S17 E5: Your Moat Already Expired (And Most Founders Don't Know It Yet)

0:00Nik:Welcome back to another episode of Limited Supply. I'm your host, Nick Sharma. And today we're talking with Ryan. Actually, Ryan is talking with me. And we're pulling out a bunch of insights out of my head, things that I've been working on or seeing or just diving really deep into. So we're talking about three main things today, AI, agency versus in-house, and what makes a brand defensible in 2026. So I think it's going to be a great episode. Ryan's an amazing interviewer. And this was just a really fun, crispy conversation. So that's number one. Number two is the Q4 Summit. is officially announced.

0:31Nik:So we're going to be rolling out announcements of speakers, which you're going to hear about, you know, over the next few weeks. But the Q4 Summit is happening again this year. This is going to be, I believe our third one. It's going to be the biggest one, the best one we've ever done. We already have insane speakers committed. You know, one is built, basically the Hudson strategy, but pre TikTok. So on bloggers, YouTubers, Instagram, and really other avenues of affiliates. So I'm super excited for that one. We have a founder of a hundred plus million dollar company talking about sourcing and offers and prepping for Q4 and how that whole world comes together.

1:06Nik:Anyways, it's going to be a sick, sick event. We're doing it at Capital in New York, which is an old bank building. It's a beautiful building. So go to nick.co slash Q4, N-I-K dot C-O slash Q4. That's where you're going to get the ticket for free. If you have any questions about the Q4 Summit or want to learn more, shoot me a DM on Twitter at MrSharma or just shoot me an email, nick at nick.co. Remember, there's no C in that. All right, we're going to get into today's episode. I'm curious to hear what you think. So shoot me a DM and let me know what you think. I will see you at the end here. Round two with Nick Sharma.

1:42Dude, I have to say, last time we did the episode, it was middle of the winter.

1:46Nik:Yes. And we looked pale as ghosts looking back. We look layered up. We look way better now. Now today it's like, I think it's like 98 degrees outside. I know. Canada can't control their wildfires. All that smoke's coming here. But it's nice. No doubt, dude. So I had to start by asking you about AI and agents because so much has changed in that world from our last conversation. Yeah. When did we do our last conversation? It was quite a while ago. I would say it's probably about 14 months ago, over a year. Okay. So I probably wasn't even really doing much, if anything. Yeah, I really think it was before.

2:21Probably just basically like basic chat GPT. Exactly. Claude might have been out. Yeah. Yeah, I don't think I'd ever used Claude at that point at all. Yeah, so a lot has changed. So what are you seeing right there? What are the use cases and fun stuff you've been messing around with?

2:37Nik:Yeah, I mean, I've gone so deep in the world of AI. I exited my agency in October. And basically after that, I was like, all right, I'm not going to get left behind. in this AI race. So the most intimidating thing to me at that time was trying to set up a Claude bot or an open claw on a Mac Mini and everybody was buying one. And I started to see on Twitter that everybody's making these websites and apps and all this stuff. And so I was like, all right, I need to just figure this out. And so I spent a Saturday night from basically like 9 p.m. to 9 a.m. figured out how to just like learn cloud code, the open claw stuff.

3:23Nik:I started adding apps and integrating things, you know, learned what power you get when you get access to an API key, for example, of different apps. And, and, you know, since then just been doing a ton of stuff in AI. Now my setup is like I use a Hermes agent for probably a good amount of work, which has like 20 agents on it. So, So Hermes runs on my Mac Mini with 20 agents, and then I use this app called HQ, if you've heard of that one. It's like a very good memory system, basically. And that syncs across all devices, so then when I pull up Cloud Code or Codex on my laptop, everything that I'm using is fully in sync.

4:04Nik:Awesome. But I've been using it a lot. I mean, you know, with brands of all different sizes, there's so many interesting use cases. You know, yesterday for a, you know, multi-billion dollar food company, I was helping them build out or concept a CRM. And so I was like, we should use PostScript. That was my first thought, right? When you think about CRM and e-commerce. And so I went to PostScript and I was like, guys, we got this opportunity. They're not on Shopify. And they were like, cool, that's fine. We're now opening up our platform too. So we'll have APIs and you don't have to be on Shopify and we're gonna launch email soon.

4:38Nik:And so then I was able to use my agent along with the information I got from PostScript to basically build out what a CRM looks like. Ended up building like a scoring algorithm to rank people so that we're not hitting people too often or too few times. So that was like one fun use case. You know, the other one everybody's talking about is like, you know, you're trying to build out your creative supply chain. So you've got, you know, static ads, video ads, copywriting, you know, landing pages, advertorials, listicles, like all these things you just need to produce to generate more awareness and drive more traffic and sales.

5:15Nik:everybody's now using agents to now build those pieces. So whether it's like, you know, I was with Cody Plavka yesterday, he's built an entire engine to create emails and static ads using GPT-5.6 or Fable. And so like that's a huge use case. I've seen brands now basically, you know, launching landing pages within an hour or two using their agents and connecting it to Framers API. and you build out your brand kit or style guide kit, put it in GitHub, and then using Framer and whether it's Cloud Code or Hermes or whatever, you can now just launch landing pages in an hour. So what used to take two weeks with a really good agency or maybe a week if you had a really good internal team with resources, otherwise maybe four to six weeks for an average brand is now taking two hours.

6:06Nik:But yeah, there's so many use cases. Everything from, I think the easiest use case is just plugging everything in and being able to just ask it anything or tell it to go look at best practices. What I've seen some people do is they've downloaded probably your podcast transcripts, my podcast transcripts, the nine operators podcast transcripts, whoever's talking about stuff going on. and then they'll save that to a database and then they'll plug in all their e-commerce stuff, Klavia, Postscript, Shopify, everything. And then they'll say, based on all this advice, what should I be doing better? And it's legit something you'd pay a consultant 10, 15 grand for.

6:53Nik:There's just so many ways where I feel like the leverage is now in your own pocket. Leverage used to be elsewhere, right? It used to be like, oh, if somebody had a really good designer, they had that leverage. If somebody had a development team in-house, they had that leverage. If somebody has the ability to just come up with these ideas and bring them to life, they have the leverage. But now it's like it puts all the accountability on you. And yeah, it's pretty sweet. It really is. Yeah, I think now the challenge is more around distribution and continuing to get those eyeballs and maintain that customer because customers also now leave easier.

7:32Nik:They have less loyalty to a brand because of everything that's just coming at them. Yeah. I mean, it's so fascinating thinking about, I feel like a broken record in talking about this, but like unique data being such an important element of all this stuff. And like, you know, ChachiBT is incredible, but it works on averages. Totally. And the averages of all this, you know, data. And if you ask it for general marketing advice, it's going to give you some average ass marketing advice. Totally. And when you have it trained on specific, unique data from people that you know for a fact are high-level marketers and are up-to-date, it becomes such a competitive advantage.

8:13It's really, really, really cool. I mean, when you start to just kind of grasp it, your mind goes in a trillion different directions of all the things you could do.

8:23Nik:Yeah, I know. I've been, you know, like that whole mindset of I'm not getting left behind, I tell all my homies that too. I'm like, we're not getting left behind, you know, like there's, there's so much you can do. And, you know, I have friends who are like, um, music producers and I'm like, yo, you need to get on Manus. You need to get on a Claude code. You need to get on codex, you know, and plug it into Ableton, plug it into a record box. Like whatever you're doing, do it and use, try to do it with AI because only the only thing that's going to happen over time is it's AI is going to get more and more simplified like we've already seen it happen from you know think about like when we did our last interview i probably mentioned a prd like a product requirement document um which you know i would build a chat gpt and then take that document and go to replit and then try to build the app there right but now we're at a point where you just tell the idea to manis and the whole thing gets done but because it gets more simplified you kind of miss out on understanding the steps happening behind the scenes.

9:24Nik:And the more you miss out on that, the less you're going to be able to diagnose things later. It's like the media buyers who used to buy ads in Power Editor, you know, in 2011, 12, 13, and then, you know, did all the manual ads buying from, you know, 14 to maybe 18. Like those guys have an intuition when they're buying media and they know the things going on behind the scenes. It's not just the algorithm. them like they know actually what those pieces are and that's basically happening in the ai world so i feel like people should just get in and play with it and see what happens and um you know you could like yeah there's just so many things you could build it's also like a lot easier to do than it sounds that people have in their heads like i remember when i set up like my hermes i was like this i was like i gotta the whole weekend well one goal intimidating thing is like it's up it starts in terminal yes exactly you know that that's the most intimidating thing ever the first time i set up an open claw was with this guy geo and he basically he was nice enough to just like he was like i'll just screen share with you and like do it for you you can just watch it happen and um and it was so complicated like the first time and then i was like i should just do this a couple times myself and then once i started to feel the power of it i was like yo to all my friends i was like i need to get you guys on this so i've probably made like 20 to 30 mac mini setups now at this point now i can do it in like 30 minutes nice how much you think you're spending on credits right now well or tokens yeah i mean um i actually don't know the token usage but you know two months ago right after claude cut their uh yeah that was made you have to go api yeah i think the fall the two two or three months after that it was like four thousand five thousand 6 ,000 my manis bill at one point was like eight or 9 ,000 um but like I was building anything and everything you could possibly think about building games for friends I was building like like I built this uh roast.nick.co which takes you know 30 ,000 lines of a markdown file of how I think about landing pages and then you put your site in and for five bucks it'll just run it through the whole thing give you a recommended like what you should do for your landing page um so i was just trying to build everything and it sounds like you have hermy's agent too do you use telegram with it i do i've gone away from using it on a more consistent basis yeah because i found that for most of my use cases i could do them within cloud code and yeah i don't really need to you know take on the extra token usage yeah yeah um but yes i do use it in uh in telegram yeah it's so much nicer that it could like watch youtube videos and like it's amazing i mean it's yeah there's a lot of really cool benefits to it totally the other thing is uh if you do you pay for the 200 a month chat gpt okay so if you if you plug in gpt 56 soul that thing is on par with fable but like you get it for the 200 a month plan you don't pay on top okay yeah that to me has been right like crack right after this conversation it's the first time i'm using a model and feeling like oh this thing actually is like reading my brain to some degree like under understanding a lot more than the previous ones super cool super interesting um what's exciting you in that world right now then i mean obviously you're building a million things and you have a little bit of uh it seems like a little bit more mental space now since you yeah totally agency congratulations by the way um to just like think about your next move like for somebody right now who's, you know, seeing everything going on right now and, like, maybe they have an agency, maybe they wanted to start an agency, but then they got cold feet because they're like, what's going on in this world?

13:11Like, I don't really know if media buying or, you know, these sort of marketing stuff is going to be something worthy of an agency in two to five years, whatever. Yeah, I mean, how do you think about it?

13:25Nik:I think the agency world is a lot more niche down now than it used to be. Like, you know, I don't know how much room there is for like an agency that's good at everything anymore. Most agencies generally are like really good at one thing. Or nothing. Or nothing, yeah. But it's rare that like an agency is actually good at multiple things. but I do you know I I exited because I felt like I didn't want to do the what I was doing at the agency which was basically a lot of like what just felt like people management and ops management and like me personally I wanted to just I want to build things I want to like I was itching to like spend more time in the world of AI because I couldn't do it because I was so busy dealing with other stuff um but yeah i mean for me like what's interesting now is um i'm just building things uh so like i've started a couple things um you know there's there's a brand i'm working on bringing to market um there's a uh there's a phone charging kiosk business that i launched with a couple friends and we brought that to market and started putting that at venues and there's one or two other things that are kind of just in the works but the common theme is basically like okay, from everything that I learned at the agency all the patterns, understanding unit economics what makes a good business, what breaks a good business what do I know about brand and what do I know about consumer psychology and community marketing and all these things out of that how can I filter down to a couple of really good ideas and then can I use everything that I know, all the knowledge that I have and AI to basically bring this to market efficiently.

15:17Nik:And I think the plan is basically, how can we bring this to market efficiently, test it very rigorously for like six months, understand if there's an opportunity here and then from there decide, do we try to scale this thing or do we say, okay, we tried this, it didn't work, on to the next one. when I say it out loud I sound stupid because so many people have tried this in the past but it's funny me and two or three other growth marketers I know that I respect a lot are also doing the same thing it sounds stupid when you say it out loud because it's failed so much in the past but I think with the growth marketing knowledge plus being cracked out on AI and then of course any other advantages when it comes to like having done this before or, you know, having economic advantages as it comes to a 3PL or, you know, having like a partner who can help source ridiculously good stuff in China.

16:18Nik:You know, like I think those are all advantages too. But yeah, that's kind of what I'm working on now. And it's honestly just been a lot of fun. It's like every day I'm just building things, you know? It's just like, okay, what am I going to build today? Or what am I going to go create? or like, you know, Saturday night I was at the office and I was like, how come, like, I should be creating AI influencers. Let me try doing that and see, look at, you know, go through that process. And so, yeah, it's just been a lot of fun really. But it's been, like, I'd say efficiency is like the number one thing that I'm trying to value across everything, you know?

16:52Nik:Yeah. It is awesome, man. It kind of, it reminds me of, have you ever read the book, The Lean Startup? I've like heard of it. pretty much the only thing the only thing you need to take away from that book is just the one line of test before investing heavy into something and it sounds like that's kind of just the main, it's like let's use AI and just build, build, build and then see what sticks totally and it brings up an interesting conversation of moats because in that whole world like you were saying with the competitive advantages of having a good supplier or having this unique knowledge. I've been thinking a lot about moats just in the fact that I think a lot of people thought they had a moat before AI and we're seeing a lot of these things are kind of getting destroyed.

17:45What do you see as, if we're trying to think about creating a product or a business just in general, because obviously you want a moat, that has this unique competitive advantage, how can we kind of create that? Like, what do you think, you know, in this world that is changing so fast? You know, that is.

18:08Nik:I mean, it's like moats are definitely tougher now, I would say. Do you think you need a moat? Yeah. Well, I think you need like a reason to exist, you know? Yeah. Like, I was just talking to this guy yesterday. He's a super successful guy. He co-founded this, like a fertility product. and, you know, there's no moat. Like there's really no moat. It's just like another supplement brand that exists. And I told him that and I was like, dude, you need a reason to exist. Like you need to scream that this is a problem. And because of this problem, you're not going to lead, you know, a fulfilling life as, you know, as fulfilling of a life as you can.

18:50Nik:And this is our solution and this is why it works. And here's why everybody else sucks at doing this. You know, I don't know if you need a moat, but you definitely need at least that. And I think like, like Grooms is probably a good example of that. You know, like they basically came to market with the perfect product market fit, which was basically like a reason to exist, right? You're missing out on the fiber and all the greens. We're going to make it super easy and in a way that like Americans are going to love to consume. And that was pretty much it. Then they just started running ads and within the first 60 days, it started to take off.

19:26Nik:but I do think there is a lot of value to emotes. There's basically like a few main ones I think you can rely on or try to get involved in. One is like on the product side or basically in the supply chain side. So, you know, pre-sale stuff. So anything from like you've got a, you know, like the Black Wolf Nation, that was like a men's skincare brand that used to exist. You know, they owned their own 3PL and that was like one of their side businesses. So like that was a moat for them. They paid basically at cost for shipping, nothing for pick pack storage. And that might be, that's a few dollars an order that they're saving right there.

20:06Nik:Another one might be that like the Buffy, Buffy is like a longtime bedding brand. You know, that guy's family owns the factory where they produce all the bedding and material. So like that's his moat. Like no one else can get that, you know what I mean? um and then so basically like you know if you've got friend family or a homie who owns something that gets you crazy advantage 3pl or product or shipping stuff whatever then i think there's a moat you can build around your product so like do you have actual innovation in your product is there something that's patented um you know is it a formula or an ingredient that other people can't get you know is it like like there's that energy drink update they have an exclusive on the ingredient for parazanthine do you remember when i told you about parazanthine in our last uh conversation did you so i after our conversation i so i'm like into weird biohacking stuff yeah and after our last conversation i brought up parazanthine and i was like i think that this little like coffee alternative caffeine thing is is gonna blow up i think it's a it's a great product.

21:14Wow. Super random side note. That was just funny. Continue. But like for them, their

21:19Nik:moat was like, no one else can get that ingredient, right? It's a great ingredient. I highly recommend people check it out. And then on the distribution or marketing side, you know, like if you've got Kourtney Kardashian, if you've got David Beckham, like that's a huge moat, right? Not only because you get a ridiculous level of awareness and, you know, instant eyeballs, but you can walk into any retailer in the country and just walk right in and they're very happy to have the meeting and they're you're you know your your test rollout is national instead of in a tiny little region um so i think those are like the i mean those are the main modes that i think about um there's obviously also like you know if you're if you're doing things around licensing you know you might be able to be the exclusive beverage licensee of like you know some big franchise or whatever but yeah i think those those are at least like moats that i think about most it's basically like okay is it around the supply chain or is it around the brand yeah or distribution yeah yeah the uh the creator stuff is interesting because i think for a lot of people like you know it's going to be hard to have a moat in supply chain when you're not familiar with that world but you know i think a lot of people would be even on a smaller scale like a more of a niche micro creator there's a lot of uh kind of competitive advantage you can gain by partnering with those people 100 especially if you can do like what hudson did which is you get exclusivity on the creator so it's not like one creator is working with even two or three companies it's literally just one forever you know um and there's there's a huge moat in that because now you've basically got an army that only does work with you and um and it's also way more authentic to a customer you know if they go and look up the profile and they see that sally only has 5 000 followers she only talks about one brand ever because she's obsessed you know yeah no no doubt dude so i really wanted to ask you this question because um you know i come from more of an e-com background uh so many friends of mine come from the agency background and man oh man do i get jealous sometimes just in terms of the fact of like high recurring revenue and obviously it's high ticket sure um it seems like it's a lot easier to sell a service which has an roi to it you know um and then kind of on top of that when i just think about the fact that like you know for me to make a hundred thousand dollars i need to sell a lot of customers yeah for them it's like 50 customers you know and uh yeah i think grasses are obviously green are always on the other side but i think you have a super unique perspective kind of being on you know both ends of that spectrum seeing both sides of that equation yeah um when you think about like you know the right business or like what's your kind of two cents when it comes to that agency commerce or just business model in general yeah i mean For me, I think it depends on you as an individual.

24:23Nik:But my take is basically I worked at a brand first for about two years. And because of my experiences there, I was able to start consulting and then that kind of snowballed into an agency. um and then as the agency started to grow then i was like oh wait this is now just people management and operations management but until a certain point like until probably the 200k a month mark 250k um i think agencies are great you also like past a certain point it's you know the quality of the output starts to go down unless you really are sacrificing profits and investing in the best possible talent. So like, you know, basically you're also competing with brands for that same talent.

25:17Nik:Like all of, all of the senior creative people that I had are basically now like Groon's Array, Marsmen. It's, you know, that, that was the talent pool I was competing with basically. So for me, like I decided early on that I didn't want to sacrifice. I didn't want to just gain margin for exchange of like producing a shittier product. And I think that's why so much of our websites or our stuff was really sick. But at the same time, you know, the thing that you build, like agency, you get cash up front, essentially, right? You're basically doing work for exchange of cash. But then as soon as that work's done, your cash stops.

25:58Yep.

25:58Nik:So that's the thing that sucks about the agencies. You're not really building like much longevity there. With the brand, you know, if you turn your ads off, you still got subscriptions, you still got organic, you got all these other channels. When you're ready to sell the business, you're selling the brand. You're not just selling like the product or the revenue that you were able to get. Whereas on the agency, it is kind of that. You're basically focused on like, okay, you know, how much margin are you able to squeeze out? And then, you know, where are you at in terms of like EBITDA or revenue?

26:31Nik:So all that said, I think agencies are phenomenal businesses to learn because a lot of the great marketers today have come from the world of agencies where you're basically thrown into a pool when you don't know how to swim and you've got to figure out how to swim and then by the end of it you're doing laps. So agencies teach you a lot. You kind of get into this boiler room environment out to go. So you learn how to communicate quickly, communicate up, down, left, right to clients internally across other vendors or partners. so there's a lot of like benefits it's almost like i would say the equivalent of like going to college before you go to a brand um on the other hand there's a lot of people who are just wicked smart out the gate and they start you know the brand thing right away or they maybe get to a brand but um they yeah i don't know i think you could go either way my personal recommendation for people is go from agency to brand i think you're a lot more of a weapon when you get to a brand and you've been at an agency because you've seen multiple brands at the same time.

27:37Nik:You can, you under, you have a better like collection of patterns at an agency versus a brand. Um, and yeah. And also again, I think culture wise, like you, uh, you know, you just get like thick skin and, and all that at the agency side. But if I were to like decide which one do I want to run and operate today, I would say brand. Yeah. What type of brand do you think that would be? um i mean you know the typical for me is uh you know high consumption or high uh high reorder okay um not too not too heavy uh to ship um you know caters toward vanity or vice um easy to share easy to be a prop uh when it comes to content and you know ideally something where you're not competing against people who've got exclusivities on retailers or celebrities or creators or things like that.

28:38Nik:So yeah, anything from, you know, I love the whole just health and wellness world. That's where a lot of our work has been and that's where I started my commerce journey. And I love the idea that like if you do your job right, you could get people healthier as a byproduct of whatever you're doing. Yeah, it makes a great mission. Yeah. I'm not a huge fan of the apparel world. I think it's insanely hard. I don't know how people like Hudson do it, man. You got to be insane in a good way to do that. And, yeah. Super interesting, yeah. Okay, I told you about the benefits. Now here's Satva on what changed when their brand moved to TV advertising using Tatari.

29:23TV has been the perfect way to drive upper funnel awareness and overall brand awareness. and favorability that also supplements our lower funnel performance channels where we've always been pretty successful and now we're seeing even additional scale. The beauty of working with Tatari is we can leverage their platform to look at both our linear buys, streaming buys under one roof and be able to compare performance between the two media channels to optimize them as one sort of holistic TV approach.

29:52Nik:Want the same? Head to nick.co slash tatari to learn more. that's n-i-k dot c-o slash t-a-t-a-r-i I mean I love kind of you breaking things down in that way because it trinks the search a lot more than probably you would think about I mean kind of running through the like I wish I knew that when I got started because like my product we sell lab tests like blood testing direct to consumer and And, you know, I think that there's a lot of challenges that come up with something like that, that like, you know, you initially there's pros and cons and you initially kind of just have this idea and want to try it.

30:39And you're totally green and don't have any of these. But, you know, I think for myself now, I find myself in a position where three years later, we've had success. but it's like I know for a fact I'm far away from a lot of the unit economics and things that I need to have this be something, you know, bigger. Like, for example, like I had the perfect unit economics here, which is like 80 % gross margins, huge TAM, you know, high discretionary money to spend, those sort of things. and it's like lab test blood testing is a commodity first of all it's there's a lot of venture capital that has entered into the space and it's like kind of like a race to the bottom in the sense because the there is no real like if you're getting your blood work done you know at any of these different companies there's not really a major difference like your results are going to be your results yeah um and in terms of margins like you know when i when i first started I was running at like probably 45 50 gross margins and now that's down to like 30 and I'm still way overpriced and compared to some of the other competitors in the market yeah um is that because they're selling stuff on the back of that it's it's interesting I think it's twofold I think one you know you take like a function health for example they've raised over 300 million in and dc and i think that they're kind of they they're they're running you know subscription based um so i think they're operating at a loss um to acquire a customer at the current moment yeah um at a price point that is just you know i don't even get the wholesale price at that and that we use the same wholesaler so it's like um it's interesting there and i think they're starting to add things into the back end i think they're starting to do you know more supplements and i think like peptides and that whole world um but i think they're still very much in like beta some of that stuff um so i think it's kind of tbd uh but it's interesting because i find myself in this position where it's like yeah i'm making money it's but i i know that it feels either one temporary because i feel like the only reason i'm making money is because it's like a inefficient market in the sense that like people are probably buying from me because they're unaware that these other uh better price options exist and i find myself in this weird kind of predicament of being like you know where do i go here um what would be your advice in a situation like that well um you

33:23Nik:know like one of the problems with competing in a commodity market is you're competing against convenience or price. So like if you're selling like a toothpaste, you're competing against somebody going to CVS around the corner when they run out. And if you're selling this, you're competing against everybody else who's selling it for cheaper, right? In your case, I would say like either, you know, basically you got to figure out like, what is your mode? Like, why should people come by from you? It might be that your brand is a lot more relatable than these VC backed, gradient loving startups. Gradient love.