Michael Mayer – Pseudonymous Social Capital and Bottomless Coffee - [Invest Like the Best, EP.124]

My guest this week is unique and so requires a short story. I met our guest Michael Mayer because of twitter. I followed and enjoyed one of several pseudonymous accounts that he maintains to experiment with ideas. His various accounts have wide followings. I think many of the best accounts on twitter are anonymous or pseudonymous, and I’ve always made a point to get to know the ones I like best. As it turns out, Michael was also an entrepreneur. He’d been building a new company and was raising a small amount of outside capital. I didn’t invest personally, in part because he raised it so quickly after I spoke with him. Ever since, I’ve gotten to know him better and followed his company, Bottomless, with interest. You know that I am always hyper transparent about any potential conflicts of interest, so it’s worth noting that while I am not an investor in this company, I expect to be at some point in the future. The topic of our conversation is both his social media activity and his company. I am a coffee fanatic, and the problem he is solving is one I live. I order a weekly bag of coffee beans, but I often have too much coffee or run out. Bottomless solves this by shipping you a simple scale which you keep wherever you store your coffee, connect to your Wi-Fi, and set your bag of coffee on. It automatically orders new coffee for you at the right time. Thus the name: Bottomless. If you like the conversation, check out bottomless.com With this podcast, all I’m really trying to do is find, meet, and learn from interesting people. Michael certainly qualifies. I hope you enjoy this unique episode. For more episodes go to InvestorFieldGuide.com/podcast. Sign up for the book club, where you’ll get a full investor curriculum and then 3-4 suggestions every month at InvestorFieldGuide.com/bookclub. Follow Patrick on Twitter at @patrick_oshag Show Notes 2:06 - (First Question) – Why he writes under a pseudonym online 2:58 – Positive impacts of writing this way 3:45 – His background 5:02 – Habits he improved upon 7:03 – Where did his exploration into technology and start-ups come from 7:33 – Algorithms to Live By: The Computer Science of Human Decisions 10:32 – Elements of business that interest him most 13:26 – Building social capital vs the current state of education 17:06 – What information does he like to consume 18:17 – Zero to One: Notes on Startups, or How to Build the Future 18:34 – Jerry Neumann blog Reaction Wheel | Podcast episode 18:39 – Kevin Simler’s blog Melting Asphalt| Podcast Episode 21:01 – Why the current education system is busted 22:54 – Formation of his business 24:04 – Importance of making things legible 25:54 – On demand delivery vs subscription business models 30:16 – Early day in developing the scale for his business 33:50 – What he learned about coffee roasters 35:29 – thoughts on supplier power 36:17 – The customer relationship 39:50 – Best objections to his business 41:58 – Biggest operational/emotional challenges 42:56 – Best moment 44:39 – Time at Y combinator 46:28 – His unique co-founder story 49:47 – Marketing strategies and acquisition costs 51:37 – The idea of a commercial loop 53:27 – Discarded ideas, such as spaced repetition social networks 57:38 – Having a long-term plan vs reformatting a business into success 1:00:35 – What works on twitter based on his experience 1:03:09 – Most controversial opinion 1:05:59 – Kindest thing anyone has done Learn More For more episodes go to InvestorFieldGuide.com/podcast. Sign up for the book club, where you’ll get a full investor curriculum and then 3-4 suggestions every month at InvestorFieldGuide.com/bookclub Follow Patrick on twitter at @patrick_oshag

Speaker names marked ? are inferred from speaking time and the show’s known hosts — they are not voice-verified.

• 0:00Patrick O'Shaughnessy?

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• 0:36Patrick O'Shaughnessy?

  Hello and welcome, everyone. I'm Patrick O'Neal and this is Invest Like the Best. This show is an open-ended exploration of markets, ideas, methods, stories and of strategies that will help you better invest both your time and your money. You can learn more and stay up to date at investorfieldguide.com.

• 0:57Speaker 02

  Patrick O'Neal is the CEO of O'Neal Asset Management. All opinions expressed by Patrick and podcast guests are solely their own opinions and do not reflect the opinion of O'Neal Asset Management. This podcast is for informational purposes only and should not be relied upon as a basis for investment decisions. Clients of O'Neal Asset Management may maintain positions in the securities discussed in this podcast.

• 1:22Patrick O'Shaughnessy?

  My guest this week is unique and so requires a short story. I met our guest, Michael Mayer, because of Twitter. I followed and enjoyed one of several pseudonymous accounts that he maintains to experiment with ideas. His various accounts have wide followings. I think many of the best accounts on Twitter are anonymous or pseudonymous, and I've always made a point to get to know the ones that I like best. As it turns out, Michael was also an entrepreneur. He'd been building a new company and was raising a small amount of outside capital. I didn't personally invest, in part because he raised it so quickly after I spoke with him. Ever since, I've gotten to know him better and followed his company, Bottomless, with interest. You know that I'm always hyper transparent about any potential conflicts of interest. So it's worth noting that while I'm not an investor in his company, I expect to be at some point in the future. The topic of our conversation is both his social media activity and his company.

• 2:05Patrick O'Shaughnessy?

  I'm a coffee fanatic and the problem he is solving is one that I live. I order a weekly bag of coffee beans, but I often have too much coffee or run out. Bottomless solves this by shipping you a simple scale, which you can keep wherever you store your coffee. You connect it to your wifi and set your bag of coffee on it. It automatically orders new coffee for you at the right time. Thus the name Bottomless. If you like this conversation, check out bottomless.com and their product. With this podcast, all I'm really trying to do is find, meet and learn from interesting people. Michael certainly qualifies. I hope you enjoy this unique episode.

• 2:37Patrick O'Shaughnessy?

  Maybe we can begin by you telling me why you choose to write synonymously online.

• 2:42Speaker 03

  So a lot of people assume that I do this because I want to sort of protect my real life identity from anything offensive, I might say. And that's not really the case. I mean, that's part of it. It is useful to have this firewall between anything you say online and your real personality. But the crux of it is that I just don't think who I am is that relevant to people out there in the world in terms of like what I'm saying. Why should people care about a picture of my face, a link to my LinkedIn? It's noise. And I think the best way to be successful with publishing online is to have the best signal to noise ratio. So you go to my account, you see nothing about me, you don't see a picture of me, you directly get to the content.

• 3:26Speaker 03

  So I guess, yeah, I just don't, I don't think my identity is the most relevant thing in the world.

• 3:31Patrick O'Shaughnessy?

  What have been the most positive things to come out of that that you didn't expect? Maybe if you had assumed it was going to be a success, I'm sure you didn't assume that. But what have been some of the positive things that have happened as a result?

• 3:41Speaker 03

  It surprisingly doesn't matter whether my public identity is connected to my account at all. I don't think I've seen any difference. I myself am not a famous person because of it, but... It's somewhat easy to transfer that social capital into the right places when necessary. And so it's somewhat overrated to accumulate social capital only under your own name. Like, I still have control of the various accounts that I have, and they're still my own capital. It's like a Swiss bank account or whatever. Like, I can transfer out of it whenever I want.

• 4:13Patrick O'Shaughnessy?

  Yeah, really interesting concept. So, let's talk a little bit about your personal background before we get into some of the tech and entrepreneurial type stuff. So just, just tell me kind of your backstory. I found it really fascinating when you and I first talked, and I think people will appreciate it as the fertile soil for, for what's gonna come next.

• 4:31Speaker 03

  The most interesting thing about my background is probably less where I am today, and more about my speed of progress in the last five years, and where I was five years ago. A snapshot of where I was five years ago, I had dropped out of school. It was a unranked university, by the way. Like, if you went and found my university on the US News and World Report, it says unranked.

• 4:52Patrick O'Shaughnessy?

  Not there.

• 4:53Speaker 03

  And I had dropped out of that because I couldn't hack it there. I was working at a, at a restaurant, and washing dishes and doing prep work. And I was working with a lot of Spanish speakers, and they had a nickname for me. They would call me Tortuga, which means turtle in Spanish. So, I wasn't even particularly succeeding at that. And if you flash forward to today, I consider myself a fairly productive person. I have this company with venture backing that's growing fast. I have a lot of distribution for my ideas online through various accounts. And so, it's been quite a rapid clip of improvement since then, and I would probably put almost all of that down to just getting my habits right. And I can get into that if you're curious.

• 5:34Patrick O'Shaughnessy?

  Yeah, I'd love that. So, what was the first step?

• 5:36Speaker 03

  First step, there's just sort of like a constellation of habits that are useful. And some of them are removing things, and some of them are adding things. And I honestly think that the removing of things is easier. Removing unhealthy food, removing binge-watching TV shows, removing junk information, junk food, just removing as much junk as I could. Removing very unhealthy people from my life. Whenever I hear people say that, I sort of cringe. It sounds cruel. But, in reality, it's very helpful to remove people from your life that don't really wanna see you. Happy because we're social creatures and we want to make the people around us happy. And if the people around you don't want you to thrive, then you actually subconsciously internalize that and don't really want that for yourself either.

• 6:20Speaker 03

  So if you surround yourself with people that actually are happy when things go well for you, suddenly it starts to create this incentive in your social mind, or whatever you would call it, to do better. So removing things and then adding things, exercising regularly. Personal health, your physical and mental health is upstream of your productivity. Trying to be productive first is virtually impossible. No matter how ambitious you are, I was ambitious at the time and I just couldn't find a way to hack it because I didn't have the right foundation.

• 6:50Patrick O'Shaughnessy?

  Was there a catalyst for, so you know, obviously, a lot of these things are unsurprising in the sense that they're just, they're so obvious, but what I'm often interested in is the original point of trying to do this. There was like an epiphany or some catalyst that caused you to realize at some moment that you had to change course, or was it, was it a slow, a slow process?

• 7:11Speaker 03

  I don't think there was a seminal moment, to be honest. I think it was just the momentum flipping from the wrong direction to the right direction. And once things are going in the right direction, habits really can compound. So once you have a solid foundation, you can start layering better habits on top. So I probably didn't quit binge watching TV shows until after I had got a solid exercise habit and was eating well and, you know, I felt well enough to do that.

• 7:36Patrick O'Shaughnessy?

  So what is the, on top of those habits, where is the origin point for your interest in technology and business and startups? Where did all that get laid?

• 7:45Speaker 03

  It just seems to me like technology is obviously the most fascinating thing going on right now. Human beings are tool builders. Everything around us was a technology once before. So building new technology is just really building the future and I think it's the best way to make an impact. I don't think any of that's particularly surprising either.

• 8:02Patrick O'Shaughnessy?

  I don't know if you got it from the same book, this book Algorithms to Live By, but I've seen you write about Explore Exploit, that kind of chapter two of that book here and there. And so I'd love to hear your thoughts on that concept where the prescription of that chapter, if you will, is that if you're early on in your journey, you should basically spend all your time exploring.

• 8:19Speaker 03

  Oh, yeah.

• 8:19Patrick O'Shaughnessy?

  So you have kind of come to some conclusion of the exploration process because you're doing something very literal and you're starting a business. But talk about what your thoughts are on maybe overexploring as the right way to approach things. And I'd love to hear about that exploration process for you personally before starting Bottomless in this case.

• 8:36Speaker 03

  Almost by definition, you shouldn't overexplore. You should explore the right amount. And the question is, what is the right amount? Maybe you should overexplore because most people don't explore enough. So in their mind, they should overexplore. The funny thing is, you were asking about how I got into technology, and that was just a pure exploration. I had a really simple thing that I wanted, and I thought, why not just try to build it? And I was shocked at how easy it was to build. I don't think people understand how coding works today. There are tons of massively powerful libraries and technologies that are totally free to use and fully documented online with tons of examples all over the place for virtually anything that you want to do. People don't understand that. They think that you have to be some sort of wizard or some sort of incredibly educated person.

• 9:21Speaker 03

  Somebody needs to teach you to code, and that's absolutely not the case. So this was like a simple project. It was basically I wanted to show all of the showtimes for the independent movie theaters in my town. Not an interesting product, but I wanted it. So I sat down to build it, and I thought it was just sort of quixotic attempt that I would abandon. But I made such rapid progress on it. And it turns out there's an example for exactly how to do this, and you can use all of these libraries that already exist completely for free. And when I discovered the power of that.

• 9:56Speaker 03

  And I realized, holy crap, there's examples for literally anything that I want to do out there and there's free open source libraries that are fully documented that I can use. That really piqued my interest because it's just like a massive amount of leverage for a curious person that is just available. It's just sitting there open for anyone to figure out.

• 10:15Patrick O'Shaughnessy?

  So if that's sort of the code epiphany, we'll call it, what was the progression like from that to trying to find if the independent movie theater is not an interesting idea of business, to trying to find something that's that you could commercialize that, you know, potentially could be very large?

• 10:28Speaker 03

  For me, it wasn't a conscious decision. I just always thinking about businesses and random business ideas and just obsessed with business strategy or whatever, like reading whatever I could come across. So it wasn't really so much of a progression as just stumbling upon an idea that I couldn't get out of my mind that I thought could potentially be very powerful. And that's what eventually drove me to leave where I was working at the time to start Bottomless. I was so taken. I was infatuated with the concept and the potential of what the future could look like if we were able to really attack the idea.

• 11:04Patrick O'Shaughnessy?

  What are some of the most powerful business concepts that maybe at this point in your life you believe in or hold most firmly? The same exact thing you said about open source libraries could be said about things like business strategy where now there's this incredibly well codified set of books and articles that if you read these things, you know, you're better informed on business strategy than than anybody in the world was, you know, 25 years ago. So I'm curious, in all that exploration, you say you're obsessed with business. Maybe what is the point that you're obsessed with or is it just the whole thing? And are there strategic elements to business that interest you most?

• 11:38Speaker 03

  I think you hit the nail on the head that basically the keys to the castle are there and available to anyone. And, you know, I'm not sure that there's that much that I can add. Because it's already out there. The market for ideas and business strategy is pretty efficient. Berkshire Hathaway and like amazon.com shareholder letters. They basically give it away for free. The only thing that isn't free is actually executing on that. And the judgment to choose the right strategy. And you know, I think people get infatuated with certain strategies. You see things that become popular and then everybody wants to do it, both in the business world and the technology world. For instance, right now, computer vision is really hot because suddenly you can make all of these real world things legible.

• 12:19Patrick O'Shaughnessy?

  Readable.

• 12:20Speaker 03

  Yeah. Fundamentally, the real world has now become legible to computers and to the internet through cameras. But like, that doesn't mean that every company should be doing computer vision. For instance, Bottomless is using weight-based sensors to restock. And if I had a nickel for every person who's told us we should do computer vision, we would already have raised our series, like our C round. But fundamentally, I don't think computer vision is going to work in people's cabinets or fridges or wherever it may be. I fundamentally think it's not the right technology, but that doesn't mean you're not going to see everyone trying every possible computer vision thing they can, which isn't a bad thing, right? Who knew?

• 12:56Patrick O'Shaughnessy?

  There's probably a lot of consumer surplus in there.

• 12:58Speaker 03

  Who knew what the right application of the internet or any particular technology was? So it's definitely good for people to explore. But you see these trends following. Like, for instance, I've heard on your podcast, people talking about value investing and how value investing became very popular after the dot com bubble. But now, there's probably just not much alpha left unless you have some other unique insight. So I think you have to be careful following trends. And in particular, contrarian ideas, which is sort of counterintuitive. You would think contrarian ideas are a way to avoid the trend. By the time that you hear them, they're not contrarian anymore by definition.

• 13:36Patrick O'Shaughnessy?

  You need to originate them, not call them.

• 13:37Speaker 03

  Yeah, yeah, yeah. You're just one of the average. You have to understand, like, you're one of the average people out there. And by the time the contrarian idea hits your mind, assuming that you didn't come up with yourself, that you found it online or you read about it, it's not contrarian anymore. And it's actually probably less likely to work than mainstream. Because contrarian ideas, they're contingent and the opportunity vanishes once people discover it.

• 13:59Patrick O'Shaughnessy?

  Before we lose track of some of the writing stuff, because I do want to spend quite a long time on the business and your thoughts on the competitive landscape in this world. I'm curious your thoughts on. The intersection of education and social capital, which you talked about earlier. So if you believe that there's, I think, some way to build social capital through sharing interesting ideas, I guess, is kind of the way that you've done it. But I think you and I share some, maybe we'll call it negative view, on classical education. I'd just love to get your take on your own education. You mentioned dropping out of a school, a fourth year school, and then obviously your activity has been very counter to that. So talk about social capital, how you think it's most effectively built, and your thoughts on education.

• 14:42Speaker 03

  The traditional ways of building social capital are definitely useful if you can get a Harvard degree or a Stanford degree, of course. But even then, they can only be so valuable because they're being minted. You're still replaceable with another Harvard MBA. But if you can create social capital in a totally unique way, you're totally irreplaceable. And that is much more valuable. Even if what you're doing, if you imagine that it's more valuable than credential that is stamped out, almost an industrial process, you can do something that's actually less impressive than a Harvard MBA. For instance, for me, I've built up a number of pseudonymous accounts. Maybe doing that is actually not as impressive as being like a Harvard undergrad and like

• 15:26Speaker 03

  a Stanford MBA or whatever it may be.

• 15:28Patrick O'Shaughnessy?

  But it's unique.

• 15:29Speaker 03

  But even if it's less impressive, it is almost more valuable because you can't replace that.

• 15:35Patrick O'Shaughnessy?

  Super interesting. Do you think there's any rules? And I think the answer's no, but do you think there's any kind of playbook for original social capital creation, other than just, I guess, authentic pursuit of what interests you and sharing of it?

• 15:50Speaker 03

  Are there any rules?

• 15:52Patrick O'Shaughnessy?

  Or maybe not rules, but just things that, as you've continued to do it, you would say you've learned, or beliefs about it that have strengthened in the process?

• 16:00Speaker 03

  I think that originality is important. And in order to achieve some degree of originality, you need to have an original Information diet. You're not really that special. If you consume the same information as everybody else, how are you going to come up with unique ideas? Maybe you can, like, maybe you're such a fantastic algorithm that you can combine those in a unique way. But fundamentally, it's unlikely. So if you can find a way to try to inject random, unique, interesting things into your mind at a regular point, and also try to regularly inject good content into your mind. I know a lot of people that basically spend 90% of their information consumption on sports

• 16:44Speaker 03

  and serial TV shows and stuff like that. Then they try to come up with unique insights about tech or business. And it's like, good luck, man. I started cutting out a lot of what I consider junk information when one day I was, I was in the shower and I was sitting there thinking, oh, should the team trade X player? Or would it be better if a head coach took this player and put them in the rotation? And I had this epiphany that, is this what I want?

• 17:06Patrick O'Shaughnessy?

  Your brain is hijacked.

• 17:07Speaker 03

  No, is this what I want? The stuff of my thought to be? Is this what I want to be having an epiphany about? Am I adding any value to my life or the lives of other people by having an insight about the configuration of what players play at what time in some regional sports team? I'm really not. To get back to, I think, what the original question was, social capital formation through like content creation, you're not going to be able to get very far unless you have really good quality information coming into your mind, then therefore are able to transform it into good quality content.

• 17:39Patrick O'Shaughnessy?

  For you, what, what has been the nature of that information? So not necessarily, you could share individual types or sources if you think that's useful. But any thoughts on kind of what those inputs look like relative to the generic content diet out there?

• 17:54Speaker 03

  So I was, I was kind of hoping you would ask me for book recommendations so that I could explicitly not give any book recommendations.

• 18:02Patrick O'Shaughnessy?

  Now's your chance.

• 18:03Speaker 03

  Yeah, now's my chance. I'm gonna, I'm gonna answer the question that I want, that I wanted to be asked. So I've noticed that a vast majority of podcasts, a guest will be asked for book recommendations, and almost everybody will give lots of book recommendations. And I'm guessing that most of those people don't read that many books, or maybe read like a couple of books a quarter. That's probably the median.

• 18:22Patrick O'Shaughnessy?

  That's why I stopped asking.

• 18:23Speaker 03

  Okay, that's good, that's good. Yeah, I noticed there's not much about books in the modern age that would make the quality of information in them that much better than other sources. I mean, obviously you have editors, but there's a lot of really garbage books out there just because somebody has a lot of distribution. They're famous. Those aren't that great. For instance, I'm a big fan of the CS 183 notes that Blake Masters took on the class.

• 18:49Patrick O'Shaughnessy?

  The zero to one source material.

• 18:50Speaker 03

  Yeah, exactly. The zero to one source material. And like, I think I've read that like three or four times. And I bought zero to one, and I actually think zero to one is worse than, than the Tumblr blog. And there's a lot of great writers out there that write a lot of good stuff, like I could name some. There's Jerry Neumann. His blog is really great. It's so good. There's a lot of really, really great blogs out there. Kevin Simler's blog is good.

• 19:13Patrick O'Shaughnessy?

  The best. Two, two past podcast guests.

• 19:15Speaker 03

  Oh, really? Inside baseball. But to get back to information sources, it's much more important for people to cut out bad information than it is for them to seek out good information. I'm imagining there's so many people out there that want to learn and educate themselves, and they spend 95% of their time just consuming junk news articles online. And then they sit down to read this book recommended on some podcasts. Like, that's not gonna get you very far. You're way better off cutting out all of that other stuff and then just reading what interests you. And whether that's books, or podcasts, or social media, as long as you curate your social media feed to remove all the garbage, I guarantee you, you can build a Twitter feed that is very high quality

• 19:59Speaker 03

  by just removing anybody that tweets about the Democrats or the Republicans, or...

• 20:04Patrick O'Shaughnessy?

  Anything, anything topical.

• 20:06Speaker 03

  Yeah, anything topical. Yeah, yeah. Actually, that's a good point. Anything that's not gonna be relevant in a day

• 20:10Patrick O'Shaughnessy?

  Yep.

• 20:11Speaker 03

  is unlikely to be a source of solid... Insight more than a day from now. You know, it seems really simple, but if it's not going to matter tomorrow, why would you want to consume that information today? Because the shelf life of the information you consume is going to be so short. The stuff in your brain is just going to be constantly out of date and useless, basically.

• 20:32Patrick O'Shaughnessy?

  One of the things I'm always surprised, I don't consider myself a particularly controversial person, but the opinion I have, which seems to bring up the most controversy is not reading the news.

• 20:41Speaker 03

  Oh, yeah.

• 20:42Patrick O'Shaughnessy?

  And when I tell people I don't read the news, they cannot, they cannot believe it. They think I'm a moron.

• 20:46Speaker 03

  How do you stay informed, Patrick? Don't you have to be informed?

• 20:50Patrick O'Shaughnessy?

  There's always some version of that, yeah.

• 20:51Speaker 03

  Yeah, you actually are uninformed if you're reading daily news.

• 20:57Patrick O'Shaughnessy?

  Exactly.

• 20:58Speaker 03

  Because it's completely out of date. I mean, news is good if it's weekly or monthly news, perhaps, or quarterly. That almost isn't news anymore, but there's definitely.

• 21:08Patrick O'Shaughnessy?

  Information anyhow. It's amazing how much you can keep dropping and have zero impact on your life, negative impact, or your business, or really anything else you're trying to do, and obviously gain a huge amount of free time to do other stuff.

• 21:21Speaker 03

  Yeah, I mean, if you read something that is still being recommended by people 10 years later, anytime you get a book recommendation for something that's 30 years old, if it's 30 years old or 1,000 years old, you should fill your brain with that stuff as much as you can.

• 21:33Patrick O'Shaughnessy?

  Before we lose the thread, the reasons why you think the standard system of education is busted? Be interested in that.

• 21:41Speaker 03

  We have this system of education where essentially everybody needs to learn at the same pace. And it makes sense, it's like a batch process. Batch processes are more efficient. So to the degree that information needs to be coming from the teacher, from one source, then you need to have batch processing of students. Otherwise, it's very inefficient to have one-to-one teacher-student relationships. So up until the moment where self-education was really possible, you absolutely need to have the system of education that we have today. Otherwise, it's way too expensive. So you have this system where the teacher teaches to the median or probably slightly above the median, but you know, trying to get as many kids covered in the bell curve as possible by any lesson, which is okay, it makes sense.

• 22:25Speaker 03

  You lose the kids at the top and you lose the kids at the bottom, but that's what you have to do. Nowadays. Self-education is absolutely possible. You know, I've completely taught myself code, but it doesn't have to be code. It can be virtually anything. And you can have teachers as helpers while students are learning at their own pace. And that would, I know people have wanted to do that for a long time. And that might just be one of those ideas that failed for a long time because there were good reasons why it didn't work, but now it might work. I would just recommend people to actually try to learn things themselves rather than pay somebody $2,000 for a course that you just show up to and browse Facebook the whole time.

• 23:05Patrick O'Shaughnessy?

  It's a nice way of thinking about it for me. Like now as a dad, this is kind of the thing I think about more than anything else, right? Like it feels like my, since I'm not, I'm not homeschooling my kids. Obviously that's, that could be one option. That seems a little too daunting, but trying to steer the ship a little bit away from the process which left me so uninspired and in this kind of wilderness is, is something I think about a lot. So let's talk a little bit about the formation of this business and how the business represents all of these interests intersected, kind of what the challenges are, what the advantages are, why it might be interesting. So first, describe what the business is. It's actually pretty straightforward, but has a million really interesting, very deep rabbit holes underneath the simple surface points.

• 23:49Patrick O'Shaughnessy?

  So describe the business and then we'll go down each.

• 23:51Speaker 03

  Yeah, it's really funny. It almost sounds trivially simple, but it's essentially a smart subscription that figures out the perfect time to ship you your next order using a weight sensor. So the weight sensor essentially just captures how much you have and how fast you're going through it. And so therefore it's able to ship you at the right time rather than just typical subscription, which just ships to you on a monthly or weekly schedule. And we're starting with fresh coffee. So right now we're a coffee company. In the future, who knows?

• 24:20Patrick O'Shaughnessy?

  I love this idea because, I mean, the obvious analogy is Amazon had to pick something first, right? And to express its core idea. And you know, you picked coffee. So I do want to talk about coffee because I think it's an interesting one to start. But the more interesting aspect is the measurement and the scale. So if, you know, you mentioned the word legibility earlier, which I think is a really a critical word, that word specifically, that ties back to this notion of software eating everything. So talk about that connection and the type of legibility you're trying to create and why that specifically do you think is interesting and hasn't been done?

• 24:54Speaker 03

  Anytime you can make something important legible to computers, you can change the world. If you look at all of the revolutions that happened after smartphones got significant penetration, it was because suddenly people's locations were legible and the world around them was legible with cameras. Suddenly you have Uber, Instagram, all of these things. So fundamentally, we're making the stock level in your house of coffee legible to us and then eventually to coffee sellers. And not just your level, but also using those levels, we can figure out how fast you're going through it. So previously where you have taxis, people's location isn't legible. People have to call

• 25:35Speaker 03

  to get a taxi and then the dispatcher has to call a taxi driver and it's this whole laborious process. Then with Uber, when you make everything legible to a network, suddenly it's much more efficient and suddenly you see people using taxis a lot more than they used to. Similarly, I think making stock levels and consumption speed legible will actually make subscriptions a reality in a lot more cases than currently exist. It'll definitely expand the market if you have subscriptions that actually work.

• 26:04Patrick O'Shaughnessy?

  I guess one assumption that this relies on is that people consume at a rate that isn't really simple and obvious. So it just so happens that we consume a bag of coffee per week. We're the perfect, we consume perfectly one bag of coffee per week. So, and then it runs maybe like every six or seven weeks, we need one supplemental bag. So I'm probably as close to like the perfect standard subscription service as possible. So talk about, given the data that you've gathered so far, what the normal customer looks like that's probably looks way different than me?

• 26:39Speaker 03

  Oh, people are totally variable in their consumption. It's all over the map. And even people that consume regularly every day will see inflection points where suddenly they start consuming faster. Or slower and definitely people will go on vacation and then we automatically sort of like, don't ship for you because you're flatlining. So yeah, when I started this, I thought that we would have to focus on things that were very variably consumed. Coffee for some people, you can imagine other examples. And I remember I was doing a pitch to somebody for the business and I was telling them, well, coffee works really well, but it wouldn't work for something like razors. That's why Dollar Shave Club worked. There was this massive subscription boom after Dollar Shave Club and it turns out like only a couple of companies actually worked and it's something that you actually can just use until you have

• 27:24Speaker 03

  to throw it away. You know, that's not true for most things, but like I was telling him with total confidence that nobody's ever going to want bottomless for razors. And he's like, hold on a second. You know, it's a video call. Like, where is he going? He comes back. He has two fistful of razors that he got from some like subscription service. And he's like, you'd be surprised. I was surprised. So fundamentally, humans are not predictable creatures and our consumption of various things are not predictable. Even people that drink coffee at home every day, you know, you might run out of the house one day or you might have guests. It turns out that even very consistent consumers for us, if we were to put them on a set subscription schedule, they would get off very fast. Within like three or four shipments.

• 28:07Patrick O'Shaughnessy?

  Something would have gone wrong.

• 28:08Speaker 03

  The timing would be wrong.

• 28:09Patrick O'Shaughnessy?

  Yep.

• 28:10Speaker 03

  Right? And that's why you don't see subscriptions for all of the repeatedly purchased items in people's houses. I saw this study that the average grocery consumer buys only 13 SKUs every week. So people are buying the same stuff over and over again. And people go to the grocery stores a couple of times a week just to get the same stuff. And that's the idea behind bottomless is it's ridiculous. It's the same products. The information problem in a lot of retail is do you want a product or not? But with the vast majority of grocery items, the answer is yes, I do want that product. I want it all the time. So that's no longer the information problem. The information problem is when do we ship it? And so I think we can solve that for a lot of things.

• 28:49Patrick O'Shaughnessy?

  One, just because it's a, there's some recency bias in this because my wife and I just started using Instacart. And find it to be a really great, interesting service that in some ways attacks the same problem of we don't want to deal with going to the store all the time. It's all the same crap, you know, we're reordering the same crap all the time. And so when we find out that we need it, it's only two hours away. We can add it in and we'll, we could live close enough, I guess geographically to a Whole Foods or whatever it is that the food comes to us. So talk about the differences between those two models and where the white space is between them.

• 29:22Speaker 03

  I think people have Stockholm syndrome to the way grocery works now. You know, you're like, oh, look at this. I only have to fill out a ton of web forms for 10 minutes instead of driving down to the store. And then it arrives two hours later. Wow, this is great. I actually don't think it's great. I don't like filling out web forms. I think it's only marginally better than going to the store. So I guess I'm biased, but I think what we're doing is much better because it arrives before you even know you needed it. So it sort of removes this whole problem that maybe people don't really know that they have. But once people figure out that they can get rid of this problem, they're really happy.

• 29:57Patrick O'Shaughnessy?

  My wife was asking me what I was going to be talking about today with you. And I said, well, it's kind of like the, that how I built this show, but without the survivorship bias because we're doing it very early in the building process.

• 30:09Speaker 03

  Oh, yeah.

• 30:09Patrick O'Shaughnessy?

  So hopefully you'll be on that show one day. That'd be great.

• 30:12Speaker 03

  Which, by the way, people talk a lot of, can I swear on your show?

• 30:15Patrick O'Shaughnessy?

  Yeah, sure, yeah.

• 30:15Speaker 03

  People, people talk a lot of shit about how I built this and what they call entrepreneur porn. I honestly think, yeah, there is some aspect of truth to that. But at the same time, who else would you rather society be worshiping?

• 30:29Patrick O'Shaughnessy?

  Emulating.

• 30:30Speaker 03

  Yeah, using as role models, pop stars, sports stars, actors. Nothing wrong with those people, but I think entrepreneurs are better to worship. It's better for society as a whole because entrepreneurs take a lot of risk. I'm taking a lot of risk by doing this and the myth of the successful entrepreneur, it's an important myth in our society.

• 30:49Patrick O'Shaughnessy?

  So I want to touch on some of these always interesting early day aspects. So before we hit record, we were talking about the scales themselves. So, so I've done the signup flow, right? So I know how this works. So you sign up, you, you know, you answer some simple questions. A scale gets shipped to you, you stick it somewhere, you connect it. To a wifi, you put the bag of coffee on it and the rest is sort of history. The scale obviously is a super important differentiated part of this whole thing. And you mentioned how the first couple of them, you were literally putting them together yourself, you know, three hours a pop.

• 31:19Speaker 03

  Yeah.

• 31:19Patrick O'Shaughnessy?

  So, so talk about that discovery process. If sensing and legibility is, is the theme here, how did you decide on, on what the scale should be? How you should be sensing, what the options were, and then starting to build them?

• 31:31Speaker 03

  Okay. So how did we decide on the form factor? Well, first of all, it had to be easy to build because I'm not a hardware engineer. I don't think I really knew what like voltage and current even were when I started this. I didn't really pick something that I knew how to do. You know, I just picked something that I thought could be great and figured it out. So I used a technology where there's lots of libraries available for doing like the basic stuff that you need to do. So I didn't have to like actually know anything and where there are plenty of tutorials for how to put it together. And then, you know, the main design consideration for us was battery power. If you get a shipment every month, you don't want to be recharging your scale every month. What's the point, what's the point of that? So we had a design goal of having the things last for at least a year.

• 32:14Speaker 03

  Basically, the story is we just started building these things. And the first units we put together, he said, took three hours to put together, painstaking labor. And also we were painting them to try and make them pretty. And we found out nobody cared because we shipped one out that was unpainted and they didn't complain. So we were like, okay, well, let's see how this goes. And so we've been not painting them. Yeah, it's just been a process of we've turned our apartment into a little mini manufacturing facility every week or so. And just build as many scales as we're going to need that week. And a lot of hardware companies will try and perfect a product, do a Kickstarter. And we've learned so much making different versions of this thing. The version we have now is way better than, than what we had before.

• 32:54Patrick O'Shaughnessy?

  In what ways?

• 32:54Speaker 03

  It works like 95% of the time instead of 70% of the time.

• 32:58Patrick O'Shaughnessy?

  Good start.

• 32:59Speaker 03

  Yeah, that's important. It's much easier to assemble. We got to the point where eventually the model that I put together was good enough that we could hand it off to an engineer and they could just draw it onto a PCB and get it manufactured. So the iterative process got us to where we needed to be rather than just trying to dream up something and doing a Kickstarter. A lot of companies die doing Kickstarter too. I think it's really overrated.

• 33:21Patrick O'Shaughnessy?

  So you've got a scale, the scale. Does what exactly? It is measuring weight and weight only, I suppose, at this point. Are there other dimensions that could be measured in the future? Like, I'm thinking somehow measure freshness or take in other information as part of this idea of sort of seamless replenishment of food staples?

• 33:39Speaker 03

  One of our fundamental insights is that nobody wants to pay for reordering hardware. We're not the first to come up with the idea of reordering hardware. There's like Amazon initiative for like replenishment services. And, you know, you have to buy like a printer or like, I don't know if they have coffee, but you would have to buy like a coffee maker. Nobody wants to do that. You already have what you, you already have your setup. You don't want to pay for reordering hardware. You just want to get your stuff when you need it. So one of our most important design considerations was just that we can give this away to people for free and make money off of the actual coffee in the subscription. So we've kept it purposefully simple. And I don't think in the future, we're going to add any bells and whistles. It's just one button to do the Wi-Fi sync and that's it. And I think that's how it should be.

• 34:22Patrick O'Shaughnessy?

  We've got this process where you are creating a really interesting disintermediation marketplace kind of model. It's like a lot of the modern tech models all at once. And one side of this marketplace is, is roasters. So I'm curious what you've learned about that side of the business? And what kind of receptivity you've gotten when you go and say, you know, I want to sign you up for this thing. Like, all you'll have to do is ship directly and we're just going to be like a customer acquisition vehicle for you for free. Like, that sounds like a good pitch.

• 34:54Speaker 03

  Yeah, well, they do give us wholesale price for the most part. So you do have to sort of convince them a little bit, but it's been surprisingly easy for a couple of reasons. First of all, all of these roasters are e-commerce enabled already. If you look up a random coffee roaster that you like, odds are they're going to be selling online already. And that's thanks to Shopify. So we're kind of riding on top of some waves of e-commerce, fully penetrating into the economy. They're already shipping individual bags. So it's not that hard to convince them to ship our individual bags. And also, they're very familiar with this problem. They see their customers churn out of subscriptions all the time. They see people complain saying, hey, I have five bags and I want a refund for four of them because they're all going stale. And so that when we go and we tell them about this, they're very excited.

• 35:36Speaker 03

  And a lot of them really want to get on board because they want their coffee to be super fresh. They don't want people having multiple bags piling up because it doesn't present their coffee well. And part of our value proposition is that we actually ship at the right time. And people can select whether they care more about freshness or not running out. And a lot of our customers do care about freshness. So the roasters love that. They want people to enjoy their coffee at like the optimal time.

• 36:01Patrick O'Shaughnessy?

  One of the things I'm always interested in, in any of these like strategic power frameworks, whether it's porters or helmers or whomever's is supplier power. And I'm curious how you think about supplier power right now and maybe prospectively.

• 36:15Speaker 03

  I would love to say that suppliers don't have a lot of power in this model, but in reality, they kind of do because people are very brand sensitive. So you could put a cherry on top of that, but we do own the customer relationship and half of our customers pick just like a rotating product.

• 36:29Patrick O'Shaughnessy?

  Like a Pandora.

• 36:30Speaker 03

  Yeah, exactly. And so we can ship whatever we want and that's a massive amount of leverage for us. So there's some supplier power. You see a lot of very valuable businesses just own the customer relationship. And I think that's something that is sort of underexplored from a business strategy perspective. I have been thinking about why that is and I don't think I really know exactly. I maybe have a couple of theories.

• 36:51Patrick O'Shaughnessy?

  What's your theory? Because I've been thinking quite a lot about this specific topic lately.

• 36:55Speaker 03

  I think the person who owns a customer relationship gets to set the default.

• 36:59Patrick O'Shaughnessy?

  How would you define owns, first of all?

• 37:01Speaker 03

  Amazon owns the customer relationship, not the actual sellers. And they've sort of accrued all the value to themselves. And a lot of people say that that's because they own the network and that's a big part of it. But I think that there's something powerful about actually just owning the direct customer relationship and being upstream from the rest of the suppliers. Because every company is sitting on top of a web of. Of suppliers.

• 37:23Patrick O'Shaughnessy?

  Do you think there's some like litmus test for this this ownership of a willingness to bear inconvenience or something? So for example, if there was a brand that didn't sell on Amazon and I was willing to go outside my normal workflow to get them, even though I could get a substitute on Amazon, like maybe then that brand owns the relationship, not Amazon in this particular case, or something like that?

• 37:41Speaker 03

  Oh, and you see this playing out a lot. There's there's brands that won't sell on Amazon. So for instance, one thing we're really proud of is that we just got Phil's Coffee, if anybody's familiar with Phil's in the Bay Area. They just signed up with us.

• 37:53Patrick O'Shaughnessy?

  Does it come with cream too? That's a signature thing.

• 37:56Speaker 03

  Yeah, well, not yet, but they actually, you can't find them on Amazon and that's part of why. But fundamentally, the person that owns a customer relationship gets to kind of set the the web of decision making that happens after that. So that that just gives them default leverage because they're upstream and they control where the money flows goes and what the customer decisions are.

• 38:16Patrick O'Shaughnessy?

  They kind of capture inertia too in some interesting ways. Like if people are just, if it's good enough, like you just keep doing it.

• 38:21Speaker 03

  Yeah, exactly. Like Amazon can introduce, you see that they're rolling out all these white label brands and they can just do that and people will buy them if they put them at the top of their page.

• 38:29Patrick O'Shaughnessy?

  So talk to me about feeding that beast. So I was going to ask you some of like Keith Rebois' startup questions. What is the accumulating advantage here? So one of those is this relationship with the customer. Obviously, if I've been working with bottomless and I keep adding staples to my bottomless list, like that relationship strengthens over time and it's harder to tear out. But talk to me about how you intend to deliberately build the relationship with a customer and then we'll talk about other accumulating advantages.

• 38:56Speaker 03

  Well, so right off the bat, we have a certain stickiness. Once you have our scale, you're pretty much unlikely to set up a scale from our future competitors. Why would you do that? Then you have to send our-

• 39:06Patrick O'Shaughnessy?

  Coffee forever.

• 39:07Speaker 03

  Yeah, you have to send our scale back because you know, we're not selling the scales. We're giving it to you for free. So there's this massive stickiness that you typically would see in like SaaS companies that we have just by default, just by the way that our system works. In terms of accumulating advantages, we can expand from coffee to other products and-

• 39:28Speaker 03

  The really important nut for us to crack is bundling of shipments. If you imagine you have five, six, seven items, we can figure out the perfect time to ship two or three or four at a time. And once you bundle shipments, the marginal cost of an additional item is virtually zero. Once you have a shipment going to people's houses, there's almost no marginal cost to adding things to that box. So that's, I think, a massive accumulating advantage that could be really, really huge in the future. If you already have a couple of boxes a week going to people's houses, you can actually replace most e-commerce because you can provide things cheaper. Even Amazon with their Prime, they still have to break even with the shipping cost. And so all of their products actually account for that cost.

• 40:12Speaker 03

  But if we don't have to account for the shipping cost because we're already sending a box, like, we can actually be cheaper. So that's potential advantage in the future. And, you know, Amazon would have to rewire the way they work to make that work.

• 40:23Patrick O'Shaughnessy?

  What have been some of, you know, you've talked to investors, you've talked to people about this idea a lot, I'm sure. What have been some of the best objections or things that people have held out as reasons why the business won't work?

• 40:34Speaker 03

  Oh, yeah, that's a great question.

• 40:36Patrick O'Shaughnessy?

  And you're not allowed to say, like, because Amazon will do it.

• 40:38Speaker 03

  Like, that's the worst. I almost want to just be like, okay, well, it was nice meeting with you. Good luck putting all of your LP's money in Amazon stock, since you're so bullish on Amazon. But I haven't actually said that to anybody. I don't have the nerve. Anyway, the best one was probably, so shout out to John at Founder's Fund. He said, okay, well, you know, you have a one-to-one hardware-to-product relationship, and that's going to be tough.

• 41:03Patrick O'Shaughnessy?

  Why? Why can't you have multiple sensors on the same piece of hardware? And you just ask people to put stuff on the right labeled slot?

• 41:09Speaker 03

  Yeah, it's a limitation of how Bottomless works now, not a limitation of how we'll work in the future. So in terms of long-term, I mean, there is this big question. Do people really want to have all of their stuff monitored by sensors and sent to them? I think skepticism around that is probably the most, like, authentic pushback because nobody knows, you know? For any company, it's really hard to say. We've been talking a lot about Amazon. So like, Amazon originally, their vision was, hey, I went back and I read a lot of their shareholder letters, and they said 15% of all retail is going to be online eventually. Like, they said this back in 98. I think it would have been pretty rational for people to push back and say, hey, I don't know if I believe this. And they haven't gotten there yet.

• 41:49Patrick O'Shaughnessy?

  It's crazy.

• 41:50Speaker 03

  People still like they it's crazy how much they have to run, but it's also crazy how bullish people are on them, thinking they can go from whatever their revenue now is to like three times, four times, because they've sort of mined all of the most profitable e-commerce opportunities outside of doing something unique like bottomless. But I sit here and I pitch to people and I say, I think 15% of all of the repeatedly purchased items in the US, which might be like $500 billion, is going to go on to systems like bottomless. And I think being skeptical about that is rational, because that's an audacious view of the future.

• 42:22Patrick O'Shaughnessy?

  Yeah, it's a nice addressable market, though.

• 42:24Speaker 03

  Oh, yeah, yeah, yeah. People get excited about that, but there's reasons to be skeptical. Well, time will tell.

• 42:30Patrick O'Shaughnessy?

  What have been the biggest just operational or personal or emotional challenges? I guess, how far into this are you, like a year and a half in earnest?

• 42:37Speaker 03

  More than two years. Bootstrapping a hardware company is hard. It's very hard. You know, I've spent a lot of time just putting together

• 42:45Patrick O'Shaughnessy?

  Scales.

• 42:46Speaker 03

  Literally soldering scales and listening to podcasts and shipping them, taking them to the store and dealing with the ones that don't work. I don't know if that's actually been that hard, other than just like the exhaustion of it, but it's kind of fulfilling to work hard towards a goal. A lot of entrepreneurs talk about the emotional roller coaster, and I think it's absolutely true. When you're putting your whole life into something that's so high variance, it's pretty natural to have high variance feelings about it. You have one customer cancel and you think you don't have that much data. Early on, our first pilot was only 15 customers, and the results from it were great, but like we would lose one of them. And I'd be like, oh, God, we're screwed. This is definitely not going to work. Small sample sizes can create a lot of anxiety.

• 43:28Patrick O'Shaughnessy?

  What's been the best moment? The best subjectively, like emotional moment?

• 43:32Speaker 03

  Probably the first time I got my retention graph up and running and actually looked and said, holy crap, we have that long run. Cohort is now buying more coffee than they did in month six. They're on month 18 or something and they buy more coffee now than they did in month six. And in general, the cohorts will go down, but then they'll flatten out. And just recently, I did it again for like our more recent cohorts. And we actually see them starting to go up very early. And that's probably because our scales are working better now. And so it's getting even better. So that's important validation. Customers will send us messages saying, somebody told me it's like having somebody do my laundry. I love bottomless. It's like having somebody do my laundry.

• 44:14Patrick O'Shaughnessy?

  That's a good comment.

• 44:14Speaker 03

  That's a, that's a good compliment. Or like, I called a lot of customers and asked them questions about bottomless. I asked them like, how much would I have to pay you to cancel the service? So I think that's a pretty interesting way to figure out the consumer surplus. And you know, when people told me a thousand dollars and I said, no, like really? How much? And they said a thousand dollars. Like you don't get it. Before bottomless, I was getting in my car and driving to a coffee roaster. And I was running out all the time too. And you're saving me a half an hour of time regularly. And if I play that out for the next couple of years, it's easily worth a thousand dollars. And that's validation. And also people say that you shouldn't care about investor validation, but I think that's bullshit. Investor validation is important. If you can convince smart people to part with their money or their LP's money and believe in your vision,

• 44:58Speaker 03

  that really means a lot, especially the angel investors that have invested in us and are putting their personal money in too. Those are great moments. That's, that's great validation. And, and it's great to, you know, bring people on and see that they believe in what you're doing.

• 45:11Patrick O'Shaughnessy?

  Can you talk about Y Combinator?

• 45:13Speaker 03

  Oh yeah, I can. We got into YC. That was a really nice moment.

• 45:16Patrick O'Shaughnessy?

  What was that process like? Anything interesting in that process or was it just apply you got in?

• 45:20Speaker 03

  Well, the interesting thing is, so they fly people from around the world to do interviews, but the interview is only 10 minutes. Right? Like actually it's only 10 minutes. We were only flying down from Seattle. That's not that big of a deal, but there's people flying from all over the world. At one of the Y C dinners, we saw these people from Colombia and they flew from Colombia to San Francisco to meet for 10 minutes. You know, that's a little insane. I understand why they do it.

• 45:47Patrick O'Shaughnessy?

  Yeah.

• 45:48Speaker 03

  Because if it weren't 10 minutes, they actually couldn't interview people face to face.

• 45:51Patrick O'Shaughnessy?

  Right.

• 45:52Speaker 03

  That's sort of a crazy part of the process. And then another part of it, they give you the feedback same day, which is really awesome. Right? Because

• 45:59Patrick O'Shaughnessy?

  If it's good.

• 46:00Speaker 03

  Yeah, if it's good or if it's bad too. You know, it's good to know. The funny thing is they call you if you get in and they email you if you don't. We were waiting that afternoon. I happened to have done some food orders. And so I kept getting calls from local numbers. And like my order got screwed up. So I got 10 calls from like different local numbers. And every time I would answer, I'd be like, hello? Oh, yeah. Did you want the guacamole? Oh, God. And then like finally, when I did get the acceptance call, I answered, but I was super nonchalant. I answered almost like in a rude way. I was like, you know, and they're like, oh, you know, and then I heard who it was, but

• 46:36Patrick O'Shaughnessy?

  Did they ask any good questions in the interview?

• 46:38Speaker 03

  The interview is kind of oppositional. My understanding is, you know, Y C was started by some grad school people. And, you know, you have to defend your thesis or whatever in grad school. So it's almost like a thesis defense for like your business and what you want to be doing. So I remember leaving and thinking we totally had screwed it up. Cause it was not like a positive friendly. I mean, it wasn't unfriendly, but it also wasn't, they didn't give you the impression that they were super impressed.

• 47:01Patrick O'Shaughnessy?

  You've kept saying we, I want to, I want to acknowledge

• 47:03Speaker 03

  Oh, yeah.

• 47:04Patrick O'Shaughnessy?

  Unique co-founder story.

• 47:05Speaker 03

  Unique co-founder story, yeah. So my co-founder is my wife, which is not that common, but becoming more common. I think it's a huge advantage. If you look at a lot of the companies that have been very successful, they've been started by two friends or, you know, Stripe started by brothers. And a lot of these people live together and work together in the early days of the startup. And the reason is, is in the early days, there's so many decisions that you're making that will determine the path of a company in the future and are very important. And they need way more attention than you would be able to put to them during like Monday through Friday, nine to five. You have to schedule a meeting to talk. Tomorrow at four to five, we're going to talk about this strategic decision. Good luck making a good decision at that time.

• 47:49Speaker 03

  A lot of times the muse will attack at random moments. So my wife and I will be walking around on a Saturday and suddenly we'll talk about something of immense strategic importance for Bottomless. But we have that availability, so it's very high bandwidth because we know each other very well, obviously, and constant uptime on those exchanges. So I think it's a big advantage.

• 48:11Patrick O'Shaughnessy?

  What's her background and kind of skillset?

• 48:13Speaker 03

  Well, I think she's the real founder of Bottomless, to be honest. I'm like the type of guy who's just like always coming up with lots of ideas that I think are all really awesome. And she would always say, oh, no, that's horrible. No, no. When I just was obsessed with this for a long period of time, she said, you know what? I actually think that could be it. You should quit your job and do this and I'm going to continue doing my job and you can try to make this business. And if it was just me by myself, I don't know if I would have made the leap. So she's the person I would call like a woman of action. And those people are rare in the world. They're very rare, maybe more rare than people who have unique insights.

• 48:51Patrick O'Shaughnessy?

  I'm married to one too, so.

• 48:52Speaker 03

  You're married to a woman of action? You're lucky. So we're the lucky ones. Honestly, I think that's the case. So she has a great degree of like focus and that's never been my strong suit. So she's always been in the background steering the ship in the right direction and also just making sure that any vision that I have is actually being carried out by me. It's kind of funny, but that's actually the case. So her background, she's originally from Lima, Peru. She was born and raised there. She actually moved to the US when she was 18 alone, barely spoke any English at the time. And she's done a remarkable job of like building her life and her career. Her most recent job, she was working at Workday and was like a senior consultant.

• 49:35Speaker 03

  But her speed of progress in her career has been remarkable. That's why like I really wanted her to come onboard Bottomless full time. People's careers follow an S curve and like if you can catch people before that first inflection point where they're still accelerating upwards and you can, you can kind of see it, you know? She's, she's been, you know, she started at her first job out of college, like doing temp work and like AP work and stuff like that. And just capturing that progress inside of Bottomless is very good for the company. But there is some friction to being a married couple. There's this tendency for people to think that if you're doing something with your spouse that is less serious, that's real. And obviously, for us, that's not the case. We're dead serious about this.

• 50:19Patrick O'Shaughnessy?

  I'm always interested in marketing strategies. And I know that you are in some ways, like if you've got 10,000 orders, you don't have 10,000 scales. So you're somewhat constrained by the supply of scales, which is a good problem to have if it becomes a problem. But talk to me about how you think about growing this thing and any unique ways that you have plans to grow this thing in what's become this kind of like customer acquisition, like consumer rat race where you read Timot's annual letter and if he's right, 40 cents on the dollar of every venture dollar is going to Google and Facebook for paid acquisition.

• 50:53Speaker 03

  Oh, it's absolutely true. And I think that's the number one cause of startup death after the early years. It's just your acquisition cost blowing up. And actually, you asked earlier what the biggest pushback people have, and that's probably actually the best pushback. It's like, how are you going to acquire customers at scale when this is almost impossible? For us, we have this magical quality where we can acquire coffee customers that break even and then start pushing other products down the channel. So we don't have to figure out how to constantly acquire. There's tons of potential for revenue expansion. So, once our customer acquisition cost blows up on coffee, we can really just start pushing

• 51:36Speaker 03

  out other products at basically zero acquisition cost, just by adding more products to the store. And that's free.

• 51:42Patrick O'Shaughnessy?

  That's good math.

• 51:43Speaker 03

  Yeah, yeah.

• 51:45Patrick O'Shaughnessy?

  Good larger math, anyway.

• 51:46Speaker 03

  Yeah, we'll see. That's basically the strategy, which might make other people uncomfortable. Okay, when are you going to start pushing other products down the channel? I never give an actual answer. I'm like, oh, when customer acquisition cost blows up. You mean like 100,000 customers, a million customers, 10 million? I don't know. When customer acquisition blows up, like when we can't... Profitably acquire coffee customers anymore than you start pushing other things out.

• 52:09Patrick O'Shaughnessy?

  So I'll take a bookend approach to this. So we kind of started with some non-business ideas and then did some business for a while and we'll do, we'll close with a bunch of non-business, or maybe business ideas, but not pertaining specifically to bottomless. So a couple of the ideas of yours that I've enjoyed, one is this cycle of this, I think you called it like the commercial loop or something somewhere where you move from, if something is hard for most people to buy, making it cheaper and cheaper so that you can sell in volume. And then when people are no longer sensitive to the price, you ramp up sort of the, I think you used the word artisan to increase the interest again at a higher price point. And then it just keeps going in that cycle. So talk to me about that insight and any other places you've seen that happen.

• 52:45Speaker 03

  The original insight is just seeing it happen in beer. You had beer originally made in like little breweries across the United States, right? It was basically artisanal. And then you have these big companies come in and produce it at scale for much cheaper. But then once those people with their huge scale economies have one final victory, once they've completely stamped out all of the small breweries, then suddenly the landscape for the consumer is just boring. It opens a window to start providing more options for people. And so then you see this boom in craft beer, but then now you're starting to see mass-produced craft beer.

• 53:24Speaker 03

  The end state is like a consolidation with a couple of the big brewers owning like a much more differentiated product line with all of the options that people wanted. Eventually it consolidates into some big players who have operational excellence. And then, you know, once they've won a final victory, there will probably be a new cycle. You definitely see this in the beginning of the marijuana markets where you have these massively distributed brands. You haven't seen the consolidation yet. And I don't know, you can probably name an industry that is just like a matter of, of knowing that industry well enough.

• 53:58Patrick O'Shaughnessy?

  And that same loop has happened. Yeah.

• 54:00Speaker 03

  Yeah.

• 54:00Patrick O'Shaughnessy?

  Yeah. What were some of the other ideas that maybe got discarded? Maybe your wife vetoed them, this stupid?

• 54:06Speaker 03

  One that I would love to see built, so I'll put this out into the world, is a spaced repetition social network. I think social networks are underrated. I think right now there's this massive backlash against social networks. And I think it's because people haven't actually developed the ability to properly curate their social networks. The Facebook thing of just get all your friends was like a great way to bootstrap the first social network, but it's definitely not an optimal way to consume information. And then you have Twitter, which is better. But then it's still like, you know, follow all these celebrities that you have name recognition from the offline world. Still not ideal, but it's getting directionally better than your friends and family. So that's besides the point. Like, I think people are getting better and better at curating information. And the problems with social networking is not the form factor of social networking

• 54:50Speaker 03

  itself, but with people's inability to actually properly handle it.

• 54:55Patrick O'Shaughnessy?

  So what do you mean by spaced repetition?

• 54:56Speaker 03

  So let's get back to that. So I think the big problem with social networking right now is we only have this model of things show up in your feed once and then they disappear. And that has a huge incentive for ephemerality. I almost don't want to see something in my feed that I'm gonna want to see again. You know, there's this optimization for like one-off pieces of content. You definitely see that on Twitter. People definitely post ephemeral stuff. I think you could make a much more meaningful social network if you had some sort of repeatability in the content. And that's where spaced repetition comes in. So spaced repetition is this way of basically creating flashcards, is how people use the

• 55:39Speaker 03

  concept now, to be reminded of something when they're most likely to have just forgotten it. So you'll make a flashcard. People use it for learning languages, for instance. You'll put the word you want to learn, and then it'll repeat to you again the next day because you're most likely to forget in one day or be just forgetting it. So it's an optimal time to be reminded. And then you probably don't need it again the next day. You maybe need it two days later, and then four days later, two weeks, or whatever it may be. There's different algorithms. But basically, you start spacing out the repetition. And that's a way for basically putting things into your minds forever.

• 56:21Speaker 03

  Which I think is a very powerful idea and and makes things legible to yourself forever. When you decide you want it to be in your memory forever. So it's like people spend a lot of time talking about putting computer chips in people's brains. So they'll remember stuff, but that's kind of silly sci fi crap. But if you use space repetition, you can kind of do that already. So I do this all the time. I have my own space repetition app where I make notes to myself.

• 56:43Patrick O'Shaughnessy?

  And it kicks it back to you at some cycle.

• 56:45Speaker 03

  Yeah, I'll see it again tomorrow and then I'll see it again two days later and then a week. And then like eventually I'll only see it once a year. I kind of moderately remember these things.

• 56:54Patrick O'Shaughnessy?

  Yeah, and you and you actively choose what goes into that cycle?

• 56:57Speaker 03

  Yeah, so the way the way my app that I use work is I just make notes, so.

• 57:02Patrick O'Shaughnessy?

  Did you build this app or did somebody else?

• 57:03Speaker 03

  No, it exists. I think it's called just spaced or something. You can search space repetition and there's like a lot of apps. Space repetition itself is not really a new concept. I think it's just underused because you have to actually create these cards for yourself. You know, who wants to do that?

• 57:16Patrick O'Shaughnessy?

  Yeah, I mean, it's like the habit formation you talked about, but intellectually for intellectual concepts or something.

• 57:21Speaker 03

  Yeah, it's like I don't use it as much as I would like because I have to remember to open this app and put these concepts down. It's like kind of sucks. So I've always imagined this social network where you see a feed just like it's Twitter. But if you like it or the equivalent of retweet would be putting it to your own space repetition. So it shows up in your feed into the future. And so it creates a whole nother incentive structure for people to try and put things out that are actually durably relevant for people. I imagine for my own various Twitter feeds, if I was trying to put something out that people would use in this app, the content would be different. It would totally be different and it would probably be better because people I'm trying to create something that people actually want to remember.

• 58:00Patrick O'Shaughnessy?

  This makes me think of it like, so have you ever used if this than that?

• 58:03Speaker 03

  Yeah.

• 58:03Patrick O'Shaughnessy?

  Yeah, so like, for example, you might say, I don't know if it's possible on that app. But if you say, if I like a tweet, then put it in this app and put it in my space repetition loop or something.

• 58:12Speaker 03

  I should do that.

• 58:13Patrick O'Shaughnessy?

  So you see, you could, you could hack your way to it. It raises this interesting thought that ties back to bottomless, which is a lot of these networks will take Twitter, for example, are amazing in the sense like the creators of the platform of the toolkit. Don't know the ways in which their toolkit's going to be used. And then their success is in part the ability to recognize interesting use cases and magnify them. So like the at symbol and Twitter, you know, whatever. And I'm wondering if there's any application of that where you think of bottomless as somewhat like a marketplace platform business. And most businesses that have that feature that I just described are marketplace businesses. Have you thought about that at all where somehow it's like, it's almost like there's a developer

• 58:54Patrick O'Shaughnessy?

  kit or something that allows them to take your relationship with the customer and the legibility concept and then do whatever they want with it?

• 59:04Speaker 03

  Yeah, there's some potential future for bottomless where we create an API that uses our prediction technology that other people can build on top of. And I totally think that would be a very valid route for us to scale. You know, we have people all the time selling random stuff through subscriptions saying, if I had this, how much better would my business be? Can sort of hack on to like emergent properties. In general, I think business strategy depending on emergent behavior is overrated right now. I know that that is something that Twitter did, but there's this saying in Silicon Valley that Twitter is like a clown car that fell into a gold mine. And so maybe emulating them isn't the smartest thing. Amazon and Bezos basically had this business plan for exactly what they were going to do. And I think that that is a smarter thing to try to emulate.

• 59:48Speaker 03

  It's really popular to try and iterate your way to the epiphany, but you're just as likely to iterate your way off a cliff. But in general, I think it's way overrated to think that you're just going to iterate your way into a billion dollar unicorn business. Fundamentally, if you can reformulate a problem as an information problem, you can tackle it with information technology if you get the right data. That's what we're doing at bottomless. We're reformulating this problem of repeatedly purchased items as an information problem, and we're getting the relevant data. You have lots of technologies that are maturing right now. So it's not like we've seen that process stop. We've talked about computer vision is coming to maturity. The cost of anything in the smartphone supply chain is continuing to collapse.

• 1:00:31Speaker 03

  So there's a lot of waves that can be surfed to like improve the world and improve people's lives. And I think this concept that we're anywhere close to optimal or that somehow like these big tech companies are going to Be the ones to surf those waves, you know? I think that's just

• 1:00:47Patrick O'Shaughnessy?

  Doesn't really happen that way.

• 1:00:48Speaker 03

  Yeah, that would be historically anomalous.

• 1:00:50Patrick O'Shaughnessy?

  Well, I love this idea of, I'll add it to my find an untapped supply source as one great business kind of starting point to find a previously unlegible or non-legible information source that's relevant to something, you know, broad and interesting is a great way to think about business opportunity. I'm curious, kind of in winding down, if we go back to where we started, if you've learned anything about Twitter specifically, I'm obsessed with this platform as really an incredible tool. It really has made a massive impact on my, at least on my life, and I know on a lot of people I know's lives in a pretty deep and meaningful way, even though it is ephemeral and silly and, you know, all the jokes about it are fair enough. Anything you've noticed about building a presence on Twitter and elsewhere where no

• 1:01:35Patrick O'Shaughnessy?

  one even knows who you are in the accounts that you think speaks to what works there? So is it pithiness? Is it being unique and different? Is it straddling the known and the unknown? What is in common if I sorted all your, let's say, tweets by the most liked or the most recognized on down? What would those things share in common?

• 1:01:55Speaker 03

  A snarky answer would be that the best tweets-

• 1:01:57Patrick O'Shaughnessy?

  They're the least interesting.

• 1:01:58Speaker 03

  Well, no, the best tweets are the ones that seem contrarian but are actually consensus.

• 1:02:03Patrick O'Shaughnessy?

  Sure.

• 1:02:04Speaker 03

  Because everyone's like, oh, look at this great contrarian idea, and they boost it.

• 1:02:08Patrick O'Shaughnessy?

  Yeah.

• 1:02:08Speaker 03

  There's a couple of ideas right now that are becoming very popular, like you shouldn't compete because that was in Zero to One, and everybody and their grandma read Zero to One in the startup community. And so all of the ideas in there are just actually very popular now.

• 1:02:21Patrick O'Shaughnessy?

  Picked over.

• 1:02:22Speaker 03

  They're popular, but they still feel-

• 1:02:24Patrick O'Shaughnessy?

  Like the person's the one discovering them or something?

• 1:02:26Speaker 03

  Yeah, they still feel contrarian. So like, don't compete, never compete with anyone, you know? And I see those tweets really blowing up all the time. So yeah, if you really, if you want to consciously try to build a big following, I would definitely suggest finding these ideas that feel contrarian but aren't.

• 1:02:39Patrick O'Shaughnessy?

  Yep.

• 1:02:40Speaker 03

  And so I guess the converse would be the tweets that don't get a lot of play are the ones that are contrarian but don't feel like it.

• 1:02:48Speaker 03

  But I guess that would be the advice for how to try to consciously make good tweets. For me, I don't really try to do anything other than to be interesting. I don't actually try to tweet things that are true because that's, it's almost besides the point. Like, I'm not going to be convincing anyone of my version of the truth. I'm mostly going to be feeding people food for thought that might change them on the margins. So I think people don't optimize enough for saying interesting things and they're too scared to be wrong. You know, there's a lot of interesting things that are wrong, but make people think. And I think those are very undermined opportunities. You want to have followers that are interested in your content.

• 1:03:28Speaker 03

  So you should be very unscared of losing followers if like what you you think what you're saying is interesting. It's actually good to sort of shed followers. It keeps your account interesting to the people that eventually will follow you.

• 1:03:40Patrick O'Shaughnessy?

  Sure, sure. So two closing questions for you. The first is for what you think is your most controversial opinion, just generally speaking?

• 1:03:49Speaker 03

  Yeah, that's fun. The concept of equality is very important. It's generated a lot of progress in the world. You know, we used to be a very unequal world. Obviously, you want to give everybody equal access to opportunity. But it gets confused with equal access to outcome. And so I think the idea of equality is something that people can't criticize. People are way too scared to criticize that. And so anything that's advanced that might make the world seem like a more equal place is generally with plenty of people who are willing to advocate for it and very few that are willing to go on the record to resist that.

• 1:04:31Speaker 03

  And so in general, any very popular idea that's probably good will be applied in a lot of ways that are really bad. You know, and I can come up with a couple of examples of equality that are bad. We talked about education. Giving everybody an equal education means you're going to drop people at the bottom and people at the top. So there are ways to make education less equal that might actually improve outcomes for everybody on average. And in the healthcare space, we have this idea that everybody needs to have healthcare, which I agree. You shouldn't have people who have no access to basic healthcare in a rich society like this. But we have this aversion to lower quality healthcare for people that we give them for free.

• 1:05:13Speaker 03

  I don't understand why we couldn't have healthcare for everyone, but more basic. But that doesn't exist because we have this aversion to anything that feels unequal. So we need to pull everybody at the bottom up to slightly above the median. And if you keep pulling people at the bottom up to slightly above the median forever, that just creates constant cost inflation. It's literally impossible when you think about it. Yeah, when you think about it from the fundamentals, you can't constantly pull the bottom above the median in anything. Same for income inequality, for instance, like there's some degree of optimal income inequality. Who knows if we're there? I don't really want to weigh in on that. But I've definitely seen people advocating for increasing the wages at the bottom part of the distribution, and I think that's a good thing.

• 1:05:58Speaker 03

  That's a very noble cause, but you can never get the bottom above the median. And I actually was talking to somebody and be like, well, you can't have people, you can't have these people making the average salaries. And they said, why not? They should be making the average salaries. And that's a road to destruction economically. It's just trying to do things that are literally impossible and mandating them from the top. So I think that's a very controversial opinion. I think it's something to explore, and that's widely applicable to anything that in general is a good sentiment will be overrated.

• 1:06:31Patrick O'Shaughnessy?

  My closing question for everybody is for the kindest thing that anyone's ever done for you.

• 1:06:35Speaker 03

  Yeah, so I spoke earlier about the importance of having people who genuinely want you to thrive. And I didn't have a lot of people like that in my life up until I met my wife. I didn't actually know that was a thing. When she came into my life, I suddenly had this incentive because somebody else wanted me to do well. And so I think the kindest, I think wanting somebody else to do well, regardless of how that reflects on you, is fundamentally kind. There's a lot of people in my life that have helped me, and obviously I'm very appreciative of that, but there's very few truly selfless acts. A lot of people help you because it helps them, but truly wanting somebody to thrive

• 1:07:17Speaker 03

  and do better is very selfless and has been, is something that I'm truly thankful to have in my life.

• 1:07:23Patrick O'Shaughnessy?

  Well, I look forward to hearing you on How I Built This someday.

• 1:07:25Speaker 03

  Oh, yeah.

• 1:07:26Patrick O'Shaughnessy?

  Hopefully, and I appreciate you coming out to do this. This was great.

• 1:07:30Speaker 03

  Thanks, Patrick. I had a good time.

• 1:07:33Speaker 04

  Hey everyone, Patrick here again. To find more episodes of Invest Like the Best, go to investorfieldguide.com/podcast. If you're a book lover, you can also sign up for my book club at investorfieldguide.com/bookclub. After you sign up, you'll receive a full investor curriculum right away, and then three to four suggestions of new books every month. You can also follow me on Twitter @Patrick_OShag. If you enjoy the show, please leave a quick review for us on iTunes, which will help more people discover Invest Like the Best. Thanks so much for listening.