The Ryan Hanley Show - Ex-Google Chief Evangelist: Why 90% of Companies Are Optimizing AI for the Wrong Thing

Episode Date: April 9, 2026

I help founders & executives generating more than $1M in revenue find their Easy Mode. Start here: https://ryanhanley.com/subscribeWatch this episode on YouTube: https://youtu.be/lKaYO5Hy5LIIf you are using AI to optimize for conversion rate, return on ad spend, or time-to-hire, you are pointing a self-driving car at the wrong address. And it’s going to take you there really, really fast.In this episode of Finding Peak, I sit down with Nicolas Darveau-Garneau, former Chief Evangelist at Google and author of "Be a Sequoia, Not a Bonsai." Nicolas has advised over 1,000 CEOs on digital transformation, and his conclusion is staggering: 90% of companies are optimizing the wrong KPIs.We break down the $15 Billion mistake companies make with AI, why Customer Lifetime Value (CLV) is the only metric that actually matters, and how a simple mindset shift helped a local gym owner turn a $200K business into a $1.2M powerhouse without adding more members.Whether you run a Fortune 500 company or a Main Street bakery, this conversation will completely change how you deploy AI in your business.In this episode, we cover:👉 The $15 Billion AI mistake most companies are making right now👉 Why optimizing for conversion rate is killing your long-term profit👉 How to use AI to predict the future (and why you must get comfortable with forecasts)👉 The exact strategy a gym owner used to 6x his business by targeting 55-year-olds👉 How to build a limitless testing organization that your competitors can't catch👉 Why brand building is no longer just for massive corporations** Connect with Nicolas Darveau-Garneau **LinkedIn: https://www.linkedin.com/in/nickdg/Book: Be a Sequoia, Not a Bonsai: https://amzn.to/4tdw84DThis show is part of the Unplugged Studios Network — the infrastructure layer for serious creators. 👉 Learn more at https://unpluggedstudios.fm.Advertising Inquiries: https://redcircle.com/brandsPrivacy & Opt-Out: https://redcircle.com/privacy

To me, AI feels different. It feels like it's moving so fast and so far in each leap that if you're trying to wait till like the finished version, you're not going to be able to catch up at that point. I think as these models are doubling in power every six months, right, and they're getting 90% cheaper every year. Basically, if you can have compounded that out over five years, that's a hundred million improvement in price power.

If you're telling the AI to go in the wrong direction, the EIs going to take you there really, really fast. It's like a self-driving car with the wrong address. It's not about being right. it's about getting it right. And if you can't get past that, we can't move forward. I am so far down this AI agent rabbit hole that it's insane. I'm not technically, I'm not like a native tech guy.

I get people, people misconstrue it. And I think this is interesting. I'm interested in your take on this. Like, there's nothing technical about me by nature. I'm not great at fixing things. I can't code at all. I took like one week of C++ in college and was like, screw this. But a lot of what I do is technical and so much as like I love getting into AI.

I love learning about these things because I see them as to me it is undeniable what is coming. And to be unprepared as a leader, regardless of your technical proclivities feels you're denying yourself a skill set that's going to be very relevant. and I get a ton of questions from the audience about how much of this should I be putting into my business. Should I be building myself an open claw? Should I have co-work? Like, how much time should I be delegating to learning about this stuff? Because I think there's this group of people that has been able to, we'll say, skip off new technology and wait until it's mature and still be okay in what they're doing.

and I'm worried is the wrong word, but I'm concerned for them in so much as, to me, AI feels different. It feels like it's moving so fast and so far in each leap that if you're trying to wait until the finished version is available to you, you're not going to be able to catch up at that point.

Yeah, I'm with you, I think, you know, senior leaders, and by the way, like, when I was at Google, I met over a thousand CEOs and advised them, right, on their digital transformation, marketing and AI strategy. And that was one of the typical questions. This is like, look, you know, things are moving very quickly. Do I want to be a fast follower?

Do I want to be a leader? My answer is you always want to be a leader. You don't have that they'll take on the most complex projects at first, right? But you can't wait. And so if you're not building your AI muscle right now as a cousin, and as an individual, and I think as these models are, I mean, doubling in power every six months, And they're getting 90% cheaper every year.

Basically, if you can have compound that out over five years, that's 100 million improvement than price power. Right. And so if you're not building the muscles right now, I don't think, you know, you're going to thrive in the next five years unless, you know, the government regulation saves you. So I'm with you. I think you've got to go hard on developing the skills yourself.

You have to go hard on, you know, helping your team develop that skill. the problem is that a lot of employees are scared as they should be, right? It's very normal. And so as an executive, what you have to do is not just teach people AI, is you have to show them what the future looks like for them. Hey, if you're doing this job right now, and the AI is going to take over 50% of this job, and you'll be more productive and it's going to be great. But let's be honest, eventually, that job won't be that fulfilling.

So here's your next job. And we're going to try to get you to stay ahead of AI. And if you become really, really good at this, you know, your career is going to thrive for the next 10 years. And so that kind of hopeful message, I think, is important. Also talking about AI as a growth engine, not AI as a productivity engine, right? Like the speech of like, we're going to get 30% productivity out of AI is not that, you know, warming for employees. But instead, if you say, we want to double the business in the next five years and employ only 30% more people, then that's a much more thoughtful,

optimistic message. So a lot of this is, you know, the leaders knowing the stuff, right, personally, and having played with it, more now played with it, like having really achieved something with it. And then secondly,

is really getting people on board. AI is not really a technology problem. To me, it's like two things that are really matter. One is change management, right? And the other one is, what are you asking the AI to do? And so one of the conclusions I reached, you know,

views as Google's chief evangelist was that 90% of companies are optimizing the wrong stuff. Right? And so if you're telling the AI to go in the wrong direction, the AI is going to take you there really, really fast. It's like a self-driving car with the wrong address. Right. And so in my experience, what's happening a lot is people are deploying AI systems and employees reject them sometimes. And or the AI system is just focusing on the wrong thing. this idea of focusing on the wrong thing. I don't think, one, this is not a conversation that's being had. I don't not hear very many people talking about this at all.

It's mostly, and to be honest with you, I think for a long time I was guilty of this as much as anybody because this has only been something that's been at our fingertips, what, for two years, two and a half years-ish, and it's gone so far from what, you know, GP2 or GP3 was to, you know, 5.4 and then, you know, obviously there's a ton of other models, but just thinking about Open AI's progress, you know, what you could ask and expect to get back from those early models. I mean, that's remedial stuff that you wouldn't even think about

today. And it's this tiny little 24-month window that we've been working in. If you're a lot of leaders, a lot of, we'll call them regional and main street businesses, listen to our show, ton of leaders, ton of entrepreneurs, but it tends to be outside, say, the, Fortune 500, Fortune 1000 group that kind of come to this show. And I know the question that they're asking themselves right now is, Nicholas, what should it be working on and what shouldn't it be working on? Because I'm positive what you just said scared the crap out of them, because efficiency and the productivity of each task is so incredibly important to smaller organizations.

Not that it's not to large organizations as well, but you can really feel that pain if you have even one employee working on tasks that aren't moving the needle. Yeah, well, it's a great question. And that's why I wrote my book, B.S.C. Collian, not a bonsai. The book's about, you know, how companies can really grow a lot faster without, you know, more innovation, without new products, without hiring new people. It's just changing your mindset and asking the AI to do something different.

So I'll give you a couple of examples, right. If you look at 90% of companies and you look at how they're doing their marketing, which is usually, you know, a canary in a coal mine, because if you market, team isn't doing the right thing. The odds are your product development team, your customer service team, other teams aren't doing the right thing because marketing is very data driven. It's pretty obvious, you know, what you should be doing. So I'll give you my favorite example of doing the wrong thing. Like imagine you and I started charity, right?

And we want to advertise on Google and Facebook to raise money. It's a very simple equation. We put cash into Google and Facebook. We get cash back, right? So, and then the AI is doing all that work. It's doing all the targeting, all of the things. optimization for the advertising. So what do you ask the AI to do? Well, if you look at what charities are doing today, not 10 years ago, but today, 90% have the same KPI. Which is the most popular KPI in marketing,

which is return on ad spend, which is basically the amount of money you raise divided by the amount of money you put in. Right. Hey, if I put a bucket to Google and I get $3 back, I'll do this all the time, whereas I just found this money printing machine. Turns out, there's nothing, you know, it's fine, you're making money, but that's not the right KPI. Like what you should really focus on is how much money am I raising minus how much money am I putting in? How much cash do I have left at the end of the day, right? But very, very few, no, non-profits do this. And so St. Jude's, for example, I met San Ju's about seven years ago, an amazing organization, right, the most respected organization in the U.S., the number one place, college grads you want to work, does amazing, amazing work to help children for free throughout their entire, you know, cancer, you know, you know,

Well, you tell you know, if the cancer comes back five years later, right, San Jose will still be there for you, still for free. Parents can, you know, fly in and have a hotel for free to eat for free. And also San Jose does, you know, a huge amount of research for childhood cancer worldwide. So when I met them, they're raising a billion dollars, right? And we're kind of thinking a little bit in this kind of efficiency mindset, right? As long as we're efficient, we raise money efficiently, we'll do more. But I was like, look, you do, you should just care about how much money you've raised minus how much money you give. Facebook and Google.

And within a year of making that change, and they've done some other things as well, but it raised 46% more money. Right? And now there is a $2.5 billion. So that's simple, simple change of like, my marketing KPI is wrong, right? Let me change it to the right one.

Boom, I'm 46% better off overnight. Right. And then so that's an example. It's a very simplistic example. And I'm making you into more complex examples, but this is happening all over everywhere, every advertiser I've met. And then if you dig into, you know, their HR policies,

what's the KPI, time to hire? Like, why? Like, why do you have to hire fast? Don't you want to hire the best people? What about customer service? Average handle time? No, who cares? Right?

I mean, so if you're a CEO of a small business and you look at the KPIs that your team is following, I would bet you a lot that you can find three or four really important KPIs that are in. correct. And if you changed them, your company would be way, way better off. In working with AI as much as I have and thinking about my own clients that I work with and having similar conversations, one of the things that's kind of hit me in the face is how many of our KPIs, how many of our workflows have been determined based on the restrictions

of the system we use, not based on them actually being what's best for our business. It's like, well, we can only track time to hire, Nicholas. I, I have. have no ability to understand the long-term, you know, return on, you know, this, you know, spending an extra four months, bringing in an employee and adding these extra layers. And so they, because they didn't have the ability to either handle the amount of data or the systems couldn't do that, et cetera, you get these best practices and these KPIs that aren't necessarily, as you said, best for the business, but it's what they can do. And to me, it feels like with AI and the ability to build these agents, build your own.

own, you know, your own LLMs to mine data out of databases or multiple databases and pull them together, we can start to actually think through how would you grow the business in a perfect world with no restrictions and actually have that be a reality? And those are really different conversations in some cases. Yeah, I think that's exactly right. I would add another complication, which is most executives aren't comfortable making decisions based on a prediction. Right. So I'll give you a really great case study from the book, a company called CERX, which is an online car insurance company out of Canada. No, if your online car insurance company, what you care about is typically historically was leads. How many leads do I get? And what's my

cost per lead? Another set of really bad caveIs, right? Because who cares how many leads you got? Who cares how much they cost? These leads are any good. Right? So imagine using, you know, an AI to predict the quality of each lead. So you just, you know, you get a new lead, right? It's a 35-year-old man out of Memphis, Tennessee, who drives, you know, this kind of car, has this kind of credit score, dot, dot, dot, dot, right? And then it's actually not that hard. You can build a model that is quite accurate that can forecast the profitability of that individual customer based on how long they're going to stick around and pay the monthly premiums and, you know, are they going to have a car crash? So imagine, you know, you can build a model.

models. We'll make 500 bucks from Ryan. We'll make 100 bucks from Nick because he's going to have a car crash. And you can do this for every single customer that you acquire. You feed the simple one piece of data back to Facebook and to Google, right? And their AI figure out how to find

more people that are the most profitable. So this company did this. And within, you know, a few months, next thing you know, they were acquiring 90% more customers who were the top, you know, 20% customers. And 60% fewer customers or the bottom 20% customers, and they made four times more money than before.

And so this whole idea of, not only do I have the right KPI, and I can think about, you know, using data and AI to maximize them, but now I can build a crystal ball. I mean, I can predict the future, even though it's not 100% accurate, but if I could predict the future,

that's the data I should be using, not, you know, what happened yesterday. So too many companies also look, you know, in the rearview mirror, and none of companies actually look like in front of the windshield to see what's going to happen next. So the best, best companies in the world are the ones who are using predictive models to make decisions today. And the cool thing about AI is that now this is available for even the smallest company. Anybody can build a predictive model.

Anybody can plug it into Google and Facebook and other places and dramatically improve their customer acquisition, dramatically, you know, lower their churn, dramatically improve, you know, their cross-selling. So this is all available to everyone, but you have to be okay with making decisions based on forecasts. It's just like a mindset shift where you're like, man, I know the leads I got today. I know my cost per lead. I don't know exactly what my profits are going to be for Ryan in the next five years. I'm only guessing. But I'm actually comfortable with that guess.

I'm going to optimize using that guess. And I'm going to improve that guess over time. I'm going to get better and better. But I'm basically building a business that is running based on. future. I know you may not know this, but the industry that I grew up and was actually the insurance industry and the property casualty industry. And one of the things that to this day, 20 plus years in the business, I've sold thousands of policies. I started my own agency, grew it, sold it. In 2021, we were actually the fastest growing small commercial agency in the country outside of the top

200, which are like the marshes and the Willis Tyler Watson's and those guys, who I would have loved to compete against, but we were not. We were significantly smaller than them. But my point in saying all that is what most people would be shocked to know is how little and how broad and fuzzy the data is that most carriers make their pricing decisions on. And that's not a knock on the carriers. Honestly, until AI became what it is today, the option to actually pull in all the data wasn't even really there because of all these old pipes and there's a whole bunch of stories there which we don't know i don't want to board the audience in my point is with with some of the clients that i work with in that space uh something that i have found eye opening as well as them is the ability

to run multiple predictive models synchronously alongside each other so or a synchronency sorry so so you could essentially say okay what if we tweak uh what if we say 40 is the cutoff range for this top tier instead of 35. What does that do? What if we say people who only drive whose commute is less than 15 miles instead of 20 miles and you could literally instead of having to deploy a team of actuaries who, you know, pull up a room full of chalkboards and start doing all these calculations, you can play with all these different variables at one time and run out these scenarios years into the future. And again, we're doing, as you said, predictive modeling. But think about it, guys, even in your your smaller business, even like

a bakery or a plumbing a vertical, you can start to play with, hey, what would it look like? Here's what we're doing today. What would it look like if I added two new estimators to my plumbing business? If they were going after these guys and here, what could I predict?

And the model can give you all these scenarios so that you're not just guessing or using gut feeling. Not that gut feeling isn't still there. And I guess this is where my question is going. It's like if I can have 50 different scenarios laid out in front of me and I get all these numbers. At the end of the day, it still feels like there is a gut decision at some point to know which ones to trust, which ones to give the most weight to, et cetera. How are you, you know, advocating or consulting the people that you talk to

around this balance or harmony between the gut feeling of a leader with experience and the information they're getting out of these predictive models in this case, not necessarily looking analytics, but the predictive models that they're getting in from AI. Yeah, a couple of thoughts on that. That's a great question, Ryan. One is, let's just kind of predict the future a little bit, right, and assume AI agents work. Let's assume that, you know, the number of hallucinations goes down to near zero.

And you get all these processes of agents doing a bunch of work for you. Okay, so that's interesting. So, and that's going to get pretty commoditized, right? You get customer service agents and this and that pricing agents. So we're back to, you know, asking the. agents to do the right thing and we're back to giving it the right data and then using your judgment as well. So there's three things that matter. What do you ask the AI to do? We talked a little bit about this. What data do you feed it? And then what do you do with these decisions? So, you know, one of the

thoughts there is that these AI models are actually extraordinarily powerful and most companies are actually very worried about using today. So for example, in the car insurance business, we went back to property casualty. This is a public case study that's seven years old. I think it's even like eight years old now. So Google worked with AXA, right, the large European car insurance company, and their actuaries to look at their predictive model for large loss car accidents, right? Car accidents that cost $10,000 to insure. And AXA had 72 pieces of data that were using legally. They solved this plumbing problem, and they had the data, right? They had the data. And the actuaries were using the data. And with that data, they were able to predict who's going to have a car crash at about a 38, 40% accuracy rate. Google's cloud team took the exact same data, no new data, the exact same data, and using machine learning as opposed to human math, they're able to improve that prediction to 80% accuracy.

They doubled it. Yet, if you go around the P&C world, despite the fact that this thing is public, this case study is public, you'll be hard-pressed. to see how many property and casualty, companies actually use AI to predict risk. That's one massive opportunity. It's just, you know, your predictive models should be using the latest and greatest technology

because if you get agents competing against other agents from your competitors and one is twice as accurate as yours, you're going to lose. Right? And so, for example, going back to the marketing example, if CERX has got a predictive engine

that's twice as accurate as mine, and we're trying to acquire the best customers in the industry, they're going to get all of them, right? Because mine can't really predict who the best customers are. So there's a huge amount of work for most companies, even small companies to do, to just predict things better. Going back to your bakery example, right?

I mean, you can predict demand at the product level. You can predict how much flour and sugar you need. You can try to predict prices of these things going forward, when to buy, when not to buy. There's a lot that you can do that's really exciting. But in the end, to your problem, point, right, that's just data. And the AI is just giving you some recommendations. But the AI doesn't have a lot of wisdom today, right? And so I think it's really important to also have

a human in the loop for the really important decisions. Not that, you know, the day-to-day stuff, the agents are probably going to be able to handle loss of it. But when you try to make a direction shift in your business, right, hey, I'm a baker and I want to open a second, you know, bakery, or I want to add, you know, three new items to the menu, you can discuss with AI, other things, it can give you, you know, its opinion. But in the end, you know, you're the baker. So I guess my answer is for day-to-day things that AI can do really, really well, I think we're getting pretty close to being able to remove the human in the loop, right? With the agents, not making mistakes, you know, hopefully, you know, a year and a half, two years from now. But that means that, you know,

what executives should do is really focus on the areas that require judgment because the AI is not going to have a lot of that. But the AI can help you scenario plan. You can help you. You can help, you know, give you a whole bunch of different outcomes that are possible. But, you know, you have to pick at the end. Yeah. Guys, I'll give you a quick example of this just so you understand a thought process here. I actually built, I'm using OpenClawe and essentially his name's Maximum Effort as an homage to Deadpool.

I call Max. And he is essentially my chief of staff of this podcast and my consulting business, Finding Peak. and I'm going to give you exactly what happened with you, Nicholas. So someone from your PR team reached out to me and emailed me and said, hey, we'd love for Nicholas to come on the show. Max goes through my inbox every day, looks for podcast outreach emails, and scans them, then goes and does a full research report on that individual,

uses a set of filters and guidelines that I gave him and comes back with a quality score as to whether or not, not that this person is smart or not smart, but do they fit what we're trying to do and where we're trying to do and where we're trying to go. And if it's eight or above, it automatically crafts a response email, puts in the calendar link,

sends it back to the person and says, hey, we'd love to have Nicholas on the show, which is what happened with you because you were an eight and a half out of 10. Not as quality of a person or knowledge, just what he came up with. And then you got the email, your PR person forwarded to you.

You scheduled your time. You showed up here. As soon as you schedule your time, Max goes into Riverside, pulls out a link, creates the link, then edits the calendar so that the link for you to come into the show is ready for you. I got a notification that you were booked, but outside of that, I didn't do anything until about an hour ago, I started doing some research on how I wanted to approach the conversation, right? So, like, think about that, guys. That's, that's one process.

Now, think of processes in your business, right, that you can set up some logic around that are things that you don't necessarily have to be there for, right? I gave, now there have been scenarios where the person has come back and said, well, this person's a five. Like, I had a guy who I really wanted to have on the show after I read his bio, but he was in the blockchain space. And Max thought, well, hey, we don't really talk about blockchain that much. So he gave him a five out of ten.

And I came back and I said, well, look, I know, like, blockchain isn't the point of this podcast. However, it's a major story. it's a developing technology and the integration of blockchain and AI technology has made it, kind of brought it back to the forefront of what I think should be on leader's minds. Let's talk to this guy, right? So now we're slowly iterating to where eventually I won't have to touch any of it. And I'll just have great guests that show up that I then can just do what I like to do, which is the research in the interview part.

And that, you know, I tracked it, you know, in the last month, it's saved. me about two and a half hours a week of time just removing this process. And it's smoother for my guess because now they're not waiting for me to go back into my email and find the, you know, did they respond yet? Like all that kind of, it just gets handled. And like, this is where I think, this is where my question's coming from. That long diatribe is to say, I feel like we're looking at AI and we're looking for these big home runs. And to me, especially in these early days, a lot of the wins are just in finding a half hour in your day here, an hour in your week here, two hours here,

that like these little functions that just give you small chunks of time back that when you start to stack them up, man, now I have the time to sit back and go, you know what, Nicholas, I'm going to think about this decision, right? Where before, because I had 10 bazillion things going on and I was so hassled, I'm just making these snap decisions, it actually allows us to be leaders again, is what I'm saying. Is like, it's like, is this, do you believe that what AI is really going to do is kind of give, give leaders and people in leadership positions their jobs back to a certain extent, which is actually dissecting and making decisions and then actually advocating for them, right? This busy work, I feel like is so much of the reason that we don't do those things.

But AI can solve that. Yeah, I'm once you, I think, and then take your example, right, you can even, you know, use AI to do a lot of the research. and then, you know, find some questions. And then, I mean, like, the E.I could have read my book, right? You know, summarize it for you. And so, so, yes, I think, you know, it's not that hard to create a 15, 20, 25%, 30% headspace more than what you have today. And then I think, you know, then AI calls. So, you know, yes, to like the productivity piece and the small ball, right, hitting a bunch of singles.

But also, like, if you read my book, right, there's a lot of, you know, there's a lot of, you know, a lot of home runs that you can hit with AI that are not that hard. Right? And so, you know, for example, like, like 15% of customers drive 90% to 100% of the profits in almost every industry. Right. And so, and we talk about this, right? Large companies don't talk about this. Most entrepreneurs don't talk about this.

When I ran my companies, I didn't talk about this, right? I focused on acquiring customers and I'm making sure customers that I had already did turn. I just didn't spend enough time creating customer value, right? So the whole idea of customer lifetime value where you're acquiring the most valuable customers, just like Syrac did. But then after that, you're using it to develop these customers to make them more valuable, right?

Going back to the property and casualty example, right? If the customer has two products, if they have home and car insurance, they'll stay twice or three times longer than before. So, and so I'll give you any of it. So I'll give an example of a use of AI that I think is really fascinating. I was working with a fashion retailer, and they used a lot of AIs to make a lot of decisions faster, right? They were saving time.

They were doing that productivity piece. But then, you know, one of the merchants was like, look, you know, I've got some insights, I think, on customer behavior. And I think that if we can drive customer to do certain things, they'll buy a lot more. They'll be even happier for the customer lifetime value with the price. profit of a customer over time is going to go up a lot. So, okay, like, what's your hypothesis? And the hypothesis was that if you look at customers, we've only shopped in one category, right?

They've only shopped, you know, blouses or shirts. And you can get them to buy a different category, like pants or skirts. In my experience, people just, you know, start shopping a lot more. Which funny, by the way, was the opposite of what AI was doing. Right? If you go into a fashion retail and you buy a lot of shirts, it's going to just spit out more shirts for you. And the reason for that is because it's optimizing the wrong thing, right?

It's optimizing to a short-term metric called conversion rate. Right? So it's like, by the way, like 100%, almost 100% of websites are optimized for conversion rate. Right? It's like, hey, a customer comes in and 6% buy, and the next page, 4% by the first page is better than the second page. It turns out not to be the case, right? And so we did this test and we showed that if you can get a person to start shopping across categories, their customer lifetime value doubles.

You made twice as much money off that customer as you did before. Right. And so back to your point about thinking and not just rely on the AI, right? This was a very senior merchant who had insights that the AI didn't have. And she challenged the AI. She's like, the AI is wrong. Right. Now, the AI wasn't wrong.

The AI was just training properly, right? it was trying to do the wrong thing, which again is my experience with almost every, you know, meaningful AI project. And so once we retrained it and say, hey, look, you know, if somebody's bought a lot of shirts,

yes, the recommendation, I just should have some shirts into it for sure, but it should also have some pants and some belts and some shoes. And if you look at Netflix, like Netflix is a really good example of this. Like, if you look at Netflix seven, eight years ago,

it would just recommend stuff, like exactly like what you've already watched. And so because they were trying to increase watch time, presumably, I haven't worked with Netflix on this topic. But now if you get at Netflix, you see that recommendations engines are like all over the place, right? Like, you know, stuff you may lie because of what you saw. But then you get like a lot of weird stuff that, you know,

like why they show me horror movies? I haven't really watched any horror movies. If you like a show and you watch that show and you're done with the show, maybe you'll churn. But if you watch a show and then watch a show in a different category, right? Because if you run out of rom-coms, but then you have a horror show or an action show.

So this kind of really deep knowledge of customers is what we have to train AI on. And most companies just do a pretty bad job at one understanding their own customers. If you, you know, these thousand CEOs that I met, one of the first questions I would ask them is what percentage of your profits come from your top 20% customers?

And only about 20 to 25% of CEOs knew that. And then if you ask the follow-on question, which is okay, what do these customers eat for breakfast? Like, who are they? Tell me more, right? Because if I know that, I'm going to train the AI to find you more people like that to then develop your current customers to be more like that.

And then if you think this way, right, everything is around improving customer lifetime value as opposed to every other metric you can think of, right? Churn. Churn is important, but it's not the most important thing, right? Number of customers acquired. It doesn't really matter. Like, how is my customer lifetime? value, am I increasing it every day?

I thought Ryan was worth $2,000 in the next five years, and I was worth $3,000. I've created $1,000 of value. If you train the AI to do that, acquire the most valuable customers, and then find the next best thing you can do to get a customer to be more valuable for you, all of that while also checking that you're delighting customers, right? So customer lifetime value goes up, that promoter score goes up, right? And so that's the trick. And it sounds a little bit, you know, see, right?

if you're a small business owner. But one of my good friends runs a gym. And he started thinking this way and looking at customer lifetime value. I don't care how many members I have. I don't care how many I acquire. I want these people to stay forever and invest a lot more money in their health. So now you get this business. You know, used to be a $2,000 business.

That's a $1.2 million business. Its churn is like 3%. Right? And when people join, they stay forever. So what did he do? Well, he started targeting 55-year-old customers in the boat because they have health issues that are more difficult to deal with. He hired different types of trainers and trained them differently.

He built a whole set of practices like nutrition, all sorts of things around his members. And members love it and never quit. Right. So just imagine going from a typical gym where it is like constant churning to this really kind of customer-centric, customer lifetime value business. So his average customer is worth 28 times more than the average customer of a normal job. This can be done by anybody, right? Don't focus on just the average customer, try to understand what your best customers are, trying to find more like that,

and trying to make every one of your customers, your best customers, and AI can help you do all that stuff, even if you're a very small business. Yeah. And the best part about this, you know, is so you figure out who your highest lifetime value customer is and you you get a good feel for that avatar or avatars and then it's not like you can't then go back and now optimize for conversion of those specific people so you know guys what nicholas is not saying is just stop at what's the best lifetime value for a customer and how do you provide that product it's now that we have a better feel for what we need to optimize for we can give that to to our conversion optimization agent.

And now they have the proper target. So what I love about this, what you're saying here is figure out the right target first, spend the time figuring out what the right target is before we go into these optimization cycles because we know AI is amazing at optimization, creating efficiency, et cetera. But if we're shooting at the wrong target,

we're no further along. We just have this engine optimizing for the wrong things. and we're just as, you know, maybe miserable or frustrated with our results as we always were. Maybe we just have more. And that part of it to me is it's so the granularity of AI is another part of it, right? Like we may be able to say like people over 55, but I'm positive the way your friend didn't stop at was people over 55. It was probably, you know, men who are 55 and, you know, want to play golf more and, you know, maybe have tried TRT. in the past but didn't like it and or women who, you know, you can get so granular in who these

people are. And then what I love about it is about AI in particular and how we find places to use in our business is now the things that I'm not good at. Like I am not good at creating ad copy. I've been writing and doing marketing my entire life. And to be honest with you, creating like ad copy for like an Instagram ad or a Facebook ad, it just like breaks my brain. I know all the stupid copy hacks. I've read David, Ogilby, for whatever reason, it breaks my brain. But what I can do is say to the AI, I want you to give me, you know, Alex Hermose copy with a David Ogilvy hook with a blah, blah, blah, you know, and then give me 50 different iterations that speak to men over the age of 55 who like to play

golf, have tried TRT and are frustrated with the results. Bang. And that comes out in 15 minutes. So now the parts of the process that you normally would have had to outsource or just not in your zone of genius, those things are taken care of. And as you described, you can spend your time in the spots where your Zune of Genius actually matters, right? Talking to your customers, figuring out why they decided to stay, you know, what was, you know, was it this exercise or when we added the nutrition program? And like, those are things we don't get, oftentimes in smaller businesses, we don't get to those things, not because we don't value them, but because we have so much transactional nonsense in our business that we can't. And,

AI is freeing that up in a way that I feel like we have to take advantage of. We can't wait. Like there isn't, if you're in the same community as your friend who has a gym and you're trying to target the same market that he is, you're going to get destroyed by him because he kind of F-A-F-Oed with this stuff and figured it out and played around with it. And even if it's not perfect, he's so far ahead for the next iteration. And that's the part where I'd love for you to talk a little bit about is, you know, let's say they've gotten into the book and we've made some early wins and that's great.

But how do we set our business up? Because it feels like, and I've gotten this feedback, every week we're getting a new model and it can do this new thing and should I switch from Open AI to Claude? And like, how do we manage from a leadership perspective this, the constant change and the constant like new features and new models. Like, how do we work through all that and not get lost in that mess? Yeah, what a great question. And what you said, by the way, is really insightful.

The idea is to put customer lifetime value in the middle, right? And everything will still. So to answer your question, the same thing, right? If you've got the right KPIs and you're thinking about it the right way, you're going to get a 2x or a 3x, right? And if a new model comes in and it's, you know, 10% better, that's 10%. And so staying ahead on the, model front is useful and should, you know, try to not be too far behind.

But that's not the leverage. Like, the leverage is just, if you use, like, the latest, latest model, and my model is six months old, but I get the right, I'm asking you to do the right things and you're asking to do the wrong. I'm going to transfer you, right? And so, again, like, you know, yes, wash for everything. Yes, you know, make sure that, you know, what you develop is agnostic that, you know, uses the MCP protocol so that you don't have you.

You can't be wedded to one model. And by the way, I love Google. I live in Silicon Valley. I love these companies. But this AI agent operating system is going to run your business, right? You can't be beholden to one of them. You have to have some optionality if you can afford it. And it creates complexity.

But if you can have at least two models competing for your attention, that's a useful thing. So staying ahead of the models and using the best model, I think is interesting, but not the most important thing. Having the right KPS much more interesting, except for one exception. I would say that, you know, if you believe like I do that we're getting really close, pick a number, I don't know, 18 months to having AI being able to write code without a human in the loop, then you have to have the AI that can do that. If Claude is better than Open AI at coding, and Open AI requires a human in the loop and Claude can code without that human in the loop, just a little bit of oversight, then you have like an infinite, you know, innovation cycle. Right. And this is actually really a critical concept to understand. The data AI can write code, like 99.9% of code, is the data non-entrepreneur can have any idea, right?

And it's live, like in a week, right? Now, like, how many ideas do you have? Right? So that you have to really pay attention to what models are the best at coding. And you have to be really on the edge of that. But, you know, one element is slightly better than another at quitting, you know, ad copy. If you add copies a little bit better, but your KPI sucks, you're not going to be there. So I think that's the most important thing, right, is just making your customer in the middle.

and then, you know, even going beyond the avatar of the best customer, like you want a predictive model that can give you an n equals one. Ryan is worth this much. Nicholas is worth this much. And Ryan is improving in customer lifetime value. Nicholas is going the other way. And so why? What's happening?

Why is Ryan getting better? And why have we lost $1,000 on Nick in the last six weeks? What have we done? And then when you start thinking this way, like, one, you learn a lot as an executive, and two, you plug in the AI agents on top of that. And they tell you like, hey, you screwed up your pricing on this product and you pissed Nicholas off.

Now, that's what happened. Or you had a customer service interaction with Nick. It didn't go very well. And one of the most valuable customers that's bought from you since. So, you know, that kind of connectivity, but focusing on customer lifetime value and customer, you know, promoter score or some kind of customer satisfaction. In the end, if you really analyze what a business is,

it's trying to keep cost and control, of course, right? But then, you know, increasing customer lifetime value and increasing customer satisfaction. If you do those two things, you're going to win. Right. And yet, when people are plugging in AI agents on top of their business, the EIs never know about these two things. Right? So that's the opportunity. It's just focusing on that.

And then there's one more I want to share, which is, I think, a really massive opportunity for small businesses and medium businesses as well. It's gotten harder to compete against larger companies with big brands, right? People are consolidating to fewer brands. Trust is being eroding. And so that's why you have a lot of data suggesting that the biggest, most profitable companies in every industry

get more profitable every year, you know, faster. So their profitability is accelerating and it's leaving, you know, others behind. So, historically, building your brand has been hard. Obviously, you have to have an amazing product. You have to have amazing trust with your customers, and you can build a brand through word of mouth. But also, you can try to do some brand advertising.

But historically, like 88% of brand advertising was unprofitable. And then you have to take a big risk, right? You have to build these ads. It costs hundreds of thousands of dollars. Then you have to buy a TV spot for $200,000, 300,000 bucks, and now you're $300,000 to $400,000 into it before you know if anything is working or not.

So now with AI and with digital marketing, you can actually circumvent all that and build a brand with no risk. So I'll just share a quick story, which is Invisaline. Invisaline had some pretty big issues during the pandemic because you have to go see a debt test to get Invisaline. And their top competitor back then was Small Direct Club that shipped direct to consumers.

don't have to see a dentist, right? So you figured during the pandemic, Smile Direct Club would just eat, you know, Invisaline alive, right? And so, Invisaline was stuck, you know, trying to figure this out. And then in Q4, 2020, Dentist Office started to reopen, and Invisaline's revenues went up by 26%. And Smile Direct Club was down by 6%. And the difference in market cap that happened that day,

it was about $15 billion that shift. between the two companies. Why? Because a number of searches for the Invisaline brand in the last three months had doubled. On an absolute basis and a double relative to Smile Direct Club so that when the dentist's offices reopened, people were primed to buy from Invisaline because they really knew the brand. So how does this happen? So we did some work with Invisaline and then we repeated this for a number of brands.

And the book explains how you can do all this. But long story short, you know, use AI. to build a six-second ad or a 30-second ad. That ad isn't about selling now. It's about building a brand for the medium and long-term, right? So it's a very different ad than a typical kind of direct response, performance marketing app.

But historically, the problem was that we couldn't tell if this thing was working or not until much later. So you couldn't really optimize it using AI. Well, now you can put an ad on YouTube, and you could put like 15 different variations of an ad or even 15 different ads because it's so much cheaper with AI. And you can see in real time which of the ads is driving people to search for your brand. And then you double down on that ad and then you only start investing money on that ad.

And maybe just in one state, a small state in Iowa, for example, right? You start investing a little bit of money in and you're like, hey, look, the searches for my brand are doubling in Iowa. And maybe you wait a couple of months to see the impact on your sales. And you're like, hey, look, my sales in Iowa going through the roof relative to the rest of the country. Whoa, this thing worked. Now let me scale it to the whole country. So next thing you know, the searches for Invisaline have doubled across the U.S. The searches for Small Direct Club are flat, Dentist Office reopened, and Invisaline eats Small Direct Club's lunch.

So anybody can do this. It's very inexpensive. And next thing you know, your brand is at a whole different level. And then magical things happen, right? Your website converts better. You can price 10, 15% higher. And customers will be okay with that. Your aquarium or customers more cheaply.

dot dot dot dot right it's just like having an amazing brand is a force multiplier for a business but it was something that was you know undoable for a smart company the first small company before and now with AI and the ability to test before you invest any real money anybody you know a bakery a gym can build an amazing brand yeah I couldn't agree with you more this has been a mountain that I have been shouting off of for a few years now basically since I got into AI since my fingers first got in and I first started using this thing. Like, I just started telling all my clients on this show, I've said it a thousand times, your brand might be your most valuable asset today. Like, and what I mean by that is not you don't need to have a good product. You have to have a good

product. But having a good product is the barrier to entry, right? There's no, you know, you can have the best product. And if you have the worst marketing, I don't know today that that build a good product and they will come thing really relates anymore because of how saturated. the market is with messaging. And I saw a really trite example compared to your Invisaline example the other day. I was watching a video. This guy's name is Greg Eisenberg. He talks about AI agents clawed this whole area.

And there was an entrepreneur. He started this little application where he lives in the UK and he was moving from one. He was trying to find a new apartment with his girlfriend. And the hardest part was they both had, they both. both had different visions for the apartment, so they were taking pictures of these apartments, but they're empty, so you can't really see. So we basically built this little app

that you tell it your style, you take a picture of the room, and it kind of dresses the room up for you. It stages the room for you. Okay, cool, you know, whatever. Well, that's not the, that part is interesting, but not, not the story. The story is he had zero brand.

He literally created this, even says I created this on a weekend for my, for my girlfriend and I, and then I just, for fun, decided to, commercialize it. Okay, he's like I had zero brand. So what he did was he created an AI agent, and we don't have to get into the technical details of how he created the AI agent, but essentially what it did was using TikTok, it created five to seven different versions of TikToks and TikTok ads every day. And then he would run them. And what he found by giving it access to the analytics as well

is it would test words at the top, words at the middle, words on the bottom. Do I highlight certain words? How long should the videos be? And basically he found this format that it was like family member plus funny deadpanned story plus value plus CTA with a kitchen scene yielded these massive returns. And he was saying on this interview, how would I have ever gotten to that as the, you know, hook to image to what? whatever, like it would have taken me years, and it took him about six weeks of just iterating

and he's like, now the thing automatically builds this. It's constant, you know, I give it like, and this is the wild part about this stuff, guys, is he said 60% of his content now is in the veins that he knows works. And then he has 40% of the content they create is on new tests. So now he's got this wheel. Just, I mean, just think about this for your business, for the gym, for for large organizations, this should be, I mean, this should be like common practice. But like, he is now on the side, on this little side project that he created,

making an extra $4 to $500 a day in new. That's not renewal, four to $500 a day and new signups, paid signups, on a recurring loop that is putting 60% of your winners out there and doubling into them, but also constantly testing new to find new winners. And it becomes this self-perpetuation machine that like could we have gotten there not using these tools?

Sure we could have. But the timetable is completely different. And I know we're talking about a simple app and whatever. And guys, please don't do the like my business is different thing. There is a version of this for every business. And if we just compare guy who started an app and then has to do all this marketing the old way, right, of iterating and going to Canva or hiring a firm

versus this iterative loop machine that is constantly learning, doubling into winners while still experimenting with new stuff, it doesn't even matter the comparison and product quality, the speed at which the AI-driven business is able to iterate is going to win over time, every time. It just, I mean, to me, I just look at it and I'm like, this is a no-brainer and it's fascinating. And it is absolutely this leveraged unlock that any business can take advantage of.

Yeah, so insightful, Ryan. It's funny, that's the last chapter of my book, BUSC going out of bonsai. So let's just assume for a second that companies will figure this out, right? They put customer lifetime value in the middle. They'll optimize the entire business around that, right? And then they'll have a software engine that can really code a lot of stuff really, really fast. Okay, so now the logical question is like, okay, so everybody could do this, right? It's not going to be that hard.

What's different? How can I maintain my competitive edge? is precisely what you said. Like in the end with AI, what really is going to matter is give it the right data, give it the right thing to optimize. Of course, as we discussed throughout the show,

who moves faster? How many tests can you run a year? So, like, I was working with an internet company, we all know what it is, but I can't mention it. And the CEO wasn't happy with the velocity of testing of the company. And so, you know, I worked with them

And they created a cross-functional growth team did I have before. And that team was given all sorts of testing tools. They were also told them that they could, he couldn't test without approvals. And he could just basically go, right? And then so they started doing a bunch of tests. They had a bunch of hypotheses themselves.

I put them on a Google spreadsheet, testing, testing, testing. And after every test, they not only looked at was a test successful or not, but they also looked at what was the impediment for running the test really fast. Hey, this got stuck in legal for a while. this got stuck in creative, whatever it was, right?

And then they were just breaking down those barriers one by one. It's how you're a part-time attorney for the team. Let's do this. Let's do that. And next thing you know, like 10x the number of tests that we're doing really quickly. Then they started running out of ideas. They were like, so they put up a Google spreadsheet for the whole company. And as CEO said, look, you know, every month we're going to give $3,000, $15,000 prizes.

This is a big internet company so they can afford it. And we'll give $3,000,000 prizes. and for the best idea for a test and anybody can participate. And the innovation here is that we're going to give the prizes out before the tests are run. It doesn't matter if it works or not. It's just, is the customer going to be thrilled and are we going to be more profitable, right? Customer lifetime value, net promoters score.

Two things that really matter here. So just imagine now the whole company is listening to the customer more, and interviewing customers, going up on Twitter, and listening to what customers are saying. Just get better ideas. And now, you know, they're doing 25 times more tests than before. And now, you know, and imagine now plug it in exactly what you said. Now, you know, you can start not just doing human tests,

but you can start not training agents to come out with new tests and even test them, you know, by writing code. And so as long as you've got the customer lifetime value as the optimization factor, you can actually eventually run a limitless testing organization. you know, two, three, four, five years from now. But, but again, even if you do this, and if you got the wrong KPI, you're going to build the business going in the wrong direction really, really fast.

So KPI is right. The thing is moving at lightning speed. Good luck with any competitor catching you. I love it. And you know what it is? It's an egoless business. Because what you're saying is, I don't know the answer.

All I care about is finding the answer. And I just love that. I mean, that's like the first thing I say to a, founder to an executive that I work with is it's not about being right. It's about getting it right. And if you can't get past that, we can't move forward. Like if you have to be right, this doesn't work. But if you're willing to let the systems, the machines, the test, guide you as you layer on your experience, man, oh, such an exciting time. And Nicholas, I love that you are out there sharing this message of getting the KPI right. Because there's nobody

talking about this. I mean, obviously, I run a podcast for a living. I see all the pitches. I talk to so many people. This is such a unique perspective and it's so incredibly important. The book is be a Sequoia, not a bonsai, wherever you guys get books. We'll have the links in the show notes. If someone wants to go beyond just the book and get deeper into your world, where's the best place to do that? Yeah, we shot to me on LinkedIn. I'm happy to talk to people. I do a lot of consulting as well. And I started four companies myself. So I love talking to founders. I led it to talk to anyway. Awesome. I appreciate you. Thank you so much for your time. Have a great day. Thanks, Ryan. You too. Cheers.

You know,