AI Santa and Four Other Simple Business Ideas (+ Vice Goes Bankrupt!)

24:22That's what Vice was all about. I don't know if you remember the old school covers of these magazines, but it would be like a tab of LSD on a hot chick's tongue. Do you remember? I've never seen the Vice magazine. I remember reading something. Actually, they called it just zines. Is there a difference between a zine and a magazine? That's what I remember. Just the culture. If someone's a zine, it's typically more, it's like a punk rock thing. Whereas if it's a magazine, it could be like GQ. okay gotcha so you've never seen these but it started out as like hardcore punk rock where they would write articles about um doing drugs having sex like just rock and roll shit and that started getting picked up and so they started this company in 94 but in 99 they moved to new york and that was like where things change and that's right where like the internet just got started what looks like you're looking at something i'm looking at the magazine covers and i'm and you're saying rock and roll and i was just thinking about like this is what cool like basically like this is what influential people uh it's like kind of like our musicians are influential people and they did the stuff it's like the the tongue with the lsd on it it's like someone just biting a tuft of hair i don't know what why there's a bunch of hair in someone's mouth and i was just thinking about pod and roll and how it would be just like someone entering a cold plunge someone meditating so it's like yeah we're part of that pod and roll things have changed.

25:42Yeah, we're the famous podcasters, you know what I mean? They're all just sauna cold, hot, cold. Man, it's crazy. The temperature variance is insane. Things have changed. Things have changed. Cool has changed. Yeah, the definition of cool has changed, which is actually part of the thing I'm going to discuss. So the internet starts coming around in the late 90s. They raise a little bit of money, like$2 million. They move down to New York, and that's where they really get going. So they create the website, Vice.com, originally was a magazine it was a free magazine that they would just hand out and they would make money off ads and it would be the three of them writing articles and they would do something that i used to do all the time where they would have like fake authors so it'd be like someone who wasn't real just fucking making up stories is really what it was which is you know it was an entertainment magazine so that's fine but they start growing and it takes off after a handful of years and so they kind of created this thing at the time now we just know as like branded content where it was now sometimes people call them advertorials, things like that.

26:42But basically, their whole shtick was, we're going to make awesome content, and we're going to get the eyeballs of millennials, which back then, millennials were like the Gen Z today. It was like the elusive, hard to reach audience. And they said, we're going to reach these millennials, and we're going to make the best content. And we're just going to plaster your logo on there. And that's going to be good enough for you. And this is like pre-Facebook. So performance advertising wasn't really much of a thing. And so it was like the way to advertise. And eventually they blow up. And the important part of the story isn't exactly that they blew up because they did.

27:15But the story is like the antics that they went along and built this thing with. And so they raised money from Rupert Murdoch, who's the founder of Fox. They raised money from all these amazing people, Viacom. Eventually, they raised money at a$6 billion valuation. Today, they're nothing. But they still make$600 million a year in revenue. And so I want to talk about some of the crazy stuff that the founder did, as well as how their business model works. And so have you ever heard of the guy, Shane Smith, who was the CEO and kind of the main man? Never. All right. So he had a whole bunch of interesting things that he did.

27:50So if you Google Shane Smith, you'll probably see pictures of him. It's a guy who almost looks like a punk rock Santa Claus, where he's kind of like a bigger guy. And you'll see he's got sleeve tattoos, and you'll see him shirtless all the time and smoking a cigar. Do you see any pictures like that? Yeah, he looks a little bit like the guy who's the number two guy in Billions. I forget what the guy's name is. Not Axe, but his right-hand man. Yeah, yeah, yeah. He looks a lot like that guy if that guy had just chest tattoos. If he just had a tattoo around his nipple, that'd be this guy. Dude, so he's just crazy.

28:24And so Vice originally, the way that they became respected is they would do all this crazy stuff, but it was him doing it, Shane, the CEO. And so he would go to Liberia when they're having a civil war, and he would just bring a camera and just get dropped in Liberia and figure it out. In 2013, he traveled to North Korea because he organized a basketball game between the Harlem Globetrotters and the national team of North Korea. And that was like the big shtick. And then eventually, do you remember hearing about Dennis Rodman going to North Korea? That was for a Vice documentary. And they would make these like free documentaries and they would post them on, it was originally their site and then they moved to YouTube and they would get lots of views and they would like put like an intel logo on there and that's how they made money and so they and so he was known for walking around his office of like vice and i've been to the office it's like as magnificent as you would think it's like the coolest of the cool and he would walk around shirtless and he would just like say crazy stuff he was known for just being like this wild guy and so one time when he hired a ceo her name was nancy this was recently he said we're the monitor we're the modern day body and clyde and we're here to take all your money and he would just say stuff like that all the time.

29:35There was another time when they were just getting started. And I believe it was Intuit. They came... Was it Intuit or IBM? One of those. They came to the office in order to pitch or Vice was going to pitch Intuit. And so what they did was there was a really shitty office at the time. 24 hours before the meeting, he built a glass conference room so it looks legit. And so you could see your employees. And then he went and hired a bunch of actors and got of tons of friends to come and work in the office to make it look like they're important. Because he always said something like, we don't want them to think that we're...

30:11Or what did he say? We want them to think that we're rich. He's like, we're going to act as it. And he did. And they eventually got a$25 million deal from this company. And it worked out. And there was another time where there was this... 2003 Vice made their documentary on themselves. and he tells a story about when they started the company, how he got arrested in Bangkok. And he said something like a few years later, they were like, yeah, I remember that story you talked about being imprisoned in Bangkok. And he was like, yeah, yeah, I remember that. And he goes, tell me more about that. He goes, well, I made it all up.

30:43We needed a story on how the company started and I'd heard the story from someone else. So I just took it over and we needed, and I just had to make it mine. He's like, I watched the Hangover 3 and decided that was my life. Dude, he would do crazy stuff like that all the time. There was another time where I was reading this interview with him. There was this headline about how he spent$300 ,000 at dinner in Vegas. And a reporter goes, did you really spend$300 ,000 for dinner? He goes, no, it was$380 ,000 plus tip. And it was barely dinner. It was mostly wine. And so he's just, the guy's like wild.

31:25He He even tells crazier stories where he goes, this was a quote from the Financial Times. He would go, I would be at the party and would just go get wasted, take Coke, have sex with girls in the bathroom, and then afterwards mail my advertisers drugs because I knew if I sent them a bunch of drugs in the mail, they would keep buying ads with us. And he admits all this stuff. It's crazy, man. How could this have gone bankrupt? I just don't get it. Well, so check this out. Where did we go wrong? Was it when we mailed our customers drugs or when I did drugs during the day when I was working with my shirt off having sex in the bathroom?

32:03Dude, he tells a story about him and his co-founders having threesomes with people who are going to buy ads with them. And he says that they were like mobsters who accidentally clanked shovels together while they were burying a body. If that analogy makes sense. when someone was like, what's it feel like having sex with your co-founder? Do you guys ever touch? He goes, yeah, but it's just like two mafia guys and our shovels accidentally clink while we're burying the body. Wow. This guy is a showman. He's a total showman. Of course, it didn't work out well. In all seriousness, totally blew it. It didn't work out well for the company, but it worked out for him.

32:48So Google Shane Smith House. Yeah, I see a$50 million house. I'm up two steps ahead. He already Googled it. So there's this amazing article that came out in 2008 where it's all about Shane Smith. And it says, Shane Smith's living large. And it documents his new house that he purchased for$30 million, I think. And it's this beautiful mansion up in LA somewhere. Well, he recently sold it for$50 million. So this guy has totally come out on top of this whole thing. and it's just really fascinating that he basically came in, he spent about 15, 20 years doing his thing right before the tide changed and these guys were the opposite of woke.

33:29Now Vice is like the wokest of the woke. But right before that change happened, he got his money, he got out and he bounced and he hired a CEO. And his story is super, super fascinating. So you've never heard of him? I've never heard of him. I briefly knew that Vice started as a zine or magazine what's your main takeaways? Because this is entertaining because this guy's like Felix Dennis, just like reincarnated. So what's your takeaway? You're a media guy. You're a bit of a wild man. What's your take on this? Not that wild. I mean, this guy makes you look like a, like a, you know, choir boy or something.

34:04But what's your takeaways from this story? I have a bunch of takeaways. And so, but first, let me tell you how their business model works because that's part of my takeaways. So a lot of people don't realize how they make money. They're going bankrupt now, but they still make 600 million a year in revenue, but it's just like wildly unprofitable. So their company, it's basically like, I consider it like a mortgage-backed security for media. And so do you remember like the mortgage-backed securities of 2008, where it was basically like banks would buy like tens of thousands of mortgages in one tranche?

34:35Turns out like 4 ,000 of the 10 ,000 were shit. That's exactly what Vice does. And so they got famous because they only had like 20 or 30 million monthly visits to their website, vice.com, which isn't a ton. That's not a ton for hundreds of millions in revenue. What they did was they partnered with omgfacts.com, distractified.com, and all these other clickbait websites. And they would roll that up. And so they would call them part of the Vice network. And so they would tell people, like Intel or whoever the big advertisers are, look, we reach all of millennials and we have 100 million, 200 million monthly uniques to our network.

35:18In reality, it was on shit sites, all those other things. And once that came out, it was frowned upon. And then the other way they made money was they had an agency called Virtue, like Vice and Virtue, which is pretty clever. But their whole company is basically a creative agency. So they would make content for Snapchat, Facebook, and then eventually HBO. and they would get paid like a service fee basically for it. And it was basically one big agency. And that's how they made money. Which brings me to the takeaways. Takeaway one. If you're going to be a company that makes money from multiple different streams of revenue, you got to nail one first.

35:58They didn't even nail one stream of revenue. They had like five other things that added up to a lot, but not one of them worked wonderfully, at least not enough to be profitable. So that's one major takeaway. The second major takeaway is they would always say they're going to be the next Disney. They go, we're going to be a mini Disney. Shane once said, we're worth$10 billion right now. But conservatively, I think we're going to be worth$40 or$50 billion in a couple of years. That couple of years would have been like in 2020 or something. Never worked out. He goes, we're going to be just like Disney, except with cocaine.

36:33Didn't work out. Why? Because no one likes them. If you're going to build the next Disney, people got to love you. People love Mickey Mouse. They don't really love Shane Smith and all that stuff. They like him. They don't really love him. So if you're going to be a media company like that, you have to have something that people love. The next thing is news. If you're going to be in the news business, that's really, really hard because you have to stay relevant. And I actually think that you should be something that typically people don't grow out of, but they grow into. Meaning a Wall Street Journal, a New York Times, if you're going to be like one of these publications, Economist, Financial Times, things like that, you want to grow into it.

37:13Meaning as you get older, you want to aspire to be able to read it and like it and understand it and brag about it. Whereas with Vice, it was like, I'm no longer 28 years old. Reading about this stuff is not exactly cool. And plus, the people working there, you kind of look silly. I've always said about this about Barstool Sports. I'm like, dude, Dave Portnoy is getting older. Some of these antics are kind of not going to be cool anymore. they're more so pathetic. Do you know what I mean? And that's kind of happened with Vice. Yeah, you basically, you either stay with the shtick and you just start to look like a clown as you get older and older, or you got to sell, get out, and change your life, change your lifestyle.

37:54And it's pretty interesting because it's very hard to let go because if you weren't such a nut, you wouldn't have got this level of success in the first place. So it's kind of like a self-fulfilling prophecy. And then on the second part of it, It's very easy to get addicted to the character, the fame, the money that comes with acting a certain way. You're being rewarded, rewarded, rewarded. And then now you're 57, and you're Vince McMahon now, or you're Hugh Hefner now, or you're whoever. It's hard to leave the character, even though maybe you actually should grow out of it. Anyways, but I'm glad that these guys don't grow out of it.

38:33It's for our entertainment. Thank you for your service, Shane Smith. It is. And the last two things, if you're going to build a media company, avoid New York City. Like when you're a creative services business, you need, it's a talent arbitrage. And it's really hard to do that when you're in a really high cost of living city like New York. And also you saw that they like became this woke company, which I don't entirely believe like go woke, go broke, like that type of thing. I do think that there's a niche. You can make money in any niche, no matter if you're woke or not. But they changed that way when that wasn't originally what they did.

39:14And I think they changed that way because they moved to Williamsburg and everything like that. And it totally changed their shtick. But the last thing is actually a compliment. So you texted me the other day, right before you were about to go on to... You were going to speak at this conference and you said, what did you say? About to drop some showmanship on these bitches. Is that what you said? I'm about to show these bitches some showmanship. Yeah. And that is totally true. And that is what he did. And frankly, even though it seems as though he conned a lot of people, he kind of got the last laugh.

39:46And he had showmanship throughout the entire thing. And had it worked out, it would have been a lot cooler. But having showmanship, it totally works. By the way, people ask me, like, oh, do you get nervous before public speaking? It's like, I don't know, man. if I was nervous I probably wouldn't be thinking I'm about to drop some showmanship on these bitches it's a different attitude versus I hope I don't mess up dude he like throughout his career if you can like there's so many crazy stories about this guy it's all about showmanship he does the wildest stuff where he like tells stories the way he tells stories it captures your attention and some of his employees were like when I'm with Shane I feel like I'm going to war and I'll go to any war with him right or there's like uh Johnny Knoxville did a interview and he was talking about shane and he goes he's the greatest uh leader you could ever have also the greatest drinking buddy but uh and like he like does this what a bio yeah he like has all of these like amazing one-liners even if they are full of shit but whenever i hear him talk i'm like oh my god i believe everything you said so for example have you ever heard me say the best way to circumvent someone's bullshit detector is to not bullshit i've used that line a a couple of times, I stole it from him.

40:56So he has all these amazing one-liners and that showmanship, it's absolutely captivating. There's a story about him with Rupert Murdoch and Rupert Murdoch and Shane are walking. And Rupert Murdoch is like a, if you see the movie TV, so Succession, he's like that guy. He's like a mean old man. And Shane sits down with him and goes, you don't have millennials, but I do. I have everything you don't have. And he's talking to this billionaire. Is it testosterone? like this. The value of my youth. One of the things I don't have. All right. But he just like totally like swings above his weight. And I think it's really fascinating to learn from this guy.

41:35So if you're listening to this, Google Shane Smith. There's like crazy stories about this guy. Good segment by you. Good job by you. Good job. I like that one. I actually have a spinoff of that. You mentioned a company in there that I was like, hmm, that sounds familiar. I kind of remember this name. So you said OMG Facts. do you know who started omg facts i do i forget his name but he's an oddball right this guy emerson sparts and i met emerson sparts maybe 10 years ago and so and when he was building omg facts and building uh a network called dose media he's like a genius right he's he is i met him and i was like wow this guy is super smart um i actually think that he is kind of like if he had just applied himself to some other areas, he would have totally done some absolutely amazing things.

42:24Everybody would know his name versus just kind of me and half of you knowing his name. So I'm going to tell you a couple of things about Emerson's parts. So the guy, when he was 12 years old, built a website called MuggleNet. And I don't know if you're a Harry Potter guy, but I'm a Harry Potter guy. And I was on MuggleNet all the time. And I used to love this because it was the number one Harry Potter fan site in the world. Tons and tons of traffic. I mean, at the time, Harry Potter was like Justin Bieber. Harry Potter was super, super famous. And in between the books, people wanted a place to discuss, to post theories, to post fan fiction, to debate what should have happened, blah, blah, blah.

43:06And so MuggleNet, when he's 12, he builds this super popular site, getting millions and millions of visitors. When he's 18, he publishes a bestselling book. His bestselling book is called, I think it's called, Harry Potter Should Have Died. Controversial views from the number one fan site. And basically it's like, Harry survived, but should he have? You know, I run the world's biggest fan site for Harry Potter. And here's some of the controversial viewpoints that people have about Harry Potter. You can already see this guy's got the, he's got the certain, that au jus that comes with the sandwich.

43:46He's got the sauce and he's got the showmanship. And so he, I met him, maybe he was, I don't know how old he was, maybe 22 or something like this at this point. And where'd you meet him? I don't even remember, man. I remember being on a call with him, a video call. And it was him and I think his girlfriend at the time. And they were creating something called Dose Media. And I go, so what is it? He goes, well, we're going to make like really viral content. So they had OMG Facts. That was one of their companies. They had like four or five websites like that. One that was like science facts. One that was funny things.

44:18One that was whatever, controversial or pop culture stuff, like references to TV shows and things that were hot right now. And they had these websites. And I go, okay, so how do you like, at the time in my mind, I was like, going viral is getting, you know, lightning strikes you. It's just not something you try to do. It's just something that happens or it doesn't happen. And it usually doesn't happen. He's like, no, no, no. And he had built a four-part system. And this is the first guy. He's like, yeah, we're a different type of technology company. We have 18 engineers and we have four writers.

44:51And we reach millions and millions of people a month. And I was like, no, no, it was actually good. I was like, so what do the engineers do? He's like, well, basically, all the viral content in the world starts either in one of three places. Reddit, Imgur, or 4chan? And he's like, basically, I built a detector that would find stuff that's getting hot on those three platforms first, before it hits Instagram, before it hits Facebook, before it hits Twitter. It's going to get popular there first. And he goes, so we built a detector. Then we built a, then the writer basically would write a summary.

45:33and then we built an A-B tester that would basically create headlines and different frames of that same story. And it would test them really quickly because we had a tester that would spray that out. We would pay to get that in front of 5 ,000, 10 ,000 people. We would find what's the winning angle and then we would have the post and then distribution. And then we would actually distribute that to our audience. And so we could engineer a higher degree of virality in every piece of content. Why? Because we're finding the best stuff, we're packaging it quickly with our writer, then we're remixing it with our automated A-B tester that's going to juice up the headlines and then the images.

46:12Then we're spraying it out, getting data feedback, telling us which of these 15 variations is the winner, and then we post the winner. And I was like, dude, this is amazing. And over the few years, I saw him build this up, and his traffic kept going up and up. Now, the problem was his traffic wasn't that valuable. It was kind of fly-by traffic. it was kind of like the lowest common denominator of the internet. And from Facebook, I think. It was very dependent on social networks. And then Facebook changed. And for a while, Facebook was like rewarding the hell out of anybody that could post viral content.

46:43And then it got too clickbaity on Facebook. And then Facebook just manually went and unplugged the viral engines for these companies. And so like 10 companies died in that transition. I don't think his totally died, but I think it definitely slowed down. and I think he also grew up and was sort of like, what else do I want to do with my life? So now I just went to... By the way, really quick before that, before you go on to him, have I told you about my partner at Hampton, Joe? He had a company called Little Things, which was the same thing as that. It was a content clickbait website. He started it in New York and then he had multiple floors in an office building and it was killing it.

47:25They were at$100 million in revenue. He had a deal to sell. They went through due diligence. The deal was going to close in two weeks. That change that you just referred to, it happened to Little Things. At the time, Little Things was the most trafficked website from Facebook in the world. So it was like Little Things, and then it was like HuffPo, and then like BuzzFeed. BuzzFeed, yeah. The deal was about to close, I think, for$100 and something million. He was going to walk away with$50 million after taxes. Two weeks before the money was supposed to go through, that change happened. the deal, he lost the deal and weeks or months like only a couple months later, they had to shut down the company.

48:03And it was all because they built everything on top of Facebook. That's a Mike Tyson gut punch, right? Like birds fly, fish swim, and deals fall through. That is the sad part about deals. That is too common. Yes, and that's very common. That's what happened to this guy, Emmett Smart. Emmett Sparks. So what happened to him afterwards? Emerson Sparks. Emerson Sparks. Sorry. Yes. But here's his bio now. His thing says like AI history, complex systems of Bitcoin. Then he goes, goal. I want to die number one on the leaderboard of people who changed the world. And so what he's doing now is something called nonlinear.

48:42And nonlinear, it looks like, is basically a company that is funding people working on AI to make sure that it's safe. And so they fund basically nonlinear entrepreneurs, people who are trying to work on these exponential technologies. And so, yeah, we incubate X-Risk nonprofits. I don't even know what X-Risk nonprofits means. By connecting founders with ideas, funding, and mentorship. and so that's what he's working on now but this guy's always going to do interesting things this guy can't this guy can't be uninteresting dude when i read about him i i was like why are you doing this dude like you're doing this dose media thing like you seem like a genius you're just absolutely wasting it this is a what do you say it's a uh high uh high effort low or what do you say like harmosi had a good one for this it's a 10 out of 10 um 10 out of 10 entrepreneur going at a four out of 10 opportunity.

49:42And that's how I felt when I met him. I remember literally like, this is now 10 plus years later. I have not spoke to this guy. You mentioned OMG facts. And in my mind, I'm like, that guy's smart. Follow up with that guy, right? Because he left such an impression on me where I was like, this guy is really, really clever, really smart, really also like wholesome. Like even at the time he was like, even though he was working on something that's like typically I would say almost everybody I know that's in this kind of like viral media, actually just like lame. There's kind of shitheads. And I mean that like in an endearing way, like, you know, some people are shitheads and it's all right.

50:18You're just like, yeah, I'm trying to, I found this arbitrage, I'm making it happen. And so he was not that he was really soft spoke, a really, really nice guy. Ben says X risk is the risk that something could end the world. It's an existential risk. Okay. Yeah, good. So he's, he's going to save the planet, which is good. Dude. And his website is a, is a.org. Yeah. Noble mission. He's a.org type of guy. When I was in Austin, a friend of mine was hanging out with Justin Mares, who's been on the pod before. I think I can quote this because I think it's a good quote. But he said, he goes, Justin said the best thing.

50:48He goes, it doesn't matter how you make your first nut. You just got to make your first nut. But after you do that, then you want to work on a noble mission. And he's like, dude, I like that. He's like, do whatever you got to do to make your first nut, which is get the first few million dollars where you're financially free. and you don't have to have a job. You can work on whatever the hell you want. But then after that, don't go chase the second nut. Go after something that's a noble mission. Go after something that's awesome. And very few people actually do that. In fact, I don't even think Justin is doing that at the moment.

51:22But I love the quote. Isn't he doing like an FSA spending store? That's like the most opportunistic thing I could think of. The way that he pitched it, it was pretty awesome. He said something like obesity in America is like an epidemic and 60 % of people are overweight. We want to make you eat healthier by making it easier to acquire like, you know, this types of food and this type of health care. And we're doing it via. And then you're like, that's where the pitch comes in. That's always a good look. So his site, I think it's called true medicine, true med. So true med. He says food is medicine, exercise medicine, sleep is medicine.

51:58We don't mean this in a theoretical sense. food, exercise, and sleep are all scientifically proven to prevent or alleviate physical and mental illness. In short, these are all medicine. TruMed is a payment integration that enables qualified customers to use pre-tax HSA and FSA funds to purchase health-promoting products and services from their favorite merchants. Soon, it'll be available in the checkout flow for merchants who sell healthy food, supplements, exercise equipment, and other health and wellness products this is such a good idea by the way this is a phenomenal idea this is a 10 out of 10 opportunity and uh dude he pitched me to invest why have i not invested in this i didn't invest because i was just like saying no to everything and i deeply regret it i deeply regret it because by the way this is the best way to pitch a business which is like you like paint this like dreary picture like the world is obese you know did you know that like if you add up all the terrorist attacks, all the guns, all the car accidents, it would only be one-tenth of the people who die from being obese.

53:00That type of fact. And you say, if we continue this, this is what the outcome is going to be, this and that. And so we need to solve this. The way that we happen to be trying to solve this is by doing X, Y, and Z. And I'm like, all right, that's a great pitch. Wow. I am so jealous that I'm not invested in this. I'm messaging him right now. All right. That's it. That's the pod. We're out of here.

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