How to Think Big with David Friedberg, Founder of Cana

all the work we do at t is oriented around how do we change systems of production on planet earth so that we can make things using less energy less land less natural resources i i'm a big believer that sustainability in the twenty first century does not arise from convincing consumers to consume less i think sustainability arises from building technology based solutions that led consumers consume more and dropping the price and dropping the environmental impact and that's what technology allows us to do so if you go back to the industrial revolutions you know of the nineteenth and twentieth century we built factories right we we put all this technology in a big machine in a big facility and we used it to make stuff over and over again and that dropped the price for consumers because we automated in a big factory turns out that the technology of that factory as all technology does shrinks gets faster gets cheaper gets better let me brag about you for a second because you're not a very you're a very humble guy you're not a very brag worthy guy when i first started hearing you talk which was not on the all in podcast i went on youtube but i heard you give a talk back when you're were doing climate corporation corporation and i remember thinking this guy's pretty smart you're given talk at some school i don't know what it was and i started googling you then and saw wow this guy's actually he did that and then he did some impressive stuff since then so let me just brag on you for a second so you were at google two thousand four two thousand six some some range like that so fairly early at google like i think that's like around the ipo time that's just post ipo is that right i joined probably seven months before the ipo so yeah we were we were working on the ipo just started working on the ipo when i joined and then then you do climate corporation sell that for like a billion dollars to monsanto either you do metro mile which is a pretty cool insurance company that spa and then i think ultimately ended up selling for a little less it's back for to lemonade and then then you have this thing called t so the the production board and in that you're basically what do you call it a studio or what would you call kind of yeah we're we're technically a holding company and our you know and we're a found so we spend time kind of doing r and d and and research and and founding or building businesses so we kinda call in a foundry and i feel like people know you that we we do some investing as well but really our focus is on foundry work i wanna start with this you are known for you know being a sort of a a scientist or a science guy but i looked at your linkedin and your first job was investment banker so where did how did you go from investment banker to as you're called on the all pod assault of science well i went to school at ec berkeley my major was astro physics i spent some time as an intern at the lawrence berkeley national lab which is a department of energy physics lab up the hill from from uc berkeley and i spent you know a lot of time doing mathematical modeling of stuffed in a basement and generally found it to be kinda just pretty discouraging in the sense that like you could spend years working on a project that never sees the light a day at the same time that i was at school the dot com bubble was kind of you know blowing up all around me i mean there was even a kid in my dorm who started a company selling dvds online and sold the business for a million bucks and that was such an amazing thing to happen you know i was mostly making money by playing poker and working you know jobs around school and getting paid for my internship and stuff so you know it it was extraordinary kinda seeing just in the bay area the world changing because of the internet and so i got really kind of inclined an interest in not going to grad school and and really gonna go work in silicon valley so i you know i applied for a bunch of investment banking jobs that was kind of the the hot job to get out of school where i could focus on the tech industry and learn about it and you know i guess i had never taken a finance accounting business class and so i guess my poker experience paid off because that's how i i put that on my resume i a bunch of interviews and look kinda ended up getting a job working in a technology investment bank so focused on the tech industry so i got to work with lots of tech companies for a two year analyst program while i was there and learn about business and finance and so on gotcha so so that that was kind of my first foray you know into the world of business i tried to start a business when i was in college never really talked about this publicly raised some money from some family members some friends of the family but never really did anything with it never got off of the ground it was the idea was to let you buy all of your telecommunication services on a website so you're you know everything from your cell phone build your you know your long distance provider which was kind of important at the time and so on and what so what'd you get wrong with that because that's actually not a bad idea for especially during that time was i don't think it was probably the idea you just did you not know i still have the business plan i keep it in my office i printed it up like from nineteen ninety nine or two thousand as a as a reminder or what yeah as a reminder it was originally called telecom bomb dot com i bought i renamed it phone services and i registered it i set up a wells fargo account there was a whole experience of starting a business and yeah i mean ultimately i kinda got caught up in trying to get a job out of school and and you know transition to to focus on on you know what's next in my life and then you know before i joined google i started another business which was kind of like a research q and a site online called k k a d a n g a at ka dot com so i basically taught myself like ph p and javascript and html and css and i programmed the whole site myself and and my sq and i basically set up my own server and register the domain and set up bank accounts and it actually made money and so you know i advertise on adwords and i got users to come to the website and ask questions and get answers and they pay for the the answers and so that actually helped me ultimately get my job at google because i had all this experience you know i coding on my own to like five in the morning and then go to work at seven am and so like building the service and and building this whole site actually google had a service at the time called like google search or something forgot what it it's called but it was very similar to this and so i got the job at google i think in part because of that experience so when you were doing that you were like okay listen today i think you've built companies i'm just gonna use round numbers you know you can correct me if i'm way off but you've built companies now that i think an aggregate have are worth more than two and a half billion dollars now if if i went and i told you when you were building con or you're you know you're in college and i said you know hey that could that's something that could happen would you have been like was that even an ambition of yours were you even would you have been shocked that that's even possible or were you like oh it all worked my plan could have worked if i told you that that's how it played out no i don't think i would've have thought about it in that framework probably would've have been disappointed if i think about it i i still am generally i mean i feel i guess you know maybe ambition is you know expectations i set for myself probably greater than than than what i've experienced but i would say that you know my intention wasn't part for a second so you you're saying you're a college kid you had expectations of yourself that grand do you remember kind of what you were thinking back then not specifically i mean i just feel like when you're young you have kind of un inbound ambition i mean you don't know the realities of you know when you build stuff and you face challenges you face hiccups and you know everything from team to technology to markets and all the issues that arise as you navigate your way through complexity and uncertainty you're not even the sense that like the whole world can and should be different so we should change the whole world and let's go fix it and make it different and make it better and you know that blind optimism is where a lot of energy comes from that i think drives great entrepreneurial success stories ultimately you know there's friction and rubber hits the road and you know in retrospect i think a lot of what's gone on in my life and my career it's probably understandable in in hindsight but you know blind ambition gives you unlimited a vision and i think you know it's if if you're not if you're not challenged along the way you know that that that can and should persist you know but i i would say that my my orientation was never about starting a bunch of companies or making a bunch of money it was you know much more about kind of impact and and so you know and solving big problems and having great breakthroughs and seeing those breakthroughs really changed the world and that's still i think really core to to my sense of of energy and things that i do and you were at google at a time of google was very and i think i've read or heard basically like larry page is kind of a fan of think he's invested in t and it sounds like you were there in and you were doing corp dev there so so you were doing a kind of different role what was give me a google story what was it like at that time what what was it like around those founders give me a sort of a a a story around ambition or or your time at google well so i joined google there was just under a thousand people i believe and you know we all kinda work pretty close together there was like two buildings or three buildings that that were the main buildings at campus there at sixteen hundred amp and you know so when when i joined there was three of us that started this corporate development group which was really like what's the strategy and things we can acquire and invest in and grow the business and had pretty kind of free reign to to look at things and i really focused on kind of the advertiser or business side of google so i wasn't interested in consumer products i was more interested in like what's our business and so you know in that context i worked on all sorts of ideas of like how do we take what we offer advertisers which at the time was really just adwords and how do we think about other media we can make advertising available to those advertisers so you know can we do print ads can we do radio ads can we do tv ads can our advertisers use adwords as an interface to access media across all these different properties and channels so i did a few acquisitions and found a few companies one was called d mark that we turned into kind of this radio advertising business so you could go to adwords and click on audio ads and create an audio ad and then publish it to actual radio stations then it would play in stream and radio stations and you could see the impressions and all this stuff that's not a thing now right that didn't that didn't end up becoming part of that it stayed for a long time they're ended up being a really nasty lawsuit with the founders and a very difficult set of circumstances that arose after the acquisition i mean i'll tell you this story now given how many years it's been i think that was fifteen sixteen seventeen years ago holy shit seventeen years ago at this point but you know i had real issues with negotiating with the founders and doing the transaction and you know we thought it it was such a great plug and play for google these guys went out and all dj and radio stations buy these servers that they put into the the radio station and they and they put the mp three files of the ads on the servers at midnight every night and then when the dj says okay time for ready for ads they press the play button and starts playing the ads off the server so what these guys did is they bought the company that has all those servers for like four million dollars and they connected it to the internet and they set it up so that advertisers could remotely create dynamic content and fill in the un sold ad spots on that server every night at midnight and said so they were buying what's called remnant inventory yep and making money on it and so it was brilliant but for the four million dollar acquisition and not a lot of technology development thereafter you know they were trying to sell the business to us for a hundred million dollars so they thought it was worth a billion i mean the whole thing was crazy how we negotiated the deal so it ended up being like effectively a fifty million dollar or seventy five seventy two million dollar upfront cash payment a fifty million dollar milestone payment if they had a bunch of technical milestone and then up to one point two billion dollars in earn outs based on the advertising revenue generated from all these stations and so that earn out structure was the only way i could really bridge the gap on the deal i have to go talk to google's board about it we eventually got them sign off on it and the whole thing ended up being like a really ugly negotiation and i didn't wanna do the deal and i told eric schmidt i'm like look i don't think we should do this deal i don't think these guys are gonna work out for us i think it's gonna be ugly and eric said we have to be in radio to sixty billion dollar market pushed the whole thing through despite my push against it we did the deal and sure enough we ended up in this nasty lawsuit that lasted in for years i wasn't around for all that but you know i think eventually it all went away and and audio ads kinda kinda died down so that was the sort of stuff i also worked on google analytics so i pitch larry and sergey early on and the idea of like look our advertisers should be able to have analytics on their web pages to see you know how people are converting and why and why not we didn't have have a conversion tracker at the time or anything so you know what that means i pitch larry and sergey so like you know larry sergey are the founders of google they so i i i i work work with an amazing person named megan smith she's really well known in silicon valley she was obama cto she's she she's an incredible personality and a tour a force and megan was really my mentor at google and kinda showed me how i can just walk into larry at sergey office and walking at eric's she's like go talk to him about this and i be how about it like let's go see what eric thinks and she'd dragged me over to eric's office and he'd be like sitting there on his computer to emails and she'd like barge in and be like david's got this idea let's talk about it and then like sit down and you know like and so she really kinda showed me that we can and should have this kind of dialogue with these execs because our job was to really help push and think about things that we can take google you know what direction we can take google and so you know i really had i think great mentorship there and so i you know was in a meeting with larry and sergey saying like i think we should be in analytics and we should offer advertisers the ability to see stuff and i and i met wesley chan who was a product manager at the time and so wesley and i kind of started working together after that because the first thing larry and sergey sent to me was that's evil third party cookies are evil we don't wanna track users across different web pages and you know because then they'll know that we're tracking that and so it was fairly pressured at the time that larry and sergey saw that this might be kind of an evil or reviewed evenly by kind of consumers down the road and they were absolutely right i mean that's what's going on in the eu and and with apple and facebook and all the the cookie tracking and so on that that's being kind of taken apart right now but we showed them that like look if an advertiser can get analytics they can see an incredible improvement in conversion efficiency which means that the user is having a better experience on the webpage page so rather than the user getting frustrated and leaving the website wasting their time if the user is happy the user will buy more they will convert better and the internet is a better place at one of our guiding principles at adwords was like our advertisements should be so good and the and the advertisers website should be so good that a hundred percent of the time when people are looking at search results they click on the first ad and then a hundred percent of the time they don't come back so the bounce back rate is zero and that shows you that you've shown the perfect ad that's even better than the than organic search results and it's such a good result that the consumer stays there all the way and never comes back and searches again so that's kind of the guiding principle so everything is all about how do you improve the quality of the ads how do you improve the user's experience when they go to the advertiser site and how do you get the advertiser to pay for that value and so analytics ultimately turned into you know we we found a company called urchin i took wesley sc ses search engine strategies we walked around we met a bunch of analytics companies we met had four of them come and talk to us and we picked urchin and convinced them to to join convinced larry and sergey to do the deal within a year i think we had shown through hal var and who was our chief economist we had demonstrated that google analytics increased adwords revenue by half a billion dollars because it if so many advertisers were using it to improve their websites and make the conversions better that they were spending more on adwords and so you could kind of economically show the benefit of analytics and that was like a twenty five million dollar acquisition turned into a great product i mean i know any webpage pages that don't have you know google analytics on them you you're like where's my bonus it was all good the yeah yeah i mean if you can if you can show that alright i'm buying a visitor it takes me it it cost me a dollar to get the click but now that i can improve my funnel so that that customer is worth more to me i can convert more of those customers then i'll spend more right i get that a lot of sense and the customer's happier because people are going to a web that gets them what they want as opposed to going to a web page and getting lost in the content not clicking through by dead in so and my last google question you know when we got acquired i got acquired by twitch which is like a kinda part of amazon and i remember like the first or second meeting where like you know all the kinda execs in a room and as a startup founder i remember always feeling a little bit not like impostor syndrome but sort of always curious like this is how i lead the company i have no idea how anyone else does it right even my founder friends i don't actually get to see them in meetings so i really had no idea what they were doing in my first meeting at twitch i remember looking at emmett who's somebody i respect who was kind of my boss the he he's the original founder and he was sitting there and like there's whatever twenty people in the room and somebody presents like the six page paper and i remember he was like done reading it and like half the time of anybody else and then he had like scribble down some questions on it and then the first question he asked like cut straight to the heart of a thing and i remember just thinking oh this this is what it would be like if my brain was twice the size like oh i could read twice as fast i could get to the heart of the issue you know twice as fast and i was just so impressed by him you know i think that great great leaders in some ways feel almost feel like aliens they sorta of can this have some superpower that that others don't and what was it like with the google founders do you like were they just normal people to you or did you notice any special traits or sort of abilities that impressed you at the time or made an impression on you i mean look you know the culture is set at the top and the team that larry and sergey built around them you know remain some of the most important and impactful people in silicon valley you know susan w cheeky smaller common ga or or is it still sv of engineering there he built all of the data center infrastructure which by the way i don't think a lot of people realize is probably the core advantage of google or was originally like to tell about this my my c founder who's super technical of my pas but he used it to say that he goes people don't ever talk about this but it was google's server architecture or their choices that yeah like allowed them to win what did that mean i never got answer yes so so if you go back to nineteen ninety nine nine nineteen ninety eight right in order to search the web you had to have what are called web crawl so these are servers that are going out and scanning all the web pages on the internet and then indexing servers and then your web servers which are you know your indexing servers take all that data and classify and organize it and figure out what you know what what's the search term that each web can represent and then and and what's the ranking that would that would show up and then finally is these web servers which is the the website you know serving servers so when you go to google dot com and do a search and so you know in order to search the web extensively and to have a high refresh rate so how much of the web can you search you have to have more servers in order to search it more frequently to have more servers so at the time everyone was using kind of oracle servers that cost like three thousand bucks and they had a pretty case and they had purple on them and they used a lot of power and they looked really nice and they would last forever you know all this kinda nonsense claims and so google set out to basically build a really cheap web server or really cheap web crawling server and indexing servers they built their own servers by taking commodity hardware and basically bread boarding this thing so taking super cheap ram super cheap hard drives jamming them all on not even putting a case or a cover on i'm using super cheap power supplies no problem and then they said they said look if no purple no casing and they made them redundant and they're like look we'll make lots of these we'll be able to search more of the web we'll be able to have a higher refresh rate and we'll be able to index stuff better and have a bigger index than anyone else because we're making it so cheap to do this and so their cost was like a hundred fifty two hundred dollars instead of three thousand dollars their servers broke every couple months but guess what it was so cheap to make it when it broke they threw the thing away and so it didn't matter they didn't need to have a five year server they didn't need to have a high performance server they need need to have the fastest cpu and in fact when i joined google they had a team that was working on a ten thousand port switch so you know the and and and they were making their own asics to do that their own chips and so the the depth that the hardware engineering team went into a data center and infrastructure engineering team went into at google to create a full stack of technology that was advantaged from the ground up meant that they would always be able to search more internet always be able to do it better always be able to do it faster always be able to have a higher refresh rate and that advantage and then they made their website super simple and they didn't have to sell ads against it because it costs a little to run the website and so you add all that up and they create this huge advantage this huge structural mode more people come the network effect more people show up they've now got more people that they can sell ads to they can now reinvest and building more servers search more of the web and so on and so forth and then you know the adwords architecture was just perfect it was an auction and so advertisers would bid for search terms they wouldn't do paid in insertion or paid inclusion which was big at the time they said that's evil so we'll show ads really clearly and cleanly on the side and if you just wanna click on an ad they know they're clicking on an ad and otherwise they're search the internet and it just created this this this unparalleled mode and so the hardware advantage that google built from the beginning i think was really core to to their their their point of success and and so sorry going back to your question look larry page is one of the most impressive individuals you'll ever meet it's really sad he's not more public because i think larry could offer a lot to the world in the way he thinks and the way he talks about things he always takes a bigger point of view and a bigger picture perspective on things you know when when people would suggest products or ideas he wouldn't get into the technical details in the near term road roadmap maps he would always do out a hundred x and be like why can't we do x so you know why don't we search all the world's books was one of the things they proposed doing in two thousand three which was a crazy concept but they actually went and then did it right and no one would have done that if not for that suggestion that that audacity of perspective and so they always pushed and challenged every team to think bigger to think more grand to think more aggressively and i think that's a common trait with great leaders and technology businesses is you know and and same with coaches on sports teams you know your your team is only as good as you challenge them to be and so they'll you know if you're not challenging your team and you're asking them what do you think you can do they're they're only gonna achieve a fraction of what possible great coaches and great leaders need to kind of and and technology leaders in particular have the scenic unique ability to i think understand the technology and leap several iterations forward to speak to the team about where we're headed and then bring the timelines in and that makes for you know an incredible sense of urgency and outcome and why do you think most people don't do that so thinking big that sounds easy enough to understand sounds fun to do you know i could hear that advice why do you think that's hard to advice staff follow in practice it's a really important question so one of our principles at t of there to dream so it's all about creating that audacious perspective if you know how big can this be how big should we be and what happens when you set a big goal like let's say i have to go climb to the the top of a mountain and i can't see the path from here to the top of the mountain there's a hundred of perm or thousand perm and how you might get up that mount and you don't know which path is gonna work most people that are smart have been successful and most people that have been successful are not used to not succeed it and so the orientation at that point is that success is all about doing something and getting an action that you expect out of what you just did and so you want you are inclined naturally as a smart person as a successful person to only do things that you know what you're gonna get as an outcome and guess what that does that limits your horizon mh so then you end up saying i'm not gonna take the more as challenging route or path that might get me to the top of the mountain but i can see that this particular path gets me you know a quarter of the way up the mountain and that may not miss and you might know however that that means you're giving up going to the top of the mountain but at least you know for sure that if you do x you're gonna get y and i see this all the time i see this all the time at businesses where the teams end up compromising on their big vision and they compromise on the moonshot because they're more likely to succeed and they feel more comfortable taking a shorter range narrower horizon and minimizing the opportunity set significantly and saying i'm just gonna go do this because i know if i do x i'm gonna get y and that feels comfortable and i know it's gonna happen and so they minimize the dare to dream circumstance and then they always say well you know what we'll come back and dream big later but guess what happens let's say you're thinking about i'll give you a very specific example because this relates to the business we're announcing this week can dot com which is our our molecular beverage printer but early on there was a a hard push to say look we know restaurant owners will buy this device i don't know if every consumer is gonna buy this device it might be too expensive it might not taste good enough consumers are so you know f if we make a device for restaurants we know that there's an economic advantage there's an roi enterprise based sale let's go sell in restaurant and we'll make a bigger device so it can hold more and we don't have to worry about shrinking and getting all the technology into a tiny form factor that fits on a kitchen countertop the problem is if you do that and you start selling to restaurants you've now significantly minimized the opportunity to go into the consumer channel because you now have a customer and the customer is the restaurant and the restaurant is gonna say i want this feature and i want this feature and i want this feature and want you to do this for me and all of a sudden your whole team is gonna be inundated with product and feature requests that focus on that much smaller much narrower market and you're getting end up going deeper and deeper into that market and you're gonna lose out on the opportunity to go build for the big market to go build for the hundred x market that can actually change the world and improve the you know the the the problems that we're trying to address with this business and so you know i've seen this at many different businesses we're taking on a lot of technical risk taking on a moonshot project is often fore gong and and you end up you know trading into a much smaller pie and a much smaller opportunity and then you often miss out on that bigger opportunity and so i i i think it's really important for entrepreneurs to continue to dream big and find a aligned capital and align shareholders to let you dream big and shoot for those bigger higher risk opportunities because if they work they're a hundred expect i couldn't agree more i can think of two examples of my own career where i guilty of that where we did that and i was just talking to a company i invested they pitch me this amazing self driving car you know single person the single single passenger vehicles that were electric and self driving and it was this really fantastic vision of what the feature might look like and i feel like you know in many ways they've made a lot of progress but also it's they did the restaurant thing basically they found a customer who showed them un your path to like some validation and in doing that they sort of beat down the vision and sort of try tried to cram the vision into it okay some of the vision doesn't fit here alright it's just gonna get sort of left behind and we'll just do this one thing that might actually net net be a much smaller overall opportunity and smaller impact right of just really hard technical thing or you're gonna spend your whole life doing this well you know why not go for the one that that actually might work this also isn't limited in the technical have you heard the the airbnb brian c thing like the twelve star experience have heard this no maybe but you about you'll you'll like this so so basically he sat down his team he's like okay you know we're in the hospitality business we wanna give our our guess a great experience a five star experience he's like so first let's just define it right like what's the you know just humor me what's a one star experience like oh you get to the house it's locked you know there's cockroaches outside you know you can't get in you're out in the cold blah he's like be vivid about it so he made them sort of explain really what that one star experience would feel like then he's like alright give me a three star experience give me a five star experience and then the team gets gets excited they say oh five star experience is you know you get there it's easy to get in the place is nice it looks just like the photos and you have a great stay everything works nothing breaks and you know on the way out you know the the host leaves you a nice little gift basket so so you enjoy yourself he's awesome so what's a seven star experience and now the team sort of like you know you see everyone tighten up like they didn't expect that they already had they thought five was the max number of stars that you can have and he's like totally so give me more and they're like well i guess you could get there and there's somebody at the airport to pick you up they're they got your name on of ass son he's like yes yes give me more and so they started to define a seven star and he kept pushing it nine star ten star twelve star and they get to this ridiculous extreme of like you know you get there not only do you they have the stay they say hey you're gonna be up at nine am tomorrow i got something special for you somebody picks you up they take you on a adventure surfing outside because they're a expert in blah blah blah and then that type of thinking is what gets you to do airbnb experiences which is like the local kind of like activities to go do which wouldn't have really otherwise been in a you know go book a place to stay a place to sleep like type of website necessarily and so you can do that on user experience and customer experience just as much as you can do on the technical side i think pairs pretty well with your framework there totally so let's talk about can this is cool so i heard this this is actually when i i think i reached out to somebody on your team i said i wanna i i actually didn't want you on the pod i i wanna make a drink and so let's can i explain it in simple terms of what i think it is and then you correct me for alright so you basically made a printer like a home printer but instead of printing out you know sheets a paper with ink on it you could print out a drink any drink so like for example my wife is vegan she doesn't drink alcohol never has drink it you know to drop your life but she loves you know certain types of teas and coffees and things like that and so she can take her favorite tea and have it like exactly the way she wants it so you know like one of the reasons she loves starbucks is because she can go in and say i wanna light ice oat milk you know decaf with no sugar blah blah lot she can customize her whole drink so similarly we're gonna have a device and you know i fast forward ten fifteen years i know you tell me the timeline but we're gonna have a device in our house that we can just push a button and it'll dispense the drink we want it'll print a drink for you that is exactly the drink you want and that same machine that she's gonna use for her teas i can go use for a you know lime you know gatorade like drink that i could print out or i might even be able to print a drink that you know somebody creates somebody on the on the internet just creates a recipe and then my printer can just print that recipe out and i can try that drink at home and so instead of shipping you know cans of beverages or going to a store where there's beverages on a shelf and then i drive it home i it on my shelf instead of that whole process we just combine the water that we already have in our homes with a like kinda like a printer cartridge of flavors and you can print whatever drink you want so alright tell me tell me if i butcher it you did great i i love the use cases those are those are perfect and awesome so that was great and i mean i think that's exactly right i mean you know that the the big discovery the big kind of aha with this business is based on the idea that ninety nine percent of beverages are water or maybe water plus sugar or maybe water alcohol and one only one percent of all beverages is the chemistry that makes the flavor the smell the the color and the texture of of the beverage and that one percent is all that we really need to turn water into all these different beverages so the the chemical water into wine water into wine what can by the way is the town in galilee where jesus turn water into wine that's the name little an fact now now now becoming a better known in fact but friends that went to sunday school by the way tend to know that but basically you know if you take a wine wine has about five hundred of those flavor compounds that's all the stuff that comes from the grape and a skin and the you know the the branch and the the leaves and the oak and all the stuff and it turns out that of those five hundred compounds chemically speaking only about thirty to forty really matter to your sensory palate so your nose and mouth can only really pick up and and really cares about the thirty to forty compounds the same is true in coffee in tea in juice in soda in liquor in beer so all of these beverages are ninety nine percent water or water and sugar and alcohol and one percent or compounds where you might have hundreds of compounds in the organic state but you really only need a few dozen of them and when you look at the chemical composition it turns out that that few dozen compounds can be very overlapping from one beverage to the other only a few tweaks of a few chemicals can change a white wine into a red one or you know a char to a soft block and so the idea is like let's get those compounds those ingredients into a cartridge just like an ink jet printer where you might have c m k right four colors and we can have eighty compounds and we think that with eighty compounds we can recreate all the beverage flavors that make up you know everything from an o to a gatorade to a beer to an iced tea to an iced coffee to a margarita and so that that's the idea with the business and so you know we're canada dot com's just launched right so it's we're gonna be we spent about three years on this project first was all the chemical work so you know does the chemistry make sense can we actually decompose all the beverages so we've at this point use though what's called as g or a gas mass spec to to analyze what are the molecular components of literally thousands of beverages it's like a twenty three and b for drinks yeah yeah and it's unlike this is this is really scanning the world's or digitizing the world's beverages and so we've got have all the sodas all the bottles of wine all the liquor all the tequila everything you can come up with has gone through this device and then based on that chemical composition we've built software that uses heuristic or master combinations to try and reduce the number of compounds down and create a carbon overlapping set that we can recreate all the beverages so so give you the orders story so you were you just sitting around one day and you're like you know what all these drinks are ninety nine percent water and then just one percent is the differentiation why don't i do like does an idea like this even come into your brain what do you see what are you reading what what happened where did the epiphany happen well a couple of things one is i i had a good sense for that for a while i was at dinner with a professor from uc davis back in late twenty nineteen or so and and so or twenty eighteen twenty nineteen and so he was telling me about this research paper published by the scientist in germany at the technical university of munich and this the scientist runs a flavor science lab and he was he basically took a glass of wine and he reduced it from five hundred compound down to like thirty seven or forty or something and gave it to a consumer or sensory panel and they couldn't tell the difference between that wine and the original wine and then he did with another wine another wine and he's kind of maybe declarative statements that he thinks we could recreate all beverages with just a few dozen compounds and so that was kinda i said to a guy at dinner i'm like why don't we just make the star trek replica for beverages like we could just print any beverage if we could just get those few dozen compounds to people's homes and so there's a guy working with us as a scientist in residence at t which is a foundry we run kind of r and d programs internally and if we feel confident that the r and d yields an opportunity will build a business around it so in this particular case we said hey lance why don't we read these papers try and recreate these experiments and see if we can come up with a good orientation around is it really feasible that we can create thousands of beverages using just a few dozen compounds that they make economic sense that we can put them in a flavor cartridge and turn this into a machine and so you know after about a year year and a half we actually you know convinced ourselves that this is gonna work we separately ran a chemistry program analytical chemistry program as well as a hardware program and you know we had spreadsheet models that showed that the math could work and that we could actually make this device and we we had a bunch of different technical challenges on how do you actually dispense right you know micro leader and sub micro leader volumes of these flavoring compounds into the water stream you gotta make sure you can do the whole thing in fifteen seconds or twenty seconds because otherwise consumers are gonna get annoyed it's gotta a taste incredible you can't you gotta have high precision it's gotta be cheap gotta make it really cold i mean all the the product that you know we had all these p d's we were trying to iterate on and then we yield our kind of estimated cost model and then we had to prove the tech work so you know very iterative cycle for the last three years to get to this point so we now have fully working prototypes of the the gen one of the device we're going to production on the gen one of the device and hope to ship early next year and so we're starting pre today for for ninety nine dollars you can reserve at fully refundable nine nine dollar reservation fee and the first ten thousand orders are or or four ninety nine for the device and seven ninety nine after the first ten thousand so that's a setup so let me just let me do two things i wanna first ask about the kind of like what kind of drinks am i gonna be able to get out of this just what what what the average person wants to know and then secondly i wanna talk about the impact of that because i my sense is that if you're making the divide if you're making what you what you eat and drink in your own home like literally you're producing at in your own home you cut out a bunch of trucking storage packaging stuff that doesn't need to happen that might actually help the environment so wanna talk about the environment in a second but let's first do do the funds them so the drinks okay so i got water in my house and you can your drinks are gonna be you have a way to basically cool down the water or and can you like carbonated it or what are the limitations here yep it's it's chilled and carbonated or optional obviously in the device you don't need to worry about any of or you can go hot we don't do heating so we don't do a hot hot beverages in gen one so just to be clear you're not gonna have hot coffee or hot tea but there is cold brew there is iced teas flavored iced teas all that there's a whole variety of stuff there but the idea is there are three cartridges so there's the the master flavor cartridge you put it in it should last anywhere from one to three months before you need to kind of replace it there's a sugar cartridge because a lot of beverages people wanna have sugar and so there's a separate cartridge for sugar should last about a month and a separate cartridge for alcohol should last about a month and you don't have to buy cartridges they're free they auto ship to your home and you just put them in when they arrive the the the device sensors is when you're running low and we send you a new new cartridge we charge per drink so the the the price per drink is gonna be twenty five to fifty percent on average cheaper than what you would pay in retails for that same beverage so you know at the end of each month your card or your account as charged for the beverage as you consume but you don't need to go to the store you don't need to buy cartridges you don't need to deal with all the nonsense onset we we take care of all that really supposed to be hassle free and then the idea is there's beverages that range from morning till night so iced coffee iced tea sparkling you know soda juice hydration or energy drinks there's hard seltzer cocktails wine and so there's a range of kind of add ons and and features like there's caf combination there's nutrient boost so you can actually vitamin boost there's electrolyte boost and so you could have low alcohol hard seltzer you could have low sugar juice for your kids you could have you know add caffeine have an extra boost of caffeine or low caffeine iced tea so there's there's all this variation around what you can do ultimately from a personalization perspective and as a user what you're gonna experience is literally hundreds or thousands of brands available to you on this device and they're all gonna be new brands so we're we're we're not yet revealing who the brands are i think we're a few of them will start to announce this week but if you think about where this goes as a consumer today you really have a very limited number of choices when it comes to brands because there's only about a hundred and fifty slots in a retail store for wine beer coffee tea juice soda and so you know minute made coca cola pepsi seven up these are nameless face list corporate brands in the future you're gonna have your own brand right so so you and your podcast can make a branded beverage put it on can and your followers can buy your beverage and it can be your favorite blueberry hard seltzer or your wife's favorite tea and she's kind of you know and so you guys can build your own brands at a cost of nothing to you and so i think that the future is a lot like what we saw in media where people are consuming tiktok and youtube and netflix and you know there there there's a long tail of content there's a long tail of things that are associated with individuals now and influencers i think the same will happen in france yeah so it's basically just to to kind of explain that again because i think it's an important point so you're saying you know the same way that if you wanted to you know watch tv or listen to the radio there was just fixed number of slots and so they you know when there was three channels well they would show the most general thing that would appeal to like kind of the common denominator type of audience and then when we got cable we got more channel so now you got a fishing channel and a golf channel but you know those are still pretty broad actually when you compare to youtube where it's like i can watch somebody who just likes to binge eat food and like that's just what i wanna watch right now i can watch a guy who you know some some crossfit thing that may not have made it on the espn espn two espn three or espn you know like it would have never made you you you chose you can't you can't binge watch chess matches on espn but you can on youtube right so you're now watching way more con more media than you would have otherwise because you love chess match this podcast has is a good example not only does it give the consumer more choice it gives a creator a way to just push a button and try their hand at it and if we're good like we okay we kind of sucked at the beginning and now we're good now we get a few million downloads a month well that's great because we it was permission nobody had that we didn't have to go audition anywhere and and it get selected in order to be on stage so what you're saying is the same thing is gonna happen in drinks so the consumer gonna have this infinite selection of like flavors that fit their needs so the the low sugar orange juice you know whatever that sparkling whatever that's gonna be appealing to that person they're gonna be able to to print that beverage even though it may not be sold on this on the shelves because it's not the not like kind of mass popular drink choice and the other thing is me and sam have already started brainstorming sam wants to do a root beer i'm interested in more of like a a sparkling water sort of thing a non alcoholic like refreshing things so we're you know let's do it you got you guys wanna do it no i'm serious yeah we wanna do so cut come to redwood city try the device and we'll get you guys set up and you make your own brand and that's the question right we were we were not it and people got started dm us because they were like yeah dude we were told it because we were we we like to make up fake name brands on the on the show we're like southern sam's root beer and then you know sean's you know whatever motivates motivation i i like to i sent this idea i said somebody should make a brand of of water that's just called lucky water and just it's just a little you might have good luck if you're drink with water have lucky water right placebo water and just say there is no this is a total placebo but hey it never hurts and and so if i would a hint of something in there if the hair it's gonna have some flavor but the you know the luck is why so anyways that's my drink and so but the question was is is gonna taste the same right so for example i lived in china for a bunch of years and you would get these sodas and the there's this phrase for expat living in china called and qr not quite right where it's like it almost tastes like kfc but like it doesn't taste like kfc that was a common problem when they tried to export these kind of flavors to another country so i know you're kinda biased but give me the you seem like a you're pretty honest guy i don't think you're trying to sell stuff no i mean we're pretty technical about so so so here it's an important point and i i made this point earlier today so it's fresh on my mind there's a difference between taste and flavor flavor is the sensory experience that you have you know a biochemical and and biologically as you experience a a bunch of chemistry in your mouth taste is how you psychologically or how your brain interprets and and and finds that appealing mh so we've all heard stories about taking expensive wine and cheap wine and blind folding people and giving it to them i can't tell the the difference i can give you really cheap two bucks chuck in a two michelin star restaurant you taste in and you're like oh my gosh is amazing you know fantastic i can give you really expensive wine in a mcdonald's and you kinda chug it down right and so taste is a function of the overall kind of sensory experience when you have a product when you engage in a product and so you know a big part of what we're trying to get right is that experience being more than just the flavor we have to get right right like but you have to make sure that there's something to substitute for the affinity you have with a brand so you have an affinity with kfc or coca cola and so there's some benefit of that being ingrained in your mind you taste something it's good enough to you're like okay cool and so what we do from a flavor so that's number one is there's a whole digital experience on the device that we think is important brands no longer or static it's not just a logo brands are visual right so there's a i a video or some audio that comes through as you're exploring as you're trying stuff through the device and then flavor it's really straightforward our chemistry team prints beverages we take the best in the market for that category so we'll take sprite lemon lime soda we'll print one of our lemon line sodas and we have a sensory panel where we bring in consumers they blind taste and we score stuff and then we get iterative feedback on what's working what's not and that allows us to craft formula so you know that is a big part of our analytical chemistry process is the sensory feedback that we do blind and so we don't graduate formula we don't say that these ingredients work until and unless we hit and exceed best in market comparable by the way really interesting statistic you'll see that things like cold brew coffee which is a really interesting one because it's so complex and it can be so different just like dark chocolate you can take like starbucks and blue bottle and one group of people will passionately love starbucks one group of people will passionately love blue bottle and so you know you'll see that arc we we will score really well with one group with one of our formula and really well with the other group with another one of our formula and so this goes to the point earlier if you take a coca cola it's got forty four grams of sugar or whatever in it that's what coca cola decided was gonna be the lowest common denominator that's how they get the biggest audience to buy coca cola but it turns out some people would buy more coca cola if it was twenty grams of sugar and some people would buy more coca cola if it was sixty grams of sugar so if coca cola had a twenty gram thirty gram forty gram fifty gram and sixty gram version of coca cola they would sell a lot more in aggregate of all those versions than if they sold just the one forty four gram sugar and so sugar is a terrible example because it's evil and awful but we all love it but you know there like my point is glad has a yeah cold talk on this you've seen that one but malcolm glad has his ted talk about the the perfect pasta sauce is it's no like as millions yeah you gotta listen so malcolm glad goes on and like in his style he goes and he tells us great story about this this guy that gets hired by pepsi by coke and then gets hired by p i think it is he's like not the perfect pasta sauce what is the perfect flavor for for consumers and he discovers there is no perfect pasta sauce there are only perfect pasta sauce is he's like that's right some people want the chunky one and there is a perfect version of the chunky that will appeal to the most people there and then some people want the one that's this and and that's why you see the aisle today and there's like the the one that's super garlic and then there's the one that's super chunky and that there's one that's not chunky because those people feel very passionately that chunky is better than non joke they it's not closed for them and then the you know another group people will feel the exact opposite and so but they're limited in in some ways because there's those are still well they're they're only gonna bottle five of these or seven of these or twelve of these and put them on shelves which can only hold whatever seven variations whereas you're not limited by that in the same way that youtube's is not limited by the number of channels on your tv that's right exactly right and i think that's where it's not about are we better than coca cola it's that can everyone find a product on canada that they like more than coca cola and put you and you can't use their right so what you gonna do are you like smoke like what how are you gonna brands no we're not using any any of those brands we're it's all new brands so your lucky water is gonna be a brand we're we're gonna get that done okay and so you'll find hundreds of new brands available on can that you don't find on the store shelves and and you're gonna have like your house brands basically of the popular things yourselves to to see we may yeah i i'm not interested it like i'm more interested in finding partners that are gonna be passionate promoter and and wanna you know be creators on this plan form so i think that's where i'm most interested i think we're gonna have to see a bunch of stuff ourselves but you know i think it's it's likely gonna be the case that folks that wanna be creators are gonna be bringing brands to market through the device well well you know this has happened with alcohol right so like the rock i think is i think he exactly like he sold i don't know how many hundreds of thousands of cases of his tequila like he's the rock is gonna be a billionaire not from wrestling not from movies but from same with fifty cents same with george clooney i mean all brag but you have all got beverage brands and by the way they all you have to be huge and that's the thing so only three percent of beverage brands that launch and get retail space actually make it to ten million in sales right and so you know if you're someone with less than a hundred million followers you've only got three million followers you're a great youtube creator people know you they love you they're passionate about you you're never gonna go make a beverage brand right it's gonna cost five million dollars to do that you gotta go make a formulated it you gotta make packaging gotta make a logo you gotta box it then you gotta go convince retail stores to carry it right i mean the whole process is like an insurmountable process generally speaking you have to be huge like the rock to get that and you know there's probably ninety thousand times more people in that middle that are really have a lot of followers aren't as big as george clooney in the rock and so they could make a brand that doesn't require any investment that doesn't require any capital they don't have to take any risk and look if it it's digital it's permission with right so if it works great like they've got a nice revenue frame and you give a a share so let's say i don't what do you think the average drinks gonna sell for like a dollar or less than a dollar so it ranges from you know two twenty nine cents for like a sparkling water like a flavored water like a lac croix competitor yeah up to to two ninety nine for kind of like a really nice cocktail you know you'll find that like a mo or mimo there'll be like a dollar ninety nine generally the price will be about twenty five to fifty percent less than the store right so let's say i'm selling my my thirty cent lucky water what is the is there a standard out of the box like a app store like thirty percent cut type of thing or what what is the what is the business model because because this will let more people do the rock thing this will let people like me do the rock thing where we can just formulate a drink sell it virtually digitally into everybody who has a printer now available and then we get a small income stream royalty stream coming through this yeah by the way the royalty stream for like someone like fifty cent or something is gonna with like two to six percent you know so they're participant on net right and so there's a very different kinda model there we offer a much higher share of revenue obviously you know this is a a very difficult business to operate we've gotta get cartridges made we gotta get into people's homes we auto renew so there's a whole services component so you know we've got a pretty good pitch today for brand partners you know we haven't launched commercially so i'm not gonna kinda commit to what the number is gonna be but i i think it's a really really compelling opportunity and they're all gonna be you know real they're they're gonna own their brand so if they wanna take that brand and use it elsewhere it doesn't have to be exclusive we don't own the brand it's your brand right so you could take your brand lucky water and if it takes off and you've got ten million people that wanna buy it in stores go launch it in stores you know it's your brand so yeah i think it's a platform for letting people kind of create an idea and and you know see if they can develop value there and the it's almost like it's like merch right like i mean just talk you monetize your yourself the the device cost fees at four ninety nine or it's gonna cost four ninety nine that's the pre order kind of first ten thousand orders so once we hit ten thousand the the price is going up to seven ninety nine and then is this the like kinda tesla roadster model where you think that you know where do wanna drive this down to what do you think is the thing you need where this actually is not just my you know cool thing in my house when people come over and i can do a magic trick like when does this become standard where it's not a magic trick everyone's got one so it's a it's a great question you know there's about thirty five million keurig installed in the world there's like three and a half four and a half million sodas streams these devices have prices that range from like seventy bucks up to two ninety nine for like a nice nespresso and then this you know so so two ninety nine maybe gets you kind of a ten percent market you know one ninety nine gets you thirty percent i i don't know the number because part of what we're doing is we're not just a single product in a single day parts so an espresso curry soda screen one product one day part so will people pay more for more day parts will people pay more for more variety for lower hopefully our prices are gonna be lower than would you pay for for some other alternative products so the value we can provide the consumers i think will ultimately dictate how the market expands as a function of price right and and then form factor so so you know can we get it smaller and then heating can we add heating to it and so you know there's a bunch of features on the road roadmap and then the trade offs on price so you know if we add heating it costs a lot more it's gonna get bigger can we make a technology leap where we can actually get everything to be smaller and add heat and drop the price and you know as we go from gen one we're calling this our gen one device the canon one to gen three we really think gen three ends up being kind of like it's got everything for everyone and it's an accessible price point for the mass market and i don't know if you're fully out of time but i did wanna give you a chance to do talk environment for a second if you if you have it great i think that's probably pretty major or like at least one of the big drivers for you here pretty much all the work we do at t is oriented around how do we change systems of production on planet earth so that we can make things using less energy less land less natural resources i i'm a big believer that sustainability in the twenty first century does not arise from convincing consumers to consume less i think sustainability arises from building technology based solutions that led consumers consume more and dropping the price and dropping the environmental impact and that's what technology allows us to do so if you go back to the industrial revolutions you know of the nineteenth and twentieth century we built factories right we we put all this technology in a big machine in a big facility and we used it to make stuff over and over again and that dropped the price for consumers because we automated it in a big factory turns out that the technology of that factory as all technology does shrinks gets faster gets cheaper gets better and so theoretically technology like what existed a factory a technology that's better than what exists in a factory to make beverages can be put in your home and so you know the idea is how do you decentralized manufacturing because it takes about six hundred liters of water to make a single liter of wine takes about forty liters of water to make a liter of orange juice and we take all of this water and by the way orange juice is ninety three percent water seven percent sugar only one percent is the flavor compounds right wine is eighty eight percent water eleven percent alcohol less than one percent flavor compounds so you know how do we so we've taken all this water grown all these crops that basically turn into water put them into glass and plastic and cans that we use all carbon dioxide to make then we put them on trucks which use carbon dioxide to go to warehouses that then go into stores they then go into your home and then you store them in your home and you're basically drinking water and every industrialized home has water it's about half a billion tons of co2 that are put into the atmosphere every year to make bottled cans and beverages it is about bottled bottle in can beverages it is about four hundred trillion liters of water that are used in the whole production cycle of bottled beverages and consumers are spending two point three trillion dollars a year on this archaic insane system of centralized manufacturing to use a ton of energy and a ton of carbon and a ton of land to just move water into your home when you already have water in your home hundred and twenty million acres of farmland that could be reduced and returned back to the natural ecosystems that we would stop using to grow all this stuff so that's our long term incentive right incentive is can we take that carbon out of the atmosphere can we reduce the waste on water can we return the land to natural ecosystems and at the same time make it cheaper and better experience for consumers by decent manufacturing and putting these devices in homes and giving people better options and so that's why we're so excited about this know i think i think we we have an opportunity to do something that has a an impact but also hopefully gives consumers something that's better than what they have today yeah i i don't know if you're hiring but this is one of those companies where i would look at and i'd say wow that that'd be a cool place to work if i was out there in the job market because you have hard tech problem you have a device that if it works it's gonna be like a household name you know everybody's gonna know it it's gonna be like a netflix or an ipod or would be gonna be something that everybody knows if this actually pulls it off i mean you're on some willy won shit you know you're basically creating this magical device that lets you create whatever you want you know even your own little candy your own little beverage in your home i think that's it's pretty inspiring and and you know to do that while also having a big impact on the environment right like most people would look at that environmental supply chain you talked about and say how do we make this twenty percent more efficient at this step how do we make the trucks emit a little less carbon dioxide right how how do we how do we just reduce this by fifteen percent what you've done is said why are we doing this in the first place why don't we eliminate the whole chain so why are we using all this water and all this plastic and all this fuel just to move water from here to there and add a little bit of flavor to it right the water even but even worse when there's already water pipe into people's homes so we already built the the the core infrastructure the pipe into the home with water all we gotta do is sort of like at the at the last last mile not even last mile sort of like last two feet of counter space just convert it into the product people want so i think pretty yeah and like all the refrigerator space and energy to run the refrigerator to store all that stuff and like the the the the stuff in your in your cabinets yeah so that's exactly right i mean you nailed it like that's why it's so awesome so yeah we are hiring and we got great offices so and people go to work in the office and and so that's a perfect nowadays yeah you can see humans if you work with us yeah yeah i i'm a go out and meet people ir i think you know climate corpus cool the insurance companies all and it's not that cool but you know i guess it's some money this is cool this is gonna be your your biggest thing hopefully this will be the thing that you know college version of you would be like alright that's was that was sweet not not under overwhelmed by that one long as my as long as my kids are proud down the road i'll i'll be happy so that's all good alright tell people where to go to us so canada dot com go go is that what canada dot com c a n a dot com and yeah you can check out the product specs and the the product video and and sign up for a ninety nine dollar pre order reservation thanks for coming on man i really appreciate this i'm a fan of yours it's been awesome to chat yeah it's been a great chat i i think you really really nailed it and i appreciate you you listening so that's been great thank you