David Friedberg: The Billionaire Entrepreneur Who Wants To Save Planet Earth

1. 0:00 – 10:30

   Dave's background

   1. DFDavid Friedberg0:00

      So all the work we do at TPB is oriented around how do we change systems of production on planet Earth so that, um, we can make things using less energy, less land, less natural resources. Um, I, I'm a big believer that sustainability in the 21st century does not arise from convincing consumers to consume less. I think sustainability arises from building technology-based solutions that let consumers consume more, and dropping the price-

   2. SPShaan Puri0:25

      Yeah

   3. DFDavid Friedberg0:25

      ... and dropping the environmental impact. And that's what technology allows us to do. So if you go back to the industrial revolutions, you know, of the 19th and 20th century, we built factories, right? We, we put all this technology in a big machine, in a big facility, and we used it to make stuff over and over again, and that dropped the price for consumers 'cause we automated in a big factory. Turns out that the technology of that factory, as all technology does, shrinks, gets faster, gets cheaper, gets better. [upbeat music]

   4. SPShaan Puri0:59

      Let me brag about you for a second, 'cause you're not a very... You're a very humble guy. You're not a very brag-worthy guy. When I first started hearing you talk, um, which was not on the All-In Podcast, I went on YouTube and I heard you give a talk back when you were doing Climate Corporation, and I remember thinking, "This guy's pretty smart." Um, you were giving a talk at some school, I don't know what it was, and I started googling you then and saw, wow, this guy's actually... He did that, and then he did some impressive stuff since then. So let me just brag on you for a second. So you were at Google 2004, 2006. Some, some range like that. So fairly early at Google. Like, I think that's, like, around the IPO time. That's just post-IPO, is that right?

   5. DFDavid Friedberg1:37

      Uh, I joined probably seven months before the IPO.

   6. SPShaan Puri1:41

      Okay.

   7. DFDavid Friedberg1:41

      So yeah, we were, we were working on the IPO or just started working on the IPO when I joined.

   8. SPShaan Puri1:45

      And then, um, then you do Climate Corporation, sell that for, like, a billion dollars to Monsanto. You do Metro Mile, which is a pretty cool insurance company that SPAC'd, and then I think ultimately ended up selling for a little less than it SPAC'd for to, uh, Lemonade. And then, um, then you have this thing called TPB, so The, The Production Board. And in that you're basically... What do you call it? A studio? Or a, what do you call kind of TPB?

   9. DFDavid Friedberg2:08

      Well, yeah, we're, we're technically a holding company, and our, you know... And we're a foundry. So we spend time kind of doing R&D, and, and research, and, and founding or building businesses. So we kinda call it a foundry.

   10. SPShaan Puri2:21

       And I feel like people know you now 'cause-

   11. DFDavid Friedberg2:23

       We do, we do some investing as well, but really our focus is on foundry work. Mm-hmm.

   12. SPShaan Puri2:26

       Um, I wanna start with this. You are known for, you know, being a, sort of a, a scientist or a science guy. But I looked at your LinkedIn, and your first job was investment banker. So where did... How did you go from investment banker to, uh, as you're called on the All-In Pod, the Sultan of Science?

   13. DFDavid Friedberg2:42

       Well, I went to school at UC Berkeley. My major was astrophysics. I spent some time as an intern at the Lawrence Berkeley National Lab, uh, which is a Department of Energy physics lab up the hill from, from UC Berkeley. And I spent, um, you know, a lot of time doing mathematical modeling of stuff in a basement, and generally found it to be kind of dis- pretty disparaging in the sense that, like, you could spend years working on a project that never sees the light of day. At the same time that I was at school, the dotcom bubble was kind of, you know, blowing up all around me. I mean, there was even a kid in my dorm who started a company selling DVDs online and sold the business for a million bucks, and that was such an amazing thing to happen. You know, I was mostly making money by playing poker and working, you know, jobs around school and getting paid for my internship and stuff. So, you know, it, it was extraordinary kinda seeing just in the Bay Area the world changing because of the internet. And so I got really kind of inclined and interested in, um, not going to grad school and, and really gonna go work in Silicon Valley. So I, you know, I applied for a bunch of investment banking jobs. That was kind of the, the hot job to get out of school where I could focus on the tech industry and learn about it. And, um, you know, I guess I had never taken a finance accounting business class, and so I guess my poker experience paid off 'cause that's how I... I put that on my resume. I got a bunch of interviews and [laughs] you know, kinda ended up getting a job working in a technology investment bank, so focused on the tech industry. And so I got to work with lots of tech companies for a two-year analyst program while I was there and learn about business and finance and so on. Um-

   14. SPShaan Puri4:17

       Got it

   15. DFDavid Friedberg4:17

       ... so, so that, that was kinda my first foray, um, you know, into the world of business. Uh, I tried to start a business when I was in college. Uh, um, never really talked about this publicly. Raised some money from some family members, uh, some friends of the family, but never really did anything with it. Um, never really got off the, the ground. It was, um... The idea was to let you buy all of your telecommunication services on a website. So your, you know, everything from your cell phone bill to your, you know, your long distance provider, which was kind of important at the time, and so on. Um, so you know-

   16. SPShaan Puri4:49

       And what, what, uh, what'd you get wrong with that? 'Cause that's actually not a bad idea, especially during that time. Uh, was... I don't think it was probably the idea, you just... Did you not know kind of-

   17. DFDavid Friedberg4:56

       I still have, I still have the business plan. I keep it in my office. I printed it up, like, from 1999 or 2000. And it was called-

   18. SPShaan Puri5:01

       As a, as a reminder or what? [clears throat]

   19. DFDavid Friedberg5:03

       Yeah, as a reminder. It was, uh, originally called Telebomb.com. [laughs] Kinda bombed.

   20. SPShaan Puri5:09

       [laughs]

   21. DFDavid Friedberg5:09

       And then I renamed it InPhone Services, and I registered it. I set up a Wells Fargo account. Um, there was a whole, uh, experience of starting a business. Um, and yeah, I mean, ultimately I kinda got caught up in trying to get a job out of school and, um, and, you know, transition to, to focus on, on, you know, what's next in my life. And then, you know, before I joined Google, I started another business which was kind of like a research Q&A site online called Kadanga, K-A-D-A-N-G-A, kadanga.com. So I basically taught myself, like, um, uh, PHP and JavaScript and HTML and CSS, and I programmed the whole site myself. And, um, and, uh, MySQL, and I basically, uh, set up my own server and registered the domain and set up bank accounts, and it actually made money. Um, and so p- you know, I advertised on AdWords and I got users to come to the website and ask questions and get answers, and they'd pay for the, the answers. Um, and so that actually helped me ultimately get my job at Google because I'd had all this experience. You know, I was coding on my own till, like, 5:00 in the morning and then going to work at 7:00 AM.

   22. SPShaan Puri6:20

       [laughs]

   23. DFDavid Friedberg6:21

       And so, like, building this service and, and building this whole site, it actually... Google had a service at the time called, like, Google Research or something. Forgot what it was called. But it was very similar to this. And so I got the job at Google, I think, in part because of that experience.

   24. SPShaan Puri6:34

       So when you were doing that, you were, uh- Like, okay, let's say t- today, I think you've built companies, I'm just gonna use round numbers, uh, you know, you can correct me if I'm way off, but you've built companies now that I think in aggregate have, are worth more than two and a half billion dollars. Now if, if I went and I told you when you were building Cadanga or you're, you know, you're in college and I said, you know, "Hey, that could, that's something that could happen," would you have been surpri- ... Like, was that even an ambition of yours? Were you even... Would you have been shocked that that's even possible? Or were you like, "Oh, it all worked. My plan could've worked," if I had told you that that's how it played out?

   25. DFDavid Friedberg7:09

       Um, no, I don't think I would've thought about it in that framework. Probably would've been disappointed, uh, [laughs] if I think about it.

   26. SPShaan Puri7:16

       [laughs] Why?

   27. DFDavid Friedberg7:17

       Still, I, I still am generally. I mean, I feel, I, I guess, you know, maybe ambition, um, is, uh, you know, and expectations I set for myself probably greater than, um, than, than what I've experienced. But, um, I would say that, you know, my, my intention was at the start of-

   28. SPShaan Puri7:34

       Stay on that. Stay on that for a second. So you, you're saying you're a college kid, and you had expectations of yourself that grand. Do you remember kind of what you were thinking back then?

   29. DFDavid Friedberg7:43

       Um, not specifically. I mean, I just feel like when you're young you have kind of unbounded ambition. I mean, you don't know the realities of, you know, when you build stuff and you face challenges and you face hiccups and, you know, everything from team to technology to markets, and all the issues that arise, um, as you navigate your way through complexity and uncertainty. Uh, you're naive in the sense that, like, the whole world can and should be different, so we should change the whole world, and let's go fix it and make it different, make it better. And, you know, that blind optimism is where a lot of energy comes from that I think drives great entrepreneurial success stories. Ultimately, you know, there's friction and rubber hits the road. And, um, you know, uh, in retrospect I think a lot of what's gone on in my life and my career is probably understandable, um, i- in hindsight. But, you know, blind ambition gives you unlimited, um, uh, vision, and I think, uh, uh, you know, i- if, if you're not, um, if you're not challenged along the way, uh, you know, that, that, that can and should persist. Um, you know, but I, I would say that my, my orientation was never about starting a bunch of companies or making a bunch of money. It was, um, you know, much more about kind of impact and, um, and so, you know, and solving big problems and having great breakthroughs and seeing those breakthroughs really change the world. And that's still, I think, really core to, to my sense of, of energy and things that I do.

   30. SPShaan Puri9:03

       And when you were at Google, at a time when Google was very ambitious, and, uh, I think I've read or heard basically like Larry Page is kind of a fan of yours. I think he's in- invested in TPB, and it sounds like you were there in, in, you, you were doing corp dev there, so, so you were doing a kind of different role. Um, what was... Give me a Google story. What was it like at that time? What were, what was it like around those founders? Give me a sort of a, a, a story around ambition or, or your time at Google.
2. 10:30 – 16:30

   What Dave learned from the founders of Google

   1. DFDavid Friedberg10:30

      access media across all these different, uh, properties and channels? So I did a few acquisitions and found a few companies. One was called dMarc that we turned into kind of this radio advertising business. So you could go to AdWords and click on audio ads and create an audio ad, and then publish it to actual radio stations. Then it would play in stream and radio stations-

   2. SPShaan Puri10:48

      Wow

   3. DFDavid Friedberg10:48

      ... and you could see the impressions and all this stuff. Um-

   4. SPShaan Puri10:50

      That's, that's not a thing now, right? That didn't, that didn't end up becoming part of AdWords, right?

   5. DFDavid Friedberg10:53

      It stayed for a long time. Um, there ended up being a really nasty lawsuit with the founders and a very difficult, um, set of circumstances that arose after the acquisition. I mean, I'll tell you, uh, this story now given how many years it's been. I think that was 15, 16, 17 years ago. Holy shit, 17 years ago at this point. Um, but, you know, I had real issues with negotiating with the founders in doing the transaction. And, you know, we thought it, it was such a great plug and play for Google. These guys went out, and all DJs and radio stations buy these servers that they put into the, um, the radio station, and they, and they put the MP3 files of the ads on the servers, uh, at midnight every night. And then when the DJ says, "Okay, time for ra- for ads," they press the play button and it starts playing the ads off the server. So what these guys did is they bought the company that has all those servers for like $4 million, and they connected it to the internet. And they set it up so that advertisers could remotely create dynamic content and fill in the unsold ad spots on that server every night at midnight. And so they were buying what's called remnant inventory-

   6. SPShaan Puri11:54

      Yep

   7. DFDavid Friedberg11:54

      ... and making money on it. And so it was brilliant, but for the $4 million acquisition and not a lot of technology development thereafter, you know, they were trying to sell the business to us for $100 million. So, uh, they thought it was worth a billion. I mean, the whole thing was crazy how we negotiated the deal. So it ended up being like effectively a $50 million or 75, $72 million upfront cash payment, a $50 million, uh, milestone payment af- if they hit a bunch of technical milestones, and then up to $1.2 billion in earnouts based on-

   8. SPShaan Puri12:22

      Wow

   9. DFDavid Friedberg12:22

      ... the advertising revenue generated from all these stations. And so that earnout structure was the only way I could really bridge the gap on the deal. I had to go talk to Google's board about it, and we eventually got them to sign off on it. And the whole thing ended up being like a really ugly, uh, negotiation. And I didn't wanna do the deal, and I told Eric Schmidt, I'm like, "Look, I don't think we should do this deal. I don't think these guys are gonna work out for us. I think it's gonna be ugly." And Eric said, "We have to be in radio. It's a $60 billion market." Pushed the whole thing through despite my push against it. We did the deal. And, uh, sure enough, we ended up in this nasty lawsuit that lasted for years. I wasn't around for all that, but, um, you know, I think eventually it all went away and, and audio ads kinda, kinda died down. So that was the sorta stuff. I also worked on Google Analytics, so I pitched Larry and Sergey early on on the idea of like, look, our advertisers should be able to have analytics on their web pages to see, you know, how people are converting and why and why not. We didn't have, have a conversion tracker at the time or anything. So, um, you know, uh, met-

   10. SPShaan Puri13:19

       And tell, tell me what that means. I pitched Larry and Sergey. So like, you know, Larry and Sergey are the founders of Google. They're-

   11. DFDavid Friedberg13:24

       So I, I, I, I worked, I worked with an amazing person named Megan Smith. She's really well-known in Silicon Valley. She was Obama's CTO. Um, uh, she's, um, she, she's an incredible personality and a tour de force. And Megan was really my mentor at Google and kinda showed me how I can just walk into Larry and Sergey's office and walk into Eric's office. She's like, "Let's go talk to them about this." And I'd be talking to her about it, and she's like, "Let's go see what Eric thinks." And she'd drag me over to Eric's office, and he'd be like sitting there on his computer doing emails, and she'd like barge in and be like, "David's got this idea. Let's talk about it." And then like-

   12. SPShaan Puri13:52

       [laughs]

   13. DFDavid Friedberg13:53

       ... sit down and, you know, like... And so she really kinda showed me that w- we can and should have this kinda dialogue with these execs 'cause our job was to really help push and think about things that we can take Google, you know, what direction we can take Google. And so, you know, I really, um, had, I think, great mentorship there. And so I'd, you know, uh, was in a meeting with Larry and Sergey saying like, "I think we should be in analytics, and we should offer advertisers the ability to see stuff." And I, and I met Wesley Chan, who was a product manager at the time. And so Wesley and I, um, uh, kind of started working together after that because the first thing Larry and Sergey said to me was, "That's evil. Third-party cookies are evil. We don't wanna track users across different web pages."

   14. SPShaan Puri14:32

       [laughs]

   15. DFDavid Friedberg14:33

       And, you know, 'cause then they'll know that we're tracking them. And, and so it was fairly prescient at the time that Larry and Sergey saw that this might be kind of an evil or viewed evilly by kind of consumers down the road, and they were absolutely right. I mean, that's what's going on in the EU and, and with Apple and Facebook and all the, the cookie tracking and so on that, that's being kind of taken apart right now. Um, but we showed them that like, look, if, if an advertiser can get analytics, they can see an incredible improvement in conversion efficiency, which means that the user is having a better experience on the web page. So rather than the user getting frustrated and leaving the website and wasting their time, if the user is happy, the user will buy more, they will convert better, and the internet is a better place. Uh, one of our guiding principles at AdWords was like our advertisements should be so good and the, and the advertiser's website should be so good that 100% of the time when people are looking at search results, they click on the first ad.

   16. SPShaan Puri15:23

       Mm-hmm.

   17. DFDavid Friedberg15:24

       And then 100% of the time they don't come back, so the bounce back rate is zero. And that shows you that you've shown the perfect ad that's even better than the s- than organic search results, and it's such a good result that the consumer stays there all the way and never comes back and searches again. So that's kind of the guiding principle. So everything is all about how do you improve the quality of the ads, how do you improve the user's experience when they go to the advertiser's site, and how do you get the advertiser to pay for that value? Um, and so analytics ultimately turned into... You know, we, we found a company called Urchin. I took Wesley to SES, Search Engine Strategies. We walked around. We met a bunch of analytics companies. We met, had four of them come in and talk to us, and we picked Urchin and convinced them to, to join, convinced Larry and Sergey to do the deal. Within a year, I think we had shown, through Hal Varian, who was our chief economist, we had demonstrated that Google Analytics increased AdWords revenue by half a billion dollars because it, it... So many advertisers were using it to improve their websites and make the conversions better, that they were spending more on AdWords. And so you could kind of economically show the benefit of analytics. And that was like a $25 million acquisition, so it turned into a great product. I mean, I don't know any web pages that don't have, you know, Google Analytics

3. 16:30 – 31:30

   Why many people have trouble thinking big

   1. DFDavid Friedberg16:30

      on them.

   2. SPShaan Puri16:30

      [laughs] You're like, "Where's my bonus?" [laughs]

   3. DFDavid Friedberg16:34

      It was all good.

   4. SPShaan Puri16:35

      The, um-

   5. DFDavid Friedberg16:36

      Yeah.

   6. SPShaan Puri16:36

      Yeah, I mean, if you can, if you can show that, all right, I'm buying a visitor. It takes me, it costs me a dollar to get the click, but now that I can improve my funnel so that that customer's worth more to me, I can convert more of those customers, then I'll spend more, right? Like that, that-

   7. DFDavid Friedberg16:47

      Exactly

   8. SPShaan Puri16:48

      ... that makes a lot of sense. And-

   9. DFDavid Friedberg16:49

      And the customer's happier because people are going to a web page that gets them what they want, as opposed to going to a web page and getting lost in the content and not clicking through and buying.

   10. SPShaan Puri16:57

       Right. Dead end.

   11. DFDavid Friedberg16:58

       Yeah.

   12. SPShaan Puri16:58

       So, and l- my last Google question, you know, when we got acquired, I got acquired by Twitch, uh, which is like a, kind of part of Amazon, and I remember like the first or second meeting where it was like, you know, all the kinda execs in a room. And, uh, as a startup founder, I remember always feeling a little bit, not like imposter syndrome, but sort of always curious. Like, this is how I lead the company. I have no idea how anyone else does it, right? Even my founder friends, I don't actually get to see them in meetings, so I really had no idea what they were doing. In my first meeting at Twitch, I remember looking at Emmett, who's somebody I really respect, uh, who's kinda my boss. He, he, he's the original founder, and he was sitting there and he, and like there's, whatever, 20 people in the room, and somebody presents like this six-page paper. And I remember, uh, he was like done reading it in like half the time of anybody else, and then he had like scribbled down some questions on it. And then the first question he asked like cut straight to the heart of a thing, and I remember just thinking, oh, this, this is what it would be like if my brain was twice the size. Like, oh, I could read twice as fast. I could get to the heart of the issue, you know, twice as fast. And I was just so impressed by him. You know, I think that great, great leaders in some ways f- almost feel like aliens. Uh, they, they sorta can, they just have some superpowers that, that others don't. And, uh, what was it like with the Google founders? Do you f- like, were they just normal people to you, or did you notice any special traits or sort of abilities that impressed you at the time or made an impression on you?

   13. DFDavid Friedberg18:17

       No, I mean, look, um, you know, the culture is set at the top, and, um, the team that Larry and Sergey built around them, uh, you know, remain some of the most important and impactful people in Silicon Valley. Um, you know, Susan Wojcicki, Sundar Kamangar, um, Uh, Urs Hoelzl. Urs is still SVP of engineering there. He built all of the data center infrastructure, which by the way, I don't think a lot of people realize, um, is probably the core advantage of Google. Um, or was originally. Like, like-

   14. SPShaan Puri18:48

       T- tell me about this. My s- my co-founder, who's super technical at my past company, he used to say that, he goes, "People don't ever talk about this, but it was Google's server architecture or their choices-"

   15. DFDavid Friedberg18:56

       Yeah

   16. SPShaan Puri18:57

       ... that, like, allowed them to win. What did that mean?

   17. DFDavid Friedberg18:59

       The-

   18. SPShaan Puri18:59

       I never got his answer on it.

   19. DFDavid Friedberg19:00

       Yeah. So, so, so if you go back to 1999, 1998, right? Um, in order to search the web, you had to have what are called web crawlers. So these are servers that are going out and scanning all the web pages on the internet. And then indexing servers, and then your web servers, which are, you know, your indexing servers take all that data and classify and organize it and figure out what, you know, what, what's the search term that each web page can represent. And then fi- and, and what's the ranking that would, that would show up. And then finally is these web servers, which is the, the website, you know, serving, um, server. So when you go to google.com and do a search. And so, you know, in order to search the web extensively and to have a high refresh rate, so how much of the web can you search, you have to have more servers. In order to search it more frequently, you have to have more servers. So at the time, everyone was using kind of Oracle servers that cost like 3,000 bucks, and they had a pretty case, and they had purple on them, and they used a lot of power, and they looked really nice, and they would last forever. You know, all this kind of nonsense claims. And so Google set out to basically build a really cheap web server or really cheap web crawling server and indexing server. So they built their own servers by taking commodity hardware and basically breadboarding this thing. So taking super cheap RAM, super cheap hard drives, jamming them all on, not even putting a case or a cover on them, using super cheap power supplies.

   20. SPShaan Puri20:14

       No purple.

   21. DFDavid Friedberg20:14

       And then they said, they said, "Look, if..." No purple, no casing.

   22. SPShaan Puri20:16

       [laughs]

   23. DFDavid Friedberg20:17

       And they made them redundant. And they were like, "Look, we'll make lots of these. We'll be able to search more of the web, we'll be able to have a higher refresh rate, and we'll be able to index stuff better and have a bigger index than anyone else because we're making it so cheap to do this." And so their cost was like $150, $200 instead of $3,000. Their servers broke every couple months, but guess what? It was so cheap to make it, when it broke, they threw the thing away. And so it didn't matter. They didn't need to have a five-year server. They didn't need to have a high-performance server. They didn't need to have the fastest CPU. And in fact, when I joined Google, they had a team that was working on a 10,000 port switch. So, you know, th- and, and, and they were making their own ASICs to do that, their own chips. And so the, the depth that the, um, hardware engineering team went into and the data center and infrastructure engineering team went into at Google to create a full stack of technology that was advantaged from the ground up meant that they would always be able to search more of the internet, always be able to do it better, always be able to do it faster, always be able to have a higher refresh rate. And that advantage... And then they made their website super simple, and they didn't have to sell ads against it 'cause it cost so little to run the website.

   24. SPShaan Puri21:16

       Mm.

   25. DFDavid Friedberg21:16

       And so you add all that up, and they create this huge advantage, this huge structural moat. More people come, the network effect, more people show up. They've now got more people that they can sell ads to. They can now reinvest in building more servers, search more of the web, and so on and so forth. And then, you know, the AdWords architecture was just perfect. It was an auction. And so advertisers would bid for search terms. They wouldn't do paid insertion or paid inclusion, which was big at the time. They said, "That's evil. So we'll show ads really clearly and cleanly on the side. And if users wanna click on an ad, they know they're clicking on an ad, and otherwise they're searching the internet." And it just created this, this, this unparalleled moat. And so the hardware advantage that Google built from the beginning, I think, was really core to, to their, the- their point of success. Um, and, and so, sorry, going back to your question, look, Larry Page is one of the most impressive individuals you'll ever meet. It's really sad he's not more public, because I think Larry could offer a lot to the world in the way he thinks and the way he talks about things. Um, he always takes a bigger point of view and a bigger picture, uh, perspective on things. You know, when, when people would suggest products or ideas, he wouldn't get into the technical details of the near term roadmaps. He would always zoom out 100X and be like, "Why can't we do X?" So, you know, "Why don't we search all the world's books?" was one of the things they proposed doing in 2003, which was a crazy concept, but they actually went and then did it, right? And no one would have done that if not for that suggestion, that, that audacity of perspective. And so they always pushed and challenged every team to think bigger, to think more grand, to think, um, more aggressively. And I think that's a common trait with great leaders in technology businesses is, you know, um, uh... And, and same with coaches on sports teams, you know? Your, your team is only as good as you challenge them to be. And so they'll, um... You know, i- if you're not challenging your team and you're asking them, "What do you think you can do," they're, they're only gonna achieve a fraction of what's possible. Uh, great coaches and great leaders need to kind of... And, and technology leaders in particular have this unique ability to, I think, understand the technology and leap several, um, iterations forward to speak to the team about where we're headed and then bring the timelines in, and that makes for, you know, an incredible sense of urgency and outcome.

   26. SPShaan Puri23:26

       And w- why do you think most people don't do that? So thinking big, that sounds easy enough to understand, sounds fun to do. Um, you know, I could hear that advice. Why do you think that's hard advice-

   27. DFDavid Friedberg23:36

       Yeah

   28. SPShaan Puri23:36

       ... to follow in practice?

   29. DFDavid Friedberg23:38

       It's a really important question. Um, so one of our principles at TPB is dare to dream. So it's all about creating that audacious perspective, you know? How big can this be? How big should we be? And, um, what happens when you set a big goal, like let's say I have to go climb to the, the top of a mountain and I can't see the path from here to the top of the mountain, um, there's 100, uh, permutations or 1,000 permutations on how you might get up that mountain, and you don't know which path is gonna work. Most people, um, that are smart have been successful, and most people that have been successful are not used to not succeeding.

   30. SPShaan Puri24:11

       Mm.
4. 31:30 – 1:00:27

   Dave's new company, Cana

   1. SPShaan Puri31:30

      on my shelf, instead of that whole process, we just combine the water that we already have in our homes with a like, kinda like a printer cartridge of flavors, and you can print whatever drink you want. So all right, tell me, tell me if I butchered it.

   2. DFDavid Friedberg31:44

      You did great. I lo- I love the use cases. Those are, those are perfect and awesome, so that was great. And I mean, I think that's exactly right. I mean, you know, the, the, the big discovery, the big kind of aha with this business is based on the idea that 99% of beverages are water, or maybe water plus sugar, or maybe water plus alcohol, and one, only 1% of all beverages is the chemistry that makes the flavor, the smell, uh, the, the color, and the texture of, of the beverage.

   3. SPShaan Puri32:16

      Mm-hmm.

   4. DFDavid Friedberg32:16

      And that 1% is all that we really need to turn water into all these different beverages. So the, the chemical-

   5. SPShaan Puri32:24

      Like literally water into wine.

   6. DFDavid Friedberg32:26

      Water into wine. W- Cana, by the way, is the town in Galilee where Jesus turned water into wine. Uh, that's the name.

   7. SPShaan Puri32:31

      Ah, nice.

   8. DFDavid Friedberg32:32

      Um, little known fact. Uh, now, now, now becoming a b- better-known fact. [laughs] Um, but, uh, friends that went to Sunday school, by the way, tend to know that. Um, but basically, uh, you know, the, if you take a wine, wine has about 500 of those flavor compounds. That's all the stuff that comes from the grape and the skin and the, you know, the, the branch and the, the leaves and the oak and all this stuff. Um, and it turns out that of those 500 compounds, chemically speaking, only about 30 to 40 really matter to your sensory palate. So your nose and mouth can only really pick up and, and really cares about the 30 to 40 compounds. The same is true in coffee, in tea, in juice, in soda, in liquor, in beer. So all of these beverages are 99% water or water and sugar and alcohol, and 1% are compounds where you might have hundreds of compounds in the organic state, uh, but you really only need a few dozen of them. And when you look at the chemical, um, composition, it turns out that that few dozen compounds can be very overlapping from one beverage to the other. Only a few tweaks of a few chemicals can change a white wine into a red wine or, you know, a Chardonnay to a sauv blanc. And so the idea is, like, let's get those compounds, those ingredients into a cartridge, just like an inkjet printer where you might have CMYK, right, four colors, and we could have 80 compounds, and we think that with 80 compounds, we can recreate all the beverage flavors that make up, you know, everything from an OJ to a Gatorade, to a beer, to an iced tea, to an iced coffee, uh, to a margarita.

   9. SPShaan Puri34:02

      [laughs]

   10. DFDavid Friedberg34:03

       And so that, that's the idea with the business. And so, you know, we're- cana.com's just launched, right? So it's, um... We're gonna be, uh, we spent about three years on this project. First was all the chemical work, so, you know, does the chemistry make sense? Can we actually decompose all the beverages? So we've, at this point, used a, what's called a, a GCMS or a gas chromatography mass spectrometer to, to analyze what are the molecular, um, components of literally thousands of beverages. And we-

   11. SPShaan Puri34:29

       It's like, it's like a T- 23andMe for drinks.

   12. DFDavid Friedberg34:31

       Yeah.

   13. SPShaan Puri34:32

       [laughs]

   14. DFDavid Friedberg34:32

       Yeah. And it, it's, a- and, like, this is, um, this is really scanning the world's, um, or digitizing the world's beverages. And so we've got ev- all the sodas, all the bottles of wine, all the liquor, all the tequila, everything you can come up with has gone through this device. And then based on that chemical composition, we've built software that uses heuristics or master combinations to try and reduce the number of compounds down and create a common overlapping set that we can recreate all the beverages.

   15. SPShaan Puri34:57

       S- so give me the origin story. So you, were you just sitting around one day and you're like, "You know what? All these drinks are 99% water and then just 1% is the differentiation. W- why don't I do..." Like, how does an idea like this even come into your brain? What do you see? What are you reading? What, what happened? Where did the epiphany happen?

   16. DFDavid Friedberg35:13

       Well, a couple things. One is I, I had a good sense for that for a while. Um, I was at dinner with a professor from UC Davis, um, back in late 2019 or so. And, um, uh, and so, or 2018, uh, 2019, and so, uh, he was telling me about this research paper published by this scientist in Germany at the Technical University of Munich, and this, this scientist runs a flavor science lab. And he was... He basically took a glass of wine, and he reduced it from 500 compounds down to, like, 37 or 40 or something and gave it to a consumer sensory panel, and they couldn't tell the difference between that wine and the original wine. And then he did it with another wine and another wine, and he's kind of made these declarative statements that he thinks we could recreate all beverages with just a few dozen compounds.

   17. SPShaan Puri35:58

       Hmm.

   18. DFDavid Friedberg35:58

       And so that was kinda... I said to the guy at dinner, I'm like, "Why don't we just make the Star Trek replicator for beverages?" Like, we could just print any beverage if we could just get those few dozen compounds to people's homes. Um, and so there's a guy working with us as a scientist in residence at TBB, which is a foundry. We run kind of R&D programs internally, and if we feel confident that the R&D yields an opportunity, we'll build a business around it. So in this particular case we said, "Hey, Lance, why don't we read these papers, try and recreate these experiments, and see if we can come up with a good orientation around is it really feasible that we can create thousands of beverages using just a few dozen compounds, that they make economic sense, and that we could put them in a flavor cartridge and turn this into a machine?" And so, you know, after about a year, year and a half, we actually, you know, convinced ourselves that this is gonna work. We separately ran a chemistry program, analytical chemistry program as well as a, um, a hardware program. And, um, you know, we had, uh, spreadsheet models that showed that the math could work and that we could actually make this device, and we, we had a bunch of different technical challenges on how do you actually dispense, right, you know, microliter and sub-microliter volumes of these flavoring compounds into the water stream. You gotta make sure you can do the whole thing in 15 seconds or 20 seconds 'cause otherwise consumers are gonna get annoyed. It's gotta taste incredible. You can't... You gotta have high precision. It's gotta be cheap. You gotta make it really cold. I mean, all the, the product that... You know, we had all these PRDs we were trying to iterate on, and then we yield our kind of estimated cost model, and then we had to prove the tech worked. So, you know, very iterative cycle for the last, um, three years to get to this point. So we now have fully working prototypes of the, uh, uh, the gen one of the device. Uh, we're going to production on the gen one of the device and hope to ship early next year. Um, and so we're starting pre-orders today. Um, for, uh, for $99 you can, uh, reserve... A fully refundable $99 reservation fee, and the first 10,000 orders are, are 10- are $499 for the device, and $799 after the first 10,000. So that's the setup.

   19. SPShaan Puri37:55

       So let me just, let me do two things. I wanna first ask about the kind of like what kind of drinks am I gonna be able to get out of this? Just what, what, what the average person wants to know. And then secondly, I wanna talk about the impact of that, 'cause I th- my sense is that if you're making the devi-

   20. DFDavid Friedberg38:09

       Mm.

   21. SPShaan Puri38:09

       If you're making what you, what you'd eat and drink in your own home, um, like literally you're producing it in your own home, you cut out a bunch of trucking, storage, packaging, stuff that doesn't need to happen that might actually help the environment. So I wanna talk about the environment in a second. Um, but let's first do the, do the fun stuff, so the drinks. Okay. So, um, I got water in my house and, uh, you can... Your drinks are gonna be... You have a way to basically cool down the water or... And can you like carbonated it, or what are the limitations here?

   22. DFDavid Friedberg38:37

       Yep. It's, it's chilled and carbonated, uh, optional obviously, in the device. You don't need to worry about any of that.

   23. SPShaan Puri38:42

       Or you can go hot.

   24. DFDavid Friedberg38:43

       Um, uh, we don't do heating.

   25. SPShaan Puri38:45

       Okay.

   26. DFDavid Friedberg38:45

       So we don't do a hot, hot beverages in Gen-1. So just to be clear, you're not gonna have hot coffee or hot tea. Uh, but there is cold brew, there is iced teas, flavored iced teas, all that. There's a whole variety of stuff there. Um, but the idea is, uh, there are three cartridges. So there's the, the master flavor cartridge, you put it in. It should last anywhere from one to three months, um, before you need to kind of replace it. Uh, there's a sugar cartridge, 'cause a lot of beverages people wanna have sugar, and so there's a separate cartridge for sugar. It should last about a month. And a separate cartridge for alcohol, should last about a month. Um, and you don't have to buy cartridges. They're free, they auto-ship to your home, and you just put them in when they arrive. The, the, the device senses when you're running low and we send you a new, new cartridge. We charge per drink, so, um, the, the, the price per drink is gonna be 25 to 50% on average cheaper than what you would pay in retail for that same beverage. Um, so, uh, you know, at the end of each month your card or your account is charged for the beverages you consume. But you don't need to go to the store, you don't need to buy cartridges, you don't need to deal with all the nonsense. We, we take care of all that. It's really supposed to be hassle-free. And then the idea is there's beverages that range from morning till night. So iced coffee, iced tea, um, sparkling, you know, soda, uh, juice, um, uh, uh, hydration or energy drinks. There's, um, uh, uh, hard seltzers, cocktails, wine. Um, and so there's a range of kind of add-ons and, and features, like there's caffeination, there's, uh, nutrient boosts. So you can actually... A vitamin boost, there's electrolyte boosts. And so you could have low alcohol hard seltzer. You could have low sugar juice for your kids.

   27. SPShaan Puri40:20

       Yeah. Mm.

   28. DFDavid Friedberg40:20

       You could have, um, you know, add caffeine, have an extra boost of caffeine or low caffeine, uh, iced tea. So there's, there's all this variation around what you can do ultimately from a personalization perspective. And as a user, what you're gonna experience is literally hundreds or thousands of brands available to you on this device. And they're all gonna be new brands. So we're, we're, we're not yet revealing who the brands are. Uh, I think we're re- a few of them we'll start to announce this week. Um, but if you think about where this goes, as a consumer today, you really have a very limited number of choices when it comes to brands, 'cause there's only about 150 slots in a retail store for wine, beer, coffee, tea, juice, soda. Um, and so, you know, Minute Maid, Coca-Cola, Pepsi, 7 Up, these are nameless, faceless corporate brands. In the future, you're gonna have your own brand, right? So, so you and your podcast can make a branded beverage, put it on Cana, and your followers can buy your beverage. And it can be your favorite blueberry hard seltzer or your wife's favorite tea, and she's kind of, you know... And so you guys can build your own brands-

   29. SPShaan Puri41:20

       Right

   30. DFDavid Friedberg41:20

       ... at a cost of nothing to you. Um, and so I think that the future is a lot like what we saw in media where people are consuming TikTok and YouTube and Netflix and, you know, there, there, there's a long tail of content. There's a long tail of things that are associated with individuals now and influencers. I think the same will happen in brands.

Episode duration: 1:00:27