David Friedberg — founder of The Production Board and former Climate Corporation CEO — joins the podcast to talk about his path from astrophysics student to Google Corp Dev to billion-dollar founder. He then walks through Cana, his new molecular beverage printer that can recreate any drink from a set of ~80 flavor compounds, explaining the science behind it, the creator economy opportunity it opens up, and the massive environmental case for decentralizing beverage manufacturing.
Speakers: Sam Parr (host), Shaan Puri (host), David Friedberg (guest, founder of The Production Board, Cana)
Introduction: David’s Mission at The Production Board [00:00:00]
David Friedberg: All the work we do at TPB is oriented around how do we change systems of production on planet Earth so that we can make things using less energy, less land, less natural resources. I’m a big believer that sustainability in the 21st century does not arise from convincing consumers to consume less. I think sustainability arises from building technology-based solutions that let consumers consume more — and dropping the price and dropping the environmental impact. That’s what technology allows us to do.
If you go back to the industrial revolutions of the 19th and 20th century, we built factories. We put all this technology in a big machine and a big facility and we used it to make stuff over and over again, and that dropped the price for consumers because we automated in a big factory. Turns out that the technology of that factory, as all technology does, shrinks, gets faster, gets cheaper, gets better.
Bragging on David Friedberg [00:01:20]
Sam Parr: Let me brag about you for a second, because you’re a very humble guy. When I first started hearing you talk — which was not on the All-In podcast — I went on YouTube and heard you give a talk back when you were doing Climate Corporation. I remember thinking, this guy’s pretty smart. You were giving a talk at some school, I don’t know what it was, and I started Googling you and saw: wow, this guy did that, and then he did some impressive stuff since then.
So let me just brag on you for a second. You were at Google 2004 to 2006, some range like that — fairly early at Google, around the IPO time. That’s just post-IPO, is that right?
David Friedberg: I joined probably seven months before the IPO. So yeah, we were working on the IPO, or just starting to work on the IPO, when I joined.
Sam Parr: And then you do Climate Corporation, sell that for like a billion dollars to Monsanto. You do Metromile, which is a pretty cool insurance company that you backed and then ultimately ended up selling for a little bit less than it was backed for. And then you have this thing called TPB — The Production Board — and in that you’re basically what, a studio? What do you call it?
David Friedberg: We’re technically a holding company, and we’re a Foundry. So we spend time doing R&D and research and founding or building businesses. We do some investing as well, but really our focus is on Foundry work.
From Astrophysics to Investment Banking to Google [00:02:40]
Sam Parr: I want to start with this: you are known for being a sort of science guy, but I looked at your LinkedIn and your first job was investment banker. How did you go from investment banker to — as you’re called on the All-In pod — the Sultan of Science?
David Friedberg: I went to school at UC Berkeley. My major was astrophysics. I spent some time as an intern at the Lawrence Berkeley National Lab, which is a Department of Energy physics lab up the hill from UC Berkeley. I spent a lot of time doing mathematical modeling of stuff in a basement, and generally found it to be kind of disparaging in the sense that you could spend years working on a project that never sees the light of day.
At the same time I was at school, the dot-com bubble was blowing up all around me. There was even a kid in my dorm who started a company selling DVDs online and sold the business for a million bucks, and that was an amazing thing. I was mostly making money playing poker and working jobs around school. It was extraordinary seeing the world changing in the Bay Area because of the internet, and so I got really inclined and interested in not going to grad school and going to work in Silicon Valley.
I applied for a bunch of investment banking jobs — that was the hot job out of school where I could focus on the tech industry and learn about it. I guess I had never taken a finance, accounting, or business class, so my poker experience paid off because that’s what I put on my resume. I got a bunch of interviews and ended up getting a job working in a technology investment bank, focused on the tech industry. I got to work with lots of tech companies during a two-year analyst program and learn about business and finance.
Early Entrepreneurship: Telebom.com and Kanga [00:05:00]
David Friedberg: I tried to start a business when I was in college. Never really talked about this publicly. Raised some money from family members and friends of the family but never really did anything with it — never really got off the ground. The idea was to let you buy all of your telecommunication services on a website: your cell phone bill, your long-distance provider, which was kind of important at the time.
Sam Parr: What did you get wrong with that? Because that’s actually not a bad idea, especially during that time.
David Friedberg: I still have the business plan. I keep it in my office — I printed it in like 1999 or 2000.
Sam Parr: As a reminder?
David Friedberg: As a reminder. It was originally called telebom.com — got bombed — and then I renamed it In Phone Services. I registered it, set up a Wells Fargo account. There was a whole experience of starting a business. I kind of got caught up in trying to get a job out of school and transitioned to focus on what’s next in my life.
Before I joined Google, I started another business — kind of like a research Q&A site online called Kanga, K-A-N-G-A, konga.com. I basically taught myself PHP, JavaScript, HTML, CSS, and MySQL. I programmed the whole site myself, set up my own server, registered the domain, and set up bank accounts. It actually made money. I advertised on AdWords, got users to come to the website to ask questions and get answers, and they’d pay for the answers.
That actually helped me get my job at Google because I had all this experience. I was coding on my own till 5 in the morning, then going to work at 7 a.m., building this service. Google had a service at the time that was very similar to this, so I got the job at Google in part because of that experience.
Ambition and Expectations [00:07:30]
Sam Parr: When you were doing that — you’ve now built companies that in aggregate I think are worth more than $2.5 billion. If I had told you that when you were building Kanga or you’re in college, would you have been surprised? Was that even an ambition of yours?
David Friedberg: No, I don’t think I would have thought about it in that framework. Probably would have been disappointed, if I’m being honest. I still am, generally. I mean, I guess my ambition and the expectations I set for myself are probably greater than what I’ve experienced.
Sam Parr: Stay on that for a second. You’re a college kid and you had expectations of yourself that grand?
David Friedberg: Not specifically. I just feel like when you’re young you have kind of unbounded ambition. You don’t know the realities of when you build stuff and you face challenges and hiccups — everything from team to technology to markets and all the issues that arise. You’re naive in the sense that the whole world can and should be different, so let’s go fix it, make it different, make it better. That blind optimism is where a lot of energy comes from that drives great entrepreneurial success stories.
In retrospect, a lot of what’s gone on in my life and career is probably understandable in hindsight. But blind ambition gives you unlimited vision, and if you’re not challenged along the way, that can and should persist.
My orientation was never about starting a bunch of companies or making a bunch of money. It was about impact — solving big problems, having great breakthroughs, and seeing those breakthroughs really change the world. That’s still really core to my sense of energy and the things I do.
Google: Corp Dev, Eric Schmidt, and Google Analytics [00:09:30]
Sam Parr: You were at Google at a time when Google was very ambitious. I think Larry Page is a fan of yours — he’s invested in TPB. And you were doing Corp Dev there. What was it like? Give me a Google story. What was it like around those founders? Give me a story around ambition.
David Friedberg: When I joined Google, there were just under a thousand people. We all worked pretty close together — maybe two or three main buildings at 1600 Amphitheater. Three of us started this Corporate Development group, which was really about: what’s the strategy, what can we acquire and invest in, and how do we grow the business? We had pretty free reign to look at things.
I focused on the advertiser side of Google. I wasn’t interested in consumer products — I was more interested in what’s our business. In that context, I worked on all sorts of ideas: how do we take what we offer advertisers, which at the time was really just AdWords, and think about other media we can make available? Can we do print ads, radio ads, TV ads? Can our advertisers use AdWords as an interface to access media across all these different channels?
I did a few acquisitions. One was called dMarc that we turned into a radio advertising business — you could go to AdWords, click on audio ads, create an audio ad, and publish it to actual radio stations. It would play in-stream at radio stations, and you could see the impressions and all that.
Sam Parr: That’s not a thing now, right?
David Friedberg: It stayed for a long time. There ended up being a really nasty lawsuit with the founders and a very difficult set of circumstances after the acquisition. This was 15, 16, 17 years ago now. I had real issues negotiating with the founders. We thought it was such a great plug-and-play for Google. These guys had gone out to DJs and radio stations and put servers in that played MP3 files of ads at midnight every night. When the DJ would say it’s time for ads, they’d press play and it would start playing ads off the server. They bought the company that had all those servers for like $4 million, connected it to the internet, and set it up so advertisers could remotely create dynamic content and fill in unsold ad spots on that server every night. They were buying what’s called remnant inventory. It was brilliant.
But for a $4 million acquisition without a lot of technology development thereafter, they were trying to sell the business to us for $100 million. They thought it was worth a billion. The whole thing was crazy. We negotiated a deal that ended up being $72 million upfront, a $50 million milestone payment if they hit technical milestones, and up to $1.2 billion in earnouts based on advertising revenue. That earnout structure was the only way I could bridge the gap.
I had to go to Google’s board. I told Eric Schmidt I didn’t think we should do this deal, I didn’t think these guys were going to work out. Eric said, “We have to be in radio, it’s a $60 billion market.” He pushed the whole thing through. Sure enough, we ended up in this nasty lawsuit that lasted for years. Audio ads eventually kind of died down.
David Friedberg: I also worked on Google Analytics. I pitched Larry and Sergey early on with the idea that our advertisers should be able to have analytics on their web pages to see how people are converting. We didn’t have a conversion tracker at the time or anything.
Sam Parr: What does that mean — you pitched Larry and Sergey?
David Friedberg: I worked with an amazing person named Megan Smith — she’s really well known in Silicon Valley, she was Obama’s CTO. She was really my mentor at Google and showed me that I can just walk into Larry and Sergey’s office, walk into Eric’s office. She’d drag me over to Eric’s office while he was sitting there doing emails and she’d barge in and say, “David’s got this idea, let’s talk about it.” She really showed me that we can and should have this kind of dialogue with these execs.
So I was in a meeting with Larry and Sergey saying I think we should be in analytics and offer advertisers the ability to see their data. The first thing Larry and Sergey said was, “That’s evil. Third-party trackers are evil. We don’t want to track users across different web pages.” This was fairly prescient — Larry and Sergey saw that this might be viewed as evil by consumers down the road, and they were absolutely right. That’s exactly what’s going on in the EU and with Apple and Facebook and all the cookie tracking being taken apart right now.
But I showed them that if an advertiser can get analytics, they can see an incredible improvement in conversion efficiency, which means the user is having a better experience on the web page. If the user is happy, the user will buy more, they will convert better, and the internet is a better place. One of our guiding principles at AdWords was that our advertisements should be so good, and the advertiser’s website should be so good, that 100% of the time people click on the first ad and 100% of the time they don’t come back. The bounceback rate is zero. That shows you’ve shown the perfect ad that’s even better than organic search results.
David Friedberg: For analytics, I met Wesley Chan, who was a product manager at the time. Wesley and I started working together. We found a company called Urchin. I took Wesley to SES — Search Engine Strategies — and we walked around and met a bunch of analytics companies. We had four of them come in and talk to us, and we picked Urchin and convinced them to join, convinced Larry and Sergey to do the deal.
Within a year, through Hal Varian, our chief economist, we demonstrated that Google Analytics increased AdWords revenue by half a billion dollars because so many advertisers were using it to improve their websites and make conversions better that they were spending more on AdWords. You could economically show the benefit of analytics. That was a $25 million acquisition. I don’t know any web pages that don’t have Google Analytics on them.
Sam Parr: Where’s my bonus?
Shaan’s Twitch Experience and Reading Great Leaders [00:17:00]
Shaan Puri: My last Google question — well, when I got acquired by Twitch, which is part of Amazon, I remember in the first or second meeting, I was looking at Emmett — somebody I really respect, the original founder, who was kind of my boss. There were maybe 20 people in the room and somebody presented a six-page paper. He was done reading it in half the time of anybody else, had scribbled down some questions, and the first question he asked cut straight to the heart of the thing. I remember thinking: this is what it would be like if my brain was twice the size. He could read twice as fast, get to the heart of the issue twice as fast. I was just so impressed.
I think great leaders in some ways almost feel like aliens — they have some superpowers that others don’t. What was it like with the Google founders? Were they just normal people to you, or did you notice any special traits or abilities?
David Friedberg: Look, the culture is set at the top. The team that Larry and Sergey built around them — Susan Wojcicki, Salar Kamangar, Urs Hölzle — Urs is still SVP of engineering. He built all the data center infrastructure, which I don’t think a lot of people realize is probably the core advantage of Google.
Shaan Puri: Tell me about this. My co-founder, who’s super technical, used to say that people don’t ever talk about this, but it was Google’s server architecture — their choices — that allowed them to win. What did that mean?
Google’s Hardware Moat [00:19:00]
David Friedberg: If you go back to 1999, 1998 — in order to search the web you had to have web crawlers, indexing servers, and then your web servers that serve up search results. In order to search the web extensively and have a high refresh rate, you need more servers.
At the time, everyone was using Oracle servers that cost like $3,000. They had a nice case, they had purple on them, they used a lot of power, they looked really nice, they were supposed to last forever. Google set out to build a really cheap server. They took commodity hardware and basically breadboarded the thing — super cheap RAM, super cheap hard drives, jammed them all on a board without even putting a case or cover on them, using super cheap power supplies. They said: look, we’ll make lots of these, we’ll be able to search more of the web, we’ll have a higher refresh rate, we’ll be able to index stuff better.
Their cost was $150–$200 instead of $3,000. Their servers broke every couple of months. But guess what — it was so cheap to make that when it broke, they threw the thing away. It didn’t matter. They didn’t need a five-year server. They didn’t need the fastest CPU.
When I joined Google they had a team working on a 10,000-port switch, making their own ASICs — their own chips. The depth that the hardware engineering team and infrastructure engineering team went into at Google, to create a full stack of technology that was advantaged from the ground up, meant that they would always be able to search more of the internet, always be able to do it better, faster, with a higher refresh rate.
And then they made their website super simple, and they didn’t have to sell ads against it because it cost so little to run the website. More people come, network effect, more people show up, they’ve now got more people they can sell ads to, they can reinvest in building more servers, search more of the web — and so on and so forth. The AdWords architecture was just perfect. It was an auction. Advertisers would bid for search terms. They wouldn’t do paid insertion or paid inclusion, which was big at the time. They said that’s evil. We’ll show ads really clearly and cleanly on the side. If users want to click on an ad, they know they’re clicking on an ad. It just created this unparalleled moat.
Larry Page and Thinking Big [00:22:30]
David Friedberg: Going back to your question — Larry Page is one of the most impressive individuals you’ll ever meet. It’s really sad he’s not more public, because I think Larry could offer a lot to the world in the way he thinks and talks about things. He always takes a bigger point of view and a bigger-picture perspective. When people would suggest products or ideas, he wouldn’t get into the technical details or the near-term road maps. He would always zoom out 100x and say: why can’t we do X?
“Why don’t we search all the world’s books” was something they proposed in 2003 — a crazy concept. But they actually went and did it. No one would have done that if not for that audacity of perspective. They always pushed and challenged every team to think bigger, more grand, more aggressively. That’s a common trait with great leaders in technology businesses. Same with coaches on sports teams — your team is only as good as you challenge them to be.
Technology leaders in particular have this unique ability to understand the technology and leap several iterations forward, speak to the team about where we’re headed, and then bring the timelines in. That makes for an incredible sense of urgency and outcome.
Shaan Puri: Why do you think most people don’t do that? Thinking big sounds easy enough to understand, sounds fun to do. I can hear that advice. Why is it harder in practice?
The Dare-to-Dream Framework [00:24:30]
David Friedberg: One of our principles at TPB is dare to dream. It’s about creating that audacious perspective: how big can this be? How big should we be?
What happens when you set a big goal — let’s say I have to climb to the top of a mountain and I can’t see the path from here — is that there are a thousand permutations on how you might get up that mountain and you don’t know which path will work. Most smart people, most successful people, are not used to not succeeding. Their orientation is that success is all about doing something and getting an expected outcome. So they’re inclined to only do things where they know what they’re going to get.
That limits your horizon. You end up saying: I’m not going to take the more circuitous challenging route that might get me to the top of the mountain. I can see that this particular path gets me a quarter of the way up. That may mean you’re giving up going to the top, but at least you know for sure that if you do X you’ll get Y. And that feels comfortable.
I see this all the time at businesses where teams end up compromising on their big vision because they’re more likely to succeed on a shorter-range, narrower-horizon opportunity. They minimize the dare-to-dream circumstance and tell themselves they’ll come back and dream big later. But here’s the thing — they don’t.
David Friedberg: I’ll give you a very specific example because this relates to the business we’re announcing this week: Cana — our molecular beverage printer. Early on there was a hard push to say: we know restaurant owners will buy this device. I don’t know if every consumer is going to buy it — it might be too expensive, consumers are fickle. If we make a device for restaurants, we know there’s an economic advantage, there’s an ROI. Enterprise-based sale. Let’s make a bigger device so it can hold more and we don’t have to worry about shrinking the technology into a tiny form factor that fits on a kitchen countertop.
The problem is: if you do that, if you start selling to restaurants, you’ve now significantly minimized the opportunity to go into the consumer channel. You now have a customer and the customer is the restaurant, and the restaurant is going to say I want this feature and I want this feature. All of a sudden your whole team is inundated with product and feature requests that focus on that much smaller, much narrower market. You end up going deeper and deeper into that market and you lose out on the opportunity to build for the 100x market that can actually change the world.
I’ve seen this at many different businesses. Taking on a lot of technical risk, taking on a moonshot project, is often foregone, and you end up trading into a much smaller pie. So I think it’s really important for entrepreneurs to continue to dream big and find aligned capital and aligned shareholders who let you dream big and shoot for those higher-risk opportunities — because if they work, they’re 100x bigger.
Shaan Puri: I couldn’t agree more. I can think of two examples in my own career where I’m guilty of that. I was just talking to a company I invested in that pitched me this amazing self-driving single-passenger electric vehicle. A really fantastic vision. But in many ways they did the restaurant thing — they found a customer who showed them a near path to validation, and in doing that they beat down the vision and tried to cram the vision into it. Some of the vision gets left behind, and you end up doing one thing that might actually be a much smaller overall opportunity. You’re going to spend your whole life doing this hard technical thing — why not go for the one that might actually work?
The 12-Star Experience [00:28:30]
Shaan Puri: This also isn’t limited to technical products. Have you heard the Airbnb Brian Chesky thing — the 12-star experience?
David Friedberg: Maybe, but hit me.
Shaan Puri: So he sat down his team and said: okay, we’re in the hospitality business, we want to give our guests a great experience — a five-star experience. Let’s first just define it. What’s a one-star experience? They’re like: you get to the house, it’s locked, there are cockroaches outside, you can’t get in, you’re out in the cold. He made them be vivid about it. Then he said: give me a three-star experience. Give me a five-star experience.
The team got excited. Five stars: you get there, it’s easy to get in, the place is nice, it looks just like the photos, you have a great stay, everything works, nothing breaks, and on the way out the host leaves you a nice little gift basket.
He said: awesome. What’s a seven-star experience? And now everyone tightened up — they thought five was the max. He said: give me more. They were like, well, I guess you could get to the airport and there’s somebody there to pick you up with your name on a sign. He said: yes, yes, give me more. And they started to define a seven-star, and he kept pushing. Nine star, ten star, twelve star.
They got to this ridiculous extreme: you get there, they have the stay, they say — “hey, you’re going to be up at 9 a.m. tomorrow, I’ve got something special for you.” Somebody picks you up, takes you on a surfing adventure with an expert. And that type of thinking is what gets you to Airbnb Experiences — the local activities thing — which wouldn’t have really otherwise been part of a “go book a place to sleep” type of website.
David Friedberg: Totally. And you can do that on user experience and customer experience just as much as on the technical side. That pairs pretty well with the dare-to-dream framework.
Introducing Cana: The Molecular Beverage Printer [00:31:00]
Sam Parr: So let’s talk about Cana. I reached out to somebody on your team and said I want to make a drink. Let me explain it in simple terms of what I think it is, and you correct me.
You basically made a printer — like a home printer — but instead of printing out sheets of paper with ink, you can print out a drink. Any drink. My wife is vegan, she doesn’t drink alcohol, but she loves certain types of tea and coffee. She loves Starbucks because she can customize her drink exactly: light ice, oat milk, decaf, no sugar.
So similarly, we’re going to have a device in our home where we push a button and it’ll print the drink we want. The same machine she uses for her teas, I can use for a lime Gatorade-type drink. Or I might even be able to print a drink that somebody on the internet just creates as a recipe, and my printer can just print that out.
Instead of shipping cans of beverages or going to a store, we combine the water already in our homes with a printer cartridge of flavors, and you can print whatever drink you want.
David Friedberg: You did great. I love those use cases. That’s exactly right.
The big discovery with this business is based on the idea that 99% of beverages are water — or water plus sugar, water plus alcohol. Only 1% of all beverages is the chemistry that makes the flavor, the smell, the color, and the texture. And that 1% is all you really need to turn water into all these different beverages.
Water into wine — and Cana is actually the town in Galilee where Jesus turned water into wine. That’s the name. Friends who went to Sunday school tend to know that.
Wine has about 500 flavor compounds — all the stuff that comes from the grape, the skin, the branch, the leaves, the oak. It turns out that of those 500 compounds, only about 30 to 40 really matter to your sensory palette. Your nose and mouth can only really pick up and care about those 30 to 40. The same is true in coffee, in tea, in juice, in soda, in liquor, in beer.
When you look at the chemical composition, those few dozen compounds can be very overlapping from one beverage to another. Only a few tweaks can change a white wine into a red wine, or a Chardonnay into a Sauvignon Blanc. So the idea is: let’s get those compounds into a cartridge — just like an inkjet printer where you might have CMYK, four colors — and we think with 80 compounds we can recreate all the beverage flavors that make up everything from OJ to Gatorade to beer to iced tea to iced coffee to a margarita.
The Origin Story and The Science [00:35:00]
Sam Parr: Give me the origin story. Were you just sitting around one day and you’re like — you know what, all these drinks are 99% water and just 1% is the differentiation, why don’t I just do this? How does an idea like this even come into your brain? What do you see? What are you reading? What happened? Where did the epiphany happen?
David Friedberg: A couple things. I had a good sense for that for a while. I was at dinner with a professor from UC Davis in late 2018 or 2019. He was telling me about a research paper published by a scientist in Germany at the Technical University of Munich. This scientist runs a flavor science lab. He basically took a glass of wine, reduced it from 500 compounds down to 37 or 40, gave it to a consumer sensory panel, and they couldn’t tell the difference between that wine and the original wine. He did it with another wine, and another, and he’s made these declarative statements that he thinks we could recreate all beverages with just a few dozen compounds.
I said to the guy at dinner: why don’t we just make the Star Trek replicator for beverages? We could just print any beverage if we could get those few dozen compounds into people’s homes.
We have a scientist in residence at TPB — we run R&D programs internally, and if we feel confident that the R&D yields an opportunity, we’ll build a business around it. In this case I said: why don’t you read these papers, try to recreate these experiments, and see if we can confirm that it’s really feasible to create thousands of beverages using just a few dozen compounds, that they make economic sense, and that we can put them in a flavor cartridge and turn this into a machine.
After about a year, year and a half, we convinced ourselves this is going to work. We ran a chemistry program — analytical chemistry — as well as a hardware program. We had spreadsheet models showing the math could work. There were all these technical challenges: how do you actually dispense microliter and sub-microliter volumes of flavoring compounds into the water stream? You’ve got to make sure you can do the whole thing in 15 or 20 seconds, because otherwise consumers get annoyed. It’s got to taste incredible. It’s got to have high precision. It’s got to be cheap. It’s got to make it really cold. All these PRDs we were iterating on.
So we now have fully working prototypes of the Gen 1 device. We’re going to production on Gen 1 and hope to ship early next year. We’re starting pre-orders today — $99, fully refundable reservation fee. The first 10,000 orders are $499 for the device, and $799 after the first 10,000.
What Can You Actually Drink From It? [00:40:00]
Sam Parr: Let me ask two things. First, what kind of drinks can I actually get out of this — what the average person wants to know — and then I want to talk about the environmental impact, because my sense is that if you’re literally producing what you eat and drink in your own home, you cut out a bunch of trucking, storage, and packaging. But let’s do the fun stuff first.
So I’ve got water in my house. Can you cool it down? Can you carbonate it?
David Friedberg: It’s chilled and carbonation is optional. You can go hot too, but we don’t do heating in Gen 1 — so no hot coffee or hot tea in the first generation. There is cold brew, iced teas, flavored iced teas — a whole variety.
There are three cartridges. The master flavor cartridge should last anywhere from one to three months before you need to replace it. There’s a separate sugar cartridge, which should last about a month, and a separate alcohol cartridge, also about a month. You don’t have to buy cartridges — they’re free, they auto-ship to your home. The device senses when you’re running low and sends you a new cartridge. We charge per drink.
The price per drink is going to be 25 to 50% on average cheaper than what you’d pay in retail for that same beverage. At the end of each month, your account is charged for the beverages you consumed. You don’t need to go to the store, you don’t need to buy cartridges, you don’t need to deal with any of that nonsense — we take care of all that.
David Friedberg: The beverages range from morning till night: iced coffee, iced tea, sparkling soda, juice, hydration or energy drinks, hard seltzers, cocktails, wine. There are add-ons like caffeination, nutrient boosts, vitamin boosts, electrolyte boosts. So you could have low-alcohol hard seltzer, low-sugar juice for your kids, add caffeine for an extra boost, or low-caffeine iced tea.
As a user, what you’re going to experience is literally hundreds or thousands of brands available on this device — and they’re all going to be new brands. I think a few of them will start to announce this week.
The Long Tail of Beverage Brands [00:43:30]
David Friedberg: Think about where this goes. Today, as a consumer, you have a very limited number of choices when it comes to brands because there are only about 150 slots in a retail store for wine, beer, coffee, tea, juice, soda. Minute Maid, Coca-Cola, Pepsi — these are nameless, faceless corporate brands. In the future, you’re going to have your own brand. You and your podcast can make a branded beverage, put it on Cana, and your followers can buy your beverage — your favorite blueberry hard seltzer, your wife’s favorite tea. You can build your own brands at zero cost to you.
I think the future is a lot like what we saw in media. People are consuming TikTok and YouTube and Netflix — there’s a long tail of content, a long tail of things associated with individuals and influencers. I think the same will happen in brands.
Sam Parr: To explain that point — the same way that if you wanted to watch TV or listen to radio, there was a fixed number of slots. Three channels meant they showed the most general thing to appeal to the common denominator. Cable got you more channels — a fishing channel, a golf channel — but those are still pretty broad compared to YouTube. On YouTube I can watch somebody who just likes to binge eat food. I can watch a CrossFit thing that may not have made it onto ESPN 2. You can binge watch chess matches on YouTube, but not on ESPN.
You’re now watching way more media than you would have otherwise. And it’s permissionless — nobody auditioned us for this podcast. We just did it. What you’re saying is the same thing is going to happen in drinks. The consumer will have infinite selection. The low-sugar orange juice that’s sparkling will exist for the person who wants it, even though it’s not on the shelves because it’s not mass popular.
David Friedberg: Exactly right. And me and Shaan have already started brainstorming — Shaan wants to do a root beer, I’m interested in a sparkling water sort of thing, a non-alcoholic refreshing thing.
Shaan Puri: Let’s do it.
David Friedberg: Come to Redwood City, try the device, and we’ll get you guys set up to make your own brand.
Sam Parr: We were already about it. People started DMing us because we like to make up fake brand names on the show. Oh, Southern Sam’s Root Beer and then Shaan’s whatever. I said somebody should make a brand of water called Lucky Water — just a little hint of something, pure placebo — and say right on the label: this is a total placebo, but hey, it never hurts.
Does It Actually Taste Good? [00:48:00]
Sam Parr: Okay but here’s the real question — is this going to taste the same? I lived in China for a bunch of years and you’d get these sodas where there’s this phrase expats call NQR — Not Quite Right. It almost tastes like KFC, but it doesn’t taste like KFC. That was a common problem when they tried to export flavors. I know you’re biased, but give me the honest answer.
David Friedberg: There’s a really important distinction here, and this is fresh on my mind from a conversation earlier today. There’s a difference between taste and flavor. Flavor is the sensory experience you have biochemically and biologically as you experience a bunch of chemistry in your mouth. Taste is how your brain psychologically interprets and finds that appealing.
We’ve all heard stories about taking expensive wine and cheap wine, blindfolding people, and they can’t tell the difference. I can give you really cheap Two Buck Chuck in a two-Michelin-star restaurant and you’ll think it’s amazing. I can give you really expensive wine in a McDonald’s and you kind of just chug it down. Taste is a function of the overall sensory experience when you engage with a product.
David Friedberg: We have to get the flavor right, obviously. But there’s also the whole digital experience on the device that we think is really important. Brands are no longer static — it’s not just a logo. Brands are visual. There’s a video or audio that comes through as you’re exploring and trying stuff on the device.
On the flavor side, it’s really straightforward. Our chemistry team prints beverages. We take the best in market for that category — we’ll take Sprite lemon-lime soda and print one of our lemon-lime sodas — and we have a sensory panel where we bring in consumers, they blind taste, we score, we get iterative feedback on what’s working and what’s not. We don’t graduate a formula until and unless we hit and exceed best-in-market comparables.
David Friedberg: Really interesting statistic: something like cold brew coffee, which can be so complex and so different — you can take Starbucks and Blue Bottle, and one group of people will passionately love Starbucks, another group will passionately love Blue Bottle. So you’ll see that our formula will score really well with one group and another formula will score really well with the other group.
This goes back to the earlier point. Coca-Cola has 44 grams of sugar, or whatever. That’s the lowest common denominator that gets the biggest audience to buy Coca-Cola. But some people would buy more Coke if it was 20 grams of sugar, and some people would buy more if it was 60 grams. If Coca-Cola had a 20g, 30g, 40g, 50g, and 60g version, they would sell a lot more in aggregate than they do with a single version.
Shaan Puri: Malcolm Gladwell has a TED Talk about this — the perfect pasta sauce. Have you seen that one?
Sam Parr: Yeah — millions of views.
Shaan Puri: He has this great story about a guy who gets hired by Pepsi and then Coke and then I think Prego — “we want the perfect pasta sauce, what is the perfect flavor for consumers?” And he discovers there is no perfect pasta sauce. There are only perfect pasta sauces. Some people want the chunky one, and there’s a perfect version of chunky. Some people want the smooth one, and those people feel very passionately that chunky is worse than non-chunky — it’s not even close for them. And another group feels the exact opposite. But they’re still limited because they can only bottle five or seven or twelve variations that can fit on shelves. Whereas you’re not limited by that in the same way YouTube isn’t limited by the number of channels.
David Friedberg: Exactly right. And I think that’s where it’s not about whether we’re better than Coca-Cola. It’s whether everyone can find a product on Cana that they like more than Coca-Cola.
Creator Brands and Revenue Model [00:54:00]
Sam Parr: You can’t use their name, right? So what are you going to do?
David Friedberg: We’re not using any existing brand names. It’s all new brands. Your lucky water is going to be a brand — we’re going to get that done.
Sam Parr: The question is about the creator model. Let’s say I’m selling my 30-cent lucky water. Is there a standard App Store-style 30% cut? What’s the business model?
David Friedberg: With someone like 50 Cent or something, his royalty on a big Vitamin Water-type deal is going to be 2 to 6%. So that’s a very different model than what we offer. We offer a much higher share of revenue. Obviously this is a difficult business to operate — we’ve got to get cartridges made, get them to people’s homes, we auto-renew, there’s a whole services component. We’ve got a pretty good pitch for brand partners today. We haven’t launched commercially yet, so I’m not going to commit to what the number is going to be, but I think it’s a really compelling opportunity.
Brand partners own their brand. If they want to take it elsewhere, it doesn’t have to be exclusive. We don’t own the brand — it’s your brand. So you can take lucky water, and if it takes off and you’ve got 10 million people who want to buy it in stores, go launch it in stores. It’s yours.
David Friedberg: It’s almost like merch, right? Monetize yourself. And the thing is, only 3% of beverage brands that launch and get retail space actually make it to $10 million in sales. If you have less than 100 million followers — if you’re a great YouTube creator with 3 million followers, people know you and love you — you’re never going to make a beverage brand the traditional way. It’s going to cost $5 million to do. You’ve got to formulate it, make packaging, make a logo, box it, then convince retail stores to carry it. It’s basically insurmountable unless you’re as big as the Rock or George Clooney.
There are probably 90,000 times more people in that middle tier who are really influential, have a lot of followers, aren’t as big as George Clooney and the Rock. They could make a brand that requires no investment, no capital, no risk. And it’s permissionless — if it works, they’ve got a nice revenue stream.
Pricing, Roadmap, and the Tesla Roadster Model [00:58:00]
Sam Parr: The device is $499 for the first 10,000 pre-orders, then $799. Is this the Tesla Roadster model where you’re thinking — where do you need to drive the price down to make this not just a cool thing in my house when people come over, but actually standard in every home?
David Friedberg: There are about 35 million Keurig machines installed in the world, and like 3.5 to 4.5 million SodaStreams. These devices have prices ranging from like $70 up to $299 for a nice Nespresso. So $299 maybe gets you a 10% market, $199 gets you 30%. I don’t know the exact number, because part of what we’re doing is we’re not just a single product for a single day part. Will people pay more for more day parts? Will they pay more for more variety?
Hopefully our prices are going to be lower than some alternative products. The value we can provide to consumers will ultimately dictate how the market expands as a function of price.
And then form factor — can we get it smaller? Can we add heating? There’s a bunch of features on the roadmap and tradeoffs on price. If we add heating, it costs a lot more and gets bigger. Can we make a technology leap where we get everything smaller, add heat, and drop the price?
As we go from Gen 1 to Gen 3, we really think Gen 3 ends up being the one that’s got everything for everyone at an accessible price point for the mass market.
The Environmental Case [01:01:00]
Sam Parr: I don’t know if you’re out of time, but I did want to give you a chance to talk about the environment — because I think that’s one of the big drivers for you here.
David Friedberg: Pretty much all the work we do at TPB is oriented around how do we change systems of production on planet Earth so that we can make things using less energy, less land, less natural resources. I’m a big believer that sustainability in the 21st century does not arise from convincing consumers to consume less. Sustainability arises from building technology-based solutions that let consumers consume more while dropping the price and dropping the environmental impact.
Theoretically, technology that’s better than what exists in a factory to make beverages can be put in your home. The idea is: how do you decentralize manufacturing?
It takes about 600 liters of water to make a single liter of wine. It takes about 40 liters of water to make a liter of orange juice. And we take all this water, grow all these crops that basically turn into water, put them into glass and plastic and cans — which we use carbon dioxide to make — then we put them on trucks that use carbon dioxide to go to warehouses that go into stores that go into your home, and you’re basically drinking water. Every industrialized home already has water.
It’s about half a billion tons of CO2 put into the atmosphere every year to make bottled and canned beverages. About 400 trillion liters of water used in the whole production cycle of bottled beverages. Consumers are spending $2.3 trillion a year on this archaic, insane system of centralized manufacturing — using a ton of energy and a ton of carbon and a ton of land just to move water into your home when you already have water in your home.
120 million acres of farmland that could be reduced and returned to natural ecosystems. That’s our long-term incentive: can we take that carbon out of the atmosphere, can we reduce the waste on water, can we return the land to natural ecosystems — and at the same time make a cheaper and better experience for consumers by decentralizing manufacturing and putting these devices in homes?
Sam Parr: I don’t know if you’re hiring, but this is one of those companies where I would look and say: wow, that would be a cool place to work. You have a hard tech problem. You have a device that — if it works — is going to be like a household name. Like a Netflix or an iPod. If this actually pulls it off, I mean you’re on some Willy Wonka stuff. You’re basically creating this magical device that lets you create whatever you want — your own beverage in your home. And to do that while also having a big impact on the environment.
Most people would look at that environmental supply chain you described and say: how do we make this 20% more efficient at this step, how do we make the trucks emit a little less CO2. What you’ve done is say: why are we doing this in the first place? Why don’t we eliminate the whole chain? Why are we using all this water and all this plastic and all this fuel just to move water from here to there and add a little bit of flavor to it? The water is already piped into people’s homes. We already built that core infrastructure.
David Friedberg: Totally. You nailed it. It’s the last two feet of counter space — just converted into the product people want. The refrigerator space, the energy to run the refrigerator to store all that stuff in your cabinets — all that goes away. That’s exactly why it’s so awesome.
And yes, we are hiring. We’ve got great offices, so people come to work in the office — which is a perk nowadays.
Sam Parr: You can see humans if you work with us.
David Friedberg: Come on out and meet people IRL.
Closing [01:06:00]
Sam Parr: I think you know, Climate Corp is cool, the insurance company is cool, it’s not that cool — but you made some money. This is cool. This is going to be your biggest thing.
David Friedberg: Hopefully this will be the thing that the college version of me would say: all right, that was sweet. Not underwhelmed by that one. As long as my kids are proud down the road, I’ll be happy.
Sam Parr: All right — tell people where to go.
David Friedberg: Cana.com. Go check out the product specs and the product video, and sign up for a $99 pre-order reservation.
Sam Parr: Thanks for coming on, man. I really appreciate it. I’m a fan of yours.
David Friedberg: It’s been a great chat. You really nailed it. I appreciate you listening. Thank you.