How Kindness Became a Billion-Dollar Business Strategy with Daniel Lubetzky

28:09I actually did a video, if you go to my Instagram, on the top 10. It's, in my opinion, it's one of the more important videos that I've done. And it has only gotten like 10 ,000 views, which I think is regretful because it's - Let's boost it. Let's go. But also, Daniel, let's be real. Part of it was exiting your company. Honestly, I cannot be 100 % certain that if I had done the 10 things that I'm encouraging people to do now, that would have worked when I was like, if you lose an account, right? If you have all of your net worth and kind, and all of a sudden one of your key accounts kicks you out and introduces a copycat product.

28:48Yeah, you're not putting your mask on and being like, night, night. Yeah, it is, there should be the humility to accept that entrepreneurs don't have the luxury to try to sleep eight hours. I didn't have the time to answer. Like one of the things that I used to do is I used to stay up till I finished catching up with my inbox. You're inbox zero? Not today, but back then, I never was inbox zero, but if it was unread, I got through every night, but sometimes I would stay up 11 p.m., 12 midnight, 1, 2, 3, 4 a.m. in the morning, just going to inbox zero. I didn't know that was a term, but that took a toll.

29:30And the problem is that when you go to sleep at different times, your body doesn't get good quality sleep. It's not just that you get less hours. It's also that the quality of sleep goes down. Totally. I was a disaster. I mean, I went to work at 1.30 in the morning. I don't believe that for a second because you look like you, I don't know. We can compare pictures. I look like a rat. You look exactly the same. Like a phantom of the opera raccoon. What would you tell entrepreneurs about private equity deals? Because you hear so many disasters. I think the most important thing is neither, you know, now that I'm an investor, I also, I always thought that the entrepreneurs are the good guys and the investors are the bad guys.

30:10And the truth is more complex. Everybody's driven by their own narratives of who they are. And everybody's a human being. but the more decisions that everybody makes, everybody rationalizes to be consistent with their decisions. So you need to look at the body of work, look at the person in totality, and look at their reputations and understand who you're getting in bed with because odds are that, and by the way, Kind hit it out of the park. My problems with my private equity partners happened in spite of the fact that Kind was their best performing company and they still did those things. And after they got the biggest return in history, within three months, they had invested in three competitors and given them our playbook.

30:53It was really annoying. I'm sure that's a very kind way to say what you really think about it. No, but there were things that I learned from them. I also, to be honest, there were things that I learned from my partners that helped me get to where I got. So it's a complex reality. But the truth is that for the most part, productivity companies are doing this for a reason, which is a market reason to make money. And you need to really understand what the motivations are. I think the most important thing is align incentives. Find the best. First, look at the integrity of the people. And then second, try to align the incentives.

31:32And then you have a better chance that things will go well if you find people that are good people and the incentives are aligned so that as they grow, you grow. So very oftentimes the incentives that are negotiated are misaligned, and that creates a lot of problems. When did you decide to get out completely? Because you're out financially, not emotionally, I'm not sure. Last December, I sold my final stake in kind. But it was not something I decided last December. It started in 2017 or late 2016, early 2017, when we brought our strategic investor to invest in Kind and they wanted to eventually acquire Kind and I decided at that point that it was worth doing it.

32:22And that's, you know, it's a tough, tough, tough decision for an entrepreneur to do. Do you feel like it was your baby? A lot of entrepreneurs talk about their baby, like they personify it. It still is my baby. It still is my baby. It is, it's, first of all, the company that acquired Kind Mars has done a good job at preserving the Kind promise, meaning the ingredients are the same, the product is the same, and I'm very appreciative of that. Still, for an entrepreneur, it's very, very hard to see your baby move on. And it's very easy to feel like a gigantic behemoth is not guiding your baby the way you want it to be guided and taking it in the right direction and making it the center piece of everything you do so it's particularly when you're the founder and entrepreneur i started the company from the windowless basement of my building like it was there was a trash compactor across from the window from the office and there was nowhere to escape that trash compactor's fumes because they It was a windowless basement.

33:32Sometimes you want to jump in there, I'm sure. It was a journey where I was a one-person operation, then two people, then four people, then eight people, then two people. You lose everybody. It was a very long journey. And then all of a sudden, turbo growth and 500 people and incredible multi-billion dollar sales. And being part of every path, it's just an incredible growth experience. You grow and you learn so much. and it is part of your identity, like handing out kind bars. You brought some today. I still, by the way, I don't have a stake in the company anymore, but one of the things that I agreed on with my former partners was that I would get some kind bars because I like gifting kind bars.

34:17So I have a budget of kind bars for a few more years because that was important enough to who I am. You've done it for so long. Yeah. I mean, it's a hard habit to break. Yeah, and also people expect it. Also, yes. We were hoping for some kind of us. Really, before you came, I was like, I'm so hungry, but I know he's going to bring me a bar, so we're good. What is it like doing business with Mars? Notoriously, they're so opaque and secretive. The cultures, they're good people. I think they have integrity and good intentions. the culture of an entrepreneur and of a large company are very different to your point a large company tends to be a lot more cautious a lot more secretive a large company tends to be more defensive and an entrepreneur tends to just want to pounce on all the opportunities and be more transparent and be more assertive so the cultures were different and that's that's a overcome, meaning every single time that a friend of mine has been in this situation, we all think that we can suspend the forces of gravity and that we are going to be the ones that do it differently.

35:33And the reality is that as a large company acquires a small company, and Kind was a$7 billion company, but compared to other companies, it's not. I'm trying to be respectful of confidentiality. That's one of their sizes, but they're much, much, much, much bigger. I'm surprised that you're saying this much. so I appreciate it. But any time that an entrepreneur does a partnership with a large company, they need to expect that it's going to be, there's going to be a natural friction between the different cultures. I know, it's every entrepreneur is like, this time will be different. And, you know, it's a similar playbook, but it's so cool to see you now on the other side of it.

36:14It's so cool to see you on Shark Tank. It's so cool to see what you're doing with Camino Partners. How do you think about supporting founders now on the other side of the equation? Well, it gives me a lot of energy and meaning. First of all, Shark Tank, what it does is it's teaching young people entrepreneurship. And it's one of those rare shows that both it's entertaining and educating. At the same time, it's very engaging. And the format is really fun. But you're learning how to build companies. You're learning about entrepreneurship. And then Camino Partners is a platform where some of the most extraordinary people that I was blessed to work with are now leading the way.

36:54And we only get to invest in a couple companies a year, but we're trying to help them fulfill their potential and try to fulfill their dreams. And it's really fun, particularly when you find an entrepreneur that wants to learn, that wants to listen, and they take your feedback and they do something good with it. It's so fulfilling and so meaningful. How did Shark Tank happen? I don't know 100%, but I think Barry Posnick, who's one of the producers, saw an article about me and shared it with a fellow executive producers. And then they invited me for a conversation. And I loved the show. I was a late adopter to the show.

37:41I didn't know that it existed. it once I was I remember my first time I saw a shark tank because I was on a plane and somebody I'm the type of person that if something looks interesting I'm that annoying person that asks are you watching I'm sorry I'm very friendly and earlier today I was on a board call and there was a baby and this lady walking and I said hi to them that's just my personality can't wait to bring the baby at the end of this but where was so I was on the plane and I saw on a screen this weird format because people are sitting down and they're talking i'm like what the hell type of format is that it's not a it's not a scripted show what the hell is it so i asked somebody and they told me what it is and they watched it and the entire was a long flight and i watched many episodes and i fell in love with it and i would play it to my kids to watch it and i would pause and teach them and ask them what do you think what would you do it's a fun show to pause with you well the kids maybe don't like now when i pause but back then they were little they would they would indulge me and then when they called me i'm like yeah i would love to do it and then they they do like a little screen where they there was like four different interviews and eventually they invite you and and you crush it as usual what's been your favorite moment or founder or pitch that you've had on the show oh it's so hard to to answer it that way because or memorable so like good or bad i'll give you one quickly but just so you understand And the way it works is you show up at 6.45 a.m.

39:11in the morning and you finish at 8 p.m. And you're back to back to back recording 8 to 10 segments. And then the next day again, then the next day. So it is hard to... But let's say in this last season, there was a really fun situation with these two crazy guys from Google. They work at Google and they came up with this. they saw the problem what i love about shark is the entrepreneurs come up with really creative solutions and they're surfers themselves and nobody wants to wear helmets because they look so nerdy so they came came up a way to make helmet school and they come up with like a fun way to wear a helmet and it was so clever and i wanted to do the deal but i think they had three sharks vying for it and the other sharks actually had a better deal than me and they went for mine and you know we all have a little bit of a competitive ego i was like yes and the i think barbara got upset at them like why did you not even consider my offer when my offer was better why didn't you respond and they said because we know daniel had done a deal with tandem surf which was a company that's also in water sports and so we thought that he has synergies and barbara said it's a great answer no problem i actually get it and so but it was like all the dynamics that go into Shark Tank where it's very real.

40:35Like what's cool about the show is that we as sharks don't know who's going to present. We don't have any information. So we need to solve the puzzle on the go when every segment films when it's edited, eight to 11 minutes, but we don't get that much more. Unedited might be 30 to 45 minutes, rarely an hour, but within 30 to 45 minutes, you need to decide if you want to invest, negotiate, and develop the strategy to how you're going to win over the other sharks. And that part I'm not that good at because I'm very transparent. And then the sharks see, oh, he wants the food deal. I want the food deal too.

41:18So what Mark was really good at doing, which I need to start learning from, is like, he would just stand back and wait and wait. And then he'd bounce last minute. And sometimes Kevin did that to me. Like in my first show, my first segment, I think, I was like negotiating and negotiating and negotiating. And Kevin Alson just undercut me. He's like, I'll do that. I'm like, wait, what happened? So it's funny. And when you record Shark Tank, for a few days after, you're like driving. You're like, oh, I should have said this because there's so much going on at the moment. How many deals really go through?

41:55Because I know there is a period of due diligence. You only get a few minutes and you have to like verify everything. Yeah, it ranges per season. But I try to have more than 50 % of them close. Sometimes I get 60, 75 % close. My worst season, it was like 30%. But also it's not your side of it, right? Like if an entrepreneur retrades and they want to change the terms of the deal, then I walk away. And so, but I would hope that it's more than half close. I know you're so good at budgeting. You're like frugal mindset even to today. Do you have a sense of how much you want to invest going in? Or how do you think Shark Tank versus your private investment?

42:38The first season that I was on, and my kids and my wife make so much fun of me about this. I didn't know what I was doing. So I like this hammer company and I offered a million dollars. And my wife made me sleep outside that night. and there was no hammock. But actually that hammock company, Yellow Leaf is doing really well now and they're selling tens of millions of dollars. And so it turned out to be a good investment. But I was of the mind that like my most precious asset is my time. And so if I'm going to invest and I'm going to give my time, I need to get a big piece of the company and I need to invest big amounts.

43:16And it's kind of like when you play poker, they're real good players. They just play the long game. The other sharks, they know to be patient and not to put everything on one hand. So I learned that in the latter seasons. But I don't have an amount that I want to deploy. I probably should. I should have consulted with you. But I just go with what I see in the particular. Well, we've had – Kevin was just here. Kevin wasn't with you? We would love to do, which we've done with the other sharks that have been on the show, a little lightning round. Sure. If you don't mind. Which shark would you want to be trapped on a desert island with?

43:59Probably Damon, because he's the only person that I knew before Shark Tank. He's like a dear, dear friend of mine. But you don't need to procreate, right? Is it a deserted island that requires procreation? No, not required. I'll take Damon. Which shark would you start a business with? Honestly, any of them. I love him, but I think probably Mark. That guy is, first of all, he's so ridiculously bright. He processes so fast. He has so much integrity. Like, his word is his bond. I think he would elevate my game. Like, he stretches me. He challenges me. But I would partner with any of the sharks. Which shark is the best dressed?

44:42I used to say Damon, but I think Robert. He is so spiffy. I think Robert. Have you hired a stylist? I haven't hired a stylist, but as you can tell, I don't know how to dress. And I don't know if you can tell. This morning, I thought this was black and black. And then the light showed up and, oh, this is blue and looks horrible. Oh, I think that's in now. Navy and black. Oh, really? Well, then I got lucky. I wouldn't know. but Artemis who's the wardrobe consultant on the show is my godsend because she teaches me what to do and then I borrow whatever she taught me for that season for that year and then the next year she teaches me what's new because what I don't like about you stylish people is that you change the rules every year so if I start wearing this and then the next year it's like this the shoes or this or whatever so Artemis is my secret weapon which shark is the most competitive?

45:37everybody's very competitive. That's what's interesting at the show. And it really brings out that competitive, like you do not want to lose a deal. And then afterwards you reset, but when somebody wins a deal over you or where you don't want to partner with them, whatever, all of us have our egos and it really does. I think everyone is very competitive. I think Mark is probably with me was the most competitive because he admired me a lot, but he also regretted that he lost some food deals to me because Mark almost never lost deals. And you could tell that he does not. And he teased me sometimes.

46:13He would do some deals. What I like about Mark is sometimes he would do the deals. If he felt that the entrepreneur was not getting the right deal, he'd jump in. And I think Mark is the most competitive, but every one of us is. But Shark makes you laugh the most. They all make me laugh. Oh, Kevin. Kevin, I laugh out loud with some of his stuff. Kevin, he's very funny. And I know some people think he's mean. He's more funny than mean. And also, we're speaking earlier about telling it like it is. The gift of feedback is very valuable. So I like that. I don't like that sometimes he's such a tough cabroncito.

46:57But he's so funny. He's very witty. He's very fast. Who's the kindest shark? kindest shark not counting me i think robert's a real gentle soul i think laurie is the nicest and the most nurturing but barbara is without any doubt of all of us in that panel the person that more surprises me at how deeply authentically kind she is all the time like she blows me away every time I see how she behaves towards everybody. But every shark, I think, is a kind shark. Even Kevin, who has a reputation for being a cabron, he's... Which means... Cabron means... I guess we can guess. What's interesting about Spanish, there's a lot of words in Spanish that are bad words, but in Mexico, the bad words are sometimes good bad words.

47:53So cabron means like a mofo, jerk, but in a loving way. It's very hard to explain, but cabroncito is a devilish, mischievous motherfucker. So that's kind of, that's when a cabroncito. Do you want me to re-say it without the word? No, I like it. No, I agree. Barbara, I met her actually for the first time when she came on the show. And it was one of those examples where she debunked the idea of never meet your heroes. Like she was so wonderful and kind. Barbara is really, and she really wants to help others. But every one of the sharks, in my experience, is someone that I would want to be my friend.

48:36So you're signed up for a long time. Like, you're on the show. I enjoy working with all the sharks a lot. Like, the brother question depends on the powers that be and on a lot of other factors. But yeah, I think the format of the show, the show, the people that put it together, it reminds me a lot of the kind culture. Like the Shark Tank, everybody in the crew and in the production team are working towards a higher goal. They're all working towards each other. It's a very cool culture. I'm not used to too much Hollywood, but the way they put the show out is best in class in terms of culture. I love it.

49:16Well, maybe we can think about, we'll brainstorm on like your net worth, how much you should be investing so you don't have to sleep outside anymore. Just maybe have a budget. I thought you were going to say that you should come visit Shark Tank. I would love to. And I've talked to the producers before. They've asked me for recommendations all the time. That's useful too, but you should come watch it. My brain, I don't even know if I've recommended you in the past. I could also potentially shake credit for that. But it's an amazing dynamic that you guys have, and you're killing it. It's so fun to watch.

49:51I'd love to talk to you about the op-ed that you recently put out. that I was very, very moved by talking about your Jewish grandfather. As you know, I'm very, very proudly Jewish. Both my parents immigrated from Israel. I'm first-generation American. I had forgotten that. But now you remember. And it was so moving to hear about your own anti-Semitic experience, someone you thought was a close friend of yours. Can you share that story? Yeah, I was at Stanford Law School, so this was 30-plus years ago. and one of my friends, he was kind of drunk and he started throwing pennies at me and then said, hey, you're a Jew, pick them up, pick them up.

50:33And it really broke my heart. And he was someone that I considered a dear friend. And I think he probably regretted it, but... Did you ever talk since then? We didn't. I don't recall. I probably, being who I am, I probably shared that I was hurt and I explained it to him. But we never were friends after that. And you talk about how saving money is misunderstood and what you learned from your grandfather. What I talk about, this is a Washington Post op-ed where I explained that my grandfather always taught us to not be arrogant about money. But he would emphasize not to be so arrogant that you think it's beneath you to pick up the pennies.

51:22And certainly from my experience building Kind, like I was very proud to be resourceful and to, I mean, I would have not been able to build a multi-billion dollar company, create billions of dollars in shareholder value if I hadn't been comfortable picking up free furniture. Like when we were starting the company, did you ever watch Mad Max? Sometimes I feel we were like in the, like there were these people living in the subterranean thing would come out. If there was a free desk that somebody left, would grab the desk and bring it into our basement office. But we saved ourselves$500 and we operated out of the basement of our building instead of a fancy place, and, and, and, and.

52:03And there were so many ways in which we were initially frugal, then resourceful, but we didn't waste money and we stretched those dollars and we were able to create billions of dollars in value. And still today, it's not that I have to not throw out that avocado or that bread. But I hate throwing food, not just because there's people that are hungry, but because I was taught by my parents to not think that I'm above that. And it has nothing to do with being cheap or anything else or not being kind or giving because the opposite. I give tens of millions of dollars a year every single year in charity.

52:44And I am very generous when I have guests and I try to be lavish with my guests. I love giving. I just don't like throwing stuff out. I think it's dumb and stupid. And the more that you avoid that, and also it's a skill for business people to teach and it's a skill to teach my kids. Like one of the conversations that I tend to have with everybody because everybody does it wrong this way, is like how many streaming accounts do you have? And we don't do it perfectly, but we don't have an unlimited, we don't have like 20 streaming accounts. you can only watch one TV show at a time and each of them has enough depth.

53:21So the ideal, you're like, who's this dude? I try to teach my kids. I give them a budget and they're like, make choices, learn, because otherwise when they go out into the world, they're gonna not be well-equipped to negotiate and to make choices. So of course we can afford to have five or 10 streaming accounts, but choose the three or four that you like the most and then use them. And then if you ever need the other one, then choose which one you're no longer using. because you're not going to be watching 50 things at the same time. And again, that$10 does not make a difference on my, it doesn't register on my radar.

53:57That's not the purpose. The purpose is, it's a principle to learn how to, well, that's what your show is about, right? To teach people to make choices. Yeah. I mean, how you do one thing is how you do everything too. So extrapolate that to other things. It's crazy that you say that phrase that you learned growing up because every time still it's like embedded in me when I see a penny and like nobody uses pennies anymore. You know, I don't even have cash. But I will always have to pick up the penny because I was told like if you don't pick it up, you're not worth the penny. So I don't know. Maybe this is like a Jewish experience.

54:35It should be a human experience and certainly is an American experience because what I talk about in that article, by the way, the pennies are now collector's items. So there's an additional reason to pick them up because they're being discontinued. But part of our founding father's ethos was, you know, Benjamin Franklin talked about a penny saved, a penny earned is a penny saved, a penny saved is a penny earned. and he talked about, like our founding fathers talked about thrift as an essential tool for being entrepreneurial culture. And America is the most extraordinary country for entrepreneurialism.

55:13And it's partly because we're not so arrogant that from the dynastic, oh la la aristocrats that say, oh, I'm beneath saving that dollar. I think we should do that. And then you can be charitable one dollar and donate that dollar, but don't be so arrogant that you think it's beneath you for you to save that dollar. And we're entering a period of a lot of instability where a lot of young people have not been taught the importance and the gifts that we have of this free market system. And it's very imperfect, right? Like there's a lot of people that are suffering that don't have enough and we need to find a way to create a level playing field so that everybody can be elevated.

55:52But part of the toolkit to do so is to have agency, to not be a victim, to know that you're a protagonist, to have that kindness of spirit with that strength of purpose and to be comfortable taking decisions that are going to help you earn some money. And that is a fundamental tenet, not just of our Jewish upbringing, but of what made America such a fundamental success story and example for the world. And we should not lose that. It's really, really important that we retain that entrepreneurial, resourceful spirit. Daniel, as you know, we end all of our episodes by asking our guests for one tip that listeners can take straight to the bank.

56:31What is one final tip about saving, investing, raising money? I think it's create a real or artificial sense of scarcity so you can make choices always. Even you can afford it doesn't mean that you should do it. Even if you can get an extra house or an extra car or an extra streaming account, learn to make choices because the choice is not just about whether you can afford it. choices like whether it's going to make your life better. And Warren Buffett used to say that you don't own properties, properties own you. When I was building Kind, I didn't have, after I sold it, I didn't have a car, I didn't have a house.

57:12I was just focused on my business and I was renting and just being resourceful. And fortunately we now are able to have more, but managing all of that you have takes time and i don't think i could have built kind you had to worry about all of the other stuff and so every decision you make about what you purchase might enslave you more than you realize so be thoughtful about every decision you're making and use the instrument to think not can i afford it but do is this something that's the right thing for me and can I do without it. I think it's, and particularly if you're a parent that's successful when you're raising your kids, find a way for them to learn to make those choices.