How Founders Are Building the Next Market Giants with Anthony Katz

0:00This is Investor from KPPP Financial. Helping investors make sense of the markets one day at a time. Here's your host Justin Klein. So we're here with the founder of Hyperice Anthony Katz and Anthony and I, we've known each other for about 18 years and we've, I've seen your company from the very beginning but most people don't know kind of what it is and where it's really come from and how you've pioneered the recovery categories. So once you talk a little about like the history of Hyperice and where you see the recovery industry today. Yeah, so Hyperice is kind of referred to as a sports recovery company. You know, that term recovery, you know, used to imply things that athletes do.

1:00Post workout, post training, post game. And it's sort of become a catch all term as really anything generated around body care. So you see in the proliferation of this wellness category that we kind of, in wellness I don't think has much meaning anymore either because there's so much supplements could be wellness. What is wellness? And so where we specifically kind of focus is, and I say this with pride that we are a hardware company. And as much as you know, the investment banking community frowns on that term, the hardware is still part of our life. We still, as humans use devices and products every day. Some of the biggest and best companies in the world are still hardware companies. We really focus on hardware that is geared to change the physiology of the human body in a way that could help in an athlete's recovery, treatment of an injury.

2:00A big one is warm up and movement preparation for injury prevention, day-to-day body maintenance and overall wellness. So while the term is recovery, it really encompasses just like body care. Anything to, will we say, our just do it is move better. We're trying to create products and habits that enable people of all ages and demographics to move better. If you really think about one of the definitions of aging, it's the loss of movement over time and we're trying to kind of give people sort of a sip of the fount of youth of like, if you can do all these things and create these habits using our products, it will enable you to do the things you love to do longer. So there's two things. There's doing things longer, so there are longevity. But then there's also doing things better. And I think that part of losing our youth is that we used to be maybe good at something and we enjoyed it. And as you get older, you kind of lose the ability to move. And you're not as good at something. And that kind of causes people to maybe stop playing a sport or stop doing something.

3:03And there's a freedom in being able to do things that you love to do for as long as you can. So we're all about like trying to unlock that for people. So what recovery is the term, but it really encompasses all those things I mentioned. Yeah. And do you talk to a little bit about warm up in that? That's something that you've pioneered with the Viper and the Venom. Right. But you have a new product and you talked about move better is you're just do it. So you have a new product with Nike, the Hyperboot. So much talk a little bit about how that came about. Yeah. And then what kind of reception you've seen from athletes so far? Yeah. So warm up kind of implies like, oh, this thing I have to do before I play and you know, some people look at it as just kind of chore. I kind of change it to like movement prep, which is that if we are going to put our body through a series of dynamic movements and sports are series of movements, right.

4:03We want to put the body in the optimal state to start moving. Well, what is why optimal? Because the optimal body, if you get the body in the optimal state, you reduce the risk of injury. And in the process of reducing your risk of injury, your body has less friction and we have improved tissue glide, which means that we're going to perform better or our body can move more efficiently. So the, the, I don't know what's the side effect and what's the primary effect. Are we warming up so we can perform better and the side effect is we're preventing injury or are we preventing injury and the side effect is. Performance increase performance. Yeah. When we look at our products, we look at offering a suite like I look at it, sort of how Apple looks at it where you have, you know, you have your Mac is like your hub, you have your iPhones, you take everywhere with you, you have your AirPods, which are situational. And I have an Apple TV or in its is ecosystem of hardware that all kind of serves the purpose of communication entertainment, you know, all the things that like we have to, we kind of run our life off the Apple ecosystem.

5:05And so what I wanted to do is create a similar ecosystem for active people or the athlete, which is like, I have my device where I warm up, I have my device that like I do all my moving prep injury prevention that I recover with. If I have an injury, I could treat it and on my day to day body maintenance, I just do these things just like brushing our teeth and taking a shower. We wash the outside of our body, we should cleanse the inside of our body. And so we look at it through that lens of like providing the suite of product that there's no magic bullets. The hyperboot is our Nike collab that came about as an idea that we brought to Nike. Because we wanted to make a, we did not start with let's make a shoe and let's put this technology in the shoe. It started out with like we wanted to make a portable device that focused on the foot, ankle and Achilles. You start talking that through and you start picturing a shoe. Yeah, and this is before the Achilles, the rash of Achilles injuries and MBA, right? Yeah, I mean, there, it's been the trend in Achilles doctors has been going up since kind of the mid-2000s.

6:09And there's not one reason why there's a variety of reasons, but it was not really specifically for that. But it will help. But but but again, I go and say it's like when we put the foot ankle Achilles in the optimal state to move, we're increasing the tissue, a pliability, we're increasing ankle mobility and the glide and Achilles. Those things are going to prevent that injury. But it's also, you know, as a performance enhancer, you get you get out of the boots and you feel it. You're like, wow, my legs never feel like this. There's nothing there's nothing I could do with my hands or or with kind of just ordinary devices to make my foot ankle Achilles feel like this. So we wanted to create an experience that you just could not replicate it any other way. And we needed a footwear partner and Nike was just the first and only call because, you know, they're the only brand that would have kind of gone all into this idea because of their dedication to, you know, breaking through for the athlete. And your marketing ethos has always been very very similar to Nike's right? I mean, the company is hugely inspired by Nike.

7:09If you grew up when I grew up, Nike was sort of the most aspirational brand. So it's still is to the great. If you're good, and yeah, and if you're going to, if you're going to have a sports company, I just don't see how you get around, you know, the Nike influence. It's sort of like, you know, it's like a rock band that, you know, it's the Beatles, right? It's like they, they touched every aspect of, of, of the culture and Nike crossing over from, you know, kind of sports to like the broader culture. And so you always, when you, when you have a startup, you, you have to be aiming for something and it's, it was very, you know, it was our aspirations to, if we could create any sort of that Nike magic. And to be able to do a collaboration with them, kind of allowed us to kind of like get a taste of that. And so that's how the project kind of started in kind of where we, couple of continues to go. Yeah. And our listeners focus on a lot of big public companies and like researching them. And, you know, you have been, your company has been one of the most innovative companies over the last couple of decades in the sports space.

8:11But, you know, if you look at the bigger companies that are public, you know, that operate worldwide. There hasn't been a lot of innovation from those type of companies. So why do you think that's the case? And why do you think most of the innovations have come from smaller companies like yours? So I would say that the larger companies, you know, focused on footwear and apparel. So Nike, D this under armor. Now you have, you know, upstarts like on and Hoka. You know, you know, new balance is sort of having a resurgence asix. When you focus on footwear and apparel, innovation really happens at the margins. It's not like we discovered all, like we're not adding to the chart of the elements. So we're not going to go unearth some new foam that's 20% more responsive and bouncier. You know, it's like foam is the basis of a soul of a shoe. You know, is so like baking bread.

9:11Like you can change the composition of flour and water and baking soda and stuff. But you fundamentally, it's similar. And you know, Nike's been really innovative in how they've sort of experimented and manipulated and come across more responsive foam that you can mold in different ways. I mean, Adidas have been iterative. Yeah, it's been. And I would say that the proliferation of manufacturing technology has kind of, the advantage that one company has over another is not as great as it used to be. Right, the dynamic range of what, like a top in class product to what, like, you know, like a much smaller company, he still might have that smart company might have access to similar technologies and molding and things like that. So, so footwear and apparel is, is a lot of materials and a lot of, there is, you know, obviously engineering involved. And, but it's hard for them to really take big leave. So what you saw in the 2000s was them trying to acquire other companies. Adidas acquired tailor made and, you know, Nike had, you know, had commerce early and, you know, I think, um, bro, they had at one point technology in our space didn't really exist until the advancement of lithium ion battery technology, which allowed these like devices,

10:24the manipulative the body to come in smaller form factors that became consumer products. Larger companies use more, um, they are not so, um, I guess they're reactive. They're reactive. Well, they're also just not like, they're not going to be the ones experimenting with these new technologies and trying to roll them out to the public. Yeah. So, you have to wait till start up doesn't sort of we were that company and, and so, and then, and then, you know, once it becomes sort of, um, you know, accepted in the culture more broadly, then you start to see, you know, some of the bigger players take an interest in the category. When I first, you know, started, I remember people at some of the big companies saying, oh, yeah, that recovery, that new recovery kind of category thing. Will it catch on or is it just a people would say, is it just a fad? Yeah. I thought that was crazy because I don't, I just don't think I think that the train of looking for better health is only going in one direction. It's never, it's never been put in reverse. Yeah. And so we're part of that. And I think that like, you're asking why the big public companies are not as innovative.

11:26I don't, they're innovative in their own way. They're just, they, they, they live in a category that risks. But they're living in a category where innovation is pretty iterative. It's not like, oh, wow, we just found this new material that just is completely transformative. Yeah, I was thinking of the iPhone where it's like, there were smartphones before, but the iPhone, you know, took the touchscreen and that technology. Yeah. And really combined it with, you know, what was already kind of being done and kind of forged a really a whole new type of device. But since then, you know, everything else has been kind of iterative, right? Yeah, the difference there is this is a hundred and forty two different suppliers with a hundred and forty two different components. Yeah. So we call the downstream, the downstream supply chain. So think about the Zeiss lens is a German, we come from Germany. There's, there's chips from Taiwan. There's monster chips from Japan. There's, I think there's something like 30 countries participate in the supply chain. And so what an innovation like the iPhone does is when you know you're going to sell hundreds of millions of of a product, the downstream supply chain starts innovating for you.

12:32Because they watch your business because they want the business. So like if, if I'm making, if I'm making a chip or like maybe a lens, Zeiss is like, we need to make the best lens in the world so that we can sell hundreds of millions of lenses to Apple. And the motivation for them to stay on top and make the best lens because the second that some other startup might have something better. I mean, think about the loss of business that would be to a company like Zeiss. Yeah. And that's without knowing anything about the arrangement there, I'm just saying that basically Apple, because there, this, this is a platform. So, so all the suppliers and the self supply chain are basically motivated to say, if I make the best, whatever it is component, I'm going to have a multi billion dollar business because just just on the iPhone alone. And that is what keeps the innovation pipeline going, not just what like Apple can imagine the overall experience and the software and how it all comes together in the design. But innovation now, and this is the importance of of of of of Y globalization.

13:36So important is that we need to be able to pull the brain power. A company like Apple wants to make sure that they have good relations with Germany, which Japan, which I want because they want to be able to to to be able to buy the components at scale and don't want any or any options that supply chain because it affects their innovation. So it's all we're all independent. We can't unwind that sort of relationship. Yeah, well, get to supply chains here in a little bit that what what's talking about like what do you think makes an innovative leader? You've obviously been an innovative leader. You probably seen a lot of innovative leaders and talk to them. What do you think makes that up? We know, you know, we've seen also leaders that are the opposite of innovation where they almost only talk about the numbers, right? And there's no really spirit or ethos to the company or to innovation. Yeah, just buying back shares, you know, basically just, you know, using financial metrics and and magic to try to create value, but in reality, innovation is really what creates value.

14:37So what what do you think makes an innovative leader? Well, in an age where technology now is is available to everyone, right? It's it's it's been scaled. There's more companies of different sizes, making components and technology than ever before. Really what the innovators job now is almost to imagine the end experience or the end product because you could always work backwards to the technology. So it's not crucial that it's crucial that the innovator understands the general landscape of where technologies that where chips that where what's battery powered capacity at. So they need to understand the customer and what they need. Yeah, so you always start with the consumer first and work backwards to the technology. So to me, what an innovator is, you know, the ultimate example to me, the greatest innovator or time is Steve Jobs. And Steve Jobs didn't come up with the, I want to make a hard drive that plays music. He said, I want a thousand songs in my pocket. So I can imagine the experience that I want to have.

15:45And then we work backwards. So you go to the design team. Well, what would it, what would that take? And you go to engineering, what would that take? Well, we take a hard drive that has this capacity and at that time, they were too big to fit in your pocket. And then what happened was Toshiba came out the 1.8 hard drive and one of the sales guys was in Japan at a trade show and said, Toshiba just came out of the hard drive small enough. So Toshiba's innovation. Now it opened up the door for Apple to create the product they wanted to create. And that gave us the first iPod, which is one of the most transformative products in my lifetime. And that's a perfect example of an innovator, like I said, I have the end experience of what I want. But the technology needs to come along. So you're an aggregator. Right. So an innovator is an aggregate. And it's someone who can, it can, can foresee and see around the corner of like where technology is going. Because I would say technology all it does is limit our imagination. And as technology gets better, our imagination scope gets wider and wider. And you could say, hey, I want, like if someday it's people going to say, I want a car that I could charge for five minutes and it goes a thousand miles. That will happen someday.

16:49So it's just, you know, you put you have to imagine the car first and the whole experience first. And then you work backwards. And when that technology becomes available, you back into it. So the ethos of innovation is imagination. I would say it's imagination creativity and aggregation is that understanding that it doesn't all happen in your building. Yeah. But it may not be you that actually does it right. You have a team that can can source these things and figuring it out. Leadership is by surrounding yourself with people that can enhance your ideas. So you might have the initial idea and someone might come you and refine that idea and make it into something better saying, hey, I know you wanted you wanted to do this. But what if we went this direction and maybe you know and being open. So I think it's like it's you have to be imaginative creative. You have to be collaborative. Yeah. You have to be open. And I would say you have to be worldly because it's not like you know, we have we have products that have components from all over and in and to be open that like there might be a startup in Slovenia that has a really cool technology that no one else is going to have is going to make your product better.

17:57But if you if you're not open to like exploring and talking to other people from other places or child places, then you're just kind of like you're limiting your ability to make products. So you think the whole reality of Stortion field from like Steve Jobs is like maybe you're it's a little too extreme. You need to have that collaborative mind where you're able to also maybe envision something but compromise here and there to actually fit what is what is possible. I mean, because people don't sometimes really driven people don't like the word compromise because I think they're giving up something. Yeah. But sometimes compromises get you to a better end result. So you know, the whole like don't let you know the perfect. I mean, I think that it's important that that a person has enough humility to say I might have good ideas, but other people also have good ideas that can make my ideas better. Yeah. And being open and not rigid and not being threatened by other a players to bring in and by surrounding yourself with with a players.

19:02I would say you always know another a player because the a player is never threatened to be in a room with another a player that when you know you have a B players when that B players, that by other people's ideas. Yeah. So speaking of other people's ideas. Is there any other companies leaders in your space over the last five years that have come up with something that you think has been truly innovative that you were like, wow, I wish I thought of that idea or came up with that and made that part of my company. In my space, no, James Dyson is a huge like I would say on my Mount Rushmore like in modern times like because I think there's a difference between inventing something and then reinventing something. And James Dyson has reinvented things that were just accepted as we're just going to accept that hairdryers have an intake and they hit a metal grill and then has and then it goes to how many other industries could be reinvented that way. And like you know vacuum cleaner as well they have a bag and then you know it's like he reinvented the vacuum cleaner.

20:03You know the air purifier the hairdryer things that we use every day we kind of take for granted is like these are just kind of there's a hundred products in the market. They're all kind of different versions of himself. And Dyson came along and reinvented it. And so I would say that like there's I give just as much credit to someone who's a re-inventor like him. In our specific space, you know we you know Norma Tech was you know is a is our best selling product by revenue. And is a huge you know part of our brand identity. And that was not a product that was part of our original product line was an acquisition that we made. And that was sort of the spirit behind why we made that acquisition was I said I think that new matter compression is at the infancy stages. There's more people that use Norma Tech now there's more people that buy Norma Tech now. In a year then in the whole history of the company before we bought them and they were company for 15 years or something before that we brought the price point down.

21:04And that's the whole you know and also I think that we put Norma Tech in a better brand vehicle that reach more people and then expanded our distribution globally. But but that was something where I was like wow and when when I first got in it and I said like this makes a measurable it checked all the boxes. The experience when you use it feels good. You feel good after and then there's science to back it up those that's that's the Trinity of what makes a great product in our space. So yeah so there to answer your question you said the last five years well we bought Norma Tech five years ago. So I would say that was the one that and we just felt we needed it. We felt that you couldn't have a comprehensive recovery brand without the technology. And there was nothing that we were you know we didn't have the chops in house to do what they did it was developed by a MIT and D and there was a huge amount of acceptance around their technology. So yeah I would say like you know Norma Tech is you know was the one and we ended up we ended up trying it. Yeah well we'll talk about acquisitions in a second but before we close on innovation.

22:06Yeah we can't talk today about innovation without talking about AI. So where do you think AI is going to help impact your industry sports sports performance etc. Do you see any lanes that that is going to take certain products certain verticals to the next level or is it too early to tell? Well number one I think it's early to tell number two I'm probably not the best person to answer this question but I will offer my opinion as a hardware developer that I think there were there have been and are going to continue to be a lot of failed attempts to try to come up with some sort of. Algorithm that tells people that their body is in the fully recovered state like I've had so many numerous startup software engineers come and say I figured out a way to take data from an Apple watch or from a.

23:10Why are you I wear or a or a ring or it does give me that right if I'm in arrested state how I feel how I should if I'm if I'm ready to work out or whatever my mentors are great saying don't trust the scan trust the man yeah and when people say well you know they would come and say well this this could tell you exactly when a muscle is fully recovered. And I'm like you know what tells me what a muscle is fully recovered when it's not so anymore when my brain tells me it's not. I think that our brains are more perceptive than any AI model can be a model so I just has high level pattern recognition to our muscles are a liquid syrup surrounded by connected tissue that connects other muscles to try to quantify and any. Accurate way how recovered a muscle is I mean you have to get then it becomes like you get to the work what is recovered even me yeah. I would say recovery if you ask me to just find recovery I say when the body can return to full range of motion without restriction soreness pain or limitation yeah so like if I did a series of motion and I can't feel any friction I can't feel any restrictions on my movement patterns or limitations.

24:27That my brain can tell me that you know like so I don't think it's going to impact your space no I will never say that much compared to a lot of other issues I don't think that I think the human body is so complex and it's so it's so there's so many variables with every person that I don't think we're going to have some agreed upon you know algorithm that's going to be this is the end all be all and this is going to tell you that you know the coaches are going to look at it and say well my guys not recovered well it's like. It's a thing that bothers me about that is that like as someone who is an athlete who who grew up around sports do you know how many great moments and sports have been done by guys were dead ass tired or women that were dead as tired yeah exactly well the Michael Jordan flu game when they just set him out so we would never have the Michael Jordan flu game yeah Kirk Gibson's home run he was just we're not going to play he's not in the fully recovered state yeah it's absurd to think that like I just think that. You know technology has limits and I just think that our own human experience should be enhanced by technology and it should not it's never going to you should never dictate our lives so it could it could inform us but not dictate so you think the AI craze as it's gone a little too far I know I think that there's look I think in some applications a lot smarter than me are saying it's the biggest technology revolution of our life.

25:51I was a little bit more time and I lived through the internet which is a pretty big one and it changed changed the way we live. It flattened the world it connected the world. If this is going to be bigger than that then we're in first some stuff but I also don't I don't know that it happens sweeping tomorrow and we're all just going to be at a work in our lives are going to be running on our own. I don't see that world now and look I'm the first person say it could be wrong but that's just my opinion. At KPP financial accountability means more than advice it means we invest alongside you through our parallel investing approach when we recommend an investment for clients one or more KPP principles invest their own capital at the same time same day same price same percentage if your portfolio moves ours does too that is alignment that is transparency. That is the KPP difference.

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28:02Now available in Canada and the UK to and when quince asks where you heard about them let them know it was on invest talk head to quince.com slash invest quince.com slash invest. So let's put it over talk about acquisitions so you've made some acquisitions throughout the years some large some smaller obviously normatech was your largest so what have you learned from those acquisitions and you know what makes a good acquisition target. So we've made four acquisitions today all for different reasons all various sizes the first one was strictly an IP acquisition for what was a precursor to the modern day massage gun which became a massive category for us so it was. You know at the time it wasn't we were buying a company we were more buying the IP around a new way to create a percussion device before the whole massage gun phrase happened we were you know there was some early versions of massage guns that existed in and we had brought to market a product called the Raptor.

29:13And we did it kind of in conjunction with Gary VD was a head train of the Lakers at the time and we wanted on the IP around because we wanted to kind of take the roots of that and like kind of grow you know and add you know IP to it and to this day that is a you know a big part of our business and so it was a strategic acquisition strictly around IP the second acquisition was normatech which they had the leading product category we thought that was going to be a big we made a big bet on the future that pneumatic compression was going to continue to grow and. The and if that product was in our vehicle that it would it would thrive more which it did the third acquisition was a startup with a bunch of young engineers called recover X that was specializing in thermal technology portable thermal technology and we have multiple product lines now that feature that technology and that was really an acquisition for the talent we like the young engineers we thought they were really good product developers we were looking at our product teams so you know one for IP one for kind of.

30:13You know kind of brand positioning and product positioning in the category one for talent and then we brought in that team and developed all in you know kind of rejuvenated two or three new product line trust and then that technology ended up going to the hyperboot so you know the fourth one was just like you know it was it was sort of we took a chance at a time where we were looking at new categories it was a big topic it was very topical of you know amongst athletes of like kind of mental well this. And you know we took a chance on on a hardware device that connected to an app and it just you know it didn't work for in our brand and it's fine you know you know we if you go three for four it's not bad it'd be great to go for for four yeah but you know I think the lesson from that and I always say you learn more from your from your. and the lesson from that was just a brand has to do things that are that stay true to who they are and what they're about when they don't do that the market responds it's the best indicator you might think hey we're doing this for the right reasons this is who we are and the market says no that's not why yeah it's why certain brands make acquisitions that go to zero because they just you know like they misread the market yeah and you know that's why you can't do that.

31:31history, how the market's gonna react. The market's actually more in tune with a brand's identity, sometimes a brand's not self-aware enough to know that like, hey, yeah, you don't have permission to just do whatever you want. Apple's not gonna launch a skincare line, right? Because it's just not true to who they are, what they do. And just to go and get extra revenue. And I see brands that all the time, they go in new categories, it's a revenue graph, it's not really true to who they are. And a lot of times they'll make out additions and I'm like, well, they can't help this company. This is just kind of, they're just, you know, using acquisitions as a mean to just like, to grow revenue because they can't generate their own product line. That happens all the time. So what do you think is most important in an acquisition target? Is it IP, is it talent acquisition? Is it finding the right price? All of those things. Plus, I would say, yes. Well, but sometimes you might not need, like, you know, like, let's say it's a peril, right? Nike acquired Commerce in 2003, not for the IP.

32:32I mean, the brand IP, yes. But, you know, fashion, cyclical, and they caught a commerce on a way down. And then right when they bought it, it had a big resurgence, and now it's a huge, you know, revenue positive acquisition for them. So I mean, everything, I think you said, IP, it's sometimes it's talent. It's not, a lot of times I'm gonna be all these things. It could be one, it could be multiple. But sometimes it could just be timing. You know, you get something right before it goes big in the culture, and you get there early. And- But it's not having a vision for like what you're gonna do with this company as opposed to like you said, like just to do it, because it's a, that's a popular category, or it's a, you're grabbing users, or some types of- Chasing, chasing, chasing, yeah. Yeah, I, I, it's like, hey, we have not, our product pipeline is not very good. So people just go and tack this on, and it's gonna give us revenue we need. And by some time to do our own innovation. So yeah, and I would say that, but again, the values I learned from acquisitions are,

33:32is it who you are, is it what you're about? Yeah, and when you make an acquisition, you have to integrate this new company. What have you, what have you learned about that? Like how difficult is that to take this company that may have a few employees, it might have, I think, Norma's heck, you bought it, it had what, 20, 30 employees? No, it had like 55. 55 employees there you go. When you say company, just cross out the word company, how do you get taking your group of people and merge it with another group of people, and bringing it out, and so, you know, we were on the West Coast, Norma Tech was on the East Coast, different like kind of cultures on, in, on both sides of the country, you know, every company kind of has their own set of values, it kind of, kind of comes from the top down. We were able to make it work. I think in the end, we both wanted the same thing. So like, you know, how you get there, you kind of have to figure that out. There's been acquisitions where the, where it's been seamless, and there's been, you know, in, in, in one particular, like, it just like, it was just very two different cultures that were really, they didn't want really

34:33that to be integrated, because the missions were very different. Yeah, you have to sell, almost sell that to the new company, you're acquiring that, hey, this is the art vision, is that you come along with it. The people part is, anyone could sell anyone else's products, you know, maybe not effectively, but they could do it. It's not easy to integrate people into another, another group of people's value system, into their, you know, like, just to their norms, to the way they do business. So I would say that, in that, in that particular case, it, when it comes to the hardest part of access, is just getting the people to all kind of, now, you work for a company, you had a vision, that was their North Star. Now you're, now you're on this company's, and then, now the North Star is over here, and then maybe it was kind of in the same direction, but there's always gonna be, you know, just new dynamics, and how do you get people, you know, you might have been senior at this company, and now you're more junior or, you know, and then, how do the, and it's not just hard for the company's gonna acquire, the acquired company, and now, all your people have this new set of, like, there's always a little bit of a natural,

35:35humans are tribal by nature, and a little bit in-group, and it's the new guy, and, you know, so it's, but, yeah, managing that is a real challenge for management. That's really, it's a management. So the whole synergies, because of acquisition, is a lot harder than it sounds. It's easy for the people that stare at a spreadsheet, and look at the numbers and say, this number plus this number is this, without any consideration for companies or made of humans, humans are complicated, and it makes the acquisition complicated. Yeah, and you talked about how the world's crazy at that time. What do you think that taught you about, like, timing in that position? Do you think that, you know, you'll think twice when things are a little frothy in markets, in the economy, and do you think it may be better to wait four times when maybe your intercession, or, and be able to find acquisitions at more reasonable prices? More that Black Swan events, that, like, there's some Black Swan events

36:36that don't last very long, and the paradigm shift is not as big. COVID was a prolonged Black Swan event that totally changed human behavior, interactions, the way we interact with products and brands. And you see, like, you could, someone could write a book on just the nuttiness that went on for that to your period of acquisitions, brands and companies that, like, spiked like this, and then all of a sudden, like, when the world went back to normal. Yeah. But, like, you know, it was dying, you know, like, I would say, you know, in my industry, like the connected fitness was just sort of like the Peloton craze. Hold tonal and mirror and all these other brands into valuation stratas, years that were completely untethered to reality. Yeah. I think we were about what mirror. Mirror, yeah. Yeah. And that hasn't gone well, I think, with them. Yeah. Yeah. So, I would say that don't make decisions in a Black Swan event during a Black Swan event,

37:37like, like, set a lot. Like things set a lot. That thing's, like, set a lot. And hopefully, I don't, we don't have to face in their Black Swan event. Yeah. That's the whole thing that makes some Black Swan events you don't know when they're going to come. Well, you can argue we're in a Black Swan event right now with the trade war that we're in. So a self, a self, a, but usually Black Swan events, or, you know, 9-11 was a, it was a Black Swan event. The financial crisis was a, you know, even though it was self-inflicted over a long period of time. Yeah. But, but yes, I would say this is kind of more than that. Yeah. I'm kidding, right? How would you say that's changed the way that you thought about and investing in your supply chain or adjusting your supply chain? Well, the, the issue that we're, that I think all businesses that make physical products now are facing is just the inability to plan and forecast and that slows investment. And we are just waiting for things to settle down and normalize either way, even if it's, even, use one clarity. Bad news is, okay. Yeah.

38:38That will give us guidance to go somewhere else. Yeah. So it sounds like you've, you've looked at options. It's just you don't know which way to go because you don't know how to settle. I mean, it's a, you know, we're on a football field and the goal poster moving, the yards moving, the end zones are moving. You know, you don't know what played it. You don't know. Yeah. We're, you know, it's, it's just, and the, the hard part about is that you think that we, it's like, okay, so this is the no fly zone here. The terrorists are going to be too big here. Let's try here. And then all of a sudden, that becomes prohibitive. And then so it's like, well, do we keep like at some point, there has to be this has to, like this is can't go on forever. Yeah. Because, you know, ultimately the consumer is going to end up, you know, paying the price and companies will end up paying the, paying the price for it. And, um, yeah, I think every company and this is just, you know, coming from a company that makes physical products like we just want to know. Yeah. Yeah. Yeah. And, and it would be nice to not have to worry about it because it's,

39:41it's, it's definitely, it takes a lot of bandwidth on a company's supply chain and finance and logistics people that are constantly like, and, and it, creates inefficiencies. And so, and that's one thing I think it's underrated is that the uncertainty is creating inefficiencies in business. And I think this will show up and, and I think the market is disconnected from what's happening on the ground. Do you ever wonder if your healthy routine is actually working? I mean, you eat well and exercise, but how is your body really aging? You don't have to guess. Discover the truth with the true age test from true diagnostic. True age uses peer reviewed epigenetics developed with Harvard, Yale, and Duke to analyze your DNA. It reveals your biological age, how fast you are aging, and how your specific organs are tracking. Even better, you get personalized lifestyle recommendations to optimize

40:43your longevity. The process is simple. Just a quick at home, finger prick, and you will get your results online in a few weeks. So, if you're serious about longevity, or even just curious whether your body is aging faster or slower than your actual age, this is one of the easiest ways to find out. Right now, go to truediagnostic.com and use code invest 20 or 20% off your entire order. That's true diagnostic.com code invest 20 or 20% off. How have your suppliers reacted as well as anything surprised you about what they've done, how they've changed? I think all suppliers are kind of in the same boat is they're operating on the same information as us. Everyone's trying to find solutions. And, but I also think too, it's, you know, the reality is we live in a highly

41:46connected, independent economy. And in the supply chain, it's not everything on a planet Earth comes from one place. And if you want to make these sophisticated products, like I mentioned, you know, the 142 suppliers make this, I mean, auto industries a perfect example. You know, you might have, I mean, I remember pre-dating the tariff issue, a lot of the wire harnesses for Audi cars were made in Ukraine. And when the Ukraine war broke out, you affected Audi's production because it just shows how delicate the global supply chain is. And you could have one interruption. It's like, well, I can't make a car without the wire harness. So now it's my whole business is at risk. So I think it's causing companies to diversify, but also like, you know, do a source and develop second suppliers. But it takes time. It's highly disruptive and company, good companies did that anyway.

42:48But there has to be an understanding of the delicacy of the global supply chain. Yeah, if you, but you kind of have to be a larger company in order to have that, right, if you're a smaller company, you're kind of right at the whims, right? Right. And it's not easy to find. And there are certain types of products or disciplines that are, that are not that scalable at other parts of the world. So, you know, and so if there are, what it looks like is that the tariffs are going to come in globally anywhere from basis 10%, right? But most deals are kind of coming in between the 15 and 20% range, which is crazy high. I mean, like that sounds not bad. Yeah. If you would have told someone that a year ago, they, because our, because our effective rate was like two and a half percent before, right? So you're talking about, you know, nearly a 10X for, you know, on, on, on that side. So, which is all, and so it's attacks on American companies. Yeah. And it's, and it's, in its front page, which is that's the word. It like, I, you're going to see cash flow issues, because I think companies, it's, it's not like it's after we collect the, the sales and the profits from all

43:53our products, it's up front. And so it, your inventory costs are high. Ematory cycles, everything. Yeah. Yeah. So how do you think, do you think this is, does this make Mexico, because of USMCA? Does this make producing in Mexico longer term more attractive if you can avoid, because most of those products are exempt from the tariffs? Yeah. Until, but we have a trade agreement that doesn't seem to really matter. I mean, we've, we woke up on one thing and it was 25% of it. So that's the problem is that like the solutions are only solutions until they're subject to the same thing. And so if, if trade agreements are just not worth the paper they're written on, then I don't, then it's really hard for us to, yeah, in theory, if, if that, if the USMCA was ironclad and that was, that gave us clear, like that's the whole point of why you sign trade agreements. And so, but Mexico, I think as I said for years, is a massive opportunity.

44:55It's a resourceful country with tur, you know, big tourism, population, good demographics, unlike some of the Asian counterparts. And I think we should be, you know, part of the strengthening relationship with Mexico as much as we can. You know, North American in general, like if you want to count, if you want to be less dependent on, you know, the Asian supply chain, the North American supply chain needs to be developed and how it needs to be developed by all parties in North America and not just the United States. So I feel like companies build factories, nations build supply chains and they build them with, in collaboration with other nations. And do you think that Mexico has the skill and infrastructure to eventually rival China at some point? Or do you think it's going to take, take it out? I mean, I think people underestimate the trillions of dollars and the, and the planning that went into, look, there's a, what advantage of having a government like that? Is if you have really smart people that can engineer really good, like if they wanted this own manufacturing, they could basically engineer some light.

45:55Yeah. Raw materials up in the North, they go on, you build a rail system that goes down and disperses those raw materials into the various industries, refinement in the middle. And then, and then you have, you know, textiles here, technology here, and then ports. I mean, this is, you don't build that in a decade. It's been taken three decades to build the track. So, so before we just think that like we're going to roll up the warehouse door and just, and just like replicate all that, I think, and then you look, you see the videos of like, think about the shipping containers and the shipping boats. But also the institutional knowledge, right? Of like how to, the tooling, for example, right? Right. And I, and I, and I look, we want to get better in shipping. All right, well, there's steel tariffs now. So what do you think of boats being added? Like there's just, it's, yeah. I say, you can't opt out of globalization anymore than you could opt out of gravity. It's a force that's here and it's not going anywhere. So I think we, the, the, the, the, the strength of the US economy to me has been that we've used globalization as a massive, massive tailwind.

46:58And, you know, people thought that in 2027, the Chinese economy was going to surpass the US economy, that is not going to happen. So if you're like, we're definitely, you know, in, in my view, America is still the most dynamic economy leading in all the major sectors. And we've sort of offloaded some of the most capital intensive and cyclical parts of our economy. Yeah. And so we can focus on owning the IP and the creativity in the, in the, in dominate the industries. Uh, so I like to see that continue. And I just, you know, I, I hope it does. Um, but, and I hope people realize the advantages that, you know, we've enjoyed the last like three decades. You know, the people in the United States have the highest energy living now. It's, it's, you know, I'm not a fan of, of like radically changing a game that was really benefiting us. Yeah. So you deal with a lot of retailers and a lot of companies like you rely on retailers. What willingness have you seen from retailers to work with? You on pricing and how, how much leeway do you think they have to eat some of those,

48:03the, the, those pricing increases and how much do you think will be passed on? Well, I mean, not much leeway to be honest, you know, all businesses operate on economic models that are pretty sensitive and they're sensitive to little, you know, a swing 5, 10 percent in, in margin is huge. I mean, it's a big impact to the business. So I think it's, you know, in the short term, uh, figuring out, uh, like a split of who's going to, you know, it's going to affect both the brand and the retailer. They, but ultimately it's going to get passed on with consumer. I mean, it's just, there's a negotiation of what's the pricing sensitivity in the particular category, um, because we want that price increase to cover both of, it's, there's not a lot of people think that their, these companies are operating on these massive, we're retouching our operating on massive, like three, four or five percent margin. And so in a little, so that, uh, these are, these numbers, you know, when people hear, oh, it's only going to be 10 percent, it's, that's, it's an 8 percent increase over what it is now. I mean, that's not insignificant.

49:03So someone has to pay for that. Um, so either companies or brands are going to be less profitable. It means they have less money for hiring and investment and, um, or demand is going to go down. I mean, there's, uh, I just don't think that, uh, increased prices is, uh, you know, it's, it's going to be shared by everyone, but I don't, I don't know who wins in that scenario. Yeah. Well, we live in unique times and, uh, you run a unique business in a unique category. So, uh, congratulations on your success and thanks for being here. Thanks. It's a pleasure to be here and, uh, I just only hope good things for, uh, the global economy going forward. Invest talk is a trademark of KPP financial because of the nature of the interactive dialogue inherent in the format of this program. It's important for the listener to understand that not all comments made will apply to them. Specifically, nothing said she'll be taken to be investment advice or shall statements on this program be considered an offer to buy or sell security because such advice is

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