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Hey acquired listeners, before this episode starts, David and I wanted to give you a heads up that the audio quality is pretty rough in the second half. We had a problem that we didn't catch until afterwards that makes it sound like a conference call with a poor connection. The stuff is important to us and we even talked about not even releasing the episode. However, the interview content is just awesome, so we thought it'd be a shame not to share it with all of you. We apologize and we hope you enjoy the interview. Okay, and is video good for you? Yeah, it's good angle. Is this a good angle? You look great. It's a good angle. Are you getting my good sense? Always, David. Welcome to season two, episode one of acquired the show about technology acquisitions and IPOs. I'm Ben Gilbert. I'm David Rosenfall. And we are your hosts. And I'm Alfred Len. Hey, welcome, Alfred. We're very excited. We're very excited. I know. I know. Too bad our titles really do those in. Thank you for having me on the show. Yeah, we're super pumped to have you. Listeners, this episode is going to be about Zappos. And Alfred is one of the few people in the world who can actually do this episode justice and come on to do the show with us. We, in December, I mentioned that we're switching to season so we can do themes and many series across several episodes. And for our first episode, we wanted to do a really classic acquired format reviewing an M&A transaction. And this is one of the ones that has been at the top of our list for a very long time. So David, you want to introduce who is Alfred Len? Our mystery guest, not so mystery guest. So today, Alfred is a VC at Sequoia Capital where he's the co-head of their US venture business and represents Sequoia on boards of many great companies such as Airbnb, House, DoorDash, Zipline, and many others. But today, we're going to talk about his time before Sequoia when he was the chairman and COO of Zappos, and which was prior to Whole Foods, Amazon's largest acquisition ever. But my favorite part of Alfred's background, which we'll get into, was that long before Zappos when he was an undergrad at Harvard with Tony Shea, he was known as the, and I'm quoting directly from Tony here, he was known as the human trash compactor of pizza, which also it turns out is pretty relevant to the Zappos story. So welcome Alfred and thanks for coming on. Well, thank you for having me. I'm no longer the human trash compactor of pizza. I'm not too much. I was going to say. Given that I'm a lot older, I don't have the same metabolism as I used to. It looks like a few things have changed since those days. Our presenting sponsor for this episode is not a sponsor, but another podcast that we love and want to recommend called the founders podcast. We have seen dozens of tweets that say something like my favorite podcast is acquired and founders. So we knew there's a natural fit. We know the host of founders. Well, David Senra, hi, David. Hey, Ben. Hey, David. Thank you for joining us. Thank you for having me. Take how they group us together and then they say it's like the best curriculum for founders and executives. It really is. We use your show for research a lot. I listened to your episode of the story of Akio Maria before we did our Sony episodes this incredible primer. You know, he's actually a good example of why people listen to founders into acquired because all of his greatest entrepreneurs and investors, they had deep historical knowledge about the work that came before them. So like the founder of Sony, who did he influence? Steve Jobs talked about him over and over again if you do the research. But I think this is one of the reasons why people love both of our shows and they're such good compliments is on acquired. We focus on company histories. You tell the histories of the individual people. You're the people version of acquired and where the company version of founders. Listeners, the other fun thing to note is David will hit a topic from a bunch of different angles. So I just listened to an episode on Edwin Land from a biography that David did. David, it was the third, fourth time you've done Polaroid. I've read five biographies of Edwin Land and I think I've made eight episodes of them because in my opinion, the greatest such a printer to ever do it, my favorite entrepreneur personally is Steve Jobs. And if you go back and listen to like a 20 year old Steve Jobs, he's talking about Edwin Land's my hero. So the reason I did that is because I want to find out like I have my heroes who were their heroes and the beauty of this is the people may die, but the ideas never do. And so Edwin Land had passed away way before the apex of Apple, but Steve was still able to use those ideas and now he's gone and we can use those ideas. And so I think what requires doing what a founder trying to do as well is find the best ideas in history and push them down to generations. Make sure they're not lost history. I love that. Well, listeners, go check out the founders podcast after this episode. You can search for it in any podcast player. Lots of companies that David covers that we have yet to dive into here on acquired. So for more indulgence on companies and founders, go check it out. So David now without further ado. So when most people think of Zappos, they probably imagine it was started by again, named Tony Shay, who lived in Las Vegas, loved shoes, and he probably named it Zappos because he had some lifelong obsession with weird and quirky company culture, right? Impressive David, every word of that sentence was wrong. Yeah, that's right. That's not quite accurate. I really should have done my research here. The founder of Zappos was Nick Swimmer. He had started the company because he was looking for a particular pair of shoes and he went to one store, couldn't find the right size. One to another store, couldn't find the right color. One to another store, couldn't find the right style and went home, empty handed, and decided to go Google on the internet. And he couldn't find a place where you can buy his shoes. And so this is 1999. He thought it was a good idea and he was a webmaster. He thought it was a good idea to just quit his job and create a website and start Zappos. And here we are. Fortunately, he called you guys. Alfred, I missed the term webmaster. We're going to bring that back. Well, I guess nobody really is a webmaster anymore because we've moved on to web sites to mobile apps. No, there's one webmaster. His name is Jeff Fasos. He is a webmaster. So let's start way back even before then. We go back to your undergrad days at Harvard in the early 90s when you were still the human trash compactor. And so you were an undergrad and you had two friends, Tony Shay and Sanjay Madan. And you guys decided you would develop a business together. And Tony and Sanjay were CS majors and you were a math major, right? And so naturally you guys are going to do something very technical, very smart. But the business actually turned into a pizza business. And so the story, as it is told in lore, is that Tony and Sanjay lived in Quincy House at Harvard and they managed the grill in the basement, which was sort of a late night dive bar study spot. And you lived upstairs and you would come down and you would buy pizzas from them and then take them upstairs and resell them by the slice at a profit. Yeah, that's mostly true. But I think the interesting part about that story is, yes, Tony and Sanjay and our were friends. We had other friends. We didn't really hang out all that much together. What brought us together is grill. And that is an interesting place. It was a place where lots of undergrads hung out late at night trying to get something to eat while they were working on their prom sets or their term papers. Tony and Sanjay were actually very entrepreneurial even back then. Usually what happens is the graduating seniors would sell the grill, the rights of the grill to the upcoming seniors. So the graduating juniors who will be seniors. So they would hold the rights of the grill for one year. And because they can only operate the grill for one year, they mostly did very simple stuff, like hamburgers and fries and milkshakes, which sounds great, but it actually doesn't have great margins. And Tony had this great idea of like if I could just buy the rights of the grill for two years, I can amortize the cost of having a pizza oven in there. And pizza has great margin if you can overcome the cost of the oven. And so he decided that he was going to bid for the rights for two years. And his bid was highest bid plus one dollar. I mean, that was a pretty courageous thing for him to do. And so that's what he did. I happened to have a pretty large rooming blocking group in Quincy. And I did come downstairs and negotiate with Tony and say, hey, I'll just buy them by the pie instead of the slice. And then I did bring it upstairs. I didn't really sell it by the slice. I just wanted my money back. That's the part that is, it's sounded predatory, but what I was trying to do is just get my money back. And the slices were two dollars of sliced downstairs. I got a discount. So it was maybe a dollar $50, $1.25 when you buy it as a pie. And the thing that is most interesting about that story is I always got two dollars, even though I asked for a dollar $24, I've got a dollar $50. And the reason is like today maybe not as obvious, but back then you needed quarters for washing machines, dry machines, vending machines, arcade games. Today you probably have, you know, pay for that with a card or a phone. But that was important. It was a really interesting business lesson, which is sometimes even something like a commodity, like a quarter, a quarter is sometimes worth more than 25 cents. I just thought that was an interesting arbitrage opportunity like story. That's awesome. You guys were delivering happiness. Yeah. Even back at Harvard. You get your slice of pizza and your quarter full laundry. Yeah. Yeah. And it started out with lots of conversations on how to make the grill better. Tony started recording movies and playing downstairs. So they would get people to hang out more to make the experience better. We were talking about customer experience and not just like serving people food, which yes, made them happy. But how do you get people to congregate downstairs and hang out? So there was a lot of conversations about that one day. The reason Tony tells this story is because he was one day we're calculating how much we made. And he was like, he made a calculation and said, you actually make more per hour than I do. Like come on, order, I call down order, come downstairs, pick it up and take it upstairs. Yes, I find I make more per hour. But you still make more aggregate because you spent more time on grill. But there was a type of geeky things that we talked about when we were in college. And the legend is of course that's why you became CFO of your first company together, which was Link Exchange. So after you guys all graduated, you all moved out west. And Tony and Sanjay started working at Oracle as developers. And you started a PhD program in statistics at Stanford. And then supposedly right, I have to ask you about this. You tried to convince them to come and run the same pizza game at Stanford, right? No, actually Tony was looking into starting a similar business that he was trying to get a subways franchise on campus. Ah, cool. Or pizza business on campus. And I told him, well, plenty of pizza stores and there is a subways on university avenue. So it may be a little difficult to make the economics work. But he's always a little bit ahead of everybody else because he said, well, that's too far away. Why not on campus? And at the time, campus didn't allow third party operators to be there. Of course, that's changed. Change tools have changed on Stanford's campus. But it was always a little bit ahead. The thing that was interesting is like, like, the internet was happening. So it was like, why don't we think about some internet business? And like Exchange came about as a fluke because when they started, Tony and Sanjay were bored at Oracle, they would go to their weekly meetings, they'd be told what to do. And they would figure out how to do that work within half a day to a day or an afternoon. And then they would work on their side business, which was building websites for companies that would pay them. And this is back once HTML seemed like something really hard to learn. It turns out it not to be that hard to learn, but people didn't want to learn it. So they were more than happy to code up sites for the HTML for others. And they were paid a very handsome fee for creating these sites. And the sad part for them was these sites would just stand along and they would be there be no traffic. Nobody would go to them. So then they sort of figured out how to link all these sites together and try to drive traffic to each other. And that was the creation of Link Exchange. And I mean, basically, in a lot of ways, invented the display advertising network business that eventually becomes double click and a quantity of these become massive acquisitions from Google and Microsoft. But you guys were first in a lot of ways. We're early. There were a bunch of copycats along the way. Some were hyperbanner and other banner exchanges. And then obviously double click and a quantity of we saw the little too early before that. And then there was a next wave of these companies on the mobile. So history does repeat itself. And so Sequoia not only invested in Link Exchange and made 17X and 17 months, but they also invested in AdMob and AdMob's acquisition by Apple was much bigger than Link Exchange's acquisition. Well, if you adjust for inflation, you know, it's probably about that. Yeah. Alfred, it feels like you've said that 17X and 17 months before. I don't know, rolled right off the tongue. Yeah, I thought, you know, that was the first time I was like, I said to Michael Moritz who was on the board. And wow, this is a great business. It's just happened all the time. And he's like, yeah, that doesn't always happen. But what I got to do is I learned a lot from Michael. He was a great mentor for me. I developed a great relationship with Sequoia and the Sequoia partners. I know how they operate. There's a lot of work that goes into venture capital that I did not appreciate at the time because it seemed like it was easy money. But going back, if you had to rewind, you know, Michael was interim CEO for a period of time when we were looking for a CEO. Oh, wow. He spent a day a week at the company. And so today, when I'm sitting in this seat at Sequoia, I just remember back the success of Sequoia has a lot to do with partnering with the founders and the management teams of their companies and picking up and doing whatever to help the company succeed. Yeah. That's why this is for me a very rewarding job. That's really cool. I didn't realize that Michael had actually stepped in as temporary CEO. But as you say, you sold the company after 17 months to Microsoft and you and Tony decided, maybe as you said, you thought the venture business was easy. It's not. We've talked about that a bunch on this show. You leave and you decide to raise a fund on your own. And this is essentially like today, this would be a pre-seed venture fund. Yeah. Back then, we raised $27 million from friends and family of Link Exchange after the liquidity event. The $27 million back then was a fairly sizable fund for seed and pre-seed today. It's like not that. It's like average, I would say. And the idea was not to write $100,000 or $200,000 tracks, but to have like a million in on average for a concentrated portfolio. We had decided that we were going to figure out how to invest in $27 in, or really 30 companies over three years. We ended up making $27 investments, but it was over one year. Wow. And you didn't reserve anything for it? We didn't reserve anything for ProRata. So that was a big learning experience of like time diversification is actually important in the venture business because it was at 1999 was not a great time to be an investor. How do you even have the deal flow to be doing two deals a month with that small of a fund and that few of a number of GPs? How does that work? I think we were just, you know, we had a good network. We knew lots of people in the internet space. And so we were primarily investing in just the internet. So it wasn't hard to find companies to invest in and keep in mind, you know, deal flow, the level of sophistication people have today thinking about companies was not the same back then, right? Like the company, any company that had a product that was working and had eyeballs, people were funding. So we did some of that too. We also made some good investments. We're pretty proud of our track worker to venture frauds ended up being a seven and a half to eight X fund after fees for a 1999 fund. Pretty sure that's in the top. That's not the top. I mean, it's very early. The top, top venture funds these days are seven or eight X after fees. Period. But to do that in 1999, but it was the result of a lot of work that you ended up doing in the portfolio. It was a result of we, in 2000 or 2001, we looked at the portfolio and there were basically three sets of companies. There are like companies that we, you know, regardless of whether we help or not, they were going to go under. And then their company is like, regardless whether we help or not, they were going to do just fine. So that was, you guys invested in open data, right? We invested in an open table. They were going to do just fine. Mago music got sold to Microsoft. They were going to do just fine. We didn't have to do much work for it. There was a company that was in the WAP space. It was called Myable. They were trying to create my pages for WAP phones. Imagine like, can't even imagine looking at these small screens. Why you would put a My page on that? But anyway, they were, they were building that. That got told to phone.com, which got merged with software.com to create open wave systems. So that defined there. There are bunch of companies that define regardless of whether we help them or not. And then then, you know, like I said, the first class was like most of these companies were just going to go under regardless of whether we help them or not. And then there were two companies we felt like if we helped, we could make a lot of impact in those companies. And those two companies were telling me not works and Zappos. So did you and Tony sit down and say like, okay, let's draw straws? Who's going to go on this? Yeah. And also on this, how do you determine if a company is at a place where if you apply high leverage, it makes an impact or not? Like how do they, are there certain types of business models or certain places where you have domain expertise where you're like, yep, if we apply here, it can go the distance. Or how do you figure that out? I think when you, like you sort of step back, you kind of think about whether the investment thesis was right or wrong. And then you kind of know that, you know, you got this wrong. It's not going to work. Here are the reasons why it's not going to work. This might be an interesting problem. But we, you know, at Sequoia, we've over the years like created these buckets. Like sometimes you have a feature. It's not a product. We have a product, but it's not a company. And I didn't have those lists or frameworks back then, but it was pretty clear. Like, yeah, this is a nice tool. And people will use it, but you can't really build any meaningful business or user based on top of it. And so then you're like, okay, well, maybe they'll pivot to something different, but we're not in the business of helping them think about pivoting to another business that they're not passionate about. You know, that's one set of like, well, we can't really help companies where they're not really a company or a product. They're really a feature. And they're a set of like, I think founders who are resistant to change. And so they really want our advice. That's difficult to sort of influence. And then there are just a set of things you just got wrong about the business or the business model and the underlying assumptions has proven to be the opposite of what you assumed. And so those are the conclusions. And then unfortunately, there's also class of things where maybe the product is great and the underlying assumptions are right. And the founders will listen and work hard, but it can't raise money for whatever reason. The story is not good, you can work on the story, but for whatever reason, it can't get the capital that it needs to get the capital. And what's interesting, Zappos kind of fit into that, right? Like the business was good, it was growing. So you guys invested in 99 and they can found it the business, just had a business plan. It was it was initially called shoesight.com, right? But still redirect to Zappos if you go there. And so you guys invest and then it grows pretty nicely. I think year 2000, first full year, it does about 1.6 million in revenue. In 2001, you do over 8 million in revenue. But everybody was nuclear winter, they've been pets.com and eToys, nobody wanted to fund it, right? But the business was growing. The business was growing and it was actually one thing that was different about Zappos, even back then, was it was break even. Most e-commerce companies would not break even. Even today, we accept they won't be break even for the first years. But then two, a lot of companies like pets.com didn't warn breaking even. And I think the whole e-commerce category was just dead to all investors in 2000, 2001, 2002. And so even for support investing, support invested in I think in 2005. And so it took some time for a very toxic space to turn around, even when you have a good business. I attribute some of Zappos' success. There's a lot of like feel good stuff in Tony's book. But there are two things that I attribute that is not told about very much in the founder lore because it's not a happy story. But the lack of money is actually one of the things that sort of made Zappos successful. It very early on, it had to figure out how to acquire customers in a way that is unit positive on the first order. Yeah. And that's not an easy thing to do at that moment. The company only raised $10 million for primary capital. And yes, it raised more money from Sequoia for secondaries and yes, it had debt and yes, it had sort of leveraged relationships to get vendor credit. All of those things that are written in Tony's books, those were all true. But primary capital was about $10 million. And I don't think you can imagine today a e-commerce company raising $10 million and becoming a billion dollar company over time. You'd probably think it's in the hundreds of millions of dollars, maybe 100 million or 200 million. And Zappos did burn 100 million dollar to free cash flow. It was just smart about how he did it. Yeah. He did it from vendor relationships, extending the terms from net 30 to net 90 over time. We didn't do it immediately. We got a line of credit that we did need to use for a short period of time to get inventory before we sold it. So we had to understand our cash conversion cycle very, very well. Was it easier to acquire at scale those days? When you think about today, it's in many ways expensive to acquire from Facebook and Google. But then you were educating people about the whole category of e-commerce, particularly in these new niches they'd never seen before. So can you talk about acquisition costs then versus acquisition costs now? Yeah. I think that's a great question about acquisition. Everybody seems to think, well, yeah, you had it easy because Google was a lot cheaper back then. Well, it wasn't obvious that Google was a place to actually apply. It probably wasn't sending you that much traffic. Well, no, but to back then, there was a lot of acquisition channels that just didn't work. We tried all of them. There was Yahoo, banner ads, there was MSN, banner ads. So there was a whole banner advertising category. Then there was trying to buy placement at home play at Pac-Bel. We got all of like three customers from that. Did you guys do an AOL sponsored channel? We probably did an AOL sponsored channel for a short period of time. I don't particularly remember, but yes, we spent money on AOL. So when you say, oh, yeah, you had it easy because you had Google and it was cheap and it was converting well, yeah, that was true, but we discovered that. And then as soon as we discovered it, it wasn't like there was no competition up there. As soon as we discovered, oh, yeah, it's really cool. You can bid on shoes and it actually sends us traffic and it converts pretty well. Other people started bidding on shoes. So we had to keep going further and further and further and further down the long tail of keywords. This is all like things that you now think about. But we had to do that. We had to do SEO. We had to figure out SEO optimization. Those were not things that there was a book about you or AB testing this stuff all the time. I would say, but then Google was not obvious. We did that. And we did that. And we did that. We did that. It was actually pretty good. And when you did print ads with that were co branded with Stuart Weitzman or with Clarks, depending on the shoes that you're selling, it actually were pretty effective. And then we got we figured out a way for Stuart Weitzman to pay for that because it was co branded. It's like, well, you put up Stuart Weitzman ads and they don't know what it by. So why don't you put ww.dappless.com at the bottom for your ads. And so a bit of negotiation. So there was our clever things that you had to sort of do as soon as we started doing that competitors started doing that. They were called co-op dollars or money that were available. And this is something for parameters. You talked a lot about this. All this stuff was really hard. And you get like, nobody, if you had a slow to business plan across the table, it was just a quiet capital that you were going to do this. They'd probably be like, you're going to do print ads, right? But like, because you had to do it, you had this muscle that nobody else had. And then when Amazon came and tried to compete with you, they didn't know how to do this stuff, right? Yeah, I think that nothing in the consumer business is completely proprietary. You can try to create these modes along the way. But consumer business modes are like little by little. You know, you can make things a little bit more user-friendly. You make it a little bit cheaper for you to acquire customers. These are all like getting up every single day and figuring out how to do something one percent better than the day before. And you try to make that additive, and if you really do try to make those 1% compound, and that's the way you sort of get ahead. And when Amazon tried it, there were other competitors before Amazon. But I would say one of the other things back to the one sort of thing that people don't talk about is not having too much money was actually the thing for Southwest. Not having too many competitors at the beginning was also the thing for Southwest. Yeah, it's calling it the herd, right? Yeah, so like in 1999, there were competitors by 2001, most of the competitors, like died down, and some of the competitors that did exist were pretty weak. And the competitor, they got a lot of money. What's Nordstrom Shoes.com? I got 20 million. Zappelisk got funded with 2 million. They soon didn't go anywhere because they had too much money. And five years end. That's when the competition started heating up. But I do think that it is important for founders to know that nothing destroys value faster than irrational competitors. And so if we had irrational competitors very, very early on for long sustained period of time, I'm not sure Zappelisk would have been around. But being able to learn a lot of these lessons over some period of time, and there's room to make mistakes and to experiment and to figure out the security bin and putting the ads in the security bin was actually pretty effective and actually pretty cheap because we've never done before. Yep. This is Bradson writes about this and everything's stored that you guys put ads in. And when you go through security to check in at the airport, you put Zappel's ads where you had to put your shoes, which is brilliant, apparently. Which is now like an ad unit. That's a thing now. Now it's very competitive. So when you say like, oh, yeah, you could acquire users for cheap. Sure. But you have to go discover these things. This company had developed this business plan in 1999. They were all ready to go. And then September 11th happened. And for they were still like working with the TSA for a long period of time to get it done. And so by the time they were ready and they were capable of doing this, they were soon going to be out of money. So they were willing to sell those ads. You guys are the only right. Very cheap. Yeah. So it actually was a third party who did those ad units. Interesting. Yeah. Well, let's rewind a little bit here. So we talked about venture frogs. So at some point Alfred, you went to tell me and Tony went, it says like not as CEO, but it's just sort of joined the leadership team at Zappos. Can you take us from there a little bit on how Tony became CEO and how you found your way to Zappos? Sure. So I think we were both trying to help the companies that we thought we could help. And back to Tony thought that he could help Zappos. And he was willing to incubate the company in the loft and venture frogs incubator. And then I had long standing relationship with Hadi Partovian, Ali Partovian. So Hadi was one of the founders of Tell Me and he was telling me how much he was, they were spending. And I'm like, wait, you raised $265 million and you're burning $60 million a year. That sounds crazy. It was your revenue company. Meanwhile, like, Zappos can't raise any money. It was like night and day and like, well, Zappos can't do whatever. Tony just grow the business. Don't spend it. Don't spend any money just like it is today. Just grow it at break even. You're fine. You can't raise any money anyway. Here, this other company raises $265 million and is losing $60 million a year. I'm like, I'm actually, I was pretty sure with a $60 million loss, you can narrow that to something lower than that. You can add value that way. And so Tony, and Tony really like the notion of trying to figure out to take a business from Connie business and later on service. He had this whole thesis that most commodity businesses are commodity businesses because they don't layer on service. And so he went to Zappos first. And for Tony, I just thought my financial skills were going to be valued. It told me it turned out to be one of the first SaaS computing, cloud computing companies just wasn't. We had to build an ARM cloud. And we turned that company from not having any revenue, having too many people, having going through two and a half rounds of layoffs. The notion of the consumer business was that you can sell advertising as well. Advertising units on Google are 90% risk margin on this because of the infrastructure was going to be at best 50% risk margin. That may get very hard to work. So pivoted to enterprise business, had to sort of change the mindset of the company. Mike McHugh did a great job sort of shifting that. And we built an enterprise business through a lot of pivoting. I didn't realize Mike, so Mike's the fanatity of football. I didn't realize he was the tell me. And so after tell me was in good shape, I joined Zappos. So 2005, you came over to Zappos. You just raised around from Sequoia. And shortly after you joined, Tony gets an email from the app business saying he's going to be in Las Vegas and wants to meet you guys. What were you guys thinking when you got that? I don't know. I was probably should take the meeting and be cool to see if there's some partnership that we could do together. We weren't thinking that he was coming down to buy the company at all. So you brought back to Pete's to the meeting, right? Well, he's came to sleep out from his two pizza team. So we thought we'd bring two pizzas. Funny enough, nobody, I don't think anybody ate the pizza. It wasn't that kind of you. It wasn't. Yeah, it wasn't a pizza. Was Amazon in the shoe market at this point? Were they a competitor? I don't. I think they were in the market to not in a big degree, but in a small way. And the suppliers, the shoe manufacturers, were pretty scared of Amazon, right? Because they were worried that Amazon would discount their merchandise below MSRVD. They just go back like back then, they were scared of anybody in the internet. They not scared in the way that you're thinking about like these people are going to be dominant, they're going to take our business. They were scared because they thought all internet businesses were fly by night business. And consumers were never going to get your business. Yeah, they're like consumers would never buy shoes on the internet. You got, you need a shoe salesman. It's like the silk road. Yeah, he is. He is salesman to come and talk to the customer, measure her fee or his feed and bring out like three pairs and try to sell them another pair that they don't really want. I'm like, okay, whatever. So as you know, originally the idea for Zappos was to be completely dropshed. And over time, just to get even some of these brands to sell to us, we had to get more get inventory. We had to buy the inventory. So part of, I was going to ask about that. When you started it with dropships, so the manufacturers would send the shoes directly to the customers. You wouldn't have to take inventory. You convert to a retailer model. Part of that, I imagine, was to provide better customer service. Yeah, because I think the brands are not set up to be direct to consumer businesses. So they don't take the time to think about what direct to consumer business needs. And so the packaging wasn't perfect. They were sending packaging slips like they would send to a store as opposed to the consumer. The boxes were not branded. They didn't have exact inventory because that's not actually as important to when you're selling your sort of distributing to a store. So they were providing a subpar experience and we took over the experience because we felt like we wanted to provide 99.9% accuracy on inventory as an example. And we wanted to provide a nice and happy and joyful packing slip as opposed to a grid with numbers. But part of it, it sounds like also is just getting there. Charlie, you had to buy the inventory or else they weren't going to trust you to sell it. And that's where most of the use of capital went which is buying inventory. So when you go into this meeting with Amazon, what's the result of that? Do you guys walk away feeling like, well, they're about to come after us? I mean, I think it was a very happy meeting from what I remember. It was a long time ago. So maybe I'm not remembering correctly. But I think we didn't really, it was hinted at. Maybe we should join forces and we hinted back where we're not quite ready to sell. And the meeting kind of wrapped up pretty quickly. We suggested we do a partnership. And I think the response back is rightful, which is like partnerships don't tend to work when you have to spare, like hugely disparate sizes of companies. And so we went on our way. And I don't think we were thinking that they would, we always thought they were going to come after us. I wasn't thinking that they would immediately, well, in a few years, launch endless outcome. Yeah. So what was the next year, they launched endless outcome, which is basically a clone of Tappos. They've been $30 million developing it. And when they launch, it has free overnight shipping, which is super clear. I mean, I'm sure it was obvious to you guys. They were losing money on every order. You guys worked so hard to be profitable. And they're just, as you say, it's like lots of capital coming to the space and killing your economics. How did you react to that? Well, the only way you can react is like figure out what you want to match that and how you differentiate it against that. So those are the two conversations. We had fortunately figured out how we had been operating shipping along the way. So over the years, we had sort of gotten people from on average five day delivery, would always say five to seven days and deliver it in five days and then four and then three than two. We hadn't gone to overnight yet. And so it wasn't that big of a leap to go from two to one. It was a big, you know, for that time, it was a big dollar difference shift. We're going from profitable to just break even again. And so it was a big like decision to do that. And we were still focused on making sure we had the largest selection. We had the best vendor relationships and things like that that we thought were still differentiated against endless. So we went to free shipping both ways. We went to free overnight shipping. We went from free overnight shipping to because discounting on the shoes and season is not thought of as positive by the industry. And they didn't want to hurt their own sort of ability to get inventory. They said and by not thought up as positive, you mean like the brands would stop retailing through them if they were selling below MSRP, right? Yeah, they can't shake. They can't ask you to change the price, but they can stop selling to you. Like, okay, well, if you're going to discount before the season ends, we're going to not let you access to more. Right. They want them to keep it. So Amazon is very clever. I thought this was very clever. It's like, instead of discounting the shoes, they said minus $5 for or $5 back for overnight shipping. We'll pay you to send it to you overnight. I'm like, yeah, that's really clever. Coming to Prime some scripts in the next year. Wow. So despite all this, I'm wondering, you guys continued to grow in 2007. You did 840 million in revenue. Was there an element of like, I'm thinking of, you know, when Facebook, Clone Snapchat and Released Poke and it was like the best thing that ever happened to Snapchat? Like, did Amazon do category development for you? Like, did you see, I'm sure they were spending a lot of marketing. Did you see any bleed over of that into Zappos? I think when you're in a grow, one of the advantages of being in a growing market where the consumer trends are in your advantage is that for a period of time, it's a one-win situation for the consumer and those involved. Meaning, we were growing, Amazon was definitely growing and we didn't really see like mass competition, like we weren't losing, we didn't feel like we were losing our loyal customers to Zappos. We weren't, but we didn't meet the choir Amazon shoe customers to make our business work. There were enough customers out there to go choir. You get the large NS size, that will at some point not be true. And so if you end up being in a great situation where you're one of, you're one of the only kind of company in your category class and you have a natural monopoly, that's great. But if you don't and you're able to still have a large business and you're one of many, you can still be a valuable business. So that happens together. Both growing through kind of O5, then financial crash, definitely. Yeah. Zappos endures one financial crisis. So, Ms. Will stick around for the next one. Well, if you want to build a long enduring company, you're going to endure a lot more than just one or two financial crisis. So, the financial crisis was interesting because I think we saw glimpses of the slowdown happening the year before the financial crisis. And looking back, it's easier to say that back then, obviously we didn't realize it. Do you mean in raising capital or in people buying shoes and getting somehow more expensive to get people to do that? Consumer spend was more tepid. And we would see consumer confidence coming down faster than the Fed or whatever, you know, could see it, I think. Anyway, so financial crisis was interesting because our business is still growing. I think we had a hundred million online credit of which we were only using 30 or 40 million of it. It wasn't like we're overextended. So, you didn't bust your cover nits on the credit line? No, but the banks couldn't post the money. They're like, we have this contract. We're going to re-bind hold to like, we have a liquidity crunch. We need to like pull all black, some of the liquidity and that's a little disappointing. Wow. I mean, that's not how lines of credit work. Well, you should read all terms. Yeah, right. When it's not your money, it's. Yeah, we had some technical issues where we had verbal agreements that we would extend from shoes to all. They would lend against shoes to handbags to apparel. They had, it had been agreed upon verbally, but the extension went from shoes to handbags, but not all the way to the parrots. They started saying, well, we're not going to lend against the parrots. There are ways for them to sort of get out of the contract. It was also what was more painful was confrontation with employees. Some of them had lost their home. Right. Vegas was particularly hard hit by housing crisis. Felt 50% or more. Some some estimates. But so some people lost their homes. They said, well, the only thing that's of the alley you in my portfolio is my stock options. It was like, whoa. I thought I had a big weight running a business. So I mean, the conversations were obviously like we love running the company and we thought we could continue to keep running the company and there was no reason to sell except for the fact that company had existed for almost 10 years. Some people needed liquidity. I had a senior member of the team needing to sell his Zappostock at a fairly large discount during that time. Just be able to post his mortgage payments. And part and I was like, what do you mean? I thought you were renting. I was like, well, I am renting but the landlord is going to lose this house. So I don't want to move. I don't just want my family to come up with the money to buy the house. It's going to be at a discount. So yes, I'm selling my stock at a discount but I'm buying the house with a discount too. So he felt a little good about that. But I was like, you know, you're selling this at like probably 25% of the value that you would get if you just wait to sell. And he's like, well, I need to cash now. So those types of conversations are much harder. And so we were thinking about what's the right thing for all shareholders. And well, I mean, we can always think about like if Zappost had been public, you know, gone public because it could build a big enough business, what it would be value today. And it's probably not. When I left the business is doing 1.6 billion in gross sales. I don't know what the numbers are today. I'm sure it's well more than that. And when I left it was profitable. And so I'm sure it could be a public company, but Tony couldn't wouldn't be working on the downtown project and doing what he loves to do. He's delivering happiness. I wouldn't be here doing what I love to do. So. Well, now what is so so when deal happens, it's announced summer of 2009. Amazon's going to acquire Zappost for 1.2 billion dollars in stock. How did the conversation go about stock? And I mean, that was the best thing that you guys probably ever did financially, right? Yeah. So, so that was one success as many fathers. Yeah. Many people claim to have been the person who knew like, but you were negotiating the deal, right? I negotiated the stock boy. Like Tony, Tony was like push, Sancy push for stock. Mike, more than Sancy push for stock. You know what? Actually, everybody pushed for stock because we knew that coming out of a financial crisis, everybody stock was deprecied undervalued, right? So like, I think Amazon was trading like 50 or 60 bucks a share at this point. It was trading at, now you're, the day close, it was trading at 118. Okay. So the stock price today is more than 10 times what, but who could remember, you know? Who could remember exactly what it was? I was 118 at 23 cents, I think, to stop them to that effect. Oh my goodness. And so it started with all cash because Amazon had not done many transactions with stock. And we said we won't do this to you. Happy with price. We just won't do this to you on since stock. It should like in corporate finance, it shouldn't matter, right? Right. And the acquirer can decide to give stock and buy back the stock, the acquirer, you know, so it shouldn't matter to the acquirer. It does, it does matter to the company because all stock transactions are tax deferred because you don't pay taxes until you sell the stock. Whereas if you get cash, all cash, you need to pay the taxes as soon as you get the cash. And I think there are some people with different views about Amazon stock and some people sold, some people held, some people didn't have in half. Yeah. So in my view, in merchants, I think a choir should be more lenient about doing stop transactions because it shouldn't be any different for them. Unless you have a view of the value of your own stock, quite different from the market. But you can always buy back, you can sell it. That's true. That's true. One thing we'll move on to acquirers is this can category, but I'm really curious, I mean, you did this and it was announced from day one. There's this amazing video. Well, it's been in the show. Oh my God. It is the best. It's so incredible. Bezos records a video to all DAPO's employees. It's about a 10 minute video on YouTube about everything that he's learned, knowledge that he wants to impart to DAPO. It's just wonderful. It's in this like classic, for listeners who haven't seen it, you got to go watch this video. It's in the classic Jeff Bezos style of like way oversimplifying everything, being like salt of the earth, like I'm just Jeff and my jeans and you know, he has a, what not even a wayport, like you know, the paper easels that he flip and he writes in marker the four main lessons he learned at Amazon. Anyway, but the bonus, the one that's announced from day one, Zappas is going to remain fully independent, be a wholly unsubcitiary. That was pretty novel for the time I mean, now like this is the playbook that Facebook runs and other sort of that goes asians. How did those discussions go? Yeah, I think Amazon has always been pressing on this front. It wasn't the first acquisition that they'd done that was like this. I think Alexa was less dependent, so it was high to be in audible. And so we weren't the first acquisition. There are obviously situations when you acquired the company and you want it integrated, I think it makes sense when it's an aquahire, it makes sense when it's a feature as part of a whole for all product somewhere. When you have a whole business, I think it really does make sense of what it independently unless you can find a good reason why you should integrate. Decentralization has its costs. And so I think decentralization has its costs too, but you're more likely to, in my opinion, decentralize organizations are more innovative because they don't have to like bubble everything while there's not a central decision maker. So decentralized ecosystems are more innovative. And you see, if you want to compare a centred be like a lot of company versus the startup ecosystem, that's why we have a job here at Sequoia. We believe the decentralized ecosystem and the innovation of entrepreneurs when they don't have to, and I think the companies that are larger have a harder time innovating because they're centralized. And so the conversations are pretty natural. The questions were about what kind of, what's the management structure? And so there was, the manufacturer structure was basically our board, at Zappos, we replaced by a board that was now full. And Amazon board. Yeah, and Amazon board. Cool. And I think it still exists that way today. Hmm. I'm curious, you know, when they approached you about buying the company, what were sort of the main cited reasons? Like was it, we just think you have a good business and we want a poor additional capital into it for this business line to grow? Was it, we want to learn from this and figure out how to spread the Amazon DNA or the Zappos DNA around Amazon? I mean, why'd they do it? I think the, you know, you should ask them, but there's a line in the video that you were referencing when Jeff Bezos said, I get, I get tingly, me, me week. Me week when I see customer obsessed companies and he really understood that like Zappos was really customer obsessed. And I do think that for all the sort of bizarre differences between Amazon and Zappos, that is one thing that both companies share a lot in common. And maybe we do customer obsession differently, we have a different style of doing customer obsession that Zappos versus Amazon, but both companies, I think learned a lot from each other even during the due diligence process of how we think about things. And so there's a prize that we didn't, we like, we said we don't measure, for example, call times. Well, it's not that we don't measure call times for an individual agent. You can't hold an individual agent to a particular call because you don't know what that call situation is like. But you could look at the efficiency of the team. And when you talk about the efficiency of the team, it's not you like, stay on the phone two seconds longer than you should have. It's more of a, let's collaborate. Our team is not efficient compared to all these other teams. And that's how we did it. We weren't measuring every single end. And so they're like, okay, well, you're not actually like, you say these things like, you don't measure the stuff. You measure it just slightly in different ways. And the way we were trying to measure it was to try to get collective intelligence of the team and try to make better decisions. So the next statement we do on the show is that we're setting a category and we assign a category to the acquisition. And to me, it's pretty obvious. This is a business line that Amazon acquired. Keep it as a separate company. It's not just a product that's being integrated into Amazon. But I think this is really interesting. Like, this was the point I wanted to make. And the cultures, even though it's as Brad Stout and said, and you quoted it, like it's Zappos was a bizarre world version of Amazon. And the core values were basically the same. Be free goal, be customer obsessed, decentralized decision making. It's such a good fit when it comes to culture, even though it seems on the surface that it wouldn't be. Yeah, I think that's why the acquisition was a conserved success. And I don't think it was an easy acquisition at the time because it was the largest acquisition at the time now. Amazon compares and today to hopefully, hey, it's 10 years later, just for inflation. There's only acquisitions and numbers only get larger, right? So it was a business line that they acquired. I think they also were very interested to learn about some of the things that we built related to merchandising. But how did we get so good at getting the right product and the right quantities at the right times with less than stellar technology? Was it? We were using AI or? Yeah, were you guys using Kiva? Or were we also using Kiva? Okay. And then with how Kiva got on the radar screen in Amazon, right? Kiva was, it was funny. So I'll tie this all the way back to Sequoia. Rulacboy just set me in a business plan of Kiva. Asked me for my opinion. And Kiva came from Web-N, which Mike Meritz was on the part after. Mike Meritz was on the board of Web-N, Web-N, what did not work well, worked out well. They had been using, they had been using, if you wanted to go all the way back, they had been using a carousel system, wanting to vendor. We ended up using that carousel system and the same exact vendor. It was my first board meeting and I got ripped into shreds because we were saying that this was going to work, et cetera. I might call her. By Michael, and also by Michael Marks, who obviously found her in C.E.L. FlexTronics and so he means a little bit about operations. I was like, okay, all right, well, we need something different. Anyway, so that happened. And so Mick, who was at Web-N, noticed how inefficient most of the systems were. So he went on to create keyless systems. I had, I didn't know that connection, so thanks for reminding me, but at the time. So I got the business plan from Perkeva, from Brulow, asking me what I thought about it. It was like, oh, interesting idea, but probably too hard to rip out a whole set up distribution center. Maybe for a new distribution center, we might use it, but not for a one-ore set up, when I rip out a racking, et cetera, et cetera. So as a startup, you kind of move pretty quickly to your next distribution center. So we did try Keva, and it worked well. And then eventually it took over all of our distribution centers. When Amazon was doing diligence on us, they really thought they were going to rip out Keva from our distribution centers because they thought it was not going to work. And I said, why? And they said, well, you know, your spike in December or our spike in December is an order of magnitude higher than the rest of the year. So you're paying for idle robots that are going to sit around for most of the year, so that can't be efficient. It turned out it's still efficient because you can get into a much larger distribution center as you can zip things around, have people work on one end and have machines move certain things around in another. So a few years later after they observed this, they bought the car. I acquired Keva, yeah. And now I don't think it's in all Amazon warehouses yet, but certainly all new ones. And I think they've been retrofitting old ones. I think there was some public statement. They have like hundreds, maybe on the order of 200,000 or 300,000 Keva robots. Wow. That's awesome. All thanks to Zephyz. Well, that's just that. I mean, Zephyz also used them. And so they acquired diapers.com. So it was it was it was more and more evidence that this was going to work. So there was technology that there was technology that they bought as well. So we've decided it's a business line, Amazon's got a competing business line that's doing really well. Like, Amazon's in house shoe businesses is according to all these external research reports, you know, really crushing it. So why not pour all the investment that they're putting into their own in house thing in Dazappos and and you know, were they for a time and have have, does it feel like they've shifted away to you? No, I think the the shoe business as a whole, whether it's on Amazon site or on Zephyz site has been growing really well for both. And so it's not an either or I think if if you sort of used our way of like art, we talk about the power of and not about trade-offs and I think Amazon also likes and versus war and so why not have why not grow your own business and own your biggest competitor at the same time if you can pull that off and get. Hmm. I'm curious kind of on that front. Did anybody else ever seriously attempt to buy the company beside Amazon? What you guys have sold to anyone else? I don't think anybody was anything anybody else was serious. I don't think we would have sold to anyone else. And it's hard to imagine anyone else would have like let you guys keep doing this stuff. Well, I think Walmart has shown that they'd be willing to buy companies and keep them independent. Well, now, but yeah, 2008, 2009. I think today there are plenty of competitors. So like, you know, could that was a remain independent, come public and then buy it by someone else that's not possible. I try not to think about like all the possibilities because you only have one like to live. You have to rewind. You're a little busy on other stuff these days. You have to maybe test your life. So get to move on. It's okay, we'll speculate widely about it on this show instead. Techniques, yeah. We've talked about a bunch of them. There's one that we didn't, it was part of the sort of story in venture frogs. And this is great tidbit about the initial phone call from Nick to Tony sort of pitching about shoe site.com. And Tony almost deleted it, but decided not to. Even though he sort of thought it was a bad idea like, you know, who's going to try on, who's going to order shoes before they can't try them on. But Nick had this tidbit in there that it's a $40 billion market and 5% of that is already being sold by paper mail order catalogs. And it reminded me so much of a Sequoia investment thesis that we invest in markets, not ideas. And we invest in markets over founders in many ways. And I think that there's something really powerful to big companies get created in big markets. And if it doesn't matter how incredible of a widget you make in a small market, it's just not going to become a behemoth. Yeah, I would, I think you're right that markets are large markets are very, very important. I would just say that we have learned over time that founders and markets go hand in hand. It's not like you can't, like invest in a big market and have the wrong founder in place or around Argentina. The people around the company has to all work. And so in some ways, I would say we invest in companies and not ideas. We invest in companies and not products. We invest in companies, not features. And the company consists of the team and the problem you're solving, the innovation you're bringing, and also the market that you're attacking. And also the go to market and all those things. And on day one, do you have all those things? No, you don't. But you have to sort of envision all of this and why will this be an interesting company in five, 10, 15 years? And you can't envision that or you can't, you don't feel like the pieces come together or you don't know where the other pieces that you need can come from. It makes it very, very hard to build a company. Yeah. My thing that I was going to put out there that I thought we were going to cover a long way, but I actually don't think we did is, well, Ben, you mentioned a little bit, but just how much this story reminds me of this stitch fix story as well. And even down to you guys hired, it was the first hire, it's Epoz Fred, Smasler, and reminds me of one of the first hires that stitch fix was Mike Smith from Walmart. And bringing that DNA from the industry into understanding, to this new paradigm of the industry, but from the old world to it was, you can bridge that gap. But one of the things we talked about on the stitch fix episode was this idea in founding a company or investing that it's not enough to be right about something. You need to be right and have it be non-consensus that you're right. And Tony almost deleted the voice now, right? Because who's going to buy shoes online? It seems like a dumb idea, just like stitch fix on the surface, back in the day probably seemed like a dumb idea. But when you dig into the market, it actually isn't. And we're curious to say, how much you guys thought about that all the way? Yeah, so Katrina has done an extraordinary job at Stitch fix. So I think Kudos to her. I think going back to the comment you made about right and be non-consensus. I think that's part of what we were talking about where if it's non-consensus, you will not attract a ton of attention. And you will not attract a ton of competitors. And it allows you time to get things right. And yes, Tony almost deleted the voice mail. And at the same time, the reason he almost deleted it didn't delete it was, after this, that's something like we had a competition. It sounds like a dumb idea. But nobody else is going to do this. They get money and they go out. So, you know, we're going to be the only ones doing this dumb idea. Yeah, we're going to be the only ones doing this dumb idea. And then you ask, is it that dumb? So, the facts were that, you know, he had no, he knew that Nick could build a website. He was a webmaster. He designed websites. Okay, check. We knew that there was a problem here. We didn't know about the market. He listed the market size. 40 billion, 5% or 2 billion, or even a million. So what is the conclusion from those facts? Okay, well, it's not that hard to extend that conclusion to be the internet should be bigger than that order. At least it's big. Or bigger or many of orders and magnitude bigger. So you believe that. And back to like you need to build a company, we have a founder with an innovative idea. You're missing a few pieces. So as you said, we went out and hired Nick Swimmer because we're missing shoe experience. Tony or I could like knew how to sort of because of link exchange, drive traffic to a site. Okay, got that check. Like we have a bunch of things to check, but we didn't have the shoe experience. And originally the original idea we didn't need customer service experience or. You were dropped because we were drop ship big that evolved. So we needed more pieces to be filled in. But the company coming together has a lot to do with like making sure you have all those right pieces. I think that's what's so, you know, for me, at least super fun about early stage investing is like you can't think about. You can't look at it and say like, uh, judge it as if the pieces were together because if the pieces were together, it would either be a public company or like, you know, it's never going to work. You need to, you need to, not while you also, you just need to have imagination. Yeah. You need to have imagination and you also need to make sure that you can dream with the entrepreneur. Like we often start talking about like, okay, can you see a world like this? This should the future be this way. The founders we like backing like, you know, a D at house or Brian Chesky at Airbnb or Dropbox. They also just like, they see the world slightly differently than everyone else and they feel that problem from a personal standpoint and they just feel like the world has solved that problem incorrectly. They just got not wrong. And they're on mission to go change them. And it was on the mission to change that Tony was on the mission to change them. Yeah. Even though, and I think this is what's also super cool about Sapos and the story like, um, actually another one I had in here was mission, you know, focused founders versus mercenary founders, even though Tony and, uh, I don't know, I'm guessing you probably weren't that passionate about shoes, but you were passionate about seeing this way that the market wasn't working and could work and that nobody else in this space was so focused on customer service that could really deliver, you know, well, happiness to Tony puts it, uh, you know, to customers. Yeah. I think that the before getting on to mission versus mercenary founders, I think the one thing that was like clear was that e-commerce was going to have was going to compete on price and was going to compete on, um, selection. And those two things are hard for a startup to just compete on those two things because you don't have the bank role to compete on price. And on day one, you're not going to have the wider selection. And so we needed another pillar. You could compete on those two things later. But that's why we're so focused on sort of putting on another layer and it was customer obsession and customer service. And Tony and I were pretty passionate about customer service, well, a mission standpoint. You know, people asked us all the time whether we back, you know, mission focused or mercenary founders, I think best founders are kind of both. You know, I was like, they're not doing this as a charity because otherwise they would start a nonprofit. So they are in the, they are in the, in the entrepreneur space because they want to build a company. What I think is this? There's also like, I mean, back to your days with pizza at Harvard, you know, Quincy House, like, there's a element of you got to be a hustler to get this done, right? A hustler. You want to solve the problem. You want to do it in a different way. You have to differentiate. And most of the founders are successful. They want to, they want to build an enterprise that exists much longer than themselves. And that requires making sure that the company has longevity, which means it has to have a sustainable business model. Yeah. And I do think one of the, you know, themes that you have to do hard things that you'll some protection, some modes and things that are hard that are just people don't want to do. And, you know, Kudos to Amazon for building a network of warehouses. Nobody wants to build that. Like, oh, wants to do that. Or network of sugar farms. If you were, if you, if you asked in 1999, whether you put $10,000 or your life savings in eBay or Amazon, I bet you most people in 1999 would say eBay. There was this elegant, no capital, like capital light, no distribution centers, no inventory model. It was just connecting to, you know, two people in the marketplace would take care of itself. Of course, Skype people can chat with each other. And I'm not making fun of you, but they have lots of, they have lots of issues that they need with trust and safety. They have to solve that. They have to solve payments, micro payments, right? Like these are small payments. That's what they had to go about, you know, sort of develop their own. They tried to develop it now. They acquired a build point at AMP. Yeah. It's not an easy thing, but from an investor standpoint, investors seem to like these, like, high margin, like, really, like, easy to explain business models. And at the same time, some of them, the hardest things to replicate are the hard things that people do to build a real mode around the business. And Amazon built real modes. Yep. Well, that's a great, great way to close out, close out the regular section of the show. We're on degrading. Alfred, first, I want to ask, you want to participate in this? You don't have to. What is this grading thing? All right. So we basically, you know, when we started the show, the whole notion that we had in mind was we want to figure out what are, have been the most successful acquisitions in history and try and take them apart and reverse engineer and figure out how to start companies like that. And so we thought it was got to be some access on which we evaluate whether it was actually a good deal for the acquirer or not. And so we basically, you know, go through this whole process to try and figure out, was that the best use of the acquirer's capital? And our, you know, A-plus scenarios are like Apple, you know, spending money on next and basically getting, you know, having a reverse acquisition happen where the company is reborn because of it. Or Instagram's another great example. Other A-plus is the same thing. Right. And then there's other ones where we're like, actually, that was a terrible use of capital. And then they're, it kind of gives us a way to understand basically, you know, given all the options on the table, should they have done this. And usually they land in the B-to-C range. So that's the process. Well, I'm going to take it first step. So I think that on its own, Zappos was a great business. So it's not like they were, you know, buying something that they'd have to integrate and, you know, have really high costs of creating those synergies. That's not what it was about. It was about acquiring a very unique business. And one of the few large customer-centric businesses that were not Amazon on the internet. And continuing to grow that in some ways, a takeout because Zappos was a very real threat, you know, expanding category by category the same way that Amazon had. You know, we didn't talk on the show at all about how big it could have gotten from a category's perspective. But, you know, if I'm Amazon, that's one of the main fears is that someone becomes the everything store before I do. I think it's been a good business inside of Amazon. From what I can tell, which is extremely difficult, because Amazon never breaks anything out, it seems to be growing a little bit more slowly than Amazon's own shoe business. And definitely not as quickly as AWS or even the Amazon marketplace with third-party sellers. So, you know, I think it's good. I'd go with B+. But, you know, it's a tough bar to get an A on the show. Tough bar to get an A from Ben. David? Well, it's hard to see this not being a good use of capital for Amazon. Like, both for the reasons you were saying, but also, like, you know, I'm preparing for the show as a bunch of people have made analogies to this almost being like a virtual pathway type acquisition of, you know, allowing Dappos to keep doing what it was doing, free of all the financial constraints that had hampered you guys a long way. And very Amazon. This was obviously a hugely important category to the company and to JetPasos to be able to enter that stop losing estimates are estimates are Amazon lost $150 million on Endless.com. Stop the believing there and be able to cross-pollinate the knowledge to grow their own category. So, you know, sorry, Alfred, I don't think this is as transformative as Instagram, but this is A- in my book. You'll kind of come out from Alfred. I think I know too much information. We can move on. How about a little car about what do you have Ben? Last week, I listened to Andrew Mason as a guest on Recode Decode with Kara Swisher. And it is always refreshing to hear that guy on any form of media, especially in an interview format. So, so straightforward, so honest for listeners who don't know Andrew Mason is the founder of Groupon. And since started a couple of other companies and he was on talking about his new company, which is in the audio editing space, so it obviously was interesting to us here to acquire it. But there's so much revisionist history in our industry and legend and lore that get started and you just never hear that sort of thing out of Andrew's mouth. It's mostly like, no, we didn't know what we were doing. Yes, we figured it out. Yes, it was really hard. No, maybe I shouldn't have been the person to do it. Yes, that's why I was fired. I mean, there's just a very, it's just a refreshing take. So really enjoyed it and really enjoyed hearing about some of the new stuff he's up to. Nice. Mine is actually, I didn't think there was any way it was going to be related to the episode, but as so often happens, Carbouts end up, we find some way to relate them. Justin O'Bern published this great long piece on his blog called Google Maps, Mote, the Google Maps Mote. And he's a, I think designer in the map space. I believe he worked for Apple Maps for a while. And it's just a piece of like all of the culmination of all of the hard things that Google has done in Maps for the last 10 years. And I'll leave that they have because of it over Apple and Nokia and everyone else in the space. And it really detailed breaks out like product changes month by month over years across all the products in the space. Really just a brilliant analysis and very worth reading on what makes the mode in a consumer business. I'll second that. That piece was incredible. Yeah, it's got these great side-by-side comparisons and animated gifts where you can see like, he's been taking the same screenshot year after year for like seven years or something and you can see the complexity on each of these maps grow over time and he annotates what they did to do. It's just, it's so cool. Even to just scroll through. Yeah. I agree as well. That was a great piece. Yeah, for me, I'm trying to do some hard things and read, um, thick books. So I'm reading through two books by Walter Isaacson. One is about Ben Franklin, the other about Albert Einstein. I just think both of those men were fascinating people and they have contributed lots to our society. And they were, they were prolific in the work that they did. They're also interested in many, many different things. Kind of think about Albert Einstein as a, you know, physics genius, but he also loved playing music in the violin and Franklin was, you know, his publisher, he obviously was one of the founding fathers and published a lot of papers, but he was also into music and other things. And I think both, both people sort of demonstrate that having a fertile curiosity about many different areas actually allows you to do whatever you believe your day job to be better. Another fattening person, I hope Walter likes writing a book about Madam Curry because I think she's also a fascinating character. Definitely. He's a great writer. Well, thank you, Alfred, for joining us. Putting up with us, uh, reliving your trash compacted days. Yeah, Alfred, where can our guests find you on the internet? Well, they can find me. I'm just, my email is linetsacquarecapt.com. You can find me on the, uh, Sequoia website, sequoicap.com. So it's where I hang out. Awesome. Well, thanks so much for coming on. Listeners, thank you for listening. As always, if you are new to the show, you can see my email. Subscribe from your favorite podcast client. We're now in SoundCloud and Spotify as well. And at acquired.fm, you can come join us and 1100 other people in the acquired Slack. So have a great day, everyone.