The Supplement Industry Is Broken, Sports Cheating Is Rational, and Influence Is Misunderstood

[00:00:00] Andrew: Taylor, is the supplement industry gonna die at some point? I want your, I want your take on the state of supplements.

[00:00:05] Taylor: Did you see my back and forth with Bill, Bill yesterday on X?

[00:00:08] Andrew: Uh, no. Was it his comment about like, uh, science?

[00:00:11] Taylor: Yeah, which is such a bizarre thing, this idea that now all of a sudden science is the thing that the- Yeah

[00:00:16] culture cares about. Like, we have 180. Like, science was the Antichrist like- ... 20 minutes ago, you know- Yeah ... after the COVID era. So, um, I think that it is alm- it is incredibly difficult to build a durable supplement business. Um, and-

[00:00:30] Andrew: What do you mean by durable?

[00:00:32] Taylor: That is going to last for a very long time.

[00:00:34] Andrew: Yeah.

[00:00:34] Taylor: Um, and I think what ends up happening is it is just endless product expansion into the next trend that you have to be really good at, and it comes down to your capacity to build the next product category that someone cares a lot about, um, and to establish more distribution. Because it is not about science creating a defensible CAC.

[00:00:54] There is no defensible CAC, because there is no barrier to making claims.

[00:00:58] Andrew: Yeah.

[00:00:58] Taylor: This is the same thing I tell agent- But do,

[00:00:59] Andrew: do, so do you think... So that's actually one of my questions. Do you think that bar- the no barrier to making claims will be the case for forever? Yes. Or do you think at some point the FDA is going to come and say like, "Eh-"

[00:01:08] Taylor: I think these are, these are ghosts

[00:01:10] there's so much

[00:01:10] Andrew: money

[00:01:10] Taylor: here." You c- you can't find them, the people making the claims. The Black Cat affiliates are ghosts, so you can't... You, you'll never find them. Um, uh, the... You'll find some that will get large enough that you'll get made an example of. But it is, there is no barrier to entry and there's no value in the FTC chasing down some drop shipper making outrageous, outlandish claims.

[00:01:31] Like, as it gets concentrated and large enough, then you draft enough attention for it to be worth trying to stop you, but it's whack-a-mole. It's like trying to eliminate knock-offs on Amazon. It's like one goes down, another one pops up. And so there is no barrier to making claims. This is the same thing I tell, like, agency owners about, um, the value proposition of their service can't be like, uh, a thing that somebody else can just write on their website too.

[00:01:56] Yeah. That is, like, an unprovable, indefensible statement. And then we can all say things like the greatest copywriter ever. Like, what... Like, you... I- if it's something you can just write out an ad, that's not a defensible position even if you spent $10 million researching your line to be true. If I can write the same line, the customer doesn't know the difference.

[00:02:14] Andrew: But if your phrase is the greatest copywriter ever, I'm gonna assume that's not true, because it's not that good of a copywriter.

[00:02:18] Taylor: What if it's the greatest- I'm kidding, I'm kidding ... weight loss drug ever? I'm

[00:02:20] Andrew: just being an idiot. You know? I'm kidding. Um, yeah, I-

[00:02:24] Taylor: And, and like th- look at the GLP mar- like, if you go onto- What about, what

[00:02:26] Andrew: about, what about...

[00:02:27] Go ahead. Go ahead.

[00:02:27] Taylor: If you go onto TikTok right now, it is flooded with fake doctors, AI saying fake things about drugs that are not real. Like, there's endless accounts that you can go find of fake AI doctors that are intended to look real to deceive people into believing there is a benefit in the thing that they are selling on the other end of it.

[00:02:46] Andrew: Yeah.

[00:02:47] Taylor: Like, h- I, I don't know how, uh, a definitive claim... And also, like- Did AG1 and all its science defend it from grooms altering the form factor of the market?

[00:02:57] Andrew: No,

[00:02:58] Taylor: and- Like, it just-

[00:02:58] Andrew: Yeah ...

[00:02:59] Taylor: it just endlessly changes over and over and over again. Yeah. And I, I'm a- I'm also very dubious about how much anybody cares about science.

[00:03:05] Andrew: I think there's a question there too that just, like, like, I don't know, people s- G- Gatorade sold a lot of Gatorade for a really long time, and it was ba- it's basically a supplement, right?

[00:03:13] Taylor: Like, when you think about what's- People still drink a lot of Coke.

[00:03:15] Andrew: Uh-huh. Yeah, yeah.

[00:03:15] Taylor: I, I just, the idea that, like, sci- well, and even in the categories where health is a pursuit, like, there's a lot of supplement companies that exist in a space that I would say is more homeopathic or natural- Yeah

[00:03:27] that is like, i- their literal position is anti-science in some ways. It's anti-formal, uh, c- pharmacological. That's fine, yeah. Like-

[00:03:33] Andrew: Yeah, yeah. I, I wouldn't have claimed... I, I mean, I, I-

[00:03:36] Taylor: I don't think that's how they would frame

[00:03:37] Andrew: it ... I, I, no, no, no But- I, I, but I see what you mean. I see what you mean. You're saying we're, we're going against the mainstream belief about this thing, and that's the reason why we're good.

[00:03:43] Um, yeah, it's interesting. I, I- Like,

[00:03:44] Taylor: like Primal Queen is, like, the hottest supplement brand that everybody wants to reference, and I would just... I haven't s- it's not because I've seen their, you know-

[00:03:52] Andrew: Yeah ...

[00:03:53] Taylor: p- PubMed studies- Mm-hmm ... or web or, uh, PubMed studies, sorry. Yeah. Like, that's not the mechanism that they're using to drive.

[00:03:59] Well, I

[00:03:59] Andrew: mean, Grooms, right? Like, just got to a billion dollars really fast. I have no idea if they did e- a study ever.

[00:04:03] Taylor: Yeah, they have cute sticky bears though.

[00:04:04] Andrew: Yeah, yeah. Like, the little bear. Four-pack just tastes- Yeah, yeah ... delicious. Uh, Patrick's comment about this just never gets old to me. He said, "Never underestimate," and this actually is relevant to the conversation, "Never underestimate, underestimate the ability to sell, um, candy marketed as salad to American consumers."

[00:04:17] Yeah,

[00:04:18] Taylor: exactly. Um, but I do think that, like, I, I mean, I don't know, like, the peptide GLP-1, even Moderna's stock doubling because they've solved cancer potentially, like, I do think we're actually experiencing these massive innovations on the healthcare side right now that I do think that the really interesting thing is less about supplements, candidly.

[00:04:39] I find that world to be-

[00:04:40] Andrew: Well, let me- ... in anyways ... let me ask you a different question about supplements.

[00:04:42] Taylor: Yeah.

[00:04:43] Andrew: That is part of my, the reason I'm, I wonder about its ability to last. One of the things I think is just still that there's this margin game. There's like a, there's an auction-based economic thing that I think of here, which is that it is still at this stage- Uh, like the customers are still too valuable relative to the cost, um, for some of the supplement brands basically.

[00:05:04] That as- that when you can run at, like, a 0.6- I don't

[00:05:06] Taylor: know. I don't know. I don't know how true that is.

[00:05:09] Andrew: Well, I mean, it's true in the extreme ca- Well, well, let me, let me make the case like this. One of the things that is noticeable to me is that some of the big supplement super win speed game things, at least what they're supposed to be, um, recently have come with raising money.

[00:05:22] Taylor: Right.

[00:05:23] Andrew: You know, Mars Men raised a bunch of money. Gruns, you know, came, started with a raise. Like, um, and the thing that's striking about that to me is that it was, like... That that was, like, antithetical to the D2C mindset for a while, right? It was like everybody raised money in D2C 1.0, right? Bonobos and Warby- Yeah

[00:05:38] and they never had to be profitable. Yeah. You know, Dollar Shave. Um, and then it was like, okay well, actually, like, this is not really how the economics of these businesses works, and there's a new round of D2C brands. And now s- for a specific subset of, for a specific category- Yeah ... you see brands raising money.

[00:05:54] Taylor: Yep.

[00:05:54] Andrew: And I don't know what Zach is doing with that money at Mars Men. Yeah. I don't know what exactly Gruns... It might be to hire amazing people more. But there, it seems to me that part of what they're doing is fronting the CAC. And if that is true, then it is going to become less viable at some point without doing that because what is gonna happen is that those brands will just out-muscle you on volume.

[00:06:17] Taylor: Mm-hmm.

[00:06:18] Andrew: And in an auction-based system, if they're just willing to pay more for the customer-

[00:06:21] Taylor: Yeah ...

[00:06:22] Andrew: than other people are, then you're going, you're, it's gonna be really hard to grow past some level- Yeah ... or whatever. And so, so, so, so for me it's, it's basically a question about the idea, actually whether or not you're right that the customers are or are not valuable enough to s- s- sustain this.

[00:06:37] Yeah. Some subset of people are behaving as if they are.

[00:06:39] Taylor: Yep.

[00:06:39] Andrew: And therefore pushing the price, the CACs really high in this category. And if that keeps happening, it makes the value proposition of high gross margin plus, uh, extremely high el- uh, retention, which is, which is the value proposition of these, of these brands, right?

[00:06:56] Like, from an enterprise value level-

[00:06:58] Taylor: Yep

[00:06:59] Andrew: Um, it makes that less appealing because then, then margin just gets eaten away in term, in CAC, and the timeline to value creation becomes too difficult for too many brands. I don't know if we're there-

[00:07:09] Taylor: I, I think you're just describing every market with limited barrier to entry experiences that exact thing.

[00:07:13] And,

[00:07:13] Andrew: and that's part of what I'm saying- Yeah ... is that supplements have, have seen, have, have become the focal point of exactly that problem because it's such i- because the margin, because the margin gap was so big. Yeah. Like, the... 'Cause I mean, again, if you just do the, like, the return on invested capital math on- Yeah

[00:07:28] a lot of these customers- Yeah ... it's, like, 70% in a year or something like that, and whatever, don't hold me to that exact number. Yeah. Right? But

[00:07:35] Taylor: like- You know, a three-to-one LTV to CAC in three years is kind of the gold standard. So that-

[00:07:38] Andrew: And, and if you think about that, though, if you go run that same margin game against durables brands-

[00:07:44] Taylor: Yeah

[00:07:44] Andrew: you know, like, they just are not achieving that kind of return on invested capital. And therefore, the implication to me is that, at least at the D2C level, and therefore the implication to me is more money will keep flowing there because markets, especially auction-based markets, are pretty rational about this sort of thing, so they'll just keep going doing it.

[00:08:01] But

[00:08:01] Taylor: I don't, I, that's not the, that's not- Yeah, that's,

[00:08:02] Andrew: that's my theory.

[00:08:02] Taylor: Right, but those aren't the choices for capital, right? Like, it's not, uh, hard goods or supplements. I think the category where actually all of the volume is right now that's, is telehealth, is, is actually where... Because the customer values are actually dispro- Mm, mm

[00:08:15] in the thousands of dollars- Mm ... disproportionately high there. Like, that's what the GLP-1 peptide thing is actually so much bigger than- For sure ... any, any of the supplement thing. Yeah. And, and it's because there, there are real thousands and thousands of dollar, and the consumption is real, and the efficacy is real, the impact of people's lives if you take semaglutide, like, is- real.

[00:08:34] And so people are paying endless amounts of money. And again, it's a form factor evolution. I think that some of the biggest changes, like when you go from powder to gummy to now injectables, the idea of normalizing injecting yourself with something- Mm-hmm.

[00:08:46] Andrew: It's really interesting ...

[00:08:46] Taylor: is like real- Yeah, it's a pretty crazy- Yeah

[00:08:48] transformation. But those things... Zyn, I think, is another one that gets referenced, right? It's like form factor change of consuming caffeine or whatever it might be. Zyn? Yeah. Yeah. Or, uh, um, yeah, nicotine, whatever. Yeah. But those are, um, those are big moments where there tends to be high emergence of, of big winners.

[00:09:02] But, um, I, I think that the other th- category, like, I look at in our, our business that I think it is really wildly underappreciated is, like, uh, Whoop and Oura- Mm-hmm. Yeah. For sure ... where there's hardware plus software. Yeah. Like... And, and so the general premise... And, uh, those actually have moats because there's CapEx requirement, there's technology, there's innovation, there's things that actually aren't...

[00:09:21] You can't... You're, there's not 9,000 Oura Rings, despite Calo now having a one as an example of a knockoff. But it's actually, like, you can't fast-follow that because there's real work to be done to build a moat around the technology, and there's a network effect in the data, in that, like, the more users of the product they are- Yeah

[00:09:39] the better the product becomes because the more they can learn about what works for people and doesn't, they can improve the software, things like that. So Fi is a customer of ours. This is an example of this for pets. Like, that, I think, category is another example that's, like, more interesting to me.

[00:09:53] 'Cause the supplement thing, I, I... And this is the argument I was having with Bill. I think there's no defensibility against the CAC problem. I think every one of- And- ... these brands will just get... The CAC will degrade endlessly over time.

[00:10:03] Andrew: And part of my theory in that is that at the same time, the retention rates will actually start to, um, suffer-

[00:10:09] Taylor: Yeah

[00:10:09] Andrew: because there's so much competition to enter. Exactly. So people will play- All the 30 boxes, yeah ... this LTV to CAC game.

[00:10:14] Taylor: Yes.

[00:10:14] Andrew: And three years ago they would've been right.

[00:10:16] Taylor: Right. And well, this is the argument with IMA. Like, I don't know how much you're following that. I'm not. I'm not. It's a, it's a fun debate on X about...

[00:10:21] 'Cause they're, they are running this playbook to the absolute max extreme. So you talk about financing, they got a billion-dollar, um, uh, financial tool from General Catalyst that's in, exclusively exists to fund CAC with a specific interest rate relative to the payback period. So- Whoa. Yeah. It's a- I did

[00:10:36] Andrew: not

[00:10:36] Taylor: know that.

[00:10:37] Usually, it's really

[00:10:38] Andrew: interesting.

[00:10:39] Taylor: That's very interesting. Yeah. And, and s- So who, who

[00:10:40] Andrew: funded this?

[00:10:40] Taylor: General Catalyst. What are

[00:10:41] Andrew: they?

[00:10:41] Taylor: They're a venture fund.

[00:10:42] Andrew: Venture fund, okay.

[00:10:43] Taylor: Um, and so it's a, it's a debt vehicle specifically for CAC, and the pay- how far out they push the payback period alters the interest rate that they get charged, which is just like them adjusting for the yield relative to the risk.

[00:10:53] Yeah, yeah. Right? So it makes sense. It's

[00:10:54] Andrew: really rational.

[00:10:55] Taylor: And there's some-

[00:10:56] Andrew: This is ex- this is exactly my point. That's so rational as a- Yeah ... as a use of capital. This is exactly my point. That is a really rational use of capital relative to the value so far.

[00:11:04] Taylor: Right. The problem I see- Yes ... with it- Yeah ... is it, there's, there's two assumptions that underpin the model, right?

[00:11:10] One is the stability of CAC as you go forward, right? But again, the, the expectation of the dollars are only deployed through a lens of a return in some windows. So they're like, if the volume goes up or down, they don't really care. It's just how much money gets lent. So for the lender, it's like the CAC isn't actually as much of the problem as is the idea that the business has only been around for two- 20 months, you're modeling off your earliest cohorts, which are your highest value customers- Yeah, yeah

[00:11:36] with the assumption that next month's ch- uh, um-

[00:11:41] Andrew: Churn,

[00:11:41] Taylor: yeah ... value is going to be the same as the first month's cohorts. Mm-hmm. Now, you can look at the replication of month one versus month one. It doesn't have to compare month 18, month 18. Yeah. But what you don't know is if- What Grunes did to AG1 as changing the form factor from powder to gummies exists six months from now such that all of the cohorts will suddenly be depressed because there's now this massive alternative competition factor.

[00:12:04] And so anytime you're modeling anything far out to the future, the unknown unknowns- Yeah, yeah,

[00:12:08] Andrew: it's a risk ...

[00:12:08] Taylor: become larger. Yeah, yeah. And so I think there's, there's some, um- Yeah ... significant risk in that. Yeah. But, but-

[00:12:13] Andrew: My, my whole question is just, like, right now part of the reason supplements is so appealing as a subset, like compared to Whoop or Oura, what you're saying there, right, is, is the moat is the barrier to entry.

[00:12:24] Yeah, that's right. But that's, that's the thing about supplements is there's no barrier to entry. That's right. And so I would say for the last few years it's been an incredible opportunity, 'cause the other thing too is you have to think, like, like you don't have to have a billion-dollar outcome for it to be a really good opportunity, right?

[00:12:36] Yeah. Like you, not everybody has to be Grunes here. Like you, you could go build a really good business and sell it for 30- Yeah, there's lots of people to build on ... 40, 50 million dollars and be really, really happy with it. You know what I mean? And that's still a good opportunity. My question is, like, how long will that opportunity hold up or is there gonna be a spend ceiling that brands really struggle to sort, to, to push through without being great at everything they're doing operationally?

[00:12:57] Taylor: I think,

[00:12:57] Andrew: I think- You know? In, in a way that what, what, what- Yeah ... yeah, what it would do is like it would sort of sift out the truly good op- the truly great operators from the bad ones. 'Cause maybe the way you would win in that game is, like, next tier creative, right? There, there's no moat in terms of the things you're saying, but if your creative is better and your ability to build brand is better and your ability to build organic content is better, you know, all of those things, those can be really additive to, to building a good brand, again, even if it's not a billion-dollar scale, and, uh, but that's actually all really, really hard.

[00:13:23] Mm-hmm. All of that kind of marketing work is super difficult or whatever at the, at the sort of supply chain level doing something, you know, whatever it is, so, um, yeah.

[00:13:30] Taylor: Yeah, I think there's gonna be emerging new trends in health and fitness forever, um, and that there will be products that get built in support of those movements that will have massive success and that any market where the, the barrier to entry is low will suffer from long-term pricing power-

[00:13:49] Andrew: Yes

[00:13:50] Taylor: and defensibility of-

[00:13:51] Andrew: Yeah. And my, my whole question really is, is that happening now, uh, for, for supplements? It was not happening two years ago. Well, I mean, I think supplements- Is it happening

[00:13:57] Taylor: now? ... is too broad. I think I would be- Sure ... narrower in the definition. Well,

[00:13:59] Andrew: so now this is an interesting question- Yeah

[00:14:00] which is like as form factors change, like, 'cause as you've said, sell pills on subscription, that's the whole game in DTC, right? Yeah. But what happens if that becomes no longer as appealing because actually everybody wants to drink their stuff, you know? Like, uh, you know, or if they want to eat gummies of their stuff or, or whatever, you know?

[00:14:16] So, um, so yeah, I, yeah, I, I think there's a lot of questions. Yeah, I think, I think

[00:14:19] Taylor: pill, it, like pills-

[00:14:20] Andrew: What do you mean by supplement anymore? Is, is OLIPOP a supplement? You know, like-

[00:14:23] Taylor: Yeah, right. Yeah ... um- Beverage is a whole, a whole-

[00:14:24] Andrew: It's a probiotic theoretically ... question, yeah. Right? Yeah, right. So.

[00:14:27] Taylor: I think the gummy thing is, is really interesting.

[00:14:29] I think it's, that is an example of a thing that I don't think is going to last. Um, I don't know that that's going to be as durable, uh, long term or that the idea of launching a gummy supplement today is as powerful as it was when you were the first ones to do it- Right ... when Create Gummies did it- Yeah, right

[00:14:43] and, you know, whoever. Um- So I think that the novelty is part of what drives the intrigue and the adoption. Um, I, I know, like, I, I just think that Building habitual consumption amongst everyday people for almost anything that isn't actually addictive is really, really hard. It's really hard. Um, like I have s- toggled back and forth between 19 different creatine companies.

[00:15:07] Yeah. Like, and I'm back to just doing the powder 'cause it's, like, faster and chewing gummies just took too long. Like, I just- Yeah. And I-

[00:15:12] Andrew: Really?

[00:15:12] Taylor: Yeah. Um- That's

[00:15:13] Andrew: funny ...

[00:15:14] Taylor: uh, I just got tired of chewing a lot of gummies every day. Like, um, that was just my personal feeling. And again, it's-

[00:15:20] Andrew: Yeah ... but, um. I've been using the same Bulk Supplements Amazon brand for forever for creatine.

[00:15:24] Taylor: Right, right.

[00:15:25] Andrew: Yeah.

[00:15:25] Taylor: So I just think there's like, uh, people will cycle through these things- Yeah ... um, a lot.

[00:15:29] Andrew: Yeah.

[00:15:30] Taylor: But, but, but-

[00:15:31] Andrew: Maybe they'll buy a lot before they cycle.

[00:15:32] Taylor: Yeah. They, and they will. Yeah. There's a lot of- Right ... the telehealth thing I think is much more interesting. Yeah. 'Cause I think there's actual real, quote-unquote, "science" here happening about- Oh, yeah.

[00:15:40] Oh, yeah ... the efficacy of these products, and it's like the, the impacts are incredible. Like, I, I just think it is, uh, massively underreported because there's a social incentive not to talk about it that much how many people are on GLP-1s.

[00:15:52] Andrew: Oh, yeah.

[00:15:53] Taylor: It's unbelievable.

[00:15:53] Andrew: Oh, yeah.

[00:15:54] Taylor: Unbelievable.

[00:15:55] Andrew: Oh, yeah. It's crazy.

[00:15:57] Um, this is a random show episode. Yeah. We're supposed to talk about whatever's going on. We did an episode not that long ago. This is like a, this is a fast turnaround for our last recording. It would've been faster- Well, 'cause it was like- ... but we were just like- ... the one was

[00:16:06] Taylor: last time was, like, research. We

[00:16:07] Andrew: were like- I know

[00:16:07] yeah. But we did, we did, we broke our usual. So today we're talking about all the stuff that we just haven't gotten to for a while 'cause we don't get to see each other that much. Yeah. What do you wanna talk about next? That was one that I've been noodling, I was curious for your take on. Um, if- It's, like, semi-work-related.

[00:16:18] Do you wanna go totally non-work next, or do you wanna go- Yeah, let's go non-work. Okay, great. 'Cause I-

[00:16:22] Taylor: Tell me ... I'm curious 'cause you are a staunch defender of the Dodgers as a franchise. Yeah. If it turns out that they cheated to create the financial advantage that has allowed them to build championship teams- Yeah

[00:16:35] how would you respond to that, and what do you think happened here?

[00:16:40] Andrew: I don't know what I think happened. Um, I think there's two que- there's two stories, right? There's, like, did Mark Walter just mismanage his cash availability? Mm-hmm. Is like one question . You know, with, like, sort of lending to himself to have more cash on hand than he should have.

[00:16:56] Taylor: Mm-hmm.

[00:16:57] Andrew: That's in some ways separate from did the Dodgers cheat. It's, like, more like did you commit fraud with your customers? 'Cause I think it- But

[00:17:02] Taylor: if that allowed him to make the

[00:17:04] Andrew: financial decisions- Well, but theoretically somebody else has enough cash on hand to make the same financial decisions.

[00:17:09] Taylor: To cheat?

[00:17:09] Andrew: Not to cheat. That's, that's my point, is that it's not necessarily cheating- Well, if you're... Yeah, well- ... in, from a baseball perspective. Like, Steve Cohen might have enough cash on hand with the Mets, and he's paying a very similar payroll to where you could fund a huge... 'Cause there's a separate question to me of like, is it good or bad that the Dodgers pay so much money in payroll?

[00:17:24] Taylor: Mm-hmm.

[00:17:25] Andrew: Now, they may have paid too much money in payroll, but even if you take out Kyle Tucker and Edwin Diaz from this last year, they would've had a gigantic monster payroll with huge luxury ta- luxury tax implications and giant deferrals and all that kinda stuff. And maybe, maybe it's the case, this, and non-baseball fans are gonna be so, so confused here.

[00:17:40] Whatever. Uh, maybe it's the case that in that world people... I mean, people were mad at the Dodgers last year before that happened. Right.

[00:17:46] Taylor: Well,

[00:17:47] Andrew: right This year felt- But I'm talking about you ... this year felt aggressive I'm

[00:17:48] Taylor: asking about you because I,

[00:17:49] Andrew: you- No, but my, my point, my point- Yeah ... is just that there's two questions.

[00:17:52] One of them is, like, did Mark Walter commit fraud with his, with his, um-

[00:17:56] Taylor: Insurance

[00:17:57] Andrew: funds ... with his insurance funds?

[00:17:58] Taylor: Yep.

[00:17:59] Andrew: Um, that, it, my- I'm gonna, I'm gonna go on a limb and say if he did, I think that's bad. Okay. I think you shouldn't commit fraud- Okay ... financially at the risk of annuity holders, you know?

[00:18:09] Yeah. Um, so there's that. If the, second question, if the Dodgers actually then used that money to cheat and to fund their cash allowance in a way that sort of, like, made it so they actually couldn't operate at this level or something like that, then I think that was bad. I think they shouldn't... I, I wouldn't have a defense- So I think-

[00:18:24] of that. I would say, like- So

[00:18:25] Taylor: the clearest thing I understand is- ... that would suck ... the, to the two things that seem obvious is that the issues were that he didn't... When you take insurance floats, when you take money- Yes ... for people's premiums- And

[00:18:35] Andrew: you reinvest

[00:18:35] Taylor: it ... you're allow- you're allowed to invest it. Yes.

[00:18:37] Totally legal. You have to disclose the entities, and it can't be concentrated in any place. Yes. Like, those are sort of some basic laws. A- a- a- and- And he created- ...

[00:18:45] Andrew: and you can't, and you can't lend to related entities because the idea is that, like, you're gonna give really good... You're, if you're, if I'm lending to myself across two businesses that I own- Right

[00:18:55] and, and, and the, um, the debtor, uh, uh, can't pay back the debt-

[00:19:02] Taylor: Right ...

[00:19:03] Andrew: which puts at risk the people from the original company- Yeah ... especially if it's their insurance funds, right? Right, right. Like, then that's actually a real potential harm for customers, and so you can't do that. You can do it a little bit of it, but you can't do a lot of it because it creates too much risk for the, those- Right

[00:19:16] policyholders.

[00:19:16] Taylor: And, and in this case, in theory, like, he's made a lot of money with the investments. It's not that the money doesn't exist. So this is, like, different than, like, a Ponzi scheme where the money's not real. Yes, yes. He actually made a shit ton of money Yeah, yeah, yeah. Investing in the Lakers. But he did it, yes.

[00:19:28] But he did it without disclosures- Yes ... and created all these, like, entities that were- Yes ... unnamed, that didn't appear to be to the same- Yes ... but might actually have been the same.

[00:19:36] Andrew: And covering it up, and it was really risky even though it worked.

[00:19:39] Taylor: Yes. Yeah. And then the media rights deal with the Dodgers, he's on both sides of the transaction- Yes, yes

[00:19:44] which also gives him the ability to write off the interest on the loan- Yes ... to create a tax advantage- Yeah ... for himself. Yes. And if it's all the same pool of cash-

[00:19:52] Andrew: Yeah ...

[00:19:53] Taylor: then by being the lender- Yeah ... and the lendee, you create an advantage. And so that would give you then the ability to deploy more cash because you have less cash outflow-

[00:20:03] Andrew: Yeah

[00:20:04] Taylor: as an obligation from a tax standpoint.

[00:20:06] Andrew: So my answer to your question is, yes, I would care. If that, if that created an unfair advantage, that would be bad. Yeah. I think that would be bad. I don't think anybody should have an unfair advantage. I think you want the market to work within some amount of regulation rationally- Yeah

[00:20:16] and all of that kind of stuff. So I think that would be bad. It's also just not the most interesting question to me. The mo- the, actually the most interesting question to me is does, is parody good? Um-

[00:20:26] Taylor: What if, what if the GM knew?

[00:20:29] Andrew: Well, if Friedman knew- Yeah ... and he was doing that, that was bad. 'Cause, like,

[00:20:31] Taylor: did you see what happened with the, uh, the Clippers?

[00:20:33] Andrew: Yeah, yeah, yeah.

[00:20:34] Taylor: Where the president of basketball operations actually was in these meetings recording the meetings with Ballmer where they were discussing stuff, and people are kind of like, "Hey, why was he doing that?" And it appears that he was like, "This doesn't seem totally clear. If I ever get in trouble, this needs to be something that I can come out and s- where- Yeah, yeah.

[00:20:52] Andrew: That's a liability on him.

[00:20:52] Taylor: Yeah ... right. So th- a- and now Magic Johnson is, like, very much sort of being put at the center of this, as if Magic Johnson brokering these relationships-

[00:20:59] Andrew: Yeah ...

[00:20:59] Taylor: was also a piece of this. So, like, would it matter if Andrew Friedman knew?

[00:21:03] Andrew: Yeah, it's all about... Yeah, yeah. Yeah. You shouldn't cheat.

[00:21:05] Okay. I mean, I... Like, of course. Like, i- i- it's, like, a different kind of cheating than the on-field cheating of the Astros, but it's sort of the same if it, like, produces a super roster, you know? So it's like- Well,

[00:21:14] Taylor: I, yeah, this sort of des- I, I

[00:21:15] Andrew: think it's, I think it's

[00:21:16] Taylor: all bad ... do, and do you say that because, like, that's just, like, a, a moral position?

[00:21:19] Or is that, like, if it got you a championship-

[00:21:23] Andrew: No, that would make me feel tainted with the championship. Okay. I would feel, I would feel like that, that was less. I don't, I don't... I've actually, one of the things I've admired from a distance about the Dodgers theoretically-

[00:21:31] Taylor: Yeah ...

[00:21:31] Andrew: is how well they run their whole organization.

[00:21:33] Right. There seems to always be, to me, a commitment to excellence, and I would always hold that up as a way of saying, like, like, the other brands, this is what markets do. They, they, they create theoretically this ability to go operate at this really high level across everything you do, financially, player development, drafting- Yeah

[00:21:50] you know, signing free agents, like, all these things, getting the best people in the right spots. If you do all that stuff, you should win more, and I think, like, I think that's fun. That's the fun of sports, and as long as these things are businesses and somebody's gonna make me care about their business dealings, then I'm gonna do that.

[00:22:02] But I, um, I, uh, yeah, so that would definitely taint the whole thing for me. I wouldn't defend that, if that was what happened. Um, I, I also find myself incessantly annoyed at these kinds of, at the, like, business side of conversations of sports. I just wanna like sports. Um, and it, like- Yeah ... it annoys me- It is a hard thing-

[00:22:20] when people, like, drag- It's like when the owners are trying to talk about, like, how important it is that they have a salary cap. I'm like, "I don't care. You guys, I don't care who gets- You guys work

[00:22:28] Taylor: it out ...

[00:22:28] Andrew: who rounds out those..." Yeah, yeah, like- I

[00:22:30] think

[00:22:30] Taylor: if you're,

[00:22:30] Andrew: like- You guys are both really rich. There's

[00:22:31] Taylor: no villain here

[00:22:32] I think it's hard if you're a fan of a team in a market that doesn't have funds-

[00:22:37] Andrew: Yes ...

[00:22:37] Taylor: and you, you want to believe you're playing in a free market system-

[00:22:41] Andrew: Yes ...

[00:22:41] Taylor: but then you find out that there's actually a rigged game. A rig- That's bad. It's like if you go to the casino- That's definitely bad ... yeah, and you find out- That's definitely bad.

[00:22:47] Right. Yeah, yeah. Like, I- And so if I'm in the NBA and I'm like, wait a second, so the richest owner also was totally willing to blatantly circumnavigate the cap and pay a player more- Yes ... and got him in free agency, which is intended to be the most free market activity- Yes, that's

[00:23:01] Andrew: bad ...

[00:23:02] Taylor: which is in the thing designed for me to have an opportunity to get the player, I actually don't have an opportunity to get the player, then it's like, well, oh crap.

[00:23:11] Andrew: But, so-

[00:23:11] Taylor: What does that mean about this thing that we're doing?

[00:23:13] Andrew: So that's all an interesting question, but all of the anti-Dodgers conversation was existed well before anybody heard a whisper of any of this stuff. It was all of this, like, the Dodgers are rigging- But

[00:23:22] Taylor: I know my argument was always like, well, they're just smarter business people.

[00:23:25] Like, the deferrals for Ohtani are just smart business.

[00:23:27] Andrew: Yeah.

[00:23:27] Taylor: But, but maybe there's not, that's not really true.

[00:23:30] Andrew: Yeah. But my, but there's, it doesn't... In some sense what I'm saying is it doesn't matter to the conversation that animated everybody a couple months ago. What, the conversation that animated people then was...

[00:23:39] 'Cause, like, again, just take the Mets. Mets is the easy comp here because they actually have almost as much payroll. They, in fact, I think dollar for dollar payroll-

[00:23:44] Taylor: Yep ...

[00:23:45] Andrew: they have more than the Dodgers on the field today, it's just they don't have as much in luxury tax. Um, and so the point is they're comparable.

[00:23:51] They are very deep-pocketed owners com- playing against the Brewers and the Rays who are, you know, have much less money, right? So the question is like- that people have all said is, and is like, it's not fair that the s- the, the best teams win all the time, or, or that the, or that it's not fair that some teams are out-muscling everybody else.

[00:24:08] We need a salary cap to solve that problem. Mm-hmm. Yep. And the, the thing that I've been thinking about with all of this that I think is, like, interesting is the idea, like, I don't know why anybody cares about parity. I think it's, like, a bad goal.

[00:24:20] Taylor: Well, 'cause I think what you're describing is the feeling that we're participating in a rigged game nobody likes.

[00:24:23] I actually think this is very similar- But- ... to the movement of socialism in our country-

[00:24:27] Andrew: Yeah ...

[00:24:27] Taylor: right now generally- Yes. Yeah, yeah ... is that it's easy to say to everyone, like, everyone would agree that, like, if it were truly a meritocratic system, that would be ideal, and then therefore, even within that, if people won more than others, we could all kind of be okay w- with that.

[00:24:41] But when you repeatedly find out that you're being- That it's not

[00:24:44] Andrew: meritocratic ...

[00:24:44] Taylor: you're being gaslit into being told- Yeah, that it's... Yeah ... that this is a free market, and it's equal- Yeah, yeah ... and everybody has the same opportunity, and then time after time, it turns out that the people winning were cheating-

[00:24:53] Andrew: Yeah

[00:24:54] Taylor: you go like, "Okay, you can't gaslight me anymore into telling me this is a free market."

[00:24:57] Andrew: Yeah. Just cap it.

[00:24:58] Taylor: Yeah.

[00:24:59] Andrew: But, but, but that, you know why that doesn't work? Because the NBA has a salary cap, and you just told me that, that somebody did that, too. Like, the cheating is sort of irrelevant to the system.

[00:25:06] Taylor: Well, but so I think-

[00:25:07] Andrew: This is why this is why- Yeah

[00:25:09] I don't think socialism- But this is why- ... is a compelling solution, right? Is that like, it's, like, trying to fi- find the pro- fi- to make the rules fair, but then somebody just breaks that one, too, you know? So Yeah.

[00:25:17] Taylor: And I think, I think then the, the, the question there is sort of just like, well, then- There's no- the, to the cheater go the spoils?

[00:25:27] Andrew: I mean, maybe. I- unless you get caught, right?

[00:25:29] Taylor: Like- Yeah, and I think, I think there's this, like, you, you, there's, you know the, what's the- And

[00:25:32] Andrew: I think the NBA did the right thing here, by the way, by, like, dropping the hammer on that comp- on the, on the Clippers, right?

[00:25:37] Taylor: Have you... Yeah. Well- I mean, they- I mean, the hammer, what's $30 million to a guy who has $145 billion?

[00:25:41] Not,

[00:25:42] Andrew: not that, but the five first-round picks- Yeah ... and it's like, it's like, it's gonna be really hard for that organization to build again for a while- Yeah, totally ... you know, without first-round picks. Like, it's gonna be really hard. Those are really valuable trade chips in the NBA, even if you don't draft those- What is-

[00:25:54] and develop them yourself.

[00:25:55] Taylor: Yeah. I, there's the, the, this guy on, uh, he's like a professor on social that does, like, strategy and predictions. Have you seen him? Asian guy- No ... from China. God, I'll, I'll find his name. He, like, he's blown up on, on, on social, and he's always, like, sort of predicting global conflicts and different things.

[00:26:11] And he kinda talks about this as the general idea that, like, um, that, like, cheating is the, is the most powerful mechanism for winning, and so any game where the incentives are strong enough for winning, that there will be cheating. Yeah. That is, like, that is, that is a, should be a default assumption when the stakes get high enough, especially if people's lives are on the line, so, like, in cases of, you know, global conflict- Mm-hmm

[00:26:31] or global power- Mm-hmm ... or you should just assume that that's the case and, and therefore you have to make a choice if you're gonna enter into that arena whether or not you're willing to do that 'cause otherwise you shouldn't participate in the game.

[00:26:43] Andrew: Okay, but I want you to put all that aside for a second.

[00:26:45] Uh, I'm annoyed that this all happened in between the time that I was gonna talk to you about this 'cause I love this hot take. So I, I really want your take on this, all right? So, so we've handled your part of the question. Let's do my part, okay? Sure. Here's my, here's my idea. When people say they want the Brewers or the Rays or the Reds to have as good of a chance to win as the Dodgers and the Yankees- Yes

[00:27:02] okay, what they are saying is that's what parity is because every fan base should feel like they have a chance. But I don't understand why people measure this at the level of regional fan bases. Like, there are 20 million people in New York City or whatever it is, right? Mm-hmm. So why do... If, if what you want is the most people to enjoy baseball the most, shouldn't the Yankees win more than the Brewers- I would like-

[00:27:22] where nobody, where nobody lives? I would like

[00:27:24] Taylor: my team to be

[00:27:24] Andrew: good. No, but they, they do. Yeah. They do. But, like, shouldn't we all, shouldn't, isn't the ideal state of baseball, isn't the ideal state of baseball that, and really any sport, that the biggest markets win the most? Not all the time.

[00:27:36] Taylor: Well, for the sake of the, the value of the system,

[00:27:39] Andrew: yes.

[00:27:39] Not, not even for that. For the sake- For the sake of the MLB

[00:27:41] Taylor: or- No,

[00:27:41] Andrew: no, no ... for the sake of the NBA. For the sake of, for the sake of the, for the sake of... Let's just take, take, take aside the money for a second. Definitely that's true. I mean, yeah, you could look at this, like the Rangers versus Diamondbacks World Series was, like, 8 million viewers a game.

[00:27:53] Right. The Dodgers versus Blue Jays, two very big markets- But far from- ... was like 16 ... even better. And also, by the way, when MLB says they really want parity- No, they don't ... it's like they definitely do not. Right. Like, if you look at the World Series, they, they want the Dodgers and the Yankees to win- No, it's just-

[00:28:04] and be in the World Series every year ...

[00:28:06] Taylor: it's

[00:28:06] Andrew: just through which lens you're evaluating. That's, it's just a sales pitch. Yeah. But the point that I'm saying is, like, even for the, for the maximum enjoyment of people in baseball-

[00:28:13] Taylor: But why do I care about the maximum?

[00:28:15] Andrew: Not, not people in baseball. Baseball fans

[00:28:16] Taylor: Yeah, but why do I care about that?

[00:28:17] Andrew: You don't have to. I don't. I'm just saying, though, like, but when people talk about parity like it's a moral good, though. That's the way fans talk about it. They talk about it like it's- They

[00:28:24] Taylor: see everything

[00:28:25] Andrew: through the lens of a moral good ... No, no, no, I think that's what fans do. They say, "It's so bad. It's such a bad system if nobody can do this."

[00:28:29] I

[00:28:29] Taylor: feel like if their team isn't

[00:28:30] Andrew: winning. I think that's true, too. Yeah. But my point is the ideal set, this is all I'm saying, is the

[00:28:33] Taylor: i- Because like the experience, funny, 'cause like what is the ideal sports experience? I, I, so one of the coaches-

[00:28:41] Chicago. And he says that this White Sox season is his favorite- Mm. Mm ... season of baseball that he's ever been a fan. Mm. And I think it's be- It's

[00:28:51] Andrew: because they were so bad two years ago?

[00:28:52] Taylor: And, like, when you're, when the team is, like, homegrown, young, scrappy- No, I agree ... overachieving- I agree ... they've got personality-

[00:28:58] Andrew: I agree

[00:28:58] Taylor: sometimes that's, like, the most fun experience ever.

[00:29:00] Andrew: It's, it's more fun than if the Dodgers s- But, so- ... sign Kyle Tucker and he was awesome.

[00:29:03] Taylor: My, my... And this is true in life, is that joy is often the delta between expectation- Oh, my

[00:29:09] Andrew: gosh ... and

[00:29:09] Taylor: reality.

[00:29:10] Andrew: You're gonna talk about joy.

[00:29:11] Taylor: Whatever the word is.

[00:29:11] Andrew: Come on, let's go.

[00:29:12] Taylor: Whatever the word is- Let's do it ... um, or a positive experience is, like... And so sometimes the problem with being a fan of the Dodgers is that the expectation is World Series or nothing. Um, and so if you were-

[00:29:25] Andrew: I've gone to one game this year. Yeah. I'm pretty bored by them-

[00:29:27] Taylor: Exactly ... '

[00:29:27] Andrew: cause they won too much.

[00:29:28] Taylor: Exactly. Yeah. And so there's not a lot of value or joy to be extracted- Yeah ... out of the experience. Whereas if you started as a- Yeah ... White Sox fan this year, they were atrocious, and all of a sudden they're one of the best offensive hits in baseball. Mm-hmm. There's an exciting young player. Yeah. You've got this new Japanese star.

[00:29:41] Yeah, and he's awesome. And all of a sudden- And

[00:29:42] Andrew: he's awesome.

[00:29:42] Taylor: Yeah.

[00:29:42] Andrew: He's so good. Yeah.

[00:29:43] Taylor: And so, so now- Yeah ... you're like, "Whoa, this is amazing," 'cause your expectations were basically nothing.

[00:29:47] Andrew: Yeah. Um- That is, that is interesting. I mean, yeah, yeah, it is, it is, it is totally true. Like, I, I am at a point with the Dodgers where it's like they're so good that, like, I'm sor- I'm bored by the regular season.

[00:29:57] Yeah. I'll be, I'll be excited by the playoffs, but I'm like, whatever, they're gonna win the division. Like, hopefully they get a...

[00:30:00] Taylor: Yeah. And we've built up so much joy out of the characters already even. Like, what could Freddie do to really bring us a novel, new... Like, it's like... And so in some ways you need a new character to assign a new experience to, because it's like, yeah, we've...

[00:30:13] Well, Freddie's already won us World Series. What's he gonna do? Win us another World Series? Yeah. It's like his, his story is so

[00:30:18] Andrew: big. It's like he and Mookie Betts are, uh- Yeah ... stand-up guys who are easy to root for. Yeah,

[00:30:21] Taylor: exactly. And Penky. That story's played out. Right. You're gonna tell it again? You know?

[00:30:24] Yeah. Like, are we gonna watch Mookie bowl for the 400th time? Like, what, what's the story?

[00:30:28] Andrew: I... No, we need the Dalton Rushing, uh, we need the- Yeah, exactly ... the Dalton Rushing monster, like, F you game or something- Yeah, yeah ... like that, you know, to have a new... 'Cause it- Yeah,

[00:30:35] Taylor: that was, like, the most interesting thing that happened.

[00:30:37] Yeah. Right, right, right.

[00:30:37] Andrew: Where he was like, "

[00:30:37] Taylor: Oh, he's gonna show up Shohei?" Yeah. It was like, oh, this is a new storyline.

[00:30:40] Andrew: Okay. Um, influencer marketing. Yeah. That's my next thing for you.

[00:30:44] Taylor: Yep.

[00:30:44] Andrew: So that people don't have to listen to us talk, yell about baseball anymore. I'm sorry that I was eating some on this, by the way.

[00:30:47] We're gonna go work out soon, and I didn't have- Right ... enough calories 'cause of what I did this morning. It's

[00:30:51] Taylor: better than the foil packs. Anything... We set the bar. Speaking of setting expectations.

[00:30:53] Andrew: I specifically tried to open and keep the food as much off there, but I was gonna... I felt like I was gonna...

[00:30:57] You're gonna wor- You... The workout you invited me to is gonna be hard, and I'm going to... I needed some calories. I thought I was gonna suffer if I didn't. Yes, the, the carbs. It's important. I don't, I don't care really. Um. I just wanted some calories. Um, okay, but I'm done with that now, I promise. Um, influencer marketing.

[00:31:12] Um, okay. You, I remember early days working with you at Kalo. There is a, there's a w- there's a, there's an old Taylor Holiday who, who's probably dead now who loved the game of brands. He wasn't on the internet talking about how bad e-commerce was all the time- Yep ... and, and how everybody's business sucks and all that stuff.

[00:31:33] He was a, he was a bright-eyed, bushy-tailed VP of marketing at a- Yeah ... at a brand that he owned part of.

[00:31:39] Taylor: Yep.

[00:31:40] Andrew: And that Taylor Holiday talked about the importance, in fact, in the early days of Common Thread Collective, the Arch Network-

[00:31:46] Taylor: Yep ...

[00:31:47] Andrew: you guys talked about-

[00:31:48] Taylor: Influencers ...

[00:31:49] Andrew: influencers so much.

[00:31:50] Taylor: Yeah. Yes.

[00:31:51] Andrew: And what we meant by that at the time was, like, sports stars- Mm-hmm

[00:31:53] and, um, and people like that. And now when people talk about influencers, they basically mean, in a lot of cases, creators. Yes. So the word has shifted in its meaning, and I'm just curious if you would reflect at all, or if you have any reflections at all, on the sort of present state of influencer and the future state of influencer relative to, like, creator ecosystem versus, like, athlete versus...

[00:32:18] and how that plays out. And the, the, the thing that prompted this for me, um, is, is that I've got a, a brand right now that is doing really cool stuff with influencers, I think. And some of the content, it is not, it is not, like, super viral. It is not completely smashing the ad account. It's doing decent in the ad account.

[00:32:38] Yeah. They're making some money from it. But the... I bet you net-net what they're paying to people, like they're about to do, um... I don't think I should say that out publicly. I don't, uh... Yeah, okay, I won't say that. They're gonna do one with somebody who's cool who's not, like, an online creator, okay? Um, and I don't think it will go nuts.

[00:32:53] Um, but I think it's a great brand thing for them. I think they'll email it to their brand. I think it'll be on their organic social. I think for a subset of people who care about their brand, they're going to do pretty well on it, and it will be hard to measure it. It will not work on a direct response level probably exactly, and I love it.

[00:33:12] I think it's awesome. I think the brand is becoming a global brand. It's be- uh, on their way to going to do really big things because they think this way about their brand. Now, they're in a category that lends to this to some degree, so, like, I, I might think about that separately. But I, I've just been thinking more about, like, basically, here's the question, okay?

[00:33:26] I'm rambling a little bit. Should brands go sign traditional influencers more and work with them more- Yes ... and do that? Yeah. Yeah.

[00:33:34] Taylor: So I don't think, I don't think my opinion on influencer has actually changed. I actually

[00:33:37] Andrew: don't think it has

[00:33:37] Taylor: either. I don't, I just don't think creators are influencers.

[00:33:40] Andrew: Yeah.

[00:33:40] Taylor: So, um, I'm gonna give you, uh, like, an, an influencer example. They

[00:33:44] Andrew: can become that. MrBeast is an influencer.

[00:33:46] Taylor: No, he's not.

[00:33:47] Andrew: You don't think so? Okay. All right. Great. I

[00:33:48] Taylor: mean, I think... Uh, well, I, I think- He is now, but he wasn't ... I think he is an influencer, yes. He is not, uh, like the... He is a famous person. He's not a- Yeah

[00:33:55] creator in the way that we use that language.

[00:33:57] Andrew: Yeah, but there's people

[00:33:58] Taylor: who- He's a creator 'cause he makes videos. But when we say this, what we really mean is that the human's identity is irrelevant. Their identity in the asset creation is irrelevant.

[00:34:09] Andrew: That's, that's what you mean by creator?

[00:34:11] Taylor: That's a creator.

[00:34:11] Andrew: See, okay, I think that's right. I think that's right, and I think that... But I think what happens is some creators are so good that they end up becoming relevant. Like, so essentially MrBeast- But- ... didn't have anything

[00:34:20] Taylor: to stand on ... but not because of their identity, but because of the- Yes ... content that they make.

[00:34:23] Andrew: Yes, and the content then, then creates identity for them. So they, they sort of- But- ... move from creator- Okay ... to influencer at some point.

[00:34:29] Taylor: Give me, like, like, uh, like a, a- This is true I think for, like, let's say, um, the rich guy wallet Marques Brownlee. Yes. Okay? Yes. Marques Brownlee. But, like, I would contend he never started...

[00:34:41] Like, when we say creator in our universe, we mean people making ads.

[00:34:44] Andrew: Yeah. I- or I sometimes think of people making organic social content first, people who-

[00:34:49] Taylor: Well, to me that's different ... who establish it. Yeah, okay. That's like you and me. Like, I don't, I don't think we're trying- Yeah ... to be creators in the way that our industry- Yeah

[00:34:53] uses the language.

[00:34:54] Andrew: Okay, that's fine. That might be a definition. Go back to the influencer thing

[00:34:56] Taylor: that you were

[00:34:56] Andrew: saying- So, so I'll give you an ex- ... 'cause

[00:34:57] Taylor: I'm

[00:34:57] Andrew: interested to hear you say more ...

[00:34:58] Taylor: I, I actually think this is, is a wildly important part of every business, actually figure out who holds influence. Who is the person- Yes, I love that

[00:35:06] who influences people? Yes. Right, like, that's the idea. So I'll give you an example. Right now you and I, you mentioned we're going to do, um- A

[00:35:12] Andrew: workout ...

[00:35:13] Taylor: a workout, and it's a, it's a high ox base workout, which is running. So I'm trying to... Like, running is not my favorite thing in the world. Nope. But I- I'm trying to learn more about running.

[00:35:21] Interesting. Running culture, running shoes, running gear. And there... Have you heard of the Last Sol Ultra?

[00:35:28] Andrew: Uh-uh.

[00:35:28] Taylor: Okay, so there's this world of races.

[00:35:31] Andrew: Yeah. So I, I know this world exists, but I don't play in it.

[00:35:33] Taylor: Okay, but this, the... And these aren't just, like, run fast- Yeah, yeah ... who can run 100 miles fastest. This is you run- you start with a bunch of people, and you all run in a loop until no one can do it anymore.

[00:35:42] Okay,

[00:35:42] Andrew: yes. I've seen this, yes.

[00:35:43] Taylor: So this guy, Mark Dowdle, is, like, the best at this. You'd love this guy. He's, uh, um, super strong Christian guy.

[00:35:50] Andrew: Yeah.

[00:35:51] Taylor: Um, but this race- That doesn't

[00:35:52] Andrew: mean I'd like him.

[00:35:53] Taylor: Yeah. That doesn't, it doesn't mean you guys have a shared kindred view point. Yeah, that's true.

[00:35:56] Andrew: Yeah, yeah.

[00:35:56] Taylor: But I, I, uh, I, I think he's a fascinating dude.

[00:35:59] Yeah. And so, um, the race i- so he ran, in this race, 391 miles in four days with no sleep.

[00:36:07] Andrew: 391? 391

[00:36:10] Taylor: miles in four days, no sleep.

[00:36:11] Andrew: That's a- that's good.

[00:36:12] Taylor: So the, the, the rule is you have to finish the lap, and if you don't finish the lap, you're out, and you have a certain time max to finish the lap.

[00:36:18] Andrew: Okay.

[00:36:18] Taylor: Okay? And you just go again, and go again, and go again until you don't make it across the finish line.

[00:36:24] Um, and it is, like, the most... It is cr- so in the final lap- What he did, it was him and one other person, and it was that night, and there's this video of it, of them, like, it's like this, like, you know, the heat sensor cams. And he started, the guy would run, and he would stand right behind him. Because what happens psychologically is if someone's behind you, it introduces, like, a hunted fight or flight.

[00:36:49] It actually raises your cortisol, and it forces you to exert more energy. And so he literally stalked this guy. The guy would go running, he'd run right behind him, and then he'd run right behind him. What's

[00:36:58] Andrew: your, what's your influencer's name again?

[00:36:59] Taylor: This guy's Mark Dowdle.

[00:37:00] Andrew: Okay, so Dowdle ran behind the, the other

[00:37:01] Taylor: guy?

[00:37:01] Yeah, he's just like, "Imagine we're both trying to run and we're exhausted, we're about to die, and he stands right here behind you, and every time you move, I move. Every time you move, I move. Every time you move, I move."

[00:37:09] Andrew: Uh-huh. "

[00:37:09] Taylor: And so because I'm right behind you, it actually introduces this additional energy exertion- Uh-huh

[00:37:13] in your body." And eventually, like, the guy collapsed and, and he won. Right, because

[00:37:17] Andrew: so you're saying he, y- y-

[00:37:19] Taylor: our guy- He psy- he introduced psychological warfare on him ... I keep forgetting his name. Mark Dowdle. Yeah,

[00:37:23] Andrew: Dowdle. So Dowdle forced the guy's psycho-

[00:37:26] Taylor: Yes ... or, you know, bio-physiology And there was, this became, like, a big, like-

[00:37:29] or whatever, right? ... critique. Like, was this fair? Is that reasonable? Yeah, yeah, yeah. Is it-

[00:37:31] Andrew: Yeah, yeah ...

[00:37:31] Taylor: whatever. But, uh, but you watch this thing, it's just, it's so incredible. So anyways-

[00:37:35] Andrew: That's crazy ...

[00:37:36] Taylor: this hat that he's wearing is this brand called Rapid.

[00:37:38] Andrew: Uh-huh.

[00:37:39] Taylor: And I was like, "Oh, that's cool."

[00:37:41] Andrew: Yeah.

[00:37:41] Taylor: I, I went to- Yeah

[00:37:43] try and buy a Rapid hat. They're all sold out.

[00:37:44] Andrew: Of course, yeah.

[00:37:46] Taylor: And so to me- That's what influencer marketing is Yes,

[00:37:50] Andrew: yes ...

[00:37:51] Taylor: is that his identity made me want the brand. You wanna be a part of it.

[00:37:55] Andrew: You wanna be a part of it.

[00:37:55] Taylor: I wanna be a part of it. Yeah. And I went, and obviously a lot of other people did, too.

[00:37:58] Uh-huh. And so I think those examples are what brands, they want to trade and align their identity with the identity of the person.

[00:38:07] Andrew: Yeah.

[00:38:07] Taylor: That's different than I need a creator to make me an ad talking about nonsense. Right. And I think in some ways that's really- That's

[00:38:13] Andrew: direct response advertising ...

[00:38:13] Taylor: yeah, exactly.

[00:38:14] That is just, it's just creative. It's not- Yeah ... it has nothing to do with influence actually at all I don't think. Um-

[00:38:20] Andrew: That's right. No, that's the point. The point... What I would say about creators, they distinguish themselves on their ability to make engaging content. Yeah. It's not influence. It, it is about, is about s- as like they're, they're algo wizards.

[00:38:30] Taylor: Yes.

[00:38:30] Andrew: You know what I mean?

[00:38:31] Taylor: Exactly.

[00:38:31] Andrew: Like, that's, that's their core skill.

[00:38:33] Taylor: And it may or may not be because I-

[00:38:36] Andrew: And I bet this dude, y- uh, this dude, y- your runner guy- Yeah ... he probably has a bunch of followers even though he's probably not an algo wizard.

[00:38:45] Taylor: Yeah.

[00:38:45] Andrew: So the point is, like, people are following him not because he makes good content per se.

[00:38:49] Taylor: Yes.

[00:38:50] Andrew: Right?

[00:38:50] Taylor: No, I think he is evolving that skill- He is ... to your other point- Sure ... which is, like, these things do sort of meet each other. But, but it's, his identity and who he is is really important to the story, whereas for creators- Yeah ... it's like- Yeah ... oh, it may be like, "Oh, that guy's like me," and so there's a connection that has something to do with identity.

[00:39:05] But it's not that I wanna be like them that necessarily that is what is drawing me to it. And so this goes back to... I have a video about this that's like the pyramid strategy where you want both things.

[00:39:13] Andrew: Yes. Yeah, yeah, yeah.

[00:39:15] Taylor: Right? No, yeah, of course. Um, and in some cases those influencers might also be great ad makers.

[00:39:19] Yeah. That, that happens, too, sometimes. Sure. But I go back to, like, when we launched the, you know, the Calo collection, and there was some people we asked to post organically, and there was some people that we bought rights to their ads, and there were some people we did a photo shoot with. Yeah. And there was a tier.

[00:39:31] Like, they're not all-

[00:39:32] Andrew: You use them for different things.

[00:39:32] Taylor: That's right.

[00:39:33] Andrew: Yeah.

[00:39:33] Taylor: Uh, and so I think that is a piece where people are, have just- become obsessed with the, like, the just, the, like, I want to- Tribe

[00:39:42] Andrew: affiliate. Like, right ... a-

[00:39:44] Taylor: and it's like this, it's a very exploitive version in both directions. Yes. Which is all the creator wants is your money.

[00:39:49] Andrew: Yes.

[00:39:50] Taylor: All you want from them is the asset to make money. Is the

[00:39:52] Andrew: customer's money, yeah.

[00:39:53] Taylor: And none of you actually give a shit about each other at all.

[00:39:56] Andrew: Yeah.

[00:39:56] Taylor: Yeah. Um.

[00:39:57] Andrew: Or maybe even the product.

[00:39:58] Taylor: Or the pro- exactly, and it, so it's this giant- Yeah ... sort of extraction mechanism.

[00:40:02] Andrew: Yeah.

[00:40:02] Taylor: And anytime you find yourself there, you can just be sure that there's gonna be some short duration of that.

[00:40:09] Um. Yeah. Exploitation is not a system that generally produces long-standing health. No. Um, and so anytime you're operating in that kind of relationship with somebody- Yeah ... it's just likely that one of you is gonna get tired- This is- ... of being exploited ...

[00:40:21] Andrew: this is the, the Mark Baum speech in The Big Short at the end- Yeah

[00:40:24] when he says, "The problem with fraud is that in the history of the world it's never worked," basically. Right. And what he mean, you know, what he means is, like, eventually it gets found out. Yeah, exactly. That's right. Um.

[00:40:32] Taylor: And creators just move on to who will pay them more money. That's the other problem is, like, I'm here for your brand until somebody else pays me more money.

[00:40:38] Yeah. And then I'll just go sell the next widget. Um.

[00:40:41] Andrew: Yeah. That's right. Yeah. Uh, so okay, let, let's play a quick game, okay? Knowing... D- d- don't nuance this, okay? So just give me your wide sweeping things here, and everybody's just gonna recognize Taylor's not giving advice to your specific brand, your specific situation.

[00:40:53] Yep. Just, just, just I want your bas- basic thinking, okay? Your brand is at zero dollars. Yep. You started a new brand. Yep. What's your approach to influencer?

[00:41:00] Taylor: I think it's to find the community that I can become a part of.

[00:41:04] Andrew: Okay, so

[00:41:04] Taylor: are you- An existing community. Here's another thing. A lot of brands think about building a community.

[00:41:08] Don't build a community. Terrible idea. Yeah.

[00:41:09] Andrew: Yeah.

[00:41:09] Taylor: Go find a place- Yeah ... where you can trade, and ideally it's one that's, like, very interconnected- Yeah ... such that you'll gain word of mouth and- Yeah ... some virality within it. Yeah. But I would go to the events. I would go to the blogs. Yeah. I would go to the groups.

[00:41:20] I would go to the places, the creators, the podcasts, and I would try to become endemic to that community. Yeah. And hopefully my product has a benefit to that community in some way. Yeah,

[00:41:29] Andrew: yeah.

[00:41:29] Taylor: But the charities, like, all the things- Yeah. That's a day one story ... like, how do I... Yeah, how do I go become a part of that?

[00:41:33] Okay,

[00:41:33] Andrew: so in that, in that world, d- do you think generally speaking good idea, bad idea, bring an influencer on board from day one, give them an equity stake in the brand?

[00:41:44] Taylor: I think that equity is a life force that points into your business. Yes. You've heard me say this. Yeah. So the question will- Very helpful, very

[00:41:48] the question will just be how-

[00:41:49] Andrew: Do they actually provide commensurate life force- Yes ... to the business?

[00:41:52] Taylor: On an ongoing

[00:41:52] Andrew: basis- So that means you need a contract- ... for the duration ... that does this. And a lot of times, like especially if your business- Yes ... doesn't grow as fast as you want, it becomes uninteresting to the influencer over time.

[00:41:59] That's right. Exactly. So it sounds really great in y- year one, but then over time. Now, if your brand starts doing well, then they'll, then you have Gordon Ramsay. That's right. Then you have Gordon Ramsay. Well, like I look at the

[00:42:07] Taylor: Wild on Earth guys. Do you know that brand?

[00:42:08] Andrew: No, but I- They're very noble ... Gordon Ramsay everybody knows, but the, the, the reason I think is, is an interesting example is because like he clearly has stayed very involved with X Cloud for a very long time.

[00:42:15] Right. And I don't know what their equity deal was when. I don't know how much they still pay him. Yep. But it seems to me that if he owns part of that business, it's really valuable to him to stay

[00:42:22] Taylor: involved. It, it may be the most valuable thing in his life. I don't know. Exactly. Yeah, yeah. And, and that's really the key.

[00:42:25] And, and people are rationally self-interested, and so they'll, they'll, they will work with you in so much that they see a reason- Yeah ... to continue to do so 'cause it's valuable to them.

[00:42:33] Andrew: Okay, your business is at 10 million in revenue.

[00:42:35] Taylor: Yep.

[00:42:36] Andrew: Uh, and has a reasonable amount of profit.

[00:42:40] Taylor: Yep.

[00:42:40] Andrew: 10 to 20%.

[00:42:41] Taylor: Yep.

[00:42:42] Andrew: Depending on how fast you're growing and all those kind of things- Yep

[00:42:44] in the category, blah, blah, blah. Um, now tell me how you think about influencer in that business. Yeah, I would give

[00:42:48] Taylor: nobody equity in that business.

[00:42:49] Andrew: Okay. No equity?

[00:42:50] Taylor: I would pay people. Yeah. Um, uh, unless again, the caveat being-

[00:42:55] Andrew: What if you want a superstar influencer who's gonna be, who's gonna be-

[00:42:58] Taylor: I don't think I need-

[00:42:58] Andrew: $100,000.

[00:43:00] Taylor: I do- I... Well, that's not a superstar, but that's like- Sorry ... uh, that's like-

[00:43:03] Andrew: But that is a bit, uh, relative to

[00:43:05] Taylor: s- That's like what you charge Omnisend to work with you, you know? That's like, that's not, that's hardly superstar status, you know? But-

[00:43:10] Andrew: Not a sponsor of mine, first of all. Secondly-

[00:43:12] Taylor: Love Readys, love Omnisend.

[00:43:14] Um-

[00:43:14] Andrew: Secondly, uh- Yeah ... yeah. Okay, but, uh, well, I am a superstar so- That's

[00:43:18] Taylor: like what it costs you. Yeah, that's like

[00:43:19] Andrew: what it costs to work with you. But do you know what's actually funny about this example? Yeah, what? Relative to the reach of my podcast, the amount of money I charge is kinda crazy, and it actually- Your

[00:43:26] Taylor: CPM is really high?

[00:43:26] Andrew: Yes. Yeah. It's extremely, it's insanely high.

[00:43:29] Taylor: Yeah.

[00:43:29] Andrew: Like, there's a reason I don't have any consumer goods sponsors on my podcast. Yeah. You know? It's because there's no way they could afford it relative to the reach. Yeah. And the reason why is that whatever influence I have-

[00:43:39] Taylor: Mm-hmm ...

[00:43:39] Andrew: okay, which is some-

[00:43:40] Taylor: Yep ...

[00:43:41] Andrew: uh, I'm not trying to toot my own horn here, but just that there just is some.

[00:43:44] Taylor: Yep.

[00:43:45] Andrew: It's in a really narrow community, but it matters. But the thing that I have influence in matters so much to those people. It's actually a nice illustration- Well, and the

[00:43:50] Taylor: value that they c- they can capture off of a possible investment

[00:43:52] Andrew: there, yeah. For sure. But it's a nice illustration of the point here, which is like, which is what you're saying, which is like with some kind of community, if you find the people who, who actually influence that community- Yeah

[00:44:01] they're really valuable to you. This

[00:44:02] Taylor: is why, like, podcast advertising generally, I think can be... It, we're, we're- Yeah ... working on this thing actually with a bunch of conservative radio SiriusXM hosts. Interesting. And it's like one of the things that's interesting is like they, when they do the reads, that's like a- The sponsor read

[00:44:15] subset of influencer marketing that's like combination influencer creator, where it's like they don't really necessarily- Yeah ... care about it, but for the sake of their audience, they're assuming- Yeah ... some filter that says like, um, "I've qualified this. I'm willing to say it with whatever brand equity I'm willing to put at risk over this brand," so there's some trust there.

[00:44:35] I think about this, um, uh, this is a good sort of parlay here. Uh, Lex Fridman, um, you, you ever listen to his podcast?

[00:44:42] Andrew: I don't. Uh, I find him, his demeanor weird.

[00:44:46] Taylor: Yeah. But, um- It's very long. You have to have a lot of time. And I, uh- They're like four and a half hour podcasts. Uh-huh. But, um- Okay ... his reads in the beginning are like he does two podcasts, uh, two ad reads, and they're like five minutes each.

[00:44:55] Uh. They're very long, but he does them all, and he tells stories. Like, he's very intimately engaged in it. Um- And so it's like while I fast-forward through all of them- Mm-hmm ... they are- it's obviously, uh, they're trading on his identity- Yeah ... in that case as being important to the story. I'm, we're, we're,

[00:45:08] Andrew: we're dabbling in the podcast ad space a little bit too over at AJF Growth.

[00:45:11] Yeah, yeah. And, and, uh, with some interesting things that we'll talk about some more someday. But, um, but yes, you can pay a premium with the, w- in the way that we're doing it for the, uh, for the host to read it, and my contacts, the people who we're doing this with, say it's generally worth it.

[00:45:26] Taylor: Yep.

[00:45:26] Andrew: Even though you pay a lot more.

[00:45:27] Yeah. And it's because of exactly the thing you said, which is influence. Okay, go back to my 10 million thing. Like, I, forget how big the influence is. What do I, what would I do? So I'm just saying at that stage of business, is it, do you think it's worth shelling out... 'Cause I, the way I think about this thing is like personally I think like you have to get out of the direct response budget kind of thinking and get into like a brand marketing budget where you sort of allocate some amount of P&L and decide like we're gonna take these bets if you're gonna do an influencer deal like this, 'cause it d- typically doesn't have the same direct response kind of payoff i, in, in the way that it works.

[00:45:55] Now, that's not always true, but sometimes. So how do you think about budget allocation towards influencer in a business like that, you know? A- again, this isn't, assuming- I, yeah ... this business is not on the edge of profitability. This business is growing. It's profitable. It can see the path to 20 million to 30 million, whatever

[00:46:10] Taylor: in the near future.

[00:46:10] Yeah. I would reject the first premise about I would do everything I could to design the deal structure to offset the cost via direct response. Okay.

[00:46:16] Andrew: Okay. Great.

[00:46:17] Taylor: Um, and that could be through... A common one is like using that person as a mechanism to sell into retail. Um-

[00:46:23] Andrew: Yeah,

[00:46:24] Taylor: that's good ... using, so... But otherwise, I would make part of the photo shoot or video shoot what I- Ads

[00:46:29] do directly related to ads. Yeah. A- and, and even emails and things that- Yeah ... where I am going, "Okay, I'm gonna... I need this person to get me- Yeah ... recoup back some of the investment," and then the Halo brand effect of them being part of what I'm going to do-

[00:46:42] Andrew: Yeah ...

[00:46:42] Taylor: um, beneficial long-term. Like we used to... And I, and then I would try and embed them in as many places as possible.

[00:46:46] Like, we used to talk about, like, at Calo there was a while where like Jason Khalipa was the customer service message. Yeah. And like- Yeah ... like how many places can you-

[00:46:53] Andrew: That, that's such a good example ...

[00:46:54] Taylor: make little serendipitous ways to

[00:46:57] Andrew: elevate- If anybody had phone calls- Yeah ... for customer service anymore, then that would be great

[00:46:59] Taylor: I, I, I love the ideas- Yeah ... of influencers as your product photography models. Yeah. Like things like that where like how can you make it so that their presence is persistent? Yeah. Um, and so that- Yeah ... that like diminishes the need for like ads to like solve the problem right away, uh, 'cause maybe they won't- Yeah

[00:47:14] 'cause even, even famous people make bad ads sometimes or- Yeah,

[00:47:17] Andrew: yeah, yeah ...

[00:47:17] Taylor: they don't necessarily convert. But I would definitely

[00:47:19] Andrew: try to build- Jason Khalipa's a great example. I don't think we were ever running a lot of ads with him that worked well. Right. But like I still think it was important that he was part of the brand.

[00:47:24] Totally. People associated him with Calo in some ways, you know? Like, and that's, yeah, it's like, yeah. It's just this is re- I think there's this... I remember I asked Gary Vee a long time ago when he came to CTC for something. Yep. I said like, "You have the choice between..." I forgot how I said it, but like- getting, uh, like a small group of people to watch a lot of video or a lot of people to watch a small amount of video.

[00:47:46] Yeah. So you can ex- extend your reach or your depth, but... And it costs the same amount either way. Yeah. And I forget what the numbers I gave were, but something like that. And he's like, "Oh." He's like, "I would take the small amount of people watching a lot of video." Yeah. His basic point was, like, finding ways to go deeper with fewer doesn't look great always.

[00:48:02] Yeah. Like, it's not very top-of-funnel, quote-unquote, but actually it's, like, the most important thing you can do if you actually wanna resonate with people-

[00:48:07] Taylor: Well, and I think

[00:48:08] Andrew: this, yeah ... is, is get their attention. And this is where I think influencer can play a s- unique role.

[00:48:11] Taylor: I, I think that there, one of the strategies, again, that we used to deploy that I, I miss doing is that I think that for your existing customers in particular- Um, and the, the reason you do organic social and you want followers is 'cause it forces continued engagement, and they see you all the time.

[00:48:28] Yes. Right? Right. Like, you're owner... And I think in the same way-

[00:48:30] Andrew: But the numbers always look so low.

[00:48:31] Taylor: Right.

[00:48:31] Andrew: That's the reason people don't do it.

[00:48:32] Taylor: Right. Keep

[00:48:33] Andrew: going.

[00:48:33] Taylor: But that you should be running on a small percentage of budget, because video views are very cheap, to your existing customer base, cool brand things all the time.

[00:48:41] Yes.

[00:48:41] Andrew: Yeah.

[00:48:42] Taylor: So, like, that would be, like, the story of Jason Khalipa. What we'd do that video is not try and turn his long form story about his life into an ad, but to take it and go, "Okay, Kalo lovers, here's a cool thing."

[00:48:52] Andrew: Yeah.

[00:48:53] Taylor: And, uh, it's a, it's a small- So you

[00:48:53] Andrew: were native to this community ...

[00:48:54] Taylor: Yeah, for $1,000 a month- You should feel great

[00:48:56] you could probably get all, everybody to see it.

[00:48:58] Andrew: You should feel really great about wearing this ring.

[00:49:00] Taylor: That you're a part of this. Yes. And it gives you something to say about the thing.

[00:49:03] Andrew: Or to frame it the way you said, we're part of your thing.

[00:49:05] Taylor: That's right. Right. Exactly. And so I think that kind of stuff as a perpetual rhythm that exists for a business is really important to always want your thing to be cool.

[00:49:14] Like, you have to make it so that people feel proud of it. Like, they like it. They want to... That wearing it makes them cool to the people around them. Like, there's just this work to be done about that constantly- Yeah ... that's different than the work of getting them to buy it once.

[00:49:26] Andrew: Yeah.

[00:49:27] Taylor: Like, those are different problems.

[00:49:28] The

[00:49:28] Andrew: thing I'll say about this is I do think it's, it is somewhat category dependent in terms of- Yeah ... how much this matters. Right. Like, the more you're in, like, apparel, the more you're in- Yeah ... accessories, the more you're in, um, some other durable goods, but especially those one... Like, like, those are, those are probably where it matters a lot.

[00:49:44] It's interesting to think about

[00:49:45] Taylor: other places. If

[00:49:46] Andrew: you're selling keyboards, probably not that important. Doesn't matter at all. Um, doesn't matter at all. Yeah. Um, unless you're trying to sell it on premium, then you gotta go get the audio influencers. Yeah, that's right. You know?

[00:49:53] Taylor: That's fair.

[00:49:53] Andrew: The people who are, like, known as the people who have the coolest, uh, home audio setups or engineers or whatever.

[00:49:58] I don't know. That's right. There's probably a subset of people who care about that a lot. Um, you know, uh, there's, um, there's, uh... So yeah. Anyway, I think, I think there's a category dependence here to some degree. Particularly, though, with things like apparel and accessories, it really, really matters a lot because that's where, like, the, the, the thing you're wearing is essentially a commodity.

[00:50:17] Taylor: Mm-hmm.

[00:50:18] Andrew: Um, and it's, the brand is the whole value. Yeah. So you have to do that. That's right. Your Rapid example is actually good earlier, too, because you said you wanted to go buy a Rapid hat, but it was sold out. It's funny, you didn't wanna be part of the Rapid community.

[00:50:29] Taylor: I wanted Mark Dowdell.

[00:50:30] Andrew: You wanted to be, you wanted to be part of the runner community.

[00:50:32] Yeah, that's right. The, the inner, the inner ring of runner community. That's right. You know? Like, uh, you know, one of the cool runners or whatever it is. Yeah, exactly. Who knows the cool ones. Yeah. Yeah. And that's, that community exists, and brands play in it. Right. And influencers are, are, lead it probably.

[00:50:44] Yep. But, uh, but yeah. Um, okay. Um, I won't go into any higher on revenue. We can go move on to the next topic. The only thing I'll say is that I think brands think of this- um, as something you do when you get to 50 million plus, and, you know, because then that's when you get- Yeah, I would say that's not true

[00:50:58] big influencers or whatever. I, I, I agree it's not tr- I think a lot of brands think about it that way- Yeah, I mean- ... because they think they can- They shouldn't. Yeah, no ... they can't allocate the budget until they get there.

[00:51:05] Taylor: Yeah.

[00:51:06] Andrew: Um, but I think they should think about ways... I like your ideas of finding creative ways to integrate more deeply earlier and to get, get money back from it so it's not just like a $100,000 loss or whatever, you know- Yeah

[00:51:15] and that somebody calls brand. Like, that's obviously bad, too, you know? Um, but, but I think that's, uh, that's good. The, the other little thing I'll just note about this is I'm just watching some brands I work with right now have a whole bunch of success by, um, by just really caring so much about their customer and about their product and about how they show up in their community.

[00:51:38] And it matters. Like, it just matters a lot. You... It is v- it is really valuable to business. Customers can feel it. We can feel it as a team. Their internal team can feel it.

[00:51:47] Taylor: Right.

[00:51:47] Andrew: Um, you know, they're willing to work hard for it because they feel like they're part of something. Um, you know, if the, if, if the relationship with the customer and the brand just feels like a transaction, um, yeah, it just doesn't, it just actually doesn't work v- very well- Right

[00:52:00] even though you're trying to get a transaction. And so this is part of that, I think, is brands should think about, like, how much can I really care about my customer and my product and my community, the, um, you know, the community that you're part of, not the community you're building-

[00:52:11] Taylor: Yep ...

[00:52:11] Andrew: et cetera, uh, and this is just part of it, so.

[00:52:13] Okay, you, you got something, or do you want me to- Yeah, um- ... pepper you with my question about your kids'- So- ... Little League? ...

[00:52:18] Taylor: I don't know where you're at on... Like, I know you guys are deep on the AI thing. I don't know where your sort of, uh, experience of the product is right now and the influence on humanity.

[00:52:27] But, so David Henson-Hallamire, who was- DHH ... DHH, um- Mm-hmm ... Basecamp- Yep ... 37 Signals.

[00:52:34] Andrew: Yep.

[00:52:34] Taylor: Um, he was on the Lex Fridman podcast. Mm-hmm. And, um, if you are an AI, um, like, if you experience AI negatively, um, or have had bad experiences or, or not optimistic about the future, some of the doomsday scenarios are, uh, terrifying, I would listen to this podcast.

[00:52:53] It was one of the most optimistic, uh- Yeah. Interesting ... descriptions of experience with AI that I've ever heard. Um-

[00:52:57] Andrew: All

[00:52:57] Taylor: right. I'll download it right now. Really positive. Another

[00:52:58] Andrew: half hour of Lex Fridman.

[00:52:59] Taylor: So yeah, yeah. Which I,

[00:53:00] Andrew: which I find weird.

[00:53:01] Taylor: And I don't... I've never listened to a ton of DHH. I- it's funny, the story I had in my head about him versus listening to him was very different.

[00:53:07] Um- Huh ... but one of the things he said that I thought is a, is a worthwhile discussion point because-

[00:53:13] Andrew: Five hours and 22 minutes ...

[00:53:14] Taylor: I know. I know. Yeah. Sweet Jesus. Play it on, play it on 2X. Uh, you got a long drive home. You're fine. Um-

[00:53:19] Andrew: It's not five hours.

[00:53:20] Taylor: So they're talking about- It's a drive to San Francisco

[00:53:24] what role, um, AI plays in his coding now, and is it this thing where Like, is creativity or ideation still a human thing? And so Lex asking this question, he says, "Do you think the good ideas, ultimately the kernel of the good ideas, are originated in the human mind?" So individual contributors, like it can be done by agents, um, or is...

[00:53:44] But the, the pull request, they're talking about building open source, ultimately requires a human idea. Like, how to improve it. Are those incoming or can it all just be a pool of agents? Um, and his answer, I think, was, like, very definitive in a way that I'm curious because I think this is, sort of sits in a similar thing that I hear people talk about all the time, which is, like, that AI can't do creative strategy- Yeah

[00:54:03] and, like, this root origination idea. Yeah. But he says, he's like, "That was the mode and the way I was thinking about agents in the first agentic age. From November 24th to February 28th," and he has these, like, specific bounds in his mind, "I thought all the ideas would originate with humans. They would tell their agents what to build, and off they went.

[00:54:18] I don't think that's true anymore at all. I have seen things you people wouldn't believe. Ideas coming out of models so great that it makes me humble as a person who would otherwise prides himself on having good ideas. The agents are incredibly capable of creative thought, and folks who are still stuck in the analysis that agents are parrots just regurgitating the ideas that are already there are delusional about the progress that has been made in the last six to nine months."

[00:54:43] Andrew: Interesting.

[00:54:44] Taylor: Um, and so the... And, and it's funny because Lex is sort of reflecting back-

[00:54:49] Andrew: But he, he's saying that, uh, very positively it sounds like.

[00:54:50] Taylor: Yes. And, well, he goes on to talk about how much fun he's having and how the experience that he's had as a programmer with that reality has been so positive and, and that's, that's wh- And, and it's funny because Lex is sort of responding to him of like, "Wait a second, you're like..."

[00:55:02] The metaphor he keeps using is, like, "You're a master painter who is, like, now saying, 'I'm using Photoshop.'" Like- Yeah ... like- Yeah ... and he goes, "Yeah, but I don't feel any of that loss." Yeah. Like, I f- Right ... and, and so it was, uh, really interesting 'cause I find that creatives in particular-

[00:55:16] Andrew: Really struggle ...

[00:55:17] Taylor: yeah, they feel very threatened by this idea, and I understand that.

[00:55:20] Like, I, I think about that as a w- whatever discipline I'm good at, forecast, whatever it might be. Like, but I, I feel very clear that it's not that I'm gonna be y- that this thing's gonna be way better than that. Yeah. But, um, but I thought that his interaction with it, both his confidence that the creative thought was definitively a part of what these models are going to do, and his positive interaction with it were really interesting.

[00:55:44] Yeah. But you, I think, self-identify more as a creative than I do. Mm-hmm. Kind of. And you guys are in the process of building a creative thing. Yeah. Um, I'm curious where you're at on the idea of original ideation- Mm-hmm ... from models and its potential for that.

[00:55:58] Andrew: Well, um, it's a good question. I think, I think it's, it's nice to do these conversations every once in a while 'cause they're all conversations about what I feel today.

[00:56:05] Yeah. And it's definitely different than what I felt a year ago and two years ago, or whatever the timeline was of all this stuff. I can't really keep it straight. Um, I'll say a couple things. The first is that- Somebody pointed out to me with AI at some point, um, that one of the things it's ama- it's amazing at, this is only semi-related to what you're saying, but, uh, I'll just ex- express my experience here, is that, um, one of the things AI reveals to you, but is, is basically like how much moving of numbers from column A to column B you were actually doing.

[00:56:38] Mm-hmm. Um, even if you were automating stuff.

[00:56:40] Taylor: Yeah, right,

[00:56:40] Andrew: right. Essentially, like the moment you can have AI do more of these things for you, it s- it starts to spotlight, wait a minute, that would've taken me 20 minutes before, and I would've thought of it as human work, but it actually wasn't. Mm-hmm. It was actually a limitation of the software is what it was.

[00:56:54] And w- and for me, I've had this experience fairly viscerally recently where like we're updating an ad format template that we use in our creative, and we use a lot of ad format templates to try to do that as, as mechanisms for good ideas. Your microphone's covering your face. Yeah, it's good. Let me move it back like that.

[00:57:11] Um, so, uh, then I realized, wait, I don't have to copy and paste these things, you know? Wait a minute, I actually... Not only that, I don't have to do the work Once I've identified the ad format and I wanna use it as an inspiration for a format template, I don't even have to describe what I'm seeing. I can just tell the agent, "Hey, I like this ad.

[00:57:33] Here's three things I like about it. Turn that into a format template." And it actually writes up all of it and then puts it into our software for us, Olympus, we call it, like, uh, no longer called AJF OS, which is good. Hmm. Nice. Um, Olympus, uh, it puts it into Olympus, and it does a lot for me. And it, it-- What it has made me realize, like, "Oh, I was doing a bunch of stuff that was actually, like, total, like, assistant-level grunt work, and I did not realize it," you know?

[00:57:56] So I'll say that. That's not exactly creative capacity, but I'll say that. Um, that has been awesome. Uh, I think you expressed this with Adrian a while back on Twitter or something like that, talking about, like, the way you felt free, um, by using AI to do a lot of work really fast, um, and how good that felt.

[00:58:13] So there's that. Um, s-secondly, what I will say is that in the actual creative work itself, I think it's getting better all the time, first of all. Um, and s- and secondly, I'm, I'm-- what I'm not sure of is, like we haven't seen a lot of, like, amazing idea and message generation work from a- from our AI tools, but the, the thing I wanna caveat that with is that, um, that doesn't, that doesn't mean they can't do it.

[00:58:40] It me- it might mean we're doing it wrong, you know? Um, so it might be a user error, basically, as opposed to something else. And, um, and so yeah. So I think I'm in a couple places with it. I do feel much less anxiety about the whole thing than I used to, generally speaking. I now feel like it's just more a part of the work world that I'm in.

[00:58:55] Taylor: Yeah. Yeah. One of the things I think about how we inter- interact with it is based on the underlying assumption about what it's good at or bad at. Um, and so one of the things about ideation, so I even... I was listening to the operators talk about their uses of AI. Mm-hmm. And at the bottom of the list was product design.

[00:59:12] And I thought to myself, "Oh, that like..." S- at, at the top of the list was like, uh, you know, all the rote things you'd imagine- Yeah, right ... like customer service- Right, right, right ... and reporting or whatever. And I just go, "Oh, that's, it-"

[00:59:24] Andrew: That's a mistake.

[00:59:25] Taylor: It's a total mistake.

[00:59:26] Andrew: Yeah.

[00:59:26] Taylor: It's the actual inverse that all the value thing you think- It- Or the original ideation

[00:59:31] that's what

[00:59:31] Andrew: I was saying. It's actually both. Yeah,

[00:59:32] Taylor: yeah.

[00:59:32] Andrew: It is really helpful to have it do a bunch of grunt work for you.

[00:59:34] Taylor: Yeah, exactly. But, but that, but that the highest leverage action-

[00:59:38] Andrew: Yes ...

[00:59:38] Taylor: like, like if you thought about- Oh,

[00:59:40] Andrew: yeah, yeah, yeah. Right. Apply the best tool to the highest leverage. That's right.

[00:59:41] Yes.

[00:59:41] Taylor: If, if you actually- Yeah, that's right ... thought this was the smartest person in your company- It's like it's opportunity

[00:59:44] Andrew: selection. That's right.

[00:59:45] Taylor: Yeah. If you actually thought this was the smartest person in your company-

[00:59:48] Andrew: You'd put them on the hardest problem.

[00:59:49] Taylor: That's right.

[00:59:49] Andrew: That's right.

[00:59:49] Taylor: And so I, I think about that.

[00:59:51] Andrew: That's a, that's a really good framing, I think.

[00:59:52] Taylor: Yeah. A- and so it was like, oh, you, you actually don't... What you think it is is like o- You

[00:59:57] Andrew: think it's a coordinator-level position. That's right. You think it's an assistant, a, it's a, just out of college person. Right.

[01:00:01] Taylor: Right. And so, so... And/or that there are these, like, elements of it that are, that are challenging.

[01:00:05] Um, and some of it is just, like, even the most recent model Astra and its capacity to do things like 3D modeling and rendering is advancing so much already. Um, but so, so there was like a limitation in like CAD files and things like that that are, are very real. But, but that's not like about whether or not it can, uh, come up with an idea for a wallet design or something.

[01:00:27] It, it... So I think there's this sense by which when I hear someone with that intellectual cur- capability- Yeah ... that is so deeply ingrained in it, it does make me want to kind of go back and challenge my own interaction to say like- Yeah, yeah ... okay. Yeah. 'Cause I, I turn it into a secretary all the time. I'm like- Yeah

[01:00:43] "Read my emails and book calendar things for me," you know? Yeah. All the time. And I wonder, like, what are the bigger questions of my life that I could actually maybe instead of trying to get it to, like- Mm ... book the vendors for my wife's party, which i- like, it's not to say that that isn't useful.

[01:00:57] Andrew: Yeah.

[01:00:57] Taylor: But that, that maybe there's a better opportunity-

[01:01:00] Andrew: Yeah

[01:01:01] Taylor: on the original ideation side.

[01:01:02] Andrew: Yeah.

[01:01:03] Taylor: Um, I've also found, though, that, like, what I, what I experience is a little bit of, like, it's scary how much, to your point earlier, how much of my time actually isn't there myself. Mm. And so then my own skill isn't very trained at going there. Um-

[01:01:15] Andrew: Huh.

[01:01:16] Taylor: So it's like-

[01:01:16] Andrew: Oh, interesting.

[01:01:17] You're saying, you're saying there's these high, high capacity, hard to do things that you haven't been training enough to do because you've been stuck doing low capacity things.

[01:01:24] Taylor: Well, I, or I'm choosing to 'cause I- Yeah,

[01:01:26] Andrew: yeah ...

[01:01:26] Taylor: feel they're easier. Yeah. Whatever. So actually I'm- Yeah,

[01:01:28] Andrew: yeah.

[01:01:28] Taylor: It's more like me- Yeah, yeah

[01:01:30] which is doing rote tasks

[01:01:31] Andrew: that are easy and- Yeah, it's like you're, it's like, it's like you've been doing easy workouts 'cause you can get a good score on them- Yeah,

[01:01:34] Taylor: you're- ... for

[01:01:35] Andrew: a long time- I'm,

[01:01:37] Taylor: I'm, I like checklists- ... instead of pushing your capacity ... and completing- Yeah, right ... a checklist is good. Right.

[01:01:39] Andrew: And

[01:01:39] Taylor: so- Yeah

[01:01:39] I do that kind of work more often.

[01:01:40] Andrew: Yeah. Um- Um, okay, we have, like, five minutes left before we probably need to be done. So, um, I could ... see a couple things here. One of them is you have a cool announcement. Uh, or you can yell at me for being bad at business, which we haven't done for a little while. Um, and sometimes it's fun for you to do that, so.

[01:01:54] No, I need-

[01:01:54] Taylor: Or both. I, I need you and Patrick to, to trigger me again with some, some episode that I can listen to. All right. Well- When's the next one? Do you have one coming up soon? We're gonna

[01:02:01] Andrew: record next week.

[01:02:02] Taylor: Okay.

[01:02:02] Andrew: So,

[01:02:03] Taylor: um- Um, yeah.

[01:02:04] Andrew: So we'll have to put another random show on the books.

[01:02:06] Taylor: Well, yeah. Uh, so my announcement, we just- Oh,

[01:02:09] Andrew: I have a question for you too.

[01:02:10] Okay. I wanna make sure we get to it. Go ahead. You go. Yeah,

[01:02:11] Taylor: we- Do your an- Well, we can do-

[01:02:12] Andrew: Let's do rapid fire. No, no. Okay. Do your announcement. Yeah. And then I have a rapid fire really quick agency service business question for you. Okay. Go ahead.

[01:02:18] Taylor: Um, so we completed our first acquisition yesterday, closed.

[01:02:20] Um- Let's

[01:02:21] Andrew: go.

[01:02:21] Taylor: Yep. So we'll get to announce that-

[01:02:22] Andrew: Congratulations ... pretty soon. That's really awesome. You've been working hard on that. Good job.

[01:02:25] Taylor: Yeah. It, well, we finished second in, like, three or four processes. And, um- Yeah.

[01:02:29] Andrew: That's gotta feel good.

[01:02:29] Taylor: So it's been a, yeah, it's been a lot of work. Uh, it's a fascinating thing.

[01:02:33] I think at some point we'll get to talk a lot more about it and why we ended where we ended and what the, what the opportunity is and what it means and, um, so I think that'll be fun too. Let's put that in the

[01:02:42] Andrew: books for a longer conversation after you can announce it. Yeah. But maybe for now, let's just tell people, "Subscribe to your content."

[01:02:47] Yeah. 'Cause you'll probably announce it soon, right?

[01:02:48] Taylor: Yeah. Come to Commerce Roundtable would be another thing I'd say. We're gonna be, um, on stage there. I'm gonna share some things that if you don't come to that event, it's awesome, down in San Diego.

[01:02:56] Andrew: Can I get a free ticket

[01:02:57] Taylor: to that? Um, yeah, we can work that out.

[01:02:58] We can, we can figure out a way. Okay, great. Um, you are an influencer after all, you know? So,

[01:03:02] Andrew: um- Gotta use that influence.

[01:03:03] Taylor: Exactly. So- You can

[01:03:04] Andrew: tell people I'm coming if that helps.

[01:03:05] Taylor: Yeah. Tell them Andrew will be there. You can meet- I don't know if I'll actually

[01:03:07] Andrew: be there. I might be traveling ...

[01:03:08] Taylor: September 21st. So, um- Yeah

[01:03:10] the announcement will probably follow that, um, to be honest. Okay. So we'll-

[01:03:13] Andrew: So keep an eye on your content, though- Yeah ... 'cause you guys, you guys completed an acquisition. You've been working hard on it, and then let's, let's just put this on the books for a random show for you to just go deep dive, like, what is, what does finishing second four times feel like?

[01:03:24] Taylor: Yeah. Like- What is the- All that stuff ... what does the ag- what does its look like? Is

[01:03:26] Andrew: there a- Is there anybody- ...

[01:03:27] Taylor: space

[01:03:27] Andrew: you- Are you trying to do more acquisitions? Should anybody reach out to you with their businesses that you wanna buy, or do you not want that?

[01:03:32] Taylor: Uh, yeah. I, I think it's always worthwhile. At the very least, I can provide you context of how the space is and what the opportunities are and who to talk to if you're interested in being acquired.

[01:03:41] I have lived in this world now for the last two years really deeply, so if you're an agency owner that wants to talk about it, whether it's us or someone else, I can, I can definitely be helpful, uh, to help you navigate the landscape.

[01:03:51] Andrew: Last question about this. Rapid-fire answer.

[01:03:53] Taylor: Yeah.

[01:03:54] Andrew: Acquiring businesses- Yeah

[01:03:56] as a major part of what your job is, is different than what your old job was at CTC.

[01:04:00] Taylor: Mm-hmm.

[01:04:00] Andrew: Um, okay. Acquiring businesses, uh, fun and interesting work or excruciating work?

[01:04:07] Taylor: I hate it.

[01:04:09] Andrew: Okay, great.

[01:04:09] Taylor: It's just so human.

[01:04:10] Andrew: It's actually- Okay, just, just leave it. Just leave it ... yeah. Future, future answer. The next one.

[01:04:13] Wildly human. Yeah. Let's ... I'm gonna move it up the list right now on our list for our ongoing Google Doc. Okay. Here's my rapid-fire question, 'cause then we gotta be out of time. I think this is a three-minute question. We have about three minutes. Ready? Um, as we grow ... This is just me asking for your ... This is free consulting.

[01:04:25] Sure. As AGF Growth grows as a service business, okay, how much cash should we keep in the bank as a percentage? Mm-hmm. Mm-hmm. Of ... Like, how do I think about that question, and how much should we, should, like, uh, our partners distribute? As we go

[01:04:38] Taylor: Like, is there a third option?

[01:04:41] Andrew: Uh, yeah, I mean we can-

[01:04:42] Taylor: Redeploy into growth?

[01:04:43] Can we do that?

[01:04:44] Andrew: Yeah.

[01:04:44] Taylor: As one of my choices?

[01:04:45] Andrew: Yeah, yeah, yeah. I mean, yeah, I'm asking you to tell me how you think about that question. So first, so first of all, let's do the really specific one. How much cash on hand should we have in an agency business all the time? How should we think about that?

[01:04:53] Taylor: So I could give you a calculation for working capital requirements that, like, is what they would use if they acquired your business to determine how much cash they would leave in the business.

[01:05:00] Okay. That usually has to do with the amount of receivables you have, the total value of your payroll. But what I'll tell you is in most cases, the answer is, like, zero.

[01:05:08] Andrew: Yeah. That's what ... So that's what I, that's what I have thought.

[01:05:11] Taylor: Like- Because, like, likely, your receivables are larger than your payables.

[01:05:16] Andrew: Yes, for

[01:05:17] Taylor: sure. Yeah. And, and so, like, the turn of cash, you are constantly producing net positive cash flow. That's what ...

[01:05:21] Andrew: Yeah, I agree.

[01:05:21] Taylor: There's almost no moment in an agency business where you go cash negative.

[01:05:26] Andrew: Yeah.

[01:05:26] Taylor: Now, with the exception, like, you guys are an LLC or a C corp?

[01:05:30] Andrew: A S corp LLC. Yeah.

[01:05:31] Taylor: Oh, S corp?

[01:05:32] Andrew: Yeah.

[01:05:32] Taylor: Okay. So then you have tax obligation at the corporate level?

[01:05:35] Andrew: Yes.

[01:05:35] Taylor: So you do have to, like, keep enough cash to- Yeah ... pre-pay your tax obligation and

[01:05:39] Andrew: things like that. Yeah. Set aside money for bonuses and stuff.

[01:05:40] Taylor: Yeah. And all of this is just, like, especially because the two of you could always put cash back in- That's right

[01:05:44] if you needed to.

[01:05:45] Andrew: This is one of the things I've thought about, is like should we just be distributing super aggressively? Because if we got in a tight spot, and as long as Patrick and I are managing our finances reasonably, which we are, like, then we could just say, like, "No problem, we'll just put cash back in the business next."

[01:05:55] The other

[01:05:55] Taylor: thing I would do is do you have a credit facility?

[01:05:57] Andrew: Uh, no.

[01:05:58] Taylor: So I would go get a credit line.

[01:06:00] Andrew: Yeah. '

[01:06:00] Taylor: Cause if you-

[01:06:01] Andrew: That's a good idea. That way it's just- That way,

[01:06:02] Taylor: that way, like, if you have a million dollar credit line, let's say, then you don't need to keep cash at all because in the event that there's a moment for whatever reason your invoice is late- You just tap into that and you

[01:06:11] Yeah ... you just use that. Um-

[01:06:13] Andrew: Yeah. So just like a revolver basically. Yeah,

[01:06:15] Taylor: exactly.

[01:06:15] Andrew: Okay. Um, okay. That's ... Thanks, great. Now, other question is, like, um, okay, so let's say I start not keeping much cash in the business. Redeploy it into growth you think is a really good idea?

[01:06:24] Taylor: Well, I ... Yeah, for your business I would

[01:06:25] I, I can't imagine that there's a place for you to put money that's a better return- Yeah ... than the growth rate of your business. Yeah, yeah. Now, the question is can you use that money to replicate that growth rate?

[01:06:34] Andrew: Yeah.

[01:06:35] Taylor: Um, I think that you absolutely could.

[01:06:37] Andrew: Yeah.

[01:06:37] Taylor: Um-

[01:06:37] Andrew: And by the way, you said this on a, on a random show podcast with me a while ago.

[01:06:41] I heard that, and we ... I would say we have managed the business so far ... I would say, like, if we were just trying to maximize the amount of cash that we were taking out of the business, we'd have grown slower this year.

[01:06:50] Taylor: Okay.

[01:06:50] Andrew: And we would have, we would have done some things differently at the level of margin and some of that.

[01:06:54] But what we're trying to do instead is capture the moment, redeploy into growth, redeploy, and worry a little bit less about being, like, extremely margin efficient at this stage of business. Yeah. Um, and instead it's like how do we make our service incredible? How do we ... You know, it's like i- all for the sake of the longer term outcomes that we look at.

[01:07:10] So I think-

[01:07:10] Taylor: You're bu- ... Yeah, like you guys both ... I, I, I'm making an assumption about your lifestyles. You guys all have pretty low cash needs. 100%, yeah. So then, like, take it out and subject it to tax for what reason? Yeah. Like-

[01:07:21] Andrew: Yeah ...

[01:07:21] Taylor: I, I don't- Yeah ... I don't know what the benefit for you is to do that. Yeah.

[01:07:26] Unless there's something that you guys are both after in your personal lives or- Yeah ... that you're gonna go buy a new house or whatever. I don't know. Yeah. But, um, otherwise it's like... Now, I think you should do that with a very clear intention to create liquidity at scale at some point, not to do that

[01:07:39] Andrew: forever.

[01:07:40] 100%. Yeah. 100%, yeah.

[01:07:41] Taylor: So the end game matters and the timeline matters.

[01:07:42] Andrew: Okay. That's it. That's all. That's, that's exactly what I wanted to get your opinion on. We are out of time. We gotta go get super jacked.

[01:07:49] Taylor: Let's

[01:07:49] Andrew: do it. Thank you. Good job. See you everybody. Thanks.

[01:07:54] AOV