MI REWIND: MASTERCLASS ON NFTS AND BUSINESS

W/ TOM BILYEU

05 July 2024

On today’s show, Robert Leonard chats with Tom Bilyeu on how he was able to build one of the fastest growing food companies in the world and received a $1 billion valuation in under 5 years, what marketing strategies there are to turn to first in order to grow a brand new company, what NFTs are and what Tom’s goals are with an NFT marketplace, and much, much more! 

Tom Bilyeu is the co-founder of billion-dollar brand Quest Nutrition and the co-founder and host of Impact Theory. Personally driven to expand people’s vision of wellness to a 360-degree view that encompasses body and mind, Tom created Impact Theory to help people develop the skills they will need to improve themselves and the world. He has been named one of Success Magazine’s Top 25 Influential People in 2018 and Entrepreneur of the Year by Secret Entourage in 2016.

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IN THIS EPISODE, YOU’LL LEARN:

  • How Tom was able to build one of the fastest-growing food companies in the world and received a $1 billion valuation in under 5 years.
  • What marketing strategies to implement first in order to grow a brand new company.
  • What Tom thinks about the rise of popularity in entrepreneurship where everyone seems to want to be an entrepreneur these days.
  • What Impact Theory is exactly and why Tom started it.
  • What Tom’s process and strategy are for controlling one’s emotions.
  • Where Tom falls on the debate of focusing versus trying a bunch of different things as an entrepreneur.
  • What NFTs are and why Tom is so bullish on their future.
  • What an NFT marketplace is and what Tom’s goals are with it.
  • What have been Tom’s biggest takeaways from interviewing the most amazing people in the world?
  • What habit or principle Tom follows in his life that has had a big impact on his success.
  • What has been the most influential book in Tom’s life?
  • And much, much more!

TRANSCRIPT

Disclaimer: The transcript that follows has been generated using artificial intelligence. We strive to be as accurate as possible, but minor errors and slightly off timestamps may be present due to platform differences.

Tom Bilyeu (00:00:01):
All right, this is the most fascinating thing that’s happened in our time, outside the blockchain. The blockchain is admittedly so foundational, but it goes like this…

Robert Leonard (00:00:12):
On today’s show, I talk with Tom Bilyeu about how he was able to build one of the fastest-growing food companies in the world and received a $1 billion valuation in under five years, what the best marketing strategies are to grow a brand new company, what NFTs are and what Tom’s goals are with an NFT marketplace and a ton more. Tom Bilyeu is the Co-Founder of the multi-billion-dollar brand Quest Nutrition and the Co-Founder and host of Impact Theory.

Robert Leonard (00:00:39):
Personally driven to expand people’s vision of wellness to a 360-degree view that encompasses body and mind, Tom created Impact Theory to help people develop the skills they will need to improve themselves and the world. He was named one of SUCCESS Magazine’s top 25 influential people in 2018 and Entrepreneur of the Year by Secret Entourage in 2016. This guy needs no introduction and is a guest that I’ve wanted to have on the show ever since I first started hosting it. I followed Tom for a long time and I really enjoy what he puts out into the world for content. Even more than that, I really, really enjoyed this episode and I hope you guys do too. Let’s dive right in.

Intro (00:01:21):
You’re listening to Millennial Investing by The Investor’s Podcast Network, where your host, Robert Leonard, interviews successful entrepreneurs, business leaders, and investors to help educate and inspire the millennial generation.

Robert Leonard (00:01:43):
Hey, everyone. Welcome back to the Millennial Investing Podcast. As always, I’m your host, Robert Leonard, and with me today I’m super excited to bring in Tom Bilyeu. Tom, welcome to the show.

Tom Bilyeu (00:01:54):
Thank you for having me, good sir.

Robert Leonard (00:01:57):
First and foremost, thank you for joining me on the show. I have been a follower of yours for a long, long time, and I really like a lot of what you built and what you’re working on, and what you share on social, so it really truly is an honor for me to be chatting with you. But for someone who’s listening to the show who isn’t familiar with you yet, give us a quick rundown on your background and your story.

Tom Bilyeu (00:02:18):
I’ll see how close I can get to the 30 to 62nd version. Go to film school, graduate, think I’m going to get the three-picture deal, I do not. I write a screenplay, it gets turned into a feature and I was horrified by the outcome. Meet these two very successful entrepreneurs and they say, “You’re coming to the world with your handout and if you want to control the art you have to control the resources, so why don’t you come with us and get rich?” And they were starting a technology company. I thought, “Yeah, that sounds amazing, let’s do exactly that.” I thought it would take 18 months, it took 15 years but it didn’t work.

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Tom Bilyeu (00:02:53):
Took multiple companies. And the two companies that I’m known for, first, Quest Nutrition which we took from not existing to being valued at over a billion dollars in five years, and then the company that I’m building now which is Impact Theory. And I’m trying to build the next Disney so the whole idea of getting into business was to have the resources so I could build my own studio and now that’s exactly what I’m doing with Impact Theory. And it’s called Impact Theory because my theory on how to impact people at scale is storytelling. And so that’s me in a nutshell.

Robert Leonard (00:03:27):
Throughout this conversation, we’re going to talk about a bunch of different stuff. We’ll talk about Quest first because that’s how I originally found you, big in the fitness and so originally your protein bars, I’m going to go anywhere without finding them so of course, that’s how I ended up finding you originally. And I started to love what you do with Impact Theory and now you’re doing some stuff in the NFT space, so we’ll go in that order. We’ll start with Quest, getting in back there, and then talk about NFTs.

Robert Leonard (00:03:48):
But you mentioned Quest and I found it interesting because food-related businesses and even fitness businesses are known to be notoriously difficult and you still made it successful with no experience in the food industry, and like you said, you made it to a billion-dollar company in five years. How did you do it?

Tom Bilyeu (00:04:08):
It’s really important to understand that to build a company that really scales, there are a few things you’re going to have to get right and one of them is you have to be business-savvy, so you actually have to know how to run a business. The other is you’re going to have to get the timing right and you’re going to have to see something before anybody else sees it so that you can be an early mover and take advantage of whatever leverage that gives you.

Tom Bilyeu (00:04:31):
There were really three things that we did right which are echoes of the three founders. We broke the company into people, product, and process. On the product side, we understood that there was something going on with sugar, people really becoming aware of how problematic it was and we wanted to create food that people could choose based on taste and it happened to be good for them. And so that was a real innovation we were able to get to market. I’m sure there were other people that had that same idea but they didn’t know how to get it to market. And so that brings process.

Tom Bilyeu (00:05:07):
When we made the bar we assumed that we were just going to market it and that we would use a co-manufacturer to make it, and we went to co-manufacturers and they said, “This bar can’t be made,” and we didn’t understand why. As fate would have it we were going to find out, but we didn’t understand why people were saying that. And so we had the temerity to buy our own equipment and say, “Well, if people won’t make it for us then we’ll make it ourselves.” And there were some really hard lessons in there but we actually ended up becoming our own manufacturer, engineering our own equipment, and solving the problem as to why everybody thought the product couldn’t be made.

Tom Bilyeu (00:05:46):
And then the third thing was people. And so this was the part of the business that I handle, so looking at sales, marketing, culture. And what had happened to me was I had joined them as an employee in their technology company with this whole promise of come with us and get rich and did that for about eight years and really walked away emotionally bankrupt. I’m just, I’m so unhappy, this is just showing up every day, trying to get rich is misery.

Tom Bilyeu (00:06:15):
And I went in one day and I quit and I gave back about $2 million worth of equity and I said, “Look, I’m leaving. I don’t want anything for this, so here’s your equity back and I’m going to go do something that makes me feel alive.” And I was going to get back into film and just go back to writing. I was like, “At least, then I feel alive.” And they were like, “Wow, wow, we feel the same. What would it take for us to continue working together?” And I said, “Well, it would have to be something that I’m passionate about, it would have to be something where we’re building community. I need to be able to be myself.” I didn’t say authentic but I was like, “I just want to be myself. I want to be who I really am. I don’t want to be a slick marketer.”

Tom Bilyeu (00:06:53):
I had heard of Kevin Kelly’s idea of 100 True Fans. And so I’m looking at what’s going on in what we would now call social media, it wasn’t called that back then. I’m like, “All right, there’s this movement here where I can build a community, and with Kevin Kelly’s idea of 1000 True Fans if we just go after people who are going to understand what we’re doing then there could really be something here.”

Tom Bilyeu (00:07:14):
So I got, the two guys ended up being my partners, and I said, “Look, here’s what I think is going to happen with social media.” And they were like, “That sounds dope, let’s do it.” And so I took my storytelling background as a filmmaker and we started creating all of our own content. And so we ended up building inside of a protein bar company, we ended up building our own studio. And so we just understood social media before anybody else, we had a better product than anybody else and we were able to manufacture that product ourselves because of the breakthroughs in the manufacturing technology that we created.

Tom Bilyeu (00:07:48):
You put those three things together and it was just a rocket ship. So it was really, really a special time. And then understanding how to scale a business, which goes, we can get as deep in that as you want but there were some key decisions we made there that gave us the cash flows so we didn’t have to raise capital, and that was huge for us.

Robert Leonard (00:08:09):
I want to talk about those pieces, but before we do I want to talk about, you touched on scale, actually running a business and timing. I want to touch on two of those and the first one being timing, because I think that is so important. If we look at Facebook, it wasn’t the first social media. We had Myspace and I’m sure there were others, but Facebook was the right time and it blew up to what it is today and there are so many other examples. How does somebody who has an idea for a business today decide if it’s the right time or if the business idea is just is bad? How do they determine between bad timing and bad business?

Tom Bilyeu (00:08:40):
Now, we’re just getting into experience. I teach something called Impact Theory University. We have a course within that called Business Decision-Making and my whole goal is to get people to understand, to grow a business you have to understand first principles thinking. You’ve got most people are teaching courses in sales, marketing, funnel building, copywriting, that kind of stuff, all of that you can hire an expert whose entire life is about that, staying on top of the algorithm. And so what you’re hiring essentially is a person who’s going to stay on top of it because that stuff changes all the time.

Tom Bilyeu (00:09:15):
The reason that you can’t really effectively write a book on social media marketing is by the time you go through the publishing cycle it’ll be different and all of the things you put into the book won’t make sense anymore. I didn’t want to do that whereas I’m constantly having to reteach and reteach and reteach. I was like, what is it about businesses that don’t change? And the reality is the only thing that doesn’t change is the thing from first principles, it’s what I call the physics of progress.

Tom Bilyeu (00:09:42):
Anytime you understand the very nature of something, the irreducible level that you can boil anything down to, I know you do motocross racing, there are physics, literal physics to motocross racing, and as your leg will tell you violate them at your own peril. There are things you have to understand about torque, about how engines work, about aerodynamics. You have to understand jumping and suspension, you have to understand what other riders are like, you have to understand your own body reaction times right now. Once you understand all of that, then you can optimize the motorcycle so that it responds to you as an individual driver, that you optimize it for a specific track, optimize it for weather conditions, that’s all first principles thinking, none of that is going to change.

Tom Bilyeu (00:10:26):
The way that wet mud reacts is very different than dry dirt. A crowded starting field with maybe a tight corner in the beginning, it’s going to be very different than a track that starts out with the jumper, all of these things just they’re always going to be the same. And so it’s your ability to go, oh, as Ray Dalio would say, “This is another one of those.” That’s getting into like that base layer. I know what this is as a category of thing, so boiling business down to categories of things. Now I know how these things operate and you have to either by learning about business in the abstract, which is useful, but I’ll call it necessary but not sufficient and then there’s engaging with your business.

Tom Bilyeu (00:11:12):
And it’s the reason that business decision-making specifically is only available to entrepreneurs who already have a six-figure business because I’m going to teach you something, I need you to go and use it. These can’t be abstract theories. I need you to see what the goal of understanding how to think strategically is the ability to solve novel problems, novel problems, it’s problems nobody’s ever seen before. But of course, no matter how new it is, it’s another one of those, it slots into a category of thing as long as you take your thinking down to true first principles.

Tom Bilyeu (00:11:45):
That getting there to first principles now you can assess your business plan within the framework of, do I just not have the right timing or am I not actually solving a problem? Because recognizing that the sole goal of a business is to solve a problem that the buying consumer knows that they have. Now once you’re solving a problem that they know that they have and they’re willing to pay that amount of money for you to solve that problem for them, now you’ve got a business.

Tom Bilyeu (00:12:14):
Now there are going to be time for Quest that was very easy once we solved the marketing problem, once we solved the product formulation problem and once we solved the manufacturing challenge, now all of a sudden we knew that we could meet a need in the market, that was to have a bar that tasted like it had sugar but didn’t, that could be produced at scale. Once we had that then you pour gasoline on the fire and you can scale it. Impact Theory, different specifics, same universal first principles thinking.

Tom Bilyeu (00:12:43):
I’m looking at, okay, we’re trying to be entertainment, it’s not like somebody has… with food, you have to eat every day, you have a literal biological imperative. But what I know about entertainment industries is you’re looking for two things if you want to be successful in a mature industry. You need a platform moment and you need a moment of disruption. And if you can combine the platform and the moment of disruption then you’ve got a shot. When we founded Impact Theory I knew we had the right business model but we had to find the right timing. When we launched I said, “Okay, everybody, our job is to stay in business long enough to solve for those two problems.” And so now we can get into how we were able to assess that but the punchline of that is basically revenue streams, so you find that thing where you’re getting enough revenue to buy you enough time to find those two really big moments.

Tom Bilyeu (00:13:37):
And we’ve now done that. In the first four and a half years we amassed millions of dollars in revenue but just to steer by team size 27 employees, and now in the next, call it, 12 months we’ll double that because we now have our platform moment and given the blockchain, we have that moment of disruption that we’ve been looking for and now we’re marrying the platform with this disruptive technology and we believe that that’s going to be the thing that gives us enough runway ahead of the other major players that will be able to really gain some traction. That’s how you think through it but you have to understand the path to revenue, you have to understand the consumer behavior to know if this is a timing issue or if this is you just haven’t solved the right problem.

Robert Leonard (00:14:23):
You also mentioned that you have to actually run a business. And I think that there’s this interesting dynamic these days between people playing business or I think that comes from Gary Vee playing business and being a watch burner versus being a real entrepreneur and building a business. How do we think about differentiating these two?

Tom Bilyeu (00:14:40):
Well, I mean, the easy way is have you built a profitable business that you’re scaling. The issue is when you have people coming into a space they don’t understand the of business and they’ve basically bought themselves a job, so they’re a solopreneur, they don’t enjoy it and it’s gone from, I could be making more money in somebody else’s business and be able to go home at the end of the day without any stress and I’ve traded all of that for I’ve built a business around the job I was doing for somebody else, which is theoretically amazing, but I’m now stressed out. I don’t like being the one that has to figure out the accounting, that’s not my specialty.

Tom Bilyeu (00:15:19):
I don’t want to think about managing employees, I don’t want to think about benefit packages and things like that. The first time you tried to get an EIN number or the first time you try to set up health insurance for everybody on your team you’re going to realize real fast there is a very big difference between plugging into somebody else’s infrastructure and doing a job versus building a company off that talent that I have. It takes a very sort of different mindset.

Tom Bilyeu (00:15:44):
And the focus everyone should have is not whether you can say, “Oh, I’m an entrepreneur,” or, “Oh, I’m a CEO,” which are cool and it sounds neat and I get why people chase it, but it comes with a pretty heavy price tag. And so people need to be super honest with themselves about what they want. And in fact, I just tweeted this out two days ago and I said, “Look, there’s often a gap between what you actually want and what people tell you you’re supposed to want, and don’t get suckered [in].” If you start chasing the thing you’re supposed to want that can lead to basically not living a joyful life, and the punchline of all of this is a fulfilling life, that you get tremendous joy out of.

Tom Bilyeu (00:16:26):
Now, it’s not just up into the right in terms of happiness, it’s a joy to me as something, and I’m admittedly defining it under my own terms here, that joy is something that’s more resilient, that’s tied to fulfillment and fulfillment easy to define, for me. It’s working really hard to gain a set of skills that matter to you and allow you to serve yourself and other people. And if you do that there’s just a going back to the physics of things. The brain from an evolutionary standpoint has default drives and you’ll get default rewarded and punished by your own subconscious for aligning to those evolutionary truths.

Tom Bilyeu (00:17:09):
And so when you align with them you get rewarded, think of sex nature. Doesn’t care about you having sex, nature cares deeply about you procreating. It incentivizes the behavior that leads to the outcome that it wants, so, hey, sex is amazing. Same with hard work. To make sure that you went out and hunted and gathered and survived, nature had to incentivize a hard work feels good. That’s why when you work your ass off and then you attain something, you’re like, “Damn, I feel amazing because I did this thing,” in a way that you won’t feel good if your parents just hand you something.

Robert Leonard (00:17:40):
I know for a lot of aspiring entrepreneurs that coming up with the idea isn’t necessarily the hard part for them. They have a great idea for a business, they’re ready to go from that front, but now they’re like, “How do I get this first person to even care? How do I get my first customer?” And given your success with Quest, Impact Theory, everything else you’ve done being a marketer, if you were starting a new company today, what are some of the marketing strategies you’d turn to first to get that first customer, those first couple of customers to get traction to grow your business?

Tom Bilyeu (00:18:09):
All right. Rule number one is if you have a product that you can’t give away, you’ve got a problem so you need to be able to give away your product for free to draw people into your ecosystem to add value to their lives. The number one rule of marketing is add value to people’s lives, you will be startled at how you’ll be able to translate that into getting the attention that you need to get the conversions because they say it takes seven touches on average to get a conversion. If that’s true then I know I want to put something out into the world that gets people into my ecosystem. Whether they’re following me on Instagram or Twitter or TikTok, whatever, or email, very powerful, they’re now in my ecosystem. Now, once I have their attention I can add value to their lives. Once I add value to their lives then I simply open up my offering to something that they can pay for.

Tom Bilyeu (00:18:57):
And as long as that value that they pay for is worth the discrepancy between free and paid, now you’ve got a business that you can build. That’s exactly what we did at Quest. We gave away products to people to get them to try it, to eat it, to be like, “Wow, I want this in my life.” I didn’t ask you to bet on me or take my word for it. It was like, “I’m going to give it to you. Try it.” Same with Impact Theory. I have Impact Theory University but I also have a gallon of free content that I’m giving out constantly. And it’s literally that, but basically turned into real curriculum in the class. People go, “Okay, he’s already changed my life with the free content so now I want to move into the paid content. I want more, I want to deepen my relationship. I want to be part of the official community.”

Tom Bilyeu (00:19:44):
And so regardless of what you’re doing, if you are a mechanic in motocross, go do a race for free. Show people what you can do. If you’ve really got talent, if you’ve got a skill that’s valuable, then give it away. And people are always like, “Oh, I don’t want to give away the thing that is my very value, how am I going to end up getting people to pay for it?” And my answer to that is if you have so little knowledge and utility as a player on a team that you can give away all of it in a single interview, a single meeting, a single day, week, whatever, you didn’t actually have that much value. That’s just the cold, hard, honest truth.

Tom Bilyeu (00:20:28):
You have to bring something where it’s the constant doing of that thing, the constant staying up on that, pushing it forward, improving it day by day, that needs to be the real value. You can let somebody live with me for a week and I wouldn’t even be able to scratch the surface of what I know about business and how to scale companies and marketing, it’s just there’s so much information. So I’m giving it away as fast as I can. I’m also learning over here so now how much I give away over here I’m intaking now at a faster rate than I’m able to convey it to other people. And so you have this ability where I can build, we’ve got about 7 million people now in my social ecosystem just by giving it away. As fast as I can, the best stuff I have, give, give, give, and then now you’ve got them in your ecosystem.

Tom Bilyeu (00:21:15):
I don’t care what the product is. Finding out who your end customer is, delivering value to them, either in a… like I do where it’s you’re getting them into your ecosystem with a style of the thing that you’re going to sell, or whether it’s a true premium model if you have like an app or something where you give it to them for free for seven days or you give them a limited version forever and then there’s enough extra value that you can actually get them to pay to upgrade, it’s just at the end of the day you have to make something that’s worth it. Your product has to be awesome.

Robert Leonard (00:21:46):
Do you think that model is even better today because of the digital nature of a lot of products and services? With Quest, I know you gave a lot of bars away for free, which clearly is a great strategy and it worked, but each bar that you gave away was cost for you guys, you had a ton of cost that goes into every single one of those, whereas of course, sure you have some time, maybe you have some hosting, but relatively speaking you can give that stuff away for free, even at very little cost to you compared to a physical product. I would probably think that that’s even a better strategy today than it was with a physical product.

Tom Bilyeu (00:22:16):
It really depends on what the product is. There is this notion with people that came up as digital natives that information should be free. If you have an information product it’s hard to monetize that and you really have to have what I talked about, like those buckets of information that are massively usable. I’ve got to have a free bucket that is extraordinary, that someone could spend years in and then still feel like, all right, I’ve got to go to that next level. And then that next level I have to be so rad that people are like, “Oh my God, I can’t believe for years that I didn’t take advantage of this.” And that can be very, very difficult.

Tom Bilyeu (00:22:51):
Physical products on the other hand, that is a harder game to find a way to give access to people if you’re doing something for free. Let’s take something in the collectible space, because now that thing doesn’t really have utility so now it’s just sitting on somebody’s shelf, now you’re going to have to do your giveaways to influencers. Let’s say that I’m the little figurines, the characters of the big bobbleheads. If I were trying to grow that business then I would give them away to the right people that can bring attention, that are going to be excited about it, that will talk about it because they’re getting it for free, that have as an audience through whatever value creation proposition they have, whether it’s I live in the anime world. Let’s say that they do anime essay videos so I know that they’ve got the kind of fans that I want to speak to.

Tom Bilyeu (00:23:37):
If I were making anime figurines, I’m going to give some to those people. They’re going to talk about it to their audience. That will drive people back to me. And then now we also get into things like hype. You have to find a way to build hype and you’re yourself going to want to be creating content as well. Content is king, as everybody says. The reason it’s king is because it gets attention, once you have attention then you can sell. But you want to be able to create that interest and that FOMO by giving those away.

Tom Bilyeu (00:24:06):
Even something like that which doesn’t have inherent utility, you can build that excitement around by giving it away to the right people. You just have to be thoughtful about what your freebie strategy is and then how you take advantage of that on the backend. But between a content strategy and the giveaway strategy, either direct to your consumer if it’s a consumable or something that can be upgraded, or to influencers if it isn’t consumable and doesn’t have intrinsic value, but is essentially a marker of a community, then that’s the knock-on way that you use that.

Robert Leonard (00:24:40):
Another model we’ve seen recently, whether it be Clubhouse, there’s another app called Superhuman. It’s an email management portal, I guess you could call it. And what they’ve done they’ve created a lot of hype by creating basically a wait list. And you’ve seen this with a lot of crypto platforms like [Exclusivity 00:24:58], I guess you could say. Rather than giving things away for free, you have to be exclusive to get access to their products and services. How do you think about these two different strategies? Are they one better than the other or did they both work in different scenarios?

Tom Bilyeu (00:25:09):
Well, I think honestly, to succeed depending on what your business is, if you’re a business that’s using a hype strategy, you are going to need to get very good at building scarcity because scarcity is the very thing that’s going to lead to that hype. And it’s an extraordinarily powerful self-reinforcing mechanism but it’s also incredibly difficult to get started. And so you have to be asking the question, why are people going to care? If somebody creates a figurine based on a story that they wrote or a movie that they shot that nobody’s seen, then the movie has no value, the figurine has no value and you won’t be able to build hype.

Tom Bilyeu (00:25:47):
This is why a lot of these hype-driven things, there has to be some kind of narrative. Either a literal story, film, TV, animation, whatever that gets people emotionally connected to those characters and then the representations of those characters, or there has to be a narrative around your brand. Take something like Supreme, where they created that out of thin air and they built it up to be something very exclusive. But that, again, in fact, this is where you really have to look for timing.

Tom Bilyeu (00:26:17):
And so a lot of times it’s betting on an upcoming artist, they’re a nobody, nobody knows who they are, but if you’re good at recognizing whether it’s a motocross person, whether it’s a skateboard or whether it’s a hip hop artist, whatever, you recognize them earlier because ultimately there is no way to remove the need for you, the entrepreneur, to be gifted at something. So you’ve got to have something that is your special gift that makes your company valuable because other companies would want to hire you because you’re very good at this thing, recognizing talent early in this case, and you don’t go work for them, you work for yourself. Now, you need to go do that thing.

Tom Bilyeu (00:26:56):
If what you’re good at is recognizing who’s about to pop, you find them when they’re early in their career, you put them in your clothes, in the case of Supreme, you do collaborations with them, now, if they go from nobody to Drake and you were the one that was rocking with them when they were small and they show you love on the way up, now all of a sudden your brand just explodes. This is exactly what happened with Nike and Jordan. Jordan wasn’t the Jordan that we know now when he inked the Nike deal and it was a pretty big bet for Nike to make on this young kid, I think it was his rookie year.

Tom Bilyeu (00:27:29):
And so you get these huge bets that brands will make on people hoping where they can each help each other. And that really becomes the necessary strategy when you’re trying to use a hype cycle, but you’re a small company nobody knows who you are. You have to be able to recognize somebody early so that getting just some free swag would be huge for them and then as they rise then that tide should lift all boats, as they say.

Robert Leonard (00:27:56):
And anyone that’s seen The Last Dance knows that Michael Jordan absolutely blew those initial requirements out of the water for Nike and clearly Nike is become what it is today. You mentioned before, when you’re talking about building Quest about how you guys purchased some manufacturing equipment, things like that, you made a big bet. How do you as an entrepreneur fund the startup of a business, whether you need manufacturing equipment or you need something else, how does somebody fund a brand new business? And I think you mentioned you didn’t even take any outside investor capital, how does somebody get started from that perspective?

Tom Bilyeu (00:28:30):
With Quest it was in the beginning. We did everything, nights and weekends. We had this technology company, the technology company was doing fine, I mean, it wasn’t lighting the world on fire but it was doing fine and it allowed us to be making money during the day running the technology company and the nights and weekends we started building Quest because in the beginning, you don’t know if it’s going to work. And so we did nights and weekends until Quest was actually profitable and then what we were doing is reinvesting all of that money back into Quest.

Tom Bilyeu (00:28:59):
I was the first one to leave the technology company and go to Quest full time, and so I was running Quest as a full-time person in a way by myself for about a year, the other two were so hyper-involved but they were still running the technology company. And I cut my salary way down and just had to tighten my belt, not go out, not eat out, literally my wife and I didn’t leave the house 18 months. We got rid of one of our cars, I mean, just really embraced that we were now making very, very little money.

Tom Bilyeu (00:29:30):
And by doing that we were able to continue to reinvest everything into the company and then we made one really, really smart decision, which was we had the opportunity to go either into stores or online first. And we debated it in-house but I felt very strongly that we should go online first because that would give us an opportunity to touch the customer more. We weren’t putting a middleman in between us, because I remember I’m obsessed at this point with 1000 True Fans. I didn’t want somebody in between me and the customer, I wanted to build that relationship. I just felt like that would give us the ability to build this community and then the community would be something special.

Tom Bilyeu (00:30:09):
But at the time this idea of community was people weren’t thinking like that so it was very atypical and it was hotly contested inside, but ultimately we did decide to go online first. And what ended up happening then was we said no to retail for over a year. And then finally people are going into stores and saying, “Hey, why don’t you carry Quest?” So they kept coming to us with these terrible terms because retailers know that they’re the kingmaker, that just by putting you on their shelves, they’ll 10X your awareness and your sales, and they know that. So they build that into the price of the percentage that they take.

Tom Bilyeu (00:30:46):
And so we were just like, “These numbers are ridiculous.” I mean, we’re making 80% margin selling online, why would I ever go to the 20% margins that they want us to? Get out of here. We just kept saying no, no, no, no, no, no, no until the margins were awesome. And so then we finally said, “Yes,” but we were saying yes from a position of power, we had negotiated a much better contract. And now all of a sudden, because we have a much better contract and we have these great margins, we’re able to actually fund the business through our own cash flows.

Tom Bilyeu (00:31:17):
And then at some point, the scale gets out of hand. One of the hardest things to deal with is a hyper-scaling business especially in manufacturing with huge capital outlays. We did eventually take what’s called mezzanine debt where you’re basically taking a loan and they’re saying, “If you can’t pay the loan back, this becomes equity. But if you can pay the loan back, then it becomes a much, much smaller portion of equity.” We did that. That helped us scale even bigger. And then by the time that we went to banks we were doing hundreds of millions of dollars in revenue, we had a very long track record and we could just ask for a revolving line of credit based on our accounts receivable.

Tom Bilyeu (00:31:53):
And so that was how we did it without having the mezzanine debt, ended up transferring into a tiny, tiny, tiny fraction, percentage-wise of the company. But that was really, really a brilliant move that allowed us to begin to scale in the early days and then getting that revolving line of credit. As it just got too big, the capital outlays, because our growth rate was so crazy, we needed that revolving line of credit which we were able to get because of this sustained track record that we had and then just manage it until we sold a piece for basically just pure founder liquidity to just say, “You’re always in the food industry, you’re one salmonella outbreak away from going out of business.” And we’re like, “Yeah, let’s hedge our bets.” We did that first and then ultimately about, I guess, 10 months ago now… No, wow, this is all pre-COVID, I forget. COVID is a blurry year. About a year and a half ago we sold the company outright, yeah, and still at that point own the vast majority of the company.

Robert Leonard (00:32:51):
You posted a video recently where you talked about controlling your emotions, and on this show, we talk mainly about investing personal finance, entrepreneurship, things like that, all of these things that when you can control your emotion it’s going to give you a big edge. Walk us through your process and your strategy for controlling your emotions.

Tom Bilyeu (00:33:11):
Okay. The first part, and this is really important to understand, is there’s a book called Mindset by Carol Dweck. I think it’s the most important book in the English language. And the punchline of the book is really simple but utterly transformational, which is, that your talent and intelligence are malleable traits, meaning that you can get better over time. It’s what I call the only belief that matters. The only belief that matters is that if I put time and energy into getting better at something I will actually get better at that thing and that that skill has utility.

Tom Bilyeu (00:33:45):
Just let’s stick on the motorcycle racing theme here, the more you practice racing the better you get, the better you get the higher up in the rankings. You finish the higher in the rankings, you finish the more your prize money, the more your prize money the more things you can do in your life. The things you’re able to do in your life, whether it’s just have a better life for your significant other, your kids, whatever, is because you spent time on a racetrack getting better at riding a motorcycle, so there is an outcome that’s predicated on that. Same with investing. You learn about investing, that knowledge has utility that allows you to make more money in the markets.

Tom Bilyeu (00:34:21):
That was this huge aha moment and should be huge for everybody just on its face, but it has a secondary benefit which is to follow. Your brain is going to… and you’re going to mess up. You’re going to be publicly embarrassed, you’re going to feel badly about yourself. As you feel badly about yourself it curbs your behavior. All of your beliefs control your behaviors. If you have the wrong beliefs, I’m a loser, then you will have the wrong behaviors, you won’t try things. You won’t try to get better at things because you think you’re a loser and it’s not going to work out and therefore you’re standing still and therefore your life is not going to improve.

Tom Bilyeu (00:34:57):
That belief, that emotional reaction that you had to messing up gave you the wrong belief, which is that you’re a loser, or failing makes you a failure, and so now your behaviors are out of alignment with what they would need to be for you to be successful. Now, the greatest thing that will rescue you from that emotional defeat of taking on the moniker of failure simply because you failed is the realization that your talent and intelligence are malleable traits and you can improve over time. Every time I mess up I don’t waste time feeling badly about it, I just go, “Okay, what skill set do I have to get better at or hire somebody to come in and do for me that will allow me towards my goals?”

Tom Bilyeu (00:35:38):
It was only in the period of my life where I believed that failure was simply revealing the truth of my inadequacies, and there was nothing I could do about it. And so it was emotionally devastating. I would get stuck in this spiral of I’m a loser, I’m never going to amount to anything and like I said that then governed my behaviors. And so learning about the brain showed me that what’s called brain plasticity, which is just a fancy way of saying that you can get better over time at whatever skill you want, that brain plasticity is real and that now it’s just a question of where am I going to allocate my time and energy? What are the skills that I’m going to invest in and get good at?

Tom Bilyeu (00:36:18):
And so that’s step one of getting a hold of your emotions is knowing, well, I can get better so this isn’t a death sentence. Number two is to read a book called Man’s Search for Meaning by Viktor Frankl. Now, Viktor Frankl survived multiple concentration camps and you can imagine what you would learn about life in Auschwitz. And one of the things that he realized was you could predict somebody’s death within 72 hours, that they would succumb to the elements or starvation or whatever. And the reason that you could predict that, or the thing that you use to predict it was they would lose sight of why they were suffering. And there’s a great Nietzsche quote, he says, “A man can endure almost any how if he has the right why.” And that’s a paraphrase, by the way, it’s not the exact quote, but you get the idea.

Tom Bilyeu (00:37:08):
And you take that those two ideas together. Okay, I can get better at something at any time, and then Viktor Frankl’s idea of you have to have a why for all this suffering. And the why comes down to narrative. And realizing, and this is Viktor Frankl all day, he talked about this gap between stimulus and your response is a gap and in that gap is going to be the quality of your whole life. And it depends on what belief, what narrative do you insert there? What why? Why are you going through this? Why are you suffering? Why are you struggling? What are you fighting for? Why are you willing to face this defeat, this embarrassment? Why do you want to control your emotions?

Tom Bilyeu (00:37:51):
And you insert that into that gap. Something happens. You get this really strong emotional response. Now, you decide whether you’re going to just respond and lash out, which is what 99.9999999% of the world’s it does, they confuse emotion with truth and they don’t realize that, hey, you feel something does not mean you need to react on it. And so Viktor Frankl gave me and everybody else who’s read that book the understanding that I can insert consciously control in this moment and I can say, “Hey, I only do and believe that which moves me towards my goals, so this anger that I’m feeling, this sorrow, this fear, this sense of being stupid, I feel it but now I have to ask, will it help me to behave as if this were true? If it helps me to behave in that manner then I do it. If it doesn’t, then I don’t.”

Tom Bilyeu (00:38:45):
And that’s me in that gap, getting control of my emotions, whether it’s feeling badly about myself, whether it’s anxiety, whether it’s rage, whatever the emotion is, and then recognizing, okay, the emotion is telling me something and it’s worth looking at that because that’s your subconscious and your body communicating with your conscious mind through the language of emotion, so there’s something there that’s worth understanding, but I need to be very careful to recognize that emotion is not truth.

Robert Leonard (00:39:15):
This is something that you do well and I like, so I’m curious to hear your opinion on it, but one of the things you do is you cover such a wide range of topics. If you look at your Instagram, so many different things you cover, and you just talked about the skills in the Mindset book and how you can learn any skill you want. How do we decide which skill it is? How do we decide which project, how did we decide on what to work on? First, why do you cover such a wide range of topics, and second, where do you fall on the debate of the gurus who think you have to focus on the one thing versus trying to work on a bunch of different things?

Tom Bilyeu (00:39:49):
Here is a rule of life. When really smart people disagree on something really fundamental they each have different base assumptions, so odds are that in certain areas both of them are going to be right or given their natural inclinations, where their life has led them, everything that they’ve lived through, they’re just telling you exactly what they did. It’s not that one is right and one is wrong, it’s understanding for you, the open-minded person who is refusing to be dogmatic, for you to say, “When does it make sense to lean on this idea of what am I strong at and really leverage my abilities?”

Tom Bilyeu (00:40:31):
For instance, I didn’t step out in front of a camera until I was 38 years old. And the first time I stepped out in front of the camera I did it fully understanding that I am very gifted verbally. I knew, okay, cool, I have this magic trick that I can do, I’m very persuasive. I have a mastery not only of language but the ability to understand people, to read them, to say things in a modulated way so that they feel something, so this is a tool for me to leverage. But the natural outcropping of that would be, well, then, Tom, go be a speaker. Go be the next Tony Robbins. And let me tell you, Tony makes a ton of money, so there’s a lot of money to be made had I gone down that path and maybe even more money than I’m making now.

Tom Bilyeu (00:41:13):
But the reality is my goals demanded something else. Everybody’s goals should meet two criteria. Number one, it should be exciting. It should just be something that you’re enthusiastic about. I’m not enthusiastic about making the sum total of my life being a mindset coach or a public speaker or motivational speaker, it’s a part of what I do and it’s fun and I really enjoy it, but when I envision my life and that’s it, I’m totally turned off. Nope, I’ve zero interest in pursuing that. Now, what do I have an interest in pursuing? Storytelling, helping other people change their mindset because only 2% will change their mind through motivational speaking, 98% you can influence through story. I’m just way more interested in that, so my goal said, “Cool. Then you’re going to have to be involved in something totally different which encompasses business and storytelling and a whole bunch of other skills,” some of which I have natural predilections for, some of which I do not.

Tom Bilyeu (00:42:06):
In those moments, now you have to go, everybody’s saying I should lean on what I’m good at, they’re right. And so I leverage those skills wherever I can. I’m very good at galvanizing a team, I leverage that to my ability. Very good at articulating a vision, I galvanize that, I use that to my ability. But there are other things that I’m not good at, finance does not come naturally to me I’ve had to learn about it. Technology does not come naturally to me I’ve had to learn about it. And in learning about those things it’s really magnified the areas that I can reasonably marshal resources in and push forward because I can’t be bamboozled. I don’t know it as well as somebody else but I needed to get good at it. I needed to know business finance, that’s just allowed me to move things forward. Rather than saying, “I don’t know how to do that, somebody else is going to handle that for me,” that puts me in a very vulnerable position, I’ve had to learn about that.

Tom Bilyeu (00:42:55):
Also, I don’t have any entrepreneurial instincts. When I first got into business it was ridiculous how I looked at the world. And so I just had to change and shape and figure out how to think in an entrepreneurial way, find those first principles. Think from a first-principles place, which can be taught, can be learned. And so I was just like, “Cool. These parts didn’t come naturally to me but they’re an absolute must, I can’t outsource them to anybody else.” If you want to be a CEO, let me tell you, you better learn business strategy, you just can’t outsource that. So I had to learn it.

Tom Bilyeu (00:43:23):
Other things you have to learn just enough to find the right people to bring in and so you’re taking from both buckets. And letting people trap you in dogma I think is a mistake. And so being open-minded, understanding what you’re good at, understanding just how malleable the human mind is and that you can learn a lot and that if your goals demand you get really good at something that you can.

Tom Bilyeu (00:43:43):
Now, there’s a quote that I think people will find deeply comforting, which is, you can’t make a racehorse out of a pig but you can make a really fast pig. There are things where I’m a pig and I’m never going to be the greatest of all time, but I can get 10 times better than I am, 100 times better than I am, it’s somewhere in there. Your life is unrecognizable if you get 10 times better at something than you are currently. I mean, just think about getting 10 times better than where you are now at motorcycle racing or investing or building business, 10 times better, that is insane amounts of growth. It’s unrecognizable. Think about the difference between having $10,000 and $100,000. That’s 10 times, that’s a step function, it’s just unrecognizably different in terms of what you can do. And then I think it’s actually way more than 10X, but even 10X is transformational. That’s how I want people to think about it.

Tom Bilyeu (00:44:40):
Now, how do you know which skills to invest in? Here’s how I think about it. You’re standing in a room with 1000 doors. Your job as an entrepreneur, as a human, as an investor, whatever, is to shut 999 of those doors and walk through one with confidence. Now, the way that we do that is very simple. You’re never going to know which is the right door, so the only thing you can do is make your best guess based on what gives you more energy than it takes. What’s fun? What are you prepared to go learn more about than anybody else in the world?

Tom Bilyeu (00:45:17):
And that becomes this key consideration, is you’ve got to, whatever you’re going to pursue you have to be able to answer the following question. Will I enjoy this even if I’m failing? Because the struggle is guaranteed, the success is not. So every door I walk through I say, “Well, is this going to be fun even if I lose?” If it’s going to be fun even if I lose, amazing, because I know that I’m going to have enough energy to learn. And that’s really the only question I’m asking when I walked through this door, is, will I get more energy than it takes? Will I have fun even if I’m losing and am I prepared to become the best in the world at this thing, knowing how much time, energy, and focus that will take?” And when I walked through that door, I walked through with swagger and confidence, but, and here’s the secret, I hold in the back of my mind the crystal clear knowledge that at any time I can turn around, walk back out that door and open a different one and walk through that.

Tom Bilyeu (00:46:16):
And if you’re young and you’re hearing this I will say this, don’t prematurely optimize. It’s Kevin Kelly again. If you don’t know him, brilliant. When you’re young you have to discover the things that give you more energy than they take. And by encountering a lot of things, and this goes to your point about me learning a breadth of things, one, I’m just absolutely curious about everything. I so want to learn and know about different things because it gives me energy, I just love learning, and you cannot predict how that perspective is going to help you in a totally unrelated industry or thought process.

Tom Bilyeu (00:46:58):
And so when you ask me, people, what’s the greatest thing that you could do? I’m young what should I be doing? You’ll often hear people say travel. And the reason they want you to travel is because it forces you to see things from a new perspective and then you’re less likely to get trapped in your own narrow perspective. And I will say traveling is amazing but reading is just as advantageous. It’s a lot easier, it’s a lot cheaper and you can encounter all these different mindsets. And as you’re encountering those mindsets they’re planting seeds in your mind that will come to you later. It’ll be different ideas that will connect in your head. And the fact that Nobel Prizes are often given where two unrelated industries overlap, and it’s because somebody is bringing these two distinctly different worlds together and they’re creating novel solutions that other people wouldn’t have thought of.

Tom Bilyeu (00:47:48):
And one example that I use, not that this will ever be nominated for a Nobel Prize, but I was coming out of Quest Nutrition. We had 60,000 points of distribution, I forget the exact number, but it was massive, in 115 different countries, it was something crazy and I’m getting near real-time data on all the different stores and where we’re selling and which stores moved the most units and all that. I mean, just an amazing amount of useful data. Then, I’m moving into comics and suddenly I have no data and there’s only one distributor. It’s all opaque and they don’t give you any information and I’m like, “Guys, you cannot run a company like this. How are you expecting us as publishers to know what’s working and what’s not working if you’re not giving us data, it’s the most absurd thing I’ve ever seen.?”

Tom Bilyeu (00:48:31):
So we literally said, “Well, we’re not doing this anymore.” Now, I wouldn’t have been able to move as quickly as I have into digital comics, discovered there that there’s a platform that dwarfs everything else. It’s just ridiculous how Japanese-style storytelling married to the South Korean usage of the phone as the canvas is eating the world when it comes to comics. To give you an idea, one manga series called Demon Slayer outsells the entire Western comic market. One title outsells, Batman, Superman, Wonder Woman, all of it combined is outsold by Demon Slayer. They have a better style of storytelling, a better way of marketing, and then by being on the phone you’ve just got access to way more people. And the web tune which is the dominant platform in this space, they in Asia, there’s a one-to-one relationship between the number of hours spent reading webcomics on the phone and the number of hours spent watching YouTube videos. Think about how massive that is.

Tom Bilyeu (00:49:33):
And now in the U.S., we’re showing the same adoption pattern just 10 years behind. So now, because I had learned about distribution in the context of nutrition and then I see it in the context of comics, I make a move that nobody else in the comic industry is making and I end up in this much bigger area and now feel like I’m 10 years ahead of my Western contemporaries. That’s where being broad of mind, constantly wanting to learn… I didn’t know that learning all of that about distribution in the retail space in food was going to aid me in my Quest to build the next Disney but there it is. Reading a book will give you an insight, it’s just incredibly important to stay ultra curious.

Robert Leonard (00:50:17):
Everything you just mentioned about comics is that what has led you to NFTs and your NFT marketplace?

Tom Bilyeu (00:50:25):
Sort of, yes. It’s not necessarily what led me there but it is the very thing that we were looking for in terms of a moment of disruption. I had been introduced to the idea of digital rarity about six years ago and a guy showed me this thing he called Vatoms, V-atoms, virtual atoms. And it was this idea that, hey, one day, you’re going to have this, we would now call it a wallet. I can’t remember if he called it a wallet back then. But in your wallet, you’ll have these items, that we would now of course call NFTs, and they let you do things. You could exchange them for a can of Coke, that was one of his demos. You could exchange this for a can of Coke.

Tom Bilyeu (00:51:03):
You have this virtual thing that somebody could plant somewhere, could be planted in the real world, think Pokemon Go. You find it, you grab that thing into your wallet and now you can go into a store and redeem it for a Coke. And I remember thinking, “Oh my God, this is going to change my business forever,” and then promptly ignored it because the technology wasn’t ready yet. And then in early 2021, I heard about NFTs and I was like, “Ah, this is that digital rarity thing. I know exactly what this is, I’ve been thinking about it. So, boom, now we’re going to move heavily into this.” Made a multi-million dollar investment into the space that we’re going to keep investing more and more and more in the coming years and realize this was that moment of disruption that we were looking for.

Tom Bilyeu (00:51:47):
And look, if you have an audience that’s into investing, one, I’ll just say NFT is like the craziest risky investment ever and I don’t recommend it as an asset class. However, as a technology, I think it’s going to change everything. And so now as people engage in a community they’re actually going to be able to get some of the economics of that. You’re going to be able to place bets on things like, I think the property market’s going to go up so I can’t buy a house but I can buy a portion of a house. That’s of the type… I was talking to Raoul Pal earlier today and he uses the example of fancy apartments in Manhattan which are notorious for going up rapidly in price. And he said, “If you can invest in that instead of investing in a duplex in Minneapolis, Minnesota,” he’s like the odds of you getting an outsized return on your money are way better, but most people can’t afford it and so the only way is going to be tokenization and fractionalization, and that now opens up.

Tom Bilyeu (00:52:43):
I’m looking at NFTs through the lens of somebody who’s trying to build the next Disney and I realized, “Oh my God.” The way that we’re going to crowdfund is going to be totally different, the way that we build community it’s going to be totally different. The fact that my community can reap the benefits of betting early on something solved the problem between the Japanese model of doing manga, turning that into anime which is this thing called Shonen Jump, which nobody in the west has been able to replicate. And it allows me to go, “Ah, I now know how I make sure that my creators are making enough money in the early days to get good, which is why everybody else lags behind the Japanese creators because they’re the only with the societal infrastructure that allows these creators to get paid enough money to get good.

Tom Bilyeu (00:53:31):
And you’re never going to advance until you’ve got kids raised thinking, “Oh, I can make that a career.” So they get good and then you get that second generation that comes behind them that learns from that first. And so we’re probably two generations behind the Japanese, one generation behind the South Koreans, and if we can now leverage NFTs to make that an economic viability for kids to come up and say, “Cool, that’s what I want to do,” now we can begin to catch up and I think NFTs give us that ability. And so seeing that was what ended up really taking me down that rabbit hole which was then the thing that actually led me to crypto and so on and so forth.

Robert Leonard (00:54:12):
For those who had never heard of NFTs before you just mentioned it, what exactly is an NFT?

Tom Bilyeu (00:54:18):
All right. This is the most fascinating thing that has happened in our time, outside the blockchain. The blockchain is admittedly so foundational, but it goes like this NFT stands for non-fungible token. When I first heard that I was like, “Well, every word there except…

Robert Leonard (00:54:31):
Non.

Tom Bilyeu (00:54:32):
Token. I know what non is but once you marry it to fungible I’m like, “What the hell is this?” I’m like, “Yeah, this doesn’t make sense, I don’t know what this means.” And so the best explanation I heard is somebody saying, “All right, think about money. Money is fungible.” Now, once you understand fungible you’ll understand what non-fungible is. If you have a $10 bill and I have two fives we can exchange those and nobody is weird about it. If you have a 10 and I have a 10 we get to exchange those and nobody’s worried about it. So those are totally interchangeable and the amount of value that they carry is equally represented. It doesn’t matter if you have a crispy 10 and my 10 is wrinkled, it doesn’t matter the underlying value is all the same.

Tom Bilyeu (00:55:07):
Now, a non-fungible item would be the exact opposite. Take the Mona Lisa. I could do a brushstroke perfect version of the Mona Lisa, and while it would have value it would not have the same value as the original Mona Lisa, not by a long shot. And so the mere fact that the original Mona Lisa was actually painted by da Vinci, that it’s old, that it’s been handed down, that it’s got this extraordinary story and a story that the public buys into, and so you’ve got that ephemeral thing of people have belief in that resource and it’s provably the one.

Tom Bilyeu (00:55:47):
Now, I always wanted that for digital because I’m obsessed with digital art, I have been for a very long time, and it was always distressing to me that you always had to get a print of digital art but it never pops the way that it does on a digital screen. I was always disappointed by that. The only way that I could get my head around it was I would go collect pins on Pinterest. I have spent years pinning pins of just super dope art that I think is really cool. Now, NFTs come along and go, “Hey, you can make that digital art a true one of one. Now, just like you can replicate the Mona Lisa, you can replicate that JPEG,” and I get it. And you can argue and rail and laugh all you want that humans shouldn’t value these JPEGs, but if you know anything about human psychology you know that they do because of their non-fungible status. Anything that is provably rare, that has emotional resonance, people will glom onto.

Tom Bilyeu (00:56:45):
Now, through the non-fungible token you can put a piece of art inside of a contract that locks it and says, “This is that one.” You can assign it a number, you can say who created it, you can show that it’s a one-on-one, you can basically give it a serial number, you can even give it properties like it can change based on the time of day. Anyway, we’ll go down the very steep rabbit hole there if you want. But now you’ve got provable scarcity in a digital item and that really is the most basic element of what a non-fungible token is, but that isn’t the revolution. The revolution is the technology that underlies it that allows it to do all these other things, have utility, unlock things. It’s really this truly extraordinary moment because you can put utility into it. You can basically through what other people refer to as a JPEG, create a company overnight. All right, I’m going to explain it so I don’t want anybody to panic.

Tom Bilyeu (00:57:47):
You’ve got this idea of fungible versus non-fungible, now, you’ve built value into a digital item. Now, part of that value is going to be assessed on just what does the world say about this? The world says that CryptoPunks are valuable, therefore you’ve got crypto punk selling for millions of dollars even though they are a 24-by-24-pixel item that you can barely make out that it’s a face or whatever. But I think they’re rad because the world says they are rad, I want to be very clear. That is me totally buying into the hype of this, the way that humans get in these hive minds around things.

Tom Bilyeu (00:58:23):
It’s exactly the same as baseball cards, the same as non-dividend-paying stocks, and anybody that tries to convince me they’re anything but a baseball card is in for a rude awakening because they are the same unless they pay a dividend. So recognizing that these things now have value, that you can bake utility into them, now it becomes a question of what do you do with that utility and the most fascinating thing that just happened and this is why I think NFTs will change the world forever. Have you heard of the Nouns DAO?

Robert Leonard (00:58:50):
I have not.

Tom Bilyeu (00:58:51):
Oh, my friend, I’m going to change your life. Here we go. There are these things called PFP projects, profile picture projects, and they’re typically done as 10,000 units and it’s more or less one like CryptoPunks is one of the original 10,000 avatar projects. Bored Ape Club is the second one to really pop off. Now the Bored Ape Club is very easy to explain. It is a hand-drawn image of a monkey with attitude, and so it looks kind of fun and funny. And then what they do is they break that image of this ape into, I don’t remember how many attributes, let’s say it’s 12. There’s, what do the eyes look like? What does their hair look like? What kind of hat is it wearing? Does it have an earring? What’s the shirt? That kind of stuff, and there are 12 different things.

Tom Bilyeu (00:59:41):
Then of each of those 12 attributes, they create some number of variations. Let’s say there are 25 different variations of the eyes, there are 10 different hats, so on and so forth. And then through a computer using an algorithm, it will randomly assign those attributes. Some combination of attributes would be very common, some will be very rare. And then you sell them on the open market. And with the case of Bored Ape Club they were sold for, let’s call it, I think it was 0.08 if I remember correctly. And so at the time it was probably something in the neighborhood of $200, something like that. Now 10,000 of those are sold to however many numbers of people and then they start building a community around it and owning one of those gave you access to do things like there was a website that had a bathroom in it and if you owned an ape you could go into that bathroom and write on the bathroom wall and it would stay there. If you didn’t own an ape, you couldn’t. That was one bit of utility.

Tom Bilyeu (01:00:39):
And then it was, they airdropped these dogs. You could get another NFT just for owning that first NFT and you can sell and trade these things and they have value. Now, that starts with 0.08 ETH in value and now it’s gone up, dude, where the floor, meaning the cheapest one is 14 or 15 E, so imagine what a return on your money that is. And so they get more serious and they reinvest the money that they make because they probably… I don’t remember what the contract is, but most of these NFT contracts, the original creators get say 10% of every future sale. And so they use that money to fund their organization.

Tom Bilyeu (01:01:17):
Now, many of these organizations are what is known as the DAO, a decentralized autonomous organization. It’s basically like a company that’s run on rules. Now that everybody understands what these 10,000 PFP projects are, a new one called the Nouns DAO announced this was the first one sold about a week ago. And they said, “Okay, what we’re going to do is we’re going to sell one Noun which is just a little JPEG image that is pixelated, so it’s probably 24 by 24 though. Don’t quote me on that, but it looks like a Nintendo made it back in the ’80s, very simple. The first one looked like a Christmas elf, and a really simple pixelated image. “We’re going to release one of those a day, every day, forever.” It will take them 27 years to get to 10,000.

Tom Bilyeu (01:02:07):
Now they have this really scarce model but people know that somebody is going to get added every day, but the real trick is whatever is paid to buy that, 100% of that revenue goes back into the Nouns DAO and the only way to be a part of that decentralized autonomous organization is to buy one of the Nouns. Now each of these owners buys it and they get access to the full amount of capital to do whatever they want, also known as a company. Now, when you hear how much the first one sells for you will realize that this has totally disrupted the way that companies will get financed in the future, the way that artists will get financed in the future, the way that comics will get financed in the future, everything. They tell everybody this is how the Nouns DAO is going to work, these are how these images are going to drop, this profile picture project. And now all of them go on auction once a day, every day, and you have 24 hours to bid, and the first one sold for 1.8, I believe, million dollars.

Tom Bilyeu (01:03:05):
Now, you just had a company overnight get funded with almost $2 million. Then the next day, I don’t know how much was added but I’m sure it was hundreds of thousands of dollars and it’ll settle out somewhere probably in the tens of thousands of dollars and that’s just how much people will pay to own one of the Nouns. And now though, the real magic is, well, you’re one of… I mean, how many people are in the Nouns DAO now? Seven, 10? Grows by one person a day or may not. Maybe people keep scooping up and they want to own more of that share.

Tom Bilyeu (01:03:33):
But that’s real money, man. Millions of dollars are pouring into this thing and they’re able to do… I don’t know the rules of the Nouns DAO so there might be certain restrictions, they’re effectively able to do whatever they want with that money. It is unlike anything we’ve ever seen ever before in our lifetime and if people like Michael Saylor and Raoul Pal are right, this is the greatest wealth transfer in the last 100 years, at least, and it’s a retailer so the average person has access first before the institutions. [The] only time that’s happened in any of our lifetimes.

Robert Leonard (01:04:10):
I actually just had Raoul Pal back on the show not too long ago and we talked about NFTs too, so if anybody is interested, go back and listen to that episode a few ago. But, yeah, I mean, it sounds incredible. It’s just like I did with Raoul’s episode, I’m going to have to go back and listen to this one again, probably two times if not three or four to really fully wrap my head around it. Because I mean, you mentioned before that you weren’t great with technology and I’m not either. And so this all is, I get it, but I need to hear it again and a couple of times just to really fully grasp it. And so I’m going to definitely do that.

Robert Leonard (01:04:37):
But now my question is, what are you doing in the NFT space? Are you doing one of these types of companies? I think I read that you’re doing a marketplace. Admittedly I did some research but it all went off my head a little bit, so I’d love to hear a little bit about what you’re actually doing in the space.

Tom Bilyeu (01:04:50):
The first project that we’re launching, this’ll probably come out in mid-October. This is always tough for technology, it always takes longer and costs more than you think. That one is a marketplace, an NFT marketplace focused on anime, manga, and video game art. And so we are trying to be the hub for that universe of people. And we’ve got some plans on how we’ll make that the most dynamic, the place to be for people in that space so I’m really, really excited about that. That for us is a five to 10-year play of just knowing that in the beginning it’ll start small and we just have to keep adding value and adding value and adding value. But we’ve got a pretty insane roadmap that’s going to make it unlike anything else and we’ve got the capital to back it up, so we don’t even need people to be pouring money into the system and we’ve already allocated the capital to do it.

Tom Bilyeu (01:05:41):
That’ll be huge. And then we also have a platform that we’re developing that I’m going to be hyper cagey about until we actually get closer to launching it, which should be some time at the beginning of 2022. And then coming not too far on the heels of the platform is we have our own generative art project. It won’t be a profile pic project in the way that people are expecting, a very different, much more aggressive roadmap than what people have seen so far. And, yeah, that one’s pure IP, just really telling a story with it, coming out with something that’s interesting that people can invest in, emotionally invest in.

Tom Bilyeu (01:06:15):
In collecting we’ve got, again, another roadmap that goes out, we’ve imagined out for five years, so I think it’s going to be… that one could be the surprise hit. I just don’t know if we’ll get juice out of the gate or people are going to have to see what we have planned over the next five years, but those are our three major plays right now into the NFT space.

Robert Leonard (01:06:36):
Well, definitely count me as one of those people. I can’t wait to see what happens with it all, I’ll definitely be following it. Tom, this has been an awesome, awesome episode, I really appreciate your time. I know the audience is going to absolutely love it just like I did. For anybody that wants to stay in touch with what you’re doing in the NFT space, what you’re doing with Impact Theory, really just anybody that wants to learn more from you, which I highly recommend everybody does, where’s the best place for them to find you?

Tom Bilyeu (01:07:01):
It depends on what you’re interested in. If you want mindset go to Impact Theory University. If you want business, part of Impact Theory, we have is Business Decision-Making, and then if you want to follow what we’re doing on the NFT side, Twitter all day long, that’s where I talk a lot about what I’m doing in that space. And then if you just want daily doses of mindset, Instagram, I’m very active, and everywhere it’s just Tom Bilyeu.

Robert Leonard (01:07:26):
Awesome. I will put links to all those different resources in the show notes below for anybody that’s interested in checking it out. Tom, thank you so much for joining me.

Tom Bilyeu (01:07:34):
Thanks for having me, man.

Robert Leonard (01:07:35):
All right, guys. That’s all I had for this week’s episode of Millennial Investing. I’ll see you again next week.

Outro (01:07:41):
Thank you for listening to TIP. Make sure to subscribe to We Study Billionaires by The Investor’s Podcast Network. Every Wednesday, we teach you about Bitcoin, and every Saturday, we study billionaires and the financial markets. To access our show notes, transcripts, or courses, go to theinvestorspodcast.com. This show is for entertainment purposes only. Before making any decision, consult a professional. This show is copyrighted by The Investor’s Podcast Network. Written permission must be granted before syndication or rebroadcasting.

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