Afford Anything - Why The Customers Nobody Wants Are the Best Ones to Sell To, with David Bell

Episode Date: July 14, 2026

#732: Where you live is already deciding what you'll buy today, before you've even made up your mind. And it turns out the customers your local stores ignore completely are often a brand's most valuable ones. David Bell spent twenty years as a Wharton marketing professor before becoming one of the earliest investors in Warby Parker, Bonobos, and Diapers.com. He's now co-founder of the consumer venture studio Idea Farm Ventures. In this episode, we discuss: Why the same person makes different purchases depending on where they live How four college students' "nutty idea" became Warby Parker Why the customers your local store ignores can become your best customers Why a failed meal-kit startup accidentally proved a rule about demand How a founder turned a boring hand sanitizer into a ten-dollar status symbol Why AI can now replicate a $100,000 market research study for almost nothing This episode is for anyone building — or dreaming of building — their own brand, product, or side hustle, and who wants to understand why people really open their wallets. ⏱️ TIMESTAMPS Note: Timestamps may vary slightly depending on dynamic ad placements. (00:00) Introduction: the invisible forces behind your spending (02:08) From Wharton professor to venture capitalist: meet David Bell (07:32) The Warby Parker origin story: born in office hours (11:27) The "preference minority": why location shapes what you buy (23:12) Beyond necessities: targeting discretionary spending online (31:00) Getting creative offline: postal routes, school buses, and neighborhood showrooms (43:37) Where AI actually fits into consumer innovation (50:49) Touchland: how a "boring" category became a status symbol (55:13) Building a business — and an AI board of directors — from scratch (57:32) Recap: three key takeaways, and what's coming Friday  🔗 RESOURCES MENTIONED 👉 Not sure which kind of entrepreneur you are? Our free 10-day guide helps you find your path — and add the emotional layer that makes people pay more: https://affordanything.com/fiire 👉 David Bell's work at Idea Farm Ventures: https://www.davidbell.co 👉 David Bell's book, Location Is (Still) Everything: https://amzn.to/4aUO3Gh 👉 Touchland, the hand sanitizer brand: https://touchland.com👉 Brad Stone book The Everything Store - Jeff Bezos and the Age of Amazon https://amzn.to/4w6ZT8I Learn more about your ad choices. Visit podcastchoices.com/adchoices

Here's a thought experiment. Take the exact same person, same income, same values, same taste. Drop that person in suburban Kansas City and she buys one set of things. Drop that same person in Manhattan and she buys a completely different set of things. Why? It turns out that your location is quietly deciding what you buy. and today's guest built a career and a venture fund proving it. Welcome to the Afford Anything podcast, the show that knows you can afford anything, not everything. This show covers five pillars, financial psychology, increasing your income, investing, real estate and entrepreneurship acronym Double I Fire. I'm your host, Paula Pant, I trained in economic reporting at Columbia, and today's guest is here to explain why you can't buy veggie mite in Philadelphia.

because as it turns out, the shelf doesn't care about you. The shelf cares about the majority, and if your tastes don't match that of the majority, you're screwed. But there's good news because that gap, the gap between what you want and what your neighborhood offers, turns out to be one of the biggest business opportunities of the last 20 years. Today's guest, David Bell, didn't just notice this. He spent 20 years at Warton proving it. He literally wrote the book on it.

Then he left a tenured role in order to invest the companies that built on it. We're talking names you've heard of. of Warby Parker, Bonobos, Harries. He's here to explain why a $10 hand sanitizer beats a $2 one. And if you're looking for some scrappy tactics that you can steal, he's going to explain why you might want a school bus or a postal route. Whether you want to understand the hidden forces that drive your spending decisions, or whether you want a free customer acquisition masterclass, you'll enjoy this conversation with former Wharton Professor and co-founder of Idea Farm Ventures, David Bell. Hi, David.

Hey, Paula, how are you? I'm great. How are you doing? Oh, not too bad. A beautiful day in New York City. Sun is shining and now a little bit out in the country. So perfect. Exactly. You were a professor at Wharton.

Tell us about what you taught. Yeah. So when I started, I did market research because it was a bit younger back then. And then a few years in, I started teaching the intro to marketing class. So usually every professor at some point teaches the bread and butter four piece marketing segmentation, stuff like that. And that's kind of fun because Wharton and Penn is so big, there'll be like 12 sections of that. And you and I and Joe were like team teachers. There'd be three or four of us teaching either three or four repetitions of the same stuff in a day.

So it was kind of fun. And then because Wharton is so big, if you want to at some point in your career, you can sort of cook up your own class. So I did that too. It was a class called digital marketing and e-commerce that I kicked off in 2013. You have made the switch from academia to being in the real world. You now run a venture capital firm. Idea Farm. Idea Farm.

Yeah, I co-founded that with a very good friend of mine who was actually we knew each other before Wharton, but he's also a Wharton graduate. Did you find a disconnect between how business and marketing is thought of in academia versus how it is actually practiced in the real world? Yeah, great question. Yeah, I did a little bit. I mean, I think in academia, typically what you're focusing on are things like frameworks, concepts, at a sort of higher level of abstraction, whereas in the real world, you've got to decide how much budget, what keywords are going to buy if you're in a mentor or a Google environment. So the real world, to me, was a lot more tactical and a lot more about making decisions really quickly and trying to test and learn and see what works and what doesn't.

Whereas I think from a purely academic point of view, you've got concepts and frameworks, but you're not. necessarily getting down to putting them into action. All right. So academia is more that 30,000 foot view. Yeah, for the most part. But again, I think there's different nuances of research that's preferred at different kind of business schools. I think for me, I was kind of in the right place at the right time.

It was a place that valued that more practical approach and practical research. And then also you've got incredibly good students who go on to graduate who start things. And then if you stay in touch with them, they become a funnel for learning and for research. Right. And the founders of Warby Parker went to Warren, didn't they? Yeah, gosh, what an incredible company. They got 300 stores opened up now, and this is really funny. So I was teaching the intro to marketing class, right?

And just given this lecture, and I've been showing some data about diapers.com and how this e-commerce business had grown in its footprint from inception. I'm in there in office hours. These four guys came in, three of whom were actually my students, one who was in another section, like Neil, Dave, Jeff and Andy from Warby. and they come and say, oh, we've got this idea. Okay, cool, what's the idea? We're going to start an e-commerce company.

I said, okay, what's it going to do? Oh, we're going to sell glasses on the internet. So again, being a professor, right, you don't really know what's going on. So I'm thinking to myself, yeah, this sounds like a bit of a nutty idea because isn't, I didn't articulate that. It was just happening in here. I didn't say that out loud. But what I did say out loud is, isn't this a product that has tactile attributes?

Like, won't people want to touch and feel it before they commit to buying? So with Mark Law and diapers.com, I don't mind buying pamper's on the internet because I know exactly what I'm going to get for my kid, right? It's pamper's. There's no ambiguity, but I might not want to buy this jacket because I got to touch it, feel it. It's got, in terms of jargon, it's got a non-digital attribute, something you can only verify when you have it in hand. So anyway, I said something like this to the guys and then Neil's like, oh yeah, don't worry. We've thought of that. we're going to do this home try-on program.

Paula can order some number of frames or send them to her in a box and you can kind of try them on and so on. So that was the beginning of the conversation around Warby. And there was a really interesting series of interactions. Right. Did you become an investor in it? I did. Yeah, I did. And have to clarify, obviously not when they were students.

But we've been working on a bunch of things together around pricing and just, again, it's a real privilege to be at a place. like Penn where you have such good students. So I remember it's very funny. It's coming back to me now. I was actually in Brazil at a conference speaking about e-commerce, probably about Warby Parker and diapers and some of the other companies. And I got a call on my mobile phone from Jeff Rader. Jeff Rader is also the founder of Harry's as well as Warby Parker, very good entrepreneur. And Jeff called me. He said, oh, we're raising some seed capital for Warby Parker, which would you be interested in investing. And at that point, I thought, oh, yeah, well, and I had tenure. This is another quirk of academia. You're not making a huge pot of money, but when you have tenure,

you have your lifetime income stream. And I thought, yeah, I could put a bit of money. And so I think these guys really know what they're doing. And I'd previously already invested in diapers.com and so it's bonobos was another one. So I was starting to sort of get an appetite for it. So I wrote the check and that was that. Not that, but yeah. Yeah. Yeah. You mentioned, Dipers.com a handful of times. This was right around the time that you wrote your first book, which pertains to the type of people who might be drawn to that versus the type of people who might not be based on where they live. Can you tell us about this? You were one of the early people in this discovery. Right. So yeah, so this was around, I think 2012, 13. I started teaching

this class. I was thinking about online and offline what people now refer to as Omnichester. channel. And just a couple of things that might be interesting for your audience, Paula, is if you wind back far enough, you'll hear very famous venture capitalists, some professors, when the internet was sort of first a thing, there was this idea that the internet's going to sort of obliterate the physical world and will buy everything online and there'll never be any stores again. And obviously that's turned out to be completely untrue, right? What's actually happened is that the internet and the real world are not actually substitutes in the way people thought up at the beginning is that they're actually compliments. They serve different kinds of people at different

points in time or the same kind of person at a different point in time. You might want to buy a pair of Warby Parker sunglasses online, use the home, try it on with the software on your face, or you might want to walk into the store on Green Street. So with the benefit of hindsight, we kind of see that these two things are actually very, very complementary to each other. And even e-commerce businesses to do well, typically have to have some sort of physical presence, Like being direct to consumer through the internet in and of itself is not really a business. So, yes, I mean, thinking about all these ideas, I ended up speaking to a guy from Amazon. So Amazon had this publishing thing that were just starting.

And I sort of shared some ideas about some of the research he was working on. And he came up with this title. And it was definitely not a best-selling book, but it was a fun book to write. And I think a book that opened up opportunities for me with companies I wanted to invest in or speaking. It was called Locationist Still, everything. everything. And the idea was just as you expressed that the physical world that you live in has a large influence on how you behave online. So I'm happy to dive in of that. Yeah, dive in, dive in. Why would it be that if I'm living in suburban Kansas City, I would have different

preferences than the same me. So I'm not talking about the profile of a person who might live in one place. Let's take the same individual. But at one point in the individual's life, they're living in suburban Kansas City. And at a different point in that same individual's life, they're living in Tribeca, Manhattan. Yep. Right. Why would their buying choices differ? Very good observation, particularly because you've anchored it to the same person, right?

So if we said it's just different people live in different locations, which is true. So I'll sort of get that out and come back to your question. So in any language, there's this idea of homophily or birds of a feather flocked together. I should be able to say it in Spanish. or I've heard other people say that, but the concept of homophily, right, birds of a feather flocked together. If you drive through Beverly Hills 90210, the kind of people that live there in terms of their demographics, their education level, house size, income, yada, yada, physical characteristics have a degree of similarity in the same way when I used to live in Philadelphia, 19123.

Those people are quite different, but within the group, they're sort of similar. So you've taken that off the table, which is really good. So leaving that aside that different locations have different kinds of people, why would the same person behave differently? Right. That comes down to the third point, which is it's the function of your offline options. The attractiveness of the real world for buying stuff, consuming stuff, products and services is a function of what's sort of locally available to you. So if you're living in the suburbs in Kansas City, you could go to the supermarket or you could buy from diapers.com. If the supermarket's not open all the time or it's 30 minutes away or you have to come, you have to.

carry this stuff, diapers.com's very attractive. If you're living in New York right next to Dwayne that's open 24-7 and just go down the elevator, then the real world has a different kind of attractiveness to you. So the attractiveness of the real world is a function of the offline options and offline options differ a lot by location. So I think I was saying to Joe, when he let me in earlier, first customer of Amazon is someone who lived 50 miles away from a bookstore, but really liked to read. So that guy, his attraction to something like Amazon was enormous because the real world was sort of too inaccessible for the thing that he actually, actually wanted. Overall, was some of the early adoption of online buying and online purchasing

and e-commerce? Was it primarily driven by rural inhabitants? That was a big part of it. So I'll give some examples with diapers.com. So the three things I know about you, if I know where you live, I know on average sort of who you are. Number two, I know a lot about your preferences. So think of the following thought experiments. So when you're deciding where to live, and hopefully no one's going to be stalking you, but you told me earlier you're in Hell's Kitchen. I'm in Tribeca in New York.

It wasn't that you got a map of the U.S. or a map of Manhattan and threw a dart and picked randomly, right? The choice of where people live is very considered. Obviously, there's economic budgetary considerations, but the overriding one is, what does this location offer me? I'm a family. I got young kids. I need a big house, access to schools, I need a backyard and a pool.

So your offline choice is also a function of your preferences. And then, of course, what's available to you when you're locally there. Right. The reason that I anchored it in the same individual in either Tribeca or suburban Kansas City is because often a person might live in a place that they wouldn't prefer to live due to either work or maybe family caregiving responsibilities, perhaps they have elderly parents who need caregiving support, and so they end up living in a place that they wouldn't have chosen as a result of these external circumstances.

Yeah. Yeah, so in that case, if you're in a place that you haven't really chosen, then the internet becomes a great liberator. So I'll give an example here. And it actually ties to some real work that we did for diapers.com. So I'll give the personal example and the diapers.com example. So we're trying to help Mark sell as many diapers as he can throughout the entire country, right? And so you might say, where's the best place for diapers.com to sell diapers?

Well, the best place is probably where there's a lot of kids. They're not going to have a lot of e-commerce sales and neighborhoods with no kids. So it's okay. And then you do the next level of thinking saying, well, if there's a neighborhood with like a lot of kids in there, probably the store in that neighborhood has a lot of diapers on the shelf. Right. So even though there's more kids, there's more competition to whether the product's going to be bought online or offline. offline or at diapers.com. If however, let's say you by virtue of just some other

constraining factor like parents or something else, you're a young person with young kids and you happen to have to live in a neighborhood where everybody else is old, then unfortunately when you show up at Safeway or whatever the local supermarket is, they ain't going to be much for you. There might be pamphers and that's it. And so we coined this term that you would be a preference minority. Like what you want is not what everyone else wants. And so, your offline option is going to suck. Yeah. And what we found was amazing, Paula, like holding the same number of customers constant,

100 here and 100 there, diapers.com did 50% better when their target audience, people with young kids, were relatively different or sort of isolated in that community. And then when you dug even further, you said, well, Paula doesn't want pamphers. You want mini moon with, like, kids, you know, you want some more niche brand. then it's even harder to get that. So niche brand sales for diapers.com in these minority markets were like 75% higher than in the benchmark market. So it's actually very practically valuable. Wow.

So you found diaper deserts. I did. Oh, no, I have to, okay, I have to tell you something really funny. So I was used to joke when I would present this at a seminar, right? I'm sort of a preference minority, particularly when I lived in Philadelphia, being from New Zealand and your audience may have heard this great song, which has been up on Instagram again recently for some other reason. It's the down-under song. Do you come from a land down-down? Everybody has this song, right? We're bare flows and whatever. I said to the man, are you trying to tempt me because I come from the land-and-a. Anyway, it's

very funny, the down-under song. And there's a reference in the song to a vegemite and crisp sandwich, okay? Now, people might say, what the heck is that? So in Australia, people have a white bread sandwich with this vegumite black yeast spread. That's very good for you. by the way, with like potato chips and cider. It's also good with avocado. Anyway, the point that I'm getting to is if I went into the supermarket in Philly and I said to some poor guy in the store, can you tell me where the vegamite is, he's going to look at me like I'm totally insane.

And why can't I buy vegamite in Philadelphia? Well, because I'm a preference minority. There's not enough other people like me to justify the position of that product on the shelf. And so the internet's like the great liberator for the preference minority. And so that concept applies to a lot of stuff, right? Like if I'm in some remote part of the world, there's no school, there's no university. Well, online education is pretty attractive to me. So I think it's a fairly general principle that you can be liberated by sort of the tyranny of your neighbor's tastes if they're not the same as yours.

The internet helps you get around that. And was that how it actually played out in terms of who became the early adopters? Or did that come later? Yeah, it's a good question. It's sort of hard sometimes when you don't have the demographic data of the customers, but what we did see with the sales is there was a really interesting clustering. So I used to show the students in class a map of the United States, and I'd put like a little dot in any zip code where somebody had bought from diapers.com.

And this would be, let's call this month one, right when they launch. And then you show the next slide, month two, like a time lapse. And you'd always see the little dots would sort of cluster. So once I got one customer here, then I get another one here. you could start to see that if I'm getting 100 new customers in a particular month, they're not just spread uniformly across the country. They tend to show up where you've already got places. And the part of the reason there is they're showing up because of Paula who has this need

in suburban Kansas City because the supermarket's too far or whatever, probably your neighbor has the same need and your neighbor's probably going to be similar to you anyway. And then also, like maybe in Kansas in particular, not in New York, but you might actually talk to your neighbor and tell them about this great new thing. And one other funny thing for the audience, when Mark started diapers.com and soap.com, you ordered the product, the boxes were very colourful. Like I had all the soap and detergent and stuff painted on the box. And this is genius, right?

Because when that box gets delivered somewhere, then other people say it's like sort of like advertising. And I remember him saying one of the painful things about the Amazon acquisition of that business is Amazon is very focused on saving money and they started shipping everything in plain box. Right. It was a bit of marketing that went away. Oh, 100%. And this is also a bit of a funny thing, but everything I used to order back in the day, like Harry's razors, Bonobo's pants, the Soap.com stuff. I would always leave the box somewhere prominent in my apartment building. I never put it in the trash of the recycling. A little gorilla marketing right there. 100%. Maybe we'll get into some of this later. But I think creating like social awareness of

consumption or purchase, that's a very powerful thing. to live. This episode is brought to you by Accenture. When your advertising operations fall out of sync, everything else follows. Spotify and Accenture are working together to reinvent the rhythm of ad sales, using automation, analytics, and smarter workflows to simplify campaign delivery and access better data across the business. The result?

Less time spent on operations, more time connecting brands with the moments and fandoms that matter most. Learn more at Accenture.com slash spotter. Hey y'all, it's Kelly Clarkson with Wayfair. Ever order furniture online and wonder what if? Like, what if it doesn't hold up? That sofa was four days old. You should have ordered from Wayfair. With Wayfair, there's no what if. Just style you love and quality you can trust. Visit Wayfair. com.C.A. Wayfair, every style, every home. So far we've been discussing the case study of something like diapers. Yeah. But for people at a particular stage or circumstance in their life,

diapers are a necessity, right? It is non-optional. Right. How do these lessons transfer if we're discussing some type of a direct-to-consumer product that is entirely discretionary? And then the reason I ask this is because I can imagine there are a number of people listening to this who are entrepreneurs or aspiring entrepreneurs. They're thinking about what business they want to start. And they're probably imagining some type of a product category that might be stationary or coffee mugs or just something that is purely discretionary. Right. So I'll give you an example. This is a business. A friend of mine started. If he's listening, he won't mind me saying. So it was a business that failed that I was actually very interested in. I think it's come back in different forms. Around 2012, 2013, there was a business called Pop Up Pantry. Okay. Popup Pantry. David and Tom, the two co-founders, they had this idea that people, just in general parts of America, were getting more interested in food. They're watching the Iron Chef and stuff on TV. And again, this is not to say anything pejorative about a certain location.

But if you and I are in a smaller rural location, we might have TGI Fridays at Pizza Hut. We're not going to have Joe's gourmet taco fancy thing that you have in Santa Monica. So the idea was, could they go into certain restaurants in L.A.? That's where they were starting. Take a proper trained chef with them, go through the menu and say, okay, from Joe's menu, I can make this appetizer, this main course and this dessert. it and I can suvee cook it and flash freeze it or whatever and I can ship it to Paula who's living in the middle of the country. What we found with that business, which was part of the downfall, is that the strong demand was from people who just didn't have these great offline options

of where to eat. That's when you started, you were getting the real traction. And that was both the blessing and the curse because the original idea of the business was, let's only sell this product in California. Because as you can imagine, you're selling suave freeze dried stuff, right? It's a bit of a complicated process. Pretty heavy to ship. Back in the day, they were charging, I think, $40 for a meal for two people, appetizer, entree, and a dessert. So in order to make money, they probably had to sell you four or five of those things

to break even. The first one that they're costing them too much to ship, as it turned out, one of the co-founder's David was a bit of a Hollywood-connected dude, had some minor celebrity. And he was able to do a deal, I think, with iron share for one of the, TV shows where they had a deal where the winner and the runner-up were kind of facing off and then people at home could be arguing about, well, I think the runner-up's food looks much better to me. Pop-up pantry would have that made and delivered to you.

So they started selling out the wazoo the entire country. The costs are exploding. And then the venture capitalist at some points out, we're going to cut the cord on this. This thing is going to go down the drain. That's never going to make money. And I think Kim Kardashian's shoe dazzle folded at the same time. But, you know, those ideas kind of came back with blue apron and freshly and some of them have done better than others. I think there's one that the audience might like is out of University of Chicago.

I think it's called Tavola or something. They sell you an oven. So you buy an oven for like 60 bucks and then they sell you special food that's already pre-made. This is for lazy people like me. I don't want to do blue apron and assemble the Nisois salad or whatever. Forget it. I want to take something that I know is going to taste good. and just either heat it up or whatever.

So that was one that kind of went bus, but to your earlier question, the real traction, a real demand was from people who did not have fancy New York, L.A., San Francisco, restaurant options. Oh, sorry, I thought of one more since we went diaper.

This one actually was very successful. There was a friend of mine in California. She'd just become a mum, very interesting technical founder, like a Stanford computer scientist. And she had a business, the name of which I'll, hopefully come back to me, but she was curating like very high quality children's toys.

So like European wood, like nothing toxic, this and that. And she used to joke, she said, I thought the customer would be me. I'm a Palo Alto mom. She wasn't being boastful, but she was talking about a certain affluent demographic living on the coast. All the demand that she got from this business was people who were living in places where they couldn't access those kind of like fancy high-end non-toxic toys. So I think it's a pretty general, principle. Think about who your customer is and find customers and locations where they can't really get what you're offering them anywhere else. And that's going to make it much more attractive. They'll be much more willing to pay for it. And they'll be so much happier that

they can actually get hold of it. So you'll get more loyalty, more customer satisfaction, and you'll have higher willingness to pay. Interesting. Okay. So for the people who are listening to this who are entrepreneurs and they're selling some type of a product online and they want to target, let's say people in the central part of the country, people ideally in small to mid-sized towns who might not have the variety of stores that you can get in a place like New York. How would a person go about targeting those people? Is that all simply a matter of like just being excellent at Facebook ads targeting? Or are there more specialized things that a person would do?

There's more specialized things now, I think. And again, there was been some interesting press. about this most recently actually in The Economist. There was an article I saw the other day. One of my friends who's a professor at IE business school, Madrid, was quoted in it. It was just talking about, I think the thing that most people know now is a lot of the early direct-to-consumer businesses could really spend money very efficiently on platforms like meta and Google and so on and could acquire customers fairly cheaply.

That game has kind of gone out the window now because of rise in costs, privacy and everything else. So I think you have to get really creative. So I speaking with the founder the other day, and he's actually figured out a hack with the US Post Office. He's got a sort of a wellness, longevity thing that comes in a sachet that you drink it. It's quite costly, like to send you one of those as a sample, but there's a way with the US mail, you can actually buy a route. You can buy an individual postal route of a certain number of homes that some person is delivering to. And the cost of doing that, I think he can get these things in people's hands for a little bit over a dollar, right?

Obviously, still targeting through the internet can be important, but offline activations obviously would have to justify themselves. Back in the day, Warby Parker had a school bus that they drove all over the country and we would monitor. And the bus stopped in Des Moines, Iowa. Did Warbyparker.com get more traffic? And absolutely it did. Like, the traffic would go up because this thing is driving around.

people are coming into the school bus, they're trying the product on. And what was really good about that was not only did the website traffic and purchasing sort of pop, it obviously started to go down again once the bus drove off, but it never went back to the pre-bus level. Being creative and being clever and trying not to spend too much money is a good thing, probably in every community of every size. There are certain people who are more important than others in terms of being a conduit. whatever it is that you want to sell.

So who is that person in Des Moines that if they bought the product, they would have outsized influence? I mean, it's all basic targeting, but the trick is the mechanics by which you do it and the creativity with which you do it. Right. When the story that you tell about buying a particular postal route, so you have strong coverage over a very narrow area,

and then with also the example of Warby Parker, pulling up a school bus to a specific location. Again, strong coverage, kind of media spectacle in a very narrow constrained geographic area. The common thread that I hear is tactile or physical, either via in-person interaction or via something in the mail. So tactile, physical, geographically highly constrained such that there is huge coverage in that narrow space. That's a great summary of the whole thing. And just as you were speaking, reminded me of another company that I really like. I haven't checked in for a while.

But I think it's a fascinating idea. So these guys are out of Los Angeles and they have an outdoor furniture company that's sort of like the Warby Parker of Restoration Hardware. So say you have a nice house in L.A. You'd like to have people over to sit by the pool and barbecue and you need outdoor furniture. So the company's called Outer, just O-U-T-E-R. this is where the old becomes new again. So there's a reason why there are furniture showrooms and automobile showroom. Like the showroom idea has been around for 100 years, right?

It's nothing new about a showroom. So pre the internet, if you wanted to buy that chair or a bed, you would go into a showroom and you would test it out and then they would deliver it to you. So they thought, we're going to have one showroom. So they had one showroom that was their office. But then it's very expensive to suddenly have showrooms throughout the entire country, right? So they had this idea, what if Paul? would allow her backyard to be a showroom for the company.

So you buy the outer couch, okay, and it's sitting in your backyard in the Hollywood Hills, and that's actually a very interesting idea. Say I'm also living in L.A., and I don't want to buy that thing directly online because I want to sit on it. I want to touch it. I want to feel it. But I'm living somewhere like near you. I could go on to the website, see that you've already bought it, and they had some deal with their customers where I could book to swing by your house,

half an hour, go into your backyard, sit on the thing, and then you got some form of compensation. And then on top of that, if I actually converted and bought, like you got something more meaningful, maybe you got $100 or $200. So they've now got, I think last time I spoke to Jake, order of maybe 1,500 or 1,500 of these so-called neighborhood showrooms. And here's the really interesting thing. Not only did they drive local demand, because now Joe can go to someone's house and sit in a thing, but also drives up the just e-commerce sales alone,

and I think this is the mechanism. So they started getting these neighborhood showrooms in Chicago. Imagine I'm living in Chicago. I go onto the website, and I see there's a bunch of other Chicagoans who bought this thing. Maybe even without going and sitting on it, I can say, well, obviously this made it through the Chicago winter. It's probably okay.

So even their e-com sales also went up partly by the social proof, right? So I think getting creative with offline is really, really important. And if you want to, I can actually, I can expound on, there's a company that we invested in that I think is just doing this on a whole new level. Yes, tell us. All right. So there's a great guy's name's Mark. Also like Mark Law.

Ironically, Mark worked for Mark Law at Jet.com. And he and his co-founder, they had this insight. It's like, imagine you wanted to buy something that's really touch and feel like a chair or a barbecue thing or machine or whatever. And you could either buy it via e-commerce or you could buy it after you've actually used it. Like Carraway, right? It's a great product, beautiful cookware.

You might just drop the few hundred bucks and buy it because it looks so good on Instagram. But you know what? Imagine you actually cooked with it first and saw how beautiful it was now easy to clean. Like that might further increase your chance to do it. So what Mark's done is he's built a company called Minowen that does exactly that. you go away with your friends and your family and you stay in an Airbnb in Miami and you want

to cook breakfast and just in there is caraway cookware so you get to use the product you're like this is great and there's a QR code you can scan it and you can buy it so the term that we've used internally to describe what Mark's done and we actually wrote a paper for the MIT Sloan management review to get the concept out there as we call it the everywhere store it's a huge idea. I think it all comes down to execution. But if you think about what Amazon is, there's a great book, it's about 10 years old, written by Brad Stone, who was a very good writer from Bloomberg, and it's called The Everything Store. And it's all about Amazon. It's a great read, all about Amazon literally loss offers everything, right? Right. So the idea of Minoan is

the everywhere store, and here's the simple statistic. So if you look around the world, what fraction of stuff gets bought offline versus e-commerce. So in the US, like 22% is e-commerce, like the rest of it is in stores and it varies by categories. Like maybe bananas, only half a percent e-commerce. You don't want to buy your bananas through a website, right? I mean, maybe Instacart, whatever. But in the other end, you might have contact lenses, might be 80%. All comes out in the wash. It's still 80% store, 20% e-com, roughly across categories and countries. China's 45% e-com. Brazil might be six. So if you just sit back and say, on average, around a random category in a random country, 80% of the action happens in a store. I said, okay, how much time is Paula

spending inside a store? Well, according to the census, two to three percent of your waking hours are in a store. And so, okay, where is she for the other thing? 98% of the time? And during that other 98% of the time, could I sell Paul or something? Like if she walked into the tennis club and she saw lemon perfect beverage, might she buy it? If she went to an Airbnb and got to cook with Brightland olive oil, might she scan it and buy it? So this is the big idea that Minowen is trying to tap into, which is making physical properties more interesting by curating products and then also creating more opportunities for commerce, particularly for things that you want to touch and feel. And obviously, we think this is a great idea. And it's not exactly the same,

but there was an early version in Uber. I don't know if you remember this. There was a company called Cargo, and you're getting an Uber from Hell's Kitchen and you go to the Met or whatever. And in the back of the Uber, the dude had some chewing gum. And I remember this had like Snickers bars. And the idea was like, you could buy some of this stuff. And a company was a venture capital back company. It was called cargo, it went bust, not because I think it's a crazy idea, but I think probably the average order value of what can be sold is a little bit small, and maybe it's hard to manage the inventory to get snickers barreds and all the ubers. Who knows?

Maybe that idea, maybe someone figures out how to do it, and it comes back, right? Right. Like a lot of this stuff comes back. I can see some sort of a vending, like a mini vending machine type of a model. Sure. Yeah. Yeah. Yeah.

So what Mark is doing with Minoa, and he's, not doing it in Uber's, but physical properties that already exist that people are already in, he's working with the owner of that property to create various kinds of products that go in there, that's a win for the customer, because you get to experience cooking

with Caraway before you buy it. That's better than seeing the Instraad. It's good for Carraway because since you've actually used the product before you bought it, you might be more predisposed to buy even more of their stuff. You're more attached to it right from the get-go. It's good for the property because

the property is a bit cooler because it's got all this awesome stuff in it. And it's good for Mark because he acquires customers. Sorry, it's good for the founder of the brand because that founder of the brand acquires customers. I think as an idea, and in practice it's already being proven out. But that to me is like a really fascinating innovation of sort of understanding where people are and what are the opportunities to show them stuff. What's interesting about the conversation that we've just had in that we've been talking about tangible items that are often physically marketed in small geographic areas.

We've just had a 40-minute conversation about innovation in business that has on the surface nothing to do with AI. And that, I think, if we kind of zoom out at the meta level, having a conversation about innovation and business that is not an AI conversation, where we often hear, the conversations that we typically hear right now are sort of the opposite. Everyone's talking about digital innovation. Other than back office support, of course, AI can provide back office support to any company. How do you see as we move into a much more AI future?

How does that play a role in this story? Oh man, it's a great question. So AI can really play a role in a couple of ways. So one is as you've already articulated, right, in sort of back office efficiency. And as I was taking the train I saw, as you do in the New York Subways, an ad for some sort of AI CFO finance role. Like this will just pay all your bills and do everything in the background for a company you don't have to think about it.

So there'll be a ton of that. But I think where AI is really interesting to me is on the more kind of creative end and figuring out what people actually want and sort of how to put it in front of them. And I think there will be some real. really clever innovations. I'm not technical enough to be speaking about AI innovation and the LLMs and the underlying technology, but innovations in how people start to use this stuff. So there's an example always stuck in my mind that's probably a year or so old, and it was in the New York Post, so I'm going to reveal that I sometimes read the New York Post and the Daily Mail

in the morning. There was a kid, a very bright young kid, and the story was all about how he'd been rejected by sort of the elite universities in the United States and why this was kind of a bit of a conundrum because what this kid had done is he'd built some kind of app that I'm sitting there at breakfast eating bacon and eggs and I hold my phone over it and it immediately from that picture tells me the caloric content and the protein and fat and everything that I've eaten. Wow. And I forget what it's called, but isn't that clever, right?

Yeah, that's great because it's so annoying to have to manually. 100%. And this is what this guy had done and he'd just kind of, it's. It's a very good use case, and I think he'd build his business up to whatever, 10 million in revenue. The guy was like 19, like, why is Harvard knocking on his door? So I think there'll be a lot of things there. There'll be things, for example, I think a lot about customer insight work and market research

before you start a company. So your ability to kind of do that now through conversations with your favorite AI, is this a good idea? You could build a synthetic audience to test as to whether they actually like the thing. that you're contemplating. So I'll give a shout out to a good friend of mine who's a professor at Columbia University, McClush Savory, and he's a very good sort of academic researcher. And what he showed recently in an academic paper is one of the bread and butter things in market research is a perceptual map, right? And so you have all the different products. So for example,

let's say we did a perceptual map of business schools, since we talked about business schools. And you might have, on this side of the map would be like Harvard, maybe northwestern and we'd say in this side of the school it's like Dartmouth and MIT and you say okay what's this to me oh this is about size here's the big schools over here and the small schools over here

so people will create these maps to see where the white space opportunity is right and then maybe up the top here there's Harvard down the bottom here I should have reversed it whatever is Wharton and I say well that dimension is sort of quantitative orientation this is more qualitative at the top so often

before people start with a product they'll ask customers questions to see how the existing products are perceived. And usually the way you get that data is I say to Joe and to Paul, how similar on a scale of one to seven is Stanford Business School and the University of Chicago? And you give me a number. And I get all these numbers and then I crunch them through some math and then it puts all the alternatives coming out in the map. And then I figure out what the dimensions are. And you do this when you introduce new beer or sunscreen.

You're looking for, and you see these things. almost every investor pitch that you see will show, well, here's all these other products. And we're doing this different thing. So anyway, what he showed using just AI is he could reproduce these kind of maps for, I think he looked at automobile, beer, and a beauty product. Using AI, he could produce those maps to like 85% of the accuracy that you would have gotten from going out and actually talking to real customers and probably playing some

consulting firm $100,000 to do it. So that, to me, is really interesting that that early insight work, I think, can be really supercharged through AI. So for a person who's listening to this, they are an aspiring entrepreneur. They have a handful of ideas. They're not quite sure which one to pursue. And they would like to, in a very low-cost way because they're bootstrapping this, they would like to go down that route and see if they can use AI to gather some customer insight. what would the average individual do?

So I think what you could do is say you wanted to introduce a new kind of beverage, very crowded space, right? We just saw, was it poppy, I think? Yeah. Just bought for a couple of billion dollars by Pepsi or someone, I believe. So very crowded space. And traditionally you might look at a map of the market and say, oh my God, there's big opening for like prebiotic, probiotic, whatever, let me do that. I think what you could do is you could just get into a conversation. You could use something like prompt cowboy or whatever your favorite thing is.

And prompt cowboy is kind of funny because you say, I want to learn about the beverage market. And then what it does is it takes your prompt and it creates a much, much more articulate, longer prompt. And then you copy that prompt and you send it to Gemini or whatever your other favorite is. So you could start interacting and just asking it, like, where are the opportunities? How many brands are there? Tell me everything you can about why Poppy was successful. You could get probably free market research reports that have already been done, just upload them into AI and ask for a perspective. So even just a little bit of hacking around for an hour or so, plus with your own human creativity, because you can't replace that, you might come to the conclusion that, man, I should create a brand that's like sunscreen only for kids.

And the way that they should apply this thing should be like through fun stickers. You know, like maybe that's the output. but it's going to also require thinking by yourself too, because the AI, it does some thinking, but it's more of a synthesis of what's already out there. Now you don't have to hire a consulting company or have a more junior person do that. That work can be done, but what can't be done is the thinking piece. And I can give you some examples. A favorite brand that was actually discovered by our team, in particular my co-founder,

discovered it. We talked about this earlier, is an amazing brand. It's kind of a cultural phenomenon. It's called Touchland, okay? The handset. Oh, yes, the handsets. And they've got all of the, I have Touchland Hand sanitizer. I'm so great, is it?

Yeah. If you've sort of spoken to AI, and I encourage the audience, if you haven't seen it, you just go to Touchland.com and you'll see just beautiful branded website, core products. And so anyone who's got kids has seen this out the Wazoo. So this was discovered, again, as my co-founder is always looking for, he saw this on Instagram years ago, and then we kind of built a relationship. with the founder.

Now, could have AI conceived of that? I'm not sure it could have, right? But if you'd gone to AI and said, man, there's this really boring category called hand sanitiser. Tell me what's wrong with it and what's boring. I mean, it might tell you something, right? But what the founder, Andrea,

the genius of what she did is she took something that's a functional benefit product. Like her product sanitizers just as well as Purell, but she layered into it to other benefits. It's very important if you're starting a business. she layered in sort of emotional benefit, like it sort of feels cool to use it, and then she layered on top of that, like what I'll call a symbolic benefit. So when you and I are at lunch, and I pull the touchland out, and you're like,

oh my God, David's so cool. Look at these, he's got this watermelon, and then I share it with you, right? So she sort of layered in these additional benefits that the other thing didn't have while still retaining the core functionality. And then on top of that, there's many things that that team did that were incredible. But one of the think most important was selling that product in Alta and Sephora because I remember our team having a discussion where we were thinking about how's this product going to sell at retail and how am I going to tell Paula and Joe the customer who's looking at Puehl and they're looking at this new thing and this thing's like five times the price at $10, the same quantum of Purole's only two. It turns out that Touchlands still better on a price per use basis because it's a spray not this awful. No disrespect to any Puroreel people.

It's not the sort of alcohol sort of goo, right? So it's a better product. It's five times the price, but on a poor use, it may actually be better. So we were kind of scratching ahead saying, now how can I get that message across at the shelf? And then we're, because you're going to make a decision in a second, right, at the shelf. And then somebody, probably Andrea, realized the best way to tell that story is just sell the thing in Sephora.

That says everything about that story that needs to be said without, having to say it. And by the way, you're sitting there at $10 where everything else is 15 to 20 and above. And if you've ever done this, which I've done many times, if you go shopping like with a bunch of fifth graders and sixth graders running, going crazy through Sephora, I mean, they love that thing out the wazoo. So I think for the listeners, taking something that's old, prosaic, boring, hasn't been rethought in 40 years, which is frankly most of the stuff you see in the supermarket and putting some of your human ingenuity with a bit of AI, who knows what you could cook up.

With Touchland, too, the shape of the, I don't even want to call it a bottle because it's not a body, the shape of the container. It's so unique and it kind of sized like your hand. Absolutely. I mean, this is another thing that goes back to, if you read about Steve Jobs, right, and how obsessive is. and I'll tie this into Touchland. I think this is true.

I read one of the biographies, and it was saying about how he obsessed about, I think maybe got this from his father, that you build a bookshelf and you put it up in the room and people only see the front. And he's like, well, dad, why'd you spend all that time

making sure the back of the thing was perfect? But no one's going to see it. Well, yeah, that's not the point, right? Things should be done to like a very high level of quality. And I think the amount of thought that the team put into, it's got a, the haptics have to be good. It has to be something that when you pull it out of your bag,

you can do it with one hand. Like that's really important. We don't want you. And so every nuance of how that feels, how it looks, how you use it, how you use it in front of other people, was thought through by the team to the nth degree, you know?

Right. I'm thinking through like what it would actually take to do something like that, right? Because you can design something beautiful on paper, but then how do you even begin to figure out how to manufacture that and who's going to do a good job and how is it going to get shipped? And so what strikes me is you need a board of directors and then suddenly things start to get very expensive. What would you say if the person wanted to build out an AI board of directors? Right. Yeah, okay, funny. So yeah, it's a great question. Look,

there's many things you can do with AI. So I'll sort of distinguish two layers. So if we'd been having this conversation five years ago before AI was really in our everyday consciousness, I would have said the enabling factors are kind of the, what I mean by enabling factors, like the ability to build a website, the ability to find a contract manufacturer, someone typically in Asia who's going to make the thing. Like a lot of these things can now be done through some form of outsourcing. And I had a really bright pen undergrad student. It was probably about that same time ago, more or less, Rajesh, and just for fun, he wrote this tongue-in-cheek article for either Forbes or Fortune, and it was how to build a startup in one day.

And he did it sort of as a joke, but he really did it. He built a coffee delivery company. Like he put up the website, he somehow sourced the coffee. You could order it. He did the whole thing in a day, just to make the point that for something of that scale, the enabling factors are there. So I think those are still there. You can find all of those things.

But I suppose now with AI, you can put some of the human component into it, right? So you could have the AI help you think up the marketing messaging, you could have the AI process all of your invoices. You could have the AI help you forecast how much inventory you need. And, you know, this, I think

many people may have seen this now. We spoke briefly about it just earlier. But I think the company is called MedVie. It was in the New York Times. And it's the story of a gentleman in L.A. who built a GLP1 business, mostly just through

AI doing all the work figuring out how to source it, figuring out how to market it, and so on. So I think we're going to see more and more of that. We're ending part one here, but stay tuned because on Friday, David comes back for part two. And in that episode, we're going to get into the world that he actually works in now, the world, the very mysterious and opaque world of venture capital. Venture Capital is the money behind almost every brand that you hear about today, Warby Parker, Harry's, Touchland, none of them exist without it. But it's a world that is basically invisible to average folks. It's this hidden pocket of investing that very few people understand. What is it?

How does it work? And how are some of the incentives, not what they seem? We're going to unpack all of that on Friday in part two of this interview. So hit follow so you don't miss it. In the meantime, let's review some of the key takeaways from today's conversation. Key takeaway number one, the products that might be the best fit for you are not necessarily the ones that are on your local shelves. And if you're an entrepreneur, this means that there is an opening because the strongest online demand shows up when people can't get what they want nearby. So David refers to these buyers as preference minorities. Their tastes don't match the taste of their neighbors. And so the local store never carries the thing they want. And for anyone who's

selling anything, that gap is the opening, sell to the people that the shelves ignore. And if you're selling a digital product or service, that means go to the places that are adjacent to where all of your competitors are going to. Go to the places where you may still find a few preference minorities and position yourself in the places where you'll find the people who want what you have to offer but don't know where to find it. If I went into the supermarket in Philly and I said to some poor guy in the store, can you tell me where the Vegeamite is? He's going to look at me like I'm totally insane. And why can't I buy Vigemite in Philadelphia? Well, because I'm a preference minority. There's not enough other people like me to justify the position of that product on the shelf.

And so the Internet's like the Great Liberator for the preference minority. That is the first key takeaway. Key takeaway number two, people don't pay for function. They pay for feeling. Touchland is a prime example. Touchland took a basic product, plain hand sanitizer. And the founder kept the function. It cleans your hands.

It sanitizes your hands as well as Purell does. But the founder, then stacked two more layers on top. First, there was an emotional payoff. Using it feels good. And then there's a status symbol. Pulling it out makes you look cool. You add this beautiful design, this great hand feel, this watermelon scent, and now with this layer of feeling and status layered atop. You're willing to pay $10 for a bottle of hand sanitizer. of what she did is she took something that's a functional benefit product, like her product sanitizers just as well as Purell, but she layered into it to other benefits that's very

important if you're starting a business. She layered in sort of emotional benefit, like it sort of feels cool to use it, and then she layered on top of that, like what I'll call a symbolic benefit. So when you and I are at lunch and I pull the touchland out, and you're like, oh my God, David's so cool. Look at these. He's got this watermelon. And then I share it with you, right? those of you, about one-third of this audience, has some type of small business, either a side hustle or a full-time bootstrap small business. And you're probably not selling a physical product. And most of you sell digital products. But remember, the function is the only part of Touchland's story that actually lives in the physical world. The two layers that are stacked on top, the emotional

payoff and the status symbol, that is pure psychology. There's no manufacturing cost to that. And that's the part that translates even when you're selling digital products. So as you're selling online, your product, your service, the skill that it teaches or the problem that it solves or the result that it delivers, fulfill your function. I mean, that's your core role. But if all you sell is function, you're competing on price. And when you're bootstrapped, competing on price is a death sentence. So add the emotional layer and then add the symbolic layer. What type of person is drawn to the thing that you offer?

What does it say about the person when they buy the thing that you have to offer? And for those of you, this part of Touchland story, the way that they told a story, they put themselves in Sephora. that inherently told the whole story without even having to say a word. So your version of the Sephora Shelf, that is your brand, that's your positioning, that is the identity that your customer gets to wear by virtue of interfacing with your product or service. And as a bootstrapper, the beauty is those are the layers that are the cheapest part, right?

That's the cheapest thing that you can build and the hardest for a competitor to copy. Anyone can clone your feature list, but no one can clone the way that your product or service makes you feel, makes the people who encounter it feel. And no one can clone what it signals about them because that's built out of trust. All of that is baked into the second key takeaway. That's a long key takeaway. But it's an important one for any product or service that you're offering. So those are two out of three key takeaways. Finally, key takeaway number three,

AI can run your market research for almost nothing. So before you sink any money into an idea, David describes how you can test it with AI for a fraction of what it used to cost you. He points to a CBS professor, a Columbia professor, who rebuilt the maps that companies use to spot gaps in the market. That's the type of study that used to cost six figures. And AI gets about 85% of the way there on its own. So it's better than the 80-20.

So if you are bootstrapping a side project, that is critical money saved, right? You still bring the creativity, but the expensive grunt work gets a lot cheaper. What he showed using just AI is he could reproduce these kind of maps for, I think he looked at automobile, beer and a beauty product. Using AI, he could produce those maps to like 85% of the accuracy that you would have gotten from going out and actually talking to real customers and probably paying some consulting firm $100,000 to do it. So that's, to me, is really interesting that that early insight work, I think, can be really supercharged. That's right. Those are three key takeaways from this conversation with former Wharton Professor David Bell. Today's episode was part one of a two-part interview that we are doing with him.

The next episode will air on Friday. And in that episode, we're going to unpack the opaque world of venture capital. What is it? What does it mean? A lot of us here jargon thrown around, but we don't actually know. the inside of how it operates. David unpacks that for us in the next episode. So make sure that you hit the follow button in whatever app you're using to listen to this so that you don't miss that upcoming episode. If you are on Apple Podcasts or Spotify, open up that app, hit the follow

button. While you're there, please leave us up to a five-star review. If you are watching this on YouTube, please hit the subscribe button. Around seven out of ten of the people who watch us actually are not subscribed. So please, help us bridge that gap. Our goal is to get to 50-50 at least. Hit the notification bell so that you will find out when we publish new episodes. As I said at the top of the show, we cover five pillars, financial psychology, increasing your income, investing, real estate and entrepreneurship. The acronym is double eye fire. Today's episode focused on the F and the E, the financial psychology, the psychology of consumer spending, and the E for entrepreneurship.

If you want a comprehensive look at all five of those pillars and how it applies in your life, we have a free workbook that is filloutable, it's interactive, it asks you questions, you answer it, and through your answers, you unpack the way that the five pillars F-I-R-E apply in your life and how you're going to use that knowledge to make better spending decisions to save more money, to align your money with your values. That's what the double-I-fire workbook is for. It's completely free. You can download it by going to afford anything.com slash f-I-I-R-E. That's afford-anithing.com slash fI-I-R-E. Thank you so much for being an afforder.

you enjoyed today's episode, please share this with the people in your life. Friends, family, neighbors, colleagues, share this with all of those people, your loved ones, your liked ones, your tolerated ones. That is the single most important thing that you can do to spread the message of great financial health, great financial smarts. So share this with the people in your life. Download our free workbook at afford anything.com slash f-I-R-E and follow this show in your favorite podcast player so that you don't miss part-fodendiping. which is coming out on Friday. I'll see you there. Thank you again for being part of this community for being an afforder. My name is Paula Pant. This is the Afford Anything podcast, and I'll meet you

in the next episode.