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Episode 137 October 2, 2018 | 35min

Turning The Digital Product Studio On Its Head: In Conversation with Jules Ehrhart

Navigating the intersection between creativity and capital

Show Notes

What Is Creative Capital, Anyway?: This week, Paul Ford and Rich Ziade meet with Jules Ehrhardt, founder of Creative Capitol Studio FKTRY, the author of the term ‘digital product studio’, and an advocate for authenticity. On this episode, we talk about the problems with the old-guard agency model, where creatives are going instead, and how creativity is commodified and sold like sausage links.

Jules Ehrhart My background-background? Is, yeah, like design and engineering but I’m talking like during ‘weaver one—

Paul Ford Sure!

JE—and uh and, you know, Photoshop uh very early as well. So—

Rich Ziade Dreamweaver!!!

JE Dreamweaver.

RZ Just wanted to shout that out.

PF No one—[chuckling] there’s no other podcast where anyone has [all laughing] shouted Dreamweaver.

JE I saw your library, I’m sure you got a couple of manuals in the library.

PF We—we like to keep it—We keep it fresh [Rich laughs] [music fades in, plays alone for 18 seconds, ramps down]. Rich.

RZ Paul.

PF We’re in a kind of unusual industry, right? Because we’re the creative somewhat mercenary people that are on your side.

RZ K. That’s not a good sell but—[laughs].

PF I mean it’s tricky, right? We deal with this every week. We talk about it [music fades out] but I mean it’s—we’re a—a firm that people hire to do digital things.

RZ Absolutely.

PF And a couple years ago I read an article online—

RZ Ok.

PF—on the internet and it—it coined the term ‘digital product studio’.

RZ Right.

PF I saw that and I’m like, “That’ll do. Let’s take that.”

RZ Yeah.

PF So, long story short, the person who sort of put that piece together, coined that term, or probably collaboratively coined that term is named Jules Ehrhart.

RZ Ok.

[1:20]

PF And he’s here today.

RZ Is he?!?

PF So Rich it’s good to have Jules Ehrhart here in the studio, a very astute observer of our industry and of the way that . . . things are changing around how startups get built and people deliver services, all of that stuff.

RZ Yup.

PF So we’ll zero it in. I’ve done a terrible job introducing him. Jules, welcome.

JE Thank you. Pleasure to be here—

RZ Welcome, Jules.

JE Pleasure.

PF So, you were formally at a firm called ustwo.

JE That’s correct, yeah.

PF What was your job there?

JE So I joined ustwo about nine years ago. Uh it was my first ever job, funnily enough. I’d al—I’d always worked for myself but I borrowed a desk and eventually I became an owner there.

PF Ok.

JE After—after a couple of years. So my—my job at ustwo is in essence the business of creativity.

PF Ok. We—we’re gonna have to unpack that for quite [Rich laughs] awhile. Uh take a step back: what was your home base? Like you’re working for yourself—were you design oriented? Product oriented? Engineering. Like where—where were you coming from? Advertising?

[2:20]

JE Design and digital has been kind of a thread that’s run through everything but I spent my twenties owning a restaurant and nightclub, being president of sports members club, working at world cups. Throughout all of that having ownership in a digital agency and working for—working for companies but back—we’re talking about web one point oh or web one point five. So the point is that I’ve always had a deep empathy and passion for design and engineering and understand its people and the processes and that’s informed everything. So . . . yeah like I used to have bar and uh—in Japan, quite a big bar, and uh my staff wouldn’t let me behind the counter because it breaks down the flow of a [sure] highly function—and it’s [chuckling] when it came to a studio or an agency like of course I’m not gonna go near a Wacom tablet. Uh but—

PF No, no, we’re—we’re not allowed to—

RZ I don’t even use a computer anymore [Jules laughs].

PF Yeah. It’s shameful.

JE Exactly. Exactly.

RZ This is very real though.

JE Yeah.

PF Yeah.

RZ Diving in like that it can be very damaging.

JE So it was [stammers] useful as a lens cuz it—I think one of the problems the industry has is that the people representing the industry and interfacing with partners or brands or clients, they don’t actually have a deep empathy and understanding for creativity.

PF So you were out selling the work?

JE In—in essence. Yeah. Translating what we—you know—what ustwo did in the market at—at a time when things were changing in the market as well.

PF Is that when you sort of buckled down and defined like, “We’re a digital products studio.”

JE I’d say—I’d say one of our responsibilities at ustwo—which had always been in this field of user interface design, which a decade ago no one had heard of, and mobile: no one cared about the fact that you’re in mobile at parties a decade ago and you’re working with phone manufacturers like Sony Ericsson on four eighty by three twenty screens. This is pre-iPhone and suddenly when the iPhone came out then everyone did understand what user interface design was and what good user experience was and screens started to proliferate. So ustwo it had always been in this space that it’s now very popular but it was way before it was popular. Um so the world and the industry happened around ustwo in many ways and what—what we were all doing there—um which comes into it. I mean you need a great amount of fortune to have any degree of success, I think. So it wasn’t that we went to that space, you know, and I say ‘we’ cuz I’m no longer at ustwo. I left early 2017. Um but ustwo was in that space and—and the industry kind of blew up around us.

[4:42]

RZ We should touch on this. Like are there pure “sales” quote/unquote people at ustwo?

JE Yeah I’ve not been involved in the business for a year and a half now but yes, they have—they have business development people and salespeople [right]. I think the core of my belief representing, you know, ustwo’s kind of commercial side was that—that the work and the kind of work the studio wants to do is communicated properly and the terms under which it’s done are communicated properly and uh when—when those things break apart then you’re gonna lead to very unhealthy outcomes for—for studio owners, for the people doing the work, and ultimately for the partners and their work with clients.

PF You’ve got a more sort of spiritual and cosmic aspect to you. We’re sort of crabapples but I think we all end up in—

JE It’s all the same.

PF—relatively similar [yeah yeah] places. I’m curious—So I can tell you with us, we go in and we kind of . . . we’re working on this but sometimes we’re just delivering bad news to people [hmm] like just, “Hey, that’s actually gonna be hard and expensive. I—I hate to say it because I can see how optimistic and enthusiastic you are but building things is really hard and it’s gonna take a lot of time.” And that’s actually been very effective for us, like that’s very much who Rich and I are and I—I, you know, for me, the first couple of years it’s been really hard to deliver the bad news. I’ve gotten better at it.

JE Hmm.

RZ It’s advice!

PF So how—when you go in, it seems like—I get that sense that you’re able to get people kind of aligned and feeling in a positive way towards the engagement, as opposed to Rich and I . . . who get people seeing risks.

[6:05]

RZ Yeah, it sounds much healthier, the way he does it, Paul.

JE Yeah but the thing is I—I think we’re talking about exactly the same thing. You are coming in and being honest, giving your authentic perspective from what you understand of the work and that is authentic, that creates resonance. If you are going to sell them something that they didn’t need or build their shitty brief or help build their bad idea because you’re going to make money, you’re not gonna get very far in—in business. That relationship won’t last. So we’re talking about exactly the same thing. I’ve just—I’ve just uh kind of uh become a little bit abstract about it, kind of simplifying it. So, it’s the same thing: you were honest and, funnily enough, I, you know, I came to New York six years ago to set up the ustwo studio here and the thing that helped us uh really get traction in the US was authenticity and calling bullshit on just swathes of bullshit that is in this market. And it sounds like you do the same thing!

PF You know what makes me very paranoid? I’m very aware of this in myself, too, there’s like an old show biz statement which is, “The only thing thing you can’t fake is—is sincerity and once you’ve got that, you’re good to go.” And it’s just sort of—I worry about it. Cuz I think that you’re right, I think that you have to be real in that room or [yeah] people get very paranoid but you’re competing against people who are even better at being real and more authentic in a slightly abstract way. Like it’s very—it’s very tricky.

JE Yeah, I agree that advertisers [7:22?] are the best salespeople in the world. They dev—[chuckles] almost developed the—the modern art.

RZ Right.

JE But the point for me has always been that whatever heaps of bullshit are sold, unless they fulfill that, eventually that bridge will burn with that partner. There’s enough people out there in this city and in this country and in the market who’ve had—been sold wonderful things and been disappointed. So, for me, the only place to be is real and in a world of perfect information which we don’t live in, then you will find your place and you’ll find that work. You know, ustwo came to the US six years ago, unknown, you know, this is pre Monument Valley, and we had to do the job of getting up on radar, competing against whatever huge RGA, yada, yada, yada.

PF Mm hmm.

JE Uh and [we] were kind of nobodys but what cut through was just a real honest—honesty about the way things should be done, the passion for the craft, and just being willing to be really honest about bullshit. There’s a degree where some sales and BD came into it because I’d go into a meeting, planting the five seeds I wanted to leave with the partner or the client to reflect on when they were about to have the next meeting or they had the meeting before where the super glitzy agency who’d spend all weekend doing comps and—and, you know, presenting their vision for a product which a) I find super arrogant and I—one of my things I say is, “Look, it would be very arrogant for us to come here and tell you about your product. You are the experts on your users. You are the experts in your product. So I’m not gonna come back here in a week or over the weekend with a vision for your product because it’s ru—it’s kinda arrogant and rude. Our expertise is working with you and deploying our processes to get to a better place.” You say that and it’s completely true but then they’re gonna reflect on this—this super polished bullshit that they’ve just been presented by an agency. It’s all very superficial work. So, for me, yes, there’s a degree of sales, if you wanna call it, but it’s true. Even in the honesty you’re actually doing the job of sales.

[9:09]

PF But there’s a beautiful thing you just described which is critical to sales.

JE Yeah.

PF Which is kicking the legs out from underneath all of the other people pitching uh by your own process. That’s a big part of it.

JE Yeah!

RZ It is and—and you just—you don’t have the guns to go fight, you know, 12 people getting deployed by RGA to make a bunch of fancy looking stuff as part of a pitch, right? You just don’t have it and all you can try to do—and we do this—is just try to connect with the people and say, “I want to internalize your problems and the thing that’s in front of you.”

JE Human beings we—we sense in-authenticity really, really easily. So the only way to be is to be honest and real.

PF There’s a big theme here for you which is sort of protecting the company, protecting the team while you’re selling.

JE Yeah.

PF So you go, you talk to someone, you say, “I think that we could really help you here.”

JE Yeah.

PF But how do you protect the team?

JE Well, for starters, you take the team [laughs].

PF Ok.

[10:03]

JE And you build the response out with the team. You know, I was sort of the job of business development is there to represent the interests of the—the people delivering the expertise. Now, with—with a healthy dose of sanity like yeah, it would be great to do a three month global research study but let’s—let’s make that two weeks [others laugh] and use—and use Amazon vouchers in Facebook in type form.

PF There is an enormous hunger for research in our world.

JE There is but [stammers] you’re just tempering that, you know, and trying to create the healthy balance between the two. Um and—and then I think—then I think it works. And—and, again, that’s the, for me, the only way you should ever do it. You know, especially if you don’t know what it takes in terms of engineering or integration or in terms of design. [Stammers] It really pisses me off and it’s one of the—one of the reasons that the ad and marketing industry has very unhealthy working hours. Cuz work is missold which means that people have to 60 to 80 hours working weeks. Um if we went French and made a law that the people selling the business had to do the same hours as their—as their counterparts on the team delivering on the thing, that would change pretty quick.

PF You know, our people work normal weeks and most people don’t believe us.

JE Yeah, that’s great.

PF Yeah.

JE Bec—because you have sold the work correctly.

PF Right, but I mean people—adults who we’d love to like apply here [yeah] won’t apply cuz they’re like, “Agency, I can’t do it. I can’t do it.”

RZ “I’ll fry out.” Yeah.

PF Yeah.

JE Well, yeah, I mean look: the—the—the perception of this space is definitely a contagion effect from—from the worst practices in the industry.

PF Why has that happened? Do you think?

[11:32]

JE There’s one thing I wrote about in “The State of the Digital Nation 2020,” um—

PF Where can people find that, by the way?

JE Oh yeah it’s on Medium. And there are two pieces. There was one in 2016 which was about the digital industry and that’s where we coined this phrase ‘digital products studio’ to differentiate—

PF Thank you. That was very convenient to us.

JE Pleasure. Language is important [yeah]. And—and so that the people in that space and I don’t think ustwo was the only one in that space, people focused purely on digital products and services [mm hmm] rather than campaigns and marketing, and they were also doing work to start their own ideas up and they were also work to invest in it a little bit. So I think formalizing the model of digital product studio and writing about it gave a lot of us a construct, a parlance, around which we could all, you know, hold our hands and that meant that we as people running studios, the talent who wanted to work at the studios, and the partners and clients who wanted to work with them could understand what that was and I think that’s why it was important. That it was helped coined. Uh we helped coin it. And that was in 2016, that was really about ustwo’s journey over the last, you know, six years. Looking at the industry environment, the assimilation I call it, when Accenture started buying everyone and if you like Star Trek and the Borg, fundamentally, however you wanna look at it in terms of consolidation, in terms of commoditization of price, um the core of it all is a breakdown of trust between agencies and clients because of mis-sold work; because too many times engagements had begun and what was promised wasn’t delivered, they maybe weren’t even capable of delivering and that was one of the missteps of the ATOM marketing industry of like pretending to do digital product work by just kind of basically redressing case studies. In fact, rather than building product teams and product processes, and getting away from the creative director model, top-down, and going bottom-up.

PF I almost have empathy for them because building product is a disaster. It’s really hard.

JE It’s hard, yeah! It’s hard, yeah.

PF And it tends to fail and so the things you have to do to cut risk are absolutely the opposite of things you wanna do to sell services.

JE It’s a challenge but is completely surmountable and I’ve had the experience of agreeing, you know, terms with—with some fantastic companies um based on—based on that but it’s hard. And it definitely if you’re faking it, you’re gonna—- you’re gonna come a cropper in a big way, pretty fast. And I think that’s what’s happened and burnt loads of bridges [music fades in] between agencies and clients [music ramps up, plays alone for six seconds, ramps down].

[14:06]

PF Rich Ziade—let’s just interrupt our podcast for a second.

RZ Yeah.

PF My name is Paul Ford, I am the CEO of Postlight.

RZ My name is Rich Ziade, I am the President of Postlight.

PF Now, we’re having a conversation with the person who coined the term ‘digital products studio’. What’s Postlight, Rich?

RZ Well, uh Postlight, uh we’ll go after a product vision, thus making us a product studio. But beyond that, we’re a collection of just really talented designers, engineers, product leaders that drive an effort forward, and the thing is it’s beyond—what “product”—let’s put in quotes for a second. It doesn’t just mean an app, it could be anything. Uh it could be your next generation enterprise thing or whatever. That’s—that’s Postlight.

PF That’s right. You come to us and we—we get it done. You need—

RZ We do it well.

PF You come to us and you say, “I have five hundred trillion customers.”

RZ “And I need six hundred trillion.”

PF [Laughing] And you come to us and you say, “Our design is garbage across our 132 global websites.”

RZ “In 78 languages.”

PF “And we need our mobile strategy to be better.” You say, “I wanna do something serious with Alexa skills and reinsurance.” [Exhales heavily] Postlight [laughs]. Uh let’s be real!

RZ “Alexa, please quote my insurance portfolio.”

PF Honestly, let’s be real, if that showed up at the door, we’d have a big smile on our face [Rich laughs]. If somebody said, “Hey guys, do you wanna do something with insurance and Alexa skills?” We’d be like, “Hell yeah!”

RZ “Oh yeah!”

[15:36]

PF That’s who we are and we’re not ashamed to admit it. We like the big, sticky, global capitalism platform problems [music fades in] cuz that’s how we understand the world. So if you need us, [email protected] Ok that’s the end of our ad [music plays alone for six seconds, ramps down]. So what is the state of this business right now?

JE Like some of the factors in play are the commoditization of creativity [mm hmm] um because of the breakdown in trust, more work is going inhouse, because more work is inhouse, there’s less work out there. There are just about the same amount of agencies competing for the work, they’re being driven down on price. That’s a big factor. Uh I also look at the—it’s not really a word but procurimentization of creativity that you increasingly less negotiate with someone who’s on the—the, you know, the creative side. You’re working with a procurement department who will take your call and then a call with, you know, a photocopy leasing company the next call, and they have a checklist and say, “Oh we pay 160 dollars an hour for this and—and you’re 250.” And that’s also a problem. And then, of course, the mere fact that we tend to sell creativity by units of time, be it days, weeks, months, um is also for the commoditization of—you know the homogenization of the vast uh broader array of creativity to be sold like sausage meat at the market. And we’ve—we’ve screwed ourselves in that process.

PF Alright, Rich, that’s it then. We’re done.

JE Oh we’re not done yet [Paul laughs] cuz there is a message of hope! [Laughs]

PF Nah! Let’s just call it—let’s shut down the podcast, shut down the company [Rich laughs] [lots of crosstalk]—

RZ It’s very dire.

PF Yeah I mean, honestly, why not?

RZ We’ll get to turn a corner, Jules [laughs].

JE We’ll get some money for this equipment though [laughter].

PF That’s true. What do you think this laptop’s worth?

JE Well I think the point of isn’t—isn’t kind of fear mongering. It’s just reality mongering and if you draw all these things out and, you know, if you look at the agency model in itself like I’ve seen what used to be in my earlier years like a very profitable business and you could do experimenting, you could hire more people than you needed, you could try lots of things out. It was a completely different environment for creatives coming into the industry cuz it was more of a playground, a creative playground. We could develop. That is no longer there. Um you’ve got um tech companies provide a compelling alternative for creatives and people are increasingly going tech side for better salaries [sure] and different conditions—

[17:54]

PF [Crosstalk] Go to Google. Go to Facebook. Sure.

JE Exactly. Yeah that’s—that’s another factor. So, for me, all it really means is and so what this is the agency model is now spitting up single digit profits and, you know, it’s in big, big shops in—in New York alone are losing lots and lots of money, losing people, and losing money.

PF Which traditionally I mean it’s, for people listening, like that’s unusual. Like it used to be the reason you do this—

JE [Crosstalk] Yeah, 20, 30 percent margins. Yeah. Yeah.

PF It’s a good business. Yeah.

JE Not it’s single digit. I think—one thing I always say: there are more good projects than there are good studios [sure], good agencies. So in a world of perfect information in which we don’t live, you will, if you’re really, truly great, if you’re in the top ten percent, you’re gonna be fine. If you’re in the bottom 70, it’s coming for you. So the point of all of this isn’t to like say pack your bags and go home. It’s just, for me, means we should really be thinking about the situation we’re in, as individuals, as people who run businesses in this industry, about the business of creativity and begin to explore new terms, and new paradigms, with which we can do our work. And that—that’s what I’ve been doing for the last few years but more focused in the last year and—and—and—

PF And you have a new enterprise now, correct?

JE Yeah, I’ve just kicked off a studio called FKTRY [Factory].

PF But it’s—it’s missing a few vowels.

JE Yeah, well vowels are expensive. I don’t know if you found, you know, the domain name becomes like, you know, 30, 40, 50 thousand dollars.

PF It’s like every vowel is 15,000 dollars more.

JE Exactly, yeah [Rich laughs]. Uh but—but the notion for me is something—of trying to—this has happened with digital product studio is to—to define some language around which we can all gather and build new expectations between each other, talent, and—and capital, in this case. So I’m pushing something called creative capital. You can raise venture capital or you can raise creative capital. So, for me, creative capital is a subset of uh sweat equity [mm hmm]. What you do and what I’m capable doing teams I build are capable of doing is uh making a pivotal impact upon a business, on the fortunes of a company. The right advice from the right advisors at the right time can be make or break for a company. At that grade and quality I believe is a fungible lesson which means we can trade that in return for equity because the island prison we’ve lived on for decades is being—being paid for time. That’s allowed us to be commoditized and, you know, compared in the wrong way and—

[20:07]

RZ [Crosstalk] When you say ‘we’ paid for time, you mean? . . . What?

JE [Stammers] It’s the dominant model of creativity largely is that you’re buying someone’s time, even in the legal profession [yeah] and others, you’re paying for someone’s time [mm hmm]. Whereas the fact is, you know, let’s say you spend an hour with the founder of Giphy, Alex, [mm hmm]. Um that would probably be worth, you know, six months with McKinzie . . . you know, and—and—and the fact is we need to break this relationship between time and consider—consider expertise as the asset [yup]. And I believe we need to build new models that allow us to transact that expertise, to let us capture some of the upside [mm hmm] which is the potential impact we could have, sharing in that. And to do that, I believe we in the creative class, what we need to do is build half of the bridge towards the world of capital because I think venture is it where we’re sharing the upsides and the risk—uh is where one of the avenues we can explore to get off the island prison of being paid for time. So we need to understand how angels work; how VCs work; how investors work; how pension funds work; and everyone else. And we need to understand their language; their business models; build relationships and understanding so that we can build and forge these new models that—where there’s it’s [stammers] not a zero-sum game, it’s a game in which we can all win.

PF What does this company to enable that?

JE I’m looking to help define a model. So, firstly, it’s called FKTRY [Factory] but it is a creative capital studio. So in essence the digital product studio we will know what that is now. The creative capital studio is in essence the abstraction of FKTRY [Factory] which is it’s a group of experts who are funded in their work, the operational costs of the studio are met, and we go out and we work with startups in the field, whatever the stack is but our stack is product, design, engineering, ways at working. It’s people in culture and it’s also recruitment and it’s organizational design. And—and that’s your stack. You go out and you build a team of experts to transact equity in return for that. Your clients or customers or partners are startups who need that help at the right stage but they’re also VC firms cuz you in essence are de-risking their portfolio companies because you’re—you’re improving, not only the product but you’re also putting the processes and systems in place to help that startup get ready for scale when it comes to design patterns; devops, designops; culture; all that—all that work is really foundational and—and will allow them to uh scale with less risk cuz all you’re doing is really reducing risk cuz startups are quite risky.

[22:36]

PF Does this mean you can avoid sales and just sort of have relationships with VC firms?

JE You don’t really always wanna be sent in by the VC firm cuz you’re probably viewed quite suspiciously by the startup but, for me, there’s an opportunity to work with both parties. Um and be of benefit to both. Um but yeah it’s still going to be going out there: resonating; meeting people; finding people who want uh you to work with them because ultimately you will become an investor by virtue of doing that work.

PF Are you taking equity?

JE Yes.

PF Oh! Ok.

RZ You take money?

JE You’re taking equity.

PF Ok. So skin’s in the game.

JE Yeah, skin’s in the game. The whole thing is build upon that.

PF You know we don’t always I mean we’ve talked about this—

RZ We’re kind of wired this way anyway [yeah] cuz we’re not wholly driven by time based efforts.

PF We like to deliver the whole project for a fee.

JE Yeah.

PF And uh which gives you a lot more control and it’s not the same as taking equity, obviously, but you feel invested in a different way when you’re like, “I gotta get this done to these specifications.” Like it’s—it’s—

[23:28]

RZ One of these things—one of the things we say is, “Look: we’re not gonna get the whole spec into this exhibit in a contract. That’s not real.” Right? And people say, “Ok, are you gonna give me the whole thing if you charge me a hundred bucks?” We say, “Look: this is the spirit of the thing: definition is gonna take hold as we go. Things will fall off. Things will come on. We don’t know exactly what it looks like but this is the direction, this is the mandate.”

PF Yeah, this comes up a lot too uh when we talk about the business but Rich was a lawyer so there’s a comfort with that ambiguity in the contract because like I live in fear of lawyers—

JE Yeah.

PF—I live in fear that something’s gonna happen but Rich he’s like, “Eh, you know, we’re gonna just—we’re gonna have the best relationship possible and then we’re gonna—we’re gonna make sure that there’s some—some protection here—”

JE Which relies on trust.

PF Yeah. Yeah.

RZ Which relies on tru—One of the things we tell people, straight up, is um look: this may take an extra month—

JE Hmm.

RZ We’re fine with that. Like if we’re all in agreement that the better thing will happen an extra month out, we’re gonna want to be associated with that success. We’re gonna say, “Uh! Time’s up! This is your thing. We’re gonna—” Like the aim here is alignment and I think this a lot of what you’re talking about which is look: I fail if you fail. Here. Like that’s where we wanna go [truly, yeah]. Um and a lot of times, look, they’re hesitant. It’s like, “You’re not where I am. You know? We’re—I’m hiring you.”

JE I’m playing a platform game at my enterprise company, I might sink into the lava if this doesn’t work.

PF Right. Right.

RZ [Laughing] Exactly, exactly. Um so what you’re suggesting is like we’re kind of tiptoeing away from the old model, you’ve just taken the leap.

JE Well yeah—

[25:02]

RZ You’ve just said, “The hell with money!”

JE It’s building an ideal [Rich laughs] in essence, yeah, but what I’d say is is exploring a complete alignment of incentives between absolutely everyone.

RZ [Crosstalk] Yeah you’ve got extreme alignment. That, by the way, is your new company.

JE Extreme Alignment.

RZ Extreme Alignment.

JE It’s like a yoga studio [others laugh] but uh but yeah but look: [stammers] you’ve—for me it’s exploring what if we were liberated, you know, from—I—I—you know I’ve done work—same as you I’ve experienced the same tensions looking at the pipeline, what’s the probability of that in three months? How can we pay salaries? And whatever, you know, whatever—how much energy you spend . . . just keeping that in your mind and then secondly how much your decisions are short term rather than strategic—

PF Mm hmm.

JE—and for me the necessity of making this leap is to go out and demonstrate that there are these models; that they’re viable; and do everything open source. Publish all the contracts right as you—as you are doing it, so you’re learning. Invite other people to do the same. So we can almost create a new field of—a field of knowledge and experience in this space to make it really fucking normal so that in ten years there’s a normal menu of work that when you want to work with Nike or whoever you’re gonna say, “Right, cool. Do you want to be paid for time? We’re doing fixed cost and retainer or do you want to do, you know, JV?” Until we normalize this stuff it’s never gonna get processed in the compliance—uh so the procurement departments of corporates. So the only space I believe that we can forge these new models are with the pragmatic startups. Now we do that and we do it right and we demonstrate it’s viable. I guarantee you if we make that the norm, it will come back around to enterprise. But we’re not gonna do it with enterprise. I know you’ve probably tried it. You know, you have a really excited partner you’re working with—a—a big company, a big like logo brand and you think, “We could do JV here and we’ll have five percent and a profit share.” And eventually it gets to like five floors of lawyers and they’re like, “What the fuck are you talking about? I don’t have any boxes for that. No, it’s not happening.” So for me this has to be done with startups and it has—it has—

PF And that’s—of course that’s happened, right?

JE Yeah, yeah.

[27:05]

PF They can tolerate—

RZ That’s a lot.

PF—the actual risk. I mean the acquisition is where they feel more comfortable.

JE Yeah, yeah.

PF Like, “Can we buy a thing?”

JE “And destroy it?” [Rich laughs] Like truly the reason I’m pursuing this model and doing it in its purest form and focusing on startups is cuz I believe all the deals can be done there, and we can begin to normalize that. So that—and again, I haven’t made this stuff up. Red Antler have done work in return for equity. They did Casper’s branding [mm hmm] and—and the point is the more we normalize it, the more we share everything we can do, the contracts and the way it works, I believe in a decade we’re gonna have a different landscape as the creative class in interfacing with enterprise, not just with startups. But it’s not gonna happen if you try and do it with—

RZ [Crosstalk] Well let’s—let’s—let’s dive into this. Lemme be pessimistic for a second [hmm]. So, uh the world’s gone the way you’re trying to get it to go and now I’m talking to Nike [hmm]. They wanna go with us.

JE Yup.

RZ Right? And you say, “Well, look: we’re gonna, we’re—this is a creative capital contract.” What does that look like? How am I . . . doing work for Nike in return for creative capital?

JE The concept I’d look at is doing SPV, Special Purpose Vehicle. An entity, a separate corporate entity that’s majority owned by the client, that you own a minority in. Uh either of you could have options on it, you could invest equity in it based on certain milestones, and you build the product, or whatever the service is, and you get a certain amount of traction, and you decide to, whether you want to continue to invest or not.

RZ I wanna redesign a Nike training app. I want a new experience. Like I don’t—that’s not a business.

PF I just felt 500 lawyers exploding [Rich laughs].

JE Exactly. Exactly. Yeah, yeah, yeah. But—but we gotta normalize this shit. And the language, the parlance, that’s stuff that we have to learn so that—so that we can speak their language. You know I’ve—I’ve, you know, when—

[28:50]

RZ That’s how you get em there.

JE Yeah. I’ve spent more time with like VCs and—and people in the PVC space than I have in the last—

PF Well, see VCs are gonna love this because it—it creates a market around an entity that doesn’t fully exist yet or that’s hard to articulate. So they’re like, “Let’s get in there and figure out how to arbitrage over creative capital.”

JE Yeah, only because it has pivotal impact in the companies [right] that they invest in [sure] and it de-risks the companies that they invest—and we haven’t created a marketplace or a vehicle that can align incentives of the very best talent in the industry to leverage that collective talent to impact those startups. And the sooner we learn and the sooner we build these relationships and speak the language, the sooner that will fucking happen.

PF Yeah, so the model is: name it; make a market; prove it’s real [yeah]; and then the rest of the enterprise, as it always does [hmm], will see it, and go, “Oh that’s working. We should do that so we don’t get left too far behind.”

JE Yeah! I—I—I believe that we in the creative class should be exploring the intersection of creativity and capital because I believe that’s one of the parts that will get us away from the dying—the supernova that’s taking place in the kind of the regular kind of consultancy industry and that’s—that’s—that’s why I think this stuff’s so important.

PF Alright, so we don’t have to shut the company down—

RZ Not yet.

JE This is the thing: we’re heading into an age where the only difference between us and a machine uh is human creativity. So we are best placed out of needing any industry, certainly long haul truck drivers, to create leverage in what we do, to have impact. So it’s important right now that we start to think about what models we can build in that new world where our creativity is basically the only USP. So the beginning doom and gloom this is happening like—it’s just—for me just means water in the face and wake up. Like let’s figure some new shit out.

PF So FKTRY [Factory] is a creative capital studio.

JE Yeah. And I hope—I hope in years that’s common parlance. I hope someone—I—you know, as we’re publishing everything we’re learning; all the relationships we’re building; the knowledge we’re garnering—we’re—we’re picking up; and we’re sharing it. And if someone takes the model and copies it and iterates on it, that’s fucking fantastic.

[30:50]

PF No that’s definitely, I mean, as you’re talking, I’m a very suspicious person but there’s that—that zone of like, “Yeah, that’s probably the future. Ok. I can see it. You know?” Every now and then I’ll see a YouTube video and I’ll be like, “Oh there’s a kid singing in a car and they’re—they’re adding a lot of voice effects.” Yeah, we’re gonna see that a whole lot.

JE Yeah, yeah.

PF This just sort of feels like [in high pitched tone], yeah, alright, I get it. I get it. I see it. Um, alright, so we need to go uh—

RZ Is FKTRY [Factory] up and running? Just to wind this up.

JE It is, yeah. It is, yeah. It—it—it launched with the publication of State of the Digital Nation 2020 as an open source project. So there’s two ways of launching: you can do a big banner: here are five partners and the clients you’re working with and here’s the big piece in whatever TechCrunch or Fast Company or whatever. Or you go look: this is the plan. This is what we’re doing. This is the intent. Here’s the blueprint. This is day one. And that’s how FKTRY’s [Factory’s] being launched and in essence with any kind of new model you’re testing a series of theses (I pronounced that very carefully).

PF Mm hmm.

JE Um you’re testing a [chuckles] series of theses which is number one: can you assemble and incentivize a pool of creative talent? Of top grade creative talent? Number one. Does the model work? Two: can you develop a stack, an offering, that would warrant a um entrepreneurial technology companies to give up equity in return for those services? Two. Three, a really fucking interesting one to me is what is—what leverage is there in creativity? I.e., you go out with a million dollar of cheques. You’re gonna write two half a million dollar cheques to startups and let’s say early stage startups, uh seven point five million dollars premoney evaluation, and you’re gonna go cut two cheques. You’ve just purchased one million dollars of early stage equity in startups um c-stage let’s say. Um however, if you give it to your creative capital studio, we go out and do our work, I believe we can capture one point two-five or one point five million dollars worth of c-stage capital because I believe there’s leverage in creativity, and that becomes really fucking interesting. For investors. For us to demonstrate that we can do more with that money than you investing directly cuz we can negotiate on different terms. Fourth um is that if money is commoditized which is oxymoronic, if capital is commoditized, you know, the Softbank Vision Fund is billions, Andreessen Horowitz are raising ten billion dollar funds, then the only way that we get into deal flow, get to work with the best starts that’s the most interesting prospects isn’t by raising a 50 million dollar fund cuz who gives a shit about another 20 or 50 million dollar fund? No, it’s—it’s in assembling that team and delivering a really compelling suite of services. That means you get in on deals despite there being people like waiting outside, trying to throw money at this thing. Again, so we—it means also we can tap into deal flow that you wouldn’t normally get if you just decided to start a fund and become a VC. These are all theses being tested and, you know, the whole thing’s open source, you can follow it, you know, on the Medium, on FKTRY’s [Factory’s] Medium or—or my Twitter or Medium um pages as well. So, I mean, for me I’m—I’m super excited because I think we can build a new way for . . . the creative class to interface with the new world.

[33:44]

PF Alright [Jules chuckles]. I mean—

RZ Wow. What we’re doing is bullshit, Paul.

PF Yeah, no, maybe we do need to shut the company down and get—

RZ Yeah, I’m just gonna get a food truck. I’m not gonna compete with this.

PF I’m up, I’m down. No, I know. What are we gonna do? [Rich chuckles] We’ll be Irish Lebanese. That’s the—

RZ [Laughs] That’s the theme!

JE Amazing. Isn’t it exciting what we can all do? I mean we can do this!

RZ [Crosstalk] I mean credit uh it’s exciting and it’s also, I mean, it’s one big experiment, right?

JE Yeah, yeah.

RZ And I think that’s fun too, right? Let’s just try it, right?

JE [Crosstalk] What’s design? What is creativity? What’s creativity other than that?

PF No, I think we’re a little jealous.

RZ I’m a little jealous.

PF Yeah. I think it’ll be really—

RZ I’m gonna go back to my pipeline. I’m not gonna—

JE It’s ok. I brought some laptop [Paul laughs]—I brought some laptop stickers so that should [Rich laughs] make everything ok.

[34:20]

PF Alright, well thank you for coming on.

JE I loved it. I—I love exchanging thoughts and ideas and I really appreciate the back and forth.

RZ Of course. You know, Paul, it’s just not that—the line’s not that straight [music fades in]. There are different ways to—not just tweak your model or business model but to just, you know, revisit how the whole thing works and we’ve kinda done that, to an extent, but what he’s talking about is a whole other game.

PF You know, we’re—look: we’re a younger company and we’re reactive. So we’re like, “Oh my god! Digital products studio! Let’s—let’s go with that cuz that makes sense, it’s not an agency.” What’s fascinating about Jules is he goes away and he says, “I’m gonna figure out what to call these things. I’m gonna create language and a grammar around it and then we’re gonna build on that.” Like it’s a very meta way of being [it’s fun] that—and it’s not reactive, it’s prescriptive.

RZ And he’s actually trying it. He didn’t just write an essay.

PF No, he’s putting skin in the game. So, you know, more power to ‘em. But if you need someone to build a product not quite to that point—

RZ [Crosstalk] If you wanna give us actual US dollars! [Laughs]

PF Yeah! Not quite to the point of like creative capital and equity. We’re just not there yet. Jules is—

RZ Yeah, we still take money.

PF Yeah, more—like I said more power to ‘em but we’re gonna [Rich laughs]—it’s gonna take us a minute and we’re a little [Rich laughs] more conservative than maybe we thought we were uh—

RZ Ok.

PF Uh if you wanna exchange [slowly:] services for money, Postlight is absolutely your shop and we’ll build you something great [yeah], [email protected] is all you need to do.

RZ Have a great week, everyone.

PF Bye! [Music ramps up, plays alone for five seconds, fades out to end.]