EP 94: Niraj Shah (CEO, Wayfair) Building To $10B in Home Decor Revenue

24:15Like how did you sort of think about success of being a brand? So the first level of brand is just they have awareness. So they know what you are. So if they see an ad for Wayfair, they're like, oh, that's that home store. So that right there gives you a leftover not knowing who you are. But then really what you want it to be is someone really understands what you do. They understand the real benefits you provide versus others. Through the process of that, it creates trust and confidence. And so brands that really do all of that, that's a very strong moat because for a customer, part of what you're trying to do is make a good decision and not have a problem.

24:49So there's all these goals you have. Going to a trusted source is generally one of the things you want to do if you can. So you had a plan for it. It sounds like it was measured initially that you were going to take in this capital and not do TV right away, not big, splashy television advertisements off the bat. How did you think about building the brand and the different ways you were going to go about doing it? Well, so the very first piece of it was simply we knew how to get traffic that was high intent for certain products. If we bring a customer into a place that is a home store, if all our communications with them are about being a home store, how do we start just optimizing the repeat there?

25:25because we're getting a lot of folks who are clicking on our emails, coming back. How do we drive the lifetime value that way? That was sort of one piece. Second is, hey, now we have a whole new surface for merchandising. How do we do more with that to tell the story? Because now we don't just have traffic that's high intent for a very narrow thing. We actually have this kind of secondary set of traffic. One of the things we launched, and it was probably three years after we first launched the Wayfair brand, was kind of a concept that was just regular sale events. The idea of just sort of giving folks a reason to kind of, you know, we modeled it after the old brick and mortar, you know, this is going to date me as being way too old.

26:05But in the Sunday newspaper tucked in the middle used to be all these circulars and you get the circular and you'd see what, you know, Target or whomever was running on sale that week. And you might see some items you expected and oh, wow, that's a good price for that item. And then you may see some other items, you know, but that actually, we could use that. and it would be a reason to go to that store. In some cases, you actually had to cut out coupons, which most of the circulars didn't have, but that was on some of them. So the idea was like, hey, how do you give someone that type of content, which piques curiosity, gives them a reason to open email.

26:32So there's a set of things that we were doing that were sort of improving the experience. Another thing was around faster and faster delivery. In 2015, we started opening our own warehouses, targeting just talking to suppliers about putting their most popular items in there off a fast delivery promise. That item would then get a badge online about the fast delivery. lifts conversion. And to this day, faster delivery items have much faster, higher conversion than slower delivery items. So it's an interesting theme. And this is maybe in the minutia of supply chain, but it's super interesting. So 30 % roughly of items that you guys shipped were too big to be shipped by FedEx and UPS.

27:08Do I have that roughly right? That's right. And so how do you go about solving that? So there was Castlegate and then the Wayfair delivery network, right? So in the early years, we were picking transportation carriers that we thought could do a good job, sometimes by geography. And then we would have folks who would just try to work with them and manage that to make sure that we optimize as best as we could. Then as we got bigger, we were able to say, hey, let's build our own transportation network. The problem with the transportation network is you need a certain amount of scale. Because without scale, your trucks are running empty.

27:40I mean, it's prohibitively expensive. So today what we've built, what we call the way for a delivery network is basically for those bulky items, we move all of them through our own transportation, line haul, which is like trucks picking it up from the supplier, all the work to make sure the item is packaged well, doesn't get damaged, et cetera, and deliver it to the delivery agent who's going to deliver it. And then what we did is we started in the popular markets building our own delivery terminals. So we in the US and Canada, we have 40 delivery terminals. So, for example, we're in New York City right now in Linden, New Jersey.

28:13We have a building. It's probably a 100 ,000-square-foot building, and it's just every day items come in, and every morning, whatever, maybe 100 trucks with two folks on it go out and do a whole set of deliveries, each of these large, bulky items. But it's all our items. All our folks run the way we want, deliver the way we want. And you picked originally two locations, right, because you could reach some high percentage of the U.S. through those locations? Those two locations were for warehouses, for our fulfillment centers. And that was really focused on the items we could give to a carrier, like to a FedEx, for delivery.

28:47And so those were – yeah, we picked Utah and Kentucky because they covered the bulk of the U.S. with two-day delivery. And that's when we proved out the value of speed. Then what we've done over time is build out a number of these fulfillment centers. So we have a lot of one-day coverage and far more two-day coverage. but for the large items, we were still tendering them to these other carriers, then taking that over, which is what the Wayfair Delivery Network is really up to the quality service level. Hey, Logan jumping in here just with a brief request. If you're enjoying this episode or you have a favorite episode, we'd love for you to share that with anyone that you think would benefit from it.

29:26Anyone that is trying to be a better founder, a better operator, a better board member, a better investor. We'd love for you to share any episode that you think makes sense with them. We're trying to get the word out, continue to share with people in the ecosystem. And so that would be really, really helpful. Now back to our conversation. So in some of those examples, you're actually not taking, I don't know the technical term, but you're not taking consignment of the item itself or are you in those facilities? So if you think of sort of what comes out of our fulfillment centers, obviously we're handling the transportation, whether we're tending it to like a FedEx or handling it ourselves.

30:02If it's what you'd think of as dropships, so coming out of a supplier network, their warehouse, their fulfillment center, either we tell them which carrier to give it to, you know, give this to FedEx, or we tell them we're going to pick it up and we'll pick it up. And we do pickups all over the country every day, pull it into our transportation network, and we'll move it all the way to the destination. What did you find about speed? You talked about this. I assume that was a big driver of repeat purchase and building out all this logistics around is a decent sized moat, it seems like, of complexity around this.

30:36But what was the insight of speed? Obviously, people get it faster, they buy more, I assume. Yeah. So people love fast delivery, right? So that's a clear insight. I think what the insight of logistics is, though, the irony of logistics is that as you optimize it, You actually get a few benefits all at once. So speed goes up, which obviously people like. The second is by the way you handle things, damage can go down, which obviously helps customers be happy and takes out cost. And the third thing is your transportation costs actually go down because your really expensive transportation leg is the final mile leg.

31:09Now, if you can forward position it from wherever the thing is made, forward position it into that region from the get-go, that final mile leg, there's a little more cost on the way in, but it pales in comparison to the savings on the way out. So all of a sudden you can hit lower retails for customers. So they love that. Faster speed for customers. They love that. Both of those drive up conversion. While at the same time you're reducing damage, reducing your operating costs. So it's a real win. And it's impossible to do just through third parties alone. Why is the final mile so difficult? Shopify bought Deliverer and then I think spun it back out to Flexport.

31:44And it seems like that's been a really difficult situation to figure out like this last mile of logistics and all that. I mean, it makes sense that getting from a warehouse to someone's house is a bunch of complexity in there. But why is it so uniquely hard? Well, so I think first is you need to have enough volume to have the density to make it economical. So if you have enough volume and the density, then to take it on, the trick is you can neither approach it as sort of a pure software sort of solution, kind of a purist on that side, nor can you just do a great job just through physical operations without good technology support.

32:19So it's the intersection of the two. And I just think most companies who are great at building technology are not also great at the physical operations. And you end up needing to care enough about both to really get it going. And there's a lot of companies who either try to be like a software overlay on other physical operations. Or there's folks who are in the physical operations business, which are a lot of these 3PLs. But they've never really built the technology to add a lot of finesse. So in building a brand, now you spend over a billion dollars a year on advertising marketing? Is that? Yes, we do.

32:52I can't imagine there's too many people listening that have built a brand at the scale and is purposeful of a way. It wasn't like accidental. You guys actually set out to do this. So what have you learned that's interesting about marketing or generalizable things about building a brand for people? As an engineer, the idea of building a brand felt like a very foreign idea to me. as I've learned more about it over the years, a lot of it does fit the same way you'd think about solving other problems, which is, you know, you want this to stand for something. How do you help people understand what associations you want?

33:24Then help them understand what the things you stand for are. They need to be true things because customers then validate it with their own experience that then drives the loyalty back. Then there's these really powerful things like word of mouth and these other things that you sort of know exist. But, you know, I guess one of the things that sometimes folks are challenged by is like they're harder to quantify. And so people tend to like things they can quantify a little more easy, but sometimes the most valuable things are a little harder to quantify. But so what we found is like the power of having a brand is very substantial in what you can do with that earned trust and how you can then kind of keep building it over time.

33:56I'd say Wayfair today is a household brand. Everyone knows who Wayfair is. We still have a lot of opportunity though to build up a lot of understanding of some of the nuanced things we do to drive a lot more preference. And so it's also a journey that it's not sort of get known and you're done. It's like you can actually keep building value into the brand by whatever the next thing you do is. I mean, a great example would be Apple, you know, and everyone would say, oh, Apple has such a powerful brand. It's one of the most loved, most valuable brands of the world. And so, yeah. And we say, okay, so now think about what their journey has been on the, you know, the glasses, on the, you know, AR, VR product, headset.

34:32And, you know, they obviously waited a long time to release the one they did. They're very thoughtful about how are they going to, They have a very large user base. How are they going to keep driving increased loyalty and cover more ground with their base? They don't want to release something too early, but they don't necessarily want to leave that space for someone else. They know where they sit in the market as a premium product. They have a strong point of view on what people care about there. I think building a brand, your journey is never done. If you think about what I just said, the brand, it's not just the marketing aspect of it.

35:02It's how it ties into everything you do. In doing that, you have some independent brands still today. Outside of Wayfair.com, how many other brands are there? We have five retail brands. We have Wayfair, which is the mass platform. We have three specialty retail brands, all modern, Jocelyn Main and Birch Lane. They'd be at the very high end of what you could consider the mass platform really being good at. They sit above it. They would compete with specialty retailers. Then we have a luxury platform called Paragold. These are all the brands you would find in the design center that typically sell through the entire designers and the trade that are kind of premium products.

35:40And how did you think about where the demarcation exists? What would go back to Wayfair versus what would have its own standalone brand? Because you were building this all purposefully, right? Some people fall into this and they buy something and they need to keep the brand around. The truth is they're different segments of the market. And one of the easiest ways to think about that is if you list who the competitors are for each one, you wouldn't list the same competitors in each of those lists. And so there's, you know, you could say, hey, we're going to do all of this in one place, but it'd be very hard to do that because the customers get to know you for one thing.

36:14That's their association. They're saying, oh, and I also do this other thing. They're not necessarily going to kind of view that as like sensible or it won't feel right to the customers who are looking for that, that this is the place to come to. And it's mostly, I guess, price point is one big distinction, it sounds like. Are there any other ones that you think about, about where things slot into? So price point is important. You can use it as a proxy for quality, but it isn't always a proxy for quality. So as I say, quality really is maybe the main demarcation, which tends to carry over into price point.

36:48And then in the specialty retail brands, there's also a big access on style. because especially retail brand, by definition, is pretty tightly curated for a very specific aesthetic look lifestyle. And so by definition, it can't cater to sort of everybody, even in that price band and quality band. It needs to pick that audience. But for that audience who says, well, hey, I either don't want to, or I'm not great at curating, and that's my look. And they want to go there and just immerse themselves in that environment, pick out their item. There's, I'm sure a million things that you've learned about building confidence and trust in purchasing a product online with individual customers.

37:25One that there's a Harvard Business School case study on is the image catalog and how you go about scaling that. So once upon a time, you had maybe still, maybe it's more, 7 million SKUs across the platforms? And we probably have more than that today. More than that today. And all these things needed high quality images for confidence in purchasing, right? Is that a fair characterization? Yeah. I mean, you're telling the story of the item online. So you think about visual imagery, critical. Critical. And so you had to make that there was a debate of, do you go take all the pictures yourselves?

37:58Because these suppliers don't have the competency of building out high quality photographs or trying to use technology to recreate elements of AR, I guess, and these items. Is that a fair characterization? Yeah. So what it was, it was like the early day of rendering imagery off a 3D model. And what we found was that you could much more economically render the imagery than doing the classical photo studio shoots. What's happened since is I would say that's become much more widespread. But now the real value is the model can power certainly anything you're doing in augmented reality or virtual reality.

38:36But then the other thing is like if you have an item and it's selling well and you just think about what's happening with generative AI, you know, you can start generating lots of imagery, very bespoke for a person for virtually no cost. But you need to have, you know, a certain set of information about the item to do that. And that's kind of what these three models were effectively capturing. Was that the one you picked in the case study? They leave it open-ended at the end. They don't tell you which one you ultimately pick. They give you this option of do they do it all in their studio or do they use the rendering?

39:06This was many years ago now. That's 10 years ago. We really pursued, yeah, the rendering, the modeling. That was my answer. That's good. Yeah, that's what I was going to – I guess I would have passed that class as well. I guess just because you touched on generative AI, where does that fit into your perspective on Wayfair as a business and the opportunity for you guys? so you know i mean today we're you know 12 billion in revenue and you know 10 000 plus people so there's a lot of areas where we have a lot of people doing things that we can enable them to do a much better job with generative ai so that type of productivity increase is is kind of what we have in production today what we were the first use cases that we tackled a lot of internal operations related stuff absolutely whether you're talking about tagging merchandising content onto items or whether you're talking about helping the customer service folks with the best response for a customer.

40:02These types of things are where you can go from sort of a pilot into production quite quickly with significant benefits for the customer, for the company. Where we're doing R &D and where we think the real interesting potential is, the biggest challenge customers have in our category is like, how do I find that perfect item? And customers are generally, they can only describe what they want to a certain degree. And sometimes they can describe it with some pictures or adjectives or likes and dislikes. And the holy grail is make it easy for them to intuitively and quickly get onto a journey where they start seeing super exciting things for themselves.

40:43And so if you think about our catalog of items and all the data we have on these items and all the millions and millions of people that come through and what their experience has been, all that data, how do you then use what the power of generative AI is to basically facilitate that. And whether you're generating additional imagery along the way, or a lot of what you're doing is, you know, creating kind of a bespoke shopping experience. There's a real, there's a real opportunity there, but I would say that that's still early days. Part of Wayfair success in my mind has been building a culture of just incremental improvements, thousands, probably millions of lead bullets that you've just made things a little bit better, right?

41:22Everything from the SEO in the early days to the brand, to the website optimization, to the email marketing copy and all that stuff. How do you go about building a culture of like those incremental wins that really maybe only moved the needle 0.2%, but 0.2 % on 10 billion revenue is a big, big delta, right? I think, you know, what we've always had is just amazing people who are ambitious and driven, hardworking, they're collaborative, they're, you know, They're always very bright. They're quantitative, analytic. And so as a result, when you give folks ownership over a set of activities or an area of the business, they're excited to kind of use the data to inform hypotheses to then go out and try things and unlock those gains.

42:08And, you know, always think about what the customer wants and then kind of how do I do that better? Or, you know, obviously in retail, you always want to have low retail prices. So how do I take out any inefficiency that just allows us to be sharper? You know, that's in the ethos of the culture of the place. And so I don't know that we do anything to like tell them, oh, you should go do this. I think it's the nature of kind of we're always working on that. And that's sort of there's an old adage, you know, retail is a business of details. And it's just, it's true. There's no one thing that makes retail work.

42:40You need to really, you know, we use technology to kind of force enable, you know, really us to do a great job in all these areas, but there's still thousands of things. And unless you have a culture that's like not excited to just leave the status quo, but rather excited to keep making it better, I don't think you'll unlock those gains rapidly. conversely and the reason I think it works for us is if you do have that culture you know it's just happening all around you I'm sure the answer is different for a bunch of different problems as they present themselves but how do you balance the um the autonomy of empowering people to go make the changes they need to with the the shared framework and fabric of the business and so hey you can't go switch our cloud hosting provider or our back-end infrastructure just because you think it's a little bit better to do that how do you sort of empower people in that way?

43:32Well, so what you try to do is you try to have as big an area as possible owned by like a single team and single individuals so that you create less kind of interaction points where you have to negotiate or priorities may differ. Obviously, as you have a lot of people, you still have a lot of those points. Then the second thing we do is every six months, we do a company-wide prioritization cycle. That's for the next six months where teams talk about what they want to do. And in that process is what are their dependencies on other teams. And that sort of hashes things out to make sure teams are on the same page with priorities.

44:08And if there's any that are in contention, we debate those. We decide what we want to do. And that's whether it's a priority or not a priority, as well as if there's a debate about direction. And so that's kind of, it's sort of like to try it. The goal isn't to say that there's never going to be conflict, but the goal is to try to sort it out in the right answer fairly quickly. How many people come to those six-month things? What's the end? It's broken up into 95 areas. Each of the 95 areas kind of creates a plan. And then we do effectively 20-minute meetings on each of these. Every six months?

44:42Every six months. And that was something I had heard you say at one point that there was this sprawling, kind of conflicting cadence of meetings that just kind of got out of hand from an operational standpoint, was this the outgrowth of that, that everyone was kind of marching to their own drum and timeline? So this was the outgrowth of two different things. So it was outgrowth that kind of the confluence of the two sort of made it obvious that we needed to kind of redesign how we operated. One was that. The second was that, you know, and by that, what I mean is what you were describing is that certain teams, you'd meet with them quarterly, other teams, you meet with them twice a year, and not necessarily during the same months, you know, it might be, you know, and the second problem, which was an outgrowth of that first problem is that each team was creating their plan of what they want to do embedded in that was assumptions of what all these other teams that they worked with needed to do to further their initiative.

45:29But then the other team meantime has created their own plan and their plan maybe didn't sync up with this plan. They're like, oh, hey, we're tied up for the next four months with a plan we have. We can talk about it after that, but I'm not sure whether that's our priority or not. So we both decided you needed to be on the same time cycle and then you needed a way to sort out where there were conflicts and priorities. What is the time horizon that you think about? There's the six-month increments of like revisiting things in general. And then I assume there's some point in the future that you are aiming to as well.

45:59How do you think about the appropriate scoping? So it varies by area, but a lot of, I would say generally, there's a pretty good vision that goes out, maybe a reasonably tight version of it that goes out maybe a couple years, then it gets fuzzier after that. And then, so on these six months, a lot of times that initiative continues into the next one, but it's a point to say, how's it going? What progress have we made? What are we hoping to do in the next six months? So on and so forth. But it varies by area. And so we try not to be dogmatic on, you need to have a three-year vision, you need to have a five-year vision.

46:31We were for a little while and we found that that just forces unnatural activity because in some cases you're like, hey, we know we need to get this done. And as we figure that out, we know we'll know what to do next. And in other areas, it's like, well, hey, it's pretty obvious what we need to do for the next N number of years. So writing that up, do we need to write that up in great detail? Interesting. So building a culture of, I guess, the accountability around all these things, I think inherently forces you to accept failure in some ways or failing to make progress towards goals. How do you go about setting an expectation of excellence for people to succeed, but also being willing to accept the failures of different projects, because that's a function of innovation, right, is continuing to have both of those.

47:21Yeah, I mean, what you try to do is separate input and output metrics. And generally, you're judging the success or failure by the output metrics. What you want is you want a well-thought-out plan with clear input metrics. You want to see that you did get that done. Now, whether or not it fully achieves your output goals is a separate thing. And generally, you learn along the way. If it's not, you learn some new things that cause you to have a different plan, right? and you keep evolving it and you want to evolve it rapidly. If you have teams that are cycle after cycle struggling to get their input goals done, then you're like, hey, why is this?

47:52Are the plans never really that well thought through? Is the execution not that well managed? But you're never going to get to your output goals if you're not getting done whatever you think the right plan is. You've gone through cycles of building this business, and I'm sure the culture has changed over the course of, you know, whatever the 22 some odd years you've been doing this. Recently, there was an email, I don't know if it was actually released or leaked, but about getting back to some of the grittiness and ambition of the early days of Wayfair. How do you go about like, recalibrating people into obviously an email, you tell people that, but like, you can do it on podcast if anyone's listening.

48:36Yeah. But, you know, the irony on that email, that one was an internal email to kind of the corporate team that was leaked. The irony on that email is, you know, basically during COVID, we had all these like supply chain congestion and there's inflation. We had all these curveballs thrown at us that had caused our operation to just our flywheel to stop flying so well. And we figured that out in the summer of 2022. And by the end of that year, we'd gotten it flying again and we were taking market share nicely. So the email I sent at the end of last year was like, we'd been now doing that for over a year.

49:11Things were humming again. You know, we were back to kind of like doing a great job that we'd done for, you know, decades before. And so it was more saying like, hey, we just need to keep at it. Like we're, we're in the beginning, you know, we're saying like, hey, you know, we've a little bit lost our way. We need to get going. And by the end of last year, we're like, hey, it's like mission accomplished on, you know, just, you know, we're now on a good trajectory. Just keep going on that trajectory. And so I think, you know, that's what I was attempting to communicate. I don't know. You know, internally, I think it was well received.

49:41I think, you know, what some of the comments in the press, I think, misconstrued what I was trying to say. Yeah, got it. I mean, the point of it, though, and I get I'll get yelled at oftentimes if when these things get cut up and they get posted on different social platforms and people get upset when you imply things about hard work or that, you know, I think once upon a time working hard was something that people collectively valued and recognize that that often led to success. But it seems like that's not something that people are quite as willing to say in earnest, which was one of the themes, I guess, of the message that you sent out.

50:24What have you found about hard work in general and, I guess, that point you were trying to make? Well, I guess it goes back to what I was saying about culture. I mean, I think the thing that we really value about the Wayfair team, when I talked about the folks we have, they're hardworking, they're collaborative, they're bright, they're analytic. And these are ambitious, driven people. They are hardworking. And so we've just had that in the culture. These folks, you know, that's why we succeed. I think it's why they've succeeded. It's been very productive. So I think we have that. You know, I can't speak for every company out there, but I think, you know, every company has its own culture.

51:02And I think, but I think culture is a big determinant of how successful you are over time. When it comes to hiring and managing large scale teams and all that, if you could go back and tell your 2002 self as you're getting going, is there anything that stands out as particularly interesting lessons that you've learned kind of throughout all these processes? Well, not to be too repetitive, but I think what I was talking about a minute ago, I think does hold around culture really matters. So figure out what your culture is. And that is something you want to make sure that you communicate to folks.

51:34it needs to be what they want to join and you need to make sure that they're a fit for that. That leads to, you know, when it's not a fit, it generally doesn't work out. It doesn't mean the person won't be successful elsewhere, but it's unlikely it'll be a great fit together. So I think that matters a lot. And then I'd say over the years, you know, we've tried to think about, hey, can you, you know, what matters more, like someone's background of exactly where they were or the traits. And I think coming to the conclusion, the traits really matter. And so what exactly they've done and where they've done it, you know, sometimes can be a signal to support that they have those traits.

52:09But honestly, you're better off just focusing on the traits because you can find those folks from any kind of background. I want to ask about the traits in a second. But one of the things I heard is you actually have two different groups internally for potential hires, one that manages, I guess, competency or skill and one that manages the culture fit. Is that still true? And how does that actually play out? I think the way it manifests today is in an interview process. and I think it's like more so as you're interviewing at the kind of mid to senior levels, you'll assign the different folks on the interview panel, the different topics and specifically to vet for.

52:41And so they'll do a general, you know, they'll, they'll be asking whatever their general questions are, but you'll be asking them, you know, you want this person particularly to vet for this specific skill fit, or you want this person specifically to vet for this question around culture fit. And, and so, so, so, sort of, people have like a side assignment in the, in the interview and together the interviewers, you know, that, that set of panel, uh, results gets shared with all of them. And then they discuss the candidate. I heard the four traits that you hire for our intelligence, hard work, analytical thinker and teamwork were the things that collaborative, collaborative, uh, how do you go about assessing those things?

53:23I think they all make sense in process, but have you found any particularly good interview questions when you're assessing these traits or things that you ask around when interviewing? You know, I think this is also why we typically have multiple people interview someone is that everyone sort of approaches trying to get a feel for the candidate in different ways. I think we're very open around like our people principles. Like today we have a series of principles that we've articulated on our website that kind of take those old traits because I think that is something I probably talked about years ago and kind of fleshed it out more into more detail.

53:58So we're trying to tell candidates what our culture is about and what helps someone be successful here. Because, you know, you don't want to waste a candidate's time if they're like, that's not a fit for me. At the same time, that's what we're vetting for. I don't know that we have a standard way to do that, though. I heard you mention being a lifelong learner is actually like a really beneficial trait in employees. Is that something that you're able to feel out by pursuits outside of work? Or how do you sort of think about? Another way to think about someone being a lifelong learner is kind of how curious they are.

54:34Curiosity is a great trait. The danger often is if someone has done something for a long period of time, they feel like they know how to do it, and their goal is to just keep doing it the same way over and over again. The risk you run is that if there's a better way to do it, that might not be something that that person is pursuing. If you have someone who's always curious, what we found is like being curious is like a general trait people tend to have. they then apply it in most things they're doing because they're sort of, you know, they're trying to do things better. They're curious what might be next.

55:04They're curious about the thing that's adjacent. And so we want those types of folks. And our view is that the world, whether it's obvious on the service or not, it's always fast changing. There's, you know, our market's going to be fast changing. The customer desires will be fast changing. The ability to provide enhancements will be fast changing. And even though it might not be like super, super, super fast, if you're not looking for it constantly, you won't necessarily be able to be at the top of your game. I heard also, I guess, on a similar vein, but you said something to the effect of ambitious people aren't just ambitious in one element of their life.

55:38It usually manifests across a bunch of different range of things. I think so. Yeah, it's interesting. Those are two, I don't know what the way to suss that out is, but I tend to find that iterative learning one of the best traits in founders because the experience is going to change so much. I mean, your business in 2002 looks vastly different than in 2024. And if you're not the fastest learning person around the table, you probably get lapped. Totally agree. What altitude do you try to operate in as a CEO of a big company? Like what details are you getting in versus, yeah, sort of staying out of?

56:17So, you know, as you can imagine over, you know, we're now in our 22nd year. So, you know, it started with two of us. Now there's whatever, 11 ,000, 12 ,000 of us. So it's changed a lot over time. What I've found is what we try to do now is those twice a year business reviews, that's a good way to get up to speed on sort of the breadth of what we're doing and the goals and priorities and what's working well and what's not at a high level, not just for myself but for a much broader group of senior leaders. Then what I personally do is we're a big enough business. you need folks who are leaders owning their areas, really driving them forward.

56:54Because if they're counting on you to kind of always be there with them, the truth is you're probably not going to be there often enough with them to really make it work well. You need to really bet on them to do that. And so then what I typically do is I tend to focus on just a handful of areas that are either new and I want to just help them get going in a certain direction or trying to do something substantially different. And I have maybe some of it in my head. And so I try to kind of get involved with a few initiatives and generally just for a period of time until they're sort of trajectory-wise headed the way we want and that there's a team around it and a leader around it who's going to you know keep it going and i find that that when you couple that with the related travel it seems like there's an infinite amount of travel i could do that would be productive for the business um and then other kind of corporate responsibilities you know we obviously we do earnings calls quarterly we mentioned the twice a year a business review process board meetings you know, it tends to add up to being a lot of time.

57:49Those individual projects you go into, is it a short, a small number of people around the table? Like, are you sort of getting back to some entrepreneurial level of like being? It can be if it's super early. And then there's usually a phase where there's a core team on it, but it's early enough. You're still like meeting with them monthly or every three weeks, but you're no longer like on the inner circle of that team, but you're close enough that you can really stay abreast and you can help them. You all have been fairly, I guess, on the side of in-person work. Is that a fair characterization?

58:18Well, I mean, we worked from home for a decent amount of time, I think, relative to certain other parts of the country or headquartered in Boston. But what we started doing in the summer of 22 is we started trying to get folks back in three days a week. And so today we have a hybrid schedule. It's either three or four days a week in person. and then the remainder has flexibility. But that's worked well for us, getting people back together. What do you think the benefit of getting people back together is? Where have you sort of seen it play out? Communication, for sure. We get a lot of feedback on the old classic whiteboarding session, the creativity that ensues from that, and figuring things out quicker and sometimes more novel solutions, really good.

59:04And then one of the things that happened during COVID we noticed is that the team got more senior on average because it was harder to hire junior team members and ramp them up and really get them kind of being a fully going member of the team. And we want to reconstitute that. And so one of the other obvious things is like most, I think most businesses out there, this is true, but I think in most areas of our business, there's an apprenticeship model to how you learn. And I think you can learn a lot more if you're sitting next to folks that you're working with, you're overhearing conversations or you ask them quick questions.

59:36versus everything having to be scheduled, you know, Google Meet calls. Yeah, it's interesting. I've sort of found that any individual is probably more productive working from home, plus or minus, depending on how cross-departmental your job is. But that doesn't mean the business is more productive because of that, right? It's like easier to do tasks when you don't have people stopping by all the time, but it's harder to collaborate if you're not alongside your colleagues, it feels like. Absolutely. And then if you think about your business, Like how do you bring the next generation up and through?

1:00:07Because a lot of it, when they start, they don't necessarily know how to do their job. Yeah. So how are you going to, you know, all the nuance that you're trying to impart to them. Some they'll learn through their own experiences, but some they'll learn from their colleagues. And that's a lot easier in person. Yeah, there's a lot of soft diplomacy or whatever, like lessons just that you intuit from being around someone on a physically around someone that you don't. We found the hybrid model works really well because there's days where everyone's together and you get a lot of exactly what we're talking about.

1:00:34It was always there historically. But now by knowing what time is not necessarily together, it lets you schedule things in a way that maximizes the time you're together and makes your schedule more fluid. So managing people and I guess hiring and then managing people out, is there anything you've learned about the managing out process that you would impart to different leaders of organizations of how that plays out? So I think the biggest thing, and I think it's the hardest thing to teach relatively new managers, is you need to always be giving feedback. And so don't expect that everything is always going to go perfectly, but be transparent, honest, and open.

1:01:19Be giving that feedback. That allows that person to get better at what they're doing to the degree that it's not going to be a fit. But also, it's important to have that conversation because you don't want that person spending years somewhere where they're not going to ultimately be successful and nor is it helping the business. And so I think it starts by giving great feedback. And then the next piece is in those cases where it's ultimately not going to be a fit, it's like having that conversation rather than avoiding it is important. You were caught up in this very weird vortex of social media and conspiracy theories.

1:01:53and I guess what's it like to be in the eye of the storm of something with so much misinformation, disinformation and like fringe internet cult thing? I assume it's a very weird experience. Well, I think that the promise of the internet is that all this information is available to you at your fingertips. And I think the downside of that is disinformation can spread like wildfire. and in this case, there's no truth to it. I'd say a learning we had is that you can't ignore things like that at first because just because you thought it was so far-fetched, it didn't make sense. It's important to pay attention to these things right away.

1:02:34I wouldn't have guessed at the very beginning that this was something that we would have to both explain wasn't true and have it debunked, fully debunked and proven to not be true, but ultimately we did. And so I would say being cognizant of the fact that information flies around the internet, it's not necessarily true, is an important learning lesson. And just getting out in front of it and saying like stamping, because you're giving oxygen to it in some ways to say it's not true. In some ways, it's like validating that this is out there, but you're also cutting it off at the pass. And so I don't know if there's any insight around that, because other companies go through, I'm sure we'll have countless other examples of this.

1:03:11And you guys happen to be on an early one. I don't know if there's a perfect example or perfect answer, because it's very situation specific. But I would say what we learned is you need to take these things seriously from the get-go because you just don't know what is going to somehow gain oxygen from whatever source. Totally. And especially now, I mean, we talk about artificial intelligence, but the amount of disinformation with generative AI in some ways, it feels like we're on the precipice of like a real snowball of some of these things that now we can be sitting here and someone can dub what we're saying to each other, right?

1:03:48And take that video. And now it looks like Neurage and Logan are validating this conspiracy theory or something. And it's, I think we're headed to a really weird world of that stuff. And I guess you guys caught an early version of it. Obviously we can, you know, cause you've seen it with some of these generative AI, some of these movies that have been made. So yeah, I mean, obviously it's a challenging world. Yes. Yes. Yes. I, I, in a weird way, we need validators, uh, more than ever in a time that all this stuff is kind of fraying and there's concerns about media bias and all that stuff, like having the stamp, we're moving to a world that we almost need the validation to be able to say, no, the, you know, wall street journal, I'm sure wrote a story of debunking conspiracy theory in New York times.

1:04:33I'm sure wrote a story debunking the conspiracy. You need those points of, uh, aggregators almost to validate the things that aren't true. I think having ways for people to know what content is true is really important. Yeah. Very important. Yeah. Um, so there's this big company, uh, Amazon that, um, that I guess, I mean, they're not a hundred percent in your category, uh, but there's elements of, of overlap. And I think that you said something about watching competitors and being aware of them, but not focused on them. How do you think about like for entrepreneurs or executives listening in? Like, how do you think about, you know?

1:05:15So being cognizant of what your competitors are doing, I think is really important. But generally, the best plans you're going to create come out of thinking about your customers. You know, what do they need? what's not going well, what's going well, what are their pain spots, what haven't you gone into, what are the other opportunities. Start with your customer and then figure out what you want to do. That's generally, and then obviously execute it very well. That's generally going to be the strategy that has you win. Whether a competitor does something or doesn't do something, it doesn't necessarily make it right or wrong.

1:05:47Understand what your customer wants and doing the right thing. That's really how you're going to determine what's smart. So you can learn great ideas from anywhere, including from your competitors. So that's part of why you want to pay attention. But I think some companies get obsessed with their competitors. And so then their goal is to keep, you know, do whatever their competitor does. And what's missing in there is then there's an implicit assumption that that competitor understands your joint customer population better than you do. I think that's a, you don't want to get there. Did you feel that temptation?

1:06:16We talked about earlier, some of the competitors that were venture funded that you were going after in the early days when you guys were bootstrapped. Did you feel a temptation of pursuing that sort of orthogonal path when they were, I'm sure burning lots of money and trying to do different paths around that? No. And I mean, in hindsight, I think by not raising capital, it sort of forces, say, discipline and frugal. We didn't focus on what the competitors were doing. We focused on what our customers wanted. I think ultimately that is a piece of why we ultimately succeeded. Can you elaborate on that?

1:06:50That's bad for my business if not being VC backed is good for good for people, but there's constraints. I will say, if you look at some of the biggest companies ever created, oftentimes they worked right off the bat and they didn't consume a ton of capital. It's like if you go down the list of Amazon and Microsoft, Wayfair, Atlassian, Salesforce ServiceNow, all these big companies, did you find constraints as a real benefit to you guys that you couldn't pursue all those different paths in the early days? I think it is. And I think one thing that we subsequently had to learn is we had access to a lot more capital and made some of the same mistakes that others do is we had to learn how to create our own constraints so that we stay focused and we stay very disciplined and that, you know, access to money doesn't make it smarter to spend it.

1:07:36The ability to have a bigger team doesn't make it smarter to have a bigger team. On a self-discipline basis, that's, you know, you need to come up with a real way to do it. That's not necessarily the easiest thing to do because everyone wants those resources on their team and everyone wants to do those things. Having that constraint just by the nature that we were self-funding, bootstrapping the business, I think helped us. And so now how do you set the dials for people on constraint versus – because you do have access to capital as needed, and I'm sure your balance sheet looks way better than it did in 2003.

1:08:13So how do you sort of set those expectations and goals for people? I think it took us going through a journey where we didn't have as good discipline to kind of learn those lessons. And so now we've created a framework. And we're not the only one. There's a lot of other companies in the world that have figured this out. So what we did is we learned a lot from them. And so some of it is before we viewed budgets as an anathema because we viewed budgets as artificially they're either going to be too small or too large in any given area. What we learned is budget is just a mechanism to create a constraint to then get the team to focus on the execution.

1:08:50Same with the joint planning. We'd say, well, priorities means that you're not going to yearn to do more. Well, I think we've corrected that to say priorities are just getting everyone organized around what the most important things are. So I think we took some of the things that we didn't like that worked really well when we were much smaller because we could hands-on manage everything that broke down as we got bigger. and we didn't have self kind of put upon constraints. And we've created a new set of things to basically drive us forward. When you couple that with the same culture we've had the whole time of these really bright, talented folks who really are ambitious, driven and go after it, you know, that's worked really well.

1:09:28So that's kind of how we got it all back. Has being public, I'm sure stock price volatility and earnings calls, those two probably aren't your favorite thing. Maybe you love earnings calls, I don't know. But there's a lot of stuff that goes into the day-to-day of being a public company and I'm sure has added a lot of complexity to the business in some ways. I don't know if that's a fair representation. I'd say we're big enough that it hasn't added that much because the incremental amount of resource to tackle that's not very large in the scheme of things. And what we've always done externally is said that we're still going to take the long view and here's how we're going to tackle things.

1:10:06Here we're going to prioritize things. the two largest shareholders in the company are myself and Steve. So, you know, our interests are fully aligned with that of the other shareholders. So I think we've got a very good setup. But I think the reason we have it is from the beginning of going public 10 years ago, we've been very clear around what we're trying to accomplish, what the goals are, how we think about success. And then we've tried to update that for folks. And so that they can kind of have what would really be good transparency into what we're thinking. So you've started three businesses, first two with Steve as well.

1:10:42And now Wayfair is obviously the biggest and has been the biggest success of them. If you zoom all the way out and think back on your entrepreneurial journey to where you are today, and you're an entrepreneur listening to this, is there anything that you would say to that person that's maybe thinking about pursuing an opportunity or already on the journey about picking markets or finding product market fit or anything around that that you wished you had known way back when? Well, I think, look, first, you got to love what you're going to do. You can't just do it out of like, logically, this is a good market.

1:11:23And so I should go to, if you're not going to enjoy it, you know, no business is really always up to the right. There's kind of rough patches in there. And so you need to really believe in what you're doing. You need to love it because that's going to be, that's going to give you that drive. Did you kind of learn to love this stuff though? It was, uh, what is Steve's mom, a, like in the furniture sales business or something? She, um, she had two, uh, stores in New Jersey that were sold outdoor furniture. Oh, interesting. So it was in his blood. It wasn't in your, uh, I don't know if the, the, the home goods category, maybe it was in his blood.

1:11:57I don't know if it was in our blood per se. This type of business, like retail, which is a customer-driven business, details, real opportunity with technology, that was very exciting. I would say the category is very addictive. So now that I've been in it for so long, I just love it. But I think the type of business it is, the traits of the business really fit us very well. I think there's other business models that could be very good models that wouldn't fit us as well. So it'd be harder to be so excited about. Yes. So learning or loving the thing you're doing, and it doesn't necessarily need to be the day one mission.

1:12:39Like you can really enjoy the process. I'm sure you love the infinite canvas that you get to paint on with all the operational complexity and the logistics and all that stuff. I assume that's something that you enjoy. So learning to love or loving what the market you're in is obviously an important one. Is there anything else? Well, I think that's one key thing. I think another key thing is the quicker you can really focus on spending time understanding what the customers of your product want and then what they think related to it. That's where I think you get all the ahas from. How did you do that at scale?

1:13:16Were you calling up people in the early days to ask where they were purchasing? or it feels easier with like a B2B software company where you have a finite universe of potential buyers. You have an infinite universe of potential buyers. You do. I mean, there's certain things though, obviously things on the internet are very measurable. So the A-B tests and other things, you can do different things. Yeah, interesting.

1:13:51you