Taylor Holiday Thinks Ecom Is A TERRIBLE Business transcript

Taylor Holiday thinks your e-commerce business sucks. He thinks it doesn't have a chance. And I disagree with him. I think he's wrong. I think e-commerce is a great business to be in. And we argued about it on this podcast as well. He's got into a whole bunch of other stuff that's happening in the e-commerce world. This is one of those long random show style episodes that I've done with Taylor. I just love doing these.

We talk all kinds of stuff related to the day-to-day of e-commerce. And then beyond that, like usual, parenting, fitness, all that kind of stuff that attracts us, how Chat GPT is changing customer interactions and search and purchasing journeys and all the rest. Taylor, as you know, is a CEO of Common Thread Collective and a good friend of mine. We had a great time doing this in person in the CTC studio at their offices down in Orange County, California.

Super good time. You're going to love this episode. Lots to it. Let's get into it with me and Taylor Holiday. And let me be on your team here and tell you why your e-commerce business is good. We're back. New set, new location. We're just going to try and upgrade it every time. Yeah. Well, maybe. We don't know. They don't know. The listener doesn't know. It's worth noting that it's daytime cuz usually when we do these, it's like 9:00 p.m.

Our wives are not happy about the fact that it's happening. That's when we start. We get, you know, one of us is leaving the other one's house or location at 11:00 p.m. for a 40-minute drive. Exactly. Maybe there's been a beverage poured at some point. Do you have any non-alcoholic beers still? Should we do some lunchtime non-co? Well, so we got something instead. So, normally we like we've been adding like a some sort of element of thing we're doing.

It's been the beer. You've been bringing that. So, before you tell people about this, do you want to start arguing so that nobody turns it off because they think we're going to open baseball cards? Well, we're not. Okay. So, we're going to argue. We're not going to break. We're going to start with Andrew's just horrendous take that he's tied himself to as like the internet the e-commerce optimist uh is his his disposition, which is great.

I think it's going to be really hopeful for people and lead to endless sadness. But, um so we'll get there. But so to start though I so many of you uh probably lots of you watch breaks on the internet like me which is you watch people open baseball cards um is a big part of the internet that I grew up in in co and so I figured we'd have a little fun. So Andrew and I have a lot of shared history as it relates to baseball and our fantasy league and our appreciation for prospects which neither of us are in anymore.

Yeah, we both quit. You rage quit. I rage quit because I was mistreated so egregiously by the league mates. I my life got too busy quit. Yeah. Yeah. Yeah. So, Bowman uh for those of you who don't know, this is uh the premier baseball card. And what we're after here, Andrew, is they have a card that is your Bowman first. So, if it has first on it, it's that more so than a player's rookie card. Okay. Is the most valuable baseball card you can find.

So, today we're after this set of prospects that includes your guys hope over the Dodgers, Walker Jenkins, Charlie Condan, a number of other top 100 prospects. And we are hunting the three autographs. best of the best ones. That's their number. So like these will be the card number BP9 BP. So Exactly. Bowman prospect. So but Christian Campbell's in here like he's like already a good major league group. That's right. So some of these guys might already be up and some of them like James Wood.

It'll be his rookie card. So it won't be his first. So we're not looking for James Wood first, but Charlie Con it'll be his first. You'll see the distinction. And these are the first speed. Okay. So we're going to open these as we go. We're not going to talk about it. But Andrew, I have to tell you that if you get one, okay, what you're going to do is you're going to take this sleeve right here. You're going to put the card into the sleeve and then you're going to load it into the top load.

Okay? And that's going to protect us so we can turn this into a profitable endeavor. We're about It's about $1,500ish dollars of cards we're going to open. Uh uh my friend Chad GBT told me my expected value on this is not great. What is it? It's like a 30% return expected. It's like I'm going to acrue back 30% of the value of the 1,500 bucks most likely. Now, who knows? We could get lucky, but So, we'll do this as we go.

Like, yeah. So, don't mind us. We won't make this the point unless we hit something cool. So, you can kind of just open it. We'll at least get the the and we'll get started here. Um, but what topic would you uh like to kick it off with? I want to you you wrote in our notes for this that my take and I'm quoting now that e-commerce is is easier than ever before, better than ever, mostly mostly good, mostly a good business.

Oh, now let's just make an obvious carve out right away. same one you made when you're marketing operators, which is that there's a subset of people who are like facing a potential death sentence with China China tariffs like we're just going to set that aside. No, that's not lost on me. I'm not but that's not and it matters. We can talk about that in there, too. But but um but I just want to be clear that if you actually had to pay 130% more in your product cost, that's bad.

I'm not an idiot. I understand that. and that and that even down to a 30% tariff which has by the way happened since your since your negativity on the marketing operators podcast came out like a week later exactly what you expect that got to be probably not an extinction event for brands so now it's really tough still but probably not an extinction event yeah probably but maybe maybe certainly um okay so but anyway so I have repeatedly said and and again because punditry is stupid yep um there there needs to be a thing here where you're putting your money where your mouth is.

Whether it's a um whether it's a you know poly market is a way better predictor of things than pundits, right? Because people actually have to put their money where their mouth is. Um I'm not making any bets on polyarket related to e-commerce, but I am uh I am starting an e-commerce brand. So I believe in this breaking news or you've kind of leaked this. I've said it a few times before. You haven't said what you're doing yet, right?

I can say it. You can. Sure. Oh, wow. We'll get into that. Let's say that. Yeah. That's good. That's a little That's a little carrot. Yeah. I didn't know that. Yeah, I'm I'm going to do content showing all kinds of things about it at some point, but um but I haven't Yeah, but I can say it. Okay, so um so anyway, so my take is that things are basically good. You called it outlandish. So what is the best way to go forward here?

So okay, let's let's Yeah, let's let's try and peg you down to a clear position. I don't you're you're waffling on me. Um there's sort of two different things. There's one thing I've heard you say. I'm just sort of collecting all the firsts. Uh nothing major. No. So see how it says first right there. Yeah. Okay. Good. So, I'm The chromes are better than the P. These are called paper. So, no chrome. Chrome. The best thing we want is like colors or parallels.

Okay. Great. Um, if we hit something cool, we'll Somebody somebody want Okay. If we hit something cool, we'll try it. So, the first thing I've heard you say is that e-commerce is easier than ever before. Like as if there's this like collective knowledge that has This is a core position of mine. Yeah. Yeah. And I think it's maybe the most insane. Um, so it's this idea that Yeah, e-commerce is easier than before. Well, so here's the way I put it.

I what I always say is the the little phrase I use all the time is that the collective knowledge or the the the accumulated knowledge on the collective uh intellectual capital balance sheet DTC, right? the collected in intellectual capital on the DTOC collected balance sheet is is so much higher than it has ever been that that the access to information quality and level is now so high that now there's a problem here is there's so much of it but that because of that brands now can for cheap to free um get an incredible amount of knowledge about how to do it in a way that was actually not the case not that long ago because and there's a crucial reason for this because there are so many more big businesses now in the space that have and this is just a function of time.

Like there just so many more bigger businesses that have now gone through stages of the journey and reported their learnings. It's like it's like somebody who has explored a new territory. They've gone out ahead and they've said backwards like here's how to get there. Here's how to do it. And that that literally didn't exist that long ago. And everybody underrates that. It is a big deal. But I think I think you're just looking at it wrong.

What you're describing is that you are now competing with a much smarter, much more mature industry. So as a new person entering in, the gap is substantially wider than when you started. What do you think? What do you mean competing with? Like what do you enter specifically? What do you mean by competing? Somebody entering into your product category is now competing with you. Okay. Today versus Andrew 10 years ago. Yes.

Are you a harder competitor or an easier competitor than you were 10 years ago? Oh, it depends cuz almost nobody You're dumber. you've gotten done. No, no, no. Well, almost nobody's actually competing with me, right? I'm saying if someone wanted to go into the category that you're in. Yes. Are they competing with a better or worse? I just don't I just I think in most cases, this is not true in every brand that like the notion of even being competitive at the size of businesses we're talking about here.

Oh, see this is another thing that I think is wild is basically silly. And what I mean is like like uh uh you know like Apple and Samsung have to compete with each other for how many phones they sell because like you and I only have one phone and they're the they're the two two of the monsters, right? Whatever. Or Apple and Android. Okay. Whatever it is. So something like that, there's like real competitive dynamics there.

But uh but for like a a brand that's coming in and taking even a 20 or $30 million revenue business in these larger categories like let's take let's take athletic wear athletic apparel right example something like this right those businesses like if I'm Nike and if I'm uh Under Armour then I'm probably thinking about the collective um problem of a bunch of upstart mid mid8 figure e-commerce businesses and the way they're chipping away at my business.

But if I'm born primitive, I barely care because Yeah, it's completely untrue. When when born primitive started, they had a massive advantage. What was it? Oh, well, I don't know. But when they started, you know, you were the one who discovered it. Uh CrossFit, the organic search term for sports bra. Oh, yes. CrossFit sports bra. That's gone. It's been completely You mean when they were a $2 million business? That's right.

And it's been completely competed away. Take categorical search as a category. They are. So, this is a perfect example. They You said this is a big advantage. They are 20 times the size of that business now. No, it was an advantage then that that someone entering the category today could never get. Yeah. So that category, okay, this is good. All these pieces of digital real estate like imagine trying to come in and be a silicone wedding ring right now.

Yes. All these categories get competed down to nothing where the access point to profitability that was leveraged by people when the industry started is gone. Yes. And and and it's not the idea that you're competing for total market in DTOC is not what we're competing for. We're competing for very limited digital real estate. very limited. Like the SER results page for women's leggings is no longer a profitable arena for anyone.

The search term the search term women's leggings. The idea that categorical search has basically become uninteresting. It's a channel. It's a channel that is now far less profitable than it was 10 years ago. Same thing in many ways with Meta. Generally, I think that's just false. Meta is wildly more competitive and the rorowass expectation over time for a decade is decreased. the rorowass expectation. Yeah. The median rorowass of a brand on the platform doesn't go up over time.

It goes down. It gets compressed. Yes. But that's because brands figure out how to like they're spending into that based off of the rest of the economics of their business. That's not always the case. Most people run on lowest cost. Like in reality, um Yeah, but I know. But they're still spending. I mean, not not in the sense of like being a manual bid, but they're they're they're they're spending in a way that is spending towards the growth level that they can achieve to to or that they want to achieve and they're therefore whether they're doing whether they're doing it in a poor way with auto bidding, right?

Where they're like, right, but if that volume was where that curve exists like is different and if the curve is lower than it was when we started, then you're able to get less volume at lower efficiency. What if you could employ incredible talent in your business and the cost to you was much lower than whatever you think it's going to be? That is the simple value proposition of hiring amazing people from the Philippines with my friends at more staffing.

And I can tell you that it is a great value proposition that really works because I have done it with my businesses and I love my team from the Philippines. They are high performing, high achieving, high integrity people who I love working with and who I think really, really highly of all the way across the board. And I'm only able to access that talent because of my relationship with more staffing. More staffing was founded out of a DTOC e-commerce business.

People who had built their resumes in the Philippines as members of e-commerce businesses and then thought, why don't we go help? including the US-based founder of the business and the leads from the Philippines there got together and said why don't we go take this thing that's been transformative for our e-commerce business and offer it to other people because there are amazingly talented people in the Philippines with deep e-commerce resumes because there's been a lot of e-commerce work done in the Philippines for a long time so those people are there available for you to access and you just need to be able to get access to them uh if you're thinking still about Filipino talent in your business as virtual assistant level talent introductory level um assistant type things uh That is possible and that is useful as far as it goes for sure but it is not thinking big enough about the opportunities for you.

I know because I've built my business with higher level performers across the business in design uh marketing uh uh video editing uh media buying assistant type work and also higher level people like people building a supply chain for the DTC business that I am starting right now on my own. I've seen uh amazing talent across all kinds of parts of the business at the manager, director level, even executive level talent.

And I think you should be looking at the same thing. More staffing will help you by recruiting, onboarding, providing ongoing coaching to and training to um and equipping great talent in your business. And on top of that, they will give you a one-year guarantee on that talent. So if the person doesn't make it for a whole year in your business, you can uh get uh you can replace that talent with more staffing at no additional cost.

It's really a great value to you. They understand your business. They understand e-commerce at more staffing. And they can help you find incredible talent at a much lower price than it would cost for equivalent talent in the US, which is still a very high price and therefore attracting great talent in the Philippines because uh paying more relative to local markets gets you the best talent in that market, even if it's still much cheaper than having that same talent in your market.

So, it's a win-win for everybody involved. Go to morestaffing.co/ aforsstaffing.co to get started today. Okay. So, here's here's like my fundamental question response. You just said less volume at more efficiency. No, no, at least efficiency. Excuse me. Less less efficiency. So, here's here's like my here's my big question to all of the e-commercees is on fire people. Okay. Again, put aside it's not so don't change the is it easier now than before.

That's the question. Not is it on fire? Okay. So, here so here's my question. Well, okay. So, we're starting we're starting at one point. We'll move to the is the state of the industry a disaster right now. But I'm but is the state of the industry a disaster is basically how everybody frames it. Every I'm not me. I'm interrogating a specific point that I brought up in the beginning which is easier now than I might not disagree with your point here a little bit.

So we should we should the first one and move to the second. Well, we should have another poll. So the but the question is like when I think about the idea of uh of something like Meta um as a channel. Okay. It seems to me that the tool itself is is has been built now to make life easier for almost everybody now. Oh god. Yeah. Yeah. Uh yeah, you may have to know how to do it. And and I actually think this is the thing that's the hardest part of this whole thing is actually you you brought this up on your marketing operator thing too, which I was just listening to on the way here, so it's fresh in my mind, but just it sort of fits one of your classic positions that's definitely right, by the way.

Uh and you know it pains me to say that sometimes but uh no one of your positions is definitely right which is that like the attribution wars all they do is complicate things. They don't actually bring clarity at all. The whole promise of attribution it's all gotten more complicated and less clear. And you know the marketing operators guys are talking about this idea of like oh now you can optimize for north beam attribution and Google analytics and what has happened they they Cody Pluffer is on there throwing his hands up saying I don't know what to do.

Well, exactly. I go back to when you and I started Meta. We didn't know anything about any of that and we were more successful. That's not true on running Facebook ads for Kao silicone wedding rings performance. But Kao that's that's not Well, yeah. Okay. So, my point is like we the simplicity of the system was beautiful. It was the ability to set up you're going to run for sales. Oh, okay. That cools. I don't even remember what optimization setting I think it was 28 day one, right?

It was like the default and we just we never thought about it. We never debated which optimization setting to use or what attribution model to use. Just put the money in and went like this is good. Let's do more of that. Now maybe we think we underplayed it and would have made a better smarter decision. Maybe I don't know. But but it was also at so much less scale than people are spending now. And and and Kao was an extreme outlier for the time.

So like I mean this is actually the point I was going to make earlier. Why are there so many more bigger businesses now than there were before? I think there's just older businesses. that that is part of it. But there are also more stories of people in the last few years like getting to a much faster state than before. I don't know. I don't I don't know how to validate that claim like well okay so this actually the point that nobody knows how to validate the counter claim to mine which is like so so I will just like concede an unknown to are there businesses growing faster today than ever before?

I don't I don't maybe I but I don't know for sure but I I think that the question is is it easier to win in e-commerce today? What do you mean by win? This is I think another important part of the question. So when you cuz when I say the goal of business is enterprise value. I think I think I feel very clear that the goal of business is shareholder value creation. Okay. But how much at how much do you win? Cuz this is another thing I think I see very differently than most people.

Um one of the things that I see in this conversation a lot is people with pretty big businesses putting up pretty big bottom lines talking about how hard it is. And I'm like yeah but like a few years ago that wasn't possible. And yeah, your growth rate slowed down, but that's what happens when your business gets bigger. Like there's just like a thing where it's like I don't or people who you know even like you guys have how many clients at CTC? 100.

Right. And so it's just I look at that and go like you guys have now figured out how to win for a hundred clients. I'm sure you're not winning for all of them. I'm sure you're not winning for all of them. But I I'm also sure you stand behind the quality of your service and that like brands that do your thing you say and and all that especially compared to when you had 100 businesses before a few years ago. Yeah. Right. it.

And so like all of these people are saying it's so bad all the time except that the businesses are getting bigger and they're generating a lot of profit. And yes, it's that that's what they're generating a lot of profit. The median IBIDA for an 8 figureure business is about 6%. Um okay, for an 8 figureure business, the median IBIDA is 6%. What if they shrunk a little and took it to 10%. That they'd be worse off. They wouldn't even be able to grow because they would produce so little cash that they would not be able to to invest in future growth if they took more if they took more margin on a lower revenue.

Yeah. Oh, because they're are because they're already at that revenue stage or something. You have you'd have to grow in excess of whatever the delta change is, right? Like so the net cash result would have to actually do the math on what you're suggesting. But the because you're saying because they'd be pushing out their current inventory further and then they would have and we don't know the inventory on hand, but but the idea is that like in order to fund future growth, you have to have a cash value in excess of the inventory that you want to purchase, which is more inventory than you sold.

But don't you have more cash if you take a higher profit? It depends on how much revenue you gave up in the process. Over 5% at a million is is the same as 10% at half a million, right? So like whatever the ratio change is is going to determine the net cash result and in likely but but at a lower margin percentage-wise then your COGS are going to take up a higher percentage of your cash. It depends on whether it's coming from COG's marketing optics.

Yeah. Yeah. Well, what I'm thinking Yeah. Well, if you think about it as an inventory cost, so it would be like that if that's the constraint that you're talking about. Well, if they depends on what's causing the cash limitation, why your EB is so low. Oh, is it because marketing's inefficient or is it because your opex is too high or because your inventory is too high? Well, I think the the So people the the string most people would pull would be to grow less to take up basically a higher ROS, right?

Essentially that's that's what not always but that's Yeah. And they hope that they can, but in reality like I don't know how true that is. I have business doing it right now. Doing what? Taking a lower spend at a higher am and a bunch more short-term CM basically. Now there's a question about whether or not that's going to hurt them in the long run. Yeah, for the for the growth of returning customers and all that stuff.

But part of it is they're just it's just the Taylor Holiday playbook just like profitability. If you've listened to my any of my content lately, what I'm realizing is that in many ways you like the the fundamental truth is you can't cut your way to growth at some point. You have to regenerate by growth growth to the shareholder the enterprise value of the company. Yes. Yes. Because enterprise value is a like one of the things I think people miss is that acquirer of your company or somebody who's going any apply value, it's a discount to future earnings.

Yes. So the trend of those earnings matter. Yes. And if you've grown the bottom line by decreasing the top line, nobody looks out into the future and goes this business is going to grow profit. You have to you you would have to do that as stage one and then stage two. You have to verify stage two. Exactly. Yeah. Stage two is that we can keep growing at a slower pace but more profitable. That's right. And so so that is the stage I think that's a good way to describe what I experience right now which is stage one was rightsize the economics of this business to viability stop burning cash but the stage two is the actual problem to be solved which is now given the fact that you've rightsized this can you grow profitably at all I don't know if I can listen to you and do this game it's really hard you just you're just looking for colorful chrome cards that say first of somebody that you might have heard of before you know that's it that's the and when you find the something signed And then yeah, when you find the autos.

Okay, great. So because I what I find right now is brands are stuck on stage two, which is they they have they have cut back what LA can't grow. Yeah. And because when they go to market, what they find is that there never actually was viable growth here. Meaning the economics between the CAC, the gross margin, and what it takes to operate the business turns out the category got too competitive, whatever it might happen, there's now you can't actually go achieve the profitable acquisition at all.

Like it's just not there. Yeah. And so now what do you do? Because you were willing to pay the market price to acquire customers even though it wasn't profitable and you were funding that in some mechanism. And so then you're like, "Oh, I'll just cut back." But then what you realize is like, "Oh, there's not actually a clearing price where I make money." So brands try, you're saying brand, let me understand. Brands try to cut back.

Yep. But then when they cut back, the ROS doesn't just like move in this perfect linear way where they lose too much volume. That's right. And or there's like literally they can't go get a 22 on meta. So, let's just for simplicity, they set a manual bid 2.2. Manual bids work completely perfectly tuned. It gives you 100% the output that you and there's zero volume and so they uh off of what? So, they were at a 1.8 before they were losing money.

Like, let's just say that they were acquiring customers negatively. How negatively? I don't know what like first order negative. They were at a 180day payback period and whatever. And so now they're like I have to get the first order profitable. So let's come up with a theoretical situation and let me tell you tell let me this is something fan I'll give you a specific example without using a brand name. Well okay uh go ahead.

Okay highly imagine a category that exploded during co Okay. Okay. Uh a bunch of demand hot new thing trend list of players. Yeah. Uh a trend in uh fitness wellness maybe. Sure. Okay. Explodes during co for a period you're able to go acquire a bunch of customers profitably. Yes. Um you're the maybe you were first to market with this new thing. Yes. Then all of a sudden there's 974 competitors. Okay. There are alternative options that are now undercutting you in the market.

The the categorical search has dissipated. Your conversion rates declining. There's Amazon options that are way cheaper. And all of a sudden, this is not too far off of Kayla, right? By the way, exactly. I think I think this is exactly what happened to Kale in many ways. It happens in almost every category in e-commerce. This is one of the things is that the actual problem with e-commerce in my mind is the barrier to entry is zero and so all the profits eventually get competed down.

This by the way is the best counter argument to my position is is actually the barrier to entry is so low. This is what David This is why like on the other day I was listening to Matab on finance operators and he was talking about uh IP and and it was interesting because it was like uh uh Drew was like IP nobody cares about IP and and like generally default that's what I was kind of taught that's kind of the position but he's like no no no we actually think it's only the only thing that's defensible and I think I think he's right and he he louded uh Sean Frank for taking so much uh effort to defend their patents on the wallet and that's one of the reasons they've been able to kill all the knockoff offs and competitors.

Yeah, that's really interesting. I didn't know that they had that. And so that is actually part of what defends your ability to continue to acquire customers is that you don't get undercut by all of the people doing Rhino Ring and whatever else ring. Right. Right. And so, uh, what I see happens is that, okay, so now all of a sudden all that competition comes in. How big of a business do you think Sean and Ridge could have if they didn't have that?

I don't I don't think it would exist. You think it would be dead? I think it would be competed out of nothing. They would not be able to acquire customers profitably. Yeah. Um what if they kept adding product products along the way? What if they kept doing product development? I think the question is would they ever have been efficient enough to fund that kind of development? Right? Let's talk about all the things you are not doing right now that can drive more profit in your business. things like testing the price of your products, things like testing the free shipping threshold, things like testing the actual shipping charge of uh how much you are charging customers for below the free shipping threshold.

What about the sitewide discount offer you provide to new customers on your business? These are all things that you do. You just make a decision about. And I know like I've watched a million people decide we're going to charge $5 for shipping with no logic about whether or not they should be charging three, seven, or zero. They have no sense of that. What if you could make decisions like that? but actually understand the impact not just on conversion rate, not just on revenue, but on actual profit in your business.

That is the promise of intelligence that you actually start doing CRO style testing going beyond design and copy type tests, but actually to the core drivers of what makes customers interact with your business and then measure all of it based on actual profit. Because if you know anything about e-commerce, you know it is a game of driving profit, not just volume. And that is what Intelliggeems allows you to do. And they also allow you to do it fairly quickly and easily.

You don't need a developer on your team to install Intelligjs to get it going. It plugs really cleanly into Shopify. They'll hold your hand through a very short process of getting it going. And you can get going, doing better CRO testing, better offer testing, even measuring SAS tools, some SAS tools in your business, split testing, like is this actually doing the thing that people are saying? Is it actually adding profit or is that just what a salesperson from the SAS tool told me?

Intelligence is one of those tools that I just love. Multiple of my clients are using it all the time to test all kinds of things on their businesses, on their stores. You should be using it, too. It is a great product run by great people. Go to intellgeems.io and use the code ferris 20 uh to get 20% off your first three months with intelligence. There's also a link in the show notes of this episode. You just want to go straight there uh to make sure to get that uh 20% off for the first three months.

Intelligjs.io. Get started with operationally excellent profit-based uh approaches to CRO testing in your business right now. Intellig is the place to do it. Yeah, it's hard. I It's hard to know the counterfactual, but the problem is the pace of uh knockoffs. Like now silicone rings are obviously the most extreme example cuz the barrier is literally nothing. It's and the cost is literally nothing. So like it is if you were going to knock something off at the lowest risk possible with the most margin to go capture.

Oh, you got an autograph. Oh, there it is. Who do we get? Jesus Tero. Dodgers prospect. I'm a big Dodgers fan. There you go. First auto. Let's see. I have absolutely no idea who he is. Okay. Out of $4.99, Chrome Auto can't be a good sign. Can't be a good sign. He's a Dodgers prospect. I don't know who he is. It's not Let's do Let's do a quick Let's look him up. Let's check out some some numbers. I think it's probably not somebody we care about here.

Finish your thought. This is This is going to be the worst episode we've ever done. This is a clever idea, but people are going to be so mad that you're finishing that thought. They they're going to like it cuz they want to know about Jesus. He's 19 years old. That's he's the 27th ranked prospect in the organization. 45 pass ball but 60 ceiling. Okay, hold on to that. That's good. That could be good. Yeah, he pitched in the uh something league.

He's 12 and a halfks per nine in the DSL. He's walking eight per nine though. We got to go get that as a classic Dominican 19-year-old drive lines intended zones tracker. Exactly. Right. Um Okay. So, so the going back to my example in the fitness category. Okay. So, now all of a sudden that that's degrade your opex got a little too bloated because maybe you hired thinking you were going to get all this growth. it starts stalling.

You reset your opex and you go, "Okay, all right. Now, all of a sudden, we need to go from a 1.8 rorowass where we were scaling to a 2.6 and all of a sudden you go to try and get a 2.6 and there's no volume." And so, you're like, "Okay, we got to cut off X further and now we can get to a 2.5 and there's like a little bit of volume and all of a sudden at that level it's like the business would have to be a quarter of the size." Yeah.

And so do you in that business it sounds like a business that has basically won like there's very little LTV on it. Yes. Right. So yeah I mean I think I think a business with bad fundamentals that was sort of like took off during a trend and had very little LTV is not a good business. So this is how it all ends up in supplements and beauty like because the environment. Well the question is the fundamentals like how many products actually possess good fundamentals and it's like basically none.

Yeah. I I think I I think and I think part of the thing that I consider in all of this is that you ought to have and this is this is like one of you ought to have um a position about what is the upside of your business that's rooted in reality you know and that means understanding some basic things about that make an that make e-commerce work as a business model yes and uh and now one of the things I'll say is to the point about the intellectual capital and the shared balance sheet is that we have never been clear about that people were not very clear about that not that long ago.

But are we like so is do we know I well so there are exceptions to the to the basic rules here and sometimes they're like really thoughtful and careful exceptions the one I always think of as simple modern where like they have terrible gross margins but that was actually a channel strategy that launched them which is about their ability to win on Amazon with one of the smarter business strategies I could think of for a brand like and and like a massive tailwind that happened off of a random event with Stanley that produced massive categories They were doing great.

They were but that was they were like nine figures before that I think you know. So So it's not the only thing for sure. I just I but I just mean like they break the rules about gross margin being important and specifically but what have they done? What what is their next tr their next thing that they've gone to do to explore growth? Uh I mean they've gone omni channel. Well no they launched a new product that is a consumable right that they if well that's a fully separate brand.

Yeah, but it the the growth path for the enterprise the whatever the hold co is that they look at they look at the growth potential of simple modern and trevy and go trevy can be five times the size of this and so the future growth is going to come out of this thing not even no I'd say less DC more so retail like you could sell those things into every grocery store in the universe um so like I I think that there's like and the unit economics from a DC's perspective are subscription because they have DC skill set they understand the unit economics of But they they understand how that game is played, right?

And so there was a flight to consumable. It was like one of the three subsets of product category. They sent one of their talented executives to go do Skunk Works. That's the way I would look at it and say like there's enough upside here on this. How much cash? 10 million cash, 5 million cash. I think I've heard them say it before. I don't They might have said it somewhere. I just don't know, you know. And and look, they're at a spot where they can afford to do that.

I think that's smart. You know, I I'm I if if what you're saying as a counter example is really really smart uh operators decided to start an e-commerce brand, I am happy to say that I mean had an e-commerce launch. So e I don't know this is the Kelsey Ler conversation, but e-commerce sales channel to start. They they definitely thought they could incubate it there and they also have all of these doors into retail and all that.

Like yeah, I think I think that's an argument in favor of the idea that there is a really good opportunity for some people if you can find the right product category fit. you know, something like that for sure. And I don't think I again I I also want to say like when I say that it's like the easiest it's ever been, I don't mean that it's easy, you know, like this is another thing I think that happens here. Some people talk about how hard it is as if it was supposed to be like you walk down and somebody just gives you a bunch of free money.

That's annoying. I got a a redemption auto. So that means that you have to like he hasn't actually had time to sign it yet. Malcolm Moore of the Texas Rangers. Probably not worth it. It's a Chrome Prospects auto. I don't even know who that is. Yeah. Bummer. Um anyway, the what's it supposed to be? Like what's the what is it supposed to be? Well, yeah. I mean, I just think sometimes people talk about this as if the game is supposed to be like, well, what in the world? like I just put my money into Meta and I have a business, you know, like it's not I don't I don't think it's that and I don't want to suggest the idea that it is that, you know, that it's and I think that is sometimes how people frame it or they've grown really fast to $20 million at a 10% bottom line or 15% bottom line or whatever it is like they have a good healthy business putting off millions of dollars on the bottom line.

They probably don't have any cash, but like you know, but they have a good business, right? Like you're all right over there, Mickey. Great. Yeah, good devices. Yeah, I know the two camera setup is is leading to some injuries here. No. Um, okay. I don't mean that. I don't And but this is another thing that bugs bugs me with the conversation. Sometimes when I hear people with big healthy businesses talking about how hard it is, I'm like, get out of here.

Like, so what do you think they're being protectionist? Like, what what do you think the incentive is there? No, I think I I think that uh Don't you think it's sort of like Have you ever seen the interview of uh Jackson Wong from Nvidia being asked like we talked about this last time I think and he said I I would I wish you suffering. No, no, no, no. Where he's asked like if you could go back and tell yourself give yourself advice when you're starting he would he he goes yeah don't do it.

That would have been the advice. Yeah. So it sort of feels like that to me which is that like the reward relative to the journey I excuse me is not not not paying off in the way that I wanted or or there may have been a different path. I I mean I just think I just think that though for those brands also part of it is that that just success is never enough and I just think for some people there's an there's such an endless uh desire for growth.

Now this this may have perfectly reasonable business aspirations. I cast no spursions on somebody having ambition to grow a big business or something like that, right? Like it's just that what I what I ask sometimes is what is actually underneath motivating that and at what point have you been successful enough to say this is a good business and it's going well? But that's different than is it easy? Well, yeah. I I I don't know if I've ever said that it's easy.

I said it's easier. That's the that's the original point here. Yeah. I Yeah. And I don't again what I'm saying is I'm bullish on the ability to do it and like like and so I don't know if that's I don't know easy is probably not the word I would choose. All right. So maybe let's move to a different let's move to yours which is which is the present market is a terrible market. Well yeah. So I mean but maybe the way I would put it is like do you think e-commerce is a bad business?

You know like Yeah. Okay. I get asked all the time would you start an e-commerce business and I there is almost no scenario. What are the main reasons for why not? Because I think that the path to liquidity and cash return on my time Yes. is like really cool that Yeah. Okay. Um Yeah. Go ahead. Sorry. Keep going. Like I I I look at your business as an example and how much money you Yeah. how much money you've made over the last two years and how long it would take you to make that much money if and I just go like these things are not even close to the same.

Um, and I I think I have an appreciation for the asset value as well that I don't actually think the trade-off that people pre pretend it is is real either. Yeah. Does this matter? No. Okay. Um, so I I just look at that. That's just one example. Now, I don't I'm not one of these people that's like you should start a dry cleaners. I know nothing about those businesses to assert that it's better or worse. But I know that I didn't end up in e-commerce out of some thoughtful consideration.

That's not how I ended up here. And it's not my experience of how many people end up. No. Um, so I do agree with that that a lot of people are not considering opportunity selection at all. I have some friends who who I just heard about recently who like very quickly spun up a seven figure business distributing OMIC to people locally and it's just like they're just like making more money than that, you know, right? That feels like opportunity selection, right?

Like you're where you're trend riding a wave that you thoughtfully entered into potential. Yeah. Um, so yeah, I I do think that that is what I just think about how much easier it was for them to get that much money than it has been for me. You know what I mean? Like and I'm just saying like, oh, so maybe if I thought differently about what I put my mind on. That's right. Yeah. I think I so when I think about easy or hard I think about that is that like if you were to sort of agnostic to industry take a step back and go okay relative to my intellectual capacity if I wanted to maximize my earning potential you like him Hiak Hans Jen he is a Korean he was like a 17-year-old that the Dodgers signed out of Korea with like really big stuff there's like a there's a chance he's nothing but there's a chance he's a superstar and that's an auto that's Dodger autos Yeah I know that's funny that's convenient He's like a really fascinating prospect actually.

We're going to give you this cuz he skipped the KBO. He skipped the Korean League and it was like it was like he might I mean he's like 18 or something like that. He's like really young or 19 I think. I don't know exactly but yeah. Oh that's fun. Yeah. I think people are going to hate this so much. No they're not. It's so fun. Um are you having fun Nikki? Great. Great. Um okay so that that I think and then so I guess when you interact path to generating a bunch of cash yeah maybe let's just talk about the data like what data we have available to us about the performance of our industry.

Yeah. Um if we start at the top of the public sector okay it's like it's like the worst basket of performing assets ever history. So now of course there's HIMS. It's an outlier. It's crushing. Hopefully you've got some HIMS shares. I know. Um I have no HIMS shares. So, it's not that there are zero windows, but I I look at that and I go like, "Ooh, man." Like, you want to talk about uh a category with unique dynamics relative to the rest of our industry that we're we're lumping into DTOC in a very generous way.

This is like tellahalth, you know, this is uh and it fits closest to the thing we know kind of works, which is supplements, but but so at the public level, absolute blood bath disaster. Yeah. Um, now what one of the things I'll say about that is that those are all brands where nearly all of them were like blitz your way to IPO, never be profitable and and generate a bunch of uh enterprise value for the investors as we've talked about.

Great move by those people like uh building these businesses that never have a chance to be profitable. They are ballirds of the world or whatever it is, right? um they they just don't stand a chance and um and that that I that I think of as a carryover from D TOC 1.0 or 2.0 know or whatever where it was just almost nobody is operating under those assumptions anymore that I can see now I wish we were that well maybe so then it would be easier yes but that that maybe I mean not very many brands won there right like there was how many of them that actually how many of them have IPOed since yeah like not [Music] the value proposition of rich panel is incredibly clear which is that they will save you at least 30% they actually guarantee that if you are switching to rich panel from gorgeous or from zenesk and at the same time they will reduce your customer service tickets usually by at least 30% they also expect generally that customer service um satisfaction customer satisfaction with your customer service goes up in the process so that means saving money reducing tickets and having happier customers all at the same time like that's that's the whole ballgame in customer service help desk software that is what the SAS tool should be doing and if you're using a different tool you're not getting those things like what are you even doing this is the way you interact with your customers.

I've long believed that great customer service is one of the ways to create great experiences for e-commerce. I've watched over and over again as customers have responded to e-commerce brands who take this seriously and go, "Wow, something went wrong. I understand things go wrong sometimes, but this actually turned into an incredible experience for me because your customer service team handled it so well." That's the promise of Rich Panel.

They're going to use AI to help you uh make things fast and easy for your customers and at the same time drastically reduce costs for you. And I don't I don't know what else the promise of AI could be besides that, especially in this area of the business. At the same time, Rich Panel has a built-in social media comment moderator that will handle social media comment interactions for you at scale. It's one of the things I've seen customer service teams struggle with and paid media teams struggle with for forever.

There just has never been a good solution to going and interacting with people who are interacting on your Facebook ads and Instagram ads. All the dashboards stink. They're all full of friction and messy. Uh and it's impossible to stay up on all the conversations that are happening. But uh Rich Panel's AI solution to this can actually do it for you and they had trained it to make sure that it was right over 99% of the time.

That is that it gave a good response over 99% of the time. They don't release AI automated products at Rich Panel until they've cleared that 99% accuracy threshold. That is the way they think about it because they want to resist the urge to overpromise what AI can do and instead use it effectively while at the same time using it in ways that are smart and not just going to produce a bunch of AI slop with your customers and with your brand.

I really love the way they think about the integration of AI. They are an AI first platform. It's part of why they've been so good at it is they were built from the beginning with AI first. Um, you should check out Rich Panel right now. So, go to richpanel.com, get on a call, tell them I sent you. Richpanel.com and just see if if it can actually save you money uh in your customer service uh software. Again, they guarantee 30% if you're coming from Zenesk or Gorgeous.

It's really awesome. They also, by the way, promise a twoe transition. They know you're busy. They're going to hold your hand to make it fast and easy so that it's not this long drawn out process of switching customer service software. richpanel.com go check it out today. So yeah, there there was some ability for some brands to do that at the time. Good for them. They did well. Now when I talked to Fan Fan definitely suggest so now we're going to move down markets.

Well, but he suggests to me there's still a lot of brands a lot of brands operating under those assumptions. That's another good push back on my position which is like that knowledge has not disseminated as far as I think of it. I am in particular circles, you know, like I talk with my clients and with you and that's it, you know, so like I don't even really listen to any DC podcast normally, you know, so like I don't really know what everybody else is thinking out there.

So anyway, but yeah, keep going. Sorry. Okay, so at the public, so at the biggest level disaster, uh, if we go, is he a thing? Who is it? Joseeno. I think he's a thing. Sounds like a thing. Yeah, I think he's good. So you go down to the next level and you go, "All right, well, let's do the eight and nine figure crowd." Well, the only the only data that I have in real aggregate is this is what Final Loop has pulled across 500 8 figure stores.

Yeah. Okay. That's a lot. Yeah. Yeah. And so you look at that. So first of all, it's a lot more 8 figure stores than there used to be. Yeah. Sure. Again, that's just time. Like there'll be more in 10 years. Yeah. Partly. And there's also a lot more customers buying online. Everybodyates that too. Yeah. more than twice as many. Yes. Not over because the growth rate is like what 15%. It's basically grow double every year.

It's basically one percentage point per year. But that's also a pie that's getting bigger. Don't forget. What do you mean GDP of retail is growing? I mean just that like the total economy grows at some point, you know. So yeah, maybe we're actually I know. I know. I know. It's possible that we're in a recession for a couple months, but going to be Kyle De Marge. Yeah. Um Okay. I don't know who that is. I mean, that's technically a fourth auto.

I guess we get six. So, yeah, why not? Great. Um, so, so you've got uh this eight figure set of stores that basically have a a median outcome. Okay. So, median for the record is the middle. Yes. That means half the people are worse and half the people are better. Yeah. Okay. At 6% in Q1. They just pulled me the most recent data. 6%. Okay. Okay, go ahead. Sorry. So 6% EBA as a median outcome for an eight figure store.

This isn't seven figure. Seven figure is going to be worse. Yes. Um so if once you get to 10 million, the great hope is that if you're a middle of the road, eight figure, you're making $600,000 on 10 million. Yeah. That's not great. It's not great. No. Um Okay. So what would you do if you were making $600,000 on 10 million? Knowing only those two things about the business, the top and the bottom line, you would be able to pay yourself zero dollars.

I mean, so what would you do if you if you ran that business? What do you think you would try and do with it? I mean, it's too generic of a question. I would try and get out of the business, first of all. Okay. So, that's a fair answer, right? I mean, it depends on so many things, right? But but it it what I having operating in a business that has substantially more margin than that. Yeah, I can that's a grind. Yes, that is a grind for pennies.

Yes. Um, I think there are better vehicles than that to spend your life in unless you really want the question which is like the question is like e-commerce relative to e-commerce like is it better now than it was before? Well, I thought we were moving on to is the industry disaster right now. Oh, sure. We could do that. Okay. Yeah. Great. Yeah. Yeah. I I think uh I think that's a fair I think it's a fair point. Do you think that a brand though, let's say you were running it, what do you think the viability is?

Do you think it's just not viable for that brand to grow slower and more profitably? We talked about this a second ago, but this is something I always think about this is sometimes when I hear I mean Fan had a story when I interviewed him about this that was kind of kicked off some of this conversation about like a $40 million brand that sold for six figures or something like that because they were they were not profitable and I you hate that.

You hate that. Well, I just hear that and I think like that's a choice at 40 million. Like there's almost no way the economics of that business are like you are you are operating it excellently all the way down to you just don't know if there's any profitable acquisition potential at all. Yeah. Yeah. I mean, I just think at 40 million you almost for sure have some amount of returning customer revenue at that point. That's just going to whittle down to nothing.

I don't know. It depends. If it's an apparel business, apparel business returning customer revenue often, if you can operate the business well, like will be shockingly sticky over time if you can keep producing. Shockingly sticky. Yes. I mean, those those cohorts last for longer than people think. Yeah. They last in tiny percentages. No, that's what I'm saying is that in larger percentages than people think. You'll see brands that produce larger returning customer percentages over a longer period of time than many many people think.

Particularly in apparel in my opinion. What are you what are you actually talking about? Let's say they do an 80% increase in customer value in a years. A lot of those will end up doing 60 and 50 and some of that for the next course couple years. And sometimes they'll even stay closer to that 80 for longer. Like they just won't degrade as fast. There's no way. Yeah. You don't think so? No. I think I think I think there's no way in the second now in the second or third year you're going to match because you're just dealing with a perpetually smaller number of people.

So unless you are somehow extracting more and more value out of them, which apparel businesses do because a lot of them what happens some of them do because what a lot of them do over time is they release products more often and they have sales more often like they become more of as I think you've described it a rhythm and timing business over time. So they they get better at doing those things. Now I'm not saying that it'll last forever but I'm saying some of those will be better than you think.

And if you can keep piling those up at some level you end up having a pretty profitable business. But the keep piling it up part is the point. In that example though, why not go to 30 million? Because you don't know that you can actually sustain the customer acquisition at $30 million to make it work. Yeah. The customer acquisition potential might be like $4,000. Like look at Bamboo right now. This is a great example.

Yeah. Well, yeah. Now, that's a category that could not be more crowded, right? Well, so so tell me, so they have that's a weird category. They have attempted to do what we're describing, which is slow down the acquisition from nonprofitable and they're they're stuck and every day 50 more skincare brands pop up. Yeah. And so so they're trying to be disciplined about the efficiency of acquisition and doing a ton of creative smart people, good talented designers working really hard, introducing new products, all of it.

But it is a grind to get the next cohort to offset the churn from all the ones in the previous. Is that is maybe worth a good business? I don't know. But based on based on the present and I maybe we should bleep this out. I don't know if we should do this, but um the the numbers would say no. Okay. Well, what do you mean by that? Nobody's making money. How about that? Could they be? I mean, yeah. Okay. I don't know you.

Um I I actually don't know the numbers for right now, but I I um Yeah. Okay. All right. We've we've kicked this around enough. I think I just think that like uh that there are my my summary statement is I think it's very possible to build a pretty good $20 million business in e-commerce right now that and that's not satisfying to a lot of people and that's I think the difference between my position and a lot of people.

So let's just play it out. $20 million what kind of eB you want to give it 15%. You think you could double the median 10 to 20 depending on how you run it. 20 would be a really really big if if you're running let's call it 15%. Okay. So 15% on 20 million is like 3 million bucks. Okay. So um assuming you have some carrying cost of the inventory, some level of debt, some partnership, how much free cash flow do you think you could spit off in a $3 million even in a business?

I don't know. Um uh 20% of it. Yeah, sure. That's that seems that seems tricky. You may be able to do a little bit better than that. But if you're growing if assuming that you're taking it and not trying to grow that fast along the way. You're you're getting there and not trying to, you know, so you didn't you didn't go 0 to 5 to 10 to 20, you know, like 600 grand pre-tax. Yeah. Okay. Assuming you have no partners, if you own 100% of the business is a post tax earning of 300 grand.

Yeah. You make more than that running a tiny service agency. Yeah. Yeah. Yeah. That's insane. Yeah. You take home more in a service business. That is how many people now? Four, five. Yeah. Three in the uh three. You have three people that's not doing $20 million in revenue. And your take-home cash is going to be better than this theoretical $20 million business running at 15% margin, which is a 75th percentile outcome.

Yeah. I mean, that's crazy. Yeah. But but but but the the enterprise value of that business is way higher than mine. Is it? Yes, for sure. What is it? For sure. Who is buying? Give me give me the outcomes of those $3 million $3 million. Yeah. I mean, I think you're selling that for 5x ebida. Seems reasonable to me. Who's buy give me an example of that transaction. Uh, Bill Delisandro. It just happened. They're they were bigger than that.

They're definitely bigger than that, but it's it's within the range of of of that transaction. Now, I think this is another question that I think is fair, which is like what is the M&A market actually like right now for e-commerce businesses, right? And there's so many so much and that's also changing all the time. I think it's that feels like more than we can explore here, but like I think that's another possible reason that people would say that's that's right not a good business.

But yeah, so the other thing I thought that was interesting that Matab said is that basically like when he underwrites an investment um into ecom, he does not consider the liquidation event at all in the calculus of value because because basically the market doesn't exist and and like any assumption that you're going to go out and realize this great transaction that I think is another mistake people make. Exactly. So he looks at it in its capacity to do two things.

One is like to distribute cash along the way and then two is like can he get out in secondary? Is there a path to uh second round where he could take secondary off of the next investment? Basically the greater fool theory is what that sounds like to me. Um so like oh that's a cool one. Johnny Johnny Levelville. Don't know who that is but it's a sparkle out of 299 auto. Um never heard of him. He says he just dismisses the poor guy.

Eduardo Contro first. Maybe he's a dude. This might be a dude. I don't remember. That was a guy. Um, so I don't know. I I think about like that to me when I look at those different businesses and I go like and I think what you just did is what a lot of people do, which is they go, "Oh, the asset value. Oh, the asset value. The asset value. The asset value. It's not nothing at $3 million." And I mean, it's only as real as your ability to realize it.

The cash. Yeah. Uh, and so like I think about that with Kayo, right? It's the TED saying this is worth a hundred million or a billion dollars and you just go like okay that's only true in the event that there is a pathway to you realizing that value and there wasn't. In fact, you misread the the competitive dynamic so bad that like the present value of the cash you were being offered was so astronomically in your favor that you missed it.

Yeah. Right. Right. Um Right. Yeah. Yeah. Um, so tell me about the business you're launching, the e-commerce brand that you're getting ready to launch. I mean, part of it is, you know, part of the thing I'm I'm thinking about with it is that I'm not trying I'm not I should have brought the sample. I almost brought you some. Can you smell me right now? Yeah, it's nice. Little. Yeah, just a little. What did I put on? 8:00.

Um, so I uh Yeah. Well, I mean, part of the deal here is I'm not expecting this to be a monster business. So, that should just be said up front. You're doing it for fun? Partly. I'm partly interested in doing it. It also creates um potentially good content. I think it can generate some revenue because marketing for your agency. So e-commerce has marketing for your agency and also like there's potentially the ability to like you know I mean this is another thing you didn't say in the all the um talk about the the e-commerce plan we just discussed that has $3 million in the bottom line is like the salary you can pay yourself as part of that and some of those things.

Probably nothing. You have to keep opex at like 4% to get to that either. Well so I'm going to come back to this later. This is this is this is a point that I think doesn't fit with your theory, but anyway. Um okay, so it's a solid cologne business. Okay, that and it's a solid cologne business today. Uh it doesn't necessarily mean that's that's what it mean. He doesn't mean solid as in good. He means the product is literally instead of a spray cologne.

It is like um I mean for lack of a better word, it's a coupe, you know? Um and so it's it's uh there's a couple guys a couple brands out there who who make these kinds of products. Now, the probably so far as I can tell, the one that's selling the most of it is probably Fton and Ror. Um, and so they sell solid clone, although I think their main product is spray cologne. Um, Cologne is a $2.2 billion business in the US.

Um, I think it's a fairly bad e-commerce business. Um, in some ways, particularly because, uh, shipping glass bottles of liquid is, uh, heavy and difficult. Um, so, um, so, but it's really high margin, famously high margin. Solid clone or clone in general. um solid cologne creates a potential opportunity to um solve some of those shipping dynamics and then there's also I think some things around clean ingredients that could really make a difference.

So um so it would be all clean ingredients. The business is called Resolute um and it will be all clean ingredients uh that is like a solid clone and you apply a little right here and right here uh just like you would with a spray cologne. You we spray it on. Some things I like about it as a category. I'm not like a cologne junkie. That's not how this came about. that the the big thing is a long time ago Keith Knap showed me something he had played with and Keith um had thought about starting this business a while back and I just noticed that there's a couple dynamics of it for e-commerce that I think make a lot of sense.

Extremely high margin. Mhm. For example uh is one of them. You can charge a high price for cologne uh and ship it uh very cheap. And particularly that shipping component of it's a really big deal. Um because if you can ship if the solid cologne comes in a thing that's like you know a half ounce container or something like that. Um even with like really drummed up packaging which I think is a really important part of cologne businesses is is branding and packaging those things.

Um you can you can ship it very cheap and charge a pretty decent AOV. So you end up with the cost of shipping against the revenue is pretty low. And so you end up with a high margin product. I think it'll have some LTV, not great LTV. I think it'll be a really but it won't be nothing. It's consumable. Uh, we'll see. We'll see. I mean, I really don't know for sure. I don't I just don't expect that to be a huge huge element of it.

Um, but you know, my hope here is I I love um subcategories within larger categories. Y um so silicone wedding ring is the example of this that I think of all the time, right? Wedding rings are a really large business in the US. Silicone wedding ring is a way to come into that category with something that's distinct and at the same and kind of draft off of it and maybe make a play to make a bigger business if everything goes really right. the like 90 90th percentile outcome here. 90th percentile outcome is that you're able to actually move towards like a few things that are happening culturally around um a mix of things.

Some ideas around masculinity that are happening in culture um as well as some ideas around clean ingredients that I think have pervaded women's products but haven't made it all the way to men's products in the same way. Y um and and there's some of those things that I think if this is again 95th percentile outcome, right? then you're able to actually write on the back of that as people sort of have a real category allegiance or really look for clean ingredients, whatever it is.

Um that the solid cologne would be a different mechanism for doing that. I like it as a mechanism for applying cologne more than I like spray for a few reasons. Um you know, you talked about one time your spray bottle um spilling all over my spilling all over spilling all over your brush. Yeah, I mean your your breath probably smelled awesome after that was gross and I'm gonna die. You told me from from using it. Well, I'm not going to make any claim like that here on a recorded piece of content, but it's but very likely.

Um, they have 100 ads running. That's like that's Yeah. Yeah. No, that's a good business. I know. I've seen them, but I think a lot of it is is not solid clone. I'll be a lot of spray clone and this is why I say solid clone today. That's what we're going to launch with. I'm not like married to the idea that we'll never launch a spray cologne. We're not like, you know, we So, you'll be back killing me. You're going to be you're going to be in on that chemicals not kill me.

Yeah. So, you have to launch a clean spray cologne. Yeah. I wouldn't change that because I actually think that's probably hurting people. So, um, so yeah, fragrance is like alcohol brands where if you use the word fragrance, you can basically put all kinds of stuff in it without having to declare it to people. Um, you know, just like if you look on the back of a tequila bottle, it doesn't say what the ingredients are, right?

Fragrance the same way. You wear the word fragrance on a label and you know there's certainly regulation around it, but like you can't u but you don't have to disclose what is whether it's a trade secret. So interesting. Um, so yeah, so I think it's possible. I also think another part of this is a relatively low risk to launch. And what I mean is, you know, we can do this whole thing for between me and my business partner, my your friend of mine, Greg Gear, you know, launch this whole thing for something like 30 grand or something like that and and kind of get it off the ground and see what happens and see if it hits.

Um, I think the ads make themselves I like that it's visually interesting. I think you could do some stuff on the ad level to say like this is cologne like you've never seen before. Um, which I think is good. Um, yeah. Another example of like a small subcategory within a larger category that I like is is I just had Isaac Merton on from Flux Footwear. Um, you know, wide toe box shoe, wide toe box athletic shoe is subcategory within a larger category.

That's a big category. Um, so yeah. So anyway, my again I this is not putting my life savings on this. I'm actually not you know this about me. I'm actually not very risky. Like I'm I'm not the kind of classic entrepreneur chasing down some crazy outcome who's going to throw everything in there. I'm planning on running it profitably. Basically, from the beginning, I'm not trying to get it to 100 million. You know, those kinds of things.

So, that's that's the case. So, tell me why it's bad business cuz you have a better one. Yeah. And then you're neglecting. That's a decent that's that's that's the sad that's that's the only thing I care about. Like I think like I think what you'll do is you'll be moderately successful doing that. Like you just went right through the auto and you just like ignore. I'm going to get there. I'm going to get there. Prince Fielder's son.

Yeah. But he's not any good. He's not. I don't think so. Oh, bummer. Yeah. Um, yeah. So, I just my thing with you is more just like I have repeatedly tried to tell you to go grow my business. Yeah. To you have a really good business that's going to pay you lots of money that you could make very large and valuable. Maybe I'm working on that too. Yeah. I think you Well, I think you are. Yeah. Well, um, yeah. So, I think I think there's an opportunity cost to it.

And I think that I Yeah. Yeah. That's my contention more than I like I like one of your businesses better than the other business. Yeah. Yeah. Yeah. Here you go. Um, so that's my contention. I think I think knowing that category, um, I think that you're going to end up selling more expensive spray. I think that's very possible, isn't it? And I think that category uh is a good category. It's funny cuz I don't I don't see a lot of D.

That's really good. Yeah. I don't see a lot of DTOC cologne businesses um or like perfume. And it makes sense as a category to me because of the value to weight ratio, because of the margin profile. like it's got some similar skinare kind of components of it. It's not quite as high LTV as that. Yep. Um so there's some things I like about it that that are are there that I think could be really interesting, you know, and I think I think what I'm going to find out here is like do my ads hit right away and if they do then they're there.

Like a big part of this is the ability to just like have a very high margin product. Like we're going to be able to launch with like probably landed margin. If we get more than 70 I'll be really happy just because when you're lower ordering at lower MOQs it's really hard to launch with there. Like I've already got like sheets from manufacturers both at the level of packaging which is twice the cost of the of the product, right?

Packaging and product. I've got sheets that are like, "Hey, look, if you can get this from a 1,000 piece order to a 3,000 piece order, we're going to shave a $150 off every you know what I mean? It's like you you reduce cost very fast there. And if we can, you know, obviously really hard to negotiate up front, but if we can launch with like 70 points of land and margin, then you just don't have to live with that high of a of a rorowass on meta to make some money.

And um and that's a big part of it. And then and then of course core to this to me also is a lot of what I think about um the place of opex right now in the world like I we're basically planning on hiring the entire team in the Philippines um where I've you know very good contacts. I think this is a a real advantage of mine um and in terms of that and you're playing but you're playing a OPEX game that is not real which is you are a very expensive employee that you're not paying.

That's true integrate both. That's definitely true. So, this is another thing that people look at the opex and I go, "Yeah, if you were paying yourself $30,000 a month, the opex would look very different." Yeah. Yeah. Yeah. That's true. I think that's definitely true. The um and and I think that's, you know, an advantage I uniquely have in this case. What do you mean? It just means that you're not paying yourself through the business.

It's not real. Well, we'll see. I mean, we'll see if I can You would have to get an ad back to IBIDA for anybody acquiring that business for you. Yes. If we if we if we get it to many millions of dollars and sell it and we have to ad upset about that, I don't think. Yeah. Yeah. I'm just saying the lean opex when you're a very expensive person is is not real. Well, there is no opex that's lean less than a million dollars in revenue, right?

I mean, that's the thing is that's it is still an entrepreneur thing, you know, like it's it's not going to look good at a million bucks, you know. It's not going to it's just I understand that, you know. So, so that's why you you like to talk about this slow growth thing, though. Yeah. But for you in particular, based on your costs as an individual, you can't grow slow because you will be way too much of the opex for too long.

Yeah, that's possible. That's possible. Just think about like how just your your earning value alone at $5 million. Okay. Still represents a percentage of the IBIDA that's higher than you want higher opex to be. It's putting it's it depends on how much time I'm putting into it, too. And that's that's another question I think. Yeah. But it's still like you can't hand the business to somebody and be like the the applied value here is 50% of somebody's time.

Yeah. And yeah, I think that's I think that's that's reasonable that that I will end up being expensive. So maybe it has to get to a certain level of revenue for it to make sense, which I think is why you have to think about like the input on return that you're after is like you as a high expensive thing being plugged into something has to generate value. Yeah. In excess of its cost and your cost is high. it should be.

Um, so I think that's the piece where it's like if you don't think you could get that to 10 million in 24 months. Um, yeah, I think that's definitely possible. Uh, I think that's not crazy. And I also think I mean one of the things that people also underrate with the cash flow conversation is like if you run an extremely high margin then the then the holding costs issue and some of some of the cash flow dynamics change quite a bit, right?

Like so the better margin you have the easier it is to grow faster for obvious reasons. Well, it depends on the efficiency of your acquisitions. That's true, too. But you're going to use that margin to be aggressive on the acquisition side. We'll see. Yeah, it's possible. It's possible it would do that. Yeah, it's possible. Uh Jos Dinson Garcia, do you know him? Sure don't. He is a masher for the Red Sox, but he has one of these guys.

He has one of the greatest nicknames in baseball history. What is it? So, his name is Jos Dson. So, it's J H O S T Y NX O N. Yep. J H O S T YX. His nickname is the password. Oh, that's clever. Pretty good nickname, right? That's some good insight right there. All right, let's jump to a non-ecommerce topic. Let's do it. Let's give the people really what they came for. Our takes on children's schooling. Okay. Should we do this now or do we do it at the end?

I don't care. Do you want to ask me anything else about my business? Should you want to interrogate it anymore? Just forget my forget the OPEX thing for a second. Do you think it's a bad idea? Do you think it's like a It's not going to work. I just think it's a side quest fun thing that you like doing. I do like doing that. Um but imagine I was going all in on it. Forget that. Forget that. I would beg you to not. Okay, but like Okay, let's think about it this way.

I came to you and said, "I am a CTC client. You're my strategist." Right? When you just hear about that business right away, tell me what you would do with it. I think you're gonna have you're going to be grinding out acquisition at a 13 and you're going to have 30% LTV and Yeah. 30% is probably feels fair. Yeah. And you're going to be uh just really trying to make it happen. Yeah. Okay. So, you just hate it. All right.

Great. But we you don't have to you don't have to be my strategist. I'm I'm not firing you as my strategist anyway. I've I've been a strategist in that category. Yeah. Um Yeah. I think it's hard. I think I think it's it now I would just be begging you to make uh more expensive perfume cologne. Yeah. And to create a sample kit. That's actually the So, I've been talking about this for a while. Yeah. Which is And I'm I wonder if anybody has thought like, dude, just launch this business already.

So, we decided specifically not to launch without the sample kit. I saw today like there's a sampling uh packaging set uh being sent to my house. I literally just saw today. So um from that So yeah, I think it's a really really big of course. Yeah. So you have to be able to create that as an entry point. There's sort of a three-step thing here that I think is also interesting which is like you buy the sample kit. Round two is you buy like the main packaging and then you buy refill packs for the packaging because the packaging I wish I had it.

Yeah. What's that? There's that that um deodorant brand that does the refillable deodorant there. really big now. I saw a huge display in Target, but like I don't again I think there's this other part of this which is like you brushed over quickly which is like you have this like uh this thing about masculinity that it's like a message you want to get out into the world. So you're kind of preaching too like you have a like I think it's a medium for a message.

It's like a mix of things I care about but also things that I think are culturally in the water and I think they're both they're both both which I think always informs a lot of what you do. Even when you were talking to me about your business earlier. Yeah. Yeah. Like it's very valued. I I find that you really want to wrap a meaning into the thing for you to to feel committed to it. Definitely. And so I think I make enough money.

I don't need I don't I just don't feel like I need any more money. Right. So So I think our evaluation when you ask me what I think of it, I think our evaluation criteria are fundamentally mismatched from the root. uh in that sense that like like the Philippines thing as an example like that you talked about with your other business that feels important to you and it's like as an investor I would be like I don't want that in the pot.

Well, so that is I mean the Philippines thing I I really think I just sent a newsletter about this this last week I think is a huge advantage which is like and part of it is because but would you care about changing it to Vietnam and I think you would because you care about the people uniquely now. Well, sort of. I I I I mean, I think I think I would be open to doing Vietnam as well, but part of the part of the thing is that the specifically the groups of people that I am working with there I think are are uniquely excellent and talented.

And so like I because of that and also like care about the way that they are um treating the people in their business in a way that feels ethical to me, especi particularly with offshoring where there's like it could get pretty shady and unethical really fast, I think. So um so that's a big part of it to me. Um and and so so it's it's it's not just the component that I care about people do I do. It's also that I think I have connections to people who fit very well.

Like I guess what I mean is they are providing a bunch of value back to me. It's not just me being like I am so helpful to you or whatever. It's like I actually think they do a great job staffing my business. Like my design and video editing team is good. And like that's that's part of it. And so and I don't know if that would be true if I was just hiring through some giant conglomerate offshoring staffing agency. It might, you know, I don't know.

But like and so and and because I built relationships there, there's just like a business partnership thing here where I have connection to the most important executives who are moving the needle in the business. And that's good for me, you know, that's like the more I have the ear of the of the most important people in the company, the better it is for me. So anyway, so there's there's a few unique advantages there that I do think sets me up for unique success there.

So yeah. Yeah. It's more it's more that in the event that it didn't. Yes. What would be the like requirement to persist because of Yeah. Well, my mentality is Philippines first and that is a business decision as much as anything else right now. And I think if if they delivered poorly on the work, I mean, I just did this like I looked at some I I looked at some uh resumes for a position that I was trying to hire. it wasn't quite what I wanted and so I went over and did it back in the US cuz like if the if it's not good enough it's just not good enough like that is the that is the reality in fact one of the things I believe about work in general is that you have to you generate value and that generates value back for you and therefore um if if only one side is generating the value the relationship doesn't work and and so yeah it's not it's not charity like that's what I mean you know I if I want to do charity I do that separately you know what I mean like but yeah that's that's what I think Yeah.

Um, yeah. So, I I don't have any other holes to poke in. Raising raising kids. Raising kids. Go ahead. What is your school thing? Tell me about this. Well, so I'm I'm at this like position. Gosh, I don't know who's going to listen to this. Wait, I have one more question. Hold on. I have one more question. Yeah. Yeah. you are uh extremely AI optimistic uh like in the sense of like you you I mean you can reset your position however you want but like you believe that AI is taking over everything and maybe eliminating the humans from the work.

Yeah. Okay. So restate that however you want but here's my question about it. Okay. Who to whom does that acrue value in the e-commerce ecosystem? To whom does it acrew value in the e-commerce ecosystem? Because it's it's probably Meta. Um, okay. But how can but only Meta Meta can only theoretically can mostly acrue that value if it's providing at least some people some value back. But I agree with you. I just think yeah they they I think they will disproportionately continue to benefit of course and I think that's true and I think that's also good.

Then probably Shopify then it's it's all the people in the middle taking the money out that are acrewing the value. But what about agencies? I think I don't know if it's existential to agencies or not in that like I don't I don't know what an agency is. Yeah. Yeah. Sure. Um at the end of this um we're even like having a really hard time trying to distinguish ourselves from a software provider at this moment in time. And so I think these things kind of converge into a thing which is this idea of an agent.

And I if you think about it an agent is a software service provider. Yeah. Like that's what it is. Yeah. Um, and so I think there's this real question about where that all lives. I think the question of who is the agent provider. What I anticipate happening is that like I I just think that the agents become best built by Meta and Shopify, the people with the most resources and the most money and the most data and like so the value just continues to acrue to the people who develop the best technology in the process as the technology becomes more valuable.

But they have to just I mean unless Meta starts the brands and Shopify starts the brands also like at some point a brand has to make money from this right and like cuz cuz one way of framing this this is another point of of mine on the broader discussion earlier is that like it's now going to drive OPEX even lower and it's also going to and and with meta's ability to gener to between between the incremental incrementality stuff that they're clearly pushing on and the ability to do more things with AI for you faster theoretically drive your CC down or drive your volume up one of the two Y um and that another way of framing both of those is that a brand could theoretically have a lower opex as a percentage of their revenue and either more scale or a lower or a lower CAC as a percentage of their revenue.

And therefore, one way of thinking about all the things that are happening right now is that they are acrewing value down to the brand. Um and that the brand is the one who's actually going to benefit from this. And it's it's the middle part of of like I think like there's certain like here's an obvious loser that doesn't touch either of our businesses. So we can talk about it really freely. Okay. Um like there are there's a tier of service providers of software providers.

I mean um that are going to get wiped out from this because they they must charge a lot of money. It's a little bit like the YPO conversation you had where it's like there there's only so many people who are buying from you and you have to be able to keep making each of them more valuable except all of the forces right now are pushing to make the costs go down so much. Um and so and and so that tier of service of software companies are the most existentially threatened right now, right?

Um you know I started working with a tool called Ad Nova. I'm happy to shout them out because they do a great job. I'm not paid by them or anything like that, but just started to use them and they just there's just like six software companies that we use right now that they are pretty close to replacing allin-one tool, you know, like and I just think like now they're not doing the we promise we're going to make all your ads at the click of a button thing.

In fact, they've resisted overpromising, which I really appreciate. Um, but they're saying, "Here's our product roadmap. Here's what's being, you know, whatever." And I look at that and just go um and just go like that actually is a a real value ad to brands to be able to run more profitably in in this whole thing. And I think it's very hard to be very AI forward and or to be AI optimistic or whatever it is and sort of meta optimistic on their ability to leverage those tools and not think that that accuses some value to brands.

Well, what what do you mean? It's happened over the I think over the last 5 years meta has accured more value while brands have accured less. So I I actually think what happens is that Meta is that true? Have brands actually accured less value over that time. Do you know? I mean if you took the the market value of the DTOC industry versus the market value of Meta, which stock are you buying? Yeah. Right. Yeah. You just judged on the level of Yeah.

Okay. Yeah. So like I I think that what happens is that Meta has so many It's like they're like a giant index fund of advertisers. And this is one of the things that like what happens interestingly in meta is that when people like talk about an in our industry going back and it affecting Meta's earnings, it actually has almost no effect because you have to think about every advertiser on in the world uses Meta. So in reality the Meta ad revenue is an index of the entire world.

Yes. Yeah. And so when one industry bad, one good. When travel and hospitality shut down, the outdoor industry exploded. And like it so it hits like a giant hedge against every industry because every advertising business in the world uses the black right so it doesn't it doesn't have any need to make our industry better like so that's where like when CPMs this idea that like somehow we're going to what will happen is like if there's a perfect machine let's say there's the perfect optimization the reality is like for every product there's some total potential profit in the current market dynamic.

Yes. And let's say Meta could optimize to that perfectly. Like that volume isn't infinity. It's fixed. And in fact, it gets competed down, I think. And so the idea that like even if so an agency or a media buyer or or the meta system could perfectly optimize to the available volume for you, it's not infinity. And so eventually it just gets deteriorated unless you introduce something novel to the system. A new product, a new ad, a new something. like everything has this like very finite amount of value.

I'm coming back to this thing, but what should So I think I know your answer, but what should brands do then besides sell the business and leave? Well, so I I think that this goes back to where do you have a unique value proposition that the market would persistently pay for? Yeah. And that can happen in lots of ways. It can happen in the form of innovation. Um it can happen in the form of like medical discovery. Like why is him and hers creating it an advantage? as well.

They're building direct medicine tellah health relationships with people and then they're on the forefront of innovation with the customer very fast. That's like has a lot so but that'll fade and they'll have to introduce the next thing whatever the next drug is the next thing but they're owning this direct relationship to people to distribute it through. What about I mean sometimes forget him for a second like the super extreme outlier versions of it.

Like again I'll give you another example thinking of like a sort of a mid eight figure e-commerce. Let's use let's use heart and soil as an example of why I think they're they're such a good business is because they've monopolized the supply chain. So there's actually this real limitation to access to beef organs. There's lots of beef farms but very few that actually go through the process of dry freezing organs. And so because they got really big now own the direct relationship with all of the suppliers.

So you as an entrant can't come in, go to their supplier and say, "Don't make it for them, make it for us." This is the consolidation of sunglasses problem, right? Exactly. This is why Lexica does this is because they control the supply everywhere and so they can control the price. That's the only way to maintain the pricing power and cuz otherwise what happens is all these categories get competed down to nothing because the supply side gets out of control and so the demand gets dispersed across such a broad supply and the price just goes all the way down.

And so but but for heart and soil I look at that and go ooh they have an advantage that will allow them to hold pricing as so much that the demand in the market remains the same constant or even grows they will continue to grow and capture disproportionate share and hold margin because they can't they don't deal with this influx of massive competitors. Now there's a different reason that's sort of collapsing on itself which is that there's sort of this like infighting but that's like sort of a thing but um but so that's another example.

Patents are a way to do that too. can protect the distribution of the product and hold pricing in some way. Okay. But still so still still still a a hard example to to mimic. Exactly. I mean, I think what you're saying is helpful, which is like be sincerely super innovative or audience access. Like you were making fun of somebody the other day. You're like, "Oh, what's your advice? Be famous." Like you were talking to Bill.

But in reality, the answer is sort of yes. Like that is an advantage that gives you massive leverage on your competition. The only thing I'll say is is as it did for them, it takes like 10 years to do it, right? So like, well, think about what you're doing for your business. In a micro scale, you're doing the same thing. I'm doing the same thing, which is that our moderate level of internet fame drives our current level of business value.

And if we were to get more famous, we could capture more value, right? And so there's this game of doing both of those as a leverage point. That's like eight years of recording podcast for me. Exactly. And tweeting, right? So the one So this Yeah. So I do think that's a good strategy. It's just people just need to be I mean, I'm very pro that strategy. I just think people need to be realistic about about what it isn't.

Oh yeah. And the horizon for it. But but all of these another thing in all this calculation. I think some people when they say that it's hard, what they mean is I didn't get extremely rich very fast. I'm like well yeah but like what I really think some people mean that. I think I think that's what is happening for some of them. They're like oh I don't disagree. But that is the obstacle is the way. Which means it's not easy.

It's hard. Yes. And so that goes back to what is the industry? It's a very hard industry and people who work very hard win in it. But you can't not work very hard. Yeah. So like Yeah. If that's the standard, then that's fine, but let's not call it easy, you know. Um, so I think I think that's part of it. Okay. We did all this stuff. Uh, we did this for a long time. That's okay. We I don't even know how much we have. Should we do some like Yeah, let's go to some random ones.

Go to the random ones. Okay. Schooling. So, you you said you're This probably Maybe it's too deep. I've got to decide where my kids are going to school. And I loved your question, but they're they're in fifth grade. They'll be in one more year of elementary school, then they go to middle school. Okay. How have you decided it so far? Uh, one, the local public school. That was our first choice. Uh, two was along the way there's this school down the street that's like a lottery.

My kids, by the way, are three and five. I'm we're going through the same things. One of them is is like just going to go into kindergarten, first grade, and we're he's smart dude. Like, we're trying to figure out what to do with them. Not trying to be a braggy parent or whatever. Just you're just trying to parent your kid as well as you can. Where's he going to thrive? That's right. And uh so and then there's a school that's a magnet school that's a public magnet school.

There's lottery entrance only. And so we had been applying to lottery every year. One of our kids got in. So we got to run this sort of like AB test where we sent one of them to one school, one to the other school. One of your twins. Yeah. So split the twins up for a year. One of them went to that school and now all three kids go to that school. Yeah. Um was it the was it the right decision? I don't know. I it's really interesting the dynamics of what play out in both cases.

What the question that you asked of what's the point of school is like a really interesting one. There are social considerations, there are educational considerations. Unpack that a little. This was a really helpful point that somebody brought up to me. It was somebody was debating it was it was in the Christian world that I'm in and like somebody was debating sort of like home school versus public school and it was relevant really to anybody who's Christian or not, right?

But like um so one person talks about why she's for public school and the other guy comes on with home school or maybe classical school might have been you know and he's like well the question you have to ask is what's the point of school and when he asked that I thought I've never thought about that in my whole life and it was a really helpful question for me. His answer to the question I'll tell you is the development of virtue.

He thinks he thinks school is a he thinks the main point of of school like with ra with with anything with raising your kids is to develop is to develop um people of virtue as they as they grow. And I think he would define virtue wisely. There would be or widely it would be it wouldn't just be like being nice. He would mean it in terms of like pursuing excellence and various pursuits and like you know your impact on the world and various you know it would be it would way beyond just like again like a sort of general kind of although I think the development of your character would be part of that too.

That was his answer. Yeah. Hey you, you like this episode. That's why you are listening to it or watching it, which means you will like more of my episodes. So stop what you're doing. Subscribe to the channel that you are watching or listening to it on so that you don't miss out. I've got Bill Alessandro coming soon talking about the sale of Natural Dog Co. He's going to walk through a serious great win for DTOC brands, e-commerce brands.

I've got Bill uh Bear Hanland talking about uh Born Primitives turn from uh going from like break even to like deep profit at uh mid 8 figures. Uh awesome brand, awesome operator. Chad Carlton, who runs a 3PL, is going to tell you how to actually get money from out of your 3PL, like how to use it to generate value and profit in your business, not just be a cost center. It's going to be great. Don't miss those episodes.

Subscribe right now. They're going to leave. They're going to be out outside my sphere of responsibility, and I would like for their life to go well. Yes. Right. Which means that they can earn a living, that they have friends, that they can pursue a partnership in a family someday. Uh, and that would be good. Yeah. So, what sets them up for that um as much as possible? Um and I find myself in that context having a hardest time with the value coming to education.

Yeah. Um in part because I find evaluating education is very difficult for me to do. Like is this good? Is this math class good or bad? Yeah. Is an incredibly difficult thing for me to wrap my head around. And it's so standardized in many cases. Yeah. That um the distin and the distinction between then I get into like sort of evaluating teachers and it's like well I have so little access to that question. It becomes this thing of like how was your experience with Mrs.

X? You know and you're dealing with this like very limited anecdotal sample size of a kid that's not your kid that learned in some way. Yeah. And so it's man it I find it to be very hard is my point. And so I tend to go closer to the social things that I feel I have more visibility into than even the classroom side. And I just use the sort of like baseline progression of their state testing as like this indicator of progression relative to their peer set.

Um so I don't know I how are they doing? They're doing really well. Um and I think that's where I feel this like I don't I'm like okay hold constant um the thing relative to where they're at. the middle school. What's challenging about middle school is that this school because it's a lottery school. Um like all the kids distribute from here. It's not like an obvious you go to this school next because if you go to this school, you're allowed to choose to go to any middle school in the city.

And so there's this like constant conversation now about we're going to Ensen, we're going to Mesa, we're going to this school, we're going to that school, we're going to u whatever. And so the kids really fragment from here. Yeah. And so now all of a sudden it's not a choice of one or two, it's a choice of one of five. And so it becomes overwhelming amount of information. Yeah. I um we I mean the the question like where will my kid thrive in school?

Yeah. Is like we've tried to wrestle that wrestle this out you know we've looked at like public school for our older boy like uh we have looked at keeping him in a monastery setting where you can go sort of past preschool. Actually the the monastery preschool he goes to now my my wife's mom was like a lifelong monatory preschool teacher. So that was not even a decision for us. It was just like that's just what her family does, which is great.

Like Monator, so it's fine. Um, by the way, there's pretty good data to say that like if there is a decision that you ought to really kill yourself over for educational outcomes, it's actually preschool. Yeah. Like basically the development is so, you know, there's I know some old freonomics episodes about that. Um, but anyway, we felt good about Monasuri and and that was fine. And then and his experience here has been great.

That's what my kids did, too. My wife was a morator teacher at the time. That's right. Yeah. And in fact, we first took him to one school that they didn't that was not good and then we we went over there. Um but the um but yeah anyway the then it was like there's actually a monasuri elementary school monatory preschool. So it's like 20 kids 15 kids whatever from age from first grade to sixth grade in one in one classroom.

It's not we like that. My wife speaks Spanish um and mostly speaks Spanish to the boys. So um so but that is that is a drawback. So we we definitely would would have otherwise loved there is a local public school that is a um dual immersion bilingual elementary. Um so that would be really nice but uh but yeah that it's so then we're also validated at a classical school. There's like a mix of classical and home school like combo.

You know we aren't like big homes school people but it was just like maybe this is what's right for this boys. I agree with you. It's very it's a decision that feels like almost impossible especially when you layer back to one of my clients has done a bunch of research about this and has sent his kid to all kinds of different schools. like you know he just says like when you sort of look at how we landed on the way we do education it's a mix of like not nobody ever like thought about it really like it like essentially it wasn't particularly well considered to a particular goal that you would care about now first of all but or secondly the goal that it was created to was like hey it's like put your pencils down the bell rung because you got to get ready to work in a factory and that's what life is like you know like essentially it's like a postindustrial revolution artifact and that's the way we do classrooms the way we do them instead of like letting kids go like learn the things they want to learn or direct certain ways.

Now, I have no I haven't read the book. I haven't evaluated that claim, right? I'm not saying that's what the case is, but but um I I I agree with you. And so, I've actually felt a little freer on this in that um I think Emily Auster's comments about this, who's very helpful in these sorts of things, she's an economist who does a lot of stuff around parenting, but she's like worked through all the papers and brings them to a public level.

One of her things is like almost every one of these decisions that you make um doesn't have very good data to say that it works. It's essentially like she means that as a freeing thing like probably try to be a good parent and help your kids and those kids be present in the current consequences and make adjustments if you need to. I think what do you think the point of school is? Um yeah, you said social well so I I think about it as going back to like setting them up for adulthood.

Um equipping them for the skills of engaging the world functionally which are what? So I think that I think about uh hard work. I think about so the ability to develop friendships um as having a massive impact network effect on your life. It creates a floor to your life that I think is opportunity. People might not know we became seventh grade. That's right. Y and so much of my life is like that like um Yep. So I think that that's a that's a huge piece of it.

Hard work that and then I think you want um like problem solving. So like hard intellectual problem solving. you want to be faced with those kinds of challenges and work through them. I heard Mark Zuckerberg actually give a really great interview about his math experience. Um that like when he went to Harvard, what did he learn really well? And he said that uh what he liked about the challenge of this math teacher that he gave him was that he gave him this like wildly insane hard problem u and that like he had to cram for hours and hours to work through it and get to it.

But getting to the other side of that was a realization that oh I can take on a challenge and get through it. and he's like, "I don't even remember what the math was. I don't know how to do it." But the lesson I thought was like, "Oh, if I need to, I can solve the problem." Like that's a really empowering feeling. Um, so I think that's a that's a really important one. Uh, not get addicted to drugs, not like I think you want to avoid massive social consequence, not get stabbed by somebody like, you know, I think there's a avoidance piece too.

But it's funny. I So I was homeschooled, went to a private middle school, went to a public high school, right? So I have all three all Yeah. these different viewpoints of all of it. And I don't even know how to reflect on my own experience. Like I kind of liked all of them. They all offered me good things in different ways. Yeah. This is where the Thomas sold dictim is helpful. Right. There's no solutions, only trade-offs.

That's right. That's right. It's like Yeah. It's like Yeah. Okay. Uh you guys got any advice out there? I know you do. People have you want to talk about an area people have opinions. Who are we? Yeah. Right. Yeah. That's right. Um Dr. GBT. Dr. ChachiBT. Okay. I have thoughts on this, too. Okay. So, this is a good one for back and forth. So, tell me about Dr. Chief. So, I've been I have this new and your supplement routine.

Yeah. new concierge uh like medical practice through Hogue, which is like you have your own doctor, so I can get an appointment wherever I want. It's pretty cool. So, you're paying like a monthly membership to have access to a subset of concierge medicine. Yes, I've heard about this. Um you pay a monthly fee. It's outside the insurance system basically, right? You pay the monthly fee outside the insurance, but then the the care is within uh so I get uh quarterly blood tests.

Uh and so I now I have like eight quarters of consistent blood panels and I give them to Chad GBT and I uh recently got them. I saw somebody say recently, if you're not doing that with medical results at this point, anything that anybody gives you at the doctor, then you're being neg negligent. Honestly, it's like so incredibly helpful. Um, the communication and it's cool cuz I have trends, right? So now I can see eight quarters project or something.

I was like, it's a PDF. Like so my my chart is like my hospital thing that spits out a PDF that I can upload into Chad GBT. Um, but I mean, do you keep them all in one chap project or is it just like one long chat or It's one chat. Yeah. That I reference back to projects are I got to use those better. I don't I don't know. I'm not good at it. Yeah. But um and so recently I did it uh I had a little bit of high cholesterol.

Uh and so looking at all of this I was like, "Okay, give me both diet, health, and supplement plan relative to my things." And it gave me this whole comprehensive plan, this stack of supplements. And so I just went and immediately bought the supplements and like I was thinking to myself like as a discovery mechanism for shopping, right? Like how did I end up with zinc supplement? Well, there was two things. It wasn't through the website quiz.

No, wasn't through the website quiz. It wasn't through a brand. It was Chad GBT using my medical results to give me a preference. And I went to Amazon and found the exact milligram dosage of the the most like root level supplement that I could find and that was it. I don't even know the brand. It's inconsequential to me. It's so commoditized in some ways. But really, this interaction and level of trust that I have with my Chat GBT doctor now has given me an entire program of consumption that I'm on a subscription basis of like five things.

It's wild. Do you worry at all about Chachi PT hallucinating? Any of that? Yeah, for sure. And so I think that's where like sharing it back with your medical professional and saying like what do you think about this as an action plan? What I find is that the doctor tends to be more conservative in their messaging to me. Meaning they're like, "Yeah, that's probably fine. It'll work." Like they don't they don't have as strong of opinions about things sometimes.

I think there's probably Is your doctor like a functional health doctor? Uh he's a GP, general physician. Okay. Yeah. I mean that might be part of it is like especially with something like supplements or whatever it's like it's just a very different way of thinking about medicine than totally you know um so so I don't know I don't know I love it but when I think about shopping I think about like the question of is that demand capture or demand creation like where does that sit um I think is and how much of my future purchasing buying behavior is going to come from there I think it's going to be a lot a lot I yeah I it's it's helpful for me to hear things like that cuz I still don't quite use chatbt that way in my life, but I'm using it a little bit more all the time.

Like here's a good example. My uh one of my clients, uh Chris Cresser, who is a functional health clinician actually himself, a supplement brand. He's been on my show. He just sent sent the prompt in our Slack uh uh yesterday what he does for like his meal planning, you know, and he's again, he's a functional health clinician like he knows how to think about this and it's just wild. It's so smart. He's like, and I then I