managing a huge onsite thing thing in athens with all the former olympians called a visa olympian reunion center all the way to just you know the columns and everything in between and this was really great experience because also also for that stage in my career being straight out of college the team there was very senior level and getting exposure also at a global business because it was a global sponsor the rugby world cup things that were going on in australia and he's all this is really great. Learning grounds cliche american be like what the hell's rugby initial. I try the all blacks. I learned all this year so it was a really cool experience just kind of getting exposure and so <hes> how did that for a number of years out in the bay area and then straight after the athens two thousand four olympics came out east of business school which is where i went to yale and in between my first and the second year is where i discovered pepsi actually ingenuity our former c._e._o. Was speaking on campus and i was like kind of the again the dorky hey guys guys recruit and i didn't think this dorky guy. I know that that's one opinion on it. You said it <hes> ah i view it a little bit different based on the stories and something i think a lot about i said yesterday like somewhere. I don't remember if you don't ask you. Don't get yeah. You know you send out these three hundred things you go up to indra like i also yeah. I'm also person who can want who lives in a world record seeing gene people's eyes they wanna come up and do something and they don't and because others do i can't get to that person and iraq's like we're gonna miss our flight and we run away and and i think think about those moments a lot. I'm like wow that person really wanted to ask something. They might have ninety nine percent of the time. They're not necessarily saying something. I need or interested in or you know but the amount of the iraqi. How many times did you dirac saami speaker. Columbia thought it was interesting and emailed me eight times before i answered right and now as you know in the south of france and so we are you know and so there's a lot of times when i'm doing this. Obviously i love having you on the show but i'm desperately worried about everybody listening right now in the second example and i just feel like people need me too. You need to act like if you ask respectfully like if you're the one that you listen to you brooke email they times. There's people who like inappropriately stand outside my office and other things things that's not gonna work if you're making the person comfortable if you're not bringing them value but if you respectfully ask you're putting yourself in a position so indra at yale you hear that and and and you were impressed by her or or pepsi was so iconic were one of the reasons i went back to business school. Frankly was when i was in sports marketing. I knew that <hes> there would be probably a cap to kind of where i could go what i could do you gotta taste of the landscape and get an m._b._a. I'm not gonna able to yeah and it was and it was less that in an n._b._a. The advice gave whenever anybody asks you should i go back and get my m._b._a. I always say listen. If you go to law the lawyer go to med school your doctor you gotta m._b._a. You're a dude with an m._b._a. Okay and so at the end of the day when you think about <hes> business school it's not about having the n._b._a. Hey that actually does anything for you. It's what you do with it. It's how you broaden your horizons. It's networking. It's all kinds of stuff that comes with it and so that to me going back to get it back to my story. Corey was about broadening my horizons beyond kind of this world sports learning more about the financial stuff and market and all sorts of people speakers acres and that and so again when i was there it was less even about i'd go to class do all this stuff but i was there for the whole experience and so when he's talking about going to a place like yours fortune enough to go in there speakers the people is out of control and so all these things and i would make the most of to your point of just go to all the ten dollars speakers go to all these things i'd go. I led a trip to japan with a group of my friends. They're the people helped we connected with the head of nissan and all this. I mean the access the brain various i believe basketball is always a fun competitive league as well right so so that was really cool there and ended up ended up interning turning for pepsi and between my first and second years and the irony was i had wanted to go to pepsi c._p._g. To kind of get beyond sports marketing just broaden my horizon and guess where they placed me for my answers imports so who is was an iconic guy the time and was kind of one of my mentors who brought me into pepsi and we got got along like two peas in the pod and just made the most and so came back full-time and <hes>. You know what's funny about that story. Just everybody a lot of the things that i tell my brother each and i have have a sports agency and a lot of the things i tell kids before the draft. Is you know they're like. I want to go second round and i want to go third around. Throw i'd rather you go fifth round than second round around and and have the person ahead of you in depth chart be the kind of veteran who actually want you to succeed going second round and having a guy in the depth chart who who is worried about you and is undermining you teaching you nothing bad coaching like y. You know it's unbelievable. How much that matters yeah no and that's what you had. An kinship internally is at a at a great kind of mentor that <hes> you know definitely looked out for and i also i will tell you the interim program pepsi date. They do this thing every year called the intern bash which was like make the interns that have a lot of fun to do silly things and i'm still convinced bacteria have taken the initiative you know. I'm someone who likes to put myself out there. So when i was the intern this year they had a registered one thousand nine hundred eighty s fashion show the entire for the entire company outside and purchase right and so everybody r._e._i. Someone's wrestling madonna's dress up like you know miami vice. I decided to get idea to do. Tom cruise in risky business. Basically heidi whitey's white shirt. You went there weren't there and did i went there and quite literally. I still get asked by people but i'm convinced the only reason i got hired. I i believe they're it. Just put yourself out. There like time literally somebody that worked at vina for ten years who's now my partner in empathy wines eight single singlehandedly got his job 'cause he super duper duper tried hard during volleyball as an intern in vermont when we did a company off site the way he tried lied to win is why like advanced his career. Yeah i believe in that shit that's exactly right but it has to be authentic to you that kind of character director that's right. That's what i'm saying like. Everybody's listening right now. If you like okay like i'm gonna break out this year introverted. It's gonna come across the super awkward like the core of all this stuff and to that point you know i you know to the point and we can get kind of core skills and all this but i do a <hes> of course at pepsico on storytelling on a big proponent of yes sorry town telugu logical story and all this stuff but that's one of the big misnomers as everybody feels that you know to tell an effective story to present it a big conference do anything you gotta be somebody who the key is yoursel husband's laundry percent authentic to you and just owner you know. Don't try to be which i'm sure how to leave point. I'm sure for you and i were. We share a lot of this charisma over the there's a lot of times where we knowing we know some of our energy is detrimental given the context and you try to tone it down but even that is not going to necessarily be who you are either. Totally i mean there's places leases were unstaged. It's great that i'm cursing but you know in small meetings. Sometimes i just like that's not gonna play but i'm still going to do it because that just like most comfortable. Let's let me thank you. I'm fascinated by challenger brand being number you or not you know some of the stuff stuff that you're getting heralded for in the last couple of hours here announced some of the coolest stuff like this. The pepsi challenge is one of those iconic things of all time like nobody listening right now. Now is confused that coke pepsi is like some of the most interesting banter in business yeah. There's not that many places where you if such a dominant one and two that's almost fun to watch ali and frazier fight yeah but you happen to find yourself in that world. How is that. How do you think about that. How have you talking to predecessors run the business. Have you leaned more into. I'm gonna punch you in the face have been more passive. Have you been more aggressive or vice versa when you when you kinda got signed up pretty gig moving like what was your initial thoughts i would love to get a state of the union of all dunno totally because it's it's interesting coming into this role on pepsi from previous row which was again also very entrepreneurial starting new brands on water coming from the environment into do the mothership this all is lots of when you're dating back we have a water people are curious but not watching every sneeze he's and crossing every t you go blue can painting the picture for everybody listening there by the way for everybody listening as an innovator on vein or side. I always always tend to like to work on things that are a little more under the radar because it'd be far more creative work. We tend to push the envelope in general as a business model. You get on something thing like this. Everybody's got an opinion. Everybody's watching and a lot of marketing is subjective bef- before the reality kicks in the results of the business so you deal with a lot of chatter. It's almost like it's almost like being an n._b._a. Player stephen and christmas card and everybody else watching and listening and commenting. It's a two cents machine. It is no totally and that's and that's one of the biggest things is you gotta work out in public a lot more than kind of you know you can kinda. Yes just do your thing on these. Other brands a little bit more but i'd say away from a business challenge. You know it's a completely different thing on one end. You're coming into this iconic brand that is you know got this great heritage in pop culture music from britney spears to the super bowl jaju. That's all that stuff is. It got such a great heritage. At the same same time. <hes> the current landscape around consumer world has changed in the consumption of category as evolves and all of that stuff and i'd say <hes> you know the problem to solve as i quickly assess it was it's pepsi doesn't have an awareness issue doesn't that trial issue it has relevance is what we really needed to focus on and really that's really hunkered and really quickly it saying you know the main thing we gotta get is. This brand needs to be culturally relevant. At the end of the day. This has been dispatched women's to those kind of things that we talked about but what is that the kind of stuff that and i thought this was a very smart strategy. I we didn't work on this for context digital stuff. It's more the t._v. T._v. stuff but everybody who listens knows how much of obsessed with super bowl is that the kind of stuff that leads to having already yes yes so let me give some context on that and so one of the things i wanted to really address. Is this idea of a challenger mindset challenger. I think one of the things that one of the mission homers as people think challenger just means oh well. You're number two or whatever that's challenged. That's not challenger right <hes> challenger of mindset in a mental approach to kind of disrupt things a little a bit differently in an industry take on his head and be a little bit more unapologetic confidence and kind of your approach and how you do this and so she's one one second tat a little color commentary metairie all fine and dandy for a lot of us listening when your business is tiny and you're an entrepreneur and you don't have a board and you can get there having a challenge your mindset mindset when you have a brand the size of pepsi which is probably bigger than ninety nine percent of the other consumer brands in the world a little bit more tricky yeah no definitely a little bit more tricky and so one of the first things as being a challenger brand. Is you really got to acknowledge your place in the world and have a kind of a healthy self awareness for your brand and and you know i even culturally we can talk about cultural that which i'm a culture turkey as well but i don't like things that feel like advertising right. That's the very idea of brands coming out with brand messages. I'm speaking to you as whatever without any cultural acknowledgement of my place in the world things i care about whatever that isn't so starting from the standpoint of pepsi has had this one of our most frequent consumer interactions that were most famous for is probably not on most proudest moment and mississippi when you go to a restaurant that poor pepsi's somebody orders a coke and quite literally the server apologizes for service pepsi okays pepsi okay fricking horrible is that that is what i mean and every single one of us has gone through that experience you hospital time. You've been there. You've ordered one thing. Friends ordered all that kind of stuff and so it's like okay and if you look online there's mean cultures have he will say pepsi. Okay as monopoly money. Okay you know there's all these mea kevin hart and all and so saying what if what if we took that insight because it is super relatable who hasn't hasn't been in a situation where they can connect us that own it and say that's how people see us but then let's have some fun with its pepsi again. It's more than okay and how fun with it but then due to the pepsi way which again bringing the pop cold so he can cardi b. hip. Let you get little john okay right and then steve corral. You have this wonderful airfoil kind of dynamic where we're just now. We're now. We're getting somewhere. There's a fun little way you can get. The super bowl this which we also talk about. I'm a huge believer. In the super bowl is a it was a great platform to go bigger and broader and all that stuff and so that's that was kind of the genesis that whole concept that we really think of you know it. It really helped reframe the discussion for pepsi around this challenge reminds and put us on the map combined with that then this past year the super bowl you know where it took place in atlanta which was like a gift from the gods of course our competitor atlanta and it's not just because like oh company to company and we're going to have a corporate thing culturally in atlanta a coke mike runs in the veins of people like it is like a out of the faucet is literally a deep rooted thing and so saying okay. We normally go win win. Mark impacted and say okay. We're going to go into a super bowl market typically response to the n._f._l. We go on the super bowl. We beat our chests. Say say official sponsor of the super bowl mike. We can't just like run the same play. We got to have a little little fun with this and so to say okay. If there's pepsi signs all over atlanta these atlanta folks are going to be like what the hell is going on and so what we ended up doing is leading into that cultural inside and saying we we bought out of home over the entire hire city and so we had a pepsi in atlanta how refreshing hey atlanta thanks for hosting. We'll bring the drinks a lot of fun with these very pepsi centric forward the things that quite literally putting the out of home alone generated hundreds of millions of earned media impressions people writing stories. People were tweeting like what the hell i feel like. I'm getting invaded vadim right. Now you know the time you know even who was about to be in the super bowl that people in atlanta they thought the saints were coming in. They thought that was going on here. <hes> pets in atlanta and then he got a lot of interesting buzz and so seeing that a couple of weeks before the super bowl and all the traction getting where like all right well we wanna make sure people know we're not being hit spirited. We all did it on the up and up ins wherever and so we're like. We got to let everybody know that hey we're grateful for you to host the super bowl and so we came up with this concept called the chola truce and it was a it's a pretty fun also kind of instinct challenger thing we ended up doing where essentially for anyone who's been to atlanta the world of coke is this iconic landmark they have museum of all the host big events and whatever and right out in front of the world of coke is a statue of their fan their founder john pemberton and he's holding out a glass of coke greeting you as you walk in you know sharing cope with the world and and all that great stuff and so quite literally we said and what if we created a statue of our founder kayla brandon and we got them to have a nice little cheers moments and celebrate and declared cola the truce wouldn't that be a cool thing and so what we ended up doing is we we built the statue <hes> in record time by the way because this was just a couple of weeks outta the super bowl and that was just a mad dash stephen get this thing done and and we said but rather than just we're gonna engage them. We've never even socially socially it. We've never engaged real coke on social social media commonplace for brands yet so we said hey coke. You know we'd love. We tweeted a picture. We think we should get together other. Whatever and coca just launched. His campaign called together as beautiful all about unity togetherness and i'm like this perfect. It's like a movie. Meanwhile atlanta headquarters orders we're going to do together is beautiful beautiful piece on. We're all coming together on like perfect we believe together as beautiful to why don't we come hang out and we showed them this picture of the glasses coke tweets his back and says of course welcome to atlanta together as beautiful then we treat them back with a picture of the full statue in the back of a pepsi trucks cool. We're on our way. We don't hear anything and what we ended up doing as we go there to the world a coke documented this whole thing and we walked in and and quite literally. We said hey coach us invited us over here. We can we get yeah well. They were trying to declare a truce and they absolutely kicked us off. You can't be here. We were told instructed not to let you on the property of of like okay. Okay wait wait we anticipated and so earlier that morning we had snuck in actually got ourselves and so you know for the ten minutes we could get in there. Forget the photos or whatever and we ended up doing is. We tweeted the photo anyhow and said hey. We stopped by looked like he wanted that into. It doesn't feel very together as beautiful yeah we played earlier this morning and then we actually flipped and say hey you know what we wanted to clear a truce for the day anybody who tweets hashtag hashtag cool the truce and a picture of them cheers a coke and a pepsi online. We're gonna donate a meal to the city of atlanta to people in need to all again. This is all about being gracious to our host and say hey atlanta we get you. We wanna do good for you and so really the thing instantly. Trending took off like wildfire got a ton of buzz earned media social show and and it was really really fun and exciting people were tweeting pictures of them cheers in people making dance routines up became a whole thing and so all that together with with the pepsi okay with the atom just was a really fun just kind of reenergized out of the grand you know it just one of our biggest moments the super bowl so as a human we're what apps apps what caught like nap talked about netflix social todd demand forget about the executive loic social media like what what are your consumptions right now knowing that you love culture yossi super wrapping up here and so we'll have to do a part to at some point about like culture hacking in there for sure for you as a man like what instagram snap napa know. What netflix shows do you watch. If any yeah netflix it's funny we <hes> i haven't gotten as into kind of like the full on binging because is that right now when i was on prime anything where you just like when you get home you watch sports. I typically watch live sports e._s._p._n. Definitely will will dig around on netflix but i've not at i haven't been as are you jonky mentoring. I i could get into some of that again. Stand up. I definitely like stand up every now and again movies. I watch a lot of movies about social instagram facebook twitter socialize you know i think i think twitter facebook book instagram all all the standard kind of things. I'm i'm. I'm interested in i'd say but i'm not as active and it's interesting. I'm i'm not as much of a live in public persona and all that kind of stuff but i definitely it's funny. I consume a lot of them yeah but i'm not necessarily out there consume a lot of instagram but i actually don't post. You know what's funny. I don't know if you know this. You know i don't share any of my family stuff at all and and and both my main careers both wine and now marketing social media yeah. I'm i know this because i know myself obviously i i. I i never drank beer or alcohol in college or high school and had i not had a family wine business. I don't know if i've ever would've drank alcohol my life. I mean if you go through through high school and college not drinking it. It's not in your culture. Obviously i was born in the soviet union. Everybody was dying from so my mom really demonized alcohol and then social like i get it i. I'm pretty convinced that i would currently would be doing something else. In my life would not be. I would consume but i would not post which probably sounds funny but if you look at the content i put out. It's my business life. It has nothing to do with just think it's such a fascinating even going back to studying the human psyche and like you know we have friends and people we know yes. They post everything they're eating. Whatever my kid went to baseball games all the way of ever and yet at the end of the day like and that's good and fun yes. That's where a lot of it's for for me. You know post happy birthday or whatever whatever but i am not as i am thrilled they post because the one thing that clearly we share is. I got to listen to a little bit more is i want to know why they're putting up the video of their kids scoring a touchdown. I i wanna know why they're sharing. You know they're on that. That's how i basically come up with all my ideas totally. There's just so much rich insight into kind china the human behavior of why and how people are sharing all these even back to <hes> summer campaign. We just launched with instagram right yup yup where we've created two hundred fifty a._a._r._p. Filters al-tash the core inside of instagram is probably the epitome of this kind of like look how my life is out of behavior where everyone's wants to that iconic photo of their feet on the lounge chair by the rosaiah next year side right. I gotta get that in there living in really capitalizing saying yeah well if unapologetically how do you kind of amplified with these a._r. Affects and stuff but there's so many little nuggets like that just even just looking around mining on social media. Let's one thing i like watching your team dynamics. I do see the entrepreneurial l. spirit like i have this quite a bit as a leader as well which you get a lot of the motivation the rod the fire the thing the other thing you get yet with characters like us is sometimes moving so fast. There's collateral damage as a leader. You know and i think what i've watched because i love watching yeah. I think he similar dynamic than i do. Which is you know obviously winning the lead position. Your team is always going to have to deal with the reality of like that's our leader like. We're gonna have to deal with that but but i think it's palpable and your team as it is with mine think about having an entrepreneurial spirit in a corporate environment where inevitably evidently a lot of the people that work for you a little bit more structured every t is crossed speed is sometimes the enemy and i think you and i probably put speed on a pedestal whereas other people sometimes misinterpreted as being sloppy we counter with like but we focus on what actually matters how how's that yeah yeah. It's tricky because i think like you. I care deeply about team. I do a lot of offsides team building self-discovery stuff and we go do all this crazy stuff and really want to form a bond to really make sure we have a shared vision. I think the first step is making sure everyone is subscribed to what we're trying to do. Do you get why do you get where we're going. Are you and how do you feel like you actually can contribute and connect and build upon that so that's one thing that i think is paramount to has it all starts with trust as a team and so making they can sure also people understand each other. The other thing i talk about is a lot of people i want everyone to feel comfortable. Bringing them wholesale to work connecting is real people not just as workpeople workpeople yes right and so i think making sure we kind of break down some of those barriers and build the trust to get to this idea of high-performing team. I think once you get going then you have a good shot to really do whatever you do. I think the question is in a big corporate environment like pepsico to your point. Folks like me and you work. We're boom boom boom. We're moving quick. We're thinking we're spitballing ideas throwing stuff out <hes> sometimes again. It's it's a trained muscle. You know sometimes you gotta break a few eggs to kind of make some omelets right and get it going in so every every now and then there's some times we're like hey go. Oh we can't do that because legal said this. Oh we can't do that because of this and it's like and i've tried to instill hey. I don't need all those things always always boil up to me to help kind of duke it out with some cross functional teams or figure out what we can and can't three ten is the hall of fame. That's that's exactly three hundred yeah junior eddie murray total. He's iconic oriole players. What what what what what what. What do we want to end with. What like for everybody who's listening. We have a slew of different segler graphics on my show a ton of young aspiring but an awful lot of people our age group that that i do think wish their dna was a little fast little more spontaneous like anything anything kind of last parting shot for people that are trying to get into a happier police or trying to accomplish more yeah and i think i wouldn't even connected to any of this stuff on that. I what i would say is more what we were talking about earlier. Is that if you it's kind of. Life is what you make of it. Which i know is the most cliche kind of thing out there but it's this idea i tell everybody it peps. I met a lot of younger folks and people who are just coming in and a lot of people <hes> see see the world as it's presented to them not as it is right so they'll get a job and say well. My job description says whatever i like every job i've been in it pepsi. I've kind of not not rewritten completely but you make it your own. What is is your take on it. What are you going to bring to this. What are you passionate about as you connect. The dots don't always asked and just say you know. Here's the things that you need to do it boom boom boom boom boom. Ah what can you do to make your job your own. It's kind of like it's kind of like brain marketing right. All every brands big brands sentence or mission statement is so vague league without how you interpret going for it or doing it for one time life beyond the life or whatever it may be totally complete interpretation. I mean case in point point when i when i came into the water business right. It was like hey we sell female. We gotta play. We got the segmentation done what and i was looking at. It and i'm like it feels like but i'm looking outside and seeing explosive premium water. I'm seeing like this some. Maybe we should take a step back and rethink it and so innovation. I'm reading one or so. Let's turn it on its head. Come up with a new thing. That's come up with some new britain so it's like don't be afraid to push your question the norms just because they're presenting like see the the world has it is not how it's presented and deal with the ramifications and with that right which is like and if you sucked and you innovated crappy water and you got fired what you can always go something like honestly like at some level like what are the biggest ways. I think that i've been able to help my friends and then employees like i do things yeah. Push them very heavily on what what will happen. Yeah you'll get fired. Okay well that sucks and that's bad. Do you have any savings and sometimes i say yes. I'm like i'll really go into like i'm like wait. You have three years worth of savings holding. You're not trying to push the envelope you get fired and chill free urine still be okay. Other people people are in debt and they can't. Maybe you can't push as hard but while you've decided to push in your organization you're interviewing outwardly just in case you do get what what right what's this idea is. It almost goes back to when i was playing tennis growing up as a competitive tennis what my dad used to always say because i would be a head case sometimes played a win. Don't play not to lose and i would get into this defensive. Mode tennis is classic. I'm five one and i would lose. Seven five really be like i wouldn't be thinking i'd be having kigoma. Take big shadow rotor on my team. Who's who's led me five to three times and us law seven five all three times for that's but that's but that's the deal. It's kind of like right when you start realizing like shit. I'm killing the sky right now. I'm going. I got this and then getting my head and i'm like i said about ten. Then i change i start start pushing me. We gotta run but i gotta tell you know. They need to be. Sorry because i gotta say there's something crazy about tennis out of all all like i out of all the places on earth that i've navigate my life. It's the only place where i can get defensive. There's something crazy see about being up five one and losing that second game starting to like visualized to come back totally and five three comes now. You're serving serving up five three crews into this god forbid. You lose that game. It's five four. It's definitely now five five four. This is totally you react. No you know real not even ping pong not even other something about the mental of play to win not not to lose todd. Thanks thanks for being a show. Thanks to everybody listening called continue with this. Thanks guys for listening. Please please please share the podcast and make sure you've subscribed because a bunch of you aren't subscribed and more importantly a bunch of you. Listen every day and haven't told your friends. It's the best podcast in the world. I'm watching.

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Google vs The U.S Government

Recode Media with Peter Kafka

39:49 min | 10 months ago

Google vs The U.S Government

"Google's free tools designed to help millions of businesses around the country as they adapt to a new way of working and right now these businesses could use our help support the places near you by booking appointment, buying a gift card reading review ordering takeout all with a little help from Google. Xerox wants to help you make now work. Because right now there are a lot of things getting in the way of that work. Give it to future ready solutions that will help your business thrive and take on this new normal at Xerox dot com slash vox. Xerox automates and digitises your system. So being remote doesn't slow down your flow. And when you need to offer personalized care to a customer. Hopes. You do so with tech solutions that feel human. Learn more about how to transform Your Business for these changing times at Xerox dot com slash vox. This is recode meeting with Peter. Kafka that is me speaking to you Wednesday the day after the US government sued slash finally sued Google and then what will be a landmark antitrust case I'm quite surprised and pleased that our guest was able to find time to talk to us because he's got a fulltime job covering Google Times welcome Die Wakabayashi from the time I. Die. Thanks for having me. Thanks for coming on like I said, you've been very busy because you've been waiting for this suit for years at least forever at least a full year. Finally. Got It. You've been covering the hell out of it. We want to talk about what's in the suit what's not in the Su- what to expect. Let's set it up can textually first of all, just as this is the biggest suit since one, thousand, nine, hundred, Ninety, eight in terms of tech antitrust that the US versus Microsoft. Why are we seeing this suit now more than twenty years later, why has there been at twenty year gap and sort of major antitrust tack lawsuits from the US government? I think part of it is than the US. In general the legal system in America has been reluctant to really go after big anti-trust cases. If you look at America compared to country Europe certainly, the regulators here have not been as a muscular or aggressive in going after companies in I think now. Often. People say that antitrust is almost as much about politics about. The law and so I think the political climate to go after kind of tech giant's is is better frankly and so. I don't think the the nature of Google's monopoly has really changed. Much in the last ten years. But now I think the sort of external conditions are perhaps right to go after them. Yeah, and we'll talk about both those things and I wrote a little bit about the politics yesterday. This is a suit where you have bill barring Elizabeth Warren Lining up on the same side of the the argument for maybe the first first and last time. and. Like you said, a lot of this stuff is his sort of about Google's behavior that's been more or less out in plain sight for for a decade or more. So let's talk about what is in the suit again, we knew the soup coming they've been working on this for a year. What is new in there? What is surprising? We learn from the actual complaint itself that they filed. I think what we learned was that it was a much more narrow case than than what we had been expecting maybe earlier on there was a lot of talk early on that. This might involve like search involved digital advertising. So Google has the whole stack of Asia advertising and There was discussion that the DOJ case may have both digital advertising and search and even within search. Aspects like local search. So that's this is like the yelp issue where will scrape Has In the past great information from other websites and presented it on their search results. And none of that wasn't really in the suit is a very narrow. Issue about search and sort of deals that essentially help bring more traffic to. Google Google DOT COM and so it was a very narrow case and I think that's came a little bit surprised us. What does it tell us? Does it tell us that this is the beginning of a it could expand over time or this is the issue. The Justice Department thinks they can win on and that'll be that I think it's both as possible but I think the latter is more more likely. The I think this is a case that is very similar at least in sort of the contours to the Microsoft case, which was sort of not only the last big tech anti-trust. Lawsuit but also the last time, the government, really one one of these things, and so they're really trying to focus on distribution and so i. in the in the Microsoft case, they talked about you know. How Microsoft was using windows to to help distribute Internet explorer and how that was hurting Netscape, and so in this case, the government is trying a parallel case of saying Google is. Deals that essentially lock in Google to all these other all the other kind of main pathways, the search, and that's keeping out the competition in which in this case is like being in duck. Gumbo. So this is primarily focused. On on your mobile phone right a lot of discussion about deals Google has with apple to make Google the default search engine there, and then also with other carriers also the way it uses android sort of as a default as a sort of a de facto default. These have all been out in public, right there's no. There's no mystery about what Google has been doing oftentimes recode or other sites are reporting about the fact that so and so has a deal where has won a deal. What what what is the government argument says this thing that you've been doing for a decade or more is actually illegal. Yeah, I think that's a totally good point and I think what is in Google's interested normalized this as much as possible, and so you'll hear them make the analogy that these types of deals are no different than when Coca Cola strikes a deal with. Walmart to get shelf space. At their stores and to get the best shelf space. What I think is sort of. Maybe the the the time element here is that how how big these deals have gotten partially because there are many more mobile devices in the world partially because people are using search much much more and so as the size of these deals as as that kind of Internet access grows. Obviously the numbers around these deals get much much bigger and so that goes to show kind of the how valuable these deals are for both Google and apple and so I think that maybe perhaps raises the stakes of something that has been happening in the background that maybe not a lot of people you know have taken notice of now we go into Walmart and Coca Cola has purchased a certain shelf space or an end cap. That's a finite space at means that that Pepsi can't be there or if you if you really old RC Cola can't be there and in theory, right you could actually you could actually block a rival. Cola company from being there or if you go to McDonald's they have coke but not Pepsi products whatever it is on the Internet you can use Google or any other service you want. Usually none of these deals preclude anyone from being able to use. Google Google has a dominant market share, but they don't own everything. This is one of their arguments how the government is going to respond to Google's defense, which is, Hey, no one has to use us. No consumer has to use this an oftentimes they swapped different products out all the time. Yeah. I A couple of legal experts yesterday, and that was kind of one of their main. That's going to be a big point in this case is the notion that. The government in their complain has made a few references that you know that the the very few consumers changed their default option. And so they have to prove that somehow the it is very burdensome to to change or that it is in fact, very, very rare that people change. Now this in the nine, hundred, ninety s when or in the late nineties and early two thousands when the government tried to make a similar case with Microsoft. It was really a pain in the butt to try to get a new browser that wasn't like Internet explorer. So you have to go and you had to get a CD. Of. Like of Netscape, put it into your computer. If you didn't have enough hard drive space maybe at the like delete things. That is not the case anymore. Right? You can. You can change your. Default search engine quite easily it's not quite one click Google likes to say, but I think it is it is if you are have any sort of tech savvy, you can do it quite easily, and so I think that's really going to be the crux of the government's cases like how important is it to be a default? How infrequently do consumers actually exercise that choice to change when? A handset manufacturer carrier. Makes that decision for you you know initially. The government also says, looked one of it. What Google is doing here by buying these default positions, it's buying essentially buying itself all this data that makes its product better. You are both on a Google call yesterday and I asked him about that and they said Oh. No, that's just not the case and kind of left it at that. But he said it was the method not day right now and so Google Google in the DOJ case over and over they talk about sort of the amount of data google is generating ear sort of creates a moat for itself. Do you think that argument will hold up? Yeah I mean I think that is a very persuasive argument. I mean I don't think any reasonable person can argue that having more queries helps you build a better search engine. It's just like anything in life right? The more you practice it the better you're going to get this particular when it comes to machine learning and software right like. There's there's entire companies based on just get as much input as we can, and we'll build a lead and then sort of figure out what to do with it later. Yes. Totally. I discount that there is some kind of method that you can take. Maybe. Less data and somehow build something that's good or equivalent. But I think that if you have already a huge a great method, if you have more data on top of that, then you know your lead becomes quite insurmountable, which which I think is the reason why most people do prefer Google over? The alternative. So you said. The government one, it's Microsoft. Case they they won in court, and then there was a settlement and essentially not a lot ended up happening to Microsoft by the end of it and it went on for six years. What is what are the lessons that you think both Google and the DOJ took from the nineteen ninety eight to two, thousand, four, US government versus Microsoft case. Yeah I. Think Google for its part I. Think if you look at sort of the arguments that they made that they sort of make which is it's easy to switch which. Alludes to that that issue I was talking about earlier about how it was a pain in the butt to change your browser. they talk about how you know consumers are choosing Google on their own. You know that sort of alluded to the notion that in the Microsoft case, you know Internet explorer was selected for people and it wasn't like people were making conscious decision, and so I think a lot of the arguments making to sort of fight. This case are things that go directly at the heart of the things that help the government, win their case, and so I think that you know that's been the lesson for the government. I'm not quite sure you know they're sort of A. They're more opaque about how what, what sort of. Arguments that they're trying to map on speaking of a pass ity relative passivity. Let let's talk about the politics of this See your colleagues reported that the bar was pushing to get this thing done in September initially right and certainly before the election I read about the fact that you've got you know was with Warren who. Detest bill bar calls mccranie and wants him to resign but his encouraging him to go ahead with this case why do you think the government or Bill Bar? Thanks is important have this case filed now as opposed to after the election or even in a different administration I mean I think you know bill bars really fascinating in the sense that. You know he's been really obsessed with this suit from from. This investigation this suit from the very beginning. It's kind of hard and clermont that he's saying I'm paying a lot of attention to this. This is something I. Watch carefully. Yeah and he's been more involved in it than you know historically attorney general's would get involved in in matters like this I mean you know he's he's worked for a law who knows what his true motivations are, but he's worked for a long long time. In the telecom industry and as we all know, the telecom industry is no friend of Google. And I think it's possible that over these years you know he's had some very deep. Issues with the way Google does things with the way they have compete with the telecom industry. You know bar was at verizon when Google bid for wireless spectrum and effectively perhaps drove up the price of the spectrum that I think verizon ended up buying, which is where bar worked and so you know I'm not saying that he's got this like a revenge play but there is certainly sort of long intertwined history between bar and Google and outside of complaint. The courtroom there's a lot of discussion about reining in big tech and then there's a conservative slash Republican argument that says there is bias in the big tech companies and something should be done about that bar went on Fox News this summer and said there's anti-conservative bias and maybe antitrust is a good way to go after these companies which I find staggering. But the suit itself is it doesn't make any reference to that and I assume that is very much intentional. Do you think there's any way that sort of the external discussion about bias and discrimination works its way into the courtroom one way or the other? I don't think so because. I do think will they just announced today that a that an Obama appointed judge will be the judge for this for this case? So it's We'll see whether the conservative bias argument do very well not for but. I really don't think so and and even the J. Sort of went out of their way yesterday to to make clear in a conference call that that aspect had nothing. Those concerns had nothing to do with this case and they don't will not play. In this case. The initially said we're looking at that separately and everyone freaked out for a second on the call Ovalles we we don't mean we it all we mean Congress right and then I think trump also had some kind of tweet about how you know this is sort of the price we will have to pay but. I do think that ultimately in the court, it will be a very narrow case about the legal parameters of the Sherman Act and you know and arguing this from a pretty pure legal standpoint i. think that you know bringing up at issues like bias actually weakens probably the government's case in a court room. It's one thing to argue that in in sort of social media and on twitter and on Fox News and wherever. But. I don't think that that's going to help you much courtroom. So Google has seen this coming for literally for years right and they've dealt with similar suits like this Europe you had a great piece. Recently about how on the Google corporate culture how you you can say whatever you want, but it is real stricture around any discussion of of antitrust monopoly. It's well worth checking out. How do you think the now that the suit is filed that this affects their behavior, one way or another I think in A. Funny yesterday. Kent Walker whose Google's chief legal. And Sundar Pichai. We'll. See. You know they both send out emails to staff and basically send ours email was stay focused. Keep doing what you're doing. Don't let this distraction and then can walk are also had similar sentiments, but he also said, but let's not speculate about legal issues internally or externally, which is to me you know keep your mouth shut and let's talk about it. There's the not talking about it but what about in terms of actual corporate behavior I'm thinking about you know they've known the suit's been coming, but they're still been trying to say, for instance by fit bit I know that for years and years you know whenever they do by a company, the idea that it could be. Blocked anti-competitive reasons is always an issue, but they've continued to to try to buy companies. You know one of the narratives now about the Microsoft cases that the that suit distracted Microsoft innocent and prevented them from seeing the mobile revolution, and that's why they're nowhere in phones, etc.. Google certainly has been thinking about this and I'm assume that they're sort of balancing. How do we not make the government anger? How do not screw ourselves sort of while the case is going on versus how do we continue to be is aggressive and and dynamic as we WANNA be. I think. You're right. One of the things that Google has really learned from the Microsoft thing is that they think that. Microsoft dropped the ball during the anti-trust five. They let it become such a distraction that essentially Google could accompany like could emerge and Bill Gates us has come out and said that which by the way there is as much the counter to that saying that's a convenient excuse for Microsoft screwing up right and of course, you'd want some other extra analogy to blame for not understanding phones gone right. But I do think that you know. Yes. Google continues to Zeros, but they're not in that core search business. If you really look, they haven't done real deal in search for a long long time maybe because they don't have to. But you know also because I think that they realize that that's going to draw unwarranted attention and so yeah, you know they do fit bit they by fit but you know that's the help potentially you know their hardware business, which is essentially nowhere right now you know they buy things for Google cloud. Here and there but I do think that there's no I can't imagine them going out and buying like duck. Oh, not like duck duck goose out google. But like my point being like that's not a deal that's even possible right now and so the time line for this case is saying yesterday I mean basically a year and a half of discovery right before we even get to court room wh I mean. So we'll be talking about this for a long time but sort of practically thinking how long what's a reasonable expectation is sort of start to finish with this case. I mean I. Don't know I mean your guess is as good as mine I think you know I think it was micro. I was Google said twelve to eighteen months of discovery. And I think that's optimistic. You know they're gonNA they're gonNA drag out everything. You know they're going to grind out every discovery motion. They'RE GONNA ask for documents, and then they're going to fight that request and so I think it's going to be years and years and years. This assumes by the way that this assumes by the A. Future administration continues the suit exactly and that's what I was GONNA say is. A former Google policy personal came on twitter yesterday and said, you know now my this from Google perspective right? He said. If trump wins, they think he thinks that they'll fight it in court for years and that ultimately Google will win on the merits of the case and then he said, but if Biden comes in new agey my come in look at it and realize it's not that strong legally. and. TRY TO SETTLE IN A face saving way and I I mean a few concessions from Google and you know the matter get settled quickly and he's pointed to how when a I think it was Bush came in he settled. You know they wrapped up the Microsoft case pretty quickly. Yeah. Instead of fighting through all the appeal I guess the other argument I've heard is if Biden comes in and say, look, this is a bipartisan suit You know you can't argue this political point we're we're we're we're taking out something Bill Barr started so we've got cover here those that's generally heard that we want who want Google to get sued and I think you know a lot will depend on who the is. You Know It's like Elizabeth Warren I imagined she's not going to back off. Antitrust suit against Google, it just wouldn't be in her in her like brand. So you know it'll be interesting. What is the worst case scenario for Google here beyond of fighting a long long suit. I think like a worst case scenario I mean the remedies are potentially the worst case scenario right. So if you have something that breaks up the company in a way that is really fundamental. So either you know you say you gotTa spinoff android from Google or something or you got to you can't Youtube has to be its own separate entity. Those are all sort of the the worst case scenarios. I think there's a middle sort of structural things that Google would be probably okay with like if the government said, you gotTa Spinoff doubleclick although that really make sense now in the context of search. You know. If other sort of lawsuits that are expected about stages. If they say doubleclick spinoff double click Google would probably be okay with that. It's interesting right because Google is still as his tentacles everywhere it's huge it's in so many parts of our life but its core the business is still that search engine and search at business right? So there's a version where they have to sort of separate themselves from the other stuff, but they remain almost as powerful as ever. Yeah I mean that's the golden goose, right that's that's allowed them to have their self driving cars and that's allowed them to have everything and everyone on the company knows that you know the search is the thing that that pays for everything and so. it'll be interesting I mean I. Think the government's challenge is how do you sort of try to weaken search in a way? Structurally And maybe it's the spinning off spin spinoff android so that the link between android Google search is not as strong but yeah, it's going to be a challenge I mean, I think one of the challenges of this cases whether this actually changes anything for people right and that's where I was going to end up here is it it's striking and maybe just the nature of a lawsuit something has to happen, and then you have to sort of investigated and then sues someone because of something that's happened in the past but it seems like this is literally a litigation of things that we were dealing with five or ten. Years ago and and just don't seem as relevant. They're relevant if if you're looking at Google as a search business right still and but it seems there is if you were covering tech, I was covering tackle. Well, there was a lot of serious discussion about whether Yahoo could mount a real challenge to Google or being do it, and that's why Microsoft was going to buy. Yahoo and those all just seem like ancient history now and that this is a settled argument and it's striking to me and I guess we're you end up with is is this does this sort of underscore the the real divide here being? Should the US be a more aggressive about enforcing antitrust rules or does the US need new anti-trust rules? So you wouldn't get to this point. I think you need to decide I. Think I'm not sure both I mean they need new anti-trust rules that are maybe allow them to be more proactive along the way. I think what is sort of? What might end up. Having the fact that maybe the government launched, which is less Google, which is. You know we might end up with all these different ways of source searching for information. That's already sort of happening whether it's you know Amazon Echo or it's The notion of typing in query into a box and getting a bunch of links that idea has evolved over time. But I can't imagine that that's going to be the principal way of finding information ten years from now and so if the government creates enough friction for Google so that when they're when the business evolves the next thing that Google feels a little handcuffed earth can't really quite move at the same pace as everyone else maybe that has that creates this sort of consequence that you know the law can't really do right now die I'm. GonNa, leave it there because as we've been discussing, this is going to go on for a long time. So we're GONNA have other opportunities to come back to appreciate your time. Thank you. Thanks again, di. We asked on short notice I. Appreciate Him Hopping on like I said, we've got some time to cover this one's. We'll come back to it. If you guys have specific questions and thoughts about this antitrust suit or recovering antitrust and politics of tech in general love to hear from you. Let me know as always I am all ears metaphorically. Got Some bonus content coming from you in just a second maybe a minute. It's an interview with Julia for Lawn my colleague, Vox, media WHO's working on a cool new podcast. We're GONNA talk about that and perhaps we'll talk about my role and said podcast but first a word from responser. For. A lot of US home isn't just home anymore. Jim Office inner after work. Hangout. It might also be your kids to school or bakery or you knew barbershop and he has all of those things in which case I hope you have a large home. If you're a business owner or people manage your home might also be where you do your hiring. That's ZIP recruiter comes in. Ziprecruiter make hiring faster and easier because you can do all from one convenient place Ziprecruiter, dot com slash Peter. No matter where you're hiring from ziprecruiter does the work for you. They're matching technology skits, thousands of resumes and profiles to identify the most qualified people for your job. If. You're really interested in the candidate. You can even invite them to apply for your job one click ziprecuiter sent an email from you and you stand out from the competition. Wonder five employers who post on Ziprecruiter, get a quality candidate within the first day. And Right now you U that's you the person listening to this podcast. You can try Ziprecruiter for free at Ziprecruiter Dot com slash Peter that's ziprecruiter dot com slash Peter. I'm not complaining about the request that I spill. Peter. Out this particular podcast at all you need is Wifi to try it for free. Just go to ziprecruiter dot com slash Peter Ziprecruiter the smartest way to hire. Making now, work looks different for everyone, Xerox can help. But right now, a lot stands in the way of making work easy from juggling remote teams and increased issues to attempting to achieve IRL personalization in a URL setting now is a weird time xerox automates digitises, your workflows or you and your teams can access them anywhere. They bring together opportunities to help you better engage customers with personalized experiences and they make remote work easier with responsive IT infrastructure to support your team's wherever they are. So even if making now work means having two lunches or setting Cam Fridays, Xerox has a solution for you learn more at Xerox Dot com slash bucks. Now. Here's Julia. Julia, welcome. Hi Peter how you doing on. It's nice to talk to you. Again I guess we should do disclosure I We're GONNA talk about project you're working on this rarely happens, but I think I'm involved in this project because. True Yoga Yeah I. Got You. I booked an interview with you as wow I'm so honored. You did. Fortunately you say, funny things good. We're GONNA talk to Julia about her podcast, which is called go for broke, which is about it's about offensively it's about moments in history where people like get too excited about something and lose the plot. And go overboard. So in this case, it's about the DOT com bubble season one is about the DOT com bubble of two thousand when many people in fact lost the plot and last. Last their minds a little bit and I'm so old that I have a reasonably decent memory of one. Time. So that's what I talked to me about. This has great art on it because the the main character here is the pets.com sock. Did it have a name and actually that's part of the strategy they didn't have a name for the Pets.com sock puppet because it meant that every time you talked about the Pets.com sock puppet, you had to say pets.com sock puppet puppet. So it ended up being an extra boost and sort of like a a really smart marketing move ultimately, because the Pets.com sock puppet was everywhere and it's become an emblem of the DOT com bubble in a Lotta ways. So this is why your show is a good show people who was gonNA show because it's a good combination of business history. History bubble history and cultural history right the idea that sock puppet from dot com that no one had ever heard of was sort of created out of thin air. Really quickly, and then within months is on the macy's Day float. Doing husker's from. Morning, America yeah. The super bowl commercial it's like I. think that one of the things that's interesting about looking at this particular moment in history is that it was that transition between things being really easy to Google and find online like nowadays if you research it, it's this couple of years where there is Kinda dead zone for the the archival stuff. So it's been really fun to look at you know old archival. Articles and look at like old clips and sort of like look at this moment in media and tack and culture and say like, how is it that a sock puppet? That's a promotional. Device for A. Company that has yet to make a profit how is that sock puppet on Good Morning America regularly as a guest like is that sock puppet like mildly sexually harassing the hosts of this show you know what I mean so weird and also the idea that it's a reminder of up until very recently TV was thing that drove the culture is dot com boom was very exciting. What made it exciting for most people is they were learning about it on TV, and so it made sense to take out a super bowl ad to promote your dot com or made a weird kind of sense. By the way as an aside, I have this theory that that Google is really biased towards recency and that makes it very bad for finding out about things that are older. I wouldn't be surprised. That's that's something that happens in the research for this all the time actually. So you're working on this how many episodes fix episodes I'm really excited about it because like you were saying like the media has changed a lot in the last twenty years and so has the technology industry and so his business. But a lot of the things that we're looking at in this series are like super duper elevate right now you know like. Bubbles. And also but also like larger things like. You know you had Shaheen on to talk about antitrust and antitrust was a big deal even in in the dot com bubble because Microsoft had hearings antitrust hearings against them soon, like in the late ninety s before the actual bubble really happened versus Microsoft. You're hearing a lot about it. Like you said, you'll be hearing about it this week because the DOJ is about to sue Google have a replay of that street doesn't rhyme but it echoes. So there's a lot a lot here to crunch on. What's the mix? Do you think here between business history and cultural history? You know I, think that you can't really talk about the cultural things that that I think are large large parts of things without. So for example, like it's hard to talk about the DOT com bubble without also talking about. Going back to like deregulation in the eighties and how you know baby boomers all of a sudden were retiring and they wanted to and they ended up investing in 401K's, and that changed the economy like this moment twenty years ago and twenty plus years ago a little bit has a lot of. Underlying things that were happening both governmentally and in economically that created that moment. So my hope is that you'll get the cultural things and the business history as much as possible but like you know, I also really excited to look at the early early social media. We have episode that's talking about Black Planet, which I think is something that doesn't necessarily get brought into the conversation when you're talking about the dot com bubble so often. Tells woodblock planet was so black play was. A. Social Media Platform that geared towards the black community. It was extremely popular. It was founded by a guy named Omar while sow is now a professor at Princeton, which tells you. You know. which tells you like what what the staying power of like being attacked entrepreneur in the turn of the right at the bubble was like and Black Planet was actually this site that we're using as like a counter example to the bubble because they were very lean they didn't have the like splashy. IPO situation they were really focused on like creating an actual community, which is sort of like what the Internet was in its early days and it was really successful. and. I think it's it's it's an interesting piece of the story that doesn't usually get told as part of the larger history by the way if you are paying attention to debates about canceled culture. And the specific instance this summer involving black lives matter Omer Wasa was relevant to that. So again, everything is always connected One other great bit trivia that I knew about because I knew about the construction of the show. But I had forgotten about until I heard about it was was the the guy who was the sock puppet? Yeah. Yeah. The reveal sure Michael Ian Black comedian that you may know writer. You know he has a podcast. He's sort of everywhere. He was fresh off the teenage mutant Ninja, turtles of like like live show tour and used his voice from that to become the pets.com sock puppet and sort of like did Improv as the sock puppet and that was the main. The like one of the driving forces of the pets.com up at my memories of the dot com boom are both specific and also easy. Because I was created for a lot of it. That's what we talked about. Interview is going to a lot of parties as a young person because they had free things. Is Michael, Ian Black famous doing that. Or was it or or was he not? Did he not? Want or get fame from that. What's interesting about it is that he? For him, it was a Gig like his the things that he cared about I think we're more his like visible Improv and the shows that he was doing but the pets.com sock puppet despite him being in the Super Bowl like on a super bowl commercial. Perspective on it it was like, yeah, it was a good paycheck. Like which tells you a lot about how actors are able to sort of like. Own. Something but also be like, yeah, whatever it's fine. I did a whole piece which is not a long piece for Forbes, about people whose voices were famous but you didn't know that their name one was the guy the guy who did the TACO. Bell Dog Oh. Yeah. ooh. I'm not GonNa win that his name lows. Last night I think of his last name wrong. Well. The Guy, the guy who was the movie phone voice. Guy. All my God. The movie phone voice. Guy. Yeah. Great Story and then there was someone else. I'd look it up but. I wrote it a long time ago. So it may not be Google Julia we can get your podcast anywhere you listen to podcasts. The first episode is out. Now by the time you hear this on the second, we'll be out. So it's not too late to catch up. In if you want to hear Peter Kafka that'll show up at some point. Yes that will be I think ideally episode for so in a couple of weeks but. Mostly I'm just grateful to you for. Helping me get the word out. That's how podcasts kept popular. So thank you. Thank you Julia Good Luck and good luck with your Internet up there in your. Location? By. Now. Thanks again to Julia Died Joel Jilani Reduce Head of this podcast. Thanks get to our sponsors and thanks again to you guys got a couple of action packed waste coming up and then. Who knows what will happen? We'll be recording through all, but this is Rico media. We'll see. Is Your Business ready to be a five G. Business yet the coverage of five G. nationwide in more than eighteen hundred cities and in more and more cities. The unprecedented performance of five G. Alter wideband the fastest five in the world. From America's most reliable network comes, the five jeep business has been waiting for verizon five G.. Five G. O. Tra- wideband enables immersive ar experiences, collaborative VR environments and seamless four K. video conferences for businesses of any size. Brasow Five G. won't just transform how your phone works. It can transform how entire industries work. Get Five G. built right in the network businesses rely on visit verizon dot com slash five G. slash business to learn more. Five G. Alter wideband available only in parts of select cities global claim based on open signal independent analysis during the period of. January. Thirty first through April thirtieth twenty twenty. Google free are designed to help support of businesses around the country as they adapt to a new way of working with Google tools. Small businesses are staying connected to their customers by updating their business hours switching to curbside pickup, activating online booking and more, and if you want to support them, there are ways to help whether you're searching for restaurants, salons, bookstores, gyms, boutiques, or any other business near you show your support by ordering takeout, writing a review, buying a gift card or making a donation all with a little help from Google.

Google Microsoft US Xerox America Julia DOJ pets.com Netscape Peter Kafka US government verizon Elizabeth Warren Europe Peter twitter
1328: Cashing Out Of Stocks To Buy Real Estate: Analyzing The Temptation by Financial Samurai on Asset Allocation

Optimal Finance Daily

11:06 min | 10 months ago

1328: Cashing Out Of Stocks To Buy Real Estate: Analyzing The Temptation by Financial Samurai on Asset Allocation

"This is optimal finance daily episodes thirteen twenty eight cashing out of stocks to buy real estate analyzing the temptation by Sam of Financial Samurai dot com. And I'm your host and personal finance enthusiast Diana Mariam. This is the daily show where I- SAREMI. With the sweet sounds of personal finance knowledge from some of the best blogs on the planet. This show is actually one of six shows in our network covering different topics like personal development, health and relationships. So few Lake Narration Style podcast before to search for optimal living daily wherever you're hearing this and check out our other shows. But for now, let's get right to it and continue optimizing your life. Cashing out of stocks to buy real estate analyzing the temptation by Sam of. SAMURAI DOT COM. One of the wealth tenants I followed since the first dot com crash in two thousand is to always convert funny money into real assets. My definition of funny money is an investment that makes an irrational return in excess of fundamentals there obviously various levels of irrationality. Some friends and colleagues went from huge stock market returns in nineteen ninety nine only to lose everything and more in two thousand going on margin was partly to blame while some stocks like wet van pets.com literally went to zero over time. I noticed those who turn their dot com fortunes into Manhattan or San Francisco Real Estate during the early two thousand era were able to extend the value of their fortunes and two quite well as a result Young Samurai followed suit. Of course, many homeowners ended up getting slaughtered during the two thousand, eight, two, thousand, nine financial crisis buying too much home just like stock investors who went on margin in two thousand. But those who bought responsibly and we're able to refinance and hold on saw their gains return. The question I have now is whether we should cash out of stocks and buy real estate since the S. and P. Five hundred is. Sixteen percent year to date in April Twenty nineteen and back to an all time high. I'd like for everybody to thoughtfully pitch in with their opinion. Everybody circumstances are different, which is why it's important to listen to as many different perspectives as possible. There is no perfect answer. Cashing out of stocks to buy real estate. The reasons why I'm wondering whether to cash out of stocks and buy real estate or due to the following. Number One, we've recovered all our funny money gains. My House Fund consisting of stocks and bonds went from about one point nine, five, million down to one point seven million during the twenty eighteen correction, which was a lost about thirteen percent and now back up to two point one, million, a gain of twenty three, percent four of four. Hundred thousand dollar swing. I'm sure many of you have seen similar percentage magnitude of return if you calculate recent trough to peak levels in your portfolio. Number two. Real Estate was weakened twenty eighteen San Francisco median home prices went down about eleven point five percent from its twenty eighteen peak. We've seen similar weakness across many major cities in America and around the world the weakness provides some solace that some steam has already been let out of the real estate market. Number three. AFFORDABILITY INCREASING With lower median prices and declining mortgage rates interest in real estate is increasing. There's also a strong demographic trend as millennials are the largest home-buying demographic and are starting families a chart in this post highlights the ten year bond yield at close to a five year low as of August thirteenth two thousand, nineteen, the ten year bond yield was about three point three percent in q four of two, thousand, eighteen this one point five percent move down should boost demand due to increased affordability. Number Four Tech IPO spillover. Over finally filed its s one and I know the tech IPO is going to grow over the next two years. All of written there is a chance the hype will. A slumbering lumbering supply bear my Experience Post facebook's IPO is that it will take about one year for the wealth effect to spill over into real estate. The lock-up periods for tech IPO employees such as Pinterest Uber Zoom, and more is in November twenty nineteen, and later I suspect the spring of Twenty twenty will be very strong for housing again. Number five a strong desire to create utility out of stocks. Stocks provide no utility whereas real estate does it's a wonderful feeling to make money in stocks and convert gains into something tangible to be able to use real estate as a second home and office space or a new primary residence for an expanding family to enjoy for decades is a win. Living our best lives now. The entire purpose of achieving fire is so that we can live our best lives. Now, when we invest in stocks, our hope is to generate profit sue we can live better lives in the future. Of course, we can also invest in stocks to produce dividend income to live off today. But if we really wanted to generate income to live our best lives today, there are more prudent better ways to earn higher amounts of steady passive income with lower volatility. The downside to cashing out of stocks and buying real estate is that one might be jumping out of the frying pan into the fire. With rising inventory and a slowdown in the economy real estate prices could continue to soften in the coming years leverage up too much and financial pain could ensue. I just keep going through a played out during the two thousand DOT COM bubble as stocks crumbled in between two, thousand, two, thousand, and two real estate picked up steam because mortgage rates began to decline. Stock investors started seeking shelter in real estate and reits in particular performed the best between nineteen, ninety, nine, and two, thousand, eighteen. The four, hundred, thousand dollar a cover in my house fund portfolio feels like funny money to me. It's like buying a two million dollar property for only one point six million or a five hundred thousand dollar property for only one, hundred, thousand, what a bargain further the real estate market generally lags the stock market by around six months in terms of recovery or declines therefore with the stock market up. So strong year to date it feels like there's a window of opportunity to buy property right now before prices catch up. Finally, depending on how much wealth you have, you don't have to cash out one hundred percent of stocks to buy real estate. You can consider rebalancing your net worth more towards real estate while still investing a good percentage in stocks. Taxes, can really put a damper on returns. So make sure to calculate the resulting tax consequences of cash out before making any moves. Where and what real estate to buy? The obvious question is where and what real estate to buy if one does cash out of stocks we should buy what we intimately know and by and Markets Thou see the strongest job growth while also having attractive valuations. I Know San Francisco the best. Hence, I will focus one part of my search looking for ocean view properties that have expansion potential. fixers listed by our town agents are always my favorite types of properties to by. Then, I'll continue to look at non coastal city real estate that has the highest potential to be the next Silicon Valley cities like Austin Heatin and Denver have already been discovered. But there are many other cities like Birmingham and moines that have yet to receive much fanfare. They can be invested in through real estate crowdfunding platforms like fundraise or a realty mogul both are free to sign up and explore. As of now, I am seventy percent leaning towards cashing out of stock to buy more real estate stocks were back to all time highs and icy opportunity in real estate. You just listen to the post titled Cashing Out of stocks to buy real estate analyzing the temptation by Sam of Financial Samurai dot? com. Thanks to anger for hosting this podcast anchors the easiest way to make a podcast though distributor podcast for you so can be heard everywhere spotify, apple podcast, Google podcasts, and many more. You can easily make money from your podcast to with no minimum. listenership anchor gives you everything you need in one place for free, which you can use right from your phone or computer creation tools allow you to record edit your podcast. So it sounds great download the anchor APP or go to Anchor F. M. to get started. What I love about personal finance is that it so personal just the other day we read a post from millennial revolution about not buying real estate, and now we're hearing just the opposite. Note that I'm not a financial adviser. So take my comments with a grain of salt but my first impression of these considerations around cashing stocks to buy real estate feels a bit like timing the market and we all know that's a big. No now. The stock market has always risen over longer periods of time corrections are going to happen and they should be expected. Sammy makes point about knowing people who lost everything in two thousand but it sounds like they were investing in the highest flying and most risky growth stocks and more importantly were borrowing on margin to do it the lesson there is that if you borrow money to invest, you're multiplying your risk and could lose all your money and more this did not happen and will not happen to you. You're invested in low cost broad-based index funds in essence you can handle stock market risk if you don't multiply it. Now. Owning real estate is owning your own business and it requires an investment of your time in addition to money. So many people question the hassling carrying costs keep in mind that you never have to unclog the toilet navigate increasing property taxes, ordeal attendance, and repairs in your brokerage account. My is that if real estate investing or buying a primary residence is already in your plan, perhaps dig a bit deeper into the numbers here. But I myself Khun shift money over to real estate out of fear of an inevitable stock market downturn. And that should do it for today have a happy rest of your day and I'll see you in the Thursday show tomorrow where optimal life awaits.

San Francisco Real Estate Sam San Francisco Diana Mariam pets.com House Fund facebook Twenty twenty America Manhattan Sammy Pinterest
How PetSmart Solved Its Chewy Problem

The Journal.

20:12 min | 1 year ago

How PetSmart Solved Its Chewy Problem

"For brick and mortar retailers. It's become harder and harder to compete with online shopping and this black Friday for example was one of the worst for in store shopping in recent years but one industry has proven especially resilient to the shift online for a long time. People kind of wanted to go into the stores like Petsmart to buy pet supplies it was an industry that was really a bright spot for retail even as other parts of retail started to decline but near the end of two thousand sixteen petsmart started to see the same fate. It's sales began to decline after an online rival started eating into its business. That online rival was a company called Chewy chewy posed a huge threat to petsmart but instead of going head to head against them petsmart decided to do something even bolder today on the show. How how petsmart swallowed chewy welcome to the journal our show about money business and power? I'm Kate Linebaugh in I'm Ryan Knutson. It's Tuesday December. Third Miriam Miriam Gottfried covers private equity and she recently reported on the private equity takeover of one of the biggest brick and mortar pet supply stores in the US in the early two thousand. Ten's the chairman of a private equity firm saw an opportunity at petsmart. His name was Raymond fighter. He is French like most private equity. Guys he tends to wear suits. He's very smooth. He's very well educated. He has two engineering degrees in an MBA A and he has a pair of Siberian cats named Kashmir and Pearl Spider notice. There was some clear room for improvement at Petsmart petsmart was doing well but he thought it could do even better in other words he thought the company was poorly managed any thought it could be improved operationally for example Apple. The company had been stocking the same number of winter coats for dogs at all of its stores. Whether in the frigid northeaster Sunny California so in twenty 2015 spiders firm bought petsmart so that it could try to revamp the stores and hopefully turn a quick profit. The firm kind of had a view do that. The pet industry was very robust industry and it was a good industry to be in petsmart mostly had stores in good locations so they wouldn't have to do a lot like closing zing stores that other retailers done so they paid a lot of money for because they thought it's a good industry and there's some obvious things that we see we can change to make a quick buck that's right and they did. They made a fair amount of money and they were able to pay themselves a dividend and they thought okay. Great this investment is going so well. Everything's working exactly as we planned. And then all of a sudden in two thousand sixteen their sales started to decline in a period of only the three weeks there same store sales which are basically just comparing the sales from a year earlier went from flat to down almost five percent so it was a very very dramatic drop. And what was your initial suspicion about what had happened. They really didn't know. BC partners knew about Amazon. When they bought petsmart art it's no secret than Amazon was a pretty dominant force in e commerce and they also knew that Amazon sold? A lot of pet supplies applies. But it wasn't a pet specialty store and also nothing had changed in terms of the way Amazon was operating. It turned out that it wasn't Amazon. Because they were monitoring Amazon it was another online competitor and that was Chewy Curie. Tell me about about chewy. Chewy was founded in twenty eleven by two young men who wanted to replicate the neighborhood pet store online basically Ryan Cohen who is one of the founders. He was twenty five years old and he decided after visiting being a pet store to buy food for his teacup poodle tighly that he wanted to sort of replicate that warm knowledgeable intimate neighborhood experience but in an online setting. That sounds very difficult it does. It sounds kind of crazy especially for a guy who didn't have a college education and had never run a business in fact he had never even had a job before so the well-dressed Mba with two. Siberian cats was losing market market. Share to a twentysomething poodle owner who'd never held a real job spider needed to make a move petsmart had barely gotten it's e commerce operations off the ground around and spider knew it would be difficult to catch up to chewing because over the few Short Years Ryan Cohen had been running chewy he had learned how to compete with the big online retailers like Amazon Ryan Cohan basically worked really hard to get the business off the ground and once he got it to a certain point he knew that in order to be successful. Astle you needed to get scale if you're too small you don't have enough revenue to cover the significant fixed costs of running an ecommerce business so that includes includes having your website having your customer service center having your delivery mechanism and your warehouses road because if you start artis store. He's done a retail store in your community. You can have a couple of employees. You can have a small amount of inventory you can serve like a small market in your neighborhood hood or whatever but if you're running a big website with servers and online fulfillment and shipping. You need a lot of inventory in a lot of customers otherwise as the business would never really work in fact that sort of what happened to pets dot com which was a dot com era predecessor of Chewy. Yeah I remember those dog sock. Puppet commercials with dog acted crazy. Today you can get whatever you pets.com. Flock was sort of notorious hearing sorta became the poster child Dot Com bubble. Yeah and a big reason that it fail was it never got scale because people never really decided that they wanted to buy pet stuff online and in fact not that many people were buying anything online back then and they ended ended up spending so much money on marketing and trying to acquire new customers that they just went out of business. So Ryan Cohen. has this idea he starting. He realizes he needs scale pretty also needs money he also needs money so he goes to Silicon Valley to Sandhill road and he starts meeting with. Venture capitalists capitalists and remember. This is a guy in his twenty s with no previous experience going to make pitches to venture capitalists and telling them shoeing wants to go head to head with Amazon and sell pet stuff online and all of them are probably thinking. You're crazy you want to go up against Amazon in B.. Remember pets.com victorious Taylor and he really tried to convince them that he could compete with Amazon in two ways. One by being a niche expert. Spur five being a specialist in this area in the area of pets. The second thing was customer service basically Ryan Cohen decided that customer service could be Nia distinguishing factor. It could be a way that you compete against a behemoth like Amazon. He said we can have much better. Customer Service we can be much more knowledgeable audible just like the person in your neighborhood pet store and how to investors. How do these different? Vc Funds Respond to his pitch he met with over one hundred investors. Who Said No? Oh Wow that's quite a few quite a few and finally someone said yes in two thousand thirteen. He got a fifteen million dollar investment spent from volition capital which is a Boston based venture capitalist Okay volition saw that Chewy had really high customer retention rates. The great thing about pet food is you have to keep ordering like every so often. You're going to run out and you need to buy more so it's not like buying apparel apparel. It's a repeat business and Chewy was retaining a lot of that repeat business and how were they able to retain a lot of that business. So chewy had had built out and continued to build out of customer service. Enterprise that involved hiring a lot of pet lovers to work in their offices and to be given live in a prominent place in the office near management and the customer service representatives. Were empowered to do almost anything to help callers. They could could offer them free things they could talk to them for hours. They had no quotas of the certain number of people they needed to talk to. They were given free rein to sort of tend into the customer's needs sons very different customer service strategy than what most of corporate America employs which is outsourcing it to fenders overseas or just generally not having good customer service. Yeah I think the idea was to just be really human to be as if you were the shopkeeper in the small store And should we even went to the point of sending handwritten notes to customers handwritten notes and Ryan Cohan the CEO of the company sent handwritten notes to cost like somebody emailed me after my article came out and said I was one of the people who received a handwritten note from Ryan Cohen. Oh well and then. They became a customer for life life. or how did they respond. I mean if you had that kind of treatment from a company it would make you a lot more likely to keep buying your pet food there. Yeah and they would also surprise some customers with oil painted portraits of their pets and so Ryan Coen's gamble and his sort of thesis ACIS was that he could be disruptive by really investing heavily in customer service. Interesting ended at work. It worked chew as sales continued to skyrocket guy rocket and that ended up taking its toll on the rest of the industry yeah. It started eating away at Petsmart. That's right and that brings us to twenty sixteen win in Petsmart and its new owner. ABC Partners realized it was losing customers to Chewy and once they figured out it was chewy. What did they decide to do about it? Well you know at that point. And they were in kind of a bind because they had always planned to invest more in building out a website for petsmart but they didn't think it would be such an urgent matter are they thought they would have time because at the time they bought petsmart very little pet supplies were bought online. This put Raymond's fighter in a pretty tough spot and he basically had two choices one. TRY TO GET PETSMART to compete online or to buy the competition chewy option. One would require a ton of work to get its website which wasn't very good up to snuff but option to was risky. Even though Chu we were selling a lot of pet supplies it had a big problem. It was losing money. True is business strategies to spend lots of money upfront on oil paintings as of pets long customer service calls in promotional discounts to entice customers to come to chewy choose. Hope was that these new customers would become become loyal ones leading chew on a path to long term profitability. Buying a company like chewy would be very different strategy for private equity firm like BBC partners. Private equity firms are very reluctant to buy money losing companies. It's just kind of goes against the ethos of what a private equity firm would normally normally do Why would agree firms? Normally do they normally want to buy businesses that can support a large debt load and in order to support a large large debt. Load you need to be making money. In general everybody thought it was kind of a crazy idea. Even Raymond spiders said everybody told him it was nuts. Despite all all the objections spider decided to start courting chewing anyway. Raymond's fighter had met Ryan Cohan the year before so he reached out to him and said. Hey Hey would you be interested in a sale and at the time Ryan. He knew he was going to be big. He was on a path to IP owing chewy. So he kind had to think about it. This deal would be risky for spider and Cohen. How the conversation went? That's after the break so my question is male Polish. Some of the names are absolutely ridiculous. I'm Flora Lichtman from every little thing the podcasts. That answers your burning questions like who names nail Polish. I come map out of surgery at an anesthesia and the nurses drilling me on what my what my nail Polish color is. Find out more on every little thing. Listen listen on spotify or wherever you get your podcasts. Welcome welcome back well. Raymond's fighter had made up his mind to buy Chewy Ryan Cohan Chewy. CEO was still on the fence about whether he wanted to sell sell his company was on the way to an IPO. And with the buzz around the company building going public had the potential to be a huge payday but there were also some reasons for Cohen to avoid the risk of an IPO and takes fighters cash. Because even though Chu we had found some success in taking on Amazon the stock market work. It was still pretty skeptical. ECOMMERCE companies at sea was kind of struggling. People were not sure of whether Amazon would drown it out because Amazon immediately launched sort of an se competitor. There was wayfair. Those also not trading very well and those were sort of seen as the main comparable ruble companies that were already public and then Ryan had some personal issues in his life. He had just had a baby. His father had a major heart attack so he said okay all ask for a really high price. He basically went to Petsmart with the price that he wanted and the terms that he wanted and those terms were. I want three point. Three five billion dollars in cash while spider went back to discuss this with partners. It wasn't an easy decision decision. Remember the company wasn't even turning a profit yet but chew was getting other offers so eventually fighter caved. They ended up paying three point. Three five billion which at the time was the record for an e commerce company so it was a lot of money to pay Cohen got exactly the number he wanted. BC partners made one of the largest e-commerce deals in history. Is that surprising that they decided to go forward with it. It's really surprising. And the reason is basically because the go-to as investors and say look. I bought this really fast growing company. That's eating into our sales. But it doesn't make money and and I'm taking on new debt in order to buy. Meanwhile they were worried about the fate of PETSMART and what this said about what was happening at the core business of petsmart spider had taken a pretty serious gamble. BC partners took on two billion dollars in debt in order to make this deal work and in the early months post post acquisition petsmarts bond prices began to plummet signaling investors. Were worried that the company might go bankrupt and Chewy it kept losing money but doing celebrating its IPO tomorrow. So in June of this year ear petsmart was able to take chewy public and on the first day of trading its shares shares shot up. It did amazingly well. Investors tails are wagging over this. IPO like you said and by the end of the day it was worth over thirteen billion dollars. Thirteen billion dollars even though they paid three point three five three five so that ten billion dollar paper gain that BC partners experienced on that first stay of trading was almost record. It was among the top returns that a private equity firm has ever gotten on an IPO. There's a very short period period of time to make ten billion dollars very short basically it shows that. BC partners was able to recognize value in Chewy that the market didn't see because remember remember at the time when they paid three point. Three five billion people thought that was crazy and a mere two years later it was worth ten billion dollars more And and this was one of those deals is just one of those deals where it could have failed and it skated on the edge of failure and then it ricocheted upward word and if you think back to the most successful private equity deals of all time throughout history I think they share one thing in common. Which is that they escape on the edge of failure and then something beat luck? SMART timing or an ingenious investor they shoot up and something occurs that sort of causes them to instead of plummeting downward to take a really positive turn slider had bought arrival and it worked but the hard part actually came next because he needed to figure out how he could let chewy and petsmart coexist without eating eating into one another. He basically started to focus on things. That petsmart could do that. We couldn't do and a big one is the in store services so petsmart offers grooming doggie daycare veterinary services so the more you can emphasize those services versus the more you can sort of create a differentiator for your brick and mortar stores. So what are the lessons from. All of this for retailers there is a strategy that could work. I mean it's still not fully tested show. He doesn't make money yet. But there is is a strategy that could work for competing with Amazon and that strategy has to do with differentiating yourself becoming maybe more of a specialist in a certain an area and maybe to customer service. Maybe that is the key to being able to differentiate yourself from the behemoth in the ECOMMERCE space to fight the everything stores to become de. Only this thing store exactly exactly. I think it's the most promising way that we've seen in my years of writing about retail and private equity. I think that has been the best strategy that I've seen companies. Try to employ which is niche specialization. As you said don't be the everything things store be the one particular things store and knowledgeable. Warm customer service. That actually gives people what they want. that's all for today. Tuesday December Third Journal is a CO production of Gimblett and the Wall Street Journal. If you like the show follows on spotify or wherever you listen to podcasts route every weekday afternoon thanks for listening. We'll see you tomorrow.

Ryan Cohan Chewy Petsmart Amazon Ryan Cohen Petsmart petsmart Chewy Curie Ryan Cohan BC partners Raymond pets.com Ryan spotify Raymond fighter US Miriam Miriam Gottfried Chu Mba
FedEx Falls, Pets Are Paying Off

MarketFoolery

15:21 min | 2 years ago

FedEx Falls, Pets Are Paying Off

"This episode marked fully brought to you by nets the business management software that handles every aspect of your business in an easy to use cloud platform download their free guide seven key strategies used to grow your prophets today and that's we dot com slash full. It's Wednesday September eighteenth walk onto mark. I'm Chris Joining me in Studio Radio Today. She's not on twitter here in the studio. Emily flipping thanks for being here thinks Ravin even though twitter on twitter will have you. I get that question on twitter every time you're on the show like where I was like now. She's maybe I won't have to put it that way. we've got earnings. We've got pet earnings packaged food earnings. We're going to start with Fedex and technically these are earnings. Although fourth quarter profits for Fedex came in lower than expected their revenue was is also down and they cut full year guidance and they didn't really hold back in terms of all of the challenges that Fedex is facing as a company and if if you look at Fedex as a bellwether business then there is cause for concern because shares Fedex down thirteen percent this is the worst day in over a decade okay yeah and one of those businesses that tends to actually respond pretty significantly changes in the macro environment so you know and they had this this poor report to put it nicely there were a lot of things that they pointed to as as contributing one of those being the trade war right and a softening macro environment another one being being the recently severed ties with Amazon which earlier this year canceled their contract thanks for both ground and air shipping to do their own initiatives into yup speedier delivery but what I thought was really interesting. Is You know Fedex for a while has been a questionable investment just because they're spending spending so much money to invest their infrastructure clearly there's some softening and there'd be to business or business business business area which is their higher margin. Arjun business line and then in addition with the with the issues with Amazon but I thought was interesting is going back. They actually downplayed a lot of these things I think in in previous calls which is why this vis earnings report in particular was so big for them. You'll see a lot of analysts. Wall Street analysts as well. We're we're actually kind of defending their positions. They were taken aback by it saying wow wow they really misled us with with how bad this could be moving forward. at the time is that Amazon only made up about one point three percent of revenue and and this earnings call you'll see they're kind of using that Amazon is as a scapegoat for for part of their poor performance. It's interesting because Fred Smith and his team have have been there a long time and you know this is a tough business to run and I think in General Fred Smith and his team have run it well but you're right absolutely about this quarter and the reaction in the investing community because there was a little bit of that like wait a minute. This is not that bad. This isn't what you've been saying in the past about Amazon also and this is the this got a little bit of play this is not. I don't think this is as a significant as what you mentioned in terms of Amazon and and sort of the the trade war in the macroeconomic impact but you go back to the acquisition of TNT express and Fedex really trying to expand in Europe and now with the benefit of hindsight you can look at that and say you know what that didn't go nearly as well as you wanted it to and yesterday was a cyber attack and whether or not fed ex is to blame for that even if if you absolve them some of length of blame in that situation the case that they were making four acquiring. TNT Express in the synergies that could be right out and how they could expand their gross gross margins that just doesn't happen. It really hasn't happened the way they wanted it to and I think we're seeing today sort of a coalescing wing of a lot of negative opinions of the well wait a minute. That didn't work out the way you said it was going to now. You're telling US something different about Amazon and I think for the first time in a longtime there's genuine skepticism about about Fedex as a business yeah I agree and it's not to say that I think is going anywhere because look five years now and I do think Fedex is still going to be relevant still going to exist as a business but it does call into question the capital decision making of management especially now. They're spending so much money to do stuff like modernize their infrastructure structure something that they arguably should have done in priority over acquisitions right so it does kind of I think lead to a lot of skepticism from investors there's but when I think about Fedex while I don't think it's going to be a particularly outstanding stock over the next few years. You can't deny that they're good at what they do. and this might might be kind of peak. Fedex hate especially if we don't enter a recession the next I'd say six months and also using about the the next few months going into the holidays if Fedex has a blowout quarter in early twenty twenty then this is a distant memory but just ah close on the stock as I mentioned down thirteen percent worst day in over a decade. Are you interested at this lower price or do you think there are enough question marks. Some of which Fedex has raised that I'm just I'm not buying this value player option. They've lost a little bit of trust for me here. Their new earnings expectations retations are about twenty percent below what they were just before they reported so there's one report a load alone decreased twenty percent which is still a significant year year decline so. I'm still not excited by this business but I also don't think it's the doomsday scenario that some people may feel it today all right. Let's move onto chewy. Which is the pet food? end-products retailer. CHEWY SECOND QUARTER LOSS was smaller than expected. They raised revenue guidance for the full fiscal year two. We stock down about five five percent this. Why is it down this and I don't own the stock but I sort of look at this and think this is kind of what you would wanNA see. I think if you're a shareholder yeah I'm actually I'm not shareholder yet but I'm big fan of DISMAS business. I was happy by the recent report I feel like some of the market common on call it confusion market response is two folded. I is is their first report since becoming a publicly traded company you know we've seen the market destroy a lot of these high flying. IPO So it's not a terrible surprise that you know since it didn't completely blow out expectations that the market responded the way it did but it's also so the they posted a narrower than expected loss as long as you take out the non-cash based stock based compensation compensation expenses if you include that it's actually a significantly efficiently bigger loss so I guess it depends on how people are perceiving. The losses attributable to them at shareholders are they including stock based compensation. Are They not personally when I look get these types of companies which are still very much in the girth stage. I don't tend to out a lot of sway to stock based compensation but I can understand why investors do ultimately chewy is not doc profitable so it makes sense that people when they see that sticker shock of the first number booze is company ever going to be profitable but I'll give my quick t second to pitch cheer to. We could easily be profitable. They just scaled back their marketing expenses but to continuously shows that the lifetime value of the customers that they acquire significantly outpace as the amount that they spend to acquire that customer and sales and marketing so the fact is is that the company doesn't want to be profitable right now and in fact if you're thinking about Fedex and you're thinking about center a pullback in the market pet supplies tend to be pretty resilient when it comes to recessions and Chewy by far has the biggest presence for online pet sales which is still really really nominal the number of purchases that are made online for pets as in comparison to a payroll or electronics so there's significant room there for new customers to come into cheese atmosphere. I used to acquire those customers. I mean this year. They're projected to do about five billion dollars in sales so it's a big big business. It's not pets.com. Tom As many investors might think but it's an exciting company that active customer growth of forty nine percent year over year gross profit improvement because probably margin improvement so lots of like you're personally. I see this pullback and I got a little bit excited if I could just keep my mouth shut about the company. Maybe I could actually buy them. So is this a company that you think is potentially an acquisition target. I'm thinking of a couple of years back when Blue Buffalo which shares in this line of business was a public company stand alone and General Mills came in and snapped it up around eight billion dollars of chew we right right now valued at eleven and a half billion to be a little bit more. Someone would have to pay for them but if you're making up a list of reasons to buy this stock is that on the list no oh not at all one hundred percent never going to be acquired and that's because the company was actually sold to Petsmart by its founder back in I believe twenty eleven. If memory serves twenty he's seventeen meatless found in twenty seven twenty seventeen sold to Petsmart petsmart now owns the vast majority of the business virtually entirety of the voting age. All of the business and that's the the single biggest risk with this investment is probably missed for not mentioning it in my quick pitch earlier back that ultimately petsmart is declining business. there are an old school retailer and they're going to leverage their ownership of choice to the extent that makes petsmart and money not investors so. I don't think this is a company that petsmart smart is going to ever consider selling to somebody looking to acquire it simply because see only part of their business that is offering any growth opportunities quick shout out to net sweet. If you don't know your numbers you don't Know Your Business and the problem that growing businesses have a keeps them from knowing their numbers is the patchwork quilt of business the systems one for counting another for inventory and other for sales it goes on and on it's inefficient it takes too much time too many resources and yeah that hurts the bottom line and that's where next week by Oracle comes in. It's the business management software that handles every aspect of your business in an easy to use cloud platform it gives you the visibility ability and control that you need to grow with nets we you save time money and unneeded headaches by managing sales finance accounting orders. HR instantly really right from your desktop or phone and that is why nets is the world's number one cloud business system right now net suites offering valuable insights for with the free guide. It's called seven seven key strategies to grow your profits. You can find it at net sweet dot com slash fool. That's net sweet dot com slash. Download your free guide. It's free what do you got to lose seven key strategies to grow your profits and that's we dot com slash full speaking of general mills back when they bought Blue Buffalo that Kinda showed up up in this first quarter report from General Mills. It was sort of a mixed quarter the pet divisions looking pretty good the snack bar division not so much yeah actually pet food was the only division that's all any growth this quarter for general mills and I think what investors really just I'm GonNa say work cited about. I'm not I think excited is probably an overstatement but they enjoyed seeing that you know earnings still beat expectations. the fact they reaffirmed organic net sales guidance for the year of one to two percent all of that fifty third third week is definitely helping them out there to the to about one percent so even though they missed on revenue this quarter. I think the the fact that there wasn't lower guidance was probably a good thing and that's why the market generally responded pretty positively but like as you mentioned it's really just pet food that acquisition and Blue Buffalo Buffalo for them was the single thing. That's keeping their business afloat right now. Pet sales grew pet. Food sales grew about seven percent and while pet food. I don't think it is the first thing that comes to mind when you think about General Mills. I definitely think it's framing the way that they're considering their business. Ultimately pet food sales is about ten percent of their business. which is I almost as big as their entire Europe Australia business and bigger than their Asia and Latin America business so the fact is is that food has become a big part of their business and the softening opening demand on the North American retail side for things like cereals and snacks? Those are the things that are really kind of dragging down this business so it'll be interesting to see what they're you're thinking about in terms of restructuring their product but unfortunately general mills is a big company with a long history and they tend to be slowed innovate. Here's another thing that's not helping general mills millstone news this week that gold medal flour which is one of their brands that they have a general mills issued a recall for three hundred tons of flour lower for potential E. coli contamination. That sounds terrible but you say that I'm sitting here thinking. I don't think I could tell you how many three tons of flowers is that. Is that a lot of flour for general mills at a small three hundred three hundred times well. It sounds like a lot. I will say that and let's just hope this doesn't happen a boob. Buffalo Aflao exactly and I'm not concerned about it because when I bake I use King Arthur flying. That's that's a little bit of brand loyalty when it comes to flour and baking products. Here's another thing that surprised me though I mean for you know for the mixed quarter and you're absolutely right. I mean pet food is not what the average person thinks of general mills. It's you know it's probably breakfast cereal. This stock is up more than forty percent year to date this is this is not at all what I was expecting when I started looking into general the males so it will be interesting to see with all of the brands they have under their portfolio and the success thus far of the Blue Buffalo acquisition. It'll be interesting to see what this company's brand portfolio looks like in say five years because it really wouldn't surprise me if they started looking to shed some of these snack act brands maybe not the breakfast cereal ones just because I think they're so ingrained and maybe that's a business that's essentially on autopilot but it wouldn't surprise me if they started looking for more opportunities in the pet space yeah and honestly as somebody who has at least one bowl of cereal a day. I hope that they stay in this era game. They've kept it competitive. They kept options available to US serial connoisseurs but I couldn't agree more that I would expect for them to really hammered down on the brands that are actually driving driving growth for the company. What's your go to cereal unfortunately right now. It's it's a little bit basic honey. Nut cheerios have made their re rounds to me but traditionally go back a month. It was always special. K really the flakes are so crunchy and they've done a lot with flavors. It's one of those things where they've expanded to like different flavors. I did buy the Pumpkin Spice Special K. How is I'm still eating the honey nut cheerios beverly flipping. Thanks for being thanks for having me as always people on the program interested in the stocks they talk about in the Motley fool may have formal recommendations for or against Saddam buyer stocks based on what you hear. That's going to do it for this. Edition of market flirted shows mixed by Dan boy. I'm Chris L. Thanks for listening. We'll see you tomorrow.

Fedex General Mills Amazon Petsmart twitter Blue Buffalo TNT Express Emily pets.com Fred Smith Ravin Europe DISMAS Blue Buffalo Buffalo US Saddam
248- Robert Shiller & The PE Ratio

Invested: The Rule #1 Podcast

36:22 min | 1 year ago

248- Robert Shiller & The PE Ratio

"BILLTOWN and Danielle town. Welcome to the PODCAST. Cast where we are learning how to invest not speculate but invest in spite of the fact that the market is not cooperating at all that may be my new favorite mature word spoken. Oh Gosh it is so funny like we were talking about last time you know the the ratio between the Wilshire. GDP and and the stock market pricing is is historically so skewed. Now it's over double where it needs to be to be a good deal. Yeah interesting point interesting point. 'cause you said it was at one hundred and seventy something and to be a good deal Etienne below. Yeah yeah so right more than more than double. What a good deal? So he really right now. If you were trying to find really good companies you might find yourself stretching to to make it work in your head to make Saddam yes projecting the magical thinking gene of. Please let this company be something I can buy out of the entire smorgasbord of companies. Out there that you look at and steadily get more and more depressed about how great it is and that you can't own it. It's like this degree Combo of like shod and Freud Freud for yourself or your like kind of enjoying that you can't that you found something you love but you feel sad you can't buy what is shot and Freud. Yeah well okay so shrodnr fresh or whatever commonly used term in the English speaking world as well what shot in Freud means and I use the edited. Take a Brad Pitt. Movie Inglorious Bastards Situation Pastor shot and Freud. I used it very very badly. What it means is to take pleasure in the misfortune of others? It's like when somebody else has some you know a flat tire and you don't like that person in your lake. Have a little bit of luck with joy about it that shot in Freud walk. That's seems very not nice. It's not nice now. Freud means taking pleasure in the suffering of others. It's like it's not. It's not a mean thing. It's like a small pleasure in the small small misfortune of others so it's not command. Cheese taking azure in torturing their prison not. Count a shot in Freud at on it would be something small. It's like it's that small little thing of like the example I just gave like it's it's it's a very German feeling of you know. Just a tiny bit of prick of joy and it just a certain moment when you see something they know what's happening. I have a feeling we all do this. But don't want to admit it. Well that's why it's a commonly used term in the English speaking world because we don't have word for that in English but it's a Greek word. It's a great word. So what I was referring to is like I used it very badly. A Self Referential Schadenfreude in a way of flight kind of being happy in your own misery. Oh man that is so deep and complex. It's way over my head. I don't think it's I think thank you. I think you've got it so when when you get that feeling of the now being able to find some or you find something but then you can't buy it. It's a bad feeling it sucks. It's depressing it is sort of although just finding something you really understand. Stick it on your watchlist. It's good knowing what price you pay for. It I find is just the the most wonderful thing it's just like. Yes because I know from doing this for a long time that will go on sale and that is just one one less thing I gotta think about. Maybe that's the method that you're about to tell us do this for a long time and you have our respective. You'll have perspective. I was actually actually thinking that when you find a company that is on sale in this market you should be very careful careful because when the market is priced more than double where historically Torque Li. It's been for something to be on sale in the market. Now this is a gross generalization because in all markets there are in fact great companies go on sale. There are in no matter how overpriced the market gets the market. Mr Market moves money around and it goes from one industry where it's likely to go up like crazy. And when that goes up like crazy than people sell out of it and sometimes it will go down much farther than it should or or individual companies are having a problem. They could have a problem and everybody bails out and runs away and that company goes on sale. But it's it's much more difficult and you should know it's much more difficult in a market like this one. Where in general things are double what they would be at a market where we think things are on sale? So things are really fully priced and then some okay well in that market when you see something on sale how you you should be careful because there are lots of people looking for sale companies right now and if you found one and the stock market hasn't founded the people at Goldman Sachs haven't founded Morgan Stanley hasn't founded and J. P. Morgan has invited. But you found it. You're the special official person that found it. That's really amazing. I just I've heard people say that a lot lately and I'm just not sure I totally buy it because it goes back to what we've talked about so many times about our own time horizon compared to other people's time horizon meaning that we have a very long term one and other people have a more shorter term one and I just I don't really buy in this market yes overall. It's harder to find stuff. I do agree with that. But Ed being able to find companies that are having events that are having things happen that are making. The price goes down for a short period of time. That's a situation that happens. Happens in any kind of market happens at bad Margaret Evans in a good market. I haven't been media market and those things usually are happening without being connected to the overall market. So if it's one thing to say like oh I found a company in the prices down own from where it was like. It's down from this very high market and that case it's probably still incredibly high and wouldn't be a good bye but but if it's if it's meeting the criteria of your own pricing methodology on its own independently Bentley not related to like. Oh it used to be high and now it's down then. I think that's something that you found and the reason other people are buying it. It's probably the same reasons that would be going on in any other kind of market. Now everything you say is totally true. That's exactly right. Went exactly how to think about it. Okay Okay what what I'm saying in terms of being very cautious is to make sure you understand why these people are getting out of that business. It's really important that you you selling to you. Who's yourself interesting point? I mean these are eighty five percent professionals who are unloading to you. uh-huh and they've got very good reasons why they are doing that. I guarantee you they have great good reasons. Sharon your point very well taken. Is that those reasons may have more more to do with a short term timeframe under which they're judged rather than the long-term final judgment on the company itself itself and if that's the case then more power to us the little guy that has this long term horizon and we can handle two or three years where it goes nowhere are no big deal right or it goes down even more so why. Be More cautious now. Because you gotTa make sure you really are not into something you're not about to buy is something that has a terminal problem in this market in other words there you just have to be doubly sure I. Maybe I'm wrong. Maybe maybe there's no big difference. You always have to be sure now. I can see what you're saying. You're saying because if we're if we're in a situation where the whole market has dropped there's been something that's gone on and the markets have been dropping. Let's say for six months and it's really been going down and companies are hurting gene and you're seeing which companies are surviving right like some companies are going to go away really quickly right. Somebody's going to be the pets.com. That's DOT com of this market and other ones are going to be the coke and be really well priced at the end of the day and are going to last for the next twenty years or the longer so you can see that happening to your point in a market that's dropping whereas in this market companies aren't being tested at all. They're getting getting easy money all the time. So right okay. You've done a great job of making my point. So that's what I'm here for. You see clear and then express it very well and so that's why we when when we're in a market that's it's really up there and everything is going good and people are buying anything for more than they should pay when they're selling it And they're not stupid. We just gotTa make sure that we know why. So you know the right now. Boeing for example is is a company. That's under a lot of pressure from a problem that they've got and they're trying to work their way through it they just fired their CEO. You know that's that's a big deal. It's a big deal. And I look at Boeing. I go man I would jump all over this at two hundred and fifty to eighty share. It's IT's selling for three thirty down from four fifty okay. So it's dropped a lot but hasn't dropped so much that is so good deal. I could just this jump all over it. I'm getting a ten count price. Just isn't there right. Because that's what Sony people look at. Its dropped forty percent or whatever that adds up it's dropped eighty percent from its high like that's what people say and seemed to care about and that doesn't actually mean anything on the is relative to what it was it's lower but when you see that just think you know the price of gold necklaces at a beachfront gold store. Eighty percent of we buy gold. Jeez yeah then. That's price just doesn't price just doesn't mean anything. It means what somebody somebody paid. That's all it doesn't mean value. It doesn't mean what it's worth it doesn't have a damn thing to do with it except in the long run eventually eventually the markets will price things where they should be. And that's what we trust will happen. And that's why we don't want to buy things that are expensive because the market's going to eventually price them where they should should be and even if they're gone they've gone up in ten years. which good company might you know if you buy it and pay too much you still gonNA come out okay? You're just not going to have a great great rate of return. You're just not going to get rich and what we WANNA do. Is We want to do an investment style that gives us financial freedom. We want to have enough money coming out of this thing with high rates of return and the ability to do that consistently that we don't have to worry about what's our job right where we WANNA go. Yeah so be careful. In this market because things companies tend to have their prices be inflated inflated and that can lead to not so great companies being propped up and it can also lead to good companies I'm being so overprice that maybe your own metrics get a little bit skewed inside your head. Which is the scary part? But we're GONNA talk about a method another method. Is this the method that you wanted to talk about. No this this is just sort of leading to that okay. So the second. We've talked about actually quite a bit here. There was was developed by Robert Schiller at Yale. WHO's the second did the Schiller? Pe Ratio. I have to say if anybody wants more information about this you can pick up our book. Invested which goes into excellent detail plug about pursue erase show. But you can listen to it here for free go ahead and what what show did it was so bryant was to find a method that shows that the market can be irrational from time to time and when it's irrational and you're buying into it and it's irrationally high your long-term rate of return by owning the whole market which is typically what people do in their 401k. They diversify across the whole market. You ready to return it in. The whole market is going to be very very low is going to approach zero for the next twenty years when it's too high long-term and when you have the market that's very cheaply priced your long term rates. Return even if you buy the whole market will be quite good. They'll be over ten percent and so this this chart that he's created is available by Googling Schiller S. H. I l. l. e. r. p. ratio. And it'll show you this chart. It goes all the way back to eighteen seventy and you can see very quickly that the average through all of the you know the last one hundred in twenty years up to the nineteen nineties has been about a fifteen sixteen. Pe ratio this is an adjusted pe ratio for inflation oughta skip cyclically adjusted pe Ratio Cape Cape ratio. So he got the Nouvelle Prize for this because he he and I am going to make this up a little bit. I haven't read the book although it's on my coffee table right now but I'll open at some point. He he came up with this method head of developing that particular. Pe Ratio Right. Yeah okay after researching every year versus the S. and P.. Five hundred in trying to understand. Say Sorry to interrupt you. P is price to earnings ratio. Just take the price of the stock divided by US earnings and you get a number but he tell me again what the Schiller ratio is with a Schiller takes into account a ten a year average. Yep and it's in other words it spreading the shorter term ups and downs in the market spreading spreading out over a number of years which softens the curve and it gives you a ultimately a better number to know. Where's the market dangerous in whereas it super good ed right and so this you can see that the market is typically averaging out around a fifteen or sixteen Schiller and? It's a really good time to buy stocks when it's at below ten fabulous because historically you've just killed it right so in other words when in nineteen in twenty one. If you've bought a bunch of stocks the Schiller was at five and you would have made a fortune in the next eight years and then if you're really smart art and he had the shoulder. Pe ratio which you didn't you didn't see that in nine hundred twenty nine Internet to quickly bring it on the Internet you would see that in nineteen twenty nine the Schiller pe ratio had gotten all the up to thirty. And you would notice that. That's a long way north of fifteen and you would have been very nervous and you would have gotten out of the market right and then you would have been able to buy back just a couple of years later again at a five. Pe ratio and you would have made another huge fortune. So the market's it gets very very up and down like this and what we've learned over one hundred and forty years. Is that when it gets up above you know twenty four twenty five. It's getting getting into dangerous territory and it's only been up there in all those years previous in one thousand nine hundred ninety eight twenty nine it got up there at thirty okay and then nine in ninety nine it got up there got clear to forty. Yeah and then again. In two two thousand eight it got all the way up to twenty eight and then collapsed and now it's thirty one so there's only only been three times in history of this ratio. Going clear. Back to eighteen. Seventy one was the great depression the second echo the collapse of two thousand the Big Tech Stock Crash and the third time is now so yeah I remember looking at the chart it could I remember looking at. I don't have it in front of me right now. I remember looking at it. And it's like the sort of zigzagging chart and then all of a sudden there's this like insane gene skyscraper from above everything else and that's ninety nine and then it's sort of zigzags a little bit for two thousand eight and nine. It's us and it's just like steadily steadily moving up to the right and by the way that one thousand nine hundred eighty nine hundred. Ninety nine skyrocket skyscraper was exactly the time when several investors who are world class superstars of this kind of investing that. We're talking about just quit it. I mean they their own investors. Were hounding them to get into this market when they were sitting in cash. Buffet is one of the he didn't and quit because he doesn't have fun. He has Berkshire hathaway and he could control it. But Oh man you know the. He didn't have any place to put the money and he was actively looking to buy back Berkshire stock during that Time Period Julian Robertson. Who has the second best track record I've ever heard of was actively bailing out of the market? He was all in cash and he finally quit his fund and I remember really clearly watching him on TV. Say and I just don't understand in this market anymore. It's nothing like I've ever seen so we're sort of back in that. Nothing like I've ever seen sort of market could be continuing to go crazy for another little while but looking at one hundred forty years of history we can see that a little while is really just a little while it may be a year or two but inevitably gravity catches up with a market. That's price like this. So that's the Schiller. Pe and some people argue that the Schiller pe isn't right anymore that things have changed and that the true facts of the Schiller. That's averaging in a lot of really high market. Pe's aren't shouldn't be counted because they were off. So I thought I'd just look up just the regular. Pe Ratio Right. Okay wait. The Schiller shouldn't be counted as a regular. PC's because it's a little off what well because the argument would be that in the last ten years. Let's let's say four or five years years ago they would say in the last ten years it's including some really high p e ratios therefore it's higher than it actually looks like the looks fire than it actually is but they can't say that anymore today. The Schiller P. is at thirty one and the actual pe ratio. The five hundred is at twenty four point two which is incredible guys. That's incredibly ably hi. It's incredibly high. There's only been the year two thousand and the year two thousand eight in excuse me and eighteen ninety five that have been that high. That's it even nine hundred twenty nine. Wasn't that high. Okay so we are are in a sky scraping crazy priced market right now and we've already talked about why right. The interest rates being extremely low not having alternatives is out there but it starts to build on itself and you start to get a bubble and just by saying you know you sort of have to be in the market. Everybody feels that way. There's nothing else you can do. Develop this market bubble mentality so we're trying not to do that. Market bubble mentality. We're trying to look at this soberly. uh-huh recognize it. It's we me and the mouse in my pocket okay. I didn't know if you meant like royal. We didn't know if you meant like We the American government or something like that. It's just we royally okay you I'm looking at this and and try I just trying to stay pretty sober about the whole thing right the night we know that this thing can't sustain because it never has but that's inductive logic gets the same logic that a chicken house when you know the farm door slams at six in the morning it gets fed every day for two straight months and then I think the door slams that you think he's going to get you know so we don't know for sure because we don't we can't read the future but we know that that historically this way of investing this way of thinking about investing of waiting patiently until the market greed goes away and market fear begins is the safest way to manage our money in the long run and I think so. That's how we do it. And I think it's pegged to actual prophets that companies make and as we talked about last time at some point these stock prices have to start reflecting the actual profits that companies make and the question. Make it a really good point There are some things that intrude in that reflection. Actually that are very important and right now. Two of them are manipulations by the companies themselves. Right so the probably the major one of those is that they're going to buy back their own stock Dr Stock Buybacks result in the stock price finding finding a bottom because the companies stepping in and buying it and making the price go up it can and and so that puts an artificial price on it. Ah they've got a lot of extra money and do they have a lot of extra money. Yes new and do they WANNA take a risk and by a different company at these high high prices or you know. Open a new branch when nobody's quite sure what's happening while they might want to do that. Because of interest rates but yeah. They're they're not. They're not taking a lot of risks with all their extra money risk and so it religiously and right now when we look at companies that are taking risks what we would expect expect to see. Is that capital expenditures. Go up that they're investing not just in stuff for how this year's going to go But in long-term investment they're putting railroad tracks or put it in airports. They're they're putting in warehouses and they're buying equipment. That's going to last this them several years. Those are capital expenditures. And we don't see that it's one of the real conundrums for president trump. Is that that the idea of cutting taxes for American businesses was to help them be more competitive to their bottom line but with the expectation that they would invest the money in more jobs by building warehouses and more capital expenditures. And they just haven't done that it said they bought back their own stock which is an artificial boost to the per share. Stock Price does nothing for the value of the company whatsoever. Yeah it's frustrating and it's happening so much that there are if you you want to take a minute and just google stock buybacks. There are some really interesting articles that have been written about how this works. And it's a fun like our of your life just read about the stock buybacks and how many companies are using them to help their stock price and to just just use some of this extra money what it's doing to the market and it's one of the ways we actually look to see if management is a good allocate or. I'm just thinking out allowed here. I really need to get that. That into the tool set the allocation of capital needs to be a judgment call. We look look at companies in our tool set of having good management if they're keeping their debt very very low two zero and if their return on equity return on invested capital sustain high and moving up then. We were like the way they're allocating capital but there's another allocation of capital very valuable and that is to look to see life if they're doing stock buybacks at a reasonable price totally so if they're if they're companies massively overpriced and they don't know that that's a a bad sign for allocation of capital if they're companies massive we overprice. They do know it in. They're buying back stock. That's a terrible allocation of capital. Because they're spending my dollar and they're buying fifty cents worth value for it. Yeah and that idea. And they're taking my money as a shareholder and using it in a way that's not optimal it's just. It's wasting the money that we have that they could be giving to me the and dividend which I would much prefer. You've talked a lot. We've talked a lot about how companies can use this extra cash. They can invested in Capital expenditures they can invested in buying other companies Through Manet they can give it as dividends to the shareholders and they can use it as has to buy back their own shares. And those. We've talked a lot about how those things are all kind of in theory equal. It's just a matter of toys on the on the part of the management And actually I think you've said a bunch like you would prefer that they not do the dividend option if the other options can be used well but prefer they grow it for me. Yeah but they have to use it well and instead what these guys are doing with five acts the stock prices so high is just wasting it and it's incredibly frustrating to see because it's giving buybacks a bad name to the point where now there's like politicians talking about legislation about it. Warren is out there with the platform that out to stop these foreign. I thought you meant Warren Buffet and you know to stop these sort of heinous buybacks and while I don't cheer on her method of doing it from the top down because there's all these unintended costs. Yeah Cheer on the Com motion about the content is like like. Yeah these morons I mean. IBM has been buying back. Its stock for the last ten years and you can may really make a good good case that they have been just wasting shareholder money. They might as well take those billions out in the parking lot and burn them all good in with his billions and billions liens and billions and billions of dollars. They spent on stock buybacks at one hundred eighty I share and hundred and sixty eight hundred fifty share and their stock one hundred and thirty. It's just for years so this is I mean go go read about. IBM's by and you'll see what I mean and just add up the billions billions and that money's Gone Gio any gone if this company doesn't get its act together so all it's done is support. The stock option prices prices for share for the management team. And that's just a heinous use of the money so the and then of course the the second way these guys prop everything up up is to borrow money and buy other companies so this is just one of the other ways you can do it you by another company and your company revenue goes up and you start to look like you're a bigger company and then the stock ideally goes up with that right so you get you get management teams that are bad alligators of capital making very bad judgments when it comes to acquiring other companies and again not to beat up on IBM too much but they've done a lot of buying a lot oughta stuff and it hasn't improved their position in the market while Microsoft came out of nowhere get handed. IBM It's hockey event. A success success story. That's been amazing to watch. I did not predict that. I don't know I don't know who did somebody started. But it wasn't wasn't anybody I know it wasn't the guys running Microsoft. They didn't know that was going to be this thing. Nobody knew somebody. He was going for sure. What's his name Such as something is the CEO. And I can't remember his name either right now but fabulous job Bob guys done is. IBM with more resources. By far and nothing is just struggling along with a very small percentage into that market so mergers and acquisitions I mean you can see companies do it man. But y'all stores the point that they borrow to purchase companies borrowed a purchase which is a threat then Tiki your money and purchasing companies which is different than purchasing companies using your stock. Those are three different ways. Three different ways and again you wanna see that the guys who are running their that women are running. The company are allocating capital sensibly. So if they're using their own stock to buy companies you really want him to be using stock. That's way overpriced. I want you to buy companies with stock priced at two dollars a share. When it's only worth a dollar by all the companies you can? I don't with stock price at fifty six dollar. Don't be spending it at fifty cents. So Oh and and the bad allocators do that all the time and so they instead of using our money then they'll go borrow money but you know uh-huh and that sounds okay except that especially when you're paying three percent interest except you guys when they borrow money at a corporate level they don't get it like you get it on your house for thirty years. They don't get a thirty year loan. They get a three year loan which means they are at risk for refinancing that money if they can't pay it off in three years and and you know they just mostly can't and dollar tree buys family dollar in a bidding war with dollar general and dollar tree wins the bidding war pain rain for more than it should have for. Family dollar borrows the money and it's it's trying to bury them now years later it's they're still L. struggling under the debt load. That's burying them. You're saying oh the deaths horrible and it's so hard for them to get out from under it and they've got all these stores that they paid too much for aren't doing well right so you've got to have people running. The business are really good at allocating capital. And then you see them spending money mergers acquisitions borrowing money increasing the debt. Buy Back stock at a high price. Those are bad allocators and we want to stay away from those guys especially in this kind of a market. We did a really fun interview with Jacob Taylor all about capital allocation and I would suggest going back to listen to that one and he wrote a great book that Charlie Monger himself recommended and So look up. Jacob Taylor's book on Amazon and check out our interview with him. I think that Kinda gives us today all right so we got at the Schiller. Pe and the Wilshire GDP ratio which are two methodologies. That we've talked about before but to point them out again and I think is really cool. I'm really glad that you brought them up again. It's a good way to start the year kind of know where we're at. Yeah give some context have have a little tether to what's gone before and then it allows me and this is ultimately personal right investing is very personal process and it allows me to feel more comfortable like okay. Maybe you know. Maybe I'm just not beating the bushes hard enough. Maybe I should be working harder. Maybe I I should be studying more. Maybe she'd be reading more. That's probably always true. Well that's true of course but then you just find you know that there's a frustration and you start to realize. Oh yeah okay well. The market is massively priced historically above its values historically and that gives me some comfort that I probably should be having trouble right now. Finding good stuff. Okay I got that now. Then what's three. What's what's the result of that is to remind myself to be patient Continue building the watch list. Like you said You'd find this wonderful company. It's frustrating because you can't buy it well there's another side of that coin and that is wow. I got another one. That's four my list that I can buy down the road another gym here. That's going to go on sale. And Yeah that makes me feel good when I can put one up there. I agree love adding to the wish list. All right thanks seventy guys. Thanks for listening to invested. If you enjoyed this episode you want more information including show notes outs. And more episodes visit us at invested. PODCASTS DOT COM. There's a special offer waiting for podcast listeners to attend my three day investing workshop absolutely free so just head to invested podcasts dot com everything discussed on his podcast. Either my opinion or Danielle's opinion and is not to be taken as investing advice. Because I am not your investment advisor nor have I considered your personal situation as has your fight do -ciary this past is for your entertainment and education only and I hope you enjoy it.

Freud Freud Robert Schiller Schiller IBM Mr Market Warren Buffet Danielle town CEO Saddam Etienne Brad Pitt BILLTOWN Boeing pets.com Pe Jacob Taylor
What does the future hold for the subscription economy? with Tien Tzuo, Zuora

The SaaS Revolution Show

25:11 min | 10 months ago

What does the future hold for the subscription economy? with Tien Tzuo, Zuora

"Every single physical product, washing machines, bicycles, cars, they're all GonNa go through the same exact journey that suffered in. The last twenty years, and so you're GONNA see that you're GonNa see the whole physical will world wake up and basically get merged into the digital world into these broader subscription services. This is essentially what Uber is right bringing all the cards into the digital economy and and so it's going to happen it's going to happen in English. Everyone welcome back to the revolution show brought to you SAS stop the conference that helps SAS companies get traction growth and scale while I'm your host, Alex Theatre, and all be looking at what it really takes to build Grove SAS company today now, founders and entrepreneurs that healthy on the journey now on with the show. Welcome to the revolution show at zoo at Zora wealthy thanks Alex Great. To have you on the cost this is A. View as begin at Saratoga, Mia. Tweak you'll be a closing APP show says day at the fifteenth sorry. Delighted to have you speak at conference as. A lost being at speaking to your team mini for for years is this rate of the full SAS conference in action. And we get you to Dublin. But I understand that as a CEO of public company to solve need to rely and you've got to be Europe with rights alignments But now it online unlike conferences that we've seen no small or accenture. Excite delighted that one of the Nice side benefits of what's going on right now. So pleasure to be here, I, know we big supporter. It's good to join the conference myself. Thank you. Thanks so team. We stopped with funding a little bit more battle guests. At changing who live well. I think I'm on the show primarily the role of founder and CEO of a company called Zoro. We really power some the best subscription. Businesses around the world. I started this just over a decade ago journey with subscriptions, which SAS has been a twenty year journey started off as salesforce dot com in nineteen, ninety nine. And on a personal side I grew up in Brooklyn new. York and fell in love with technology probably in the eighties rate with with with the IBM PC, it had released stayed in the software industry, my entire career. So it's been a great to be. In an industry that that we're all really really passionate about the end and really gladys. We'd take the lessons that we've learned from the industry over the last twenty years and apply to all sorts of companies around the world previously CMO, and she strikes offset at sales foods and visited about that journey in. I guess joining may two synagogues wrongs with insights was enabled let to founding Zora ladies to start your company. Well by salesforce returning early nineteen. Ninety nine. and. I've been one of the folks that just played with the. Internet. In in the early days I was at Oracle I think when the browser. This is going to be going back. To? Mosaic. First came out in. Oracle was one of the companies that embraced the Internet actually marked Benny off person or the most. and. So fast for two ninety nine. At the time it, it was a throws the DOT COM boom. There was Web van pets.com All these companies that were were were trying to reinvent the world probably probably about five ten years too early honestly in a lot of the themes are issue successes now. but I thought I really wanted to be an internet company. But I my software background, my enterprise software background. I was looking for something that was combining enterprise software. With the Internet found. Cup because salesforce dot com, just come out of stealth mode. The website was three pages has some clip art on it I sent my email my resume to cool jobs at salesforce dot com next you know. Odds House since there were no offices yet. And I joined it was you know it was about ten eleven people free product pre customer. And if you simplify down. Shells was really about two things about trying to figure out how to use a new technology model. The Internet SAS cloud computing to to rethink software to try to fix a lot of the things that we thought were broken about software but just as important to that hand in hand with that was this idea of using a new business model. Right of you business model, he called A pay-as-you-go subscription based business model issue didn't have to. Millions of millions of dollars on civil upfront. You can simply just pay fifty dollars. A month I think is what we started with. In get going and the journey you know whether it was product whether it was marketing whether it was it was running strategy function. The last three years was to to to figure out how to disrupt the industry with this new business model. Obviously, you know in hindsight successful at that. So fast forward now, the two, thousand seven. We set ourselves, set ourselves me my co founders who from Webex saying, no, very similar journey. Instead is. Is Subscriptions really it just a software thing. Right or can really apply anything and we look around and we said look cars who is a service called Zipcar and there's lots of folks in. Universities at, there's no reason to buy a car you simply. A subscribe Zipcar. We looked at Netflix. which was ill mealy DVD's at the time right the little red envelopes just in the US. and. We said it looks like there's millions of people out there that haven't bought. A DVD and in years in in so it's really the same theme. So if it can happen transportation if it can happen immediate entertainment if it's happening software white kid happening all industries. And so we started really to help the best companies in the world winner the subscription economy look at our revenues, our customer base. Now by only about half of it is is is high tech, and so we power eight of the ten car manufacturers power a media streaming services like his own or foxsports. Cayo down down in Australia. I-IT-IT's a big driver of the physical world really gets into into the game as well. But we really believe that could be a subscription business model and we believe that we're seeing the end of ownership right you didn't have to buy software don't buy cars pretty soon have to buy anything you can simply subscribe to the services that you. Can you share some insights into a CEO of a the company like Zora does learning to ensure that you're on the top of your game be the best the committee. Yeah. So the way I think about it is is you know we have this whole concept. Now we called the Z. that we call ourselves Zeo their employees whereas the whole idea release to say, look you know we're not interested in building a hierarchical. Command control top down system. Right at no one's inspired by that we. All WanNa be ourselves. We all want to bring our best selves the work we all want to be empowered capable in through the best work that doesn't require. You'll heavy heavy metal collaboration ratio without all on an island but we wanna see yourselves all his eos and show I have to ask myself just like everybody else in the company would is a unique thing that I bring into the equation right? You know I shouldn't be underwriting code or or or you know closing deals I'm certainly involved in a lot of. Those things right. But the different people own different things I. Think you know what I have to one is set the tone of the culture of the company, and so this has to be a self reflection. How how am how act values that I drive because those values will premiere through the organization and the second is to understand what's going on in the marketplace are not alone in that. But that's a big big part of what we do show ice. But a Lotta time you know talking to customers talking to partners right joining events where they're thinking about where the world is going. And looking at where technology companies are going try to learn right from outside the industry where the media sector is one sector that we looked to to pay attention to install colliding if you will and so you had to spend call it ten to twenty percent of your time right just external learning about what's going on in the marketplace if you're going to. Be Running Company. We would you say? That you played the visionary role raw than the integrator is now. Your height, the skating happening. Yeah. So we we actually have A. Leader, development, framework recalls Z. Leadership, and it actually looks at people and using factor analysis. You are you a leader that Dry by vision are you leading the drive through relationships or you leader drives through execution? If you look at the different leaders presidency, Ios, you can sort of see people have different styles. Jack Welsh was Ju- `execution that was relationships, rice jobs vision. A founder right of Tech Company foundered skew very heavily towards vision in in. So you're absolutely right that is my leadership style and I find that as a company could bigger that dimension actually winds growing right because you play to your strengths and you really let folks that are not terrible at execution but are people are just walk stores of execution. In you want you want them to relate really play that role we've been asking the. I guess, obviously, how being sexy boy you know the challenges of Twenty, twenty in the pandemic. Insecurity out resort is being affected on. End How customers being affected also. At twenty twenty, they go down in history as as as as an incredible Li stressful different era you these types of situations also can bring out the best. Of the best, in people the best in companies. Let me maybe tackled out in in two dimensions when it comes to ourselves. you'll just just just enormous amount of empathy is ultimately what's what's really really call for right and so you just gotTa understand right would be going through the situations having look it is across the board right? We have a we have folks that that that all of a sudden they're finding themselves at home. Kids they haven't seen a while teenagers right or of preteens and you know they're they're. They're actually really thriving that we have folks that are young kids alone at home elderly parents and they're struggling right and and really you railing bridge for the whole company were fortunate to be a subscription based business model. So there's a certain amount of resiliency with our business We have a double layer of resiliency were a subscription business. Our customers by definition are also description businesses in. So how do we translate the stability of our company the fortunate behalf into into a foundation that helps you know our employees in Our community, our customers, all everything else through this current situation. I think that's been the guide right that that that that we follow rates stability guide, you know help health sources simply to help our entire stakeholder community. Through Kurt situation, we look at our customers does the same thing were fortunate enough or they're fortunate to be subscription based business model and so when we did the analysis? Of Data in one of the things that we were able to do is sure. A bunch of the state. Right to hug your. Customers these what everybody else is doing these are the patterns easier. The trends, each the tools that we can give you. To successfully navigate this thing but will we found was half The country's relatively unaffected right there. Subscriber growth rates did not change meaningfully since the shelter place situation versus the previous twelve months. about twenty percent of the customers actually celebrated right the alleged the sweet spot. You'd think zoom think offender place you learning video streaming, right? These collaborative tools. These these these services, Rock, some of these folks Gulick 10x museum is a good example. But then even the companies were negatively affected. A lot of them were actually still growing the screen the slow rate. I mean what an awesome situation of via this year when you're seeing entire industries wiped out where you're saying look over my challenge right now is I'm just not going as fast as I was right but that's that's that's actually a great addition of being in the last group that actually shrinking a little bit. What we're finding is the stability of the subscription based business model means that are not going to disappear overnight the customers are all knock canceled their subscriptions right? There's. People are still actually paying AOL twenty dollars a month for for something or another, and so you'll these things have certain amount of resiliency and inertia to, and it gives them time to really pivot in the just because they know who their customers are in their in concert communications relationship, they have the customers, a lot of them are actually successfully navigating the current situation. So I think what we're finding is companies really waking up to the power this business model it's something that I think sas, companies raided this audience here for granted if you will right. But but but we shouldn't we should really be counter blessings that we have a resilient model that we can navigate through and it's been a shoe choice advantage for the Sassari. What have been your biggest lessons as leader route this year that that you could share. it's GonNa. Be. Extreme empathy if you look back at this year, right every month there's there's there's something else right. There's especially here in the US our social protests. Wildfires hurricanes right in. It's it's not about to be over right. We could have it pretty contentious election season coming up here in the US and so you just got to recognize that what people are going through and you gotta take it back to I'd link extreme empathy. And extreme unity right. Unity without empathy and so what is the Common Foundation? What does the Commission? What is the common vision that we all share now? Do we support each other to achieve that vision and mission? You mention previously about. SASCHA tweet from. Businesses being pretty. Resilient. In these times that Some comedies like zoo next record at Why why do you think assess is in some ways thriving lie so I swim Alexei resenting statewide. We seeing seventy is tax growth in in many th-they says sort of businesses. While we're witnessing we believe is trending be called the end of ownership. And it's in shifts in behavior typically take a long time right when we talk about the ship typically the first reaction when get. Why would I stop owning things? It's so intrinsic. To how we grew up how we're taught? Less and less. So when you go into the younger generation certainly. But then you stop and think about it right that that you need to buy a car has shrunk ever since these by shared services have been around you haven't bought a DVD haven't bought a CD. I still see people who I signed up for Apple Music awhile right or spotify. They still by a few songs and they realized why doing this doesn't make any sense I've got access to the whole library of songs and they realize it's actually a much better model right? Sticking with the music example when you had save fifteen dollars before you can buy one. CD BY TEN SAN's. A month, and now with I, fifteen dollars, of CD a month you can listen anything right you can start exploring songs. You never heard before exploring artists you know getting guided by by by by your peers, another place, and so it's simply a much much better model, but it takes time for people in standards. So then you have this sheltered placing forced everybody into that situation I can't go out and so all I can do is tap into the services that that I have in. So you just seen this this massive acceleration in shift. Honor. Companies are saying look I don't WanNa by from Software Right? It doesn't make any sense I can't. So I might as well go to the SAS thing and I think that's the primary. Bijan in that's why this is not. This is not a you know this is not a pendulum that's going to swing back right this is a permanent shift into the future and and we simply just did it in in a quarter would normally might have taken three to five years. Do you think? Businesses will become subscription businesses it in the future we'll. Absolutely. They don't they don't have a choice they may not realize it'd been choice right because if they don't somebody else will in their customers, say Gosh using our services a lot better than dealing with the hassles of ownership I'm just going to shift over there. You've seen this having the car industry, which is why every car company is trying to figure this out in in. So it's pretty simple subscription based business models not about taking a product that you have. and. Then selling it over time letting people rent the product. The subscription based business model is about turning your customers into subscribers. Every company has customers. Every company has to stop thinking about their customers simply as somebody who's buying their product on the other side. Often you don't even know who they are. Right they're buying the store, they're buying dealers. In every company with digital technology today, I can actually know what my customers think about this. Every physical product is is being built today insult today connected to the Internet. Your vacuum cleaner connected, the Internet, your your your washing machine, your your car. Medical scanner your your caterpillar excavator. And so there's a moment. In, the SAS companies take it for granted now, but go back to nineteen eighty nine. Nineteen Ninety nine you know we're sitting around salesforce, we push out our first release ever of salesforce. In. Release four was right and it was it was it was you know it was probably data. We realized that look this way worse when she didn't call a Beta and. The, next day we start looking at the service we actually seen see what our customers are doing. And to any software developer up to lead then that was impossible right into it. You have to follow you home the see what you did with their software. It's very famous thing that they do. Because you just didn't know and also we can actually see and so you start obsessing about it. It's like well, why aren't these customers logged in? How can these customers not quitting contacts? These customers aren't creating reports I. Remember we called one customer up you actually using the product in customers like why are you calling me? I never called the support department INVER support. Until you start investing changing everything, you're doing based around that, and this is the SAS industry today. Right is why there's agile development is why you collect all this data customers you look at usage all that kind of stuff. Now imagine your car manufacturer. And for the first time you're like Oh, that's hell by drivers are actually driving these group of people actually comedian to work each be people are are are taking their kids to the soccer field right? Gosh. Is a big big variety of differences and then you start thinking about the medical scanner in engineer the says you know the doctors are using my product incorrectly. You know and and and I gotTA teach him how to use my product in the way that I designed it. Gosh I got to design it better. Maybe I should just take away some of the complexity of doing myself right and so every single physical product washing machines, bicycles, cars, they're all GonNa go through the same exact journey that software to institute has gone through the last twenty years and so you. Just GonNa see that you're GonNa see the whole physical world will world wake up and basically get merged into the digital world engineers broader subscription services. This is essentially what Uber is right bringing all cars into the digital economy and and and so it's going to happen it's going to happen in every single industry. What advice would you give to the listening now looking to stop a saas list description is tonight. Yeah I calm. I think there's so many lessons. About Sassaman is such a rich body of material that you can just see out there but we have none of this stuff at Salesforce O. Inventing all these things. But the because we had invented all these things we meet me pave new pass we pave new trails in. So you know live vice anybody that starting something is to say look be careful about simply replicating the past right because if you replicate the past, you'll be average. and. So Ah progresses always happening technology's always going forward What are the next things? Right how can you reinvent the SAS industry right? What is the next big thing that that's out there that you're tapping into it to be the company of figures that out right will voltage into a leadership position and so don't lose the essence of Innovation Dome the essence of finding the next thing, right that really makes industry. We always also Kesse fun aggression ally stay healthy inside. So Keen Salah in your way our stay helping scene look. You know. Startups. Are are certainly a roller coaster. Right, by CJ used to like to use a phrase, the violence of startup just pinkus imagery of like. Ocean, waves crashing against the rocks. Right. It's in. So show if you're gonNA have ups and downs and you gotTa keep an even Keel over the sometimes the way I think about this is is is last man standing right is is, is there something about the subscription business model where you have some level resiliency I'll tell you a story your Dan Springer who's a seal of Docu sign US previously seen responses response customer. A salesperson ultimately in Oracle bought them. took over I was assuming at the time. So he came to say so yes, the customer. And he told me that response have just gone through a tough ace. And they spent three years in had not signed on a single new customer. I mean that would have destroyed like like ninety percent of businesses but because the product was sticky, you used at salesforce back there. I think the revenues went from something like twenty, million, nineteen, million to eighteen, million Celio. They have a little bit of a decline, but he was able to take that business transform it. Rocketed two hundred million dollars when public notably oracle and so there's a resiliency to his business model if you if you do it right if you focus on your coverage customers refocused stickiness and so so if you stick with it and continue to figure out, you can navigate yourself into into to a really good place and so on and so don't don't don't. Is than the OPS, less than the downs and be more even keeled about this rate and and just just just be smart about how you do things and then find balance ultimately you know. Way a way to work through a roller coaster situation or the you know the violence of a startup situation is to have that that that that balance. Another time. I WanNa know advisor your mentoring a lot of. Founders There's one person I met with a quarterly basis. We have coffee looked at his face. As Guy, you know, let's let's just take this coffee for a walk and we went around for two hour walk and Just talking about like has gone your personal life and what's going on right and just just to kind of get him out of that moment and realized that look. No matter how bad things are these aren't as bad as this needs to be right are as good as seems to be just me more even keeled about it and make sure you have. You also have a life outside of work on that note. At Thank you add scenes. for being greg asked him suspect Blue Shark at and we're looking for GIO it'll get sessile an expert. To Be. Talking to you joined by is that right? Yeah. I think Richard I'm not sure which is One of the best reporters out there he's always asked a bunch of great questions and I think it'd be great show encourage everybody to to to to to. Thanks for tuning into this week's episode of the suspect pollution show a hope you enjoyed it, and if you learn something from it, checkout SAS stock dot com slash events to find all the coming sesto conferences around the world.

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#177 - Alex Rubalcava - We Want To Help Build Companies That Are Solving Hard Problems That Matter

The Meb Faber Show

1:07:41 hr | 2 years ago

#177 - Alex Rubalcava - We Want To Help Build Companies That Are Solving Hard Problems That Matter

"Welcome to the MED favourite show where the focus is on on helping you grow and preserve your wealth join us as we discussed the craft of investing and uncovered new and profitable ideas all to help you grow wealthier and wiser better investing starts here favors the CO founder and Chief Investment Officer at Cambria Cambria Investment Management do industry regulations. He will not discuss any of cameras phones on this podcast. All opinions expressed by podcasts participants are solely their own opinions and do not reflect the opinion of Cambria investment management or its affiliates for more information visit CAMBRIA INVESTMENTS DOT com. Eh podcast listeners hope you're enjoying your summer out of the sweltering Sun. We got a great show for you or bringing back my friend and our guests from episode number seventy eight is a GPS CO founder stage venture partner is a seed venture firm focused on emerging software tech for B. Two B. markets he's been a pro- investor for almost two decades now starting careers and analysts at anthem leading BC firm and Santa Monica and he also ran a long short fund for about a decade welcome back to the show Alex Rubalcaba. Thanks it's great to be back so man what's going on in the world. You've been busy on your third fund now. Congratulations thank you thank very fake. Keep getting bigger and better what's the state of looking like these days well. We're actively investing. We've got twenty three portfolio companies now in all sorts of areas in enterprise software everything from e commerce to artificial intelligence to defense and aerospace and so we've got a lot of really exciting companies and it's an interesting meantime in the market one of the things that we keep hearing is that there's all this money sloshing around and that there's lots and lots of people investing and there's lots of sloppy activity vity out of the market and actually Kinda wrong was wrong because there's never any money sloshing around me. I hear it the sloshes going on somewhere but I don't know where the sloshes washes but okay tell me what's happening yeah people who talk about money sloshing around I think have probably never raise capital for LP's or maybe there's friends with obscene too soon soon. Let's go out so one of the things that I think is really interesting in the market right. Now is how hard it is to raise a series. You look a few years ago. Even five eight years ago raising a series A. For an enterprise software company meant that you had to get to a million maybe a million and a half in annual recurring revenue air are and across all the companies that we see today. That's just not the case anymore. The Bar has gotten a lot higher right now. You probably have to be doing somewhere between two and three million dollars in error and growing at a hundred and fifty percent annually or more in order to attract top tier. VC to complete your round now is part of that because simply the definitions have all shifted down. One letter is it because seed is now really series a and series as now series B. and whatever used to be seed is now called precede or something I was there was actually like a monetary. Almost definition is like look this market cap. This is what this round is but I get it. Is there an element of that that the more people in the game yeah it's partially that and so if you look at what a seed round was a decade ago so when the institutional seed market really began developing as an asset class that type of around was five hundred thousand dollar raise on like a two or three million dollar premium evaluation and often that was enough to get you to then a five million dollar series on twelve or fifteen or eighteen a million pre and now companies often spend two or three years between formation raising a often for years sometimes and and to get a series from a leading venture capital firm. The average amount of money that is raised is around five to six million dollars before the the series a really spend it all on. That's a lot of money not office parties. Okay hopefully Max so it's actually not sloshing around as much as you think thank. You don't believe it is much but what's the general state. Are you seeing tons of opportunity from the standpoint of companies you talk to. Is it a desert as it toys us. What's going on well? It's pretty active out there. We are on track to see something on the order of fifteen hundred startups this year and we we will end up investing in somewhere between seven and ten in that time period so there's no shortage out there one of the interesting things about the seed market. That's a little little bit deceptive is that companies don't really report their seed rounds anymore. If you raise one million bucks a from an accelerator a couple of angel investors and maybe one small autopsy firm you're not generally putting a press release out about it and the industry newsletters the Priroda or the term sheet or strictly. BC email newsletters that go out every day aren't really reporting on rounds of that size even if they have been documented in filings and as as a result it looks like the activity in the seed market. It's way down year over year numbers for twenty nine thousand nine versus years past they look down but that's just because it's not getting report and they often get reported a year or two after the fact as part of a larger route for example we have a portfolio company called sound commerce up in Seattle that does ecommerce software and they just announced a major round led by Silicon Valley venture firm and aren't investment was was announced and it was the first time that anybody ever heard that we invested in that company when in fact we actually wrote the first check into that company a year ago. I feel like that's got to be a little challenging sometimes uh-huh. I'm y'all standpoint because you want to say hey look brilliant. We whereas amazing company I want. I'm going to demonstrate just how smart we were to be a part of this but at the same time the competition and being stealth is challenging to something totally unrelated. All of our conversations are recent podcast where we were talking about how Jay z just became hip hops first billionaire and I feel like it's a little bit of a Lazy Assessment of the world to look and say oh my gosh all these celebrities are now investing in Angel Deals feels. NBC whether it's athletes like Kevin durant whether it's other celebrities Ashton Kutcher local La Fella who been investing for a long time but part part of it. I think is actually it's simple. Come Away with that standpoint like all this dumb money's going in but once you see the success a lot of these guys have really had and they understand Dan this concept of being a equity owner or if you look at a lot of the celebrities and athletes that ended up making it to the billion dollar plus list list. It's never because of athletics or music. It's because of the business side Jay Z's was like champagne his streaming music service stakes Uber and everything else. I really have no question as you said. If there's a lot of money sloshing around I feel like a lot of people would seem that that would be a sign of it but it doesn't Roy feel like it is it's an interesting thing I always think of celebrities and athletes and entertainers investing in this area in like Peter Lynch Term Peter Lynch always said to invest in what you know and gee were out there trying to invest in cancer immunotherapy startups that would probably be a bad idea but he does know something about about branding high end spirits to dray it would be a good example to invest in what you know make sense and that's something that we have an interesting perspective on as a venture firm based aced here in L. A. A significant amount of our capital does come from the entertainment industry we've NBA All star. We have a superbowl winner we have a film producer we of a DJ. We have a significant singer all investors in our fund and many of them see their friends who are out there doing deals directly and have some degree of interest in what they're doing but they realize that maybe it's better to be a passive investor in fund as opposed to trying to do it yourself. If you really GonNa do it yourself. You've got to go all in and do it like Ashton Kutcher did and he to be clear doesn't do it by himself. He's got a fair amount of council and help that is involved. History is well. Here's a fourteen member team or so at sound ventures in I know a number of them and they're a real pro shop. They know what they're doing. Because it's a fulltime job man I try. I had to do it as a hobby and it's a lot I mean fifteen hundred companies how many of those what even the process or the vast majority those cold hold inquiries and any those ever even get past the AOL spam inbox. What's your process so only a subset or actually cold and over the transom most come from introductions from people we know from founders we've already backed from attorneys and financial professionals and service providers is to startups from accelerators from Angel Investors and whatnot and the funnel is about fifteen hundred or so in we will take hiccup meeting or a call with approximately five hundred per year that means more than one a day today I have to on my calendar and my partner rob has one one or two and about eighty percent of them we don't get past first meeting with we thank them for coming in and pitching but it isn't a fit for us we do meaningful work on about seventy five per year so right now in our crm we have five that are marked as in process in in diligence and and that leads to them the seven ten that we end up doing well as a lot of balls in the Air I imagine and not on top of that also is still keeping tabs with your current portfolio? FOIA COMPANIES ARE GONNA raise future rounds that you're still many think you mentioned you. We'll do a follow on investment if it makes sense that's correct and so the looking for startups to invest in researching them part of the job is only a third the building the business aspects of raising capital and then the most important part which is is being there for our portfolio company founders that's by far the most important part we sort of viewer investors are LP's as our shareholders and we view our our founders the founders of our startups as our customers and we believe a lot of companies do that the way to have good things happened for shareholders is to take a customer centric approach coach. We always tell people that we think of ourselves like costco trader. Joe's you treat your customers. Shareholders will do well by extension and that means all sorts of stuff. We have a portfolio company that just recently completed a significant seed growth raise so not quite a series but a big important round with some great investors where the rays took six months in the process of company became very low on cash we had to bridge the company along with one one of our co investors and then when the leads that we had introduced to the company put a term sheet out the deal went from going nowhere for five months to being over subscribed in about eleven days and helping to manage that process and to help the founders through fundraising which can be very confusing in different from anything they've ever done before is a big part of what we do I think as we look around the private space and and as we also you're a long-term public markets guy as you look around public space too. I think people would say you know what Alex. It seems like things are getting a little frothy in the public markets where romping stopping this year markets up twenty plus. We're recording this late July so depending on this comes out beyond me. It's up above twelve billion valuation a lot of people look at these many indicators eaters of what's going on in public markets particularly in tech and they a pull their hair out gnash their teeth say this is a bubble. Is that what it looks like to you so what's your takeaway on what's going on and sort of your world on the public side yeah and the public markets one of the great things that has changed in the last couple of years is that we finally have have an active. IPO Market for venture backed startups for a long time there was a worry in the industry about all the money piling up in the UNICORNS and how investors would ever see an exit from any of those companies and that was going to be a really serious problem in these see if it didn't get solved if we didn't start to have IPO now that the IPO wave has arrived a lot of the pundits are talking about. We have the opposite problem which is I can't believe all these. IPO appeals are now happening so I guess there's always a problem one way or the other one of the interesting things about the IPO market that I think think people misunderstand is that if you Google the phrase profitless IPO's you'll see dozens and dozens of articles. Everybody's talking about Oh there must be a bubble because all these companies without profits if it's her coming public misunderstands the nature of what an IPO is well it shows that Charles it's so easy to read tweet which is the percentage of companies going public Republicans unprofitable. It's certainly back two thousand all-time high right but if we think about what was going public in one thousand nine hundred nine you had the globe dot com and Pets.com and all the Gen one dot com that weren't just unprofitable didn't have viable business models we recently we just had guests on the podcast. You may know him. Bill Martin who runs raging capital Hedge Fund who had started raging bull so we were telling funny stories about he told oldest company just seem. Gi and CGI was like the poster child late nineties. I was a shareholder I guarantee you. I had capital loss carry forwards for a decade for that saw in some of these names ring back a lot of not so fond memories all right keep going so yes if you look at the globe dot com or pets.com from those those were companies that did not have viable the business models and if you compare that to some of the profitless IPO's of today there's a big distinction so on the one hand we have had for many years. This is not changed in two thousand eighteen or twenty nineteen a lot of companies coming public that our research biotech companies that you don't have any drugs that have gotten through three trials but that have drugs that are in the pipeline and that hasn't changed and most people most individual investors. They're not buying those stocks. They're not in indexes. People don't have a large degree of exposure to them and there's not enough of them and enough market capitalisation in them to make it a bubble. It's just how we finance biotech companies. They go public after awhile usually before they have a drug on the market so that's that then we have another classify peos that has not been a bubble for quite some time I would argue is not today which is we've a lot of private equity backed companies not venture venture backed companies but more old-line non tech companies owned by the Apollo's and the KKR's of the world that IPO many of them IPO with significant financial leverage they're five or six or seven times debt Ebitda and they'll have substantial ebitda won't have net income or EPS US at the time they go public because they have that leverage the IPO itself in the cash generated from that to de Leverage and then a few a years of single digit revenue growth and some operating and financial leverage associated with that. We'll take a profit free. IPO owned by a PE firm turn that into a solid cash flow EPS producer in just a few years and that happens all the time and so that's not a sign of a bubble either so then the question is are all of these venture and you're backed startups that are going public a sign of a bubble and I would argue that they're not because we need them to go public. The volume of companies like that that are going going public is still not high by historical standards. It's high by the standards of having almost no activity like that from two thousand thirteen to two thousand seventeen but it's it's happening and the companies that have gone public that have felt highly valued over the last few years have turned out to be real solid performers shop affi- and Atlassian and and service now and companies like that that felt like they were high priced a few years ago are actually companies that have put up really really outstanding performance in the public markets in part of it. Is You mentioned before the has to do with the SAS business model meaning than is possible that in times past I don't now my mom certainly wasn't on the Internet in the ninety s now she is buying CBD CBD Lotion or whatever she may be buying but just kidding mom MOMS are number one podcast listener. The world has changed over the last twenty years as well. Maybe talk a little bit about that about this. Ask companies how that might it'd be a little bit different or not software his become a totally different kind of a business model over the last twenty years. No one sells software anymore on a one time license fee basis. It's all sold on a subscription basis and that makes the company much more financially analyze -able it makes it much more predictable and it becomes a company that earns a different valuation multiple when that happens and when you're looking at SASS company that's growing that incurs all of its customer acquisition costs are indeed up front and then earns revenue back over time if if they're growing they will not show gap profits period and so- profitability is wrong measure there you have to look at essentially what you might consider a peak growth accounting statement or a cohort retention statement these might be the new analogs have been income statement and balance sheet for us. Ask Company you have to look at what is is there customer retention. What is the payback period on customer acquisition costs? You have to look at how well they up. Sell all those those kind of things in order to have an estimate of whether it's a good business or not in gap accounting was not built for that we should I have one coming down the pipe pretty quickly here. Soons been a lot in the news lately. There's been a pretty wide dispersion of IPO performance this past year. There's been some that have been flat. There's some that have been pummeled. There are some like beyond me that have just shot to the moon. What do you think we were going to do? So community adjusted abacus is kind of financial metric and I would argue we work is more akin to lift and Uber and a few other companies like that that are essentially regular companies that are trying to drag US tech companies. They're not really tech DOC companies. They're not software companies. We work is basically a gigantic asset liability mismatch that is trying to call itself a Tech Company and so those are the kinds of public tech companies that I would be cautious about because it's really hard to see what sustainable bowl cash generating model looks like for a company like that. Do you feel there's any disconnect or not. Between SORTA public private markets on evaluations on some of the deals you see on any point in the sort of funding spectrum really only at the late stages where a few companies unease got very highly priced by later stage investors they got Softbank Yahoo. Got Got Unicorn hunting fever. There's news news out that Softbank maybe announcing the New Vision Fund to sometime in the next couple of days and it'll be an interesting to see how many of their LP's from one have reupped how you get any kind of returns that are materially different from what you can do in the public markets when you are investing one hundred billion dollars at a time into late stage. UNICORNS is a hard thing for me to understand well. It's funny because a lot of the literature shows that you can do a pretty good job of replicating the average returns of private equity or VC which really the whole point is. You don't want to be average there otherwise is there's no point in doing it. Because you end up looking like some factor based stock exposure. We had a great. VCE replication ticker there was Unicorn that we lost lost cause. I was too lazy and wasn't paying attention so whoever got that Kudos to you guys but anyway you know what's funny. It's odd from someone who kind of toys around around with private investing been doing it. Since twenty fourteen you read all of these amazing founders doing the coolest stuff and every day I read these profiles problems are tackling and the successor having and it's like the most optimistic industry to be a part of because these people are brilliant. The founders founders are their hardworking men on the flip side you watch a lot of public markets newsflow and it's universally negative you've flipped on. CNBC where he football on twitter and everything else and I feel like all I wanNA do when I consume public market information is by puts and all I wanNA do when I read about private. Markets and startups is invest all my money in them so maybe that's a good barbell by bunch of puts and also invest in startups. I wanted to talk quite a bit about some sector ideas. He is with you. I saw great presentation the you did but before we get to that I wanNA talk about a few more sort of private investing concepts that we touched on in our first podcast listeners. If you didn't hear go back because I think it's really important so important that it fundamentally can change the return stream of the asset class in very significant amount but it's also a topic that almost no one pays attention attention to or understands I think you and I were the first ones on the podcast go down the USB s you WanNa give us a quick overview again for the listeners who are newer to the show. Oh yes so BS stands for qualified small business stock that is a class of companies that is defined in the Internal Revenue Code in section twelve o two of the code that has some really favorable tax treatment for it. Would it basically says is that if you invest in a qualifying small business that is not in an excluded industry like real estate or restaurants oil and gas exploration or financial or professional services and then you hold that stock for five years and then you sell it to any third party you can exclude from taxation one hundred percent of your gains the up to ten million dollars or ten times your investment whichever is greater per issuer which is enormous right so if you put fifty thousand dollars into a start up you would then have to turn that fifty thousand dollars into ten million dollars two hundred four hundred times or money an enormous amount of money in order to actually have to pay federal taxes now. If you happen to live in California like to us. Do we still have to pay art thirteen percent to you. The Franchise Tax Board and I don't know what the rules are in other states. You have to ask your tax advisor about that but you can exclude the gains from federal taxation and that's that's a really big deal now. It's important to note that in order to qualify a business has to be a C. Corp not an LLC not any other kind of passenger vehicle and it has to have gross balance sheet assets of under fifty million dollars. That's not evaluation of fifty million dollars that total assets on the balance sheet okay so that's interesting last part because theoretically you could have a company valued over fifty million but just have no general assets on the balance sheet you have a company that has a two hundred million dollar valuation but has no inventory peony and runs most thinks through the income statement and has very little on the balance sheet and would have less than fifty million dollars of capital generally when a company is raising capital in their stock purchase disagreements they will include a clause that says this company is a qualifying issuer under the rules and and if you have any doubt about whether a company is when you're looking at making an investment you can just ask them. Can you put this in your documents. If you are in fact qualifying and any attorney who routinely deals with emerging growth companies can handle something like that easily and so for the listeners that maybe are investing in private companies or want to or have been but not doing this. Do you just elected on your tax form. Is it something you can do if you're investing in. VC firms uh-huh and funds does it work there to house work yeah so you simply take the exclusion when you are filing your capital gains taxes. There's a worksheet with some. IRS number that I can't recall off the top of my head that allows you to report that and exclude the taxes and then you get that tax benefit weather there you invest directly into a startup yourself or you invest into a venture capital fund that then makes the Investment Smith in the underlying startup. The one caveat is that if you're an investor in venture fund you have to be an investor in that fund before it invests in a portfolio company in order we get the benefit of that portfolio companies. Many venture firms are open for a year or so to take new money so let's say a venture firm has a I close on January first it and then it makes an investment on February fifteenth and then it has another closed on April first. If you came in on April first you would still own your pro rata percentage of the portfolio company that was purchased by that venture firm on February fifteenth but if that accompany then goes on to generate big gains. You'll have to pay taxes on those games if you came in after February fifteenth so does the L. Pioneer Fund elect the US BS on his end or is it you do it is probably on the L. P. We basically adventure firm will send information to the LP's about which gains are qualified in which gains are not when reporting on a k. one and they often put in supplemental instructions to CPA's for the LP's because a lot of CPA's. I've actually never taken advantage of this provision of the tax code before and it does require some education from time to time we meet CPA's and tax attorneys and folks all the time who have never encountered this part of the tax code and it really can make people's eyes pop when when you look at it as an investor I mean it's like one of the biggest potential tax benefits I can even think of and if you like I remember seeing this and you may or may not know and correct me if I'm wrong to that. If the investment doesn't go five years you can still if you have again you can roll it forward. That's correct. That's called a ten forty two rollover which is roughly equivalent to a real estate ten thirty one rollover in order to do you so there are time limits and qualification that's and so it's something that is not super easy to take advantage of but can be done if you have enough enough advance warning and are in communication with your portfolio companies about when exits are likely to happen and you have ongoing deal flow so you have to have both sides in Sync Lincoln spinning at the same rate in order to really take advantage of that you gotTa Semir. CPA later I do all my tax myself and it's an absolute mess. I did did that for the last time last year and now that I have as many. LLC's LP's involved in my taxes. This is the last year I will ever do that. I don't know how this is still situation. I mean our government. God bless him but it's so complicated I mean you literally do this for a living and investing in finance and it takes me like a week and I don't even even own a house I have like the most simple investing situation on the planet and it still takes me forever so yeah but we owned businesses and so when you have all the moving pieces is an entity that we do. It's not like it's just a single w okay so listeners. This is a huge benefit. If you do any sort of private investing you mention special purpose vehicles does may or may not be passed through. I've heard both I've heard. CPA's say that it it looks through if they were buying original issuance not if they were buying in stock from employees yes whether it's an sp or adventure fund the QA benefits only accrue when you are buying original primary shares not secondary shares and so the dollars that you use to purchase the shares have to show up on the balance sheet of the underlying company Yup yeah so something like an equities n or what's the other one call the secondary market share post. There's a couple of second market it probably wouldn't qualify those none of that does and in fact most of the companies that are on platforms like that are later stage UNICORNS that are well beyond the fifty million dollar balance sheet qualification stage. We've had had equities in folks on a few times and love talking about them. I've only done a few on there but I think it's an interesting kind of bridge the gap between the early stage and pre IPO if if you really want some but they got a bunch on there it's been interesting all right so we got a little bit landscape going on. We talked about kind of private public situation what's going on on the IPO markets. You guys are finding plenty of deal flow quality companies. How long do you have to put all this Moola? Who Long to work on on three take a couple of years? Usually it takes about three years to make new investments in so per fund. We have about twenty five five portfolio companies. You need to have enough to get the benefit of diversification and enough that you can be active involved in the company and be there to help the founders throw of the challenges of growth that they will encounter and so for us that pace about seven to ten investments per a year as we sit here in July. We have done for investments this year so we're right on that pace. I feel it's gotta be hard to manage the spacing of that. You can't really control the companies you mean the timing Ming. I feel like it'd be so challenging. You just met like twenty and q one Guy. These are all amazing not to get the temporal side of it. Is that a challenge to manage at all or we try not demanded. Actually we try not to let ourselves get too focused on that metric and so we're perfectly happy to go extended periods of time between gene investments last year was a good example. We did one investment in January one in February and then none until the fourth week of August and in the fourth week of August last year we did three deals in four days. Is it as far as over the last. When did you guys start the company in two thousand fifteen hundred fifteen so over the past four or five years? Have you noticed any material difference on the competitiveness for deals. Is it been pretty stable as it got more or less us. Competitive is trying to elbow out other. BC's I feel like you guys source a lot of years. We're often not fighting with other. BBC's that's usually the case case. We are often gaining two companies very early. They're typically companies that have raised less than a million dollars in capital mostly from angels or accelerators generators or friends and family and where they're looking only to raise one to three million and we often just get to them pretty early. There are other occasions where we find a deal where we I know it's going to be really hot and we have to move very fast. One of those deals that we did in August of two thousand eighteen was like that where it was an incredibly dynamic founder. It was a company with a product that was very charismatic. What I mean by that is that it was a physical oh product that was mostly software but it had a hardware component to it and it was really easy to demo it was really tangible and salient in a way that got people's attention and they already had pretty big in interesting customers lined up and so the moment we saw this one we knew that this was going to be one of the hottest deals in? La that year we're in two thousand eighteen and we had to move heaven and earth to be a part of it and to fight took get room on that deal and get an allocation and luckily we did and we've been very happy with that. I'm I'm always fascinated by this is truth public equities to but looking back at private deals on how I'm sure you love all your children the same but over over the past five years if you could at the time maybe said look these are my three favorite. These are going to be the ones or you like all the other ones. Maybe maybe didn't have the same level of confidence that at least in the short time period there have been any translation into eventual success or do you think your initial initial optimism correlates to their eventual performance ensuing years it we have an interesting example of that we have a company that does artificial intelligence software there to help call center representatives with their conversations and to coach them live during a conversation in order to close closed sale more effectively or to provide more effective customer service and this company was founded by three you guys who were twenty three years old when they started the company had very limited experience and they started the company on nothing and I mean nothing they started this on a shoestring. They got a product out on a shoestring and the first version of their product outperformed competitive it products that have raised fifty to one hundred million dollars in venture capital and they got a handful of national customers on the basis of that and we found the company we had we looked at a number of those competitors that had gone on to raise a lot of money and had passed on all of them so we had a prepared mind for this one and were able to develop a lot of conviction from meeting the founders understanding how they made their decisions and then talking to their customers about why this was such a special company so we were raring to go we were super excited about it and then we had to assemble a group of investors most of whom we had never worked with before to come in complete the round with us and there were a lot of doubts about the technical team of the company. There were a lot of doubts about their maturity is founders and there were a Lotta doubts about how they could have done something like they've done. How real could this be? It's also a company that's in the Midwest and they were just very far from a lot of people who are natural investors in that space ace and that was a hard around put together that took months of effort that took a lot of persuasion and cajoling and from the moment the dollars went into the company last year. Everything has been straight up and I mean everything they have hired an incredible technical team. There's was a better into the story for the moment. The dollars hit the disappeared into South America. I never to be seen again. They are signing customers faster every month. They're cycling on their product faster every month. They're hiring an army of young business development reps who are being trained trained in the most effective sales culture I've ever seen at any company and that company has just completed a small internal growth round where we invited one other investor to come in alongside us and every one of the insiders put up as much money as they could and for the one slot we had available for an outsider we had almost nobody nobody say no and so we went from being an incredibly hard company to finance a year ago to one that everybody now wants to be in this year. It's so fun when you you see that product market flywheel hit I mean it just exponentially just takes off. It's rare course but it's fun when they do happen happened because it's just like magic. It's like where's this been and all of a sudden it just spreads like wildfire and it's fun because some of the folks that had real doubts about that company a year ago aw now say oh this was totally inevitable and I'm like I had to pull you by your hair across the finish line here it was not this is probably a good segue anyway. I mean me and I got to see you. Give it to talk casted. Omar shutters Los lows just kidding. Neither questions making sure you're paying attention all on the same block a It was a great presentation room packed the topic in general was a which is something a lot in the news everywhere like there's a lot of misunderstanding fanning. Why don't you give us just kind of a little bit of an overview what's going on in the world there that sector that theme what is far as with a bent towards investment implications implications the robots can take all jobs what's going on yeah so we're very active investors in the space of artificial intelligence and machine learning a whole a bunch of our companies use these new tools that are now available to solve problems that had never been solved software before or to automate processes that that had never been automated before and were extremely bullish on that sector we think that we're in the very early innings of a deployment phase that is going to take take decades probably the rest of our professional careers to really play through and it's going to create a tremendous amount of value but I think people have seen too many Hollywood movies about terminators Matrix sees and the like that they've gotten really worried about? Ai Taking our jobs and and we actually have the opposite view were massively bullish on ai from an investment perspective but simultaneously we think that it is silly and premature to worry about the effect of Ai on the job market and we have that view for a few reasons number one. It feels funny that people are worrying about job loss when we have the lowest structural unemployment in fifty years in his knocking on ever yeah darn close yeah and if you look through the headlines of the core unemployment climate rate and in to some of its components it's even better than it looks in a lot of ways labor. Force participation is about as high as it can get adjusted for the age age of the population. There are basically no workers in the workforce left that can be absorbed into the workforce right now we're getting maximum awesome and penetration of almost every demographic and it doesn't seem likely to change obviously we will have economic cycles in this country and unemployment will go up when that happened happened may never happen again. Trump maybe here for life. I don't know Rybakov. Oh we're GONNA have to watch the next election at a different bar this year or next year whenever it was Oh man November member at twenty sixteen was quite a night wasn't it. Where do we watch that wasn't bigfoot? What was the name of the it was someone culver city? Okay we go pick a different location and I remember when we saw the Florida numbers come in and unite both whipped out our phones and started doing the math on that and kind of looked at each other silently down you did the math I was has just blissfully just watching TV and having a beer and you set your face is trained to call you over. Everyone is cheering. There's like confetti going on in the room and then he said this is it you should have been online on the betting markets trading the futures at that point. I guess I should have yeah all right so the business cycle we think isn't just totally kaput. Keep going right so one of the reasons that were very skeptical of this idea that the robots are gonNA take. All of our jobs is because has we think that there are going to be more job openings then we can handle and that the robot knocking to be coming fast enough and one of the reasons we think that is that there there has been a real shift in the demographics of this country over the last ten years that I don't think a lot of people are paying attention to what I mean by that is that in the forty years before twenty ten or so our country was dealing with the absorption of five simultaneous supply shocks to the labor market that all conspire to make low skilled low wage labor abundant fungible and cheap deep those supply shocks were the fact that we had manufacturing go from about twenty five percent of jobs down to seven or eight we we had especially in the early period in the fifties sixties and seventies women entering the workforce for the first time and the discrimination that was present present against women and that is still present has held down wages and the industries that they have tended to go into we have had weak and a performing public schools calls that did not help kids with the skills that were necessary. We had immigration to this country that was tilted towards low skill skill immigration and we had a wave of mass incarceration in the country that left a lot of people once they came out of incarceration with Ed Very Limited job prospects and a lot of hostility to them from employers and what's interesting is that every one of those supply shocks over every single one is over. Some of them are easy easy. There's no third gender to absorb into the workforce. That process is over. You can't lose twenty five percent of manufacturing jobs again because we only they have seven percent of the total labor force that could even be lost and I would argue. We're probably pretty close to a floor. They're low skill immigration in this country has basically been over for the last fifteen years. The Modal Person Coming to America today is a Southeast Asian with a master's degree not someone from Latin America with an eighth grade education entering illegally which is what it was in the past and it is no longer that that's partially because demographics Latin America are so different the fertility rate so different there the educational achievement is so much higher than it used to be that the incentive to migrate is different from what it was on speaking broadly. There are certainly places says in Central America where that's not true today and then mass incarceration is something that I don't think a lot of people are paying attention to but the incarceration and rate the prison population both of those numbers peaked eight or nine years ago and have been coming down at mid single digit rates and it's only gonNA get faster Mr Because if you look at the demographics of WHO's incarcerated it's basically people our age and older people in their forties fifties and sixties if you look at eighteen into 21-year-olds their incarceration rate and the rate of committing crimes relative to even just twenty years ago is down like seventy or eighty percent so the prisons are GonNa the empty in a few years and we'll have an entire new generation that will be graduating from college that will never been imprisoned that will be working. I'm good jobs and none of that generation under the people that describes our ever GonNa WanNa pick lettuce. None of them are ever going to want to flip burgers. None of them are ever. I'M GONNA WANNA be truck drivers who are not gonNA WANNA be security guards and so all of these kind of jobs all of these kind of businesses that were built on the assumption and it was always an implicit assumption. Nobody ever really thought of it this way that this kind of labor was always going to be there that it was going to be interchangeable and that they would never have bargaining power. That's over one of my favorite places where you can see that where any of your readers can go and just look at the data themselves is look at publicly traded restaurant restaurant operators look at the chapels of the world or the company that owns all the Burger King Carl's restaurant group look at any of these companies and look at what Labor as a percentage of revenue was eight ten twelve years ago. You can exclude two thousand nine because two thousand nine was tough year but look at those financials and Edgar earned what you'll see is that Labor was twenty two twenty three twenty four percent of top line revenue then and for most of these companies his labors now thirty thirty one thirty two or thirty three percent and these are businesses that have like seven or eight percent ebitda margins if they've been able to maintain the EBITDA margin which not all of them have they have taken out massive amounts of costs elsewhere in their business. They don't have that kind of cost cutting left available available to them. If we have another seven or eight hundred basis points of inflation low skill labor those businesses break. I believe that large the amounts of businesses that are built on low skilled labor in America are in the process of breaking and we don't realize it yet so short the low skilled Labor Dulong they I or I guess it'd be a bar by Yulong both because it'd benefit them if they they started to develop short the employers that are unable to aw respond quickly enough all right so talk to me a little bit about some investment implications. What are you seeing is in the? Ai Space is or you can talk about a little more of the science if you want what's going on and developments blank slate so at high level any kind of AI that that is being deployed. Today commercially is doing one of four things it is doing segmentation optimization anomaly detection and recognizing objects. We use the MNEMONIC Sore S. A. R. to describe those four things in general commercially ice systems are being built out of those blocks folks in order to do one of two things they are automating a process that used to be done by a human or they are making a prediction about the future that used to be done by human. That's basically it. That's what's being deployed commercially today there will be more building blocks that are coming out of academia today that will be part of the commercial tool tool kit of AI in five or eight or ten years but that's what's commercially available and so one of the things that it's doing is that a is tending to make things that used to be expensive cheap and when you take something that used to be scarce and expensive and you make it cheap and abundant you you end up consuming a lot more of a particular resource one of our favorite examples of that is banking when ATM's came out people thought that they were never be bank tellers anymore there are more bank tellers today than there were in one thousand nine hundred eighty to eighty three when ATM's I started coming out what has happened is that that we as consumers use a lot more banking services today than we did when I came out so today one of the first applications where the core building blocks of ai are immediately applicable is analyzing radiological scans basically doing with radiologists does looking at films that kind of computer vision application has been well demonstrated and so you get a lot of people saying oh you know all the radiologists are going to be out of jobs. That's not what's going to happen. What's going to happen up in the world is going to consume much more radiological services in the future than it does today? We're probably going to have the same number of radiologists doing ten times the amount of work that they've ever done before and serving ten times as many people and creating good outcomes as a result of that and I think that's a better way of thinking about what the market is GonNa do. When there's a new technology we should be thinking about? How can we wait this technology? How can we use it in ways that would feel frivolous sir profligate to us today because there's no marginal cost associated with it now and you're going to see that across all sorts of applications but it's also take time so you can take this any way you want? Are there any sort of case studies examples portfolio companies. Anything saying that you think is a good example of what's going on in that world or opportunities that you would like to see someone tackle that hasn't been what's kind and lay the land as far as maybe some real world examples of what's happened so we have a company called Vera Sim life very some life uses artificial intelligence wants to build bio simulation models that mimic the way that many species of animals absorb drugs into their system the way they metabolize absorb and react to drugs the application here is that every drug that gets through FDA testing it becomes a drug that we can take has gone through animal testing before it went through a phase one two and three human testing that animal testing is not super accurate it is expensive and most importantly it's really slow it's really time consuming and there is nothing more valuable to a pharmaceutical or for a biotech company than time from the moment that they file their patent application to the moment they get a drug on the market that can be ten or eleven years it could be a billion or two billion dollars of RND but if that drug can generate two or three or four billion dollars a year in sales you can get that drug to market cricket six months earlier. That's a billion dollars in so if you can take animal testing and instead of having to tested drug in forty rats let's or in ten monkeys and deal with the amount of time that's associated with that and just figure the right drugs to test and the right animals else to test them in at first and then one day skip that process you could create an enormous amount of value and you'll end up opening up what animal testing used to do and the ability you to get drugs to market to a much greater number of biotech and pharmaceutical companies at much lower cost and many more academic labs and universities -versities than has been the case before and where do they kind of stand in the process they pre product they starting to build it. They built it. We invested in the company when they have been incorporated for forty five days and they were a two person team without a line of code written at a single customer they are now about a dozen employees. They are working with the bluest of blue chip pharmaceutical companies the Bluest of blue chip research hospitals and academic labs in the country. What what I love about the founder of this company is that she didn't waste time with the B and c players in the market she went straight to the top and has built just the most incredible customer base you could ever want and that really gets the industry's attention when you've got this kind of a customer base? What's the ideal sort of you've structure that company that they then our customers are all the pharmaceutical companies and research institutions something that they would rather be an arm of one on eventually get acquired like what does the eventual evolution of that that company will not be able to achieve its mission if it gets acquired by one of its customers and the reason for that is that one one of the things that makes a valuable is large amounts of proprietary data that other people don't have if you don't have proprietary data if you already ready say oh we have better algorithms and everybody else then you might have a competitive advantage that will last for ninety to one hundred eighty days the algorithms rhythms consistently being improved the cutting edge work is always being published in academic papers and being released in an open source way and it is an unsustainable way to build the company but if you have data the nobody else has that's sustainable so in the case of a company like him they have convinced their customers Chris to share the results of the animal testing that they have done historically and contribute that data into Verissimo data co-op and you can imagine what a conversation like that must sound like to a general counsel of a pharmaceutical company you want me to do what but but good? Ai Companies can convince their customers that the value that they will receive from contributing their data to the co-op will vastly exceed what could potentially and rarely actually happens if that data was ever lost and as a result every customer that that company like Verissimo signs up the more powerful their product becomes and what we like about this company in addition to all the things we've already discussed is that no one was really trying to do this. Before verison. There are a few companies that have built by assimilation software on technology allergy stacks that are twenty years old but no one taking modern machine learning approach to it when we talk to the customers when we were doing our diligence on the company they said Yeah. There's not really a lot of people in the world who know software and machine learning really well and who knows animal testing really well but Joe Varsity is a doctor of veterinary medicine and a PhD and Comparative Oncology and Computer Science and she's worked in all these blue chip companies in the industry mystery basically taught us we would laugh anyone else out of the rooms if they tried to do this but joe we have to take her seriously and that's the kind of thing that gets me to whip out my checkbook so the proprietary data sets seems like that is having access or generating them is a huge competitive advantage. That's correct and it's a real challenge in terms of creativity for founders to figure out where to get them from is a use case where the companies vinnies or others that have the data sets. Try to extract either monetary economic toll for that often or is it more of just a trade horse-trade a pharmaceutical companies. They know that it benefits them. What's the little bit of both the best case can be transacted in a way that's mutually beneficial and that doesn't require eric cash payments often the companies that possessed the data that is valuable for a machine? Learning startup are not capable of exploiting that data themselves. They don't have the people they also may not have a critical mass of the data you might need ten customers data sets in order to build the minimum version of a working product and obviously those ten customers who are all likely to be competitive with one another are never going to come together to do this of their own accord if they were what to do so that would be a real interesting invitation to anti-trust regulators all right. That's a pretty cool company. I'm getting more that you're particularly enthused or do you think are fun ideas. We have a company called placer dot. Ai I feel like I've heard this one probably see me tweet about it okay so placer develops software to provide location intelligence in foot traffic analysis to owners of shopping centers and commercial real estate the way they do that is that they have location data. SDK A software development kit that collects data from a lot of cell phone apps what it does is it than anonymous it and aggregates that in a way that produces a map based interface showing where people are coming and going just on a doc basis to real estate properties and you can use it to do all sorts of really interesting things. If you have a multi chain restaurant you can use it to informed the decisions. You're making about where to put a new location so you don't cannibalize your existing locations. If you are a landlord and your intendant negotiations with the supermarket or with any other retailer that's talking to you you can see the kind of traffic that they're getting and how it compares to other units in the chain. If you are a tenant and you're thinking about where I want to locate you can locate next to complementary stores and in centers and Kamall's where you don't have access before where the demographics would be really similar. That company is growing tremendously fast. It's really really exciting company. He actually the plot of the Batman and joker movie doesn't Batman have that ability where he takes over all the cellphones and Geo locates and that's where Alfred's like I'm done and I'm not helping anymore because they're not our Morgan. Freeman says that or he's like I'm on this is too big. Brother viewed it Batman is using it to. I don't even remember at this point so that's one of the things that people often think about is that it feels somewhat like people are tracking them. Individually what's funny about that is that nobody is valuable. Leading off that tracking them individually has any commercial value. You and I do not shop enough that knowing right where we are is going to move the needle allies to wear a supermarket wants to locate their next door but in aggregate data about all of us is really valuable and so that's what's cool about places that pleasure is never going to report to anybody. In fact it's not even possible on their tech where Mab or were Alex is right now or where they have gone. That's not commercially valuable and that's not even part of the product but where large masses of people go how frequently they go how long they're staying in aggregate in dwell time that stuff has really really profound commercial value and it's different than the way that website collect that data with cookies. It's exactly the same we're just equipping offline businesses with the same kind of tools that all my businesses have had from the start. That's a fun one. Most is located in Kelly or you said he won. The mid West kind of all over police has their headquarters in Santa Cruz but they also have a very large team in Tel Aviv verisign the company. I mentioned to you earlier. They're based in San Francisco. We we have a company in Saint Louis called Balto software. They're the ones who do the call centre software and so we've companies everywhere we have a company in San Luis Obispo which is not necessarily a town that slow hello slow famous for their barbecue exactly and so we have a company at San Louis Obispo that does drone detection mitigation so they can protect critical facilities like nuclear power plants or military basis from people flying commercial drones over that restricted airspace we can detect them and we can mitigate the threat which is to say so that we can essentially issue new commands to that drought. Okay hold on stop say that again so the way you're taking down. The drone is it's not some land to air missile. It's not another drone at somehow. It's all software. It's all our F- communication wow no physical interdiction. No yeah no kidding and what is the drone. Do Stooge goes home. Yeah you send it back and that works. Yes I saw great youtube video the other day that was around for the July that someone a neighborhood equipped their drone with a Roman candle was tired of their neighbor being too noisy so the drones going overshooting Roman candle fireworks at everyone. We're not too far away from drone situation. I feel like getting a little little real and pretty scary at some point well. It's a pretty interesting thing because it used to be sufficient to protect property to build a fence into put up some cameras because you do not need to protect the vertical air column above your property. You just had to prevent somebody from jumping twenty feet or putting ladder up and coming over to your property now that anybody can buy a drone for eight hundred bucks and I and fly over any fence in the world and deliver a payload or conduct surveillance security means of very different from what it used to be surprising and you haven't seen more me knock on wood but more violence or terrorism or nefarious things going on with that already. You want to know what the biggest nefarious use use of drones is in the world today getting contraband into prisons. How no way there's do like a drop? Does it have to be high enough to no one can see it or does it actually they. You just go by at night or what's the at night a prisoner so large that it's essentially impossible to see drown especially if you just put a little bit of black tape over over the lights on the drone Joan I need to get a drone. My partner rob has to drown and he is a very avid drone photographer and we use all of his photography. The in our quarterly reports the only reason I can think of the possibly get one is either dislike record almost like sports bloopers like our friends buying volleyball or surfing or something I mean just totally nonsensical. I really have no use case for one but I just feel like I should buy one at some point. They're fun. They're fun product. They can do really interesting things. There are lots commercial applications for inspection for analysis things like that listeners. Alex is my go-to human version of wire cutter. is pestered him about when I was trying to get educated on VR and I don't even remember the system I bought playstation maybe and I don't particularly really have a addictive personality but I had bought the VR system and remember I was I going to try it out and we kind of amazing the problem with Vr when I was using it was it it's very much a solo endeavor at that point and back to the days of playing in BA jams and Video Games tecmo Komo Bowl with your friends when we were growing very social but it felt very antisocial but it's almost like watching an immersive movie but I remember like I'm going to try this one night and my wife's okay whatever I'm going to bed and then just heard this like Mab Mab lift up the hoods and Jackie who knows what are you doing. I'm like sweating sweating with like cramps my leg and I'm like just playing aliens shoot. 'EM UP. She said you know what time it is. I was like no way she's like. It's four in the morning. You've been doing this for like six hours. A non-stop and I'm like okay I just got to feed this mothership real quick and I'll be down but anyway as amazing to see the possibility of it. You're my Go-to for tech ideas. You'll have to send me correct drone Dubai and any new ideas we'll do if you're has been an interesting market we looked at hundreds of the our company's a few years ago and and that's been a really challenging sector we actually have not invested in any VR companies but it's an industry where they've been waiting and waiting and waiting for a real killer rap and it hasn't arrived yet and it's not clear whether that will arrive a year from now or five years from now ten years from now and you can see the flashes of potential like the Pokemon game game where took the world by storm for a little while when you experience the Vr wow I can see how this has potential but it's clearly not whatever the going back to the magical product market fit. It's not there yet no it isn't and even in a are augmented reality like pokemon. Go pokemon go was a big sensation. It is still having significant activity today but there have not been large an ongoing subsequent titles titles or applications like that an ar is doing ten times better than Vr. VR Is really struggling and in particular because it is such in a loan type of experience. It doesn't lend itself to a lot of things that people want to do the smartest thing anybody ever told me about Vr is that Vr we are is the most effective form of contraception ever invented. It used to be video games of any type woman. That's probably the eventual product marketed of course is porn is like always the first way to monetize any of this in terms of how isolating it. I know I know I think that was video games in general but now that e gaming is such a big thing who knows is. I don't know we guess are winding down. Sadly you gotta go find some new companies to this afternoon to chat with. I think we should just do this quarterly from now on hand because I got about another two hours of questions as you start to do normal questions because you've answered them before but as you look onto the horizon what's the pathway runway for you guys. Is it just kinda every three years. Keep launching these bigger funds. Do you foresee expanding in in the other areas geographies public companies. What's the future look like like we just WANNA keep backing great startups and to keep meeting great founders and we're very lucky that we get to do that and we get to do that at extremely high volume and with the companies that we do eventually really invest in with a lot of intensity in heart and energy and we want to help build with companies that are solving heart problems and matter we really like taking taking that kind of technological risk really like being at the real cutting edge and a lot of the people that we back our doing stuff like that so there are some of those listening thing and I'm sure there's lots are they get in touch with you? You can find me on twitter at Alex Rubalcaba. Our corporate twitter account for the Fund is at stage the stage. VP DOT com there is they contact us form and we'd be happy to learn about what you're doing. Are you a deums open guy. I am a DMZ open guy and we'll see if I regret saying that I just recently I shouldn't admit this now just recently quietly without telling anyone when DMZ open and eight out of ten are incredibly thoughtful at four and respectful indecent to or not but it's been pretty great actually so I'm surprised I was like I'm GonNa do this for days. Immediately regret it because it's kind of the opposite visit of comment sections for some reason because I guess it's personal messages. I don't know but I've had a good experience so far. I promise I won't tell anyone secret don't DM EBB. What are your plan for the rest of the summer besides work you do anything fun going up to the Canadian rockies to Banff and Jasper? Oh no I've never been yeah. I'm actually maybe maybe there November just hiking around film festival. What are you doing hiking around? Whitewater rafting is supposed to be gorgeous chicken never been to that part of Canada when you go in a a few weeks oh awesome. I'm going to be up in Vancouver area but later in August so sounds good few Alex. Thanks for joining us today. Thanks to my podcast Carr's listeners will post show no links to all that we talked about today company's websites our twitter handle all that good stuff links to stage you can find show notes everything talisma favor dot com forward slash podcast shoot us any feedback questions comments feedback favourite show dot com. Please leave us a review. We love reading them. Thanks you're listening friends and good

LP CPA BC Labor UNICORNS Angel Investors Alex Rubalcaba producer Jay z Pets.com founder Ashton Kutcher Cambria Cambria Investment Man Cambria Max
How to Make Partner Marketing Work for You

Duct Tape Marketing

24:57 min | 1 year ago

How to Make Partner Marketing Work for You

"Up So of the duct tape marketing podcast is brought to you by Zephyr. Cms It's a modern cloud based CMS system that's licensed only to agencies you find them at Zephyr. Cms Dot com more about this later in the show. Hello and welcome to another episode of the duct tape marketing podcast. This is John Johnson. I guess today is Robert Glaser. He is a founder and CEO of Global Performance Marketing Agency acceleration partners and also the author of fairly recent book. Elevate push beyond your limits and unlock success in yourself and others so thanks for joining me. Thanks for having me John so we are going to talk about A. I don't know if we'd call this a channel particular specific. There's some debater on specific element of marketing. That is being called these days partner marketing. And I think that I think one of the things I want to start with. Is You talk a lot about the distinction between affiliate marketing partner marketing. And I think there's probably they're probably some overlap. But there's probably also some miss Labeling as well I think yeah yeah so the channel questions interesting. Some people think of affiliate or or a partner as as more of a methodology than a channel because it incorporates so many different types of activities at at a baseline is aligning outcomes with With your payments system rather than paying for a clicker impression recruiting partners using technology platform determining the outcomes that you're looking for tracking tracking the performance of those partners to your website and paying when when there is an outcome Affiliate has been around forever. And I think everyone in theory loves the notion of that as a performance model right what pay. Why if I literally paying your marketing after you get The sale and for a simple example. Let's say you post this podcast on a website and you talk about my books you can link to them on Amazon and join US affiliate partner and they'll pay you commission for driving to Amazon for people about my books because it came from from your website You know the affiliate term has been around for a while It includes a whole bunch of stuff. I think a lot of the white glove that we do with large brands. Who are doing kind of normal commission type payouts. It's also the term is used by a lot of these people who do you know? Fifty percent commission payout email lists ops of like overpriced nutro-ceuticals in vitamins with dubious claims. So a lot of people in in our world and give up on it to distance themselves from the world affiliate for Awhile tried performance marketing but then everyone jumped under that ten good going otherwise and then it started moving towards partner marketing because And I consider affiliate a piece of Partner Marketing. But but his company started licensing the software and running their own programs and calling them partner programs and referring to these people that they were working with as partners in not affiliates which which frankly is a is a better terminology in that context We're just seeing a lot of interest in this partner marketing automation partner automation. And I think part of it is you WANNA go. You WanNa go where the the energy is but but I think partner marketing is really a good explanation of what's being done Rather than performance marketing which was definitely a lot broader. Well and I I would interject another sort of confusing aspect of this. The term partner itself Seems to imply a relationship in many cases and I think there's a further muddling of businesses that I'll use software example They they would call their you know they would call it a channel. I think of resellers and installers but certainly they certainly always referred to those people as partners. Yeah and and what's interesting is in that in that early affiliate marketing craziness in sort of Econ one point zero and Pets.com era. It was just like get the sale. And we don't care how you get it like there were no branding. Departments in a lot of people had literally no idea affiliate commissions. Like I get a ten percent commission and I'd break it up into offer someone aid and become the guy who like affiliates there was just no transparency in the way the people operating today. They're like look. I WANNA know who? I'm working with their brand apartments. I you know it's great that we're paying you on commission but we want to know who were working with. We want to know what they're doing. And it really is more of a partnership. I think ten twenty years ago if you asked an affiliate manager who their top partners were what they did. They might have no idea. It's almost a job requirement these days that you can vouch for your top affiliates. Say A. Here's who they are and what they do. So would you say that because I think a lot of businesses looked at that and said well sure we need to have an affiliate program and they copied a lot of what they saw especially in the information products world? But would you say that it has now gone I hate to use the word mainstream but other businesses nontraditional businesses. That that didn't just have the you know. Send us a click. We'll give you ten. Percent are starting to look at ways that they can embrace this as an avenue for growth. Yeah I again. Maybe it's lands. I look at the world but I mean every company I know that's doing more than a million or two online is is looking at this as a channel because particularly there's a massive budget reallocation of brand marketing to to direct to consumer marketing. So if you're practicing Gammel ten years ago a lot of your marketing if you're razors and toilet paper what was about. Hey go by these or find them or brand you know now you have a razor subscription club in a toilet paper you know or household deliberate subscription service. So when you think about your your marketing dollars. You're you're you're trying to get that customer directly in and you're saying all right well I I'd be happy to pay one hundred hundred dollars or ten dollars to sign who signs up for one hundred dollar year subscription to my product so we see a major shift into this from a budget standpoint. A lot of that is being driven by people going direct to consumer are people having these information and frankly they're getting frustrated by all these other forms of auction marketing where once everyone crowds into it. No one can make money. And you even hear this within facebook where people figure out an audience and and it worked for two weeks and then it's burned and they gotta figure out a new audience. So let's talk about. The kind of the model here is this. I mean. Are there efficiencies in this. I mean does this change. How people look at staffing and offices and all those types of of things Because they're able to actually push maybe some functions out into the army of of branded partners. Yes so I I use this term and in my first book performance partnerships and. I'm sort of I'm leaning into again in another book but this notion of marketplaces of marketing. Where if you think about why Uber and AIRBNB? We're able to scale so quickly is because they don't need to buy an underlying these a own these underlying assets. They create a marketplace. Where if you play by the rules you know you can be a rider driver in their ecosystem. I kinda think companies were the same way where they can open up the marketing of their program to some of the you know most creative in interesting marketing entrepreneurs or publishers in the world. Set up the system. They WANNA pay on based on an outcome basis and let those people go to work on their behalf so I do see it as sort of this marketplace of of marketing entrepreneurialism where you know instead of saying. Hey I'm looking to buy clicks or or impressions or APP installs a ham looking for customers and and leads and sales. And here's what they're worth to be. An here's my rate chart and if you could stay on brand and follow my rules and do this like I. You know you really opening up a a huge opportunity of people to come. You know interested in in in working with you stimulated to questions or last one but it it's it's really kind of tag onto that and then have another question. But how do you manage the brand? I mean isn't that setting a lot of companies up for you know. Maybe maybe they've got all these martyrs out here but now they need the brand police that are watching and and this goes to the quality of your team or your partners or agency. I mean there are clearly like like we agencies out there like you'd see this is not the type of business where you want a kind of sold at the high level a twenty two year old working across twenty programs kind of you know managing high-level brand so so those programs need to be managed carefully. They are brand protection technologies softwares in the space that people with experience know how to use the. There's a lot of work of checking the regular behavior partner seeing where the traffic's coming from understanding that it looks logical so a lot of that comes through active management. You yet you cannot just set it in forget it that has proven historically to be a disaster in the channel so this is look. This is why we're in business These these programs particularly if they're global it takes a lot of resource resource in coordination. And there's a lot of people working on these big programs. So what are some of the typical especially if somebody? That's listening thinking. Well how would this apply to me? what are some of the typical kind of types of programs? If you will yes. So there's the biggest types are sorta sale or lead so if you're if you're e commerce and then there's sort of cross that threshold so ecommerce and you sell something you'd be inclined to say. Oh well you know I sell something twenty five dollars and I can afford maybe five or ten percent of sales. Because there's a measured in point you know when you get your sale Lead programs are also out there. And there's there's verified leads verify leads and won't get too far into a busy again to a lot of fraud where a lot of the Trent where the transaction can't be finished online where it's mortgage application or where it's a lot of banking or insurance you'd have more of lead. Gen where where you pay for a qualified lead and then you go make sure that you know those convert at a certain rate or that their high quality from from the publisher but but those are there some other different kinds but those are the two biggest buckets that we find most of the models working there and then now you have a lot of subscription services and they're almost sort of a hybrid so let's mention you know Hbo because everyone goes direct. Hbo SELLING A A subscription. Well you know what they'll do is they'll say while it's ten dollars a month our data's pretty good that anyone who signs up is You know stays for twelve months. So that's you know One hundred twenty one hundred twenty dollars and we really were happy to pay twenty five dollars for every you know Twelve months so what they do. Is THEY PAY? Twenty five dollars for a concern. You know paid subscriber to the service. And then they probably look at that cohort. You know to make sure that that partner wasn't doing anything they've got people on the platform who weren't gonNA stay very long. But they they use ltd data to figure out like how much it is. How much they want to pay for that subscription so I think you have kind of lead subscriptions and then kind of just straight up retail Percentages as kind of your biggest bucket. You know today content is everything so our websites are really content management systems there kinda work like one checkout Zephyr. It is a modern cloud based CMS SYSTEM. This licensed only to agencies. It's really easy to use. It's very fast. Won't mess with your Seo. I mean it really reduces the time and effort to launch your clients websites beautiful themes just really fast profitable way to go. They include an agency services to really kind of. Make them your plug and play deb. Shop Checkout Zephyr. Dot Com that is E. P. H. Y. R. CMS DOT COM. So where do I guess what I would call traditional partnerships fit into the so? This is a silly example but I'm electrical company and I have thousands of customers and I go into their homes and a of times. They need me to fix their air conditioner. And so I bring my air conditioner partner at again. That was a terrible example to compared to like what you examples you off you get you get an idea of trying to get across so why. It's being called partner Mar so a lot of a lot of traditional affiliates historically were deal sites a coupon sites loyalty sites kind of all in the same demographic and and that was because of a lot of biggest partners on these affiliate networks and that they were co branded relationships as people do more direct partnerships using the same technology but licensing it So they have control over it. They're kind of like going there other beatty partners vendors and so you can imagine a like Ticketmaster or stub going to an airline partner in saying. Hey when when someone buys a ticket you know to come to. Seattle during this month on the conference page. Why don't you suggest these four events us are tracking links? And we'll pay you a cut of anything they do. So that's how you're finding businesses. I think are starting like what we call a brand new brand sort of using this model. Is that what you meant? Yeah Yeah Yeah I guess so. Yeah like southwest. Doing that. Airbnb is doing that You know I know when I book so yeah. That's it's kind of like your your products imbedded. It's not it's not that you're getting an affiliate commission which is almost a part of your offer you're getting paid on that performance platform and this is why they're calling apart like the platform is a great platform to track performance in real time. All the deals in the past that were done tracked with coupon clue codes Aref. Id's I send you a spreadsheet and then you send me a check in or invoice send you a check like all of that can be automated onto these software platforms handle tracking and payment and stuff in real time. You can even imagine. Like a savvy. Realtor who sent a note to everyone after they moved into their house and email and said. Hey. Here's some resources for you. Here's here's my favorite online blind company. You know they can measure it. Here's signing up for comcast cable like all of those could be affiliate links in the email and they could send that out in make an answer a five hundred dollars per client for the client clicking on those things and buying them well and and let's face it they're providing a service by doing it begun. 'cause you're eating but publishers do determine publisher like someone who has an audience is trusted has information whether they're talking about deals are comparing things or otherwise they they have the audience. Who's in impressionable? Buyer art? So weird is a Kim Kardashian fit into all this she probably both right. I think I you know the influence our model really is a so so it's coming into the performance space because the first round of influence people wrote huge checks in found that didn't work in most of these cases. So now they're saying yeah. We love this model but we actually have this platform. How about we track measuring pay you on what works. We probably have to pay on top of funnel not not a bottom of funnel but you know so so like in her world like you know people are probably getting fixed fee is but a Lotta influencers focus on products that they like they get paid a performance fee and on the flip side for for the cosmetic company in all that stuff. I'm sure they have a partner in affiliate program. That's a big part of their business. Does this disrupt the sponsor advertising model so for example? I have a podcast. We have sponsors. They pay they pay a fee to be in our show. There's no performance. They don't they don't up if they're not getting you know. Hopefully hopefully they're tracking. They're getting what they they want. But but does this flip this around to where a lot of advertisers traditional advertisers are nagging to go to somebody like me and say hey. We'll pay you twelve dollars. You know for everybody that converts I yes and no. I think the first step is people want to track and they want the measurement. And so if you've ever listened. Tim Ferriss podcast. Like it's not a surprise that anytime he directs people offer its company DOT COM slash. Tim Right. That's that's effectively affiliate tracking it just in a different way so that those brands have an idea and they look they may ascribe some brand value to being on that podcast. I mean we all know that there is value to hearing something repetition but I think they want some data in the same way with influencers like look. I might pay hybrid fee. I might pay them a front but I do want to track this so that I have some some day. I do see that in podcast more. We're seeing some performance stuff for people I I when I have sponsors and advertisers. They give me a landing page. They want people to drive to. And I think that's to try to you know say. Did we get zero clicks hundred clicks? Try Try to get some order of magnitude around so is this model. Accelerating the death of traditional retailing. I don't think it's Well I'm not sure on on on traditional retailing. I think so. In in in the web world because traditional retailers have there on a lot of their online things and look it exists in other parts of the world. People you know the the concierge tells you go to that restaurant And and you know that case. They give them a nice meal once a month. But I think it's forcing people to choose between are they a company that creates products and services or has amazing of delivering logistics or their Marketing Company. That has audience share. I don't think people are going to be like twenty years ago. You needed to be both. I'm not sure that many people are GonNa be good at both and argue even like I don't like Amazon even Amazon like you know. They're trying to master logistics. And getting stuff to you quicker. Most of the products on Amazon sites now are not. They're they're third party sellers so they're almost kind of like a massive naval million plus affiliates in their program so they're almost kind of a massive you know they're not a product of the they've chosen marketing and logistics. They have some of their own products but I do think that people have to choose right. You don't WanNa be a commodity retailer. Now because he'll you'll get crushed by Amazon but but I think the way around it because Amazon's probably our biggest marketing competitor. You're not because you're not going to be better than them in search if you're selling on your website and you've given them your stuff. Disown their website. They're going outrank you. In search outbid you social they're gonNA outpa- you paid search so your best chances might be to you know. Find a group of partners that that that can provide a reliable competitive advantage and drive people to your website or you should say I'm a product company and I'm outsourcing my marketing and logistics Has Technology played a role in because again going back to the to the original sort of affiliate stuff yet? You know it all it was one size fits all it. Was You know? Blast blast blast. Has Technology allowed us to create a better experience? Maybe a more personal experience for the people that are doing this now. Yeah so the biggest change in the technology is the ability. It was a very broad stroke. Do I work with this partner? Do not work with them I paid him five percent. Don't pay them. Brands have the tools now on the technology to even pay different amounts by the by. The tactic was at an email. I on the website. Was it someone who came at the end of the transaction data the ability to say here is is what I really value at. Its core and use technology. I I can align so that I'm going to pay for that so we have a much. It used to be. We always say it's not how it's not if you work with publishers. That's how I think when you only had crude instruments you could say oh well turn this guy on or off like a lot of people. Don't WanNa work with coupon publishers. They don't provide value my business. I said I got it like but that also could be from your understanding of limitation of technology. Did you know that the technology now would allow you to only pay the coupon partner if they used a valid code that you gave to that partner? The order didn't come in the last minute and it was a new customer or customer with a high average order value. And then they'll they'll all say no I didn't. I didn't know that I said well that interests you in working with coupon partners and and suddenly the answer changes a little bit so I a lot of my listeners know that I've written marketing books. Almost exclusively I recently wrote a mindset book called the Self Reliant Entrepreneur that That every podcast. I've been on said what's up with that. John did a thing you wrote. A book called. Elevate push beyond your limits and unlocked success in yourself and others so I I guess I get to turn that around and ask what's up with that. Yeah so elevate came out of An interesting marketing expert as it came out of a note that I started sending my team every Friday when we were about forty people I just decided when I worked on my morning routine and and sort of getting better and increase my own performance that that that reading something positive in the morning was important. But I I didn't like some of the Rainbow and Unicorn Positive quickbooks in stuff I was given so I sat. Read a note and it's sort of challenged people or told a story or something motivational inspirational but a joke. It's kind of like spicy chicken soup for the soul. It's I it's easily edgy. And I said to my team for a couple of months and I didn't know if people would even reading them and I did start getting notes back and what happened was people actually started sharing them outside the company and other. Ceo has got it. Jared in the company in someone wrote an article about it and fast forward four years later I had one hundred thousand people in sixty countries getting this email which I then read named Friday forward and that forced me to sort of think about writing a book and step back and look at like why. How at our company grown so much in and and had what was our strategy of investing in people. Whatever the things I had seen a lot of other high performers How would I really improving my life? And why were strangers so interested in these emails? Why were they having impact? And it all came to the same answer. Which was these sort of four elements of of capacity building in this notion of capacity building? Which is just the methodology of how you get better and that therefore dimensions that. I think we all wrestle with and that are inter dependent in the book I come spiritual intellectual physical and emotional and and all the high performance I've ever seen really like do well in all those areas simultaneously but also realized that was actually we were. Our people was against that that playbook to so that that's how it all came together in the form of elevated in You know it's been nice to share those concepts with the world and also really used that internally like when we do some are leadership Training now we we really will actually work across those elements so in a new employee comes on you. You make them go Amazon and buy a copy of the book exactly just getting Bob. Thanks so much for stopping by and sharing your insights on partner. Marketing and you elevate Tell people where they can find out more about you and your work and maybe even grab a copy of your book. Sure if you're interested in an elevator. Friday for the elevate podcasting go to Robert Glaser. Gla Z. E. R. DOT COM. And if you're interested in learning more about affiliate marketing partner marketing we have a bunch of great sorta just resources in one information At acceleration partners dot com. It's probably easier to google it than than than try to spelling it but the resources tab has tons of free stuff you can read or download awesome. Thanks so much end. Hopefully we will bump into Thanks.

partner Partner Marketing marketing partner Amazon publisher Robert Glaser Airbnb John Johnson CEO of Global Performance Mark Zephyr US Pets.com facebook Seattle founder google Kim Kardashian comcast
Supergoop!: Holly Thaggard

How I Built This

1:13:12 hr | 1 year ago

Supergoop!: Holly Thaggard

"I created these sunscreen swipes, and apparently the swipes where huge hit, so I would go around to stores during that period and The swipes were always gone. They were just. Off The shelf, but the problem was I knew that my sales couldn't be great. If there were no products on the shelf, and so I'd go into as many stores as I could with swipes in my bag, and literally like stock the shelves like I. Give Them Product. which is crazy, right? From NPR, it's how I built this show about innovators, entrepreneurs idealist stories behind the movements they built. On the show today how Holly! Fagor decided that sunscreen should be used every day and every time of year, and how that idea grew into the multi-million dollar brand super goop. There's a concept and business known as product market fit. It was popularized by the well known silicon. Valley venture capitalist and Iraq left, and the idea is pretty simple. You have a product. If there's a market fit, people will buy it if not they won't. Sometimes, there's no product market fit because the product solves a problem that no one really has for example cheetos lip balm. Did someone really think there was a market for cheetos lip balm. At other times, there's no product market fit because the idea comes to early before people already like pets.com, which fizzled out in two thousand and one, but a decade later shoe dot com, which basically does the same thing took off and is now valued at more than ten billion dollars. But not having an exact product market fit doesn't necessarily mean your ideas doomed to fail. Think about AIRBNB or left. There was no market for those ideas. At first, it took those companies a lot of time to convince consumers that it wasn't weird. Sleeping at a random person's house are popping in their car. AIRBNB and lift had to create the market for what they offered. And it's kind of the same story for Holly. THAGGART and super. Goop, the vast majority of people think of Sunscreen as something you use at the beach, or you slather on small children before they go outdoors, but holly wanted to convince people that they needed to use sunscreen every day all the time year round like getting dressed or brushing your teeth or taking vitamins. Her whole plan was to work with educators to create awareness around skin cancer something. Thousands of people are diagnosed with in the US alone every single day. And Holly's business model would be based on selling. Cheyenne sunscreen dispensers Kinda like those hand sanitizer dispensers to schools. But as you will hear that whole business model was doomed from the start, and not just because there was no product market fit, so holly had to pivot and completely rethink her idea of how to get people to use sunscreen every day, and in the process had basically build out a market for her product, and although her mission is still very much a work in progress, supergroup is now one of the top rated sunscreens on the market. The company did about forty million dollars in revenue in two thousand eighteen and became profitable last year, and so far even seems to be navigating the. Uncertainty of the pandemic. As I often say when introducing the story of a founder nothing about holidays early life in Baton Rouge Louisiana hinted at the career she would. Choose except for one important thing. Both her parents were entrepreneurs. Her Dad ran a machinery business and her mom was an accomplished portrait painter. Yes she and my maternal grandmother, even her mother, they were both amazing artists and I watched my mother's career. Go from when I was younger, she created a custom handbag brand that Marx could not keep in stock. All hand painted and monogrammed, and and she went on ultimately to paint portraits, senators and judges and She's very talented. I feel fortunate to have to have her as a mother because I have portrait's now of my children and I didn't have to pay for them. It's so cool and so as I. Guess as a kid like as a little girl, you took up. The harp is that. Is it right and what? How old were you? I. Did you know, but I'd? I'd even back up a little bit to that. As I started on the piano and I played the piano for several years I started and I think Second Grade And by the time I got to fifth grade I saw this bright shiny gold harp that I didn't see anywhere other than my grandmother's living room, and and I thought Gosh, if I could switch gears and play the harp it. Would you know there's not a lot of competition? You could be the best harpist because there are bright. There probably weren't that many around you. And everything sounds beautiful on the harp. When even when you mess up, it's pretty. Yeah by the way is a you know a fifth grader sixth grader. How did you carry the harp to on wheels? it has a Dolly and you learn how to handle it. It's not so much that it's heavy as that it has so many moving parts, but you're not bringing the heart onto the school bus, no, no, and in fact I played at home, and then for the talent shows. Of course I'd show up, but it wasn't really until high school that I began getting really excited about the harp because I saw it more as A. A business and the I the idea of creating a business around holly, the Harpist was exciting to me. Why wait so you? As you sort of got better at the harp? You Thought Hey, this could be my business like you're thinking this. In High School. I was I was actually already working on the weekends and every Sunday for Brunch local country club like in the dining room. You would just be in the corner playing the harp. Be Holly the Harpist, the harvest and I kind of set my price, because there wasn't a lot of competition, so a really started out playing for one hundred dollars an hour, which was a lot when you're in ninth grade. Wow, all right, so you are. Holly, the harpist playing harp am for money, which is awesome and and you decide to go to school at Louisiana State University, which is not that far from from where you live. I guess. And what did you? Did you study music there? Yes I did so I was never really that great of a student I I spent those first two years in college studying music. I totally did not fit in with anyone in the music school. I realized how serious the musicians were in college, and I was more interested in doing what I was already doing. Wish was performing and playing and I was at the time. You know still getting jobs in new. Orleans at the Museum of art and I played a little backup for Aretha Franklin when she came through. And what a what what whow? What did you? What did you play with Franklin Amazing Grace Wow, that's i. mean if there ever is a song to play. Play with Aretha Franklin. You run the hard man that's amazing and look. It makes me sound like I. was this Great Harpist? But like I was so winging it. I had no idea but I knew I couldn't say. No and I had no business I. Literally had to break down every measure and that reading music type student you know, but you keep in mind like I enjoyed the business of holly the Harpist way more than I enjoyed playing the harp, so if you I mean if you didn't enjoy playing the harp that much. Like. What did you decide that you want do professionally? So I had also grown up because I think I'm so such an organized person, and I love pencils and supplies and things. I grew up thinking that being a teacher would be really fun and I often even when my little brother we get home from school and you know, keep in mind. He was seven years younger than I was. I would sort of start. Start a new session in his room and get worksheets for him and pass out my sheets, and and so I thought well, maybe I should. Maybe I should be a teacher and I guess that's what you did. I read that you. You went onto to study education and got your first teaching job. I think in in Baton Rouge that is right. It was so there was a private episcopal school in Baton Rouge, that was actually I, later learned was quite difficult to get a job there as a first year out of college, and how was it? It was fantastic, so I had a wonderful year. I poured my heart into doing. Everything that I had learned in college. I also kind of looking back now I think I, poured my heart into outdoing every other teacher in the school, and kept my eye on trying to impress the the board that had given me the opportunity to be there, but. I loved every second of it. I am in fact I? Still talk to those seventeen students many of them. Today. But from what I've read, you only will only a teacher for a year I. Mean You have this in? Promising career. What why aren't you a teacher today? What happened? Yeah so? You know the end of the school. Year came when contracts are placed in the teachers, boxes and I didn't receive one and. And the school said they were not offering me a return contract, and I later learned as a first year teacher. You're considered provisional. And they said you know. This was due to problems and concerns that were were brought up from. Teachers and not really fitting in well. What does that mean? Exactly I. I didn't know either I did a lot of exploration at that moment, but I was devastated. Yeah, you know had gone to college to to third grade schoolteacher, and and here my career was seemingly ending very quickly. And then you Denver got any more specific feedback. Like what was it that you did or not do or? I did I did and I learned you know I was SORTA breaking rules? I wasn't eating lunch with other teachers I wasn't hanging out in the teachers lounge, talking and connecting and and I I was being completely honest with myself I did feel a little claustrophobic within the four walls of a classroom and they were in a way. Right did constantly look for ways to sort of leave campus early or I'd say I had a hard job and and double book myself and you know it there was. That wasn't in the cards for me and yeah, but you know after a couple of months of exploring these these things I just decided I'm GonNa move on. It is amazing though that setbacks can actually be a blessing that you don't. You don't realize the time right like Hugh. Had you had this amazing year and renewed your contract and you stayed there. You might not have ever done what you did. Absolutely I'm so grateful that. Played out like it did because I don't think would have been pushed to go and change directions I would have kept that cush job and. That's not in the cards for my life's work. So, so what did end up doing next well at the time, my brother was starting college at Smu in Dallas and. I had plenty of time on my hands, so I went to help him move in the dorms and. All I could do is look around at all the beautiful homes in Highland Park and. How they all really needed holly the Harpist in their life, so you decided to stay in Dallas after helping him move in. I well. I knew that if I were going to propose a move to my parents that I needed to have a job lined up so I actually during that brief weekend visit, I walked over to the Dallas Country Club and knocked on the door of the general manager's office, and introduced myself, and told them all about my music, and and that I was hoping that they might look to have some new entertainment in their in their dining room. And I went back convinced my parents that I could make a living performing. And moved to Dallas found an apartment, and literally did the kind of back of the Napkin math. Like how many hours a week do I need to play the harp to pay for the rent? This is like nineteen ninety-six. Think yes, so you're like in your twenty two twenty three years old living in Dallas. Playing the harp and that's that becomes your. Business Holly the harvest highly the harvest. Yes, so I went from Dallas. Country Club. to the Petroleum Club Debris Kalo Golf Club and and did this same introduction, and and this is really when I realized that building this business of holly the Harpist was when I lost all track of time, and creating like direct mail pieces, and and looking into the book of lists I often would read the CEO's and write letters to their home. You know I'm from the South so writing letters has always been a big part of my upbringing in. But I got a really good response from from just the jobs that I had and spent the next ten years of my life. Actually performing, and that's how I paid the rent. You are the Harpist of choice or one of them. I guess in Dallas in probably making a decent living I was doing really well. My rates had gone up to I. I had a thousand dollar minimum for any party which often if a? Party was only an hour. That's that's a great. Scrape many. That's a hard senior partner at a law firm in New York right. I just wasn't billing the hours. Yeah. And what about your personal life for you married? Were you single at the time? Just, dating, and Dallas, and until my late twenties, did I not meet my now husband and his very best closest friend in college, I performed I played the Hartford mini, rehearsal, dinners and weddings for their family and Mary Montgomery. Is The you know the person I work? That would engage me for these said you've got to meet my son's best friend. And so that's how I met tie and. We continue dating as I. Performed in played until I guess we were engaged when we were about thirty one, and so this is like two thousand four. She got engaged run in two thousand, more like to think than to okay, but when tie started talking about a family being married and everything you know performing on Mother's Day and Christmas and Thanksgiving and continuing on that path just felt like. It was time to retire. It's exhausting playing evenings, and that's not a real great life or having a family and you're. So you're kind of done with the harp side of your life. Your newly married and I guess you send the happens in two thousand five. which is a a friend of yours diagnosed with skin cancer? Yes, and first of all this is I didn't know this, but this is one of the most diagnosed form of cancer. You know full stop. When your friend was diagnosed, what was the prognosis? Oh and he's fine. Now but you know. I started thinking an and a good college friend of mine was going through her residency in dermatology at the time, and I was talking with her about my friends skin cancer, and and you know she said Holly. It's not about the beach it's. It's about that every single day. Cumulative exposure that ultimately and usually much later in life become skin cancer, but for your friend who has blonde hair and blue eyes and you know it happened at a much younger age sounded by the beach night using Sun Lotion Santana right. Sunblock. It's just about being outside every day, and over time some people developing skin cancer, and and by the way most people who do develop skin cancer I'm it is, it's it's generally highly curable. His caught you know relatively early. It's like a guess if found early. So you to hear this? And and and then you're thinking well. My initial thought was this could have just as easily have been me. I have blonde hair and blue eyes, and I remember Gosh, my spring break in my middle school years I remember going to Florida and lying on the roof of this House we rented and I got so blistering sunburn that I was sick and swollen and It ruined my entire week, but then I also immediately thought about my seventeen kids that I taught that year in the classroom. And never once did I see a tube of sunscreen on the school campus. Despite the fact that the children were on the playground in the middle of the day, and often even staying an in sports in the afternoon, no one was wearing sunscreen. And and to be clear with the vast majority of us are not wearing sunscreen all the time, right? This is just not part of our. It's not. It's like brushing your teeth. Most people don't just don't do this. This is two thousand five and you start to think. What like hey, maybe maybe I can figure out a way to get people to wear sunscreen all the time, not just at the beach. was that what you were thinking like? Immediately asked so I found the study by Memorial Sloan Kettering that was talking about how most people knew. SUNSCREEN prevents skin cancer. I think it was six seventy percent. Don't wear it just like you said every single day and the number one reason was because it didn't feel good on the skin, and I think just being a child of two entrepreneurs, always thinking about creating and building researching, and this just was really interesting. I also think that I have always been a product person. which I think kind of goes back to with being with. With my mother and often critiquing other art, and talking about skin, tones and colors, and the com-, the composition of things being so important, yeah, to the success of that, and so I was thinking. Why don't schools offer sunscreen? Why don't children have access to sunscreen schools and for me I? Just took it to this extreme of like Gosh. We wouldn't send the kids on the playground without a fence around the playground. But, we're sending them out on the playground with a carcinogen above them, so the original you had was let me figure out how to get sunscreen into schools like like You know we've got like hand. Sanitizer dispensers like you'd have those around schools network that would essentially be your your business. Yes, and in part I, also knew the importance of education around us, and you know I was a teacher and you know it's not really A. It wasn't a shortage of SPF products in the country that were causing the DEMOC it was a lack of education around the importance of wearing SPF every single day. So was your this two thousand five was your idea to find an existing sunscreen brand and then just get schools to put that into their lake into the hallways. was that or did did you orders from the beginning thing? I'M GONNA. Make some screen well, so the first step was to what is what is out there and I really wanted to look I did not grow up wearing sunscreen every single day, so I was thinking. What is that product that I should have been wearing, and so I I looked on the market, and you know like you said in two thousand five SPF, incredibly sleepy category, and it was owned by the mass channels of distribution like walgreens and target and Walmart. And what I found was the SPF was being promoted and marketed as an incredibly seasonal thing. And you couldn't actually even find us. PF outside of May June or July. And when I did find it I looked at the ingredients and found that. Ninety percent of what was on the market was just full of very controversial ingredients. What what's an example of that? Well so one of those that was often spotlighted was the ingredient succeed penzone, which was being found in breast cancer tissue, and what I also found is that every single chemical formula in the country relied on oxy been zone for its efficacy, even the organic brand well, so there were two types of formulas there were the chemical formulas which are those that absorb easily into the skin, and they're great for athletes, and then there's mineral formulas and the mineral forms. Just to be clear. There's the ones that are like really white on your skin like flick the zinc. Sticks and I feel real, thick and pasty on the skin. Yeah, sure and. You couldn't rub in the natural ones into your skin and your thinking. Hey, why? Why isn't there a a natural one that we can do that? Yes, I felt like there was such an opportunity to do. Both chemical formulas, which there are advantages to in a clean and healthy way and mineral formulas I felt neither to upgrade to. They didn't need to feel so thick and pasty, because if there were options for people to wear sunscreen every single day that were beautiful and luxurious and felt great. Then that would be that first step closer to stopping skin cancer. All right I'm thinking if I'm you I'm I'm? It's two thousand, five, two, thousand six, and I'm starting to kind of you know sound Kinda falling this idea and thinking. There might be something there, and you're obviously learning as much as you can about sunscreen. But when I've read the backs of like competitive brands that I think are pretty great i. don't understand any of the words, were you? Weren't you like looking at the backs of sunscreen bottles? And like what is this? And what did you even know what those things were? Now is a lot of research. A lot of exploring I found that there was national sunscreen symposium, and I reached out to every chemists that was speaking at that event and I just picked everybody's brain and just became obsessed with learning. you called them or you email them and sit and ask them what you said. I'm holly and doing a psalm starting sunscreen brand. Like what was your pitch to them? Why would they give you the time? Well? Fortunately for me, the chemists all the response was very kind to me, and they taught me so much about Ingredient Dexin. Of those chemists were not up for the challenge of the challenge that I gave was I'm interested in creating an SPF product that does not have oxy been zone does not rely on parabens. Propylene Glycol handful of other ingredients that I. Just wasn't that fond of and Mr of I heard was. It can't be done. He can't be done. They were saying you can't make. A sunscreen that is non-chemical. That can be rubbed into skin. They were saying that you can't make a sunscreen that will test to a high efficacious SPF number without the use of oxy been zone, and without the preservative system of a pair of Paraben which is what keeps your product, healthy and clean. It couldn't be done, so paramedics need. Why is some I? Know idea that sunscreen was so complex. Well I think what is so complicated is not necessarily having an efficacious sunscreen. It's limiting yourself to a certain set of ingredients, and then making it aesthetically pleasing that it would make gyros want to pick it up and put it on his skin. Every single day got it because now. If you ask me like if you. If you saw me on the beach in the summertime, you would think I was zebra because I just have giant white stripes over my face. Because I'm fine. I don't care. But you can't do that every day right. You can get away with the beach or if you're three years old. I remember like slathering on White. Zinc stuff on my kids face, but you can't. You're saying you wanted to do something that you could use every day and you can't became zebra everyday well, and the reason for that is that in my research? I learned that there's UV rays, and there's UV rays and UV rays caused that burning on your skin that changes the color of your skin, but UV rays are not only aging, but they penetrate deeper into the skin, the new VP and their president in all seasons, no matter what the weather is even on a cloudy day and their skin cancer causing. So, you clearly are starting to develop an expertise on. Sunscreen, but but like. You're not picking. You're not being like cookies to bake. You can't do this alone. You actually have to go and find somebody willing to make you a product. That doesn't have the ingredients that you don't want it to have, but does what you wanted to do. Correct that is the joke around our family. Is You had to do sunscreen? Holly? Because, it's very difficult to formulate. And so where do you go? I started with the first chemist that said that's interesting. That's an interesting idea. I didn't realize that oxy zone was so controversial, and he was willing to completely pro bono start working on a formula to see if we could rise to the challenge of creating something that felt great on the skin was healthy and ingredient choices, and who was this lab and were they and had you in touch with them? Yeah, so? Through, those conversations with chemists from the national sunscreen symposium is who I found that the first chemist was in California and I am in Texas and I think you know in a good way. A lot of chemists are a little, nerdy and up for challenging things like that and. And I just got lucky too I think, but how did you convince this chemist? To make your prototype of mean putting on my hat as like a you know entrepreneur hat right, and that's not enough right I. Mean You just call? You can't just call somebody WHO's at this mission I. WanNa do it, and then the person says devote all this time. In my lab to working on building prototype for you like it had to been harder than that. Maybe maybe it wasn't I. Don't know. I'm. Telling my story, my my intention for this magic formula that we were going to create was to put it in every school across America and so I sold that story of Gosh. We're going to. We're going to create this. And every child and the country's going to be wearing this. Game Changing SPF and That is when in the process of creating an SPF product takes a while. And once I had that kind of off and running with the right chemistry, who I felt was up for the challenge. I, then sort of pivoted my time and attention to. How are we going to do this? In a beautiful way, it's fun and playful and more of the the marketing and education side of the business, and did you fly out to to work with the chemistry? Chemistry will you just dealing with the person who phone the emailer like? How? How did that work? We had a lot of phone calls about what I felt like. You know the characteristics of the texture the feel and then they started mailing Fedex. We did mailing samples, and then I give feedback on the samples and I just kind of passed around in my family, and asked what they thought of this goon for that Goop, and you already knew your goop. I did not I just actually called it Goop, because I didn't know the word lab sample I think. Industry Glop or whatever. Goofy! And in the meantime, what were you doing and you're living in Dallas still at the time, What were you? What were you? I was completely obsessed with this project. I pulled my sister. WHO's an excellent writer into helping me create an educational curriculum? You know I mean changing consumer behaviors like one of the most difficult things to do right. But I looked at campaigns like lady. Bird Johnson's don't be a litterbug. When she was first lady, she started that. Don't be a litterbug campaign. And, it wasn't necessarily the children that were throwing the Diet coke out the window, but it was their parents. And, so I thought. This is really interesting, because through a very playful way, she's got the kids telling their parents not to be a litterbug, which is going to ultimately change the parents behavior, and so I thought if I could create this first formula and make it a fun and playful way that appeal to young children to then sort of bug the adults in their life. There was something there, so you've got this this product. That's being developed and. What are they making it with I? Mean if all these scientists were saying. Hey, you gotta use oxy Benzon. That's the most effective way to protect your skin from UV rays, and there's no other way to do it. What do I mean what? Yeah, actually? What I learned was oxy Ben Zone is not the only way it's the most inexpensive way. And began going back to most SPF was a mass product and mass products. Are you know as inexpensive as possible It turned out that there was a counterpart Eva Benzon that could help achieve the efficacy needed, but it just costs a little bit more. Eva penzone AVA Benton and that's still today what we use in our chemical. And where does that come from? It's a raw ingredient that you buy from the people that make I mean. There's different brand names like parcel and that makes that. So you manage to work with this lab entirely remotely like they never had to present to them or anything they just. Didn't have the money to go in promote. Ca I was bootstrapping with my new husband and we were thinking about having a baby, and he was thinking about going out on his own at the time. He has a background and. Practiced law out of law school and he has a real entrepreneurial spirit as well and so we were both bootstrapped. All of the cost. So you're going back and forth and and you finally settled on what you think is right. And how do you know? How did you know that when they finally got it like the smell of it and the feel of it? was just just you're just using your own your own judgment your own instinct. You know it was probably the fifteen twentieth iteration on a formula that we tweaked many times over those two years that finally felt amazing on the skin, and it tested because right. It has to be efficacious and and it was then that I literally said this is super and the name. Immediately occurred to me that I, had I had also in that moment named name brand supergroup supergroup, and was it SPF fifty fifteen or thirty, or or what yeah, it was a fifty to fifty. which is exactly what we were aiming for in? So you get the final. You're the one that works, and would you like slathered on and go outside and just stand outside in the sun. I started wearing it every single day because I. had you know over the long term? If that was something that was actually a pleasant experience right, and in fact I've always believed in no animal, testing or anything, so I often laughed and made my husband. Guinea pig and say hey. Can you put some in this in your eyes and make sure it doesn't burn and. Had you by that point formed like an LLC and then all the formal stuff that people do to to start a business. Along the way I definitely relied on my husband. He had mentioned a background in in law, and he helped me with registering the trademark and forming an LLC kind of just put a few of the things that weren't too costly in place to start creating this business. So you've got the formula you've got the name. And now it's time to go to the schools, and I'm assuming you know you Kinda. rip-off Rabat, old playbook where when you contacted the CEO's of of companies to play the higher for you called all these scientists, assuming you start calling school administrators, you're right, have whipped out my playbook and started talking to the heads of schools and school boards and I very quickly learned that as an over the counter. Drug Sunscreen is actually prohibited in schools across America so you just spent two years building this prototype. Discover that you have no market, no marketplace right? Wow, your whole business model is down the tubes. Exactly. When we come back in just a moment. How holly eventually pivots out of schools and into retail and along the way hires a publicist that she cannot afford and makes a connection at Sephora that she cannot afford to lose stay with US Cairo's and you're listening to how I built this from NPR. Hey everyone, just two quick thanks to our sponsors who help support this show I to each rate. Trading isn't for everyone, but e-trade is whether it's saving for a rainy day or your retirement e-trade. Has You covered? They can help you. Check financial goals off your list, and with a team of professionals. Giving you support when you need it, you can be confident that your money is working hard for you. Get more than just trading with E. Trade to get started visit eatright dot com slash podcast more information, e-trade securities LLC member Finra SIPC. Thanks. Also to American Express their proud to support small business owners through this unprecedented time, and whatever comes next to help your small business. Get back to business visit. STAND FOR SMALL DOT Com. That's the powerful backing of American Express. This week on. It's been a minute talk out the news with my aunt. Betty more concerned about the black man that I love that anything in the world because. I just don't want to get that COM. Also parenting in the age of black lives, matter and the history of police reform listen and subscribe to. It's been a minute from NPR. Hey welcome back to how I built this from NPR. News, so it was two thousand seven and Holly Thaggart had a big problem. She built a sunscreen company supergroup with the goal of getting. In the schools but at the time most public schools did not allow students to use sunscreen without a prescription or a doctor's note. So Holly thought well. Maybe I should try the private schools where the rules aren't as strict and she actually made a bit of headway. I did I launched five private schools all in Dallas Dallas Area I. Know Dallas in Louisiana. Baton Rouge where I'm from. Dallas. So how did you approach the schools, did you? Did you just get like a directory or go online and just type? It did I think I looked in the private school directories by city, and I would call and ask for meeting I've all you know dating back to sitting under my father's desk reading and listening to Zig Ziglar tapes, which is what I did my throughout my childhood and exemplary. Exemplary, which used like that like the guy told Ya like motivational speaker on sale for sales, right? Yeah, he was a sales and marketing genius I. who like he had these tapes in the seventies and eighties? Maybe that right? Yes, exactly I learned from Zig so many things that I still referenced today. You know you have to have so many knows before a yes and attitude. Is Everything being optimistic? Optimistic and thinking positively, and I mean I spent weekend sitting under my father's dusk listening and absorbing these neatly organized tapes that he would bring home from been president sales and Marketing Club, and that really shaped how I approached things because You know those conversations with the schools i. just I just kept going kept going. If one said no, I'd go to another one and so school say no. No no interest in you sick. We'll thank you very much, and you move on. I'd move on, but I'd still keep them informed of everything I was doing because you know. I also learned from those tapes that no is tell me more right, and so you know I'd hear no and I I realized that. Maybe they're just going to say no for another month, and then they'll eventually say yes. So it's two thousand seven. You've got this formula. You're in a couple of private schools, but that's not enough presumably to really sustain business right, and how how are you dealing with finances? I mean you had to get the product made from? That I'm assuming that lab was making the product for you even for those five schools. Yes, they were making it in large pumps, and we were really just of coming up with every which way we could financially pay for it and how how was it? It well. We Ha- I know our AMEX was maxed out to the limit at which was like thirty thousand dollars. It wasn't a huge number, but but it was always it was always about that, and I also convinced the people that were making this product that they needed to also I didn't have a warehouse or anything. So I convinced them to warehouse it for me and then let me pay as I pulled from the warehouse, and then of course I could also go play the harp and. Anytime I started to get concerned about cash I'd take a harp job and use that to pay for the product. It was pretty messy. Actually we didn't keep Roy. Good track of the financials at that point because we were just still kind of testing this whole model, and and you're right that that soon became after one year of being in the school that year it seemingly became hard to scale. N. Did you. I mean I'm assuming you're not be packaging these into small bottles, but the branding and the the logo. This is just like a. were you like had not yet? They were still in twenty four ounce containers. They did have our logo which I had created in. And I sort of self taught how to make a label and how to make a barcode, and and the logo that you even have to this day you created that Photoshop I did and actually the logo today we just. Had A refresh on our brand about four months ago, actually and tweaked a little bit here and there with my handwriting I'm. I'm also obsessed with handwriting, and and so we digital league. used my handwriting to tweak the original logo. So you've got the product and you're trying to you know, Mount Campaign and to get people to know more about this. But. It doesn't sound like you're really making a whole lot of traction. The schools thing wasn't doesn't sound like it was really working. So what did you? How were you going to build this out into something bigger well, so I started just looking at what retail look would look like? And what is the world of Prestige Children's retail? And how do brands go into what I thought? Were some of them? The best storytellers like FAO Schwarz in New York or Now defunct giggle was a very. Very highly curated store of just the best of the best things from. San Francisco to New York and started down this path of going to trade shows, and showing my line to buyers of little prestige, mom and pop and retailers that could help support. And tell the story in their in their location across the country. Your, your husband was a lawyer, so he had some income, but were you'd like getting help from friends and family at this point I. Mean Castillo like? You can't run the business on on air and you asking people for help. Yes, and my husband was not practicing law anymore. He was actually going out on his own in real estate investing, and so we were definitely depleting all of our savings. And it really wasn't until I. think Thanksgiving of Gosh. Two Thousand and Eighty Ish that we asked my dad for twenty five thousand dollars I. Think so he kind of saved you. He did it was that you know? Every entrepreneur has the Thanksgiving dinner story. And I had another trade show. I wanted to go to in Vegas and I asked You know my dad at the dinner table I think like if he'd be willing to give us twenty five thousand dollars and. Forced this conversation of how are you planning to scale this because I think at this point. We were like literally making forty five thousand sales I want to say. A year, and how are you going to scale this? Holly, because even if you doubled tripled your trade show at the trade show that you WANNA go to. You know that still not much money in. Did you need the money for that trade show to make product to bring to that trade show? No I needed the M- the money for to actually pay for the trade. Show itself to like pay for the booth. And I had at that point also received a phone call. From the skin-care, buyer Sephora. So wait a while all. This other stuff is going on. Sephora which is like a huge beauty company retail company. They also reach out to you. Had How do the buyer even know about the product? While she was a new mom, and she had been shopping at Giggle, which was that little? Do Teak retailer that I landed at one of my other trade shows and she. Purchased it for her child, and also took it to the Sephora corporate office, and they started passing it around and having this conversation, apparently what they shared with me was that they felt most skin-care today, and this was you know? Two thousand eight nine was really highly clinical and built on Dr Driven Brands and not fun and playful, and they thought there was something really interesting about a brand that was very serious in technology, but doing it in a very fun and playful spirit, so all right so sephora calls you out of the blue by the way I think at this time. You had your phone number on the on the bottle. Right your. Cell number well now is so that if anybody wanted to talk about, super goop they would reach me directly and and she said we like what you're doing, and and we don't think that you're ready for a meeting, but we thought maybe we could be helpful and you know. Sephora is known to really nurture indie brands, and and with strong founder visions, and and she said I thought I would reach out and just share a few things. That might be a good idea for you before. If you're interested in, and then maybe you can get in touch when you feel that you've grown up a little bit. And the what was her name Kim Holt and what did Kim suggest you? She said you need press. She said you need. If you WANNA get into Sephora. You gotTA start with getting some more press. Yes, so in two thousand a you know this is before instagram and influence or marketing, and it was all really about those press placements that you'd get in the magazine that showed your product. They were very product driven, and that's what sold product in Sephora so I had none of that. So. What did you do? Well So. That Twenty Five thousand that my dad the next day left our home after Thanksgiving and he left check on the counter, and he said to me Holly go get your elephant. And that was his way of saying. Stop Messing with all these small little retailers and and go get a big account. And so I went to Vegas. We put that booth together, but. What I found when I got to Vegas was was just like I could have cried. I had really fought to be in the natural and organic and very thoughtfully curated selections of the show. But what I found was I was. SMACK DAB in the middle of all of the GRANOLA and very poem, grown brands, and all of the very cool, modern, beautifully aesthetic brands were up on the second floor and the lady in the booth. Right next to me, had a brand called happy, green be, and she spent the whole show all five days knitting. And and show is so slow that I spent most of my time in her booth looking. I thought this was. You'RE GONNA? Tell me about how you found a publicist. Did you find the? So well kind of the last day when everyone was breaking apart their booths and everything I was you know walking around and someone who came up to me and said Gosh. You've really got to be good buddies with Roxanne. And I said Oh I know you know we had to way too much time to talk on during the show, not enough sales and they said well I would imagine she could really help you and I was like. What do you mean and she said? You know who that is holly. It's Roxanne quimby the founder of bees. Roxanne Quimby, who has been our show? We've had on our show. She's amazing. So you, you you? Did you go tour? Yeah, so went right back over there I was like rock. How could you not tell me that you're the you were Roxanne Quimby. The founder of birth vs She's Super Low key super low key, and she said Holly I wanted to hear your story and your vision without you knowing that. So then what I mean, do you like exchange numbers emails go for coffee. What do you do know is the last day of the show. She said I very quickly. How can I help you? WanNa help I like what you're doing? And I, said I need a PR firm in New York and I can't get one to save my life. And and an hour later Nancy Berman was calling me while I was in a cab to the airport. And she nancy is the founder of Berman Communications which was known as the biggest beauty pr firm in New York. And she said I just got off the phone with Roxanne Quimby and she says I need to fly to Texas to me. She says. I gotta fly to Texas to you. You're doing forty five thousand bucks a year in sales. And this this is like a big shot PR person. And you're like great. Let's do it. No actually I immediately kicked into well. She needs to know. There's competition because I know. This is GonNa cost me an arm and a leg. And, so I said well. Actually I'm going to be in New York next week interviewing several other PR firms. I'd love to schedule you in. Bound, which was totally made up on the fly. Nice so than you. Fled New York so well then I grabbed my sister, my brother, my husband. was still just so I had people in the room to look like we were doing something bigger than we were, and I did. In fact, get several other PR meetings with quite a few of competitors based on being able to call and saying I'm coming to New York to sit down with Nancy Berman next week and I'd like to also I hear I should also be talking with your firm. So Nancy. Presumably you end up working with Nancy she did she rolled out the red carpet and I was very impressed with. We were all very impressed with her pitch. But given that you only have forty five thousand in revenue for the year, which is not profit. How how? How much did Nancy Com student to bring on well, that was the hard part because when it got to be. The last page of her proposal was where we started talking about money, and knowing that the world of PR wasn't GonNa talk about US PF outside of the summer months. She pitched me on a six month contract. That would go from January to June. and. She felt in that time. We could in January hit the long leads to make sure we were in the april-may books and she would charge US twelve thousand dollars a month. But only six months out of the twelve seventy two thousand dollars. And you thought. I think I might have said. Have you been listening to everything that I've been talking about because I'm trying to DC's analyze a category, and it's never going to happen if I'm only talking to the beauty editors and my I think everybody's going. Oh, my gosh. She's trying to convince now Nancy to take twelve month retainer and I always credit my husband for this because that sounds. Sounds Crazy to pay twelve months of a retainer when we weren't even making in revenue, but he was adamant about. You've got to do this, holly. This is your path to Sephora elephant and we will figure out how to pay for this, so you're GonNa pay basically what you decide. We're going to get the best publicist because we. This is our one our moonshot here. GOING TO COST US two years revenue to get this publicist. And you, you basically take the plunge. And I think she came down to about eight thousand a month, because it was a twelve month retainer right when you signed on with her Where where was she able to place stories about supergroup in all the beauty magazines, so a lure and you know just the traditional press ended that. Move the needle that you get. Did you start to get a lot of? People enquiring. We did and and we also got that helped a lot with the launch and Barneys New York which Nancy set up an interview with the beauty buyer of Barney's, and she actually was a skin cancer survivor, so she really very fair skin. Her name is Pitino Neil and she bought into the idea of building a skincare brand with a foundation in SPF. And Barney's certainly at that time was really important, really influential place to be yeah. We launched in show in their apothecary. And you know they're things that came from that that were super inspiring along the way like being asked to I know we got a call once from Elon Musk's team to put supergroup into all of his roadsters that we're taking a press tour down the H. or something and I. I thought you know Gosh. If Super Goop make sense because the roadster was a convertible could be in every cup holder a lot. A lot of people would see it I think that's the year that we also were asked to join the Ted Conference in Long Beach and put our products into the hands of all the attendees, and that's and by the way they don't pay you for that, you donate. One hundred percent donation, and I had to create a custom box because I wanted my story to be on the box. Because I knew that if it weren't, nobody would know what the meaning behind the product was so really Kinda went out on a limb there, yeah. And at what point do you feel comfortable to reach back out to Sephora and say hey, look, you know we've been. We've got a couple of magazines and we're getting a little bit more publicity ensuing. You're still not really profitable at this point, no. No we're not This was in. A couple of years after that press and growing my revenue went from forty five to I know one hundred and fifty two I think six hundred, so we were you know we were increasing in growing the business. It was by no means profitable, and I don't think I was even keeping quite good track of the finances like that I just knew I had to keep going, and and it was actually in two thousand and ten when I felt like I was ready to talk again to Sephora. You call the same person who originally called you. I called her and left her a voicemail and told her that I was going to be in San Francisco the following week for I gave her a five or six day range, because I wanted to make sure that she could find a minute for me on her calendar. And she didn't call me back. And, so, how did you get her attention? Well, so I felt obligated to go to San. Francisco, because I said on her voice mail that I was going to be there on other business, and I didn't I was afraid that she might eventually call during that week, and then if I weren't in San Francisco, she'd be calling me out and I didn't even have a hotel reserved when. When I got on the plane to go there, I just knew that I had to be there. And I cried the whole way there and found a shoebox of a hotel in Union square that I remember like going in, and it didn't even have windows in the bathroom was down the hall and I was so upset because we didn't have a lot of money and this was expensive. Thing for me to go do when I didn't really have anything to do there. Does she call you back? So I went to bed that night, and at eleven thirty myself and lit up, and it said Sephora on it, and that's how I had programmed her name into my phone was as Sephora. And I don't know why. She was up late at the office that night, but she said I think you might be in San Francisco. And she said well, we would love to meet with you or you available tomorrow morning at ten am amazing. She go go to Sephora, headquarters. And? Did you have a bunch of product with you samples Oh. I was so prepared I had foam boards with each of my products pricing, you know and I had product with me and they just said. Tell me about what you're trying to do here. And I walked them through my story from teacher to to where we are today, and why I needed their help, and and why I felt like they could help put a megaphone to this message, and they say all right. We're in. We move. We rolled will work with you. They did not they just. They just said we enjoyed meeting. You I thought. The meeting went really well and lasted. You know a good hour and a half and. And I felt pretty good about the potential, and they said they would be in touch. And that was it I got to go home early. She could go back in the plane. I'm assuming on the way back. You were not crying well, actually I. The next morning woke up and you know my father growing up. Had this thing about doing things in twos. Me The best time to accomplish something as after you've accomplished something. You're on a high feel optimistic. You feel good about yourself offensive. Whenever I had done something well, he would say that's awesome. Holly. That's so great I'm great great to hear it going to do. And so I felt like that next morning. I had to figure out what the answer to like I felt really good. You're right I wasn't crying, but I felt like I. had to know what was next game I mean you. You must have been feeling pretty confident because I. Think like maybe even the same day you. You decided to reach out to the buyer of Nordstrom to right. Yes, so I said that I was in San Francisco talking with Sephora about a spring twenty eleven launch, which was not totally true. Really Yeah, no I kind of bluffing, luffing hoping. Willing it to church. And I would love to come through Orange County on the way back to Texas and share with her more about my brand. And was she in? She sounded really interested in optimistic again. She didn't give me any answers. Johnny on the spot, but she sounded interested and and I felt good about flying home, and and then doing the follow up. That was needed to to land both of these accounts and I feel like that was a real important for me was when I think about where I saw. Saw Our brand. I felt like the sephora demographic. The customer was young and they're playing with makeup. They needed to understand how important it was too I protect their skin and for the Nordstrom customer I felt like that was the mom with three kids in tow and a Stroller, and she really needed to be instrumental in teaching young children. These healthy habits so I felt. Felt like the two brands were the ideal launch pad for me and in the country together. But how do you get into them? What would convince US afford a finally? Call you and say okay. We'll do it, and then, of course you know what kind of shelf space you're gonNA. Get and how long so what? What was the deal they offered? You Yeah so well and. And Tobacco up a little bit I got home and for several weeks. Didn't you know I sent my follow up? Email my you know exactly as I should have post a meeting but I didn't hear from either of them Oh. Wow, nothing not even like a great to me, no not nothing and like the silent treatment for six years of rest of that year actually. And so that's when my husband and I were Kinda tapped out on the money side and and we went to my brother, who after graduating from you moved to New York started a business and has been super successful building it to several hundred people with his partners, and we asked him if he would be interested in investing. And he agreed, and he agreed he said you know Holly. I'm I'm. Think if he were here today on the podcast. He'd probably say I was betting on the jockey. Not The horse and He put in initially seven hundred and fifty thousand dollars. Wow, so you're assuming that that in March of two thousand eleven you're you're gonNA. Do a nationwide launch somewhere, but you don't have any commitments Sephora or When. When do they call a win the Sephora call? January twenty six. And I know the day because it's my brother's birthday, and they called the twenty six. It's called me on the twenty sixth, and it was actually doesn't eleven well, and she called and said Holly, it's Kim. And I'm super excited to share that we are going to prepare for a summer launch in all stores and big cap for the twelve weeks of summer, so good news because four is gonNA launch, but only twelve weeks, and only in the summer which kind of undermines your whole narrative because you don't. You're not selling the summer product. So. Would you say I said you know as flattering as this is, and I'm super excited and want this badly. I need to scale my size down to whatever size makes sense that you can assure me twelve months of distribution. You're talking about the size of the bottle, the size of the space on the shelf so the shelf, yes. An in cap. Is that big fancy thing at the end of the aisle where you have five shelves and. Product. I didn't expect that they would hold that for twelve month period, so I convinced them, and this is how I really knew that Sephora was the right partner for me. they listened, and they said you know. Let us take this back and think about how we could do this. Assure you twelve months of distribution which I also didn't know that that's kind of crazy. Really retailers don't launch with any guaranteed one year of distribution. And how much shelf space to they offer you, so they later called and said they were excited to share that they were going to open a new wall, and Sephora called skin-care favorites, and they have secured six inches of space, and to pick my two favorite products and is that is a pretty good like as I'm thinking. Six Inches Mike. There's nothing in big store, but is that is that? Were you happy? Happy with that I was ecstatic. The sounded like a dream. It sounded like something that I could manage again. I didn't have a team. I didn't have a marketing team. I didn't have people in the stores to help. Sell it I I felt like that was positioning us in the care category, which is how I've always seen our brand as Nada sunscreen brand. We are a true skincare, but all about protection. And that's our thing. So I was just thrilled so summer of two thousand eleven. You debut at Sephora, yes, and I had nurtured the Nordstrom relationship along the way and keeping in touch, and and we launched in forty seven stores, so I had full distribution and Sephora and forty-seven nordstroms and a lot of work to do right because you still even if you're in Sephora Nordstrom it doesn't mean people are going to go to your product and buy it you've got. You've got explained to get them to buy it so how? How did you do that exactly? Well? Because of that twelve months a distribution, I think that really shaped. How I thought about product. I I've always thought about innovation and SPF. And how do I create products that are game changing that you will reach for in those shoulder seasons and I had created the sunscreen swipes. That were away to reapply your SPF in a towel. Let and they were at the time pretty new to the world and I didn't really realize it at the time because I didn't know what success meant it before? I would go around to stores during that period and The swipes were always gone. They were just wiped out of the off the shelf. Yeah what explain that apparently swipes where you shit in the world loved them, and the problem was I knew that my sales couldn't be great if there were no products on the shelf and so I started what I later coined within my family as reverse stealing, but I didn't know how to get product to the shelves, and I knew I couldn't make the numbers if there weren't products so I'd go into as many stores as I could with swipes in my bag, and literally like stock the shelves like I'd give them product. which is crazy, right? I love that story by the way I've never told US story. It just popped in my head, which is so crazy, but like I literally remember going into stores and pushing products onto the store shelves. Alright so you're you're you're now in these brands. By the way had was immediate or fairly quick impact on your revenue I mean you've gone from what one hundred and fifty went to like six hundred. A year in that year two thousand eleven. Wow, so that was, and then what about twenty twelve? We kept doubling. We've been doubling and sometimes more than since so twenty twelve. You pass a million dollars in sales. Yes, we did it now. Start to become easier to raise money outside because up until this point just as your dad, your brother, you and your husband. Now. Scale I am imagining. You wanted to go out and raise more money because it costs. Money gotta make the product to make the bottles and distributions expensive, or did you? Did you say you know we're? We're not going to raise money. We're going to sell on this thing. No, no and I've always known you know when you have this vision to change the way the world thinks about sunscreen. Scaling is Super Important, and also I'm dealing with a category where we. We actually have to convince people why they need to wear SPF. And then why supergroup so you know I often say like imagine. I was having lunch with the founders of MCI Wallace. which is a handbag. Brandon I said you know imagine if you had to convince women everywhere to carry a bag with them everywhere with their water bottle in their wallet and their person, their phone and their umbrellas. Yeah, you. Don't you just have to sell them on your bags? But for me, I've always looked at it. Like I have to convince I, people the why it's so important that they protect their skin and secondary to that is why supergroup, so yes, it's been very expensive from a marketing perspective, and I was still not profitable at that point so raising money with something that was just a necessary thing that we had to do. Yeah, and and so I guess you were eventually able to raise like like two million dollars from from a combination of friends and family, and even some some private investors and people in the medical field that I should mention tennis, Star Maria Sharapova. Did that happen. Yeah, so that was just a phone call from her agent, that said. I'm Maria Sharapova agent and I'm like Googling Maria Sharapova. What's the Word Sunscreen? And she said she found your product as Sephora four, and it's the only product she can compete in. And it doesn't burn her eyes, and so she's interested. If you guys have ever thought about making an investment and actually, this was a a just about the same time as our friends and family was still open, and I thought the first thing I need to do is to La to meet her. Because of course if we're going to have an investor, come into the brand, she's becoming part of our family, and so I wanna make sure could also be a brand ambassador spokesperson presumably. Yeah, so we. We flew out there and spent a day visiting with she and her age and. You know honestly put the deal together really quickly want. Holly as you grew and today, I think the latest public numbers founder are that you did like forty million in revenue in twenty eighteen, and maybe more than twenty nineteen swimming, but a certain point you decide to open up a New York office. You're based San Antonio. You've got a New York office. You hire a president to more or less run the company, and from what I understand like. This was sort of a request from your investors are like hey, holly, great. You're really good at what you do, but like union operations person. That's not your strength was that? Is that true is that how went down? Yeah you know so. We had our series A. followed our friends and family and one of the former partners. T. S G. Jon Kenny was going off on his own to create what is now coke capital and he asked to lead our series a round and he said Holly. What is it? You want to do for this next phase of superglue. And I said John I. Want to build a team. I want help. I WANNA presence in New York City. And we decided together that it was time to go on that search for a brand president who could be the perfect integrator for my vision, and she's been now with us for four years, and this is a Baldwin right. Yes, and having had Amanda to help was a real turning point for me in realizing the time to put our foot on the gas and. The team that we needed to take this and make the magic of of supergroup Papin. So let's talk about this moment. Now. no one is going into Sephora prepositioning. Most Sephora are closed if not all of them, nordstroms are closed and who knows when they're gonNA open up some open, but I mean I have to assume that you know you've got direct to consumer you can. You can buy supergroup online, but I've got to assume that like probably ninety nine point nine percent of businesses. You've taken a hit in in recent weeks. Yeah, you know, I mean I think definitely. We had to set reset, but i. what's been really neat is we're having real breakout conversations? In fact this week, we launched Sephora Canada and I trained over zoom three, hundred fifty of the cast members in Canada well well. We're still there, and you mention direct to. Consumer is still very very strong. We in fact relaunched our SUPERGROUP DOT com platform yesterday, and this time has given us all a minute to to really focus on these things, and how business in general is being impacted by what's going on. Are you I mean obviously we've done a lot of companies at our cash. Intensive companies in that don't have ninety one hundred and eighty days of cash sitting around, and they might have forty five days cashing around in in of those businesses won't be able to make it even with. You know investors and so on I am I have to assume that you're Biz a little bit different for one thing you're making a product that is relatively shelf stable and. It's not as cash intensive or am I wrong well. Fortunately, twenty nineteen for supergroup was are year to get to profitability and double digit profitability this year so. having Amanda Brand, president and a husband and a brother. That's all very strong in finance. We have you know remodeled the entire year to to remain profitable and and continue pushing and even spending money. Do you. Do you think that what's happened to you? And and the success of the company is because you of your skill and work ethic, or do you think more of it has to do with luck? I think it's a little bit of both guy. You know if I think back was that. Was it skill that positioned me next to Roxanne Quimby. In Vegas no, but it was very strategic in that I was telling my story to everybody that would listen and same is with my launch Sephora because Gosh, I was lucky. The skin-care buyer that year happened to be pregnant and shopping and giggle. but you know I put my number on the carton and. And so anybody could reach me and that was. That was strategic. For, something we, you mentioned earlier. Ask you that this again I'm what what do you think? How do you think being a musician? Playing the Harp helped you be an entrepreneur. I think being a musician has really me in and just learning those how to break it down and you know you can be overwhelmed if you open it picture opening a piece of sheet music, and there's his notes everywhere and staff, and it can look very jumbled and like how in the world am I ever GonNa? Learn this whole song, but what you learn in music is to break it down and learn the first measure, learn the right hand and learn the left, and then put the right in the left together, and then once you've mastered that. Go onto the second measure, and if you continue to break it down like got you. Eventually, have have a beautiful song and I think also though for for me because I, started performing at such a young age. It gave me so much confidence, and if you think about you know, playing here comes the bride to a church that's full of people that are everyone's dead silent, and you are the music. You're the only thing that anyone's listening to. And this is this brides biggest day ever life? It really gives you the confidence to. Think you can do anything and that helps me and has over the years as we've been fundraising, and you've gotta be completely confident to walk into any scenario, and and pitch your brand and sell them on evaluation that you believe in one and I think music really is what what gave me that. That's Holly Fagor founder of supergroup. By the way, holly has come full circle with her original idea of getting sunscreen into schools. Since she got her start. A bunch of states have changed their laws and now allow kids to use sunscreen in schools without a prescription, so supergroup started a program where they give it out for free and this past school year they donated three thousand pumps of supergroup schools across the country. And thanks so much for listening to the show this week. You can subscribe wherever you get your podcast, and if you want to write us, it's H. I. bt NPR DOT ORG! If you want to tweet at US act how I built this or at Guy Roz. This episode was produced by James. Who See with music composed by air. Bluey thanks also to Kansas Limb, Julia Carney Neva grant and Jeff Rodgers I'm Garros, and you've been listening to how I built this. This is NPR. As protests, sweep the nation, the subject of policing is once again being hotly debated this week on through line, how police forces developed in the north and the south in the nineteenth century, and expanded their power in the twentieth century through live from NPR the podcast where we go back in time to understand the present.

Holly Sephora skin cancer Dallas New York founder US oxy NPR nancy president sales and Marketing AIRBNB High School San Francisco Roxanne Quimby pets.com America Vegas
Quibi is Proof that Capitalism Works

MarketFoolery

18:46 min | 10 months ago

Quibi is Proof that Capitalism Works

"It's Thursday October. Twenty second welcome artillery. I'm Chris Sale with me today Mr. Jason. Moser good to see you my friend. Good to see you. We've got. Set it before it's my favorite time of year. It comes four times a year we got earning season heating up which we got. We. Got Tesla. We're going to. Perform an autopsy on Qube. Let's start with Tesla. Tesla reported a profit in the third quarter that was higher than Wall Street was expecting and this is the fifth quarter in a row that Tesla has delivered a prophet. Stock up about five percent this morning. It was one of those things where the light bulb went off above my head this morning Jason Fifth Quarter in a row prophets earnings Oh wade they have a pe ratio now what you're what it is. Just shy of eleven hundred. Oh. That's you know I mean. I guess the market is just pulling. Ford's some very some very. Robust expectations. Let's just leave it at that. You know I. I don't have a dog in this in this out so to speak. I don't own Tesla shares I'M NOT RECOMMENDED I've I'm not short I just I enjoy following this business learning from it and just the there's some entertainment value there for sure. The core business here's really so simple right I mean they make cars and they sell them to people. And yet, it's such a sideshow to the distractions and the drama with analysts who are just does there. So dead set on one position or the other I mean just you go on twitter and there's just this back and forth that never ends and I mean it's it's like it's honestly it's like DC I mean nobody's going to budge right? But I mean to your point fifth consecutive quarter profitability I mean, yeah. We sit there and argue about how they got the profitability in. You know I'll I'll note that. Regulatory Credits I think probably a big question that a lot of folks. Will Continue to harp on how important are they? I. Mean I think in regard to Tesla's business regulatory credits are very important but I mean that shouldn't be a surprise. That's how you incentivize moving an entire society over to a new technology like this that we're so reliant on in transportation and so. This year so far they've taken advantage of about one point, two, billion dollars in those credits in that clearly. Affects profitability that that's good for them right. But I don't hold that against them because they're just they're playing the hand that they were dealt. They're playing with the rules of the game more or less. If you compare that to last year at this time they claimed about four, hundred, sixty, million dollars. In credits so clearly A considerable amount more in credits this year than last and I'm sure that's that's something that will continue to see them take advantage of to the Senate they hand. But I mean, they produce just over hundred, forty, five, thousand vehicles they delivered almost one hundred and forty thousand. And I think while Musk certainly loves to aim high and I think he should They're five, hundred, thousand deliveries for the year remains the target. Now, that is a high goal that's a lofty goal they need about one, hundred and eighty thousand. To go they need about one, hundred, eighty, thousand this final quarter maybe they get their maybe they don't but I think the more time goes on the more we're seeing the market's willing to give this give this business your time to do its thing and and that's not not every business out there can claim that luxury but but you see companies like Amazon for the longest time the market really gave Bezos the leash to run with that business and building you see the same thing happening here. So I I'm for the business I love what he's trying to do. I think it's funny. Listen to people go back and forth on the valuation and whatnot but but here we are in in in this is clearly a business that's making a big impact in the world. Yeah. There are there are definitely a couple of. A couple of analysts I was watching on CNBC this morning core bearish on Tesla and. They're getting Kinda worked up. One of those things I felt. I felt a little bad for them. I don't know I mean. It's it's. Like I said I mean I don't dive into that discussion because it's just it's just so unproductive but I mean the one. So I'd say the one thing like if you look at where they are today in regard of the balance sheet, I mean they're they're quarter in cash equivalents jumped from six billion to fourteen and a half billion. Remember they had a capital razor recently brought the around five billion dollars if I had one piece of advice. Freon, musk in wasn't course I'm a dummy. Okay. I. Know that I mean he's not asking me for advice but if I if I were to give him one piece of advice, you know like we've talked before about Tom Gardeners. Philosophy on your holding period. Right. However long you plan to hold a stock just Bouma. Automatically double that right double that holding period in you'll benefit from it i. feel like any time he wants to raise money double it because it's clear as day that age lever he wants to pull he's going to be able to raise that money without too much trouble and particularly where the stock is today I mean. If you get to a point review to raise more capital and he probably will I mean he sees the energy business ultimately being as large as the vehicle business one day, and that's going to require a lot of investment to. Yeah anytime you're ready to raise the money just go ahead and double I think that'd be a nice rule of thumb. Third quarter profits and revenue for AAA came in higher than expected. Same store sales were north of eight percent and CIPOLLA digital sales tripled year-over-year. And despite all that. Shares. down. More than five percent what is going on here Brian Nichols say something call? No no no no I. Think there are a couple of things that are probably coming into play here. Number One, I think you just selling probably a little bit on valuation. In that, the stock is trading for over one hundred twenty times full year earnings, estimates, rights, I mean this is still a Burrito company basically the end of the day. So you know one, hundred, twenty times plus that's A. That's a pretty expensive Burrito so to speak so I think there's probably a little bit of selling on the valuation side of it, but there's also some concern there. In Fair concern I think in the delivery and we'll talk about that in a minute but I do think it's just amazing I was thinking about this. Yesterday. You know the the CIPOLLA store a story. It's been just it's amazing to watch here over the over the last several years because they went from a restaurant that really couldn't stop from getting people sick. To now being like one of the best operators in the entire space during a pandemic were people are getting sick so Hats off to Brian Nicholas Ceo I think he's just done such a good job with his business he took over in it goes to show you the value in hiring. Folks with a lot of industry expertise like like he has. Coming over from Taco Bell. So I just for what it's worth I think they made a great call on the CEO side. But when you start looking at the numbers, it really does feel like elise is turning Turkish police turning into domino's it's it's really interesting to see. They have over seventeen million loyalty program members now versus just seven million a year ago I mean that's all thanks to. Strong APP in if you looked on the call as I did. The word delivery was mentioned forty five times on yesterday's earnings call a year ago. It was mentioned six times in and I think that is potentially a source of some market concern as well because when you look at delivery. I, the digital sales numbers were really impressive. They grew over two hundred percent. They represented close to fifty percent of sales about half of digital was delivery in the concern there and they they know this right and so I wanna read this exactly as they noted. But here's the crux of it. They say, the amount that we remit to our delivery partner for sales to our APP and website is higher than what we collect from customers and included in other operating costs. So delivery is something that is yeah it's driving top line maybe a little bit, but it's also something tampering profitability and and they're going to have to figure out a way to square that at some point. But for now, I mean, they're doing a really good job. In the face of what is a very difficult restaurant space utilizing that delivery level really growing that that part of the business I don't hold that against them I understand maybe a little bit of a concern in the near term but I think that when you look at all of these numbers put together, you still have to be very bullish on this company's future we've talked before about. The opportunity. They have in terms of. Expansion, to go to grow their footprint. Gary Kelly CEO of Southwest Airlines. was talking this morning. About corporate travel and how he thinks that's going to take ten years. Ten years for corporate travel to. Recover for the airline industry. David Chen, the restaurant tour chef was was. tweeting this morning. About how the restaurant industry is tied to corporate business. and. You know put putting those two together and in particular David Chiang's comments it really does seem like. A longer opportunity for that type of investment for AAA to grow its footprint. Yeah absolutely agree I mean I think they've done a very good job of not trying to expand too quickly that can be one of the dangers of franchising. Is it Wa- It gives you the opportunity to grow really quickly but sometimes, that can be a little bit of a of an anchor on the if if the. Times a little bit tougher and so they opened forty four new restaurants through the quarter closed only three, twenty, seven, hundred just over twenty, seven hundred. Stores today in most of them are all open right since sin sales really hit their low. In March, they've been able to retain said eighty five percent of the digital sales gains while recovering about fifty to fifty five percent of their in store sales. So again, I think that you know when when you see how they're slowly and methodically growing that footprint and then they're also making sure that they. Utilize that physical store footprint for more than just Indian store dining experience even picking up for that matter. Again I go back to domino's and really one of the one of the things that is dominos has really done. So well through the years utilizing that physical footprint to to you know essentially offer two different businesses, right it's a pickup and delivery and and I think that is really starting t to exploit that as well if you do it right if you do it well. It can be really really valuable over over many years. In Domino's investors. You know what I'm talking about right. If you held on for the last ten years plus you are just love and life. Now, I'm not saying chipotle will be domino's right. It's it's pizza versus Burritos, and probably a little bit of a different market opportunity there but I think that he's GonNa continue to be able to focus on the core Mexican business. Mexican food business for for some time to come. In at Twenty, seven, hundred stores today you know they're gonNA keep on opening up one hundred new stores a year here and there for foreseeable future in an in. So for investors you have you have to love that because now we're gonNA see to two different really drivers of sales from from not only the store itself but also the delivery model they'll. They'll perfect that they'll get it down and it'll become something that's a bit more profitable in meaningful the bottom line it's just gonNa take a little time. Six months after its launch, an April Qutb. The short video streaming service is being shut down due to a complete lack of interest. Company was started all the way back in. August of twenty eighteen by Jeffrey, Katzenberg and Meg Whitman. The raised one point seven, five billion dollars, and then proceeded to like that money on fire. Where do you want to begin with this because? I had and we were chatting a little bit about this yesterday is that capitalism works? Like among other things, this is an example of capitalism working. The built this thing they spent a lot of money to do it. They put it out there and everyone collectively said No. I mean you're absolutely right. This is a great example of capitalism working And there are a lot of different ways to go with this in. I don't want to make light of the fact that people are losing their jobs from this though I will say that Even even for the most glass half full person. Jumping on board with this with this. Entity had the probably feel like chances were were chances of success. We're going to be lower than fifty percent I would have assumed but I mean, it seemed like it was a little bit bit obvious to all of us in the analyst community. But I, it was amazing to me like there was read in one of the articles that during a video call. With. With employee's Katzenberg actually suggested. Staffers listened to the song get back up again from from the trolls film to buoy their spirits. Like, he's still talking book. He's ready to lay people off is what it sounded like. It was very odd. I just feel like. It it it just didn't seem to me to be empathetic is probably could have been but. I mean, we talked about this a few shows ago right a few weeks back where it just I don I don't think anyone including Jeffrey really knew what Qube was supposed to be I mean is social as it streaming is social streaming i. mean there were already all sorts of competitors out there in that space to some extent in. So you know you sometimes when in-investing, like we say sometimes investing, you just got to be able to call call the mistake admitted move on as opposed to just keep on burning money in. It sounds like in this case I mean they burn through their capital and that was basically that and I think the writing is on the wall. It sounded like a lot of Hollywood was doubtful to begin with interestingly enough. They didn't have any problem selling content there like eight. Sure. We'll sell it but we don't think you're GONNA succeed. So. It's listen when you jump into a crowded space like this in in video streaming a crowded space obviously, you need to differentiate yourself right you need to innovate do something different and and it just didn't seem like they did that like at all in. Speaking of Seinfeld that reminded me of that reservations episode of it all comes back to Seinfeld Chris like you know how you say you know how to like get in their differentiator or innovate, but but you don't actually know how to do it. Right saying it doesn't mean that you're doing it and it didn't feel like they. Really. had come to that realization until way too late. So. One of the thoughts I've had about all this is. I feel like we need to come up with a new word to replace the Word Unicorn as it is used in the world of investing and for those unfamiliar. A Unicorn is a private company that. Reaches a private market valuation of a Billion Dollars and. I was thinking about something Emily flippant set on this show a few weeks back where. She was she made the comment like the world is only getting bigger. We're only going to have more. Companies with trillion. Dollar. MARKET CAPS in the future not fewer and so as things continue but I think I. Think we need to come up with a different because you know that was part of it. It's like Oh look at this company they've raised nearly two billion dollars. You know what would this be worth in the open market? Well, it turns out zero. So, look at I look at some of these capital raises with some of these businesses. It's astounding the money that some of these businesses raise and it's just. It's Just astounding I mean like it's it's breathtaking like you said, I mean look at. Robin. Hood for example with all of the trouble and issues that they continue to have like I don't know why anybody who's getting started investing today why would you use Robin because every other platform could basically match what they're doing for the most part and it's going to be a more robust and frankly trustworthy platform and yet this business continues to raise billions and billions of dollars it's garnered some like Ten. Billion Plus Market Valuation now, which to me seems really serve but it. It just goes to show. There are some very deep pockets when it comes to when it comes to. These, these these interests in know investors who aren't necessarily participating the public markets and. I think the thing is in most cases it's really all about it's all about hitting a couple of really you know it's about hitting a couple of home runs as opposed to try to get like sixty percent of your picks. Right I think most people know they're not going to be getting sixty percent of those picks right? It's really just about finding a couple of grand slams. The can make a big impact. Yeah. I mean a Unicorn is an incredibly rare creature and private market valuations of a billion dollars are becoming increasingly less rare. I'll tell you what is really a Unicorn is something like qube something that from day one we all sort of looked at and we're like I don't think that's going to work and then every step along the way like, yeah it's still working the launch isn't going well, they're burning like Oh my God they're they're exploring strategic alternatives up their dead. Every I can't think of another time when. There was a bit like. maybe, pets.com early like back in the day but. It feels like. They're always going to be those examples and I mean it's it's it's that's just so fun. That's why this job is so fun because we get to see this stuff every day I mean the market at the end of the day we said it is it's just like a really big to just disagreement right and I, mean both parties think they're right for whatever reasons and You have to figure out a way to reconcile that and choose the side. I think we chose ours on this one very early on. If only we had a chance to short it. We'll wrap up there Jason. Always great talking to you. Thanks for being. Thank you as always people in the program may have interest in the stocks they talk about in the May have formal recommendations for her against. By herself stocks bid solely on what you're here, that's going to do for this edition of. The show is mixed by Dan Buoyed I'm Chris Sale thanks for listening see on Monday.

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