How To Turn Your Passion Into A Business Without Sacrifice - James Hoffmann

James Hoffmann 0:00 So the hero bullshit of entrepreneurship of like, "I must grind myself down. I'm a fucking hero. I'm working super hard. I'm doing it right." And it's such bullshit, and it's such a toxic aspect of all work, and I hate it, but I definitely worked 110-hour weeks for, like, months.

Ali Abdaal 0:14 Mm.

James Hoffmann 0:15 Ground myself down to the point of deep misery, and there is no quicker way to hate a thing you love th- than to work, like, to work on it like that, right? Like, uh, I really love coffee. I definitely got to the point where I was like, "I should quit coffee. I should just... I, I, I hate this. I hate this. I hate my life. I hate working in this. I should just do something else." 'Cause I'd worked in a stupid way, and I burnt myself out physically and emotionally because people do that because the world says, "Good for you. Get the grind on." You know what I mean? "What, it's your thing. It's yours. Pour yourself into it." And you're like, "No, don't. Don't do that. That's really bad." What you should do is start with enough capital that you can hire people to work with you, pay them properly, uh, uh, and then work in a healthy manner. Do you know what I mean? Like, just have work and home, uh, be separate. That's helpful. Turn off. Don't work at weekends, or don't work some days a week. It's very satisfying, Ali Abdaal, is to, to pour yourself into a business. It is rewarding. It's enjoyable, but y- you're just burning through yourself so fast. And so I regret not starting with probably twice as much money, hiring more people out of the gate, and going home at 5:00.

Ali Abdaal 1:17 Hey, friends. Welcome back to Deep Dive. If you're new here, my name is Ali, and in each episode, I chat to entrepreneurs, creators, authors, and other inspiring people about how they got to where they are and the strategies and tools that can help us along our shared journey of living healthier, happier, more productive lives. Now, many of us dream about turning our passion or hobby into a business, but very few of us manage to successfully do it and at least keep it fun while we're doing it. One person who seems to have really nailed it is World Barista Champion, author, creator James Hoffmann, who is one of the most famous people in the world when it comes to coffee. He's got his own coffee shop. He's got his own coffee roasters. He's got his own YouTube channel with 1.2 million subscribers. He has hundreds of thousands of followers across all the other social media platforms. He's written a best-selling coffee-themed book. And in this episode, we talk a lot about how he's managed to build this empire themed around this passion, this hobby of coffee. We talk a bit about how to actually build a bricks and mortars, like, physical goods, coffee roastery type business completely from scratch. And we talk a little bit about James' regrets when it comes to hustling and burnout. I definitely enjoyed the conversation. We could have talked for hours and hours more because there was so much more to unpack in James' story, so we're definitely gonna have him on for a part two at some point. But in the meantime, I hope you enjoy this conversation between me and James Hoffmann. I wanna understand how you... how- how did we get here? How did you end up becoming the world's most famous coffee person

Ali Abdaal 2:28 on the internet?

James Hoffmann 2:28 I don't think I can say I'm the world's most famous coffee person on the internet.

Ali Abdaal 2:31 [laughs]

James Hoffmann 2:31 I feel like Howard Schultz still will maintain, like, higher-

Ali Abdaal 2:33 Howard Schultz, never heard of him.

James Hoffmann 2:34 Never?

Ali Abdaal 2:34 Who is he?

James Hoffmann 2:34 Never?

Ali Abdaal 2:35 Yeah. No.

James Hoffmann 2:35 Never? No? What, really?

Ali Abdaal 2:36 I think, you know, there's James Hoffmann, and then there's, like... I don't, I don't know anyone else in the coffee world, to be honest. [laughs] So you're in a category of one as far as I'm concerned.

James Hoffmann 2:42 Yeah. Um, how did this happen? It's a, it's a, it's a good question. I think, um, so I've been in coffee since 2003.

Ali Abdaal 2:48 Okay.

James Hoffmann 2:49 Most people start in coffee for the same reason, which is sort of-

Ali Abdaal 2:51 Sorry, how, how old were you in 2003? If you don't mind me asking. [laughs]

James Hoffmann 2:53 Uh, 22, 23.

Ali Abdaal 2:55 22, 23.

James Hoffmann 2:56 Yeah.

Ali Abdaal 2:56 Okay.

James Hoffmann 2:57 So I'm, I'm like... How old am I now? I'm 42 now.

Ali Abdaal 2:59 Okay.

James Hoffmann 3:00 I think about-

Ali Abdaal 3:00 So at the age of, like, 23-

James Hoffmann 3:02 Yeah

Ali Abdaal 3:02 ... you got into coffee.

James Hoffmann 3:03 Got into coffee because-

Ali Abdaal 3:03 What, what were you doing before 23?

James Hoffmann 3:05 Oh, uh, I worked as a croupier in casinos, uh-

Ali Abdaal 3:07 As a what, sorry?

James Hoffmann 3:08 A croupier.

Ali Abdaal 3:09 What, what's a croupier? [laughs]

James Hoffmann 3:09 Uh, you deal casino games. So-

Ali Abdaal 3:11 Oh, okay

James Hoffmann 3:12 ... so if you go gambling-

Ali Abdaal 3:12 Yep

James Hoffmann 3:12 ... in the, the bow tie and the nonsense, I would-

Ali Abdaal 3:15 Oh

James Hoffmann 3:15 ... you know, do that. Um-

Ali Abdaal 3:15 Okay. And did you go to university?

James Hoffmann 3:17 I did go to university for no real good reason. Uh-

Ali Abdaal 3:19 What, what did you study? [laughs]

James Hoffmann 3:20 [laughs] I have a combined arts degree in, um, philosophy, Central and East European Area studies, and East Asian studies. Um-

Ali Abdaal 3:29 [laughs] Okay.

James Hoffmann 3:30 From Durham University-

Ali Abdaal 3:31 Nice

James Hoffmann 3:31 ... which, which gives me the extra letters on the end. Um, but-

Ali Abdaal 3:34 Yeah. Wait, what? Extra letters on the end?

James Hoffmann 3:35 You get the, you get the BA Hons Dunelm, so-

Ali Abdaal 3:37 Oh

James Hoffmann 3:37 ... uh, you know, like Oxford, Cambridge, and Durham gets-

Ali Abdaal 3:39 Yeah. Oxon, Cantab.

James Hoffmann 3:40 Right.

Ali Abdaal 3:40 Oh, yeah

James Hoffmann 3:41 ... uh, and, and so I get a Dunelm for no good reason.

Ali Abdaal 3:43 Oh, nice.

James Hoffmann 3:43 Uh-

Ali Abdaal 3:43 I thought that was, like, a furniture company or something. [laughs]

James Hoffmann 3:44 No one's e- ... It is, I think. Um-

Ali Abdaal 3:46 Oh, [laughs] okay.

James Hoffmann 3:47 No one's ever asked to see my degree. I, I don't regret going to university.

Ali Abdaal 3:50 Yeah.

James Hoffmann 3:50 I should not have gone to university.

Ali Abdaal 3:52 Okay.

James Hoffmann 3:52 I gained nothing other than debt and weight.

Ali Abdaal 3:54 [laughs]

James Hoffmann 3:54 Uh, that was my... I had good... and friends, and life experience, all that stuff. But academically-

Ali Abdaal 3:59 Yeah

James Hoffmann 3:59 ... total waste of time.

Ali Abdaal 4:00 After university, were you like, "I, I have this combined arts degree in philosophy and stuff, what am I doing with my life?"

James Hoffmann 4:04 Totally. There was a job demonstrating domestic coffee machines in a House of Fraser department store that paid weekly, and, um, you know, paid £6 an hour. Uh, and I was like, "Whatever. I don't drink coffee. How hard can it be?" And so, uh, I got this job, and what I've always done that's a sort of weird sickness for me is whatever I've worked in, I've tried to kind of read up upon. So when I worked as a croupier, I got really into, like, the history of card sharping and, and kind of, uh, a little bit of magic stu- cheating at cards, sorry. Card sharping is the sort of broad term. And, um, there's a really interesting history around that. Anyway, uh, coffee, same thing. I started buying whatever books I could find about coffee. Uh, and I read a couple that just really interested me. Um, there's a g- a book called The Devil's Cup that's kind of, uh, essentially about coffee's journey from Ethiopia as it spread throughout the whole world, and it was kind of the way it infects and binds itself into different cultures just really interested me. I was like, "Coffee's way more interesting than I thought. It's not just Nescafe." That was my kind of limit of understanding. And so I decided I would learn to drink coffee and, and I did, and, and I just sort of fell in love with it. And I tried to work in wine when I was a little bit younger, sort of university time, and just sort of hated that industry.

Ali Abdaal 5:10 And what was it about you that makes you want to kind of... Uh, because, 'cause I imagine if you're getting, like, a £6 an hour job, most people-

James Hoffmann 5:15 Yeah

Ali Abdaal 5:15 ... wouldn't think, "You know what? Let me read up about the history of coffee so I can understand it more."

James Hoffmann 5:19 I, I don't know.

Ali Abdaal 5:19 Yeah.

James Hoffmann 5:19 I mean, there wasn't a lot to do most of the time is one part of it. And I don't know. Like, I, I'm, I've always been a, a reader.

Ali Abdaal 5:25 Yeah.

James Hoffmann 5:25 Uh, an aggressive kind of reader. And so I was like, "Well, I may as well know what I'm talking about." I dislike, uh, uh... you know, I'm not a comfortable liar or, or, or bluffer to a point. Uh, and so I just, you know, started reading about it, and then I just kind of fell into this rabbit hole where it just fascinated me, and I started working my way up that company's kind of... I started doing training and teaching for that kind of company-

Ali Abdaal 5:46 For the coffee company

James Hoffmann 5:46 ... who did demonstrators. Yeah. So I looked after kind of demonstrators in, like, Selfridges and House of Fraser and John, all the kind of big department stores here. And then I got a job training for a kind of big commercial machine company rather than domestic ones.

Ali Abdaal 5:57 Commercial, like, those big ones that cost, like, thousands to use?

James Hoffmann 5:59 The cafes basically. Right, yeah.

Ali Abdaal 6:00 Okay.

James Hoffmann 6:00 Like, like, like car money sort of level.

Ali Abdaal 6:01 And how, how old were you at the fi-

James Hoffmann 6:03 24-

Ali Abdaal 6:05 Okay

James Hoffmann 6:05 ... 20, 24, 25, somewhere like that.

Ali Abdaal 6:06 So in about a year or two, you sort of worked your way up the-

James Hoffmann 6:08 Yeah

Ali Abdaal 6:08 ... House of Fraser department store hierarchy to become a-

James Hoffmann 6:10 And, um-

Ali Abdaal 6:10 ... kind of demonstrator of coffee machines.

James Hoffmann 6:12 Yeah, the kind of, like-

Ali Abdaal 6:12 And then you did a sort of lateral move to the industrial [laughs]

James Hoffmann 6:15 To, to teaching people about coffee, right?

Ali Abdaal 6:16 Okay.

James Hoffmann 6:16 So I would then go round the UK. I had, like, a big commercial machine in my car, a projector screen. I would turn up and do these trainings, 'cause the coffee scene in 2005 was, wasn't really there. You know what I mean? It was growing, and it was kind of being fostered, and there were these things called barista competitions. So I, when, in my demonstrator job, I'd met this guy who was the UK Barista Champion, and I didn't know that much. I did know that he would come in, I would clean everything, prep it for him. He would work for four hours and then leave, and I would clean up again, and he would earn more that day than I did that week, and I was like, "Tell me more about these competitions."

Ali Abdaal 6:48 [laughs] Okay.

James Hoffmann 6:48 Uh, and so I got into the competition thing, and I won the UK Barista Championship.

Ali Abdaal 6:53 Right, what is the barista competition?

James Hoffmann 6:55 It's kind of part, uh, cooking competition, part sommelier competition, part dog show. Like, you are-

Ali Abdaal 7:03 Dog show [laughs]

James Hoffmann 7:03 It's a performance, right? Like, you are sort of assessed on your performance as well. So you make, um, there's four judges, who are your customers, and you make them each an espresso, each a cappuccino, each what's called a, a signature drink, which is a non-alcoholic coffee cocktail of some sort. They judge you on your drinks, are they delicious, on your knowledge, on your presentation skills. There's a couple of other people who judge your technical skills, and the best barista in this weird game based on coffee wins. And so I competed in 2005, won in the UK in 2006, and ended up winning the world competition in 2007. So it was kind of, it, coffee t- so this is kind of really important. Coffee was so young in some ways at that point, that a kid could come in, start drinking coffee in 2004, and be a World Barista Champion in 2007. That shouldn't be allowed, right?

Ali Abdaal 7:48 [laughs] Okay.

James Hoffmann 7:48 Like, I, I'm not some sort of, uh, savant in the worlds of coffee. It, it just was an immature industry that if you were willing to work hard and, and you got lucky, and I got lucky, then you could sort of have these kind of breaks. Uh-

Ali Abdaal 7:59 Okay

James Hoffmann 7:59 ... uh, so-

Ali Abdaal 8:01 W-

James Hoffmann 8:01 Yeah, kind of weird to me

Ali Abdaal 8:02 ... well, what, so, and, uh, is, is, is that a thing now? Like, could someone listening to this decide, "You know what? I'm gonna become World Coffee Champion in the next two years?" Or, it's not really

James Hoffmann 8:08 Well, it, it's so much more competitive now. Like, it's a much more developed thing where, you know, people might train for a long time. The competitions are just much harder.

Ali Abdaal 8:15 Mm.

James Hoffmann 8:15 The standards keep going up and up and up. Um, so, uh, you know, uh, the nice thing about winning the Worlds is that they put you out to pasture. You're not allowed to compete again.

Ali Abdaal 8:23 Oh.

James Hoffmann 8:23 So, so-

Ali Abdaal 8:23 That's great. [laughs]

James Hoffmann 8:24 You are undefeated, and, and-

Ali Abdaal 8:25 Yeah

James Hoffmann 8:25 ... you know.

Ali Abdaal 8:26 [laughs] It's not like every year you have to sort of fight back and retain your title.

James Hoffmann 8:29 Exactly. So you're not, you're not welcome.

Ali Abdaal 8:30 Yeah.

James Hoffmann 8:30 And that's good. It's also bad in that every year you dilute the pool of world champions one more time.

Ali Abdaal 8:36 Mm.

James Hoffmann 8:36 Uh, so you, you are less interesting every year, which is kind of, uh, something I worked out quite early on and, and that wasn't really a rou- a pursuit of, like, being a world champion for whatever. Um, so in 2008, I started a business, uh-

Ali Abdaal 8:49 Okay, hang on, sorry. Can we re- rewind a bit? So-

James Hoffmann 8:51 Yeah

Ali Abdaal 8:52 ... you're doing the selling industrial coffee machines-

James Hoffmann 8:55 Yes

Ali Abdaal 8:55 ... and training people in how to use-

James Hoffmann 8:57 Make coffee

Ali Abdaal 8:57 ... industrial coffee machines, and then you discover that there's this thing called the Barista Championships.

James Hoffmann 9:01 Roughly.

Ali Abdaal 9:02 And so w- what was the process from, from the, "Oh, th- there is a thing such as this," to, "I'm going to actually start competing in this thing"?

James Hoffmann 9:09 Pretty, I mean, pretty short. So, uh-

Ali Abdaal 9:10 Mm

James Hoffmann 9:10 ... you know, the community was very small then, so finding people who knew about the competitions was pretty easy. I began to work with people who understood them or judged in them or that kind of stuff.

Ali Abdaal 9:18 Yeah.

James Hoffmann 9:19 Uh, and my boss at the time was hugely supportive of them, and they were doing work to kind of get these competitions happening because they saw that if coffee boomed in the UK, if you sold commercial machines, you would benefit. So their job was very much to kind of fan the flames of getting coffee going in the UK.

Ali Abdaal 9:34 Mm-hmm.

James Hoffmann 9:35 Um, so I was kind of supported very much by that employer, which is kind of unusual, uh, in, in some way, or was back then. I ended up quitting my job before I competed in 2007. I, sort of, i- if you go and tell people what to do for a long time, there is a point at which you should be like, "Just go and do it."

Ali Abdaal 9:52 Mm.

James Hoffmann 9:52 Like, "Stop, stop pre- just go and open a coffee shop," and that's what we were gonna do. So myself and my business partner were gonna open a coffee shop in Shoreditch. We're gonna roast the coffee on site, uh, and, uh, we quit our jobs and, uh, I was gonna compete. I didn't think I would win. Went to Tokyo where the competition was, won. That kind of ruined everything, 'cause suddenly I had to g- you know, there's kind of responsibilities and travel and opportunities when you win.

Ali Abdaal 10:14 Okay.

James Hoffmann 10:15 That pushed us back until 2008, which was kind of good in that we were about to sign a lease just as the, the global economy tanked.

Ali Abdaal 10:21 Mm.

James Hoffmann 10:22 And so we didn't sign a lease, and we were like, "This is, this is just a bad time to sign a 10-year lease." Um, and so we took a, like, a little railway arch in, in... There's loads of railway arches. So s- they were cheap spaces back then in London, and we started roasting coffee there and trying to wholesale it into London cafes, and that worked, and that, you know, that turned into a whole other

James Hoffmann 10:41 thing.

Ali Abdaal 10:41 To what, to, to what extent are independent coffee shops concerned by the Costas and the Starbucks of the world? We're gonna take a very quick break to introduce our sponsor for this episode, who is Brilliant. I've been using Brilliant for the last few years, and they're a fantastic interactive platform with online courses in maths, science, and computer science. My personal favorites are the computer science courses. I think they're absolutely fantastic, and when I was initially applying to med school, I was actually torn between applying to medicine and applying to computer science. And I ended up going with medicine in the end, which I really don't regret, but there's a big part of me that really wanted to continue learning the stuff around computer science, continuing to understand how coding works, and the courses on Brilliant have given me that foundation in computer science which I didn't have before. The courses are really fun, engaging, and interactive, and the way they teach you stuff is based on very first principles thinking. Like, they'll teach you a concept, and then they'll take you through interactive exercises to actually help solidify your understanding of that concept. And it's pretty cool, because they're always updating the library with new courses. For example, there's one they've just released called Everyday Maths, which is kind of like a visual exploration of the maths that we use in everyday life, like for example, fractions and percentages, and putting them in a context that makes it very understandable and certainly very different to the kind of boring way that I was taught maths when I was in school. The courses and lessons are particularly good if you have a busy life with lots of stuff going on, because they really teach you the stuff in bite-sized chunks. So you can always return to a course at a later date if you don't have time to do it in one sitting. If any of that sounds up your street, then do head over to brilliant.org/deepdive, and the first 200 people to hit that link, which is also gonna be in the video description and in the show notes, will get 20% off the annual premium subscription. So thank you so much to Brilliant for sponsoring this episode.

James Hoffmann 12:07 Not hugely-

Ali Abdaal 12:08 Oh, okay

James Hoffmann 12:08 ... unless they're in, um... Most independents see other independents as competition.

Ali Abdaal 12:12 I see.

James Hoffmann 12:13 By and large, uh, they are, they are trading on the idea that you're buying from them something of higher quality, made with better ingredients, made with more care.

Ali Abdaal 12:20 Okay.

James Hoffmann 12:21 Costa is trading on it's convenient and, and relatively inexpensive. You know what I mean? And, and that's a different audience who is prioritizing one thing over another.

Ali Abdaal 12:30 Mm.

James Hoffmann 12:31 Um, and, you know, independents are more focusing on space, experience.

Ali Abdaal 12:36 Like-

James Hoffmann 12:36 It should be a nice place to go and hang out. Right. It's important. It's, you wanna be in a space for an hour, it should be a nice space. I don't particularly enjoy being in most chain coffee shops for an hour.

Ali Abdaal 12:44 Mm.

James Hoffmann 12:44 I don't like the space. They want me to move on.

Ali Abdaal 12:47 Yeah.

James Hoffmann 12:48 And they need me to move on 'cause, you know, we're, uh, that's part of the business model, whereas I think it's, it's kind of different in independent businesses.

Ali Abdaal 12:54 So as a, uh, uh, do you, does the coffee from Costa or Starbucks just taste objectively worse to you than coffee from an independent place generally?

James Hoffmann 13:03 I enjoy it less.

Ali Abdaal 13:05 Okay.

James Hoffmann 13:05 Let's go with that. Like, better and worse, it gets very subjective. It gets easily quite preachy of, like-

Ali Abdaal 13:10 Mm

James Hoffmann 13:10 ... well, this is why I think it's bad or, or judgy or those kind of things. And lots of people enjoy coffee from Starbucks. Millions of people-

Ali Abdaal 13:17 Yeah

James Hoffmann 13:17 ... enjoy coffee from Starbucks.

Ali Abdaal 13:17 Or even coffee from, from, uh, McDonald's [laughs] like drive-through.

James Hoffmann 13:20 Right. And, and, and the fact that I don't enjoy it is not a reflection on them. If-

Ali Abdaal 13:23 Yeah

James Hoffmann 13:23 ... if I say it's, it's, it's worse than what I drink, that is a reflection on them. If I say I don't enjoy it as much, it's not, and that's kind of an important, I think one of the things that kind of has helped me in the kind of, uh, growth on YouTube is, is having an attitude of, like, I'm not trying to judge what you drink, but if you want it to be better, I wanna help you.

Ali Abdaal 13:41 Okay.

James Hoffmann 13:41 That's the, that's the kind of the, the vibe there.

Ali Abdaal 13:43 Interesting.

James Hoffmann 13:43 Um, not this is what you should drink. This is how to be correct. This is what you should order. None of that nonsense. It's just no one likes it. Um, so yeah, I, I, I don't enjoy it as much. It's a different product. It's just a different thing, and it's, it's got a different intended sort of target, price point, process than what you would see at a good independent.

Ali Abdaal 14:02 Okay.

Ali Abdaal 14:03 So it sounds like, I guess with any, even with a, a kind of sort of a business model I'm more familiar with, like starting a YouTube channel-

James Hoffmann 14:09 Mm-hmm

Ali Abdaal 14:09 ... um, it's very hard to do unless you have a way of differencing, differentiating yourself in the market as it were.

James Hoffmann 14:16 Absolutely.

Ali Abdaal 14:17 And even then, it takes a large amount of consistency and effort and sticking, putting a lot of stuff out there and not making much money for a very long time.

James Hoffmann 14:23 Yeah.

Ali Abdaal 14:23 And then once, once you get that product market fit, as it were, you then benefit from kind of good things happening.

James Hoffmann 14:30 Yeah. I, I think there are, there are successful coffee shops out there that make people a good living, and they enjoy running that business.

Ali Abdaal 14:37 Mm.

James Hoffmann 14:37 But I think you've got to want to enjoy running the business.

Ali Abdaal 14:40 Ah, okay.

James Hoffmann 14:41 You know what I mean? Like, and that's the, that's the bit where-

Ali Abdaal 14:42 Kind of like if you enjoy baking, you shouldn't necessarily open a bakery-

James Hoffmann 14:44 Right

Ali Abdaal 14:44 ... because those are two very different things. [laughs]

James Hoffmann 14:46 Absolutely. And, and, you know, I think the best operators are people who love hospitality, and they understand coffee's place within that, as food's place in that, you know, how signage works. That has a place in the experience hospitality, and, and those are the best operators to me. They're also the most profitable, most successful 'cause they're, they're kind of the holistic operator, not just the coffee obsessive-

Ali Abdaal 15:07 Mm

James Hoffmann 15:07 ... who's like, "I'm gonna serve the best coffee in London," and then they're kind of bummed that no one cares because the wait is long, the, it's not comfortable, it's not enjoyable. It, it's not what I need necessarily from the coffee shop. I don't need every time I go out for coffee to, for it to be the single best cup of coffee of my life.

Ali Abdaal 15:23 Mm.

James Hoffmann 15:24 I'm often with someone. I want, I want coffee as a social lubricant. I want it as a little caffeine. I want it maybe as an intellectual experience of like, ooh, this is interesting to taste. But, you know, it, it can't be the sole focus of a business, and I think it's taken London coffee shops and globally coffee shops maybe 15 years to work that out.

Ali Abdaal 15:40 Oh. Yeah, there's, um, a lot of thoughts that, that sparked through, through that. Have, have you, have you come across, uh, The E-Myth?

James Hoffmann 15:48 Oh, yeah.

Ali Abdaal 15:48 Oh.

James Hoffmann 15:48 Big, big, uh, that was-

Ali Abdaal 15:49 [laughs]

James Hoffmann 15:50 That was a super early read for me. So I, to go back to the sort of starting a business-

Ali Abdaal 15:55 Mm

James Hoffmann 15:55 ... I was a classic, uh, I was a coffee obsessive. I was like, "Well, I understand coffee. I'm good at making coffee. I should open a coffee business."

Ali Abdaal 16:02 Mm.

James Hoffmann 16:03 And, uh, very quickly it was like, oh, then there's the business of business.

Ali Abdaal 16:07 Mm.

James Hoffmann 16:07 And, uh, how rapidly can I get good at the business of business to build the sort of the machine underlying that? And, and I didn't have time to do anything other than read, uh, and, and read I did. And so yeah, uh, Michael Gerber's book, I think, was, uh, super, super informative, very relevant to me, and further encouragement to, to work on the business or in it, uh, which becomes slightly glib when you say it, but it's so, so important.

Ali Abdaal 16:30 Yeah.

James Hoffmann 16:30 Like, I, I, you know what I mean? I can't emphasize enough the, the need to get out from the, the, the, the daily of the manufacturing of a business-

Ali Abdaal 16:37 Yeah

James Hoffmann 16:37 ... whatever it is that you make and sell and do, into a, a, a higher level think, uh, or sort of thought process to understand the model, the mechanics of the... It's a machine, right?

Ali Abdaal 16:47 Yeah.

James Hoffmann 16:47 You're tweaking cogs, and you're, you're kind of making it work just nice. That's hard, and you need to get good at that, and that has nothing to do with coffee.

Ali Abdaal 16:54 Yeah.

James Hoffmann 16:54 Has nothing to do with coffee, and everything to do with understanding everything from people through to sort of marketing, sales, economics, finances, reading a balance sheet, understanding the impact of decisions you make on your balance sheet, on your future, on your cash flows, all of that sort of stuff.

Ali Abdaal 17:11 Mm.

James Hoffmann 17:11 I really enjoyed it, which is fortunate. Uh, lots of people are immediately turned off and go to the safe space of the thing that they know and care about and, and that's, you know, not healthy for the business long term.

Ali Abdaal 17:22 Yeah. Yeah, I think that's an insight that so many people have o- only once they have started a business.

James Hoffmann 17:27 Yeah, yeah.

Ali Abdaal 17:27 When you realize, oh, actually, I don't know, like b- I guess, I guess YouTube is a d- a, a different example because you do actually make money from it, but, like, you know, j- just being good at making coffee does not, does not make me a good owner of a or, or manager or operator of a, of a coffee business.

James Hoffmann 17:43 Not at all.

Ali Abdaal 17:43 Um, and so I f- I first read The E-Myth I think in, like, 2019 or something, and I'd, I'd had a business at that point that'd been going for five years, and I was like, my God, I wish I'd read this book five years ago 'cause all of the mistakes under the sun.

James Hoffmann 17:55 Oh, yeah.

Ali Abdaal 17:55 And, and the first time I came across that phrase that, you know, you should be working on the business, not in it, I was just like, my mind was completely blown, and now it's just so, it, it feels so standard to me that I almost can't remember a time where I didn't know that that was a thing.

James Hoffmann 18:06 Right.

Ali Abdaal 18:07 And even now when kinda coaching YouTubers and stuff, this is the thing I try and encourage more creators to think a little bit more businessy 'cause I think creators are very easy at thinking like, "Oh, it's about the craft. It's about the video I want to make."

James Hoffmann 18:17 Sure.

Ali Abdaal 18:18 "It's about how it makes me feel." Which is fine, but I also, I think if you ha- if you want to turn it into a business, there is a level of let's actually approach this from a, a slightly more businessy angle.

James Hoffmann 18:28 It's, it's, you know, coffee- Has historically had a difficult relationship with profit because, you know, a lot of, uh, specialty coffee ran as a kind of counterculture to commercial coffee-

Ali Abdaal 18:41 Yeah

James Hoffmann 18:41 ... which is coffee for profit.

Ali Abdaal 18:43 Yeah.

James Hoffmann 18:43 Right? And so, uh, when specialty coffee emerged, it, it very much was like the it's not about the money, it's not about profit, it's about the coffee, and to focus on the money was not to focus on the coffee, and that was to dilute the purity of what you were trying to do, and it made you something of a charlatan or, or, or just someone looking to extract money from the system, which is not what it's about. And, you know, the ethics of coffee aside and the challenges there aside, you know, it, it took me a little while to get comfortable with the idea of, like, I need profit to do the things I wanna do. Like, it's the enabling factor in being able to pay people properly, hire more people, do more interesting stuff-

Ali Abdaal 19:21 Yeah

James Hoffmann 19:21 ... improve what we do. You know, however you feel about the, the, the model of capitalism aside-

Ali Abdaal 19:27 Yeah

James Hoffmann 19:27 ... in this model, I need to make profit, and good profit, to have a sustainable business.

Ali Abdaal 19:33 Mm.

James Hoffmann 19:34 And that, you know, I, I, I think a lot of people certainly in the coffee industry would've heard the whole, like, you know, "You need to make profit," be like, "No, no, no, I need to make great coffee, I need to find my c- my customers, I need to build the relationships," and you're like, yeah, but, but what keeps you going, what builds a sustainable business is, is an underlying profit. You, you can choose to focus too much on that, sure, and you can compromise your product, but, but they can be mutually beneficial if you kind of do it right, if you're reinvesting, if you're, if you're, you know, creating profit for a purpose other than personal, you know, uh, gain or-

Ali Abdaal 20:07 Yeah

James Hoffmann 20:07 ... that kind of

James Hoffmann 20:08 stuff. Um-

Ali Abdaal 20:08 Yeah, 'cause I guess profit is often seen as a bit of a dirty word.

James Hoffmann 20:11 It is-

Ali Abdaal 20:11 Yeah

James Hoffmann 20:11 ... in many situations, right?

Ali Abdaal 20:12 [laughs]

James Hoffmann 20:13 Like, lots of terrible things are done in the name of profit. Uh, absolutely. Like, loads of big businesses do terrible things for, for the benefit of shareholders, for to maximize profits, and I think that's, that I'm uncomfortable with that.

Ali Abdaal 20:25 Mm.

James Hoffmann 20:25 But at the same time, you know, we end up in this very binary sort of world of black and white, profit is good, profit is bad. Well, it's sort of, it's sort of agnostic of that. What you do with it can be good or bad-

Ali Abdaal 20:35 Mm

James Hoffmann 20:35 ... I think.

Ali Abdaal 20:35 Yeah.

James Hoffmann 20:36 But there shouldn't be the kind of shame that a lot of bus- businesses have around making money in order to do good things-

Ali Abdaal 20:42 Yeah

James Hoffmann 20:42 ... is how I feel about it. You know, I, I think I got very interested in the idea of, um, sustainable businesses, you know, 'cause I, how do you build a business that, that, uh, exists outside of the people that work within it?

Ali Abdaal 20:55 Mm.

James Hoffmann 20:56 Um, and, and this in coffee is a particular challenge because, go back to this and I'll, I promise to make sense of it. You do loads of barista training. As a, as a coffee roaster and supplier, you train loads of people, and what you end up feeling is that you're just pouring water into a bucket with a hole in it because you train a bunch of people, they leave because they're just there for a little bit, uh, and y- the business itself doesn't retain the knowledge. And, and you look at businesses that are hundreds of years old, how did they, how did they exceed th- the will or the ideas of one person a- and become this thing where they are almost a living entity themselves? And you get into the boring answers of, like, systems and structure and that-

Ali Abdaal 21:33 Yeah

James Hoffmann 21:33 ... you, you build a business that is able to retain knowledge independent of the people that work within it.

Ali Abdaal 21:37 Mm.

James Hoffmann 21:37 And that isn't a bad thing. That doesn't strip people of their value or utility. That makes their job easier, more enjoyable, uh, 'cause they can still access that information and knowledge, but when they leave, half your business doesn't walk out the door.

Ali Abdaal 21:48 Yeah.

James Hoffmann 21:49 That for me became a very, uh, interesting sort of thing to think about of, like, how do you treat it like a, a, a, a thing that can learn independently, right? Can you teach a business? And we got very interested in this with a bunch of customers of, like, okay, we need to stop just training our baristas. We'll keep doing that, but we need to work with you in a way of collecting and systemizing the knowledge that we are delivering so that it's yours regardless of who's executing it. And that sounds dehumanizing, but it, but it, I don't think it is. I think it's, it's about creating actually a much healthier environment, uh, for, to work in, where you don't feel like you, you can't leave because you'd break the business. That's a really... A- and lots of people have felt that way of, like, "I can't leave when I want to. I wanna do something else, but I feel stuck here because I know too much of this company rests on me," and that's an awful thing to do to someone. It's not good retention. That's a bad, it's a bad thing.

Ali Abdaal 22:39 Mm.

James Hoffmann 22:39 Um, so yeah, I, I, I think not enough people talk about that, the idea of, like, you know, be it a founder or key people or, you know, the business itself has to retain information, knowledge. It has to have a purpose bound, sort of into it to be sustainable long-term.

Ali Abdaal 22:56 We are gonna take a little quick break from the podcast to introduce the sponsor of this podcast, which is Curiosity Stream. If you haven't heard by now, Curiosity Stream is the world's leading documentary streaming subscription platform founded by John Hendricks, who's the founder of the Discovery Channel. And on Curiosity Stream, they've got hundreds of really high quality, high budget documentaries covering all sorts of things from science and technology to history and ancient civilizations to food and medicine and meditation and, like, all of the stuff in between. Now, the really cool thing about Curiosity Stream is that they support independent creators, and so there is this service called Nebula, which you might have heard of. It's an independent streaming platform that's run by me and a bunch of other creators. And on Nebula, we can put content like videos and behind the scenes and long form, longer form stuff without worrying about things like the YouTube algorithm. And so for example, on Nebula, I have a bunch of exclusive content that you won't find anywhere else. We actually have the original Season 0 of the Deep Dive podcast, which started off as, like, remote Zoom live streams during the pandemic, and that is only available on Nebula. You won't find it anywhere else. So if you enjoy the sorts of conversations we have on Deep Dive, you might like to see, you know, a whole year before we started this podcast properly once the pandemic stopped, what sort of conversations I was having with people on Zoom. I've also got a series of videos on Nebula called Workflow, which is where I deep dive into some of my favorite productivity tools. And on Nebula, you also get early ad-free access to my videos and videos from a bunch of other creators that you might be familiar with, like Thomas Frank and Tom Scott and Legal Eagle and Lindsay Ellis. And the really cool thing is that because Curiosity Stream loves supporting independent creators, we've got a little bundle deal, which is that if you sign up for an account on Curiosity Stream, you actually get free access to Nebula bundled with that. So if you head over to curiositystream.com/deepdive, then for less than $15 a year you can get full access to Curiosity Stream's incredible library of documentaries and also free access to all of the stuff on Nebula bundled with that. So head over to curiositystream.com/deepdive to get the bundle deal. So thank you, Curiosity Stream, for sponsoring this episode. Yeah, I think this is again one of the, one of those things that you only really start to appreciate once you have a business.

James Hoffmann 24:45 Mm.

Ali Abdaal 24:45 And before, uh, when I was reading about businesses, system, structure, processes, HR, values, vision, what the hell is all that bullshit? And then as soon as you start like, oh, okay, now, now I see what's, what's happening. Now I see why I, I like it's, you know, with, with, with my first business, it's bad that I'm, I am the one staying up until 12 mi- midnight making sure that our book deliveries for our course, which is happening in Manchester tomorrow, have actually arrived because I'm the only one who knows how to deal with the supplier. That's probably bad. [laughs]

James Hoffmann 25:13 Probably bad.

Ali Abdaal 25:13 And this is, uh, fi- figuring out all these things of like, oh my God, [laughs] like what started off as me enjoying teaching courses for medical applicants, now turning into a, tu- turning it into a business is actually a lot of the, quote, "boring stuff," which then, at least for me, became the fun stuff when I realized how much there was to learn and how much of a kind of, uh, what the learning curve was like and that every new book I was reading, I was just, my mind was blown, like, oh my God-

James Hoffmann 25:35 Yeah

Ali Abdaal 25:35 ... businesses have been solving these problems, problems for decades, if not hundreds of years. There, there is a system behind this and I can learn the system. Um, yeah.

James Hoffmann 25:42 I think that's the, that's the oft- you know, I think for me though, I read loads and loads and loads of books, but there was still the kind of lag of the conversion of information to knowledge through the, the application of it. Do you know what I mean? Like it took me doing it, messing it up, doing it again, messing it up, to kind of get to the point where like, okay, now I truly understand the ideas here and, and how they work. Uh, yeah, it's, it's a problem.

Ali Abdaal 26:02 Yeah. Like it's all, it's all well and good to read a book about hiring, but until you've done it [laughs] and made mistakes a bit. [laughs]

James Hoffmann 26:06 Yeah, absolutely. And you know, like, uh, you know, I come from, I suppose, a family of entrepreneurs, so I, I was fortunate in that I had, in my family, people to be like, "Hiring is gonna be the hardest bit." Uh, you know, and all the advice they gave me, I was like a, a little bit blase about at the time. They're like, "It's gonna be really hard. Starting business is really hard." And you're like, "Really hard. Got it. Great." And then you're like a year in, you're like, "This is really hard. Why didn't you tell me?" And they're like, "What's wrong with you?" Uh, and they're like, "Hiring is gonna be the hardest bit and, and it's fi- and it stays the hardest bit-

Ali Abdaal 26:36 Mm

James Hoffmann 26:36 ... forever." And you're like, "Nah, uh-uh."

Ali Abdaal 26:38 "Nah, how could it be? Can't be tough. Good vibe." Yeah.

James Hoffmann 26:39 And the first, we had some really great first few people.

Ali Abdaal 26:41 Yeah.

James Hoffmann 26:41 And you're like, "This is fine. This is easy." And you're like, "No, no, no." No, you learn a bunch of awful lessons and, and, and, um, you know, it still remains the hardest part and, and especially if you wanna... You know, I, I, I think that there are businesses out there that still want to find a human, extract the value, on you go.

Ali Abdaal 26:59 Yeah.

James Hoffmann 27:00 You, you know what I mean? That's not, that's for us, not that interesting. We're interested in development, enjoying where you work, satisfaction, all of that kind of stuff. Uh, be, you know, it's the, the, the slightly trite line of like we wanna be the place where you do your best work.

Ali Abdaal 27:11 Mm.

James Hoffmann 27:12 But I think that's very true for what we certainly aspire to, but that obviously it doesn't make things harder, it just changes the challenge-

Ali Abdaal 27:17 Yeah

James Hoffmann 27:17 ... and, and changes the sort of focus.

Ali Abdaal 27:18 It does. Okay, so let's go back to, to 2008. You're 27-ish years old.

James Hoffmann 27:23 Ish.

Ali Abdaal 27:23 Ish.

James Hoffmann 27:24 I think. Yeah, probably.

Ali Abdaal 27:24 James Hoffmann deciding, "I've become World Barista Champion."

James Hoffmann 27:27 Mm.

Ali Abdaal 27:27 "I'm gonna start a coffee shop."

James Hoffmann 27:28 Yeah.

Ali Abdaal 27:29 What's like the dream there? Like, is this gonna become the next Costa or the next Starbucks? Is it gonna become like independent pro? Like what, what, what's going through your mind to make you decide, "Do you know what? Starting a coffee shop is the way forward."

James Hoffmann 27:40 I often think about the staggering lack of long-term thinking that I had-

Ali Abdaal 27:44 [laughs]

James Hoffmann 27:45 ... uh, and how that might have saved me multiple times.

Ali Abdaal 27:48 Oh, okay.

James Hoffmann 27:49 Um, I think, you know, we had, when we started the company, we, we had a five-year plan-

Ali Abdaal 27:53 Mm

James Hoffmann 27:53 ... that was kind of revenue based of like, we wanna get to this kind of a revenue, and if we get there in five years, that'd be really super successful. Um, and we'll be really happy with that and, and that would be it, and we'll do that through wholesaling more coffee. And I think at the, once we focused on coffee roasting and not coffee shops because the economy tanked, forget about the shop. Let's roast simpler, lower overheads.

Ali Abdaal 28:14 You become like a B2B service almost, right?

James Hoffmann 28:16 Super B2B service. Uh-

Ali Abdaal 28:17 Super, like just providing roasted coffee beans to-

James Hoffmann 28:19 Right

Ali Abdaal 28:19 ... Starbucks or equivalent.

James Hoffmann 28:20 Up, up until the pandemic, we were still 80% B2B as a business.

Ali Abdaal 28:25 Oh, okay.

James Hoffmann 28:26 Um, and then obviously that changed when all the businesses closed. [laughs]

Ali Abdaal 28:28 Okay. But, but just on, on, on that front-

James Hoffmann 28:30 Yeah

Ali Abdaal 28:30 ... like I've, I've never once had the dream of I wanna become a, you know, a coffee roaster selling coffees to companies. I don't think many people have a d- like, people have a dream of starting a coffee shop, but not a dream of becoming a coffee roaster, I think.

James Hoffmann 28:41 Sure.

Ali Abdaal 28:41 Like how did you go down that route?

James Hoffmann 28:42 I mean, most people, very few people dream about coffee generally. It's a weird industry.

Ali Abdaal 28:45 [laughs] Sure.

James Hoffmann 28:45 No one has aspirations. People aspire to work in wine or, you know, whiskey or, or-

Ali Abdaal 28:49 I know. I've, I've, a bunch of my friends wanna start coffee shops or, or bakeries or restaurants.

James Hoffmann 28:53 It's different. Or r- right. They, they wanna have a social space. That's different.

Ali Abdaal 28:55 But, but no one thinks, "I want, I wanna supply flour to, to bakeries." They think, "I wanna start the bakery."

James Hoffmann 28:59 Yeah, but if you get a bit of a sickness for wheat, uh-

Ali Abdaal 29:02 [laughs] Yeah

James Hoffmann 29:02 ... and grains, then yeah, I can totally understand how you would wanna just, you know, supply some flours for bakeries.

Ali Abdaal 29:06 Okay. If you really get into the kind of, the, the industry of wheat and you understand all about it.

James Hoffmann 29:10 Right. Well, or the product-

Ali Abdaal 29:10 Yeah

James Hoffmann 29:10 ... and you get interested in provenance and flavor and terroir and traceability and taste of place and all of these things.

Ali Abdaal 29:15 Yeah.

James Hoffmann 29:15 That can totally suck you into ingredient obsession-

Ali Abdaal 29:18 Oh, okay

James Hoffmann 29:18 ... for want of a better word.

Ali Abdaal 29:19 So when you're a layman, you wanna make the shop. When you're a pro, you wanna make the product that supplies to the-

James Hoffmann 29:24 I don't, I don't think it's that

Ali Abdaal 29:24 ... or, or think about that. Yeah.

James Hoffmann 29:25 I think it's, you know, it's a different sort of obsession or a different-

Ali Abdaal 29:28 Okay

James Hoffmann 29:28 ... sort of passion, I guess. Um, so okay. So w- what we wanted to do super early doors is, uh, we had been part of this global culture of specialty coffee that hadn't really kicked off in London. You know? It, it, we maybe talk about this later. I'd been part of it online for a number of years, and I'd felt part of a global specialty coffee community-

Ali Abdaal 29:47 Mm

James Hoffmann 29:47 ... but didn't really exist in London back then. There was like Monmouth who'd been going since 1977. Uh, and there was like a little place called Flat White in Soho, and that was sort of the beginning and end of coffee in London in 2008. That's unfair to a couple places, to Plinsson and Sons and so. But there wasn't much. For a city of 8 million people, there wasn't much, and so our goal was not to sell loads and loads of coffee. Our goal was to foster a community of specialty coffee in London to help drive the consumption of like a, of, of good coffee, right? We wanted great coffee to be part of this city's experience and DNA, you know? That was, so we named the business Square Mile because between 1650 and 1750, London was the greatest coffee drinking city in the world. It had a totally unique culture. We had more coffee shops per capita than anywhere else in the world. We had this really unique culture here, and we didn't in 2007, 2008. We had the Americanized Italian version of coffee, but we didn't have something that was London's coffee culture, and we wanted to sort of help foster that, and we did that through working with cafes and, and you know, that was the route that we did it. Uh, and so yeah, we, we kind of grew as a wholesaler and our, our job was to give good ingredients and, and, uh, help ... coffee shops succeed, 'cause if they succeeded, we succeeded.

Ali Abdaal 31:00 Yeah.

James Hoffmann 31:00 They sold way more coffee, so did we. So we were motivated to do a good job with product, and then in our customer relationships, you know, to help them win. That was the, the goal. And if they won, great. And, and that also meant helping competitors win if they didn't use our coffee. More shops meant more culture. Rising tides lift all boats kind of thing.

Ali Abdaal 31:20 Mm.

James Hoffmann 31:20 Very true with coffee shops back then. Um, so yeah, that was the kind of goal.

Ali Abdaal 31:25 How, how much was culture the main, like, we want to develop this coffee culture versus I need a job to make money? [laughs]

James Hoffmann 31:32 Uh, so I, I, it wasn't necessarily, early days it was community not culture was the thing. We wanted to bring people who felt weird about coffee together, and then, you know what I mean?

Ali Abdaal 31:40 Yeah.

James Hoffmann 31:41 Like, make them coherent. Um, we figured that was a great way to grow the business, but also it was what we wanted.

Ali Abdaal 31:48 Mm.

James Hoffmann 31:48 We were people who were weird about coffee who wanted to find like minds, and, uh, it, it was a really strong, really coherent community. And the advantage of that is that if you are a deeply passionate person, if you're a lone voice, you go right at the back end of the news right before they do the summary again with the, "Hey, check out this one weird person. He's really into, I, I don't know, water bottles. And he's gonna, you know, and he's really into it, uh, and here's this weird person." And you're like, "Yeah, I'm really into water bottles." And, and you're like, "How is, how nice is that? How hilarious." And they treat you as the one lone obsessive. But back then, like, magazines like Time Out or the, you know, uh, uh, the newspapers would, would talk to the one crazed person about coffee who'd then be like, "You gotta go and talk to these five other people." And they'd talk to them, and they'd talk to those five other people. And it, it made the sort of the voicer, the voices, uh, of the community much louder and more coherent, and suddenly the media paid much more attention to coffee because there was this coherent voice of coffee can be good-

Ali Abdaal 32:44 Yeah

James Hoffmann 32:44 ... coffee can be better, coffee can be interesting. And that really supercharged London, and London just exploded compared to most of the rest of the world. It had, you know, density, it had enough money, uh, but it also had this really coherent community, and London led the world for a little while in terms of coffee culture. Everyone else caught up. I mean, Melbourne was way ahead, Australia, all that sort of stuff, but London had this really interesting explosion, certainly in Europe or also the Northern Hemisphere, uh, that made it a focal point for a lot of other places.

Ali Abdaal 33:10 Hmm. Okay. Question on that front. Um, when, when you're starting a business, like now that you've done this I think like a few, a few times and you've been in, in the, in the game for, for a while-

James Hoffmann 33:20 Yeah

Ali Abdaal 33:20 ... uh, it's, it sounds like you had a vision or a mission that was bigger than just, "I wanna make money."

James Hoffmann 33:27 Sure.

Ali Abdaal 33:27 Um, in that you wanna create this coffee community. Um, how important do you think it is if, let's say someone wants to quit their job and start a business today, for them to have a wider altruistic somewhat vision behind it that's other, other than I need a business to make money 'cause I wanna try and quit my job and do something that's fun?

James Hoffmann 33:44 If they wish to derive satisfaction from the work they do, I think it's essential. 'Cause earning from, I mean, for a certain sort of mind, just, just extracting wealth is satisfying. They see the number get bigger and that's-

Ali Abdaal 33:55 Mm

James Hoffmann 33:55 ... satisfying enough. But for most people it's, it's quite hollow and empty and unsatisfying, and they end up doing work they don't like 'cause the number goes up but they don't feel good about it and they look for something else. So I think having a purpose or a meaning behind it for me is essential. Like, what am I... You know what I mean? I, I, I, I don't really believe in legacy, but I, uh, I think it's a shame not to, to leave something better than you found it. That seems, you know what I mean? Like, this, the decent thing to do. So I, I, I wanna improve things or be, have a positive impact, and so that's driving a lot of the decisions I might make around starting businesses or, or doing stuff like that. And I would say the people who enjoy their work the most, I, I've met miserable billionaires.

Ali Abdaal 34:32 Yeah.

James Hoffmann 34:33 You know what I mean? Like, miserable people 'cause they're just, what, the number's very big. So what now? Slightly bigger? Like, what is that? That is, you know, and they're just miserable. Uh, I have no aspiration for that. Um, so yeah, for me I think it's essential. If you wanna enjoy the work you do and, and feel like it has meaning and purpose-

Ali Abdaal 34:50 Yeah

James Hoffmann 34:50 ... there has to be vision.

Ali Abdaal 34:52 Nice. And is this how you were feeling in the early days as well, or is this something, a philosophy that's developed over time?

James Hoffmann 34:56 That's a good question. I, I think, um, like, uh, I, I'm, I'm aware that I grew up middle class, and so I grew up with a safety net in that I started a business and I was never gonna go to, to zero.

Ali Abdaal 35:10 Mm.

James Hoffmann 35:11 You know what I mean? And, and I think that that's always worth noting in people like me who took risks, started businesses. There was a safety net. I was gonna be okay and I, you know what I mean? That, that changes your relationship with money. I, I think if you don't have a safety net, then I, I, I'm much more open to the idea of like, "No, I need money. I need to build my safety net 'cause I don't have one." Um, but, but I was aware I did, and so for me early, uh, you know, I was a very passionate person about the product. I just really, uh, I really enjoy coffee.

Ali Abdaal 35:38 Mm.

James Hoffmann 35:38 I get very excited about it, and so that was always a driver for me. But I also like learning stuff, and so, you know, learning to build a business was satisfying, learning to sell or market or do the other things that went alongside that. Some, like with YouTube now, like learning to shoot better films, uh, do better audio, light properly, all of those things, I enjoy that process. That's just part of me. I like the, the constant obsession.

Ali Abdaal 36:00 Yeah.

James Hoffmann 36:00 It's just, it's, it's just very satisfying to, to get better at something. I like that. I, I'm always gonna like that. It is what it is. Um, so yeah, I, I, I, I think I wasn't super money focused. I didn't earn very much from the business for a long time. And, and, um, you know, e- even now I, I, I think my, my... Because we've always been bootstrapped, so the coffee company's bootstrapped, everything else has really been bootstrapped. I, I, I have, um, left it in a lot of the time. Like, I, I, I like, uh, especially going into pandemics or going into whatever the economy's gonna do now, having cash inside a business is a good thing to me. Uh, and that's just 'cause I don't like to be responsible to other people 'cause I suppose I have a bit of a control freak aspect to me. Uh, and, and it's not I'm a- I'm against investment or I'm against, you know, raising money in different ways, but I just like the control. It's just how we've always done it, like we've, we've done everything out of cash from the beginning. And you would argue, and I would hear you and say you're probably right, that was not the best use of that money. That we could've, you know, uh, borrowed, leveraged the business a little bit, borrowed a ton of cash, grown faster, done all those things. But if the goal is, the goal is to make better stuff and feel good about it, then that was not a route we needed to go. So, so yeah, like, uh, historically, uh, you know, we can talk about money I guess a bit. I've never really pulled tons out of the business, uh, which is maybe foolish. You know what I mean? I never really cashed the chips in, so to speak. But I, you know, I, I'm interested in the businesses that, that I work with doing the work and being long-term sustainable.

Ali Abdaal 37:34 Yeah.

James Hoffmann 37:34 So, so yeah, that's been the, the general approach.

Ali Abdaal 37:36 Interesting. Yeah, there's, um, a, a good book by, uh, Matt Mochary, the, the, The Great CEO Within. Um, one of the things he says is that, 'cause he, he, he does a lot of coaching for, like, uh, tech founders, Silicon Valley types. Um, and he says that basically people wanna go- p- people wanna work or, or start a business for three reasons: to make money, to have fun, and to help people. Um, and, but if you ask them that if, if they could only pick one, it would be to make money. [laughs] At that point, once they've ticked that box, if they could only pick one, it would be to have fun generally. And once they've ticked those two boxes, at that point people then s- shift to, to the, the helping people thing.

James Hoffmann 38:11 Interesting.

Ali Abdaal 38:11 And I think that's certainly true for me. Um, like, it's, it's very nice that right now the thing that I'm doing does all three. Um, but I think, yeah, when I was starting out, I was like, you know what? Affiliate marketing, selling T-shirts on the internet, I'll do whatever I can to make money. [laughs] Then it was, "Cool, I'm making money. Now I'll do whatever I can to have fun while doing this." And it's only kinda now that I've done it for a few years that I'm now shifting to act- to, to, to realize this point about how having a wider mission is ultimately the thing that makes it most satisfying.

James Hoffmann 38:40 Yeah. I think, I think purpose is kind of everything for me and the, the, the bit, you know, I, I suppose of have enough time to look back on, what are we, 13 years old or whatever it was?

Ali Abdaal 38:50 Yeah.

James Hoffmann 38:50 Like, the... It's the same, it's ultimately it's the same as YouTube metrics. Like, subscriber counts are deeply unsatisfying. Hitting a million subscribers isn't rewarding in any way. Not, not a single way. It's, it's, it's, y- you know it's coming deep down when it happens, and then you're like, "Oh, yeah, but it really doesn't feel like anything." Uh, and it's the same sort of thing for me i- in, in business, the same sort of thing. Like, like, a, a big, fat balance sheet at the end of it, sure, good, fine, whatever. It's, it's an indicator. You, same as an audience, you could do something with it if you want to, but it's what you're gonna do with it that's more interesting and more satisfying than, than the accrual of the number.

Ali Abdaal 39:26 Mm.

Ali Abdaal 39:28 So let's go back to, um, coffee roasting business just getting off the ground.

James Hoffmann 39:32 Yeah.

Ali Abdaal 39:33 Uh, just again, 'cause I'm totally n- a naive to this space, if I decided tomorrow I wanna make the Ali Abdaal coffee roasting business-

James Hoffmann 39:39 Yeah

Ali Abdaal 39:40 ... what, what does it take to make a coffee roasting business? [laughs] As, like, very, from a very broadly.

James Hoffmann 39:46 Are we talking, like, what, what's the cost of-

Ali Abdaal 39:48 Yeah, like, what, what-

James Hoffmann 39:48 ... like, the CapEx of going, of getting going?

Ali Abdaal 39:49 Yeah, I, I guess, like, how much would it cost to get started, and what do you actually have to do?

James Hoffmann 39:52 [laughs]

Ali Abdaal 39:53 Do you have to go to, like, Colombia and buy coffee, or?

James Hoffmann 39:56 No, you have to. Uh-

Ali Abdaal 39:56 [laughs]

James Hoffmann 39:57 You probably shouldn't. Um-

Ali Abdaal 39:58 Okay

James Hoffmann 39:59 ... that's complicated. We won't go too far down that rabbit hole, but no, it, like, there's a lot of coffee tourism that happens under the guise of buying, but it's really-

Ali Abdaal 40:05 Oh

James Hoffmann 40:05 ... like, anyway.

Ali Abdaal 40:06 What about fair trade? But, like, I guess. [laughs]

James Hoffmann 40:08 It's a whole other conversation.

Ali Abdaal 40:09 It's a whole, it's a whole nother helping.

James Hoffmann 40:10 So you would need a coffee roaster, a machine that roasts coffee.

Ali Abdaal 40:13 Okay.

James Hoffmann 40:13 They will co- it depends how big you want it to be. Um, per, uh, the old metric used to be per kilo of capacity would cost you about 1,000 pounds. That's now more like 2,000 pounds. So if you want a 15-kilo roaster, that's probably 30 grand. Um-

Ali Abdaal 40:28 And so this is roasting 15 kilograms of raw coffee beans-

James Hoffmann 40:31 Of raw coffee at a time

Ali Abdaal 40:31 ... in one go-

James Hoffmann 40:32 Yep

Ali Abdaal 40:32 ... to turn it into those nice brown beans that you see in the coffee shops.

James Hoffmann 40:35 Indeed. And-

Ali Abdaal 40:36 Ah

James Hoffmann 40:36 ... so, so that's the sort of, the, the biggest capital expenditure is probably the roaster. If you're in London, you probably need to treat the smoke coming from the roaster 'cause no one likes that, so that might be another 10 through 20. Can be quite a lot more, but there's-

Ali Abdaal 40:51 Oh.

James Hoffmann 40:51 Yeah. Uh-

Ali Abdaal 40:52 Oh, what, to make the smoke less bad for the environment?

James Hoffmann 40:54 Yeah. We, you either sort of react it away or in a feat of pure elegance, you burn it. Uh-

Ali Abdaal 41:00 [laughs] Okay. You burn the smoke.

James Hoffmann 41:01 It's the, it's just the dumb- We, yeah, we burn smoke. Um, which is n- net better than, th- in terms of greenhouse emissions, burning smoke is better than just letting the smoke out-

Ali Abdaal 41:11 Yeah

James Hoffmann 41:11 ... 'cause there's things in the smoke that are very bad, worse than carbon, uh, carbon dioxide. Uh, but yeah, it's, it's not, y- you try and build them as efficiently as you can, but yes, you have what's called after burners that burn smoke. And owning these is the dumbest thing you'll ever do. But it, it is what it is.

Ali Abdaal 41:24 [laughs]

James Hoffmann 41:26 Um-

Ali Abdaal 41:26 Uh, are electric roasters a thing?

James Hoffmann 41:27 Electric, but they still produce smoke, and it, it's the roasting of coffee itself. As, as it goes brown, smoke is a byproduct.

Ali Abdaal 41:33 Oh.

James Hoffmann 41:33 So there, it's, it's inevitable, and the bigger the roaster, the more the smoke. So you need-

Ali Abdaal 41:37 How, how big is a coffee roaster? Like, if we wanted to make one here?

James Hoffmann 41:41 How big would... Like, uh, so a 15-kilo roaster would occupy this, the sort of space of this rug, so it's not huge.

Ali Abdaal 41:47 Oh.

James Hoffmann 41:47 Uh-

Ali Abdaal 41:47 It's still pretty big. Like-

James Hoffmann 41:49 Yeah

Ali Abdaal 41:49 ... it's hard to fit into a bedroom, like, as a-

James Hoffmann 41:50 Yeah

Ali Abdaal 41:50 ... side hustle business. [laughs]

James Hoffmann 41:51 Yeah, yeah. I did once go to someone's, uh, uh, Brooklyn loft conversion, and they'd somehow managed to get a 15-kilo roaster-

Ali Abdaal 41:58 Nice

James Hoffmann 41:59 ... into their, uh-

Ali Abdaal 42:01 Brooklyn loft

James Hoffmann 42:01 ... yeah, which is highly illegal. Uh-

Ali Abdaal 42:03 Okay

James Hoffmann 42:03 ... but it was pretty impressive. Um, anyway, uh, so you need, you need roasters, a way to treat the smoke. You need, um, machines to package coffee, at least to weigh coffee. You can, don't have to f- have fancy packaging and just buy bags and put coffee in, but you need to weigh it properly. Uh, and-

Ali Abdaal 42:18 Weigh properly? Like, beyond just a measuring scale?

James Hoffmann 42:21 Uh, you, it would need to be trading standard certified. You'd need to, you know what I mean? If you were selling by weight, at some point you need to prove the weight is the weight.

Ali Abdaal 42:27 Oh.

James Hoffmann 42:27 Buying a scale on Amazon and using that is not-

Ali Abdaal 42:29 It's not allowed

James Hoffmann 42:29 ... adequate for trading standards unless it's properly calibrated and you have a calibration process. It happens now and again that roasters don't pay attention to calibration and end up selling you 230 grams instead of 250. That's illegal. Uh, you get in trouble with trading standards for that if you get caught doing it, 'cause-

Ali Abdaal 42:45 Well, what does trading standards do? Like, what, what, what do they do?

James Hoffmann 42:47 Trade, trading standards is the body in the UK that regulates how people trade and the units they trade and that kind of stuff.

Ali Abdaal 42:52 Oh, okay.

James Hoffmann 42:52 So if, if, if someone is selling you 230 grams of coffee in a 250-gram bag, that's who you'd r- report them to.

Ali Abdaal 42:58 Oh, okay.

James Hoffmann 42:58 And they would investigate. They probably wouldn't, if it was a mistake, they probably wouldn't. But, you know, obviously that's a very cheeky way to make money. You can short someone a product, they're probably not gonna check. You know what I mean? When was the last time you checked how much granola came in the box?

Ali Abdaal 43:10 [laughs] Yeah.

James Hoffmann 43:10 You probably don't. Uh, so-

Ali Abdaal 43:12 You know, like, my, my, my 50-gram bag of Walkers or whatever is... [laughs]

James Hoffmann 43:15 Right. You know, there's a lot of trust there.

Ali Abdaal 43:17 Yeah. [laughs]

James Hoffmann 43:18 Um, so, but, uh, you know, onto-

Ali Abdaal 43:19 So you need some kind of special calibrated scale and thingy so you can tick the box of regulation.

James Hoffmann 43:23 You are doing this thing.

Ali Abdaal 43:24 Nice.

James Hoffmann 43:24 Um, anyway, that's very boring. I'm sorry. Uh-

Ali Abdaal 43:26 No, this is, uh, this, this is interesting. Like, it's, I, I find it so interesting getting an insight into- Bricks and mortar businesses

James Hoffmann 43:32 Mm-hmm

Ali Abdaal 43:32 'Cause you just don't hear about them.

James Hoffmann 43:33 So this was the thing-

Ali Abdaal 43:33 Like, no one talks about what it's like to own a freaking coffee roastery business. [laughs]

James Hoffmann 43:35 It's really true. So starting in 2008, all of the, the startup stuff-

Ali Abdaal 43:39 Yeah

James Hoffmann 43:40 ... and, and I didn't know what a startup was actually. I, I, I, you know, I didn't know w- how is that different to a normal business? I would see this word startup. I'm like, "What exactly is a startup?"

Ali Abdaal 43:47 Mm.

James Hoffmann 43:48 Uh, it's a question I feel like no one's really good at answering yet either. But, um, y- I, I was trying to start this coffee roasting business, and all of the books were about online startups.

Ali Abdaal 43:57 Yeah.

James Hoffmann 43:57 Everything was about online startups. I was like, "No, but I mean, how do I-

Ali Abdaal 44:00 [laughs]

James Hoffmann 44:01 What is, what is my model? Like how, you know, you know," no one would tell me how much money to make. No one would tell me how much is a, a appropriate amount of money-

Ali Abdaal 44:07 Yeah

James Hoffmann 44:07 ... a profit, what's the model, you know what I mean? It just wasn't out there, which is very frustrating.

Ali Abdaal 44:11 Yeah. Which I gu- I, I, I guess is kind of unusual because you would, like bricks and mortar businesses have been going on for loads longer than online businesses. [laughs]

James Hoffmann 44:17 Right. But I mean, it was, it was-

Ali Abdaal 44:18 But all the stuff is written by the online business owners-

James Hoffmann 44:20 Absolutely. Yeah, yeah, yeah

Ali Abdaal 44:20 ... and the courses, and the gurus, and the videos, and the podcasts, the whole shebang.

James Hoffmann 44:24 It was all about that stuff. And it felt-

Ali Abdaal 44:26 Yeah

James Hoffmann 44:26 ... it felt weird. I felt like, you know. But what I will say is that, that, um, bricks and mortar is satisfying in a way that digital is not.

Ali Abdaal 44:35 Mm.

James Hoffmann 44:36 A lot of us, uh, the day could be summarized into I have slightly less digital stuff now than I did earlier this morning, and I'll have more tomorrow 'cause all I've done is write emails today. Do you know what I mean? Like that, that's, that's, I send a bunch of emails is like I have slightly less in my digital to-do list.

Ali Abdaal 44:52 Yeah.

James Hoffmann 44:52 If you've manufactured a wall of coffee that you're gonna sell for more money than it costs to make it, that's quite satisfying.

Ali Abdaal 45:00 [laughs]

James Hoffmann 45:00 Here's a thing. I made it. I packed it myself. I sealed the bag. I weighed it out. I put it in a box. I sent it to someone, and they paid me, and I made money on that 'cause I, I created value as part of this process.

Ali Abdaal 45:10 Mm.

James Hoffmann 45:11 That's rewarding in a way that, that, um, I struggle to find the same level of, of sort of manufacturing satisfaction. Videos are different 'cause, 'cause it's different.

Ali Abdaal 45:19 Yeah.

James Hoffmann 45:20 But, um, certainly in oth- other jobs or roles or, you know, that, that's been less r- you know.

Ali Abdaal 45:24 Yeah. I guess being an affiliate marketer [laughs] is, you don't really see the-

James Hoffmann 45:28 Yeah. I, I-

Ali Abdaal 45:29 ... the tangible output-

James Hoffmann 45:29 Yeah

Ali Abdaal 45:29 ... of the thing that you're creating.

James Hoffmann 45:30 I feel it. And for a while, I, you know, when I was doing more office-based stuff as the company grew, occasionally I would just wanna go down and pack coffee for an hour 'cause that felt more satisfying than the seven hours of staring at a laptop-

Ali Abdaal 45:40 Yeah

James Hoffmann 45:40 ... um, for me, you know what I mean? And that's just y- y- you know. Anyway.

Ali Abdaal 45:44 So, uh-

James Hoffmann 45:45 All the way back to-

Ali Abdaal 45:45 Roaster

James Hoffmann 45:46 ... starting a coffee roaster.

Ali Abdaal 45:46 15, 20, or 15 to 30 grand for the 15K, uh, for 15KG roaster. Uh, another 10 to 20,000 for the weird machines that purify the smoke-

James Hoffmann 45:53 Potentially

Ali Abdaal 45:53 ... and that's a bit.

James Hoffmann 45:53 And some other, say, say another-

Ali Abdaal 45:54 Yeah

James Hoffmann 45:55 ... 20, 30 of like stuff, equipment for packing coffee.

Ali Abdaal 45:57 Yeah.

James Hoffmann 45:58 You're gonna need computers and stuff to run stuff. And then ultimately, I suppose you need raw material.

Ali Abdaal 46:03 Yeah.

James Hoffmann 46:04 Um-

Ali Abdaal 46:04 Where do you get, where do you get raw coffee from?

James Hoffmann 46:05 Initially, you buy it from, uh, importers. So they, uh, there are companies out there that source this stuff, bring it in, warehouse it in the UK, and you can look at a shopping list and be like, "I'll have one bag of that, one bag of that, two bags of this, and one bag of that." A bag being 60 to 70 kilos of, of the kind of jute sacks. And you would need to, for your first order, probably buy 10 bags of coffee, about 700 kilos.

Ali Abdaal 46:25 How much does that cost?

James Hoffmann 46:26 Mm, four, half, five grand probably.

Ali Abdaal 46:28 So this is not l- the, the, this is a business that requires large amounts of upfront capital.

James Hoffmann 46:32 Right.

Ali Abdaal 46:32 Like, in fairness, a lot of bricks and mortar businesses.

James Hoffmann 46:34 Yeah, absolutely. And, and, you know, we, the great lesson from my point of view is that we didn't start with enough, um, because I worked-

Ali Abdaal 46:40 Enough capital

James Hoffmann 46:40 ... too many hours. Yeah, yeah.

Ali Abdaal 46:41 Oh, okay.

James Hoffmann 46:41 So I fell for the, the classic... What, what's the, can I swear here?

Ali Abdaal 46:45 Yeah, please.

James Hoffmann 46:45 Oh, great. Uh, so the hero bullshit of entrepreneurship of like, "I must grind myself down. I'm a fucking hero. I'm working super hard. I'm doing it right." And it's such bullshit, and it's such a toxic aspect of all work, and I hate it, but I definitely worked 110-hour weeks for, like, months.

Ali Abdaal 47:01 Mm.

James Hoffmann 47:02 Ground myself down to the point of deep misery, and there is no quicker way to hate a thing you love th- than to work, like, to work on it like that, right? Like, uh, I really love coffee. I definitely got to the point where I was like, "I should quit coffee. I should just, I'd, I, I hate this. I hate this. I hate my life. I hate working in this. I should just do something else." 'Cause I'd worked in a stupid way, and I burnt myself out physically and emotionally because people do that because the world says, "Good for you. Get the grind on." You know what I mean? "What? It's your thing. It's yours. Pour yourself into it." And you're like, "No, don't. Don't do that. That's really bad." What you should do is start with enough capital that you can hire people to work with you, pay them properly, uh, uh, and then work in a healthy manner. Do you know what I mean? Like, just have work and home, uh, be separate. That's helpful. Turn off. Don't work at weekends, or don't work some days a week. It's very satisfying, Ali, to always, to, to pour yourself into a business. It is rewarding. It's enjoyable, but y- it, you're just burning through yourself so fast. And so I regret not starting with probably twice as much money, hiring more people out of the gate, and going home at 5:00. Do you know what I mean? Like, just be done. Just turn it off. Turn off the b- go home. Enjoy life. You can build this thing. You don't have to sacrifice yourself for this. The downside is you need more money to start with. So that's, that's the trade-off. We didn't have that money. We didn't know we needed it. We had enough to buy the physical things, not enough to build the systems, hire the people. And so we just worked ourselves to the bone, and it was miserable, and I regret it, and it was a mistake.

Ali Abdaal 48:29 Oh, okay. On that point-

James Hoffmann 48:32 Yeah

Ali Abdaal 48:32 ... so I feel like sort of, uh, at least in the online, online discourse around starting businesses, circa 2013 to 2019 was the era of the hustle culture movement-

James Hoffmann 48:45 Sure

Ali Abdaal 48:45 ... saying that, look, you're starting from nothing. Your 20s are for hustling. You gotta grind yourself to the ground, work on weekends, work on evenings to make that, to start that thing. Since pandemic, I think, has accelerated this, there's a lot more, like, that kind of approach of actually s- sustainability's important, et cetera, et cetera. Um, but what a lot of the kind of pro-hustle people say is that, look, when, when you don't have that startup capital, like, and you're working your crappy job and you need to start the business, there is not much you can do other than kind of work between, I don't know, 7:00 PM and 2:00 AM and also work on weekends and all that kind of stuff. And I guess you're just hoping it's just a s- a season of time so that you can build enough money, build a business off the ground 'cause it will take blood... Theo- theoretically, it takes blood, sweat, and tears to get a business off the ground from, from moment one.

James Hoffmann 49:30 Yeah.

Ali Abdaal 49:31 Um, b- And a lot of entrepreneurs that I've spoken to who have done that kind of were grinding themselves to the ground say that, yeah, it wasn't ideal, it wasn't really a happy time, but without that period of crunch, which for several years potentially, the business wouldn't have got- gotten off the ground. So I guess my question to you is, do you think that you would have been able to do it in a more nicer, sustainable way? Or do you think it was necessary to put in the blood to, to get this, get this off the ground?

James Hoffmann 49:56 I think, I think the, the tricky bit is that if I'd had the understanding that I have now-

Ali Abdaal 50:01 Mm.

James Hoffmann 50:01 -and a little bit more capital, then yes, we could've built the same business far more enjoyably. I don't think it'd have been a bigger business necessarily-

Ali Abdaal 50:09 Mm.

James Hoffmann 50:09 -but it, it would've been a more enjoyable process to, to do that. And I think certainly, uh, you know, I may start more businesses in the future. Uh, and, and I know that I got a little bit hustley when YouTube started to kick off for me, and I... Uh, you know what I mean? I was like, "Oh, I gotta feed this a little bit."

Ali Abdaal 50:24 Yeah.

James Hoffmann 50:24 'Cause, you know, it feels... When you, you... When it feels like you're pouring just straight gas on flames, and it's just every, e- everything you put in comes back 10 times, you're like, "More, more, more, more, more."

Ali Abdaal 50:33 Mm.

James Hoffmann 50:33 Uh-

Ali Abdaal 50:34 Quite addictive. [laughs]

James Hoffmann 50:34 Yeah. But it, then you still end up with a, well, where are you going with this? Like, what's the, you know-

Ali Abdaal 50:38 Yeah, all the big questions.

James Hoffmann 50:39 Yeah, yeah.

Ali Abdaal 50:39 Yeah.

James Hoffmann 50:39 It doesn't... You, you might get to where you don't know where you... You know, you get to a, a point slightly quicker, but what's the point you're trying to get to?

Ali Abdaal 50:45 Mm.

James Hoffmann 50:46 Do- does it need to happen quicker? Is that better? Um, so y- you... Look, I, I'm not saying that there's a perfect way, right? Like, to, to... Back in 2008, to raise another 100 grand would've been really hard, you know? The, the, the, the, the system that we live in makes it much easier to raise one million than 10 grand. Uh-

Ali Abdaal 51:08 Really?

James Hoffmann 51:08 Yeah. Look, you know-

Ali Abdaal 51:09 What do you mean by that?

James Hoffmann 51:09 We can get a 10 grand bank overdraft. But I feel like if you go and pitch big and you make big promises, yeah, you can raise lots of money on the, on the promise of lots more later.

Ali Abdaal 51:18 Yeah.

James Hoffmann 51:18 But if you want, "I'd like a 10 grand overdraft, please," the bank's like, "Mm, no."

Ali Abdaal 51:22 Yeah.

James Hoffmann 51:23 And you're like, you're like, "I turn over, like, 30 grand a month." And they're like, "Uh-huh."

Ali Abdaal 51:25 [laughs]

James Hoffmann 51:26 And you're like, "10 grand." You know what I mean? Like, pre-financial crisis, you could get, like, a month's turnovers overdraft was the sort of rule of thumb.

Ali Abdaal 51:32 Yeah.

James Hoffmann 51:33 And post-financial crisis, the banks were like, "Nah." Uh, which is really unhealthy for, for loads of small businesses. It was... It really restricted access to capital. From 2008 probably to 2015 was really difficult.

Ali Abdaal 51:45 Yeah.

James Hoffmann 51:45 Right? Uh, if you wanted less than 100 grand.

Ali Abdaal 51:47 Yeah.

James Hoffmann 51:48 The moment you wanted serious cash to make big promises to, to roll out this giant thing that, that'll... IPO or there'll be an exit, much easier. Do you know what I mean? For a while, I was like, I could easily raise two million quid-

Ali Abdaal 51:59 Yeah

James Hoffmann 51:59 ... I, in a way that I couldn't raise 200 grand.

Ali Abdaal 52:01 Wow.

James Hoffmann 52:01 That's what... That's messed up, but that's, that's the way it was back then.

Ali Abdaal 52:05 But the-

James Hoffmann 52:05 Or at least still is now.

Ali Abdaal 52:06 Reminds me of that quote which is that, um, I think you, you probably would've come across it, that, um, uh, if you owe the bank 200,000, it's your problem. If you owe the bank 200 million, it's their problem. [laughs]

James Hoffmann 52:15 Absolutely. Yeah, yeah, yeah. Absolutely. It's... Yeah.

Ali Abdaal 52:17 [laughs] A weird, weird system of capitalism.

James Hoffmann 52:20 But that's what it... I mean, like, it's messed up.

Ali Abdaal 52:21 Yeah.

James Hoffmann 52:21 And, you know, um, but yeah. So, so, you know, I, I, I'm perhaps talking about this idealized world where I could have found another 100 grand somewhere in a way that, that didn't r- you know, result in me signing over, uh, control or, or direction or, or-

Ali Abdaal 52:37 Mm

James Hoffmann 52:37 ... you know what I mean?

Ali Abdaal 52:37 Yeah.

James Hoffmann 52:38 Some aspect that would be later important. But I do know that had we accrued more capital at the start, we could have worked in a way that was less damaging to our physical and mental selves.

Ali Abdaal 52:46 Yeah.

James Hoffmann 52:47 And, and, uh, you know, I, I think you can justify a hustle culture all you like, I, I, I just, I, I don't think I'm proud of those years-

Ali Abdaal 52:54 Mm

James Hoffmann 52:54 ... the way that I worked. Do you know what I mean? Am I proud of the way we got to? Yeah, maybe sure, but I don't like that that was the, the route, and I certainly wouldn't wish that on anyone else.

Ali Abdaal 53:03 Yeah.

James Hoffmann 53:03 And I would wish for or encourage a, a system or a, a way of working that wasn't that. Do you know what I mean? Like, I, I, I would hope for other people... You know, I don't feel like I suffered, you should suffer too.

Ali Abdaal 53:14 Yeah.

James Hoffmann 53:14 Like, that's a sickness that infects our culture. I may... I suffered. I would like you not to suffer-

Ali Abdaal 53:19 Yeah

James Hoffmann 53:19 ... 'cause this sucked. Uh, that's sort of my feeling about life. So yeah, I, I'm not saying there's a perfect way. It's a messed up system.

Ali Abdaal 53:26 Yeah.

James Hoffmann 53:26 But that's my experience and how I feel about it at the end of it.

Ali Abdaal 53:29 So I guess, okay, so let's say if we, if we could rewind 13 years and you have the same understanding you do now, but you're in those market conditions-

James Hoffmann 53:37 Yes

Ali Abdaal 53:37 ... it sounds like you probably would've spent more time trying to figure out, how do I actually raise the startup capital I need such that I don't burn myself out?

James Hoffmann 53:43 Yeah.

Ali Abdaal 53:43 Rather than, "Oh, can't raise the 100 grand." You know, there's always other things we could do if we knew the value of it. But I guess at the time, when you're at that stage of life, you're like, "Oh, I'll just, I'll just work harder."

James Hoffmann 53:55 Right. Uh, yeah, that's absolutely it. And certainly, the, the, the, everything around me told me that was the right thing to do.

Ali Abdaal 54:00 Mm.

James Hoffmann 54:01 You know what I mean? That, that was... The, the, the culture around entrepreneurship was-

Ali Abdaal 54:04 Yeah

James Hoffmann 54:04 ... "Yeah, you work. You put those hours."

Ali Abdaal 54:06 Yeah.

James Hoffmann 54:06 "No one else is gonna do it for you. It's your business. Get out what you put in." Uh, and I believed it. And, but I, I do- I don't... You know, I don't want someone watching this to h- hear me say, "Yeah, you should hustle. Yeah, you should suffer." You know what I mean? I, I, I don't feel comfortable saying those words to someone.

Ali Abdaal 54:23 Mm-hmm.

Ali Abdaal 54:24 Were bits of it fun?

James Hoffmann 54:26 Yeah, lots of it was fun.

Ali Abdaal 54:27 Yeah.

James Hoffmann 54:27 Like, it, it, it was, it was growing. We were part of this booming thing. Like, um, you know, uh, uh, it, we felt, um, like we were making an impact. You know what I mean? Like, we felt influential. That was very satisfying. We felt like... You know what I mean? Like, we felt like we were pioneering in some ways. That feels very arrogant to say and awful, but it felt that way at the time.

Ali Abdaal 54:49 Mm.

James Hoffmann 54:50 Uh, it's not really a phrase you get to use about yourself. Uh-

Ali Abdaal 54:53 [laughs]

James Hoffmann 54:53 But that's how it felt.

Ali Abdaal 54:54 Yeah.

James Hoffmann 54:54 It felt like we were kind of pushing new ground, and it was, it, people were excited about it. Uh, uh, uh, and I think that we were having a wider impact and growing more than just our business. So yeah, that was, that was good.

Ali Abdaal 55:06 Yeah, 'cause I think this is the kind of conundrum I find myself in sometimes with this business and the team that we've got here, where, like, it's very easy for things to feel very frantic, that, oh, we're doing all these things. We're launching this new product. NFTs are a thing. Let's get on that. You know, every A, B, C, D, E, F, G. And like, you know, the other day, I kind of g- just got a, a bit of an impression that everyone was just a bit, like, sort of working flat out, and I kind of stopped and s- took a step back. I was like- Well, why the hell are we working flat out here? Like-

James Hoffmann 55:38 Mm

Ali Abdaal 55:38 ... this is a, this is supposed to calm. The reason I left medicine is 'cause I didn't want a life and death job. [laughs] I didn't want something that was, like, massively stressful.

James Hoffmann 55:45 Right.

Ali Abdaal 55:46 So why are we creating these con- these, like, constraints for ourselves where we have to be wedded to, "Oh, this course needs to come out in Q1 because 31st of March is an arbitrary deadline that we have decided, and if we push it back two weeks, that's the end of the world, and therefore we have to burn the midnight oil"? And I think without a... It's, when you, I, I guess, you know, our, our team's fairly young, average age like 27-ish. When you have, like, a young-ish team of people who are, you know, hungry and keen and hopefully enjoy their jobs, it's very easy to unchecked it sort of to turn into this flywheel of fra- sort of frantic- franticness and, and-

James Hoffmann 56:18 Sure

Ali Abdaal 56:18 ... stuff, and it needs a bit of a, of moderating influence, like a coolant [laughs] to be like, "Hang, hang on. Let's just actually think about why we're doing this."

James Hoffmann 56:26 Yeah.

Ali Abdaal 56:26 You know, are we all happy, broadly happy with how much money we're making? And to the, to the extent that we're not on the poverty li- poverty line, yes. Cool. So then chasing more and more for the sake of, like, I don't know, an extra s- an extra dose of revenue or profit or whatever at the risk of sacrificing our mental health and burning out and stuff, probably unsustainable. Let's, you know-

James Hoffmann 56:46 Let's do that

Ali Abdaal 56:46 ... let's add the coolant.

James Hoffmann 56:47 Yeah.

Ali Abdaal 56:48 Yeah.

James Hoffmann 56:48 I think it's, I, I, I think it's back to the idea of, uh, you know, your best work does not happen in that environment.

Ali Abdaal 56:54 Mm.

James Hoffmann 56:54 You know what I mean? Like, uh, yeah, you might occasionally pull out something from the bag under pressure, but constant pressure-

Ali Abdaal 57:02 Yeah

James Hoffmann 57:02 ... no. No one does their best work like that.

Ali Abdaal 57:04 Yeah.

James Hoffmann 57:04 Do you know what I mean? Like, you need space. You know, like a, you, you need to, to just have, for everyone needs a little space in their work of just like, I'm not-

Ali Abdaal 57:13 Mm.

James Hoffmann 57:13 I, I can have time to think and read and be bored briefly, and-

Ali Abdaal 57:17 Yeah

James Hoffmann 57:17 ... those things are really important, really useful, especially in creative work.

Ali Abdaal 57:20 So going back to roa- uh, our roaster, so we've contacted one of these wholesale suppliers of, like, raw coffee beans.

James Hoffmann 57:27 Yeah.

Ali Abdaal 57:27 Needs to be roasted. Now you have a wall of coffee beans that need selling.

James Hoffmann 57:30 Yes.

Ali Abdaal 57:31 What do you, what do you do then? Do you go to Starbucks?

James Hoffmann 57:33 No.

Ali Abdaal 57:33 You know, starbucks.com-

James Hoffmann 57:34 I mean, like-

Ali Abdaal 57:34 ... and be like, [laughs] "Hey, do you want some coffee?" Like, how, how does it work?

James Hoffmann 57:37 No, no, no. You, by and large, you're gonna sell to independent businesses.

Ali Abdaal 57:40 Okay. But Starbucks already have their own system for-

James Hoffmann 57:41 Starbucks roast their own coffee. They've got a massive facility in the Netherlands that, that supplies most of, like, Europe and, and, uh, most of Europe now. I don't think they... Anyway, um, so you- you're probably gonna sell this either online, which is one sort of challenge, or you're gonna sell to other, uh, coffee shops. And I think it, it was a little bit different when we started, but, but these days, it's back to, to having a bit of a problem in that most people who start coffee roasting companies are very passionate about producing the best coffee they can. And, uh, so they'll think that because they have what they believe is better coffee, that's gonna be quite easy to sell. But the problem is that if you go to a coffee shop and you say, "Hey, I've got better coffee," one, you're saying the, the coffee that you have chosen to serve so far is not very good.

Ali Abdaal 58:26 Mm.

James Hoffmann 58:27 And two, that's probably not fixing a problem that a business owner has, right? Like, sales is, is solving problems to me, and so i- i- if you think about what problem a coffee shop might have, better coffee, probably not one of them actually. Like, they've probably already chosen coffee they like, and so why would I buy your better coffee than... You know what I mean? Why would I buy this? So-

Ali Abdaal 58:47 Yeah, if it's not a problem, people aren't gonna pay to solve it, like-

James Hoffmann 58:49 Exactly.

Ali Abdaal 58:50 Yeah.

James Hoffmann 58:50 So then you're into, okay, well, what, what do you do that's different? And, and, and that's a much more complex thing, and, uh, that's also why a lot of small coffee roasters struggle to grow because they don't have a compelling answer to-

Ali Abdaal 58:59 Yeah

James Hoffmann 58:59 ... a, a problem that a cafe owner might have. Uh, but yeah, that, that's, that's what you're gonna do. You probably quite early get stuck in the trap of credit where you might say, oh, you, you're gonna let someone get the coffee and pay you 30 days later.

Ali Abdaal 59:12 Oh, yeah.

James Hoffmann 59:13 Kind of.

Ali Abdaal 59:13 That's the kind of thing, isn't it? Like invoice-

James Hoffmann 59:14 Super-

Ali Abdaal 59:15 ... terms and, like-

James Hoffmann 59:15 Yeah, yeah

Ali Abdaal 59:15 ... accounts receivable and all the-

James Hoffmann 59:16 Yeah, yeah

Ali Abdaal 59:17 ... BS that normal businesses, non-online businesses have to deal with.

James Hoffmann 59:19 A- and, and that-

Ali Abdaal 59:20 Yeah

James Hoffmann 59:20 ... historically has come from larger businesses leveraging capital to gain customers of, like, what's the problem the coffee shop's got? Not enough cash flow. Great. Let me solve that problem for you. If you sign with us this binding contract to buy coffee from us for 12 months, we'll give you 28 days from invoice. So you'll order coffee through Ja- January. We'll send you an invoice February 1st, and on the 28th of February, that, that coffee's due. Because we've got enough cash that we can lend you this much cash-

Ali Abdaal 59:43 Mm

James Hoffmann 59:43 ... and you've got loads of time to sell that coffee, make the money, uh, and have a bit of cash flow back.

Ali Abdaal 59:48 Okay. So this sounds good and bad.

James Hoffmann 59:51 Yeah.

Ali Abdaal 59:51 What are the... I guess the good part is that you can then get the product without paying for it.

James Hoffmann 59:55 So for the coffee shop-

Ali Abdaal 59:56 Yeah

James Hoffmann 59:56 ... it's great. I, I can, I can get 500 pounds worth of coffee in the door. I can sell that, turn that into 10,000 pounds. Obviously, I've gotta pay wages, I've gotta pay rent, all the other stuff, but I get a chance to do that, but I have to pay off the bill for 500 pounds at the end of it. That's the, that's the upside. Then also, however, I'm a bit stuck 'cause I can't buy anyone else's product 'cause they won't give you the terms, and it's a binding agreement. So essentially they've bought my loyalty, but they've solved a problem for me, which is-

Ali Abdaal 1:00:21 Mm

James Hoffmann 1:00:21 ... cash flow, and that's a very common problem in, you know, a business that, you know, coffee shops have big VAT quarters. You know, uh, it's-

Ali Abdaal 1:00:28 Sorry, big, big VAT quarters?

James Hoffmann 1:00:29 Quarters. So they'll often have a large VAT bill at the end of each quarter-

Ali Abdaal 1:00:32 Oh

James Hoffmann 1:00:32 ... to, to pay to the government.

Ali Abdaal 1:00:33 Yeah.

James Hoffmann 1:00:34 Um-

Ali Abdaal 1:00:34 And then that causes the cash flow issue.

James Hoffmann 1:00:35 Right. It's of- often a cash flow issue for-

Ali Abdaal 1:00:37 Oh

James Hoffmann 1:00:37 ... for businesses that don't make large margins and aren't accruing a lot of cash at the bottom. So having suppliers give you credit terms essentially gives you liquidity. The problem is that i- if you're a small coffee roasting company, it's very easy to get into that, and then coffee shops, well, they often fail. Uh-

Ali Abdaal 1:00:55 Oh, okay

James Hoffmann 1:00:56 ... at that point if they go into administration, you, uh, you know, best case from a liquidator might be 10p on the pound kind of thing of, of your, of your debt.

Ali Abdaal 1:01:04 Oh.

James Hoffmann 1:01:04 If you manage to get to the top of the pecking order of, like, who's getting paid out by-

Ali Abdaal 1:01:07 Yeah

James Hoffmann 1:01:07 ... uh, those, which you won't, so you're getting nothing. So that's going to be a straight bad debt and-

Ali Abdaal 1:01:10 So you've given them the coffee.

James Hoffmann 1:01:12 You've given them-

Ali Abdaal 1:01:12 You said y- they, they promised to pay you 60 days from now.

James Hoffmann 1:01:15 Right.

Ali Abdaal 1:01:15 But in that 60 days they go bankrupt. [laughs]

James Hoffmann 1:01:17 Yeah.

Ali Abdaal 1:01:17 And but you've already given them the coffee.

James Hoffmann 1:01:19 Right.

Ali Abdaal 1:01:19 And that, well, you can't do anything about that.

James Hoffmann 1:01:21 Classic. Cla- This happens all the time.

Ali Abdaal 1:01:23 Yeah.

James Hoffmann 1:01:23 Loads of bad debts out there. And, and chances are actually you probably kept, they, they, they probably missed the payment February 28th, and we're like, "No, no, we'll get it to you. We'll get it to you. Just keep sending us coffee. We're sorry we messed up. We forgot to write the check," or someone messed up or whatever other story. And so you might get 90 days of product to that customer, and then they go bust, and then you're out that much money. If you're a giant coffee company, eh. It's the cost of doing business. It's built into the price. It's fine. I- if you're a small independent coffee roaster where you haven't built that margin in 'cause you're trying to be competitive with pricing, uh, y- you can, you can have a five or 10 grand debt that would take you down too 'cause that might be your cash flow gone.

Ali Abdaal 1:02:00 Mm.

James Hoffmann 1:02:00 And then, you know, historically we were always taught bricks and mortar is, is like i- i- profit is one thing, cash flow is everything.

Ali Abdaal 1:02:07 Okay.

James Hoffmann 1:02:08 Right? Like, if you don't have, y- you go under 'cause you run out of cash in the bank, not 'cause you weren't profitable, but you ran out of cash in the bank.

Ali Abdaal 1:02:14 Mm.

James Hoffmann 1:02:15 Because certainly, you know, we got, we were never not prof- we were always profitable, but we got real close on running out of cash, 'cause you do if you're growing, you know, the roaster's buying stock, buying bags. We're not getting the same sort of terms, so we're laying out much larger invoices. We've got, you know, say 100 grand of stock that's cash out. We've got all these other outgoings, and we're still waiting for money coming in. And-

Ali Abdaal 1:02:35 Yeah

James Hoffmann 1:02:35 ... there's profitable money coming in, but there's a gap.

Ali Abdaal 1:02:38 Yeah.

James Hoffmann 1:02:38 And so y- you know, uh, that doesn't exist as much in the online world, but, but bricks and mortar businesses, cash flow is the main concern, uh, which is why credit is such an app- appealing way of, of selling coffee. Uh, so yeah, that's the sort of, that's the, the, the bit that you create quite a fragile market, and certainly, you know, right now there's a lot of debt in the market, you know what I mean? There's lots of businesses that are stro- struggling for cash that will owe money to suppliers, and they'll owe money to fruit and veg suppliers, milk suppliers, takeaway cup suppliers, coffee suppliers.

Ali Abdaal 1:03:10 And they're hoping their restaurant or coffee shop or bakery will do well enough to be able to pay those.

James Hoffmann 1:03:13 To make it through and-

Ali Abdaal 1:03:14 That's quite, that sounds quite hard from th- from, from their perspective as well. Like-

James Hoffmann 1:03:17 Yeah, it's incredibly stressful.

Ali Abdaal 1:03:19 It, yeah.

James Hoffmann 1:03:19 Yeah.

Ali Abdaal 1:03:19 You're, like, always running in the red, and at the end of the month you're like, "Oh my God, we just need to wait for tomorrow." Be like, "Oh, but the person paying our invoice is off sick, so we can't, we can't, we can't do payroll this month."

James Hoffmann 1:03:26 Right, or we can't afford payroll this month.

Ali Abdaal 1:03:28 Yeah.

James Hoffmann 1:03:28 We don't have the cash in the bank for payroll. And then-

Ali Abdaal 1:03:30 And then all the employees are like, "Well, I need to pay my mortgage," and then start, like-

James Hoffmann 1:03:33 Right, I'm not coming to work if you're not gonna pay me.

Ali Abdaal 1:03:34 Yeah.

James Hoffmann 1:03:35 And yeah, yeah. It, uh-

Ali Abdaal 1:03:36 Ah. [laughs]

James Hoffmann 1:03:36 You know, it's, yeah. Th- then this, but this is the reality of a highly competitive-

Ali Abdaal 1:03:40 Yeah

James Hoffmann 1:03:40 ... old industry. It's been going a long time. It's developed certain bad habits, and certainly I think credit is one of them. Um, but I mean, that's, again, further encouraged people to underprice product. You know, coffee is probably too cheap. Uh, but you know, it's, it's as cheap as people can make it and still just about survive.

Ali Abdaal 1:03:56 Yeah.

James Hoffmann 1:03:56 That's kind of how pricing ends up being in a highly competitive market.

Ali Abdaal 1:03:59 Mm.

James Hoffmann 1:03:59 Which isn't in anyone's best interest long term, but it is what it is.

Ali Abdaal 1:04:02 Yeah. So how did, how did Square Mile succeed despite all of these?

James Hoffmann 1:04:06 I think initially it was a, a different sort of, um, approach. W- our, our problem e- early doors was, like, people aren't really drinking specialty coffee, and people didn't really know how to build businesses doing that, and we had a background of teaching and training and education, and like, "We're gonna help make you successful. Our goal is not to sell you beans. Our goal is to make you a successful cafe, and we'll work with you on your training programs. We'll h- work with you on equipment or anything else."

Ali Abdaal 1:04:29 Oh, okay.

James Hoffmann 1:04:29 "But our goal is your success."

Ali Abdaal 1:04:30 So way more than just selling them coffee.

James Hoffmann 1:04:31 Yeah, yeah. That's just-

Ali Abdaal 1:04:32 More, like, yeah

James Hoffmann 1:04:32 ... that, that was our approach.

Ali Abdaal 1:04:34 Oh, that's cool. Yeah.

James Hoffmann 1:04:34 And, and everyone's problem is I'm not successful enough.

Ali Abdaal 1:04:36 Yeah.

James Hoffmann 1:04:37 So if you're focused on, like, we're, we're gonna increase your top line-

Ali Abdaal 1:04:39 Yeah

James Hoffmann 1:04:39 ... we aim to increase your bottom line, too, somewhere in there you buy some coffee. But, but we're trying to help you build a better business. That was our initial kind of goal and, you know, it's changed over time and, you know, uh, at some point if you have a more recognizable brand, the problem you can fix is my customers don't trust me 'cause I'm a new coffee shop, and the answer is if I buy a brand of coffee that they do know, they might trust me. They see the logo of X coffee company and they're like, "Oh, this is probably good coffee." Right? That solves a problem. It's a difficult problem 'cause other brands solve the same problem and it's not as effective.

Ali Abdaal 1:05:11 Mm.

James Hoffmann 1:05:11 Uh, but, but yeah, I, I think that was always our approach of, like, we want to help our customers succeed.

Ali Abdaal 1:05:17 Yeah.

James Hoffmann 1:05:17 It, it feels disingenuous now, like, you know, I did all the sales early doors. It's very easy for me to talk about that time. I don't do the sales now and, you know what I mean? Like, it, it feels like I'm speaking on behalf of people, which is-

Ali Abdaal 1:05:27 Mm.

James Hoffmann 1:05:27 You know, I, I, I don't wanna minimize their job.

Ali Abdaal 1:05:29 No, I appreciate that.

James Hoffmann 1:05:30 It's more complex now.

Ali Abdaal 1:05:30 We're, we're kind of talking about early days where-

James Hoffmann 1:05:32 But yeah, certainly early days, that was our kind of approach and, and I think we had some experience in what great coffee was, and I, I suppose I had this weird title to be like, "Well, I know what good coffee is 'cause I'm on this stupid dog show."

Ali Abdaal 1:05:41 [laughs]

James Hoffmann 1:05:42 Uh, so, so like, you know, that's, that's how that went.

Ali Abdaal 1:05:45 Okay. So the way you f- you differentiated yourself in this crowded, potentially crowded, competitive market was not n- not actually competing on the quality of the coffee, but in fact being like the whole, the, the service as a whole where we help you be a better cafe-

James Hoffmann 1:05:59 Right

Ali Abdaal 1:05:59 ... solves the problem that you're having, and by coincidence, by the way, we also sell some of these things.

James Hoffmann 1:06:04 Yeah.

Ali Abdaal 1:06:04 Kind of.

James Hoffmann 1:06:05 Yeah, I think so. It, it was designed to be a more collaborative relationship.

Ali Abdaal 1:06:08 I see.

James Hoffmann 1:06:08 And, and not just here's a box, here's my check, see you next week.

Ali Abdaal 1:06:11 Okay.

James Hoffmann 1:06:11 Uh-

Ali Abdaal 1:06:12 So what's happening with The Square Mile these days?

James Hoffmann 1:06:15 Well, it's, you know, uh, it's been a interesting couple of years. Uh-

Ali Abdaal 1:06:19 Yeah

James Hoffmann 1:06:20 ... obviously when, when the first lockdown came in, we w- you know, 80% of our revenue stopped, uh, 'cause every cafe shut initially.

Ali Abdaal 1:06:28 Mm.

James Hoffmann 1:06:28 Well, a handful stayed open, but almost everyone shut because that was the thing to do and, and businesses shut down. And, uh, I think we were very fortunate that over the years clearly people had developed an attachment to our coffee through the business that they were buying it from because when, when B2B disappeared, online exploded.

Ali Abdaal 1:06:47 Mm.

James Hoffmann 1:06:48 And so we very rapidly transitioned into being very focused on, you know, we were aiming to be good at online already, but suddenly there was just a bigger market for that and, and I, I think we had a lot of growth. And that was, you know, uh, something that we worry about quite a lot in that it's been a really busy, successful two years, and that's definitely put a strain on people inside the business and I think-

Ali Abdaal 1:07:08 Yeah

James Hoffmann 1:07:08 ... you know, like, um, our focus for this year is not rampant growth in terms of top line or any of that kind of stuff. Our, it's a kind of, it has to be a year of consolidation-

Ali Abdaal 1:07:16 Mm

James Hoffmann 1:07:16 ... and I, I think a year of, um, making a stronger company, and a stronger company is not necessarily growing the top line at all costs. A stronger company is looking after the people inside it, uh, making sure that they enjoy coming to work, are not exhausted by the process. I, I think we all have, like, a, a layer of fatigue globally from the pandemic. Like, there's, there's a, I think everyone feels fatigued by it all. Is that fair?

Ali Abdaal 1:07:41 Yeah.

James Hoffmann 1:07:41 Do you, you know, I think that impacts everything. Uh, just it's been draining. It's been emotionally draining and physically draining for lots of people, and that's regardless of where you work or what you do, and I think you can't ignore that fact. When I think if you've been successful in that time and you've had that- Then I th- I think it's maybe the temptation would be, now we've just got to go harder again and harder again and harder again, and I'm just not sure, uh, I think we're not sure that that's the right way to go, and I think we want to build a, a healthy, strong company. 'Cause again, we're interested in sustainability.

Ali Abdaal 1:08:12 Yeah.

James Hoffmann 1:08:12 We're not working to an IPO, we're not working to an exit. Uh, we're just trying to do what we're doing, do good meaningful work, but sustain and last.

Ali Abdaal 1:08:20 Yeah.

James Hoffmann 1:08:20 You know?

Ali Abdaal 1:08:22 So it sounds like Square Mile's kind of grown from 2008 to 2022.

James Hoffmann 1:08:26 Yeah.

Ali Abdaal 1:08:26 To say things seem to have gone pretty well-

James Hoffmann 1:08:28 Sure

Ali Abdaal 1:08:28 ... even with pandemic transition to, to on- to online and stuff. W- when did the other stuff that you do fit into the timeline? [laughs]

James Hoffmann 1:08:37 That's a really good question. So I've s- so, you know, I, I sort of took on a de facto managing director role in Square Mile in the early days. We didn't really think in those terms-

Ali Abdaal 1:08:44 Mm

James Hoffmann 1:08:44 ... but I suppose I did those kind of things. Um, and I have also worked with other companies as a kind of collaborator, uh, in terms of designing or promoting equipment and those kind of things. And so by 20... I want to say t- 2013 maybe-

Ali Abdaal 1:08:59 Okay

James Hoffmann 1:09:00 ... I was-

Ali Abdaal 1:09:00 When you were sort of like early 30s at that point.

James Hoffmann 1:09:02 Yeah.

Ali Abdaal 1:09:02 Yeah.

James Hoffmann 1:09:02 Traveling enough, 2013, 2014, I want to say. I was traveling enough that we realized that if anything inside the company was reliant on me being in the building, it's broken.

Ali Abdaal 1:09:12 Mm.

James Hoffmann 1:09:12 Because I wouldn't necessarily be in the country. I was in Melbourne for a month at one point. I was traveling all over the place, like it was just a lot of travel, a lot of away time. And I, I, I think that the dual factors combined of the kind of person who might be good at starting a company is not necessarily the kind of person who's good at running, uh, a small, medium-sized company.

Ali Abdaal 1:09:33 Mm.

James Hoffmann 1:09:34 I don't know how... You know what I mean? Uh, we, we were initially a small company, and then we got to be a big small company, and then I-

Ali Abdaal 1:09:39 Yeah

James Hoffmann 1:09:39 ... went out small, medium size.

Ali Abdaal 1:09:40 How, how many people are we talking? Like-

James Hoffmann 1:09:41 In Square Mile now is about just under 30.

Ali Abdaal 1:09:44 Okay.

James Hoffmann 1:09:44 Um, but, but, but I think the, the role of running a business changed-

Ali Abdaal 1:09:50 Mm

James Hoffmann 1:09:50 ... and I think it wasn't what I was very good at. And again, I wasn't always there, and I think then you have a broken system.

Ali Abdaal 1:09:57 Yeah.

James Hoffmann 1:09:58 Right? That, that's bad. So I stepped out of the managing director role and, and a new managing director stepped in. She'd been with us for a, a while. Very capable, and she runs the company still. Uh, and we began to work out how that relationship would work and be healthy for both the company and specifically actually for her in that role. Uh, you know, if you talk to a lot of founders who, um, in theory move out of operations, they often love a medal. They love to come back, set some fires-

Ali Abdaal 1:10:28 [laughs]

James Hoffmann 1:10:29 ... and leave, right? And so we, you know, we've tried to learn other people's hard lessons the easy way.

Ali Abdaal 1:10:33 Yeah. [laughs]

James Hoffmann 1:10:34 And so really early doors were like, how do we stop this happening?

Ali Abdaal 1:10:37 Okay.

James Hoffmann 1:10:38 Do you know what I mean? What are the ground rules-

Ali Abdaal 1:10:39 Yeah

James Hoffmann 1:10:39 ... of how I interact with the company now-

Ali Abdaal 1:10:42 Okay

James Hoffmann 1:10:42 ... but I'm not operational.

James Hoffmann 1:10:44 Um-

Ali Abdaal 1:10:44 Do you not have a thing of like, okay, so I, I have this problem where it's all well and good trying to get other people to, to do stuff, and then you see something that you think, "This seems dumb. Why are we doing it that way?" And then you start meddling. [laughs]

James Hoffmann 1:10:56 Yeah. Yeah, but I'm not allowed.

Ali Abdaal 1:10:58 Okay.

James Hoffmann 1:10:58 That's the deal, right? Like that's the deal. I, it, it, it... If I want someone to take on this mantle and to work with me and then be satisfied by the work-

Ali Abdaal 1:11:05 Yeah

James Hoffmann 1:11:05 ... I have to let them do the work. And, and it, I have to move into a more passive role-

Ali Abdaal 1:11:10 Yeah

James Hoffmann 1:11:10 ... of how am I useful to you, right? But it, it's a, yeah, sure, there's times where I'll, I'll, I'll be like I have a bee in my bonnet about something and I'll be like, "Talk, talk, talk"-

Ali Abdaal 1:11:18 Yeah

James Hoffmann 1:11:18 ... "into the office. Can we talk about this?" And, but that's the first point of contact. It's not me going to the person in the role and being like, "Can you just go and do this? 'Cause I've seen this and I want this, and do that."

Ali Abdaal 1:11:27 Yeah.

James Hoffmann 1:11:27 I did that a little bit in the past and I'd get told off, and I'm like, "Good," 'cause I shouldn't be left unchecked. 'Cause it, it creates a really difficult dynamic in a business because u- ultimately I'm a founder. And if you're a founder, there's a different sort of a relationship you have. If you work in the business, the founder walks in the door-

Ali Abdaal 1:11:43 Mm

James Hoffmann 1:11:44 ... that's different, right? And so i- it's easy to accidentally override or derail a direction that the managing director is, is dictating-

Ali Abdaal 1:11:54 Mm-hmm

James Hoffmann 1:11:54 ... correctly.

Ali Abdaal 1:11:55 Mm.

James Hoffmann 1:11:55 Don't mean to, but you're like, "What..." You know, I- it's easy to come in and be like, "Ooh, I was thinking about this the other day." And you can set someone off on a task for a week and, and you know, then at the end of the week the managing director's like, "So where are you with this?" And they're like, "Oh, I'm way over here."

Ali Abdaal 1:12:09 Yeah.

James Hoffmann 1:12:09 And you're like, "Why are you over there? 'Cause we're going over here." They say, "Well, James said..." And that's really unhelpful. That just, that's a company working against itself, and that's bad. So the rule is very simple. I can be called upon by the team.

Ali Abdaal 1:12:22 Yeah.

James Hoffmann 1:12:22 If they want something from me, they can take something from me.

Ali Abdaal 1:12:25 Yeah.

James Hoffmann 1:12:25 And that might be ideas for marketing, that might be ideas for products-

Ali Abdaal 1:12:29 Mm

James Hoffmann 1:12:29 ... that might be knowledge or specific things or whatever it's gonna be.

Ali Abdaal 1:12:32 Mm.

James Hoffmann 1:12:33 But anything that I wish to inject into the company has to go through the managing director at an appropriate time where we'll sit down and talk about my ideas, and then those that, that are deemed worthwhile-

Ali Abdaal 1:12:43 Yeah

James Hoffmann 1:12:43 ... can then be taken in further. But I am not allowed to come in and give direction to anyone in the company about anything. That's the deal that we made.

Ali Abdaal 1:12:51 Nice.

James Hoffmann 1:12:52 And that's because I'm saying, "You're in charge of this company."

Ali Abdaal 1:12:55 Yeah.

James Hoffmann 1:12:56 I have to mean it.

Ali Abdaal 1:12:57 Yes.

James Hoffmann 1:12:57 Otherwise you- they're not.

Ali Abdaal 1:12:58 Yeah.

James Hoffmann 1:12:58 And then, then it's just a very fr- I'm not in charge of the thing. I'm y- I have all the responsibility of running this thing, but I'm not actually able to steer the ship because someone's got their wheel on it and they keep pulling it to the side every five minutes.

Ali Abdaal 1:13:09 Mm-hmm.

James Hoffmann 1:13:09 And I'm trying to go over there, and they've just had a moment of like, "But I want to go here quickly."

Ali Abdaal 1:13:13 Yeah.

James Hoffmann 1:13:13 It's unhelpful, and I think it's bad. I am not perfect in that regard, but I try really hard and we talk about it a lot, and we make sure that, that we are constantly aligned because you just can't have the bit of like, "Well, you said this, but she said that."

Ali Abdaal 1:13:27 Yeah.

James Hoffmann 1:13:28 "Uh, which one do we believe? Which is the truth?" Really unhelpful, right? If I'm to be useful, then I have to be a resource, I have to be passive, and I, I have to be respectful-

Ali Abdaal 1:13:39 Mm

James Hoffmann 1:13:39 ... of what I've asked someone to do in that role of, of running the company.

Ali Abdaal 1:13:42 Yeah.

James Hoffmann 1:13:42 And which is, "Please let me run the company. If you want me to do the job, let me do the job. That's the deal." Uh, so that's-

Ali Abdaal 1:13:48 So I guess you need quite high confidence in that person that-

James Hoffmann 1:13:50 Yep

Ali Abdaal 1:13:50 ... you have hired them to run the company, they are competent at that, et cetera.

James Hoffmann 1:13:53 But they also should be comfortable saying, "I need a little help with this."

Ali Abdaal 1:13:56 Yeah.

James Hoffmann 1:13:56 Or, "I'm not sure of this." And, and, you know, like the person I speak the most to in the company is the managing director. We talk a lot about everything-

Ali Abdaal 1:14:02 Mm

James Hoffmann 1:14:02 ... and, and it's just great for me to feel connected, and also for her to have a sounding board and, and, and, and, you know, another person she can talk freely to about any aspect of the business.

Ali Abdaal 1:14:12 Yeah.

James Hoffmann 1:14:12 That's, that's a good healthy relationship, I think, inside a business, and I think it allows us to be very coherent, and it just stops me setting fires. I, I want to, don't get me wrong. Like, I see stuff and I'm like, I just wanna go and meddle with that, but I know the deal.

Ali Abdaal 1:14:25 [laughs]

James Hoffmann 1:14:26 And I, I can't have it both ways. It doesn't work. Do you know what I mean? I can't have the freedom, so to speak-

Ali Abdaal 1:14:30 Yeah

James Hoffmann 1:14:30 ... of the responsibilities-

Ali Abdaal 1:14:31 Yeah

James Hoffmann 1:14:31 ... and then all of the fun meddling. That just, it's, that, that just breaks the thing. Might be fun for a year, but it breaks the thing.

Ali Abdaal 1:14:37 Yeah. Meddling.

James Hoffmann 1:14:39 Meddling.

Ali Abdaal 1:14:40 I have so much stuff I wanna ask you about this more, but I think we're getting, we're getting into weeds that is n- not applicable to most of our listeners.

James Hoffmann 1:14:45 Sure, sure.

Ali Abdaal 1:14:45 So if I can take you back, so when, when did the YouTube channel start?

James Hoffmann 1:14:49 Oh, uh-

Ali Abdaal 1:14:49 And how did that fit into your whole business model?

James Hoffmann 1:14:51 So I, I, pretty famously, I blogged early days. I started a blog in 2004. I felt very isolated and alone in my coffee obsession.

Ali Abdaal 1:14:58 Yeah.

James Hoffmann 1:14:59 And the internet was full of people, enough people that I could connect to. You know? Like, it's like a healthy version of flat Earth, right? Where, where like-

Ali Abdaal 1:15:06 A healthy version

James Hoffmann 1:15:06 ... I was the one isolated person being like, "I really love coffee," and no one else cares. Uh, but the internet cared. And so I, I started a blog to sort of chart what I was learning to, to, you know, go through the classic process of if, uh, if, if I understand it, I can explain it to someone, right? So, and in, in sharing it with someone else, that's valuable, so that's why I will write this blog.

Ali Abdaal 1:15:24 Mm.

James Hoffmann 1:15:25 And the win of the blog, uh, which is a bit like YouTube, I kept doing it, and I just kept doing it. And for years and years and years and years and years and years and years, I kept doing it. And blogs came and went, uh, but I sort of was consistent throughout.

Ali Abdaal 1:15:38 Yeah.

James Hoffmann 1:15:38 And consistency has this really fascinating value. And it wasn't that I blogged every week. I wasn't Seth Godin doing every day. Like, uh, you know, it was, I was just regular. I kept going, and, and, uh, uh, it made it more rewarding for me and also more valuable and, and, and, um, as, as a thing. However, by 2016, people have moved from blogs to video, and I'm a little, I feel late. I feel late, actually, in 2016. Uh, like, Casey Neistat's exploding at that point. Do you know what I mean? Like, uh, and I'm like, "Oh, I should, I guess I should start on YouTube, I guess." And, you know. Um, and I knew people that would do, like starting to spend money with influencers, and I was like, "What's going, is there an economy here I didn't really know about?" No one takes YouTube very seriously at that point outside of people already in YouTube.

Ali Abdaal 1:16:23 Yeah. Yeah.

James Hoffmann 1:16:23 If that makes sense. So yeah, 2016 I started uploading videos which were initially, like, um, I, I, I bring up Neistat 'cause, you know, like it was a really easy, uh, thing to copy.

Ali Abdaal 1:16:36 Yeah.

James Hoffmann 1:16:36 Right? And so I, I-

Ali Abdaal 1:16:37 A distinctive style that's very clear

James Hoffmann 1:16:38 ... right. I'll do, like, I'll do, like, vlogs, but I'll do a weekly vlog. I'll cut up my week, uh, you know, put some, like, head nodding hip hop in there, and you know what I mean? I'll, I'll do that, and I'll try and work out how to do that. And I did, like, 12 weeks of that, I guess, and was like, okay, actually I, I, you know, I wanted to develop a, a practice of making videos, but these aren't the videos I particularly wanna make.

Ali Abdaal 1:16:58 Mm.

James Hoffmann 1:16:58 Like, I, I'm not actually interested in sharing my life that much.

Ali Abdaal 1:17:01 Yeah.

James Hoffmann 1:17:01 I'm, I'm interested in, in kind of communicating with that. And really early days, I wrote a blog post about takeaway cups and how they're not that bad, and what the actual impact of them is, and I made a video about them. And, and the, like, time on site on the blog, it was like a minute and a half on average. It did like, I don't know, 10,000 views. And then back then, that video did, like, 15,000 views on YouTube with, like, a six-minute time on site. And you're like, all the attention is on YouTube, is on video, and so if I want to communicate with people, if I wanna learn and share and teach, I have to move to video. That's just what it is.

Ali Abdaal 1:17:38 Mm.

James Hoffmann 1:17:38 And I'd made little videos in the past, and I feel like that, like I liked it, but I wasn't very good at it back then, so I started making videos on YouTube. And, uh, you know, a couple of really interesting lessons early on for me was that moving audiences between platforms was almost impossible.

Ali Abdaal 1:17:51 Mm.

James Hoffmann 1:17:52 However many sub- I had like 20,000 followers on Instagram, and I could not get them to go to YouTube. I was like, "But I'm making videos." And they're like, "Yeah, but we like Instagram." Uh, same with Twitter, same sort of, probably 30,000 on Twitter. Couldn't get anyone to go to YouTube.

Ali Abdaal 1:18:05 Yeah.

James Hoffmann 1:18:05 And, and-

Ali Abdaal 1:18:06 And you got that initial audience through the blogging, through just being-

James Hoffmann 1:18:08 Well, the initial-

Ali Abdaal 1:18:08 ... a prolific, prolific content-

James Hoffmann 1:18:09 I, I got to 2,000 quite quickly, and then I flat lined for a long time, and it was really, like, you know, it took me a long time to get to 10,000 subs from that point onwards.

Ali Abdaal 1:18:19 Mm.

James Hoffmann 1:18:19 And that's the cl- that's YouTube, right? Like, it's just the graft, and it's just, it's a, it's a difficult place to be discovered. Takes time. You've talked about this a lot.

Ali Abdaal 1:18:27 Yeah.

James Hoffmann 1:18:27 It is what it is. And that was, again, totally my experience too. So yeah, um, I think by 2019 I crossed the 100,000 subscriber mark.

Ali Abdaal 1:18:37 Oh, three years to get to 100K.

James Hoffmann 1:18:38 Three years. Yeah.

Ali Abdaal 1:18:39 That's-

James Hoffmann 1:18:39 Um, that's great.

Ali Abdaal 1:18:40 Yeah.

James Hoffmann 1:18:41 I'm not, I'm not mad about that.

Ali Abdaal 1:18:42 No, that's interesting.

James Hoffmann 1:18:42 Do you know what I mean? Like-

Ali Abdaal 1:18:43 Because I think, I think, I think, I think people have a lot of, like, unrealistic expectations-

James Hoffmann 1:18:46 Super, yeah

Ali Abdaal 1:18:47 ... about, about YouTube. Like, you see the big YouTubers, and often they're the ones that sort of broke out earlier on.

James Hoffmann 1:18:52 Yeah.

Ali Abdaal 1:18:53 And then I find, you know, we have hundreds of students going through our YouTuber Academy every cohort, and people are always like, "Oh, I, I'm, I'm on video number 32, and I'm still only on, like, 3,000 subscribers." Like, bro, it took me 50 videos to get to m- to get my first thousand. Like, what are you talking about? And even you with, with that inherent unfair advantage, as it were, of being a World Barista Champion-

James Hoffmann 1:19:11 Sure

Ali Abdaal 1:19:11 ... of running a coffee roastery business, of like-

James Hoffmann 1:19:13 Right

Ali Abdaal 1:19:13 ... being very, very pro at this thing, talking about the thing that you're pro at, still took three years to get to 100K.

James Hoffmann 1:19:18 Totally.

Ali Abdaal 1:19:18 Damn.

James Hoffmann 1:19:19 Yeah.

Ali Abdaal 1:19:19 That's great. I love that. [laughs]

James Hoffmann 1:19:20 But it, it, you know-

Ali Abdaal 1:19:21 That's a good-

James Hoffmann 1:19:21 It is, it took me a long time to get better at making videos-

Ali Abdaal 1:19:23 Yeah

James Hoffmann 1:19:23 ... to understand how to... You know, I'd done a lot of presenting over my life. I've done a lot of talks on stage. I did, you know, in, in the, in the job, my first kind of, um, training job on, with the commercial machines, that was a lot of presenting, essentially. It was two, two-hour talk I would give several times a week. So I, I got comfortable presenting-

Ali Abdaal 1:19:41 Mm

James Hoffmann 1:19:41 ... which is a whole other skill that, that I, I guess I had a lot more practice at coming into YouTube than is normal-

Ali Abdaal 1:19:46 Yeah

James Hoffmann 1:19:46 ... I guess, which maybe helped a little bit. Um, so yeah, that, that, that took a while. I had a few videos do really well, but, but, you know, the, the way that, you know... It, it, it was interesting to me that- Um, weirdly, coffee's a part of so many people's lives, and coffee's a part of loads of bloggers' lives-

Ali Abdaal 1:20:02 Mm

James Hoffmann 1:20:02 ... and vloggers' lives, and you would see lots of people have a little coffee part of the, their videos. But actual coffee content on YouTube, there wasn't very much. And quite early on, on National Coffee Day, like, YouTube's Twitter account was like, "Go and watch James." Uh, and I was like, wow, that's cool.

Ali Abdaal 1:20:16 Yeah.

James Hoffmann 1:20:16 But also, you don't have many choices. This is a really empty niche. It's changing very quickly now, uh, as this sort of niche fills in inevitably, but that's good. That's really helpful. Um, so yeah, like, um, so yeah, for the first three years, it was like I had a little space, um, that I used for making videos and also, uh, a, a sort of office near home, far enough away that it was healthy-

Ali Abdaal 1:20:41 Yeah

James Hoffmann 1:20:42 ... uh, but still convenient. And then that was a bad studio and it was, sounded awful, and slowly we sort of improved that, and then it kept going and going, and it sort of gained momentum. Um, and for a long time it made no money, and I, it took me a long time to discover that I had somehow at some point unticked a box [laughs] on AdSense that was like the, the, essentially it was a box of, like, can, can Google serve people custom ads-

Ali Abdaal 1:21:03 Mm

James Hoffmann 1:21:03 ... to who they are? And for some reason, I'd unchecked this. I have no idea why I'd unchecked it. But basically, Google couldn't serve a sp- tailored ads, which meant that my AdSense was appalling.

Ali Abdaal 1:21:13 Mm.

James Hoffmann 1:21:13 Uh, really, like appalling. Uh, for the views that I was doing, I was earning, like, a fifth of what normal AdSense would have been for those kind of things. I don't really know, but the point was I had a job, I had a living, and this was, like, a thing that I was doing 'cause I was passionate about teaching and sharing and communicating-

Ali Abdaal 1:21:28 Yeah

James Hoffmann 1:21:28 ... and doing that kind of stuff. And then it grew and grew and grew, and I was like, okay, now this is a business and I have to sort of switch my thinking in this to being a business now.

Ali Abdaal 1:21:36 Mm.

James Hoffmann 1:21:36 And, and I still struggle with that part of it because my, my instinct is to try and build a sustainable thing, and you're constantly wrestling with YouTube of like, when, when do I get the top of the bell curve?

Ali Abdaal 1:21:52 Yeah.

James Hoffmann 1:21:52 When am I gonna see the decline? How do I build a sustainable thing? But then you sort of listen to other channels. I think Marques has been particularly interesting on this front. He's, he's just like, "No, I'm just gonna build a production company in an int, in a, in a sector that's always interesting, and we're just gonna go."

Ali Abdaal 1:22:07 Yeah.

James Hoffmann 1:22:07 And you're like, oh, maybe that's... 'Cause I, part of me is like, okay, this is, this is, am I gonna be a YouTuber in 10 years?

Ali Abdaal 1:22:13 Yeah. I think about this all the time.

James Hoffmann 1:22:14 I don't know.

Ali Abdaal 1:22:15 Yeah.

James Hoffmann 1:22:15 But, but I'm, genuinely enjoy making videos and, and, and producing them and sharing them and doing this kind of stuff, so I'm like, maybe I wanna do this in 10 years. I don't, I don't know. My career has taken so many weird routes.

Ali Abdaal 1:22:26 Mm.

James Hoffmann 1:22:26 And, you know, like I've done so many odd things as part of the stuff that I've done. I, I'm very bad at predicting the future, so two years feels like a long time to be predicting for. But yeah, so now I, I'm trying to understand how to build this into a sustainable thing. Uh, what that is, what that looks like, how much time I spend doing that. Like, I have quite a condensed work week, probably more so than most people would think. I'm sort of, for various reasons, I probably get everything done that people see me do in about 25 hours, hours a week.

Ali Abdaal 1:22:53 Wow.

James Hoffmann 1:22:53 And then I have other stuff the other part of the week. Uh, and I try and sleep, but whatever.

Ali Abdaal 1:22:58 Yeah.

James Hoffmann 1:22:58 Um, but yeah, 25, 30 hours is my kind of active working time in a week, um, on this sort of stuff.

Ali Abdaal 1:23:05 Mm.

James Hoffmann 1:23:05 And, and the sort of tangential stuff of that as well, you know, this sort of advisory work that I do or other things that are off topic.

Ali Abdaal 1:23:12 Yeah.

James Hoffmann 1:23:12 Um, so yeah. I'm trying to work out what, what, what, you know, is better the ideal day. What do I want a week of making videos to look like? What do I want a day to look like? I've always enjoyed having no structure to my life. It's just easier. Uh, I don't have any routine. I don't know what I will do tomorrow. I do tomorrow, but I mean, tomorrow I'm gonna get on a plane and go to Italy. That's not normal.

Ali Abdaal 1:23:30 Oh. [laughs]

James Hoffmann 1:23:31 So, you know, like, uh, you know, there's no rhythm, and I'm sort of okay with that to some extent. Uh, I've, I've lived that way for a really long time now. So yeah, it, now YouTube is a thing. I have to pay attention to it, and I feel a responsibility with it. Do you know what I mean? Like, I feel like I, especially as a, as a large creator in a small niche-

Ali Abdaal 1:23:50 Mm

James Hoffmann 1:23:51 ... I have a disproportionate influence that I think is unfair and inappropriate, but that's the nature of having a loud voice in a, in a relatively quiet room.

Ali Abdaal 1:23:59 Mm.

James Hoffmann 1:24:00 Um, so that stuff stresses me out a bit. But, um, yeah, mostly I just like, I, I, I like making videos, and I, I think I have ambitions to be better at that as well as the stuff inside them. I just, I don't know.

Ali Abdaal 1:24:10 Yeah.

James Hoffmann 1:24:11 Do I wanna be a director? No, but also kind of.

Ali Abdaal 1:24:14 Yeah.

James Hoffmann 1:24:14 Uh, anyway, yeah.

Ali Abdaal 1:24:17 So what does your overall, like, business portfolio, as it were, look like? You've got YouTube channel, you've got the roastery.

James Hoffmann 1:24:23 Sure. So-

Ali Abdaal 1:24:23 Do you have other stuff going on?

James Hoffmann 1:24:26 Um, so-

Ali Abdaal 1:24:29 Like what are the streams of income? [laughs]

James Hoffmann 1:24:30 Streams of income.

Ali Abdaal 1:24:30 I keep forgetting about it.

James Hoffmann 1:24:31 Well, m- like, lots of them aren't income-

Ali Abdaal 1:24:33 Okay

James Hoffmann 1:24:33 ... if that makes sense. I don't take anything from them at

James Hoffmann 1:24:36 this point.

Ali Abdaal 1:24:36 Okay.

James Hoffmann 1:24:37 Um-

Ali Abdaal 1:24:37 And what are the streams of revenue then? [laughs]

James Hoffmann 1:24:39 Sure, revenue.

Ali Abdaal 1:24:39 Yeah.

James Hoffmann 1:24:39 Revenue is probably fine. Uh, so Square Mile is one.

Ali Abdaal 1:24:42 Yeah.

James Hoffmann 1:24:42 Square Mile owns most of a cafe called Prufrock, um, which is a, another business. Uh, Square Mile also ha- well, we sort of have an investment in a, uh, espresso machine distribution company in the UK. They, so I collaborate with a manufacturer in Italy, uh, and I've helped them design and build and sell machines. Not s- I haven't built them, but they've built them.

Ali Abdaal 1:25:01 Oh.

James Hoffmann 1:25:02 I've helped-

Ali Abdaal 1:25:02 You've designed espresso machines that these guys-

James Hoffmann 1:25:03 Sort of. I've had input into these things.

Ali Abdaal 1:25:05 That's cool. Yeah.

James Hoffmann 1:25:06 Um, and so that relationship has led to kind of, uh, us beginning to import those machines into the UK, and then they've mostly taken over that business. It's a branch office for them, but we're still sort of involved a little bit-

Ali Abdaal 1:25:17 Yeah

James Hoffmann 1:25:17 ... uh, in that business. There's YouTube and the sort of bucket of YouTube that is also things like money from books. So I wrote a book in 2014 that continues to sell in a way that I don't understand but are very happy about. Uh, it was one of those ones where they sat me down early doors and were like, "You're not gonna make any money. You'll have a beautiful business card, but you will not make any money." And I was like, "Cool." And then it's done, like, 300,000 copies and everyone's a bit like-

Ali Abdaal 1:25:42 Oh, wow

James Hoffmann 1:25:42 ... uh-

Ali Abdaal 1:25:43 Bloody hell. [laughs]

James Hoffmann 1:25:43 I know. I know. I know. Uh, and that's in translation-

Ali Abdaal 1:25:45 I've only recently got into the publishing side. 300,000 is a hell of a lot of copies.

James Hoffmann 1:25:48 It's huge, but that's over-

Ali Abdaal 1:25:49 It's enormous. Yeah

James Hoffmann 1:25:49 ... that's since 2014.

Ali Abdaal 1:25:51 Yeah.

James Hoffmann 1:25:51 So it just ticks. It's just one of those things.

Ali Abdaal 1:25:52 That's quite good in a way.

James Hoffmann 1:25:53 It's been incredible.

Ali Abdaal 1:25:53 That's, that's the Marques approach to selling books.

James Hoffmann 1:25:54 It's gone really well. Uh-

Ali Abdaal 1:25:55 This is your atlas of coffee.

James Hoffmann 1:25:56 This is World Atlas of Coffee, yeah. So just finished another book, we wrapped the photography on it last week, um, that'll come out in August.

Ali Abdaal 1:26:02 Oh, hello.

James Hoffmann 1:26:03 Uh, so-

Ali Abdaal 1:26:03 Can you send me a copy?

James Hoffmann 1:26:04 Of course. Uh, of course.

Ali Abdaal 1:26:06 Sick. That's fabulous.

James Hoffmann 1:26:06 Um, you'll ne- yeah, it's, it's just about making coffee. It's kind of the YouTube channel as a book.

Ali Abdaal 1:26:10 Yeah.

James Hoffmann 1:26:10 And kind of fleshed out in a different sort of way as a book. Um, anyway, uh-

Ali Abdaal 1:26:14 Oh, oh, just, uh, just on that though, James-

James Hoffmann 1:26:16 Yeah

Ali Abdaal 1:26:16 ... so, so we shared the 300,000 number, like- Does that, like, how, how, h- how much do you make on a royalty from a book sale?

James Hoffmann 1:26:21 Oh, very little. Uh-

Ali Abdaal 1:26:22 Are we talking, like, pennies? Are we talking dollars, tens of dollars? Like, what's the-

James Hoffmann 1:26:24 Oh, per book. So, okay, so, um, I think am I... I'll make less than a pound a book at best.

Ali Abdaal 1:26:32 Okay.

James Hoffmann 1:26:32 And often less than 50p a book.

Ali Abdaal 1:26:34 Oh.

James Hoffmann 1:26:34 And often less than that, 'cause a lot of them have been in translation, that's the way the licensing and translation works.

Ali Abdaal 1:26:38 Yeah.

James Hoffmann 1:26:39 Because the Atlas is very image-heavy-

Ali Abdaal 1:26:41 Mm

James Hoffmann 1:26:41 ... it's a ton of cartography, ton of licensed images.

Ali Abdaal 1:26:43 Yeah.

James Hoffmann 1:26:44 The, the word component, little piece of the book.

Ali Abdaal 1:26:47 Yeah.

James Hoffmann 1:26:47 And so the words don't earn that much money.

Ali Abdaal 1:26:48 Right. [laughs]

James Hoffmann 1:26:49 Uh, and that's okay. Like, you know, o- over those eight years-

Ali Abdaal 1:26:52 Yeah

James Hoffmann 1:26:52 ... it's been, it's been g- really nice to have that revenue come in.

Ali Abdaal 1:26:56 Mm.

James Hoffmann 1:26:56 And, uh, it's, it's money I never expected.

Ali Abdaal 1:26:58 Yeah.

James Hoffmann 1:26:59 And it's been really nice.

Ali Abdaal 1:27:00 Nice.

James Hoffmann 1:27:00 Um, but yeah, it's not, I haven't earned £300,000 from it. Uh-

Ali Abdaal 1:27:04 [laughs] Yeah

James Hoffmann 1:27:04 ... which is, you know, part of me is like, "I should write fiction." Uh-

Ali Abdaal 1:27:07 Yeah

James Hoffmann 1:27:07 ... that seems to be a much better-

Ali Abdaal 1:27:08 Children's fiction in particular.

James Hoffmann 1:27:09 Children f- yeah, right? Like, uh-

Ali Abdaal 1:27:10 It seems, seems to be the real, like-

James Hoffmann 1:27:11 That's the one

Ali Abdaal 1:27:11 ... side hustle these days. [laughs]

James Hoffmann 1:27:12 But, but, yeah. Not gonna do that.

Ali Abdaal 1:27:13 [laughs]

James Hoffmann 1:27:14 But, um, so yeah, no, the book, but the book has been a great way to sort of, uh, I, I don't know. The book was written to be not about me, which is kind of d- weird. I, this, my picture's not in the book.

Ali Abdaal 1:27:23 Yeah.

James Hoffmann 1:27:24 Nothing about Square Mile's in the book. It's, it's built to be useful to anyone interested in coffee, and that could be competing businesses to mine.

Ali Abdaal 1:27:31 Mm.

James Hoffmann 1:27:31 I'm sort of, and the name on the front, and that's the only time I'm really in the book, is the, is the name on the front thing. Um, and, and that's sort of the same with the YouTube channel. Obviously, I'm not there to advertise the coffee company, because I wanna be useful-

Ali Abdaal 1:27:42 Mm

James Hoffmann 1:27:42 ... to coffee companies everywhere, who can be like, "Oh, you wanna know about this? Go watch James' video about that." And i- if it's sort of apolitical, it, that works much better. Um, anyway, so that's the book. I'm bouncing around a bit. Um, so yeah, the book and, and, and sort of other sort of, uh, royalties or other things like that would fall into, to sort of the YouTube business. Um, we have a merch business separately, uh, called Tens Hundreds Thousands. Um, that's one thing. And then, uh, there's a few kind of investments. Um, in some cases, uh, w- I've started and sold some businesses in the past, and those have gone different places. And one of them, um, was a kind of part cash, part paper deal. So I have a little investment in one company that bought a business of mine, and they have some investments in various things. Uh, I invested in, um, a canned coffee beverage in, uh, San Francisco called Taika, who are kind of a coffee and adaptogens in a can, and it's great.

Ali Abdaal 1:28:35 [laughs]

James Hoffmann 1:28:35 It's very good. If you could get it here, it would be great. I'd send you some. Um, I work with a, a Danish booze creator called Empirical Spirits, who do really interesting stuff. Uh, there's a non-alcoholic brewery in the UK who I think are amazing called Big Drop. I have a tiny investment with them. Uh, there is, um, tick, tick, tick, tick, tick. Is there someone else? Oh, there's an interesting software as a service platform in coffee, um-

Ali Abdaal 1:28:55 Oh

James Hoffmann 1:28:55 ... I'm working with a little bit called, called, uh, Beans, who are doing interesting stuff, but really on, like, business to business coffee stuff. And, and, and a few other bits and pieces I think out there. I'm not really an active investor in that regard.

Ali Abdaal 1:29:07 Mm.

James Hoffmann 1:29:07 But I, I, I'm interested in seeing cool businesses do cool stuff, and, and there's times where I'm like, "Yeah, okay, I'd, I'd like to be a little bit involved." But I'm not writing big checks.

Ali Abdaal 1:29:15 Yeah.

James Hoffmann 1:29:15 You know what I mean? Like, uh, they're little checks.

Ali Abdaal 1:29:16 [laughs]

James Hoffmann 1:29:16 Little tiny checks. Um, just because-

Ali Abdaal 1:29:19 Having you on a cap table is just a value add in itself.

James Hoffmann 1:29:21 Maybe.

Ali Abdaal 1:29:21 Even if you only put in-

James Hoffmann 1:29:22 To some, to some businesses-

Ali Abdaal 1:29:23 ... a small check, yeah

James Hoffmann 1:29:23 ... yes, maybe. Um, you know, a- and it's been interesting to learn about that world.

Ali Abdaal 1:29:27 Yeah.

James Hoffmann 1:29:27 Uh, you know what I mean? Like, uh, most people never have to worry what a convertible note is. Uh, and that's probably for the best-

Ali Abdaal 1:29:34 Yeah [laughs]

James Hoffmann 1:29:34 ... uh, if I'm honest. You know, like, uh-

Ali Abdaal 1:29:36 I've heard that term so often, I still haven't Googled to find it to know what it means.

James Hoffmann 1:29:38 Just, uh, and then you get into, like, blind trusts and like, you know, like, the, the whole deal of, um, preemption rights and dull things and I don't wanna get into this.

Ali Abdaal 1:29:47 Yeah.

James Hoffmann 1:29:47 There's a, just-

Ali Abdaal 1:29:48 I have, I have lots to learn about that particular-

James Hoffmann 1:29:49 Yeah, yeah. I'm not sure-

Ali Abdaal 1:29:50 ... topic

James Hoffmann 1:29:50 ... it's certainly not something I'm interested in, in, in deepening my involvement in-

Ali Abdaal 1:29:53 Mm

James Hoffmann 1:29:53 ... uh, meaningfully. Um, but yeah, like, that's a sort of, sort of, I, I, it, you know, I, I run a very boring, I have a decent pension.

Ali Abdaal 1:30:01 Yeah.

James Hoffmann 1:30:01 I have a little bit of money in, like, a, like a Charles Stanley-esque kind of thing. Uh, but I, but I, historically, I've just chosen not to pull much money out of my companies. And so, um, yeah, that's been a kind of, uh-

Ali Abdaal 1:30:13 So a high paper net worth, but not necessarily a [laughs] -

James Hoffmann 1:30:15 Yeah

Ali Abdaal 1:30:15 ... yeah.

James Hoffmann 1:30:15 Which, you know, like, um, yeah, like a, I, I don't have a particularly extravagant lifestyle or demands for one, really.

Ali Abdaal 1:30:25 Yeah.

James Hoffmann 1:30:25 You know what I mean? So it, it, I don't know. Uh, part of me is like, "You should get the chips off the table." The kind of dealer, you know-

Ali Abdaal 1:30:30 Yeah

James Hoffmann 1:30:30 ... the gambling part of me is like, you know, like, "Cash out a little bit. Cash out, cash out." But I'm like, I don't, I don't know. It's not-

Ali Abdaal 1:30:35 What are you gonna do with the cash? Like, put it, put it into more investments? [laughs]

James Hoffmann 1:30:37 You know? Like, um-

Ali Abdaal 1:30:38 It's like, yeah.

James Hoffmann 1:30:39 So yeah, like that's, that's maybe not the healthiest approach to money, but it is, it is mine and, and, and, like, I don't know. I, I, I'm not driven by accruing an enormous amount of wealth, because I don't know what I would do with it. I'd probably aspire to give a bunch of it away or use it, help, you know, sensibly, because I don't, I didn't want very m- much. You know what I mean? Uh, uh, which is, uh, something I'll try and maintain. It just, I don't know. I see, again, I've had interesting talks with incredibly wealthy people and, and, uh, they're not very happy. Miserable people. Like, a bunch of miserable people. Uh, and you know, that doesn't appeal to me. Just, I don't know. I think you very easily get into just make the number bigger, and that's the least rewarding game in the entire world.

Ali Abdaal 1:31:21 Mm.

James Hoffmann 1:31:22 So that's, I'm like, "How do I not play that game?" I don't know. And I th- also think, like, I think, I think generational wealth is important, but I also think you easily cross a line into just, like, the easiest way to destroy a human is give them an enormous inheritance.

Ali Abdaal 1:31:34 Mm.

James Hoffmann 1:31:35 I don't think there's ever evidence of that going particularly well.

Ali Abdaal 1:31:37 Mm-hmm.

James Hoffmann 1:31:37 So like, like, I, I believe people should be able to build generational wealth, but I also think there's, there's kind of points where it gets a little screwy and I think, I don't know, like, you know, I was never promised any... I was given a safety net growing up, sure, but I was never promised, there's never gonna be, like, a, you know? But I imagine how it must be to grow up and be like, "At some point I'll have 100 million quid." I, I think that's, I don't think that's good.

Ali Abdaal 1:31:59 Yeah.

James Hoffmann 1:31:59 Is that good? I don't think that's good. I'm not sure that's good. I, you know what I mean? You can do with your money what you want to do, but I don't, I don't know if giving an enormous amount of money to someone-

Ali Abdaal 1:32:08 Mm

James Hoffmann 1:32:09 ... will help them lead their happiest life.

Ali Abdaal 1:32:11 Mm.

James Hoffmann 1:32:11 I think about that quite a lot. So anyway, little bit like the die with nothing thing, right? Like-

Ali Abdaal 1:32:15 Die with nothing, yeah.

James Hoffmann 1:32:16 Yeah, yeah. A little bit similar to that of, like, you know.

Ali Abdaal 1:32:18 Yeah.

James Hoffmann 1:32:18 I don't think you should... It, it's a world where you might wanna pass on enough that your kids can get on the housing market or, you know what I mean? Like, they can- Get through university debt-free and not, you know, carry a student debt throughout their entire life that's unnecessarily and stupidly crippling.

Ali Abdaal 1:32:31 Mm.

James Hoffmann 1:32:32 But I don't know if millions of pounds at some point is, like, good and healthy.

Ali Abdaal 1:32:36 Question. Um, one standard... Well, so somewhat standard piece of business advice is stick to your core focus.

James Hoffmann 1:32:42 Mm-hmm.

Ali Abdaal 1:32:42 Stick to the thing that you're good at, your hedgehog concept, your whatever, your unique ability, et cetera, et cetera. Um, we've been thinking about this, I've been thinking about this a lot when it comes to setting up a kind of merch company.

James Hoffmann 1:32:54 Sure.

Ali Abdaal 1:32:55 So I was very inspired when you gave a talk at the Ziggurat Summit a few months ago, actually-

James Hoffmann 1:32:58 Yeah

Ali Abdaal 1:32:58 ... um, around how you have this separate company, Tens Hundreds Thousands, which does your merch, as it were. But it's, it's not like, it's not like a sh- a T-shirt with your face on, on it.

James Hoffmann 1:33:06 No.

Ali Abdaal 1:33:06 Although those would sell. Um-

James Hoffmann 1:33:07 Right

Ali Abdaal 1:33:08 ... it's more like these, these cool products, uh, like the decks of cards and, and, and stuff like that. And I like the idea of making physical products, and in fact, we have some physical stationery which-

James Hoffmann 1:33:17 You do

Ali Abdaal 1:33:18 ... is around here somewhere. Um, but I also see the advice of, you know, the physical products are a bit of a side hustle. Like, I'd love to make my own mechanical keyboard. I'd love to make my own everyday carry laptop bag-

James Hoffmann 1:33:28 Mm-hmm

Ali Abdaal 1:33:28 ... just because I freaking love keyboards and bags and pens and journals and, you know, the daily productivity kit. Uh, but it's not our core focus in that when, we as a team are not very good at making physical products. We don't have any expertise in it, and the thing we do is content. So one argument is double down on the thing you're good at. There's another argument for diversification, for building a brand outside of me necessarily-

James Hoffmann 1:33:48 Sure

Ali Abdaal 1:33:48 ... that I can be the marketing director of, but not necessarily the managing director of, uh, or not so intrinsically tied to the brand that it is unable to function without me in the room. Um, but it's like, yeah, any, any thoughts on that balance between stick to what you know and do content around the thing versus branch out into multiple things where you might not necessarily be an expert, like physical product?

James Hoffmann 1:34:11 Uh, sure. I mean, like, I, I, we do it-

Ali Abdaal 1:34:14 Yeah

James Hoffmann 1:34:14 ... because the actual creation process is very enjoyable. Like, making fun new things-

Ali Abdaal 1:34:18 Mm

James Hoffmann 1:34:18 ... is satisfying, and I think that's why we do some T-shirts and posters, but we also try and do more interesting stuff that's just kind of satisfying-

Ali Abdaal 1:34:26 Yeah

James Hoffmann 1:34:26 ... in that regard. Um, you know, I, I think the reason we kept it separate is, again, it's that kind of part of, like, how do you build a sustainable thing? W- I want it to have a relationship with its audience outside of me. I can do-

Ali Abdaal 1:34:39 Yeah

James Hoffmann 1:34:39 ... the marketing for it in some ways. That's good, but I, I like the idea of it being its own independent thing, that it can grow a team inside, it can have development for the people inside that. Not, it doesn't have to be huge. It doesn't have to turn over millions of pounds. It can do that as a smaller business and still be satisfying, and at the end of it, be like, "We made some cool stuff and people really enjoyed using it." And that, for me, is a, a, a, probably a bigger motivator than it generating thousands of pounds of, of profit-

Ali Abdaal 1:35:05 Yeah

James Hoffmann 1:35:05 ... or, or payout. But that's just, you know, going into this because I've, I had a job from the beginning, and this hasn't been lifeblood stuff. I've had a stronger feeling of, like, what do, what's the thing I want to do that I enjoy?

Ali Abdaal 1:35:19 Mm.

James Hoffmann 1:35:19 You know what I mean? Like, I, I have no doubt that the Essentially stuff has been very satisfying for me.

Ali Abdaal 1:35:24 Yeah, very nice.

James Hoffmann 1:35:25 Like sitting down with it and using it.

Ali Abdaal 1:35:26 Yeah, I get to use my diary every day-

James Hoffmann 1:35:28 You know what I mean? Right

Ali Abdaal 1:35:28 ... and it's just kind of cool. [laughs]

James Hoffmann 1:35:28 Like, that's, that's, that's enjoyable.

Ali Abdaal 1:35:30 Even though it doesn't make much money. [laughs]

James Hoffmann 1:35:31 Yeah, yeah, yeah. And that's-

Ali Abdaal 1:35:32 In fact, I don't think we're at breakeven just yet, but still.

James Hoffmann 1:35:34 Well, it takes time. Like, um-

Ali Abdaal 1:35:36 Yeah. [laughs]

James Hoffmann 1:35:36 But i- it's one where at the end of the year, th- that may be a moment that you reflect on and be like-

Ali Abdaal 1:35:40 Yeah

James Hoffmann 1:35:40 ... "I've enjoyed that."

Ali Abdaal 1:35:41 Yeah.

James Hoffmann 1:35:41 That was, that was, that was, you know, like a, that was a return on whatever I put in. I felt a return on that.

Ali Abdaal 1:35:48 Mm.

James Hoffmann 1:35:48 And I, I think that's, that has its place. I, I think, you know, running around trying to do six million different T-shirts and mugs and all the rest of it can easily be a distraction.

Ali Abdaal 1:35:56 Yeah.

James Hoffmann 1:35:57 It's not a great margin business-

Ali Abdaal 1:35:59 Mm

James Hoffmann 1:35:59 ... unless you get deep into the manufacturing and then that's-

Ali Abdaal 1:36:02 Yeah

James Hoffmann 1:36:02 ... building the manufacturing.

Ali Abdaal 1:36:03 Yeah. [laughs]

James Hoffmann 1:36:03 Like you kind of start a paper factory. There's a whole other thing, you know? You'll make a lot more money on each little diary.

Ali Abdaal 1:36:08 Yeah.

James Hoffmann 1:36:09 But you'll have had to build a paper factory to do it. Like, you know, that's the, that's, that's the trade-off. Um, so y- you know, yeah, I, I, I think for me, one of the requirements of business is I enjoy it, I'm satisfied by it, and I think this is a great way to do that. And again, I, I think I'm also interested in, in poking around in the places that people aren't there.

Ali Abdaal 1:36:29 Yeah.

James Hoffmann 1:36:29 Do you know what I mean? Like, no one's really making trays for dosing coffee into before you put it in your grinder.

Ali Abdaal 1:36:34 Yeah.

James Hoffmann 1:36:34 Uh, lots of people are making T-shirts. Uh, and so the, the T-shirt real estate available to get my T-shirt on a body is limited.

Ali Abdaal 1:36:40 [laughs]

James Hoffmann 1:36:41 Uh, you know what I mean? Like-

Ali Abdaal 1:36:42 Yeah

James Hoffmann 1:36:42 ... you're gonna have to pick the... And, and we still make them, and I enjoy them, and we just have some fun with them. But, like, it, it, it's, T-shirts are not as satisfying as, like we've got a, some botanical prints coming, like botanical drawings. Uh, an artist who works with Kew Gardens a lot, like, w- it's like legit botanical drawings turned into, like, these posters. I wanna own it, actually. Like I, I, if I don't wanna own it at the end of it, we don't make it. Uh, if I don't wear the merch, we don't make it. If I don't wanna-

Ali Abdaal 1:37:08 Oh

James Hoffmann 1:37:08 ... drink out of the mug, we don't make it.

Ali Abdaal 1:37:09 Nice. That's good. That's a good motto.

James Hoffmann 1:37:10 Like, I have to want all of it.

Ali Abdaal 1:37:11 Yeah.

James Hoffmann 1:37:12 And I really wanna own these prints-

Ali Abdaal 1:37:13 Yeah

James Hoffmann 1:37:13 ... 'cause I love botanical drawings. Um, so we're gonna make it, and you know, like we can, and why would you not if you could? That's, that to me is the better why would we do this? 'Cause w- we want to and we could. We have the opportunity. Like, I think, switching to YouTube for a second, like I'm in a weird place where I can, I, I have a freedom to make videos that really no one else in my industry can make.

Ali Abdaal 1:37:37 Mm.

James Hoffmann 1:37:37 It doesn't, and you know, like I, I, I, uh, from AdSense or Patreon or other things, I can spend money to make videos. So I feel like I have a moral obligation to make things that no one else can because they don't have that opportunity-

Ali Abdaal 1:37:50 Mm

James Hoffmann 1:37:50 ... and I would be squandering the opportunity to make stuff. So that's what we wanna do. Like, it, it doesn't... I'm gonna fly to Italy tomorrow 'cause I wanna talk to someone who's the biggest collector of vintage espresso machines in the world. Like, they have a museum. They are like the, the person. I wanna buy a vintage espresso machine, and ultimately I wanna put it on bar in London and have people drink coffee from a machine made in the '50s and have, like, a really... That's a nice thing, you know what I mean? But that's, that's, the upfront cost of that, and actually it will lose money as a video, but doesn't matter. I can do it. I should do it, and that would be cool 'cause I wanna do it. Uh, that's a weird metric for making decisions, but it, it's very satisfying.

Ali Abdaal 1:38:28 That's a great way of thinking about it. Yeah, if I think of the keyboard, if I think of the bag, the stationary, it's like it's, it's cool and I wanna do it, and I know it's not gonna make much money. But I think I s- I need to start shifting my thing from the thing that we should be doing is the highest ROI thing-

James Hoffmann 1:38:41 Right

Ali Abdaal 1:38:41 ... to ROI as measured in things other than profit. [laughs]

James Hoffmann 1:38:44 Yeah.

Ali Abdaal 1:38:45 Yeah.

James Hoffmann 1:38:45 You know, it shouldn't be damaging for the longevity of the business, but I, you know, I think that, yeah, it's not. It's easy, it's a nice metric-

Ali Abdaal 1:38:52 Mm

James Hoffmann 1:38:52 ... which makes it very appealing.

Ali Abdaal 1:38:54 Yeah.

James Hoffmann 1:38:54 Uh, but I don't think it's always the best metric.

Ali Abdaal 1:38:56 Yeah. And I really like the idea, for example, spinning this off into another company that, that can have its own team, that have ownership, that have equity-

James Hoffmann 1:39:02 Right

Ali Abdaal 1:39:02 ... et cetera, et cetera, so that it feels like... And it, you know, I think it's, it, it, the, the model that you describe sounds like you are the owner of a mult- multiple businesses, but not necessarily the operator of multiple businesses.

James Hoffmann 1:39:12 Correct.

Ali Abdaal 1:39:13 And that feels-

James Hoffmann 1:39:14 I'm not very good at it.

Ali Abdaal 1:39:15 Yeah. That feels interesting. I, I, I think I'm kind of like you in I like the idea of starting stuff and-

James Hoffmann 1:39:18 Mm-hmm

Ali Abdaal 1:39:19 ... shaping the vision initially, and then when it comes to the day-to-day stuff, I would much rather someone else deal with that. [laughs]

James Hoffmann 1:39:24 Yeah. But it, you know, uh, I think it is important to, to understand that, that there has to be a trade-off in that.

Ali Abdaal 1:39:28 Yeah.

James Hoffmann 1:39:29 And that there's days where I-

Ali Abdaal 1:39:30 I'll be in Nebula. [laughs]

James Hoffmann 1:39:30 Yeah. There's days where I want to get in the nitty-gritty, and I just can't-

Ali Abdaal 1:39:35 Yeah

James Hoffmann 1:39:35 ... or shouldn't, and that's just, uh, that's the, that's part of the trade-off. But yeah, I, I think I'm not very good at a bunch of stuff. I'm quite good at certain things-

Ali Abdaal 1:39:41 Mm

James Hoffmann 1:39:42 ... and, uh, and I think I'm most useful if I'm doing creative stuff.

Ali Abdaal 1:39:45 Yeah.

James Hoffmann 1:39:45 I'm kind of good at ideas, and ideas are valueless, uh, without execution.

Ali Abdaal 1:39:50 Yeah.

James Hoffmann 1:39:50 And I'm not the world's best executor, so I need to work with good executors to be vaguely useful to anyone. And, um, I think we, we over value ideas. Uh, you know, you sign NDAs around ideas, you sign, oh, some- it's a nonsense. They're worth nothing-

Ali Abdaal 1:40:04 Mm

James Hoffmann 1:40:04 ... until they're executed upon.

Ali Abdaal 1:40:06 Do you worry about, like, money these days?

James Hoffmann 1:40:10 No.

Ali Abdaal 1:40:10 Okay.

James Hoffmann 1:40:11 I mean, yes and no. Like, uh, um, you know, going into the current economic future-

Ali Abdaal 1:40:19 Yeah

James Hoffmann 1:40:19 ... if we go through, uh, if we get into the spiral of inflation and all sorts of other stuff, yeah, that's concerning.

Ali Abdaal 1:40:24 Mm.

James Hoffmann 1:40:24 That's a worry, but, um, uh, yeah, I don't, I don't really meaningfully worry. I mean, I've worried about it in the past.

Ali Abdaal 1:40:31 Yeah.

James Hoffmann 1:40:31 I've, you know, like, I've sold food, sold, like, uh, clothing items or, or vinyl to pay rent.

Ali Abdaal 1:40:36 Mm.

James Hoffmann 1:40:36 And, you know, like, uh, uh, I don't worry about it the same way now. But I'm, I'm, you know, what I'm aspiring for is just I want the brain space back, uh, to think about other things. Um, so yeah, I, I, I think that's... But that's easier if I don't want a ton.

Ali Abdaal 1:40:50 Yeah.

James Hoffmann 1:40:50 And I think if I had a lot of... I'm trying not to get into the hedonic adaptation of-

Ali Abdaal 1:40:54 Yeah

James Hoffmann 1:40:54 ... of that stuff, where you just consume more-

Ali Abdaal 1:40:56 Yeah

James Hoffmann 1:40:56 ... compensation with that stuff. Again, I'm desperate to learn other people's hard lessons the easy way.

Ali Abdaal 1:41:00 Mm.

James Hoffmann 1:41:01 Uh, and you, you don't always. You, you, you intellectualize it, you understand them, but you still kind of get sucked in and then, you know, two years later you're like, "Oh, no, this is the lesson I need to have learned two years ago," and I, I, I can't learn it on paper. I have to learn it-

Ali Abdaal 1:41:14 Yeah

James Hoffmann 1:41:14 ... by making mistakes.

Ali Abdaal 1:41:16 Okay. So I'm, I'm 27 right now, probably in a similar position that you were probably a few years ago, just getting started with all the stuff, not taking a lot of cash out of the business 'cause reinvestment, et cetera, et cetera. Um, I'm noticing a tendency of lifestyle inflation in myself where it's like, you know, £1,000 a month rent is good, but 5,000 gets you a really nice apartment. Oh, I wonder what 10,000 is like. You know, et cetera, et cetera. Um, we were talking about espresso machines, be like, "Oh, I'd like to get into, into this as a hobby." And I kn- and, and I see the warning li- the warning signs of like, hang on, the more the kind of, uh, baseline how much money I need to comfortably live, the more that increases based on just hedonic adaptation and, um, lifestyle inflation and stuff, the more worries about money I just will have further down the line.

James Hoffmann 1:41:59 Sure.

Ali Abdaal 1:41:59 Whereas if, if I can actually be very comfortable living a slightly more frugal life, uh, keeping in mind the [laughs] principles of Die with Zero, then it would free up a lot of head space, 'cause right now I spend a lot of time thinking, oh, shit, what, what's the business gonna look like three years from now? Are we still gonna be profitable? Am I still gonna be a YouTuber, et cetera, et cetera. Any advice? [laughs] Just-

James Hoffmann 1:42:16 I, I think-

Ali Abdaal 1:42:16 ... throwing that ball to you. What do you reckon?

James Hoffmann 1:42:18 I think it's really paying attention to the dissatisfaction or the lack of satisfaction that comes with spending more money sometimes.

Ali Abdaal 1:42:26 Mm.

James Hoffmann 1:42:26 Do you know what I mean? Like, you, you buy the nice thing-

Ali Abdaal 1:42:28 Yeah

James Hoffmann 1:42:28 ... and you're like, take a nice camera.

Ali Abdaal 1:42:31 Mm.

James Hoffmann 1:42:31 You buy the nice camera. That is nicer, but I'm not satisfied, and part of your brain goes, "You didn't spend enough." Right? And so that's the-

Ali Abdaal 1:42:39 Yeah

James Hoffmann 1:42:39 ... but the answer is, you can't spend enough. You... This feeling is inevitable. You can't, you can't spend it away. So it's, it's... When, when you have that feeling, I think it's really useful and nice to be like, "Okay, that is... Oh, there isn't, there isn't what I- what I'm looking for is not here in the thing."

Ali Abdaal 1:42:56 Mm.

James Hoffmann 1:42:56 And I think, I, I think a nice, I'm not picking on you-

Ali Abdaal 1:42:58 No

James Hoffmann 1:42:58 ... 'cause I saw you buy a nice camera.

Ali Abdaal 1:43:00 Yeah.

James Hoffmann 1:43:00 But, uh, but I think that's a good example of that. Like, that, that feels nice to use and there's moments where it feels special, but it's left you feeling like, what do I get for even more, right? I, I suspect you've thought about it-

Ali Abdaal 1:43:10 Yeah, I'm like the Leica Q2 is nice, but like the Leica Q3 is gonna be even better 'cause it's gonna have a way of recharging via USB-

James Hoffmann 1:43:15 Right

Ali Abdaal 1:43:15 ... or the Leica M whatever that has film. Oh, hello.

James Hoffmann 1:43:18 Do you know-

Ali Abdaal 1:43:18 Yeah

James Hoffmann 1:43:18 ... and, and it's, uh, th- that's the wrong diagnosis-

Ali Abdaal 1:43:21 Yeah

James Hoffmann 1:43:21 ... of the symptom. You know what I mean?

Ali Abdaal 1:43:22 [laughs]

James Hoffmann 1:43:23 And, and it's just trying to catch yourself in that loop of like-

Ali Abdaal 1:43:25 Yeah

James Hoffmann 1:43:25 ... oh, I can't, I can't upgrade my way into a, a more-

Ali Abdaal 1:43:30 Into happiness

James Hoffmann 1:43:30 ... into satisfaction.

Ali Abdaal 1:43:31 Yeah.

James Hoffmann 1:43:31 Do you know what I mean? It, it, it isn't there.

Ali Abdaal 1:43:33 Yeah.

James Hoffmann 1:43:33 And, and stop chasing it. Do you know what I mean? Like, uh, but at the same time, lean into the things that do give you real satisfaction.

Ali Abdaal 1:43:40 Mm.

James Hoffmann 1:43:40 I really enjoy food, I really enjoy restaurants. I don't wanna, you know... I, I think the fun thing about restaurants is that, um, the really super expensive ones are terrible value for money.

Ali Abdaal 1:43:49 Okay.

James Hoffmann 1:43:50 Right? You can eat incredible... The cutting, the, the most interesting food is not necessarily the most expensive. Sure, if you wanna get a Noma or you wanna go to Fat Duck, that's, that's an experience. But I think really interesting food doesn't have to be very expensive but, and, and that can be satisfying. It's discovery-

Ali Abdaal 1:44:05 Mm

James Hoffmann 1:44:05 ... it's just straight deliciousness.

Ali Abdaal 1:44:07 Mm.

James Hoffmann 1:44:07 You know what I mean? Like, that, that I'm happy to lean into and spend on because I find a strong return on that-

Ali Abdaal 1:44:12 Yeah

James Hoffmann 1:44:13 ... particular thing, you know? And, and, and try not to fall into food as fuel or just, like-

Ali Abdaal 1:44:17 Yeah

James Hoffmann 1:44:17 ... whatever else. That happens 'cause you've got stuff to do, and I eat at my desk like most people and that's wrong and messed up. Uh, but the trade-off of trying to work more in less time. Um, so yeah, that, that, that's a, a kind of piece of it I think, of just like where, where are you finding genuine satisfaction-

Ali Abdaal 1:44:33 Mm

James Hoffmann 1:44:33 ... and not just the, "That's good"- I enjoy it, but and there, like, that's a dead end, and you can go fur- you just, it's a dead end down there.

Ali Abdaal 1:44:42 Yeah.

James Hoffmann 1:44:42 The minute you buy the nice thing and it's not quite what you wanted and you want more, nah, not gonna happen.

Ali Abdaal 1:44:47 Oh, interesting. Yeah, I guess, um, Ramit Sethi has this k- kind of, you know, idea. He sort of, he talks about f- figure- figuring out what is your rich life. Like-

James Hoffmann 1:44:55 Mm

Ali Abdaal 1:44:55 ... what, what are the areas for you in which, uh, the addition of more money does in fact lead to more enjoyment, satisfaction, et cetera? And it sounds like for you, being able to just eat at whatever restaurant you want is a significant value add.

James Hoffmann 1:45:07 Yeah, absolutely.

Ali Abdaal 1:45:07 Whereas for other people who are happy with, like, the local fried chicken joint, [laughs] that's not a thing that they should spend money on-

James Hoffmann 1:45:12 Absolutely

Ali Abdaal 1:45:13 ... 'cause it's not gonna bring them any satisfaction.

James Hoffmann 1:45:14 But I, but I-

Ali Abdaal 1:45:15 Yeah

James Hoffmann 1:45:15 ... think that's, you know, it's, it's understanding where your passions kind of intertwine.

Ali Abdaal 1:45:18 Yeah.

James Hoffmann 1:45:18 Like, I'm a flavor person, you know what I mean? So that's unsurprising that I'm-

Ali Abdaal 1:45:21 Mm

James Hoffmann 1:45:22 ... interested in food and then, y- you know, things like provenance and story and all these kind of things get woven into good food-

Ali Abdaal 1:45:27 Yeah

James Hoffmann 1:45:27 ... and good restaurants. Uh, there's nothing wrong with fried chicken. That's a great time-

Ali Abdaal 1:45:30 Yeah, fried chicken's great

James Hoffmann 1:45:31 ... fried chicken.

Ali Abdaal 1:45:31 Yeah. [laughs]

James Hoffmann 1:45:31 But, um, yeah, I, I, I think that's it for me and, and just, like, thinking about budgeting for those things separately-

Ali Abdaal 1:45:38 Yeah

James Hoffmann 1:45:38 ... but also understanding them well enough to, to buy them well, you know what I mean?

Ali Abdaal 1:45:41 Mm.

James Hoffmann 1:45:41 Like, I love food. It doesn't mean I should be spending £500 a meal-

Ali Abdaal 1:45:44 Yeah

James Hoffmann 1:45:44 ... to be satisfied. That's a different, that's just a v- that's the wrong shortcut.

Ali Abdaal 1:45:48 Mm.

James Hoffmann 1:45:49 You know what I mean?

Ali Abdaal 1:45:49 What is your sort of, uh, vision these days?

James Hoffmann 1:45:53 In what regards?

Ali Abdaal 1:45:54 'Cause you said that before you had this, uh, you had this vision of, like, building a community of coffee lovers or equivalent, and you were agnostic about the details of the execution.

James Hoffmann 1:46:02 Sure. I-

Ali Abdaal 1:46:02 Do you have a similar thing for, like, your life or what you want to do personally?

James Hoffmann 1:46:07 I, I think there's a bunch of... You know, I, I work in a deeply broken industry.

Ali Abdaal 1:46:14 Okay.

James Hoffmann 1:46:14 Coffee's messed up. Coffee is built on colonial wealth extraction. Coffee is ethically highly questionable. It's bad. Even if you're paying better prices, you're still working within a system designed to extract as much wealth as possible from producing countries and, and capture it and keep it in consuming countries. That's not very good. That's a massive imbalance of power. It's ethically highly questionable, and while we try and operate within that ethically, it's a more extreme version of there's no ethical consumption under capitalism, right? Like, it's... I'm, I'm, I'm very uncomfortable with that being a part of my life, and I'm, I don't know how you change that, but I'm interested in working towards coffee being a better industry. Uh, uh, on my end, I feel like I have a, an opportunity to, to have people see coffee as being more valuable than they do. C- the coffee industry spent 100 years teaching you that coffee was cheap, easy, commoditized, gets you caffeine and, and a bit of bitter taste, and it's fine, and that isn't true, and I need people to see it as being a bit more valuable. Uh-

Ali Abdaal 1:47:10 Mm

James Hoffmann 1:47:10 ... 'cause they enjoy it more. That's the secret. If you enjoy it more, then, then you've got a bit more space to spend money on it 'cause it's rewarding and you enjoy it. So that's my kind of raison d'être for YouTube is to, like, have people enjoy coffee a little bit more, so they see it as being more valuable, because coffee needs to get more expensive 'cause it's just too cheap and it's wrong.

Ali Abdaal 1:47:28 Yeah.

James Hoffmann 1:47:29 End of story. Uh, and then I have responsibilities further back in the chain to how we buy and that kind of stuff to do a better job, but I don't feel like I should necessarily lump ethical challenges onto the consumer, who just wants a cup of coffee in the morning. If I get you enjoying it, delighting in it, it's a very positive experience for you, then that's easy for me to develop that relationship. If I just tell you you should feel bad about yourself for buying coffee, that, again, dead ends things a little bit. So that's kind of a thing. So I, yeah, I, I, uh, to make a coffee sustainable, coffee has to be much more expensive. That money has to go to producers. They need more power in, and, uh, and more sort of equity in the whole supply chain. Uh, and the end though, that means a more expensive cup for consumers, and I need them okay with that, seeing the value in that to sort of have that happen.

Ali Abdaal 1:48:12 Mm.

James Hoffmann 1:48:12 Now, I can't do this on my own-

Ali Abdaal 1:48:13 Yeah

James Hoffmann 1:48:13 ... but it's a role I can play. There you go.

Ali Abdaal 1:48:15 That's very cool. [laughs]

James Hoffmann 1:48:15 There you go. I don't know.

Ali Abdaal 1:48:16 It's, this sounds great.

James Hoffmann 1:48:17 It feels-

Ali Abdaal 1:48:17 Yeah

James Hoffmann 1:48:17 ... tiny and pointless some days and satisfying and wonderful in others.

Ali Abdaal 1:48:20 Yeah.

James Hoffmann 1:48:21 And that's just the nature of this.

Ali Abdaal 1:48:22 Yeah, it's like you're not being so grandiose as, like, I wanna change the world single-handedly, but it's like wanting to only make the world a slightly better place in your own way, where you're kind of leaning into the things that you're good at, the things that you enjoy, and the platform that you've built, therefore the opportunities and privilege that you have to make this sh- change happen-

James Hoffmann 1:48:42 Yeah

Ali Abdaal 1:48:43 ... or work towards it.

James Hoffmann 1:48:43 I think so. I think that's a pretty good summary of, of, of the aspiration of the, the project right now.

Ali Abdaal 1:48:48 Yeah. I think it's a good place to end the con- end the conversation. Thank you very much for coming on.

James Hoffmann 1:48:51 Thank you for having me.

Ali Abdaal 1:48:51 I feel like we could, we could talk for hours and hours.

James Hoffmann 1:48:53 Yeah. [laughs]

Ali Abdaal 1:48:53 Uh, it would be g- it would, it would be good to do a round two sometime where we go more into-

James Hoffmann 1:48:56 Absolutely

Ali Abdaal 1:48:56 ... I'm very curious about the ethics of coffee.

James Hoffmann 1:48:58 Mm.

Ali Abdaal 1:48:58 We kind of went a little bit into the whole, like, Nestle stuff, which I, I still, like, have so many unanswered questions about. Um, and I'd love to learn more about the sort of more specific, the business side of things that you managed to-

James Hoffmann 1:49:08 Sure

Ali Abdaal 1:49:08 ... p- p- pull the strings of. Um, but I think, yeah, this has been great. I think people have got... will, will get a lot of value from the conversation.

James Hoffmann 1:49:14 Hope it was fun. I, I-

Ali Abdaal 1:49:15 Thanks for coming along. Yeah.

James Hoffmann 1:49:16 Yeah.

Ali Abdaal 1:49:16 Great. [laughs]

James Hoffmann 1:49:17 Thank you. Thank you very much.

Ali Abdaal 1:49:18 All right, so that's it for this week's episode of Deep Dive. Thank you so much for watching or listening. All the links and resources that we mentioned in the podcast are gonna be linked down in the video description or in the show notes, depending on where you're watching or listening to this. If you're listening to this on a podcast platform, then do please leave us a review on the iTunes store. It really helps other people discover the podcast. Or if you're watching this in full HD or 4K on YouTube, then you can leave a comment down below and ask any questions or any insights or any thoughts about the episode. That would be awesome. And if you enjoyed this episode, you might like to check out this episode here as well, which links in with some of the stuff that we talked about in the episode. So thanks for watching. Uh, do hit the subscribe button if you aren't already, and I'll see you next time. Bye-bye.