We Study Billionaires - The Investor’s Podcast Network - TIP392: Frameworks for Building Billion Dollar Brands w/ Kat Cole

Starting point is 00:00:00 You're listening to TIP. Today, we are exploring the power of brand and how it fuels billion-dollar enterprises. My guest is Kat Kohl, former president and COO of Focus Brands, a portfolio company with household names like Cineban, Carvel, Jamba, Ante, Schlotskies, and more. Focus as a whole generates around $5 billion in revenue per year, so we take a deep dive into how these brands came to prominence. In this episode, we discuss Katz rise from being a Hooters waitress at age 18 to being a VP of Hooters by age 26.

Starting point is 00:00:36 What it was like to be placed at the helm of Sinebond during the Great Recession and how she pulled off a miraculous turnaround, operating principles that can be applied to any business, the importance of community while building a brand and so much more. Kat is an absolute powerhouse and she shares a generous amount of knowledge and wisdom in this episode. So without further ado, please enjoy this discussion with Cat Cole. You are listening to The Investors Podcast, where we study the financial markets and read the books that influence self-made billionaires the most. We keep you informed and prepared for the unexpected. Welcome to the Investors podcast. I'm your host, Trey Lockerby, and today I am so

Starting point is 00:01:28 excited to have with me, Cat Cole. First time on the show, welcome to the show, Kat. Thanks for having me. I've been really looking forward to this conversation because we interview a lot of people, mostly investors, who are looking at companies more or less from the outside inward, right? You've been in the inside and operating multi-billion dollar brands and companies. And I wanted to take the opportunity to kind of peek under the hood a little bit, what that means exactly, because as investors, we look for great leadership. And here you are a proven great leader of multiple companies.

Starting point is 00:02:03 companies, and there's just so much to learn from that. And I'm really looking forward to the conversation. Awesome. Before we get into all that, I think it's kind of important to touch on how you got to where you are a little bit. The fun fact that stood out to me is that you became a VP at Hooters by age 26. So how on earth did that happen? A few things converged. You know, one very important foundational element is that the company was growing rapidly. And that fact creates more opportunity.

Starting point is 00:02:36 And you can't remove that from the equation and get the same outcome. Beyond the company growing rapidly and therefore resulting in many opportunities for people inside the company, I started early. I literally started working in the company when I was 17. So while 26 sounds early and it was, it was still essentially a good number of years into to my tenure there. And so I was a hostess at 17, a waitress at 18. By 19, I was opening franchises around the world as a training coordinator, literally traveling, showing up, training the staff, leading the training team, getting the franchise launched, getting the

Starting point is 00:03:15 first ever unit in that country, in many cases on that continent, open to, you know, begin the brand's journey there. And so that put me in a position to understand the business from the ground up. I took a corporate gig at the age of 20. I was the first person in my family to get into college, but I was subsequently failing college because I was traveling so much in my first and second year. So I dropped out at the age of 20. And then from that point, as a 20 year old, helping to lead a department in the corporate office, which is what got me to Atlanta, Georgia, again, as the company grew, I grew, and every few years, I took on more responsibility. And then And just six years after starting my corporate journey, I became an executive with the company.

Starting point is 00:03:59 Well, something just stood out to me there because you said you've worked multiple roles. I even heard or read that you at one point as a waitress would jump in and work the cooking line, you know, if needed. So where did that drive come from? I mean, that's a fairly uncommon trait that you don't see very often. You know, I don't know that it would be fair to call it drive back then. I can look back and see the patterns of doing many things like jumping in the kitchen and really assess what was going on. It was in part curiosity, just like, can I do it?

Starting point is 00:04:34 It was also a genuine desire to be helpful. I'm a helper. I always have been. People need help. I raise my hand. I go help. All the cooks quit one day. That's how I ended up in the kitchen cooking.

Starting point is 00:04:45 One day the bartender needed to go home to take care of a sick kid. So I ended up working a bartender shift. The manager needed help shutting down the restaurant. So the answer was just always yes. And so there was this deep curiosity to see, can I figure it out? There was a true desire to be helpful. And then the third driver was whatever you want to call it, selfishness, you know, personal reliance.

Starting point is 00:05:05 I was paying my own bills. We were very, very poor when I became of working age and needed to save up for my life's expenses. And so more shifts meant more money and different types of shifts being added to, the menu of options of shifts also meant more opportunity. So I also can't remove that from the equation of what looks like ambition or drive, but was simply like, oh, great, more opportunities to make money. So curiosity, helpfulness, and then this concept of either selfishness or self-reliance. So as I understand it, your father at one point was more of in a white-collar role,

Starting point is 00:05:45 and you had a comfortable upbringing to a point, and then it changed. And so you went from that to living on very little. Do you see that as playing into this in any way where sometimes you've kind of seen the potential a little bit, right? And were you trying to get back to that sort of level of comfortability at such a young age? In fact, it was the opposite. Because we left my dad when I was nine, and yes, we had a comfortable living compared to everyone else on all sides of the family. My association with that was a very negative one. We had holiday gifts and we had a car and we had a house that wasn't on wheels and we had like not good

Starting point is 00:06:24 things going on in the home. And so in my mind, the one person with the fancy job on either side of the family equaled bad stuff. And so it was the opposite. I wanted nothing to do with money. As soon as I made it, I gave it away. In fact, it became a real missed opportunity because I didn't save and have the thinking around financial planning that would have benefited me even more, you know, because I actually started making a lot of money very young because I was such a young executive. And I just wanted to give it all away. I didn't want anything to do with it. I had a very unhealthy relationship with money. The good news is it led to an abundance mindset. If I need it, it will come. And even if I don't need it, if I'm doing things I love, it will come. And it did.

Starting point is 00:07:12 But at the same time, it was something that I felt was deeply tied to negative outcomes and behaviors. And it would take me time to figure out the healthy balance in between those things. What did tie to the drive was this desire to be independent and not be reliant on people like my father or other elements of my family. I just wanted to learn. Doing something different tomorrow meant I was going somewhere, right? different, even for the sake of different, was progress in my mind. And learning became my currency. That's so interesting. Yeah, I'm just fascinated by this idea of nature versus nurture, right, where people as driven as you who achieve so much, especially so young, where that comes from

Starting point is 00:07:56 if it's environmental or just comes from within. And I love the idea that money is more or less a byproduct, right? And you mentioned being a helper. And I imagine that just putting all that good karma or driving the ship with that kind of good karma led to that abundance you kind of speak about. Really interesting. You mentioned dropping out of college at one point because you were so busy, which I can relate to. I was curious because when I've heard you speak, you come across as just, I mean, one of the most intelligent speakers and that I've heard. And I wonder if you have a practice of writing. And I'm also kind of curious if you were a good student. I'm fascinated by kind of the book smarts versus the street smarts. And you kind of seem to have both. So I'm

Starting point is 00:08:37 fascinated by that. Yeah, I was a very good student, advanced AP, all of those things. I excelled in every subject in school until my senior year. And I just got lazy. It wasn't challenging. I wanted to be a rebel. I was hanging out with people who were far my senior. I barely eeked out my senior year with decent grades. I mean, it wasn't horrible, but not compared to my straight A's 4.4.2, 4.3 of literally everything leading up to that. I made my mom a little nervous, but everything worked out all right. So I was a great student generally and had a natural inclination toward academics. And so there is some core book smart there.

Starting point is 00:09:22 And I was put in situations all around the world with a complete lack of familiarity of culture, with people I had never met before. And that forces, at least in anyone who wants to be. to be successful, it forces a muscle of excellent communication. Not only articulation, because I'm in other countries and yes, they speak English, but needing to speak clear English, not, you know, what I would call comfortable or lazy English was critical, you know, in order to be understood. And so very quickly, between the ages of 19 and 20, I completely lost my accent. That was very deep from I'm growing up in Jacksonville, Florida, which is basically South Georgia.

Starting point is 00:10:08 Often people will hear me and say, I literally cannot tell where you're from. And it wasn't a goal of mine. It happened because I wanted to be understood more easily. And I needed to articulate very clearly in order for that to happen. So that occurred organically. You know, on the other side of speaking or words or intellect, words have definitely been my jam for a long time. I have pictures of me speaking in front of groups when I was three years old. So it would be one of those how it started, how it's going memes for sure.

Starting point is 00:10:40 And I've been a large scale public speaker for a very long time. So when you have to say a lot in a little amount of space to people you don't know, that also builds a muscle of communication. But I do believe the thing that formed my ability to communicate in a way that is clear and approachable, but still intellectual, is running businesses. from a young age and needing to be in various stakeholder groups, from lawyers to attorneys, to the press and media, hourly employees, executive employees. This really pushes on the need to get through, to get a message across, not to just be good at saying what you want to say,

Starting point is 00:11:21 but understanding that the real goal is to be heard and felt and valued. And that, again, it's like this water weathering rock to build a really strong foundation. for communication. I'm curious, what did you apply at Cinebond, maybe that you learned up to that point, what was iterated on? And do you believe that there's sort of a one-size-fits-all for every company, or do different companies need different customized approaches? We probably need an entire podcast.

Starting point is 00:11:52 You thoughtfully answer that question. So I'll just touch on, you know, a few things that come to mind. But the answer is much deeper than we're going to have time for. So one is it relates to what translated, from chicken wings to cinnamon rolls, from casual dining with alcohol, corporately owned and franchise to almost solely franchise snacks, malls, airports. A lot translated. All of it translated. It may have evolved or tweaked a bit, but the fundamental approach of being obsessed with the

Starting point is 00:12:22 customer, obsessed with the key stakeholders, in this case, franchisees and employees and the closest, most enabling vendors, like obsessed with them, in love with them, really wanting to understand what's going on in their life right now and how our business affects that. That is a major key, you know, if you will, to apply anywhere, always, and forever. And it just the questions are the same. The answers are different. And then the resulting actions are targeted to that particular environment. So that's one thing that translated. The other thing that translated is, you know, out of my 15-year tenure at Hooters, only two years was spent in the orange shorts, like actually serving wings and serving beer. I was doing other things as that second year occurred, like opening franchises and

Starting point is 00:13:12 helping to train other employees and going to other restaurants, but I was still a waitress in between those things. I was still an hourly employee with no contract in Jacksonville, Florida. And that experience of being a waitress, a server in a casual dining environment where my income was tips. This is a tipped wage state, right? So the base tipped wage was $2.13 an hour. And so all your income is tips, which means the customer's experience is so literally tied to my financial success. And when you have the privilege to be in a situation where you have such proximity between your effort, the customer's experience, and their returning appropriate value. That is a very tight feedback loop.

Starting point is 00:13:57 It is instant. If they don't like it, I can see it. I'm not wondering, what was the unboxing like? I'm like right there. And so that is a powerful training ground for a customer-centric mindset, clear on how value is created and shared. I can be a great waitress, but if the cooks aren't competent, the outcome, you know, so you can just see how this, you're just literally the entire value chain is right in front of you

Starting point is 00:14:25 and you're at the beginning, the middle, and the end of it, including receiving the food and preparing the food. And, you know, it's just such a powerful training ground. And even though that was only a small piece of my overall Hooter's tenure, it is never left the way I think about the world, customers, employees, brands, and how deeply I appreciate the connectedness of all the things in the business. So I could go on and on, but those are two things that certainly translated. And then in terms of frameworks, I am the queen of frameworks, partly because I was asked a lot of questions like this from a very young age. How did you do

Starting point is 00:15:01 that? Why did you do that? And it made me think and it made me reflect. And then when I became a public speaker, I was forced to put things in a nice package that was easy to remember and to apply for oneself in their own environment. And so the frameworks, because I was in so many different environments, became necessary because I couldn't remember or translate every individual varied situation. But I could see the patterns between them and use that as something that would make each endeavor or team or challenge or brand to make that learning curve a bit faster and to help others and ask their own questions that I had learned to ask, but then come up with answers that were relevant to their situation. And so I developed a lot of what would be considered

Starting point is 00:15:48 frameworks that I largely used to populate my newsletter today. I know that you've since moved on into this role of more of an advisor and investor. So I'm curious, do you examine these systems in the companies that you're interested in investing in? Do you audit them in any way? Do you let entrepreneurs develop their own? How do you kind of think about your active role in your investing? It's a big giant asterisk. It depends. If it's pre-revenue and an idea and I'm investing in the founder, then of course I'm

Starting point is 00:16:21 evaluating framework. There are no frameworks, right? It's more, can I use the frameworks that I have applied and the resulting set of outcomes as a frame of reference through which to see the opportunity? And so the frameworks are more about my experience. experience and my filter and how do I connect with the founder, the market opportunity, and then how those two things are converging to create whatever this business. It's very different at early stage pre-revenue or just post-revenue seed stage than it is

Starting point is 00:16:52 something much later. And even then, as an investor, because I'm not an institutional fund leading a route, you know, I am typically a contributing angel, a follow-on investor or a strategic advisor being brought in, I'm being brought in to help them learn these frameworks. And so I don't expect, nor do I judge, if someone early in the journey doesn't have these things in place. For the founders and funds and companies that I'm heavily involved advisor, these frameworks are a lot of what we talk about and spend time discussing how they can put their own version of it in place if it's what's needed where they are in their journey. Do you have like a rudimentary framework that you

Starting point is 00:17:35 would kind of start with. I know it's objective, but is there something kind of fundamental that you think every leader of a company should enact? And it's kind of a basic principle for you. Yeah. Ask, answer, act quickly in proximity often. That's it. Every one of my frameworks fits into that framework. It is a question looking for answers, the goal of ensuring that there is an environment in which the answers flow freely and candidly, or that you are able to to give the answer freely and candidly, and then action on what you learn. Rinse, wash, repeat. Every one of my frameworks is a series of questions.

Starting point is 00:18:15 And then the answers guide the actions. And the actions are what make the difference in progress. So as I understand it, you were placed as president at Cinebon right during, you know, or right after the financial crisis, essentially the great recession that incurred or ensued thereafter. This turnaround was incredible. It kind of reminds me of when Buffett invested in American Express because there had been a controversy of sorts. People had lost faith, but the brand was so strong that he knew it would recover. And Cinebond seems to follow a similar narrative there. And the brand was incredibly strong. I'm curious, when you took the reins there, what was some of the

Starting point is 00:18:57 biggest challenges on day one? I imagine there was a lot of ancillary just because of the environment, the economic environment. Were there cultural challenges as well? Were there any other things that stood out to you that you had to address on day one? Yeah. None of them that I could address on day one. I'll tell you that. Day one, you're looking for the bathroom and trying to meet people. But one, in terms of the economics, stability of the business, they'd had multiple years of high single digit, low double digit, top line sales declines because of not only the recession, but in particular being primarily based in malls and airports during the recession. And when people don't have money, there are two things they stopped doing, shopping and traveling.

Starting point is 00:19:38 And so you just like lost the humans. And this had nothing to do with e-commerce yet. Right? It was just like, people had no money. And so they were saving it and not doing these things and the businesses in those venues were hurting. Then on top of it, there was this just overall shift with the few people who were coming in and consume our preferences, even for indulgent businesses. And we were a premium price dessert, which is not the best place to be during a recession. And at the time, the business model was a highly infrequent visit, you know, like 1.4 times per year. And so if you miss people that 1.4 times per year, you don't, you know, you don't have another chance. And so there weren't alternative channels of revenue outside of the base business.

Starting point is 00:20:21 There weren't alternative for the franchisees. There weren't alternative channels that we would eventually lean into like grocery and other massive markets that have a far higher frequency rate and much more opportunity around the world. And so just the brand was beloved, but the business model was flawed and it had become broken over time relative to the evolving environment. The other element of the business model that was challenged at the time is, you know, We sell food.

Starting point is 00:20:51 That's part of what we sell, but we also sell franchises. And in order for franchises to expand, you need lenders. Well, I'll tell you who a lender was least likely in 2010 to loan money to, a first-time business owner for a concept based in the mall at the heart of the recession, serving a cinnamon roll the size of your face, famous for sugar and fat at the height of the Atkins craze, which we joked was the Atkins crisis for Sineban. And so, you know, now there's like this lending crisis broadly that definitely was particularly detrimental. and exacerbated for a potential Cineban franchisee.

Starting point is 00:21:23 So both growth levers, growing units and growing sales out of the units, were depressed. And so you had that sitch. It was very interesting. And then on the culture side, you've very tenured franchisees, incredibly tenured employees, who loved the brand, but they were tired. They had been beaten up. Losing, whatever you want to call negative sales, it's not winning. Losing that many years in a row is hard.

Starting point is 00:21:48 It's hard on your heart. It's hard on your pride, especially because in the years prior, you are used to, like, all I do is win. It was like the biggest brand with the highest volumes. Everybody loved it. And so, that's a big crash from an ego perspective, not to mention franchising as a business model. These are small business owners that have their life savings, most of them, in these businesses. And so it's particularly emotional. I also had the largest franchisee who on a third of the units was essentially insolvent because he was running a borderline Ponzi scheme out of the restaurants. It was so crazy and had the deal with that and then our reputation with the malls and developers as a result. So you just had all this mess like legal stuff,

Starting point is 00:22:27 franchise stuff, optics, emotions, culture, and then the business model needed to be fixed. And we needed to go into channels that we really had only begun to explore. And so that was the diagnosis. What I'm hearing is that because you then ventured on to different channels, you must have seen this optionality of the brand that wasn't apparent to the people before you. And that's what's so interesting. I'm wondering if it's where that comes from, what led you to think outside the box. And I'm remembering right now, you mentioning that Hooters at one point, you know, had an airline. You know, they were definitely doing what Jim Collins would call sort of the bullets and

Starting point is 00:23:03 cannonball sort of approach where they're firing bullets, seeing what sticks, and then going bigger into this. So I guess, I'm just curious, was there something that that you applied in this scenario that was like, okay, we got to think outside the box here and optionalize this brand a little bit more? It was just so obvious. Maybe that was the gift of fresh eyes. To your point, I'd grown up in an Omnichannel brand before Omnichannel was cool. We had a hotel, we had an airline, we had a casino, we had our own merchandising company. We were fully vertically integrated. I grew up with a brand that was far beyond the places it belonged. Just because it was in places doesn't mean it was successful or the right place, but my belief of where a brand could go was certainly in part shaped by my experience

Starting point is 00:23:46 at Hooters. And I was just a young consumer. You have to remember, I'm 31 when I'm taking over Cinebin. I'm a consumer. I'm a fan. I am of the modern era. I'm on Twitter and none of my president peers of brands were even on there. It's just a different mindset when you're technologically native, representing literally a different generation. And came out of a brand that was expressed in so many creative ways. And to the credit of the company and the leaders who came before me, they had begun the journey of alternative channels. They had a little bit in grocery. They had begun. It was just no one put on the gas. And in order to put on the gas, you had to step back and really deconstruct the brand,

Starting point is 00:24:29 figure out where it had permission to go. And then in order to go there, what do you need? And are you going to rent that capability, build it or buy it? And so there were little sprouts of the opportunity already in the company. I didn't start licensing an Omni Channel at zero. They had played. There were one or two lines of business that were clearly material and had tons of opportunity like Pillsbury. But it was so linear and it wasn't a model being applied across that brand,

Starting point is 00:24:58 much less the other brands, which I would later go help do. And so that was the magic was both who I was as a young consumer, what I believed was possible for the brand. And then it's all about execution, just because I had these ideas and saw the potential, and so did some others in the company. Clearly, it hadn't been done to that extent before. And execution was part of the challenge in a franchise business, getting franchisees to appreciate the opportunity for the brand and how it actually served them as opposed to

Starting point is 00:25:25 competing with them. And that was the art part. I brought the art and heart that is needed to build a branded ecosystem across channels because doing it just on the science and compliance doesn't work. Not when you have that many stakeholders. And so it wasn't just the vision to see what was possible. It was the ability to test, learn, bring it to life, build trust, resource the organization appropriately and have the humility to decide when it was time to not build the capability,

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Starting point is 00:30:08 Back to the show. I've been speaking with a few investors and they've brought up this potential of optionality as more important that I ever would have thought, especially when you're making an investment, just knowing how much of an advantage it is to have a lot of optionality, Amazon comes to mind, other brands that have ventured into other spaces. And what has got me thinking about a lot lately is mission statements and how important they are. So for example, Tesla's is to advance the adoption of sustainable energy, right? It's not to make

Starting point is 00:30:39 the best car. It's to advance the adoption of sustainable energy, which means that it does make sense for Tesla to now do solar panel roofs and to do big batteries, et cetera. Is there a mission statement or was there a mission statement for a brand like Cineban that you said, okay, this can be applied in these markets or through this lens? Yes, but I will say most companies that are well known today that have mission statements that seem so inspirational and obvious, that was not their mission statement when they started. It was like, I don't know the case for Tesla, but I'm sure some car companies, it started as like make a better car, you know, get people to where they need to go in a classier way. And then as they mature as a company and realize what they're

Starting point is 00:31:24 doing is more than their product, that's typically when the mission statement like levels up a couple notches and becomes this umbrella under which many things can sit. And so I just, for anyone earlier on the journey, don't beat yourself up if your mission statement doesn't give you the permission to become Amazon. And yeah, Sunaubon had a tagline that was a statement of inspiration that helped guide where we could go. And it was life needs frosting. And it was about giving people an indulgent moment wherever they are, because life is hard. And then that had to be then interpreted, well, what does that mean in cereal? What does that mean in coffee? What does that mean in a fresh bakery? What does that mean in visual creative? What does that mean for how we talk to our

Starting point is 00:32:10 franchisees, right? This brand voice, brand truth, brand approach, it's more than, you know, in a mission statement. The mission statement typically is the why we exist what we're here to do at a kind of a platform level because you do want to give yourself permission to extend. But most product companies don't have that stated really beautifully in the early days. It's once you realize what you're actually doing with the very linear thing you started with. And you're like, oh, wow, we're bringing people moments of joy. And so, but the mission statement is important in that it helps ground in the why we're here. That and it will evolve over time. It is not the key to the brand and the business being successful, but it is a helpful piece

Starting point is 00:32:58 of content that allows for a more consistent understanding of what is behind the approach to the business and what it's trying to do in the world. I love life needs frosting. It really does highlight how powerful a brand is and what it brings up in your mind. And the question that came to my mind is, what are you really selling? Yeah, you're selling cinnamon rolls the size of your face, as you put it, but what are you really selling? And you're really selling that sparking of joy, as you mentioned, that moment for people. And you realize that, is that, would you consider that at least part of the secret sauce that makes up what these billion dollar brands that you've now managed? I mean, how does McAllister's Deli, how does that compare to something like?

Starting point is 00:33:43 that in the portfolio? Are there similarities? There are similarities in that what you're hoping for and what is likely you have built at least at some point if you are a scaled brand because otherwise you wouldn't have been successful is some emotional connection because most things in their product form are replicable and you could argue are commoditized. And so then what is a brand? And it's a lot of things. It's how you do what you do. It's why you do what you do. It's what you say. It's how well you deliver on those statements and promises. It's the consistency over time. It's every touch point that the customer has, which at the beginning is a single product and some marketing messages,

Starting point is 00:34:23 but over time has more to do with their interaction with mistakes and humans and all of that at scale. And so, you know, what was true at Cinebon is we were so that life needs frosting was also then, well, what does that mean we deliver? We deliver irresistible indulgence. And that needs to be true relative to whatever channel we go in. So is the coffee with Green Mountain Curig, the Cineban License Partnership, as indulgent as a classic cinnamon roll baked fresh in a bakery? No way. Like you can't even put them on the same sweetness scale, but relative to their category, that Cinevon coffee was irresistible indulgence. Like the work that went into the flavor profile and the aroma to make your eyes roll back in your head to be like, oh, yes, the perfect note of like

Starting point is 00:35:08 yeast and butter and cinnamon and dough that is coming through in a light roast coffee that is gluten-free and fat-free is different, but it's the same things are true relative to that catacourt. For McAllister's, for anyone who doesn't know, it's literally like a cash machine and one of the most successful franchises in all of food franchising and it has very large and sophisticated franchisees and it came out of Jackson, Mississippi, and they sell sandwiches and salads and are known for huge baked potatoes and delicious soups. It's like Americana at its finest. It is not the sexiest, trendiest, juice, dessert, whatever brand. It wins because of its model of hospitality. Like they're famous for their sweet tea and you get free refills. And the portion sizes

Starting point is 00:35:53 are enormous. The value proposition in terms of value for money is like high top decile of all restaurant brands and this Southern-inspired hospitality that transcends no matter where it is is part of what makes that brand special. It's community connections. So big groups go eat their families after a soccer game. A whole church group will go and have a lunch there. It skews families and it skews older, but it's also very close to college campuses. So college kids love the value proposition. And so that is about home favorites that you remember, but better. It's like, you know, baked potatoes and sweet tea and club sandwiches, but better. No offense to moms, you know, our moms that have made them, but it's like plusing up a classic.

Starting point is 00:36:40 And so super different from life needs frosting, right? It's like community connections, home favorites done better, but consistently at scale over time, and which is a credit to the franchisees, a credit to the original recipes and brand. And then you have like Carvel ice cream, you know, almost a 90-year-old brand. That's a very different. value proposition. Jamba Juice, which is one of the largest smoothie and bowl chains in the world, very different value proposition and mission statement. Now, there are similarities because you're affecting communities, you're serving food, you're doing it in generally an accessible price point. You know, these aren't aspirational Uber premium brands, nor are they value fast food brands.

Starting point is 00:37:22 They kind of live in this middle tier. So there are similarities, but there are distinctions, which is what's allowed these brands to become, most of them, billion-dollar brands. Something came up a minute ago. You mentioned community and how that impacts brand. And that's a word that I'm hearing a lot lately. Community, community, community, this Web 3 development, et cetera. And what I'm harking back to in my mind lately is when I was a kid, there were all kinds of like, you know, let's call it communities or whatever.

Starting point is 00:37:52 You see something on a cereal box and you cut it out and you mail it in. and yeah, you become part of this sort of membership of sorts. Like there's a loyalty element to it. So these ideas are not necessarily new, right? As far as like creating exclusivity, there's such a movement happening right now around this idea of community and getting brands to be so interactive with their customers, especially digitally. You're absolutely right.

Starting point is 00:38:17 What we're seeing with Web3, you know, the evolution to the ownership economy where people are not just participants, but creators, owners, shapers of companies and brands and economies through DOWs and crypto and NFTs and then just the overall mindset. It is an advancement of old forms of loyalty, rewards, ownership, and community. And whether it's old school like points and rewards programs that are being brought into a modern era with far more transparency and traceability or the idea of a digital good, which is not new. People have been buying coins and things in games for literally decades. We've been buying things that allow us to play in a universe. Now it's just the universe is our

Starting point is 00:39:08 life and it's the metaverse. And the why is one, the technology has advanced to such a agree that it is unlocking the opportunity for the individual to have the power, as opposed to the few who were able to build those technologies and capabilities, whether it was the search engines or large industrial complexes or companies. It's an individual. I can go mint an NFT right now, publish it on chain, have it tied to a course or a community, issue regular rewards, allow those people to stay with it if they want or sell it to someone else, have proof of attending an event. So affiliation, the desire to connect, the ability that this technology brings for any individual to find their people, you know, to have a voice and find their people. I mean,

Starting point is 00:40:00 I am pretty deep in the Web3 space, at least as corporate types are concerned. And I do subscribe to the theory that the future of cities are being formed right now in these many communities, Dow's and NFTs, if people have gotten into NFTs, if they own a cool cat, or an ape or a punk, the IRL get-together is already happening. The building of cafes and bars for membership are already happening. The idea of future of cities, I mean, if anyone's heard what Mark Lorr is building with the idea of designing a city with a particular kind of life in mind that, of course, requires physical land, but long before that requires a digital community to come together and develop governance and common interests in ways of working. I mean, it, wow, we are living through

Starting point is 00:40:45 such a wild revolution to shift power to individuals. And as it relates to brands, that represents not only an opportunity, but what will become a foundational requirement to respect and cultivate community. Otherwise, you are literally a commodity. Anything, almost anything can be duplicated if you have the capital. And capital is certainly not limited at this point. And so if anything can be duplicated, then what differentiates? It's brand. What is brand? Culture, a promise of how we're going to do business, what we're going to do and how we're going to do it. And now that can be shaped and voted on. People can vote with their wallets, their digital wallets, as opposed to just with their feet. And of course, this is revolutionizing work. It's revolutionizing community. But web 2.0 is more

Starting point is 00:41:34 about audience. This is now community, and you've seen these power businesses, power brands, seemingly come out of nowhere because they obsessed over a tiny core customer cohort that became community. And then that has exponential growth around it because then they market and attract many rings out of customers. And you see these 10x, 20x, 50x, 100x growth stories of brands in sectors that are not solely software, which is credit to people who know how to build community. A couple questions come to mind from that. Do you think brands will be defined by the communities in the future, meaning like right now, the companies have the power to define what their brand is, but you start giving ownership out to your community and they start building

Starting point is 00:42:22 upon that and iterating on it. Will brands be more democratized and what the brand meaning of something over time? I mean, the short answer is yes, but the reality is brands have never been the sole driver of their brands. You make the thing for a customer. You build community around that or audience. It was audience before. You listen to them. You evolve based on their needs.

Starting point is 00:42:43 If you do it well, you grow. If you don't, you die. So the foundational truth of brand being shaped by community and what audience before has always been there. It's just shifting to a more literal truth now. because the community or the consumer or the participant has so many frictionless options for alternatives. And so if you don't get it right, your death is accelerated. Your business death is accelerated. And so I just believe this has always been true for the brands that have endured. And certainly in the recent decades, the brands that have not only endured if they were legacy

Starting point is 00:43:21 brands or come out and then real winners and taken a ton of share and even created market are the ones that have built brand identity through community and given their community power and voice. Think about Nike. Think about Patagonia. Think about Tesla. Think about Peloton. These are communities that people jokingly call Colts. It's because they're communities.

Starting point is 00:43:42 And not every user or customer is part of a deeply engaged community. But there is a powerful enough community fueling the business. And the smart brands know how to feed that community. In the case of Peloton, they make their instructor stars. They make their stars, stars, and they reward the community for being on the journey and staying on the journey. I mean, it's one of the more literal business cases of seemingly out of nowhere, community-centric, community-driven versus audience and marketing. The old CPG, you know, big company playbooks of the 70s and 80s, billboards, mass marketing, put it out there. You see it.

Starting point is 00:44:22 It's not a crowded enough marketplace for something else to creep into your mind. Therefore, you buy. the more we spend, the more you buy. Then the kind of creeping evolution of growth hacking and performance marketing still if you see it, but now it's digital, see it. And digital ads and, again, performance marketing, I can buy my customer, but you still have to have community and something that's differentiated in doors over time to have low churn and a lowering cost of customer acquisition to have a valuable customer cohort over time.

Starting point is 00:44:50 And now it's, you know, especially with recent changes in data laws and Facebook and the whole growth hacking performance marketing approach alone doesn't work. You literally have to have community that has a voice that can help you keep your brand healthy over time. Let's take a quick break and hear from today's sponsors. No, it's not your imagination. Risk and regulation are ramping up and customers now expect proof of security just to do business. That's why VANTA is a game changer. VANTA automates your compliance process and brings compliance, risk, and customer trust together on one AI-powered platform. So whether you're prepping for a SOC 2 or running an enterprise GRC program, VANTA keeps you secure and keeps your deals moving.

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Starting point is 00:48:27 All right. Back to the show. I'm recalling a question from earlier, especially when you brought up NFTs and things like cool cats and apes. What are they really selling? What does a cool cat afford you when you buy it? You have the NFT. You're part of the community.

Starting point is 00:48:43 What is that saying about you? And where does that live in the metaverse? It is, it's actually just so beautiful because it's, one, it's, it's a media property. You know, it's an, it's an asset, it's IP. And so, and it's art. And art is in the eye of the beholder, but in the case of Cool Cats, literally is an artist who has been drawing these types of figures as an illustrator for years and years. So there's truth to the art, Klon.

Starting point is 00:49:13 And then there are a group of co-founders partnering with the artist to turn this into community and something that endures as an enterprise. And that could mean gaming, peril, you know, literally think of Marvel or Disney or Universal and what these characters brought to life by illustrators become in our lives as a franchise. Now add to that, the community that is inspired by social media, inspired by IRL. activities like Pokemon, right, and gaming. And you're literally bringing together elements of 80s, 90s, gaming culture with what we already know and love with media franchises, with in many cases not widely known, but deeply respected artists and creators. And then with

Starting point is 00:50:08 all of that coming together, there's actual functionality, which in the Web3 world is called utility, where you do things with it. And it actually, if you're buying it and you're participating, not always, because things can go to zero, but often has the potential to be liquid. And if you need to get out, you can sell it. And if you have a few, you can sell some and keep some, which keeps your membership in the community. And yet even people like cool cats, for an example, you don't have to have a cool cat, NFT, to be a part of the community in the discord. Sometimes people hear about it and engage and find their opportunity to engage in the community through the community, but they don't have the NFT, so they don't have something that

Starting point is 00:50:54 unlocks other utility and value-add elements. So it is, it is community, it is franchise, it is IP, it is utility, and it's just becoming identity for some people, right? The fact that some of these things were in this era of almost celebrating anonymity, and you see people, with a Twitter handle that is their crypto punk. And many don't know who that person is. And that's kind of fun, right? You can just be your crypto punk. And, you know, and I had my Cool Cat, NFT, as my image,

Starting point is 00:51:27 there are a lot of people in the NFT community who see me tagging in, you know, different Cool Cats, Twitter things are in the Discord. They have no idea who I am. And that's really cool. You know, we're all just entering because we're celebrating the art and we love the vibe. And there's this exclamation vibes, you know, I'm part of the cryptodes and creatures and cool cats. And they're all a vibe, man. Like, they're a vibe.

Starting point is 00:51:51 And they have very different vibes to them, the creatures, NFT, being a bit more like corky and funky because that's the personality of Danny Cole, the artist. And cool cats being just adorable and family friendly, which they insist on in their discord, right? And that's attracting a particular type. And the toads, I mean, they're like vibes, vibes. You know, it's just super cool, chill people. You almost like picture Reagan music playing. And so there are these cultures, these vibes that develop that are, one, just so exciting to be a part of as a fan and as a member and as a consumer and as an advocate.

Starting point is 00:52:27 Like you can tell you're a part of revolution of the next version of the internet. Like you can feel it. It's really rad. I think I know the answer to this. But as I understand it right now, there's more or less two options. a brand could either create like a social coin of sorts to token, right, or go NFTs, right, and create their own content of sorts. So many more options.

Starting point is 00:52:53 The world of opportunity is unlimited. Like we're all building the plane as we're flying it. And no one's an expert because it's changing so quickly and everyone who's experimenting is stumbling on the next thing that is the future. And that's just important to remember. It is so early. which means it's messy, it's fringe. When you're in it, it doesn't feel fringe, but, you know, practically speaking, there's only, I think, two million people in the world. I don't know what the

Starting point is 00:53:19 actual number is, but with a wallet, you know, where they can even buy an NFT, whatever that number is, it's a teeny fraction of the global population, still small fraction of the developed world population. And so, it's early. My advice to brands, like what brands can do and some counsel is be a fan first, be a student first, buy an NFT, which means you have to have a human, like a brand can't buy an NFT, right? I mean, a brand can buy it because you can come from your account, but a human needs to engage. And so have someone on your team, can be on behalf of the brand or just someone as research, get into a project that seems to be aligned with the brand, read the Twitter threads on Web 3 and Dow's and NFTs and just learn and be a customer, but be a fan. And then

Starting point is 00:54:06 then there is a continuum. So that's like the least you should be doing. Find an Ft, celebrate an artist that you think is cool, engage with the community and do your homework. Then from there, you could partner with an existing NFT project, right? You could literally like get in the discord, DM the founders and say, hey, I'm such and such brand. I love what you do. Here are some of our ideas. Do you have any? We'd love to support you beyond being a member of the community. And that's happening. That could be a co-branded drop, like airdrop to people who are already NFT holders. It could be a public-facing campaign. Like, there's just a bazillion things. It could be a giveaway, just ship it to everybody's houses if they want to put their physical address somewhere.

Starting point is 00:54:47 So then there's like co-lab, right? That's asset light, not a lot of risk, but you are tying your brand to a project. Then there's getting into this world that you described, which is what can you then go do as a brand. Going all the way to issuing a token, which is making a promise of some membership and utility. My recommendation is if you're not ready to commit to culture and community is don't go what we call Red Pill, Web3.0, Go Purple Pill, Web 2.5. You can issue a token, but it's not an actual NFT token. It's like an upgraded version of a loyalty and rewards. To the point of our earlier conversation, just modernizing what's already done out there, but give it more meaning, more utility, more community, but it's not an actual

Starting point is 00:55:33 token powered by the blockchain. So that's make your choice, make sure you're prepared to support your choice. But if you're not going to do a token, you could still create and mint a digital asset, a digital property, an NFT, a non-fundable token. That could be an image or it could be a POAP. It could be like a proof of people being a part of something with your company. And it's a digital proof. And you can sell it or you can give it to your existing customer. You can allow them to mint it and sell it. But then it's like, okay, but why? What does that do other than, okay, cool, I have a Cineban NFT.

Starting point is 00:56:13 Does it unlock discounts? Does it make me a part of a community that can give feedback? Do I get special early news on things? What does it do back to community? This being the community economy and the ownership economy. Does it give me literal ownership in some way in terms of just rewards? Again, modernizing loyalty. or does it actually give me ownership like a Dow in an organization where I have a vote

Starting point is 00:56:36 stopping short of a security and a shareholder? But it acts a lot like that in some ways. And so that is not tax advice or financial advice. So you can see how established companies would get pretty cautious when you start getting into this launch a token, launch an NFT world. I really encourage brands to do it and play and explore, but don't do it if you're not going to resource it properly, you need someone to facilitate the resulting community from a token or an asset. And if you're going to do that, then make sure you have great devs who

Starting point is 00:57:09 under developers who understand Web3 and dedicated resources to facilitate and listen and fuel and love the community. And if you're ready to go there, there's plenty of us who are here to help. But for many companies, going Web 2.5 and Purple Pilling versus 3.0 and Redpilling is a better step in that direction. It's like the spirit of Web3 without the tokenization and kind of like the full back-end infrastructure of Web3. But first, be a fan. Just go learn and be a fan. I love this discussion because I consider you to be a master of brand. And it speaks also to how you and I've come to this conversation, which is that you've been building the Cat Cole brand. And I've noticed that. I mean, it sounds a little funny, but I think

Starting point is 00:57:58 I first noticed you on things like Clubhouse. And I just remember Cat Cole, Cat Cole kept popping up in every room. She was talking. She's here. She's there. You're on Twitter. You've been very active in this role in this space. And I can tell how excited you are about it, which is really cool. What drove you to this? Because you seem like you could have easily retired, I guess is what I'm kind of going. It's like, you know, given your career, I guess, a lot of people probably would have been like, you know what? I'm like, but you seem to just be getting going. What is driving this interest into this new role that you're entering into as an advisor and I mean, I've been doing a lot of these things in the background for a long time, in a moderate way, of course, because my priority was running the company. But I've been angel investing for eight years. I've been leaning into social media from the early days. I've been advising founders and growth stage companies, not many, but a few, you know, along the journey, I had to focus on my own business, but I made the time to help others. And so it is like all things that seem sudden not. It is just under,

Starting point is 00:58:58 a decade of helping other people build their businesses, experimenting with technology that is built a muscle of loving to learn, never being worried about being the nub or the plebe in the room. And that means it's always going to look like I'm into the latest thing because I'm very comfortable being the least experienced person in the room, even though I am typically the most experienced person in many rooms in certain industries and verticals. And it is where people are spending their attention and their time, which typically ends up leading to their money and where the economy goes and where brands go. And I am a student of commerce. I am a student of humanity. I love people and I love to continue to be on a journey. I also have two kids, you know, a two-year-old and a four-year-old. And I don't ever want to be disconnected to what is shaping their future.

Starting point is 00:59:54 And when my kids become older teenagers, this is the beginning. We're at the beginning, whether it's driverless cars and Web 3 and NFTs and DOWs. Like some of the biggest businesses in the world are going to have started as DOWs. Some of the biggest media brands in the world that they are going to grow to love, like we do movie franchises, are starting right now as NFT projects. Like, I see the future. And I'm wrong about it. That's what's certain.

Starting point is 01:00:23 but I like being in it so I also can put my thumbprint on it. And that's the leader in me. That's the brand shaper in me. And so it's both the desire to learn and lead. And you cannot lead from the past. You cannot lead from the past. And so I am a learning leader. And so wherever I can go that allows me to do both optimally is where I go.

Starting point is 01:00:47 And that has led me to angel investing quite some time ago, to advising earlier stage founders, I'm part of an S-cur, you know, earlier in the S-curve than the businesses I was running at focus. Certainly, it led me to lean into social audio and Clubhouse, literally right after it launched when there was nobody on the platform. And it's what led me to be a part of the NFT community and the Web 3 and crypto community. And so I'm still learning.

Starting point is 01:01:14 But that, because I started learning early, it now also allows me in a way to be a leader to some. So I'm still able to be a leader. It's just in something that is still, the clay is very, very, very wet. And I feel like I can feed my desire to learn while also exercising my muscle to lead. I love it. And I'm a big fan of what you're doing. So please keep it up. I really enjoy this conversation. Thank you for this opportunity. It's been a blessed. I've really enjoyed seeing your passion in person. And it's really exciting, making me excited about the future. So with that, before I let you go,

Starting point is 01:01:49 I want to make sure I give you an opportunity to hand off to our listeners where they can learn more about you, They could follow along, anything you want to share? Yeah, the usual suspects. I mean, Twitter for one, that's where I amplify and celebrate a lot of other creators and thought leaders. And it's definitely the NFT space. Instagram is where I share a lot of lessons in my personal life, my newsletter called Checking In, which is just Cat Cole on Substack.

Starting point is 01:02:15 And certainly I can be found on Clubhouse, holding rooms on leadership and thought experiments in big ideas. And you have a book coming out. And I have a book coming out next year. Amazing. Well, let's have you back next year and see where we're at. That would be great. All right, everybody.

Starting point is 01:02:35 If you're loving the show, please go ahead and follow us on your favorite podcast app so you get these episodes automatically. Kat and I originally connected on Twitter. So if you'd like to get a hold of me, you can find me there at Trey Lockerbee. And if you're really looking to 10X, your investing skills, I guarantee you'll find a ton of value at the Investorspodcast.com. or simply Google TIP Finance. And with that, we'll see you again next time.

Starting point is 01:02:57 Thank you for listening to TIP. Make sure to subscribe to millennial investing by the Investors Podcast Network and learn how to achieve financial independence. To access our show notes, transcripts, or courses, go to theinvestorspodcast.com. This show is for entertainment purposes only. Before making any decision consult a professional.

Starting point is 01:03:18 This show is copyrighted by the Investors Podcast Network. Written permission must be granted before syndication or rebroadcasting.

We Study Billionaires - The Investor’s Podcast Network - TIP392: Frameworks for Building Billion Dollar Brands w/ Kat Cole

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