Inside Wonder's Plan to Automate Restaurants: From Robotic Kitchens to Drone Delivery | Term Sheet

0:01This episode is brought to you by Google Chrome. You think you know a browser, but Gemini and Chrome? That's new. It can help you with practically anything on the web, like restoring a vintage motorcycle from a 50-page restoration block, or finally break down that long article you've had open for weeks. Gemini and Chrome is here for it. Ready to make anything online make sense? There's no place like Chrome. Check responses set up required. Compatibility and availability varies 18+. This episode is brought to you by ChatGPT. Hey, it's Bill Simmons from the Bill Simmons Podcast. Have you guys heard about ChatGPT work?

0:34It's the new way to use ChatGPT for bigger multi-step projects. And when you need more than just answers, give ChatGPT work access to your apps and files, and it can create real work documents like spreadsheets, slides, and structured reports. Get started at ChatGPT.com by selecting work mode available on Plus and Pro plans. A restaurant in our world is just recipes and brand. Millions of restaurateurs will exist in 5 to 10 years.

1:04Allie Garfinkle:Valued at$9 billion, Wonder is on to the next big thing. The company has plans to automate its kitchens with robots that can make more than 500 bowls an hour. That bowl is in production and every bowl comes out perfect every time. As millions of people rely on food delivery apps each year, automation will make the process increasingly cheaper, faster and more efficient. You're going to get hotter food, faster food. So it's a completely different experience. Now CEO Mark Lorre has an even bigger idea. Using AI to launch personalized restaurants. Here's how it works. You give Wonder a prompt and its AI will generate the concept, branding, menu and recipes.

1:40Imagine building a restaurant and then next thing you know you're serving millions of people.

1:44Allie Garfinkle:So are we entering an era where anyone can become a restaurateur? Welcome to Termsheet. I'm Allie Garfinkel. So Mark, you have lived many lives. As I was reading about you on the internet, you qualified for the U.S. National Bobsled Team, counted cards in Atlantic City, and at one point wanted to build the utopian city of the future. What is the through line? I feel like this tells me something about how you're wired, but I don't know what it actually is. I'm just really curious. I like to learn new things. I also love magic. I just like, yeah, experimenting, trying new things. I find that's the best way to learn, is just throw yourself into something new and figure it out.

2:21So yeah, that's it.

2:23Allie Garfinkle:What is the craziest thing you've thrown yourself into? Craziest thing? They're all crazy in their own way. They're all crazy. They're all crazy in their own way. You don't get to say they're all crazy. There has to be one that is especially crazy. I mean, startups are just crazy. Startup is not for everyone. I think anyone doing a startup that's raising billions of dollars has definitely got something not quite right. What is that thing, though? Yeah, I mean, it's not a coincidence that so many successful entrepreneurs were adopted, right? Is that true? Yeah, I think a lot of it comes from childhood wounds, something to prove, and you're just wired in a different way.

3:04Like, if you come from, like, a good family, raised, coddled, then no chance. You can't compete with me. You know what I mean? It's just the drive is at a different level. and I think yeah that's what it really is and then over time I think you learn to harness it as a superpower but it doesn't start that way.

3:26Allie Garfinkle:When you were a kid did you think did you know you wanted to be an entrepreneur? Oh yeah when I was four years old I have this thing I showed my grandmother that said I want to be a farmer when I grow up and my grandmother was like no no no, no, doctor or lawyer because nobody ever went to college in my family. Nobody was a profession. And I said, no, I want to be a farmer because they grow stuff from nothing. This is at four years old. And that's essentially what entrepreneurs do. They grow stuff from nothing. And that's always been. You said that at four years old. I want to grow stuff from nothing.

3:57Yeah, that's why I wanted to be a farmer. I remember, I could actually remember the feeling as a little kid of like the thought of like you put a seed in and it grows something. Like that feeling is still with me. And I tried every entrepreneurial venture a kid can do from newspapers to baseball cards to recycling to car washes to lawn mowing, like just anything. And from a young age, I always had this like incredible work ethic where I can get up in the morning, start mowing lawns and mow lawns until the sun went down. And even after without any and then get up and do it again the next day. It didn't affect me.

4:34like the actual quantity of work, it was never a thing.

4:39Allie Garfinkle:Does that trait still exist in you? Yeah. Oh, yeah. It hasn't mellowed over the years. No. You combine work ethic with an appetite for being able to take risk and sustain productivity in an uncertain world. You have that. It's a good foundation for being an entrepreneur, I think. What has your relationship to risk been throughout your life? I'm not a risk taker in the sort of physical harm sense. People say, oh, you know, you take so much risk at work. You must like do skydiving and motorcycles and stuff like that. When it comes to like physical risk, I'm very risk adverse. When it comes to taking risk in business, for sure.

5:24But it's not taking risk for the sake of taking risk. It is looking for those low probabilities of success with massive outcome. And so someone could look at that and say, that's risky. It's not going to work. I look at it and say, but look what will happen if it does work. So that's the way. I think people underestimate the risk of the status quo and they overestimate the risk of change. Most people, they're afraid to take risks. It's unknown. But doing nothing is inherently very risky. It just doesn't feel like it because you're not making any decisions. It could be in work. It could be in a relationship.

6:02It's sometimes doing nothing is the riskiest thing you could be doing. And oftentimes when people do take the risk, they realize, oh, that wasn't as scary or risky as I thought it was. So that's just an inherent human trait, I think, that I don't subscribe to.

6:20Allie Garfinkle:You're like, I don't buy it. Well, to your point, we naturally fear change as people. And risk often involves change in some way. And it sounds like the other thing you're saying, too, is I really do believe we are who we once were in so many ways. I do believe people can evolve, but a lot of the core is always there. It sounds like for you, that's totally the case. Oh, totally. Okay. Yeah, you are still that kid who wanted to be a farmer. Still the kid. I want to be a farmer. I still want to grow stuff from nothing. I still want to build stuff. I'm mission-oriented that way. The money comes, whatever, but I'm motivated by the mission to build something.

6:58And I would risk and have risked a substantial amount of my own wealth for that mission. And I think that's something that, you know, I don't think you can learn. I think it's something you're kind of born with.

7:12Allie Garfinkle:How did you think about the risk around buying the Timberwolves? I have to ask. I'm a big NBA fan. Yeah, that does not go in the risk bucket. That doesn't go in the risk bucket. Okay, so what bucket does it go in? That goes as just smart transaction bucket. It was like, I mean, people could argue it was risky. It was during COVID and it was, you know, the lowest value team in the league. And there was some things around that. But if you just take a step back, you're buying a team. You know, it's the cheapest real estate in, you know, in the neighborhood. And MBA is going like crazy around the world.

7:51And it's also a lot of fun. and it's not often you can invest in something that's fun that also goes up in value. Most of the things that are fun, you lose money on.

8:02Allie Garfinkle:Like what are you thinking of? I'm thinking of racehorses, vineyards. Motorcycles, boats. Boats. Most stuff just – Restaurants actually. Restaurants maybe too. Famously difficult business. Yeah. No, it's right. Right. So the fact that the team appreciates in value and it's as much fun as it is made me just feel like, yeah, these teams are undervalued still. Well, we've seen what the Lakers are valued, right? The Suns. It's actually wild. Yeah. And I don't think they're going to stop anytime soon. So you think that it's one of those things like the value just goes up over time like real estate?

8:39Yeah, exactly. It is like a piece of real estate. It's uncorrelated. It's a combination of real estate and art in some ways. but it also can generate real cash. So it has a lot of advantages. And then it's uncorrelated with other asset classes for the most part, which makes it also a great investment. The prices of teams are the most correlated with the number of billionaires in the world. So they did a correlation study and that was like the factor that drove price the most. So it does tell you a little bit something about it being more like art or real estate, than it would be just a straight financial transaction.

9:17Allie Garfinkle:What has been the most surprising thing about owning an NBA team or the most humbling? It feels a lot like a startup. A lot of the same principles apply. Building a great culture. That's always hard in any organization. Coming into a new organization that already had an existing culture and trying to recreate the culture that you want. And Alex and I have spent a lot of time on that. starts with bringing in the right people, getting them in the right spots, creating a clear vision for who you want to be, what you want to stand for, what your core values are, things like that. So the whole process is just humbling because, you know, you're learning every day something new in a new area, new business, new sport.

10:03But it feels very entrepreneurial to me. That's what entrepreneurs do. I didn't know anything about food when I started Wonder. I knew nothing about retail or e-commerce when I started diapers.com. So it's humbling. You have to have that need of it to go into something. And that's where I think a lot of innovation happens. You don't know what you don't know. And that's a strength. Sometimes it hurts you, but then you just pivot out of it. But like now when people ask me about e-commerce and they say, oh, I have this great idea for e-commerce, I very quickly find myself pointing out the things.

10:37No, let me tell you why that's not going to work. That's not going to work. And I'm like, you know what? Might work. Because I know that feeling. If you're hungry and you have drive and you're willing to pivot and move and try and weave and bob, you're going to figure it out. There's going to be some angle. And so people often think it's the business you're in right at this second is the business you're investing in. But you're really investing in where that business might go in the future. And so that comes down to the person.

11:08Allie Garfinkle:To that end, you built Jet in one of the most brutal corners of e-commerce, right? In one, you were at Walmart and then walked away to go after food. Of all the problems in the world, why? Because food is a famously difficult business. Yeah, but much higher margins the way I saw it than e-commerce or even retail. So I think the mission of Wunder is to make great food more accessible. and I think food industry is ripe for technological disruption. I think with automation, we could significantly bring down the price point of great food. Given the platform we built, we can bring that great food to geographies that don't have access today and at times a day that people don't have access to great food.

11:55So when the suburbs open until 2 a.m., you can get 26 different restaurants. the price point on the food is a lot lower today than it would be elsewhere. But then with automation, the price point will continue to come down over time. And I think we can get to a place where the price of fast casual food, which I would argue is higher quality than fast food, would converge, where it would not be much more expensive at all to get fast casual meal of high quality food versus just ordering fast food. So I have a passion for that and bringing better for you food to people.

12:36Allie Garfinkle:As you think about the world of e-commerce versus food, food is perishable, right? And it's also so emotional in a very specific way. Like when my delivery is late, that actually makes me sad, right? In a way that actually when I order something for my apartment from Amazon, it doesn't. When you think about your old playbook, things you knew worked in previous businesses, what has stayed true and what have you kind of just had to throw out? The one thing is in a B2C business is customers front and center to just obsess over the customer, the customer experience. It's one of the reasons why we've invested so much in getting the window locations close to where people live and setting a tight delivery radius so we can get it to you faster or harder, more on time, more accurate.

13:22Like that's really important. so I think the customer hasn't changed. That's sort of front and center. I think, you know, on the flip side, we used to think in e-commerce that it was challenging, you know, the logistics and that part of the business, when in reality it's kind of laughable because, you know, you buy a box of diapers from Procter & Gamble, they send it to your warehouse, you put a label on it and give it to FedEx. Like it feels a lot less intimidating than buying, you know, fresh produce that may or may not be the same quality that you bought last week, that has a shelf life, that you have to move through a cold chain and not break it, get it into your location, keep the cold chain, and then sell it before it expires.

14:08That's a lot tougher challenge. So I would say that was the big learning, is that food is a completely different beast because the product itself could be different and the product expires.

14:23Allie Garfinkle:The other thing, too, is to that end, food is a space where many have failed, right? Many ghost kitchens have kind of come and gone. Many food startups have struggled. What made you think you could tackle it and solve that particular problem especially? If you looked at e-commerce before Amazon, it was littered with a lot of people that tried and failed. Still is. Yeah. But I think learning from the lessons and the failures of people that come before you, I think is a big thing. Absorbing that, being humble and knowing that it's going to be hard. You're going to need to raise a lot of capital.

15:01You're going to make mistakes. But I think at the end of the day, it comes down to having a clear vision, which hasn't changed from the beginning, and hiring great people, the very best people to go execute and building the right culture so that people want to come, they want to give the best they've got, that's foundational. And so I think if you do that, you have great people, you have the right organizational structure, the right culture, they're motivated, and you have a big vision, that that team will figure it out. And that's the bet. And I've put a lot of my own personal money at stake as well.

15:42Allie Garfinkle:You've got to get in the game. To make that bet, yeah, definitely. When you think about failures of the past that you've learned from, whether yours or someone else's, what's one you brought to wonder? I don't think it's like one business. It's like pieces of it. There's too many things that have flown in my mind now, like micro failures at different places, either myself or watching it. What's the one that jumps out the most? I mean, I think at Diapers.com, we were maniacally focused on the customer, customer experience. I think we lost some of that with Jet. And I think it was, that was a great, like, reminder.

16:13Customer has to be number one. The customer experience, bringing that mindset to wonder, I think, is important. I think also the clarity around the vision and the strategy to get there and all its nuances. So a lot of times, you know, you have a team and they're executing, but in their mind, they're thinking about the vision or the strategy maybe differently than the founder is. Even though the words are on the wall and everyone knows what it is, there's nuances around what the words really mean and how people interpret those words. So if you said, you know, we want to be the best at X, what does the best mean?

17:00Does that literally mean number one, like the best in the world?

17:03Allie Garfinkle:But with anything, it's hard to actually define when you're number one, actually. Unless in the NBA, actually, you know when you're number one. But in most things, that's actually more ambiguous. But if you look at the strategy that we have on the wall in the room. I would say, what's the strategy you have on the wall at Wonder? I mean, it's called VCP, Vision Capital People. and it's a room that we meet you know weekly basis and there's whiteboards around the room and it's got you know vision strategy organizational structure is on the wall it's all color-coded so you can kind of see where you're investing because it's color-coded like taekwondo belt so you can very quickly see i got a lot of black belts here a lot of yellow belts here is that the right is that intentional yeah yeah intentionally it's like taekwondo because you intentionally level up I mean, there's a separate performance management part of the taekwondo belt strategy, but I think visually it's a very easy way.

17:59Rather than having to remember what each color and level is, there's already a leveling system that's out in the world around colors with belts, where you know a black belt is better than a brown belt, and a brown belt is better than a yellow belt, and a yellow is better than a white. And so when you visually look at the wall, you can see where you're investing more and where you're investing less. You can see the spans of control. You can look at a black belt and see how many blue and brown belts are reporting in. Maybe some black belt might not have as many, some do. And you kind of, so I sometimes just stare at the wall and think about the structure.

18:35Allie Garfinkle:Is this something you'd recommend to other entrepreneurs? If they wanted to implement this strategy, how would they do it? Absolutely. I mean, I could talk forever about the sort of performance management stuff, but we have a transparent compensation system too, so everyone knows what everyone else is making in the company. Including you. Yeah, including me. It's very structured, and each level is a different color belt, and we have a performance management system every six months where at least a dozen colleagues will rate you across the behaviors that we value at Wunder, across performance management stuff, and the leadership qualities.

19:18And then you get scored by all these people. And then you get written comments, and then AI will produce your report. And so this AI-generated report makes it easy for managers. It's objective. And then based on those scores and based on something called value above replacement, VAR, where we have people that evaluate whether somebody is adding more value than somebody that you can get to replace them at the same level. And it's minus three to plus three. Plus three is extremely hard to replace this person at this level. Zero is neutral. Minus one, easy to replace somebody at this level. So you have this var and it's this matrix in between your var score and your performance management score, AI basically calculates whether or not you should be promoted.

20:13So it's very objective. And there's a chart that shows you how much time in role you need to be before you'll get promoted based on the curve that you're on based on the scores you got. So it's hard to do it in a short period of time. But anyway, you get the picture. There's a handful of exceptions every period where we disagree with the AI model and sort of the program. So you can disagree with the model? You can, and it's got to be a good argument. A lot of times when people disagree with the model, then we sort of use it to update the model a bit. Like, yeah, you know what? That's a good point.

20:53The model is not incorporating that piece of feedback. And the model is getting smarter, and there's less exceptions every time. But I do like the fact that it is very objective. You know, it's not like a manager that has a problem with a person or some personality conflict. It's not vibes in any way, shape or form. Or worse would be, you know, a woman or a minority or something being disadvantaged in some way. This kind of corrects for that.

21:20Allie Garfinkle:Now, there are people listening to this who would hate that. But I am the person who's like, no, objectively tell me how good I am or I'm not so I can know the objective ways in which I can get better. And it's fair, right? It's not fair. Well, it's also, it seems like I think giving feedback is actually really hard. But I like the idea of sort of some of it just being database. I mean, it does make me wonder about how you view the conversation around AI and jobs generally. Are there concerns from your perspective about AI replacing jobs and food? I mean, in our case, I think it's going to be the opposite.