B (3:15)

Well, thank you for having me. I do appreciate it. And like you said, thank you for the kind words of the introduction. I do work for a single family office out of Washington, D.C. i'm the CIO, and we do focus on a few critical areas, such as real estate, AI Oil, you know, some. Some of the more headline names that we're hearing about these days. And I'm also the CEO of Crosscheck Media, which is a spin off of our media division of Crosscheck. And. And I'm here today to talk all about the shoe company.

A (3:47)

Yeah. Thanks, Todd. It's not just a shoe company, is it?

B (3:50)

No, it's not.

A (3:51)

Oh, this is going to be great. Let's talk Allbirds. So what's so confusing, at least to me, is that what their Allbirds is attempting is not a traditional pivot. It's switching categories entirely. They're going from footwear to AI infrastructure. They're entering into a space that requires deep pockets, technical operations expertise, strong negotiating power, and enterprise sales experience in a very competitive space. If they don't know what they're doing, their new $50 million raise could come like that. Now, Allbirds is not the first company to attempt a dramatic reinvention. It could even work. Nintendo started as a playing card company before it became a gaming giant. Netflix mailed DVDs before it became the backbone of streaming. Amazon went from books to everything. But none of these were overnight identity swaps. In each of those cases, the companies identified a market need, built capacity, invested heavily, and expanded over time. And those are some of the success stories. Turning one company into a drastically different company can backfire horribly, too. Let's talk it out. But what I think gives Allbirds a fighting chance is how beloved a brand it was. This wasn't an Anonymous shell company. It was a $4 billion breakout that was incredibly popular. But why AI? Why now? Hot take. Chino, what do you make of the switch from shoes to AI? Are you buying this?

D (5:08)

Yes and no. I've been conflicted with it. In the beginning, I thought, what do you mean, AI? And. And I actually want to break it down a little bit more because we've all heard of CPUs, central processing units, which is the brain of a computer. And what allbirds is looking to do is sell again, what we love on the podcast, software as a service, graphic processing units, GPUs. That is the brain of AI. So they're doing GPUs as a service, which I think is brilliant, essentially what it allows companies to do. Because when you're investing in AI and the tech, there's a lot of capital that you need from that and you're moving that more into an operating expense. So. Which I know I'm sure you'll jump into. So brilliant for people who. And companies starting out that don't have the capital that Allbirds once had are the name, brand and identity. So I think good in theory, where their challenge is going to be is, you know, the brand attachment theory. We still call it All Birds. I don't even remember what the new name is, but it's always going to be allbirds. And I think, again, moving from shoes to AI, when you look at the workforce and the culture takes a different level of skill there. And so I'm wondering what the kind of the social identity those that are working there of. Okay, well, what does this mean for me? And I want to touch into that, but I got to talk about the operating side, Melissa, and hand it over to you of just what does this mean to just switch? You can't just do that.

C (6:50)

It seems you actually have made me given me pause to think about it because I have my beloved Allbirds here. I have. This is my third pair. The pivot really only works if All Birds can explain why it belongs in this space at all. And so you kind of explained that a little bit, because going from sneakers to AI is such a wide leap that that's going to be the obvious question is this. You know, and Todd and Aaron, we can talk about this from a brand perspective, but is this just a gimmick to buy them some time and whether it's a real strategy? Because definitely from an operating perspective, you're going into some unchartered space compared to where you were in the sneaker space. And so for me, that's something I'm really a little concerned with because it doesn't feel like they've thought realistically about what that's going to take. You know, standing up an AI infrastructure business from scratch requires heavy capital in of itself and they're a struggling business. It requires what you just mentioned, Chino, specialized talent and a very clear use case and a wedge of what are they? What makes them so different than every other company that's slapping AI into their name or into their brand. So it will really need an operating system that's much different than that retail side that they are looking at. It's a tech side side. They've got product, they've got compliance, they've got security issues like data governance, all of those types of things that they didn't necessarily have to deal with before. And those all come with a price because we all know that the tech talent in this world right now, if you have AI certification, if you have any of that, you can ask for a higher salary. So it's an interesting concept and I'd love to hear, you know, because it really feels to me that it's really driven by using their brand to get by time. And so that's what I would be interested in hearing like from you Todd, or you Aaron, about like whether you think they're going to get enough out of this to even actually build a business.

A (9:12)

Yeah, go for it, Todd.

B (9:14)

Well, I was just going to say, I mean, first of all, it's irresponsible of the company. The people that lead Allbirds are not stupid people. These people have graduate degrees from some of the best business schools in the country. They're speakers at Stanford. I mean they're very smart people. But they went from a 4 billion dollar valuation down to like you said, Aaron, 21 million dollars. They almost didn't have a choice. They had to do something. And God bless them, because guess what, they just brought in a $39 million. They sold the company for $39 million and they raised another $50 million. Granted, the company was 77 million in debt, but now they think, okay, we could just say that we're a new AI company. What they did, they didn't pivot to AI, they pivot to a headline. And that helped the underlying stock pop in one day, but with that it made a lot of people rich in that one day. But, but afterwards, now you have to question what is the strategy here? What's their business model look like? They don't really have a business model. They can't compete at just $50 million. I mean, you need billions of dollars. And they're not even close to that. So this is a company that I would imagine we're going to hear about in a Harvard case study someday. And with that, it probably will be deteriorating and dissolve and evaporate from there on.

A (10:35)

Well, Todd, what I find so fascinating is that you call it a rebrand, but it's kind of an unbrand. So they took a brand that has cultural cachet and consumer awareness. It's beloved. And they're saying they're going into operations and infrastructure, you know, back of the house. And who cares how AI runs and who cares how the Internet runs? Why would they take something with so much public goodwill even as their stock slid and they lost their valuation? Maybe people lost money in the problem, but people still love this company. Why would go and say we're doing something that's so far apart from the public eye?

B (11:11)

They had no choice. The company was quickly. They were going to be gone. I mean, in 12 months from now, you never would have heard of them again. And you are right. You're absolutely right. They are. They had that in their charter about being environmentally friendly, and now they're doing the complete 180 and going into what is really a utility draining type of operation that they actually had to ask their board to remove from their charter.

D (11:38)

The.

B (11:38)

That they're no longer going to be environmentally friendly. I mean, the whole spirit and the heritage of Allbirds is no longer going forward. So any goodwill that they had, forget about it. They're looking at a completely different customer base right now looking to change that model. They made a ton of business mistakes down the line. We already know that. They opened up 60 retail stores. What they should have been focused on is developing their shoes and continuing to evolve those shoes and. And do more of an online type of business. But they didn't do that. They felt that everybody wanted to go into their stores and buy their shoes. It just didn't happen. Now they got a ton of inventory. These shoes, who knows who's who. I mean, I know that new company bought them, who took. Who also helped, Ed Hardy, et cetera. They might be able to help them down the line, but realistically right now, for them to go into A.I. forget about it. I don't see it working out for them.

A (12:28)

Yeah, because if they wanted to make a headline, they could. They could go into ice cream. We all like ice cream. You know why they. And that'll get them a stock bump or something. Just do something that has visibility behind it. But to say, or even AI, AI software that does something that's public facing or consumer facing. But to say, yeah, and you'd be

B (12:48)

in California, this would be like in and out burger going to compete against Intel. It doesn't work that way.

A (12:53)

Yeah, right.

C (12:54)

I think Todd, you brought up a really good point and I wanted to talk about that as well is around their mission. Right. So this is really a destruction of what Allbirds really stood for. You know, their original mission was essentially to make things in a better way, meaning comfortable, good looking footwear built with more sustainable materials and a lighter environmental footprint. So you felt good about it. It was kind of the Patagonia of shoes, so to speak. And they really emphasized that. And really I think that's why it ended up being something like a beloved brand. Like people felt like, oh this is good for the environment, I'm wearing these recycled shoes, whatever. But they could have actually leaned into their mission a little bit in this pivot and I think that's a mistake they've made because better things could have meant something like I'm making this up. Better infrastructure.

D (13:48)

Right.

C (13:49)

So you know, a new company in AI we have, we're going to have a better infrastructure than a lot of these popping up companies that are around AI. A better way means more operational discipline. You know, they wanted to operate certain way with rigor and reliability, reliability and security and support and cost discipline. They could try to, you know, focus their new AI company in that direction. And then sustainability is a big thing about, you know, allbirds, the original snkrs brand. And they could have translated that into efficiency. They could have rebranded that Erin, like you said, into AI that talks about sustainability and how to make, you know, companies more sustainable. You know, really focused that their purpose could still stay but their categories changing. And to your point, Todd, they just kind of threw it all out and they're just like, okay, we're going to keep Bird, you know, like, you know, like he's. I loved your, your in and out example because that is actually hilarious. Yeah, you know, you, you know, you go to in and out and then get an intel chip. You know, like that doesn't even make any sense. So I do think that that is an example of, you know, it really is living in to Chino, what you mentioned, the gimmick of it all. It's not living into anything that feels authentic besides them just trying to a money grab. And then like you said, they're going to be in a Harvard Business Review

D (15:23)

fairly soon, unlike Other AI.

B (15:26)

Slack Bot lives in Slack.

A (15:28)

It understands you, your team and your work.

C (15:31)

So you can ask it for help with anything.

A (15:33)

Can I ask it to summarize client feedback?

B (15:35)

Yes.

A (15:36)

Can I ask it to find time for a meeting?

B (15:38)

Absolutely.

A (15:38)

Can I ask it to turn our meeting notes into a launch plan?

D (15:41)

Sure.

A (15:42)

Can I ask it to call me Da boss?

D (15:45)

Actually, you can. The balls.

B (15:48)

See how Slackbot can turn you into

D (15:50)

the balls@slack.com Meet Slackbot. Yeah, I want to jump on that too, because you're talking about identity, continuity, right? Like continuity, you just, you know, why did you just throw this old mission away? And I think if they were able to have, you know, said we're gonna be the better AI, I don't know what that means. It's always not great anyway. It's, you know, destructive for the universe. We get it. But if they had come with that in mind, it would have brought a little bit more trust within their consumers and their investors. Right. Like the. I just. The psychological safety of it all is really interesting because we just. I just love how you're empathetically just sharing. It's like we just don't trust it. We don't trust it. It's a gimmick. And I think if they want to try to turn this around, I don't know how they can because already the train has left the station. They pulled back so many things. To flip it back the other way, other way the PR needed and involved would be helpful. But if they were to be listening, all birds listen. You need to build back that trust. You need to try to use the brand that you're known for. Right? You were the Tech Bros. Shoe, but I think again, you can use it as like, you know, we were in the vicinity of these people and this is, you know, why we thought. AI, listen, it is a. It's a Hail Mary moment. We needed it. Because the reality too is the numbers. How do you go from 4 billion to 21 million? Like that is a huge loss. And for us, what's happening is, you know, we're confirming that they kind of, you know, they were doing great already. And just this weird gimmick is just showing us as like, you're not probably going to do really great here too. Why would we trust you? If you couldn't handle a shoe, how are you going to handle AI? And I think they need to kind of manage that narrative a lot more and leaning away from. The only good thing about them is not the move from a brand perspective. Psychological safety for the People involved, like all the people that are currently there, as well as, you know, just, you know, prove that this isn't just a gimmick.

A (18:09)

Todd, we're not here to give investment advice, but if we're not allowed to either. But if you're an investor, are you going to give Allbirds any money at the stage of the game and what they just announced?

B (18:20)

So it's very funny. So when the news broke that they were changing the AI and the stock popped, it was up some 600% in the one day and the next day was when I looked into it and I did have that, that fear of missing out the FOMO trade. Should I get into this? And I was almost on the ledge. I was right there. I was thinking, I gotta do this. I gotta get into it and invest in this. And thank goodness I didn't because it would have ended in tears because the stock has been dropping. It was down 30% the very next day after that pop. So to answer your question, Aaron, absolutely not. I would absolutely stay away from this. This is kryptonite. Unless you like to lose money, you probably shouldn't be in it. If you look at the chart of this stock, it actually has done nothing but gone down over the past month. The rolling, rolling 30 day period, the stock's up 170% because of that one day pop. But just over the last week, it's down 30%. So, no, you do not want to buy a loser like that. Right?

A (19:24)

Sure. We did an episode about meme stocks. You, you know, the. Is this one where the people that are paying attention are doing it for the dips in the day trading or are there serious investors looking at this and saying, okay, maybe there is something to it?

B (19:39)

No, they're definitely not looking at like a fundamental standpoint. They're just looking at it for the quick buck. They might as well just bet on next week's Kentucky Derby because. And you get the results a lot faster then in this case, you are not going to be thinking long term with this stock. What happened on the day that it popped 600%? That 21% of all the shares that were outstanding on Allbirds were actually short selling. They were short sellers, meaning that they expected the stock to continue to go down and therefore they would make money. But once the stock started going up, they had to cover their shorts and buy their stock back, which then caused this ripple effect of having to bring in even more buyers. So that point on meme stocks, then you have these people that are thinking, oh, I want to jump on my Robinhood account because all of a sudden, allbirds is up 50%, 75%, 100% for the day. They start buying in, they push the stock higher and higher and higher. Went all the way up to $24 a share. It trades right now at $2.50. So you take a stock like that, or actually, I take it's probably a little over $3 now. But with that, there are people that are just gambling with this. They're not thinking this company is going to do anything. Best to stay away from it.

A (20:53)

Yeah. Okay. Well, yeah, there are the Robinhood people that'll throw 50 bucks at it and the social phenomenon and that one day peak. But then there's also. There's investors that are handing over $50 million.

B (21:04)

Yeah.

A (21:05)

So who. Why would they do that?

B (21:06)

Well, that's a good question. So on the $50 million investment, which has yet to close, mind you.

A (21:12)

Sure.

B (21:13)

So they haven't actually received those funds

A (21:15)

yet as of this taping.

B (21:17)

Yeah, exactly, as of this taping. But with that, the real reason for that is because there is such an appetite on Wall street from private equity firms and family offices and institutional investors who want to get inside somehow these AI companies and invest in them. And if you just put AI out there, if you take your show and add AI to it, you could probably raise some money. I mean, that's how much of an appetite there is. Right.

C (21:45)

Do it.

B (21:46)

Yeah, there you go. For AI investments, because people are willing to write a check and they're just willing to do it. And the problem is, is those are the types of investors that get burned later on. So best to be prudent. Once you start going down this path and you want to invest in AI, and AI is the future, but you also have to understand the risks that are involved with it.

A (22:06)

Melissa, Operationally, they own customer data. They have a really good market segmentation, understanding. They own whatever. Maybe they own some supply chain or logist software or something they've developed that helps their processes. That maybe could be a segue to AI. Why are they doing hardware?

C (22:25)

Yeah. To me, again, this doesn't make sense because they're not really taking anything. They're not taking any signal from their old company to their new. So to me, that is an issue with what a big watch out for. Besides, everything else that we've talked about for Allbirds is that they really need to carry forward something believable from their old business. And they do have that because that translates to trust, that translates to operational rigor. That translates to values driven brand. And this new venture is something that's really unknown. And so that pivot feels very much like a gimmick and not intentional. And for them to not feel less random, they really do need to think about where would we go and transfer that. And so to me, I think again I mentioned brand building around their mission. So really reframing that strategy that, you know, what doesn't transfer cleanly is really the product and the infrastructure layer in itself. So that would require a lot of investment and deep technical capability. But what does transfer is managing your fiscal responsibilities, managing margin, your inventory, your vendor coordination. So customer experience, turnaround and execution. All of those things depending upon what your services or product is, is transferable in that, in that space. But it's again, the fact that they've done this so quickly and without any, it doesn't feel like any actual business strategy planning. So if they had said, you know, you know, and even if they had said, we're going to, you know, we're looking for funding, you know, because we're having some struggles here, we're going to close some of our shops, but what we're going to go do is we're going to try to invest in AI that will help retailers, will help these athletic brands, right? Athletic, athletic leisure brands are hot right now, right? Like Lululemon, all of those Alo, you know, they're all super, super hot, right? So what if they said, we're going to go to some of these places and we're going to say, you know, how we were able to have our sneakers individually made, you know, the colors, the options, so that people really felt like they were great. What if we were able to replicate that process and that operations and share that playbook with you and sell it or, you know, or now we're going to have AI help us do that so that you can, you know, promote, you know, to your customer, your loyal customers. Hey, we know that it's been, you know, eight months since you bought a pair of running shoes. We think it's time. And here's some ideas of some of the new ones based on your foot arch, you know, how, how many miles you run every day, all of those kinds of things. I think that that would have been a better place to go into. And then they could have actually utilized some of that knowledge, some of that tech technology they already currently have and the relationships they've built with their vendors and the supply chain.

A (25:48)

I like what you're saying, Melissa. If you're down to what is it 39 million with maybe 50 million pending. But that's only because of the, hey, look over here, we're AI. So down to $39 million. Can you really reinvent as a company that does all that? Or Chino, do you do like, what happens to all your people? Do you just hang on to your, your, your C suite and hire some sales reps and that's your company now?

D (26:12)

So that's what I was going to get to. It's like they need to invest in the legitimacy of the AI side. Right. You know, again, you're a. Sure. You know, a lot of people in tech, they wore your shoes. Does that mean there's someone. I know that they've done some hiring as well, but they need to have a retraining strategy. They need to be transparent about what does this mean for them as a brand, for the people that are working there, as I mentioned before, and I think at the end of the day, if they are not able to articulate why. And again, leveraging the brand, as Melissa has shared too, you do have brand knowledge from people who've used and have been, you know, your customers who want to see you succeed. There's not everyone wants to see you fail. But take that brand recognition and invest in legitimacy right now. Hire a PR person. Right. Do I think and do I agree with Todd that I don't really think this is going to go anything that is just a gimmick? Sure. But if we're going to live in a hypothetical land where what should another company do who wants to tack AI onto their name to, you know, rebuild some type of brand or movement and, you know, kind of change the narrative of their dying business. I think the playbook is leaning into your mission, looking at that old brand as an asset. But again, investing in the right people, the right talent, communicating that to your talent, I don't think it needs to be, you know, there's always going to be haters. So you need to have an opportunity and a communication around what the critics are going to say, get ahead of it. I think if they came with a better campaign, Aaron, that's kind of more your domain. Like how, you know, the story is not leaning in anything that's genuine. We think this is a gimmick. So how could they have gotten ahead of that is super important, I think. Yes, again, invest, Invest, invest that $50 million into something that's going to make you more credible.

A (28:30)

I love everything you're saying. And $50 million is. Todd, like is not even the entry point for the hardware, let alone the company infrastructure.

D (28:41)

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have four times more applicants than non sponsored jobs. So go build your dream team today with Indeed. Get a $75 sponsored job credit@ Indeed.com podcast. Terms and conditions apply. To Todd's point, you know, you can't start up a company for that little. Honestly, you really can't. In AI and tech, you really need to understand what space you're getting into and cloud and computing costs rise faster than revenue and then you're really in a messed up place. And that's where people who really know what they're doing and have a wedge in the sense of they have an answer to a serious question that needs to be, you know, addressed in the, in the ecosystem of AI that they have. You know, they have actual customers. You know, Allbirds doesn't. And the second is like the operational complexity that we just talked about, Aaron. And it's not just about that. You have all of this baggage, you have all these old sneakers, you have all these people, like Chino said, you have this culture of, you know, retail. And now you're trying to move into this tech culture, which is different. And the way you scale it is different. And so deployment from day one needs to be crisp, the product needs to be ready. You have to be able to understand what it takes to grow revenue. And I don't think this team, and I would say that C suite, even though they, to Todd's point, they might be some of the smartest people, I think what they're doing is trying to buy some time for them to get the walkout paper, you know, walk out and get the few bucks that they can out of it. And actually I don't think, I think that been a better strategy, honestly, instead of doing this gimmicky thing with AI, I think if they would have just owned it and been more authentic and said, look, we're struggling, you know, asking their loyal customers like, hey, what should we do? Where should we go? How should we build out? Right? You know, like, is there something. And you know, and maybe they would have become a meme stock because maybe all of the tech bros, you know, in Silicon Valley would have invested a little bit in them to say, hey, we want to keep you afloat and we want you to now brand your Allbirds with, you know, meta on the side so we can give them to all of our employees as a uniform type of thing.

D (31:22)

Right.

C (31:22)

You know, I mean, I just think that they, you know, I, it seems like way too little of an investment. 50, I mean, okay, this is rich people problems. When I'm saying $50 million seems like too little. I would take, you know, $50. But I do believe that it's, it's not gonna, we're not gonna be able to pull them out of the ashes, you know, especially with the strategy that they have. And I think Chino and Aaron and Todd, you've hit all the things but unit economics 101, like this is not, there's no way.

A (31:55)

No, because if you're going to enter into an already competitive market, you either have to own something proprietary, which it sounds like they don't, or you have to undercut everyone else who's already playing, which it sounds like they can't afford to do, or you have to have handshake deals with, you know, the tech bros that they're, they live and breathe with and, and, and have these, you know, pending agreements saying okay, we'll buy you at a premium way up, way above and beyond market price. Which probably isn't going to happen either because companies don't, you know, there's some loyalists out there, but people don't want to overpay for something that's, that's untested. So Todd, what is, you know, what does $50 million get them? How long can they sustain on that? And what's the true point of, of entry to be a viable competitor in this market?

B (32:38)

Usually about a billion dollars to really, if you really want to be a player. And the reason why is because you use Nvidia chips, Nvidia GPUs that can range, they, they price between obviously with the speed of what you're looking for, but they range from as low as $20,000 up to $70,000. So on 50 million, think about this. You have to build the infrastructure, you have to buy these units. You also have to find the utility, the electricity that's actually going to be powering these units. There's a lot at stake here. Plus you got to work with the local government. You also have to work with the local community because a lot of people don't want these places around because it just drains on utility costs and then raises their electric bills. And you hear that a lot now where you have utility costs so high for American households and especially the ones that are located within the vicinity of any type of data center, any type of, of AI organization. So there is that. That you have to deal with. There's a lot of moving pieces that I question that the person that was selling a pair of Adidas one day is going to truly understand what is actually at stake here. And it's a reason why the big companies like the Oracles and Microsoft's, the Intels that are in there that actually are spending billions of dollars and they're actually involved with this. The other part of this is that, and a lot of people never talk about this, but is the depreciation. These, these units don't last forever, so they have to be, they have to be substituted. You have to pull them out and put in new ones, which then are also costing more. And usually that happens within a year. So places like an Oracle, they're building this gigantic data center in West Texas right now in order to keep their costs low. They actually have put up a windmill farm. Therefore they're off the grid. They're not working with it with the state of Texas with their electricity. They're creating their own energy to keep this thing going. However, they do know that in one year from now, everything they're installing now is going to have to be replaced with something that's newer, something that's faster. And therefore you have to wonder of an allbirds company is going to truly understand that. I think a lot of people think they could just buy the equipment and they're good. It doesn't work that way. You have to continue to keep up. And I'm not exactly sure they have the wherewithal when it comes to that that.

C (35:04)

You gave me an idea, Todd. I think they should do all birds. Windmills.

D (35:08)

That's closer.

C (35:09)

That's closer to birds, right? Like, that's closer to birds. It's sustainability, it's climate. Like, what about doing something like that?

B (35:17)

I mean, I, my goodness, how great would that be, right? And work with an AI data set or something like that. There would, there would be a lot more that you can do and it will probably be profitable for them down the line. So, yeah, I'm surprised they're not going in that direction.

D (35:31)

And I think, you know, just adding to what Todd said, at the end of the day, if it's constant renewal, you need to continue to replace, which I think everyone's forgetting this piece. I love that nugget of information, Todd, but it kind of confirms what we know they were failing to begin with, right? They kind of foiled their arms, foiled Their wings, I should say, to, to grasp at, you know, some. And now it's kind of confirming that you're not going to do well long term. So this is one of those cases that all birds, if you, if you can hear us, fly home and just, just wrap it up, wrap it up or lean back into your shoes, because this is not going to work.

C (36:13)

I love that. I love that because I do think they do have a great brand. And they. What they should do is as they're going into bankruptcy or wherever they're going, which is pretty clear, they should lean into that, Lean into their loyal customer suite. And like I said, you know, it's true. They could still try to partner and restructure and get something out of it and, you know, partner with one of these athleisure brands, Partner with, you know, even, like, you know, they were very sustainable, very good. You know, like, you know, there's the tom shoes and bombas where they're giving away, you know, all these things. What about if they, you know, because these are reasonably priced Tenny sneakers, why don't they do something with that? And where they could partner with schools, they could partner, you know, they could do something totally different. And I think that you might see, as Todd said, there's people out there wanting to invest in something, right, and invest in something good, and not just AI, but I think invest in their community and give back. And in this time, like, I feel like Allbirds is taking a risk when they should trust their own community just as much as anything. And the trust that they built and the reputation they built to try to help pull them through a really tough time. It may not pull them through to keep them a standalone company, but they could get absorbed by somebody else and it could still be a, you know, a beloved brand.

A (37:53)

Yeah, but after list, I agree with everything you're saying. After burning through all that capital and all that valuation and taking your company down to the studs, is there anything they could have announced that beyond having a moment in the sun, that investors and the public would say, okay, we like what you're saying, we're behind you, or are they poisonous? Like, do they have, do they have the credibility beyond whoever they have on the hook right now that may or may not shake out?

D (38:20)

Do.

A (38:20)

Do we trust them, Todd?

B (38:22)

Yeah, well, that's a good question. Because they were once a category killer in that space, in the shoe apparel space, and they could have continued to evolve in that space to remain in that, in, in their lane and, and really had taken that 4 billion dollar valuation that they had after they went public in 2021. And they could have done more, but instead they followed it to almost like a slow death over the past few years, five years. And then the company, they just, they decide, okay, we're just going to sell it off, pennies on the dollar and we're going to regroup and just go in an entirely different direction. There were so many things they could have done that they didn't do. And as a result, those failures, they start piling up. And it's really a shame because it's, it's actually a sad business story at the end because they were such a good company with such a great loyal following and now they completely reverted to a whole different sector. And I don't even know how they're going to be able to compete at this.

D (39:24)

We just don't trust them. That's I think, the net, net of everything, right? Like you just, I can't trust you to, you know, manage a shoe company. And now I'm definitely not going to manage or expect that you're going to manage an AI company where you need a lot more capital than what you have and to do that successfully. And again, you're just kind of confirming what we already knew. But you just had your moment in the sun. So it's a sad story. It's a sad one.

C (39:52)

You know, it's a cautionary tale. And in the world of startups, and I've worked in a few of those, you know, mergers and acquisitions are a big deal, right? You know, it happens a lot of times. There's a lot of hubris. You know, as a founder, you want to go public, you want it to be all you about your product or whatever your service might be. But a lot of times it doesn't happen. And to Todd's point, you know, they've now pretty much bullet holed their entire reputation, they've entire, you know, product. You know, you could almost, you know, say that going from 4 billion down to where they are based on, you know, oh, things changed and they didn't keep up with it. They didn't keep up with the Joneses, they didn't keep up with, you know, all the changes that were happening in, you know, and they, and they could have done that, but it's still with their brand. I think that somebody would have acquired them for $50 million and then kind of like slow rolled, rebuilt it and used it for something else, you know, use it to launch, like I said, for like Lululemon, like Launch a footwear brand. Right. You know, like launch into that. And it would have been, it would have been, you know, something that would have worked. But I think that based on their pivot, I mean, basically they're saying, we don't care. We're just, we just are going to try to do the last cash grab. I feel like they're in that one of those money machine things where the dollars are flying around and they're trying

D (41:29)

to come in their pants and stuff,

C (41:30)

you know, and then they're going to walk out, right? And they're going to have like $13 and that's it. And it's, it's pretty sad because like I said, I feel like there were some possibilities and I wish we would have been able to talk to them a lot earlier on, you know, and said, hey, before you make this huge pivot, like, I think that there's some really good things that, you know, and I would, I would say that Chino, we talk about this all the time. The culture they built, the employees they have, the people that have worked there. You know, you want to work for a mission driven company. A lot of people find great purp and that. And so it must be very frustrating for that team that is still there trying to keep the lights on to see such a big pivot and see that they're not going to get anything out of that.

D (42:16)

Right?

C (42:17)

Like, well, maybe they'll get a pair of sneakers.

D (42:21)

That's it.

A (42:23)

Well, and I, and I reached out to the founders to get their side and I'm still open to hearing what they have to say. But you do wonder also, you know, we didn't mention this, but was it responsible to give, to give them a $4 billion valuation in 2021? Was that, did they have an unlimited market and was it really representative of the growth trajectory that that company had in front of them? And the possibility was $4 billion realistic? Maybe. Maybe it was, yeah. Okay.

B (42:52)

Well, at that time it was, yeah, then, but now, no way. And that Wall street doesn't care about anything except forward earnings, forward guidance. How was the company going to do for expansion? And it just wasn't there. So you saw the valuation drop to a fraction of what it once was.

A (43:12)

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D (43:39)

Learn more@schwab.com trading I also gonna throw something out there. Me and my partner were talking about this, right? Albert's the shoe. You know, sustainable, plain looking, right? They're not the gimmick. It's not a Nike, there's no swoosh. It's a standard shoe for everybody. They have great, you know, water resistance. This came up at around the time of COVID Everyone was at home, no one was wearing flashy things anymore. And I also think just the time and place of when it came to light does play a factor here. And obviously as people continue to shop and athleisure, although big and you have brands like Aloe and Lulu who, who've also taken a hit too in recent times because you know, people are gonna, they need to start wearing jeans now that they're going into the office more and things like that. The valuation of 4 billion in 2026 looks a lot different. Again dropped down to 21 million. And again, of course, the, the decisions they made from an operational standpoint is one. But I think from a cultural zeitgeist standpoint too, people are dressing up more and they're not dressy shoes, frankly. So that's another piece to the puzzle. Do I think if they leaned in on being a sustainable shoe, do I think they could have had a rebrand? Yes. Do I think that they can? If they have the right PR to say, hey, we made a mistake, oh my goodness, we're going back to our basics and like, sorry that, you know, we kind of freaked out there potentially for the people who love the meme and the lulz and the trolls and the loyalists, I think you can lean into that. That's the only way, a real Hail Mary moment for them if they can go back to shoes. But if they're going to pivot into AI, we're all going to jump off the bird.

A (45:29)

And that's a great point, Gina, about that 20, I was going to say 2021 was an anomaly of a year and based on unsustainable and unpredictable consumer trends. So yes, okay, they achieved that valuation at the time. Try that now. If they launch today, would they launch it at $4 billion in this market? Probably, you know, brand new company, Second Chance on fresh identity and all that. Probably not going to hit that mark, that, you know, that threshold.

C (45:55)

I mentioned this before. I actually gifted my entire leadership team about 90 people, Allbirds for a holiday gift or end of year gift, not holiday gift, end of year gift. And I loved it because they could all pick the color they wanted their size. You know, we had, you know, like, two or two choices of the type of shoe, whatever sneaker that they were going to get, they thought that was fantastic because it was not branded, actually, with, like, the company's stuff on there. But I'm thinking you could brand it because it doesn't have anything on there and just a little something on the back, maybe. But they all loved. It was practical, it was easy. But to your point, Chino, it's not a status thing. Like, it's not like you're wearing your dunks or, you know, all the. All the other kinds of shoes that. Now sneaker culture is such a huge culture. So you're right that there was not enough foresight and forethought thinking strategically about, like, where sneakers were going and maybe doing some. And I don't know if all birds ever did this, but, like, a lot of those sneakers companies do collaborations with musicians and entertainers and athletes and other things that kind of bring a whole new culture, pop culture to that,

D (47:19)

you

C (47:19)

know, And I just feel like they missed the boat there that they could, like, again, we were talking about how do you partnership differently? Like, maybe they become the corporate thing because, again, like, there's so many corporate tchotchkes out there. Like, who wants chapstick? Who wants, you know, another battery charger? I don't need that with your logo on it. But, like, sneakers, that's pretty cool, right? You know, and I think that that's something that would be a very interesting, like, you know, gift at conventions and things like that. And so I. I just think that there's. They had that opportunity. They just kind of kept it very narrow and just thought that they could just. Just survive, Erin, on that, like, valuation and that people would just keep coming. And as we all know, in every business we've talked from everything from coffee to sandwiches to cars, luxury cars, you know, it doesn't matter. People's tastes constantly are developing and changing. You've got to keep up with it. You've got to look forward and you've got to pay attention to what you are doing and what. What, like, real problem you're fixing or what, you know, what are. What. What are you answering? What call are you answering that people and customers really want.

A (48:34)

Thanks, Melissa. Before we tell them what to do. So athleisure and sneaker market and all those, like, they're not going away. There's winners and Losers. But is there, Todd, is there a world where they could have taken the $39 million or 39 plus $50 million or whatever they could scrounge up and say, you know what, we're going to figure out our shoe market it, we're not abandoning this. There's still money to be made here. Is there a world where they could have turned this around and stayed the course as the kind of company that they were?

B (49:03)

Yeah, absolutely. I mean, their shoes themselves were unique shoes. They were different. They offered a different story, a different narrative. They would have, they, they probably could have done under considerable amount of things because like you said, Bess, everybody still needs shoes. I mean, it's just like oil you still need. And so you need these items. You have to go out and get them. You don't necessarily need a fur coat, but you do need a pair of shoes to walk around. And as a result, they could have done so many other things. I think when they opened up their 60 retail stores, that was probably the kiss of death for them because those lease agreements were long term leases. They were paying rent on these, on these stores that they were just simply putting paper up in the windows because the stores were going out of business. So they could have been much more of a direct to consumer online type of shopping experience. And therefore they could have done a lot more to help penetrate that industry and also take market share. And you see companies like a Nike, Nike struggling right now and they are not. Their sales are down, nobody's buying their shoes. But remember, Nike is one category. Tennis shoes. And Melissa said it best. She could create the shoes. They were customized shoes, different colors, different logos to everything you wanted with them. And that's something that's unique that you can't get elsewhere. So there's a lot of things they could have done. They still can do it actually, if they truly want to try. But I, I don't know if the. It sounds like the train has already left the station.

A (50:31)

Yeah, you do wonder about some of these retail stores. I was at a center the other day and there was not Stanley, but Yeti. They had the Yeti coolers and, and it's this, you know, beautiful retail space. And maybe their sales are incredible, but you know, you have to wonder if those types of things are built to last.

B (50:48)

I'll share this story with you in the retail space. So there's a company called Vineyard Vines. You may have heard of them. They're similar to like Johnny O Brand out in California. So Vineyard Vines had a great strategy going on they were direct to consumer. They had a few stores, they worked on a collaboration with Nordstrom. They're selling their product. Everything is great. And they're catering to that group that's going to the beach or give or selling the idea that you're sitting on, you know, on the beach and you have an extra large shirt on and

C (51:17)

you're in Martha's Vineyard.

B (51:18)

Yeah, right. So what Vineyard Vines did, though, which hurt them, they went out and they went and hired a bunch of executives that were deep into the retail space, that were used to selling a certain way to a different clientele. Then all of a sudden their catalogs came out and the first few pages of Vineyard Vines, which used to consist of T shirts, shirts that were selling for $25 with that vintage whale, they were selling $150 dresses. I was ridiculous. And then all of a sudden they tried to be more on the high end. And that hurt Vineyard Vines. They still exist, but that really hurt them. And it helped Johnny O in California actually expand their operation and take market share away from Vineyard Vines. So you have to be aware of your staffing, of who you have the executives that are making decisions. A big box retailer like Target is. Exactly. They went through the same process. They brought in a lot of outsiders rather than actually promoting internally. And these outsiders were changing the game. They were doing all kinds of things. Target has yet to truly recover from the problems that they had over the last couple of years because of what they were marketing about. So as a result, though, you have to be aware, you have to be concerned with that. Allbirds wasn't that big, so they probably didn't have these problems. But as a retailer, there are things, and that goes with any business. You have to worry about your company culture. And don't worry about changing culture, worry about expansion and taking market share and increasing revenues. Those are the most important things.

A (52:47)

Okay, well, with that, let's fix it. That's what we do here. So we said, okay, there is a world you could stay as a shoe company that's going to take, take some bridge loans or some heavy financing, and you got to figure out what, what, what went wrong, why you were built on a 20, 21 bubble that doesn't. Isn't realistic for today's market environment. But how do you keep up with trending consumer tastes? How do you do those, those cross brand tie ins, the celebrity endorsements, Keep your product the way it is. People like the product. There's no issue there necessarily. They like the customization. But. But you Know, really, really do some deep soul searching and get some financial backing to buy yourself time and come out of this stronger as a, as a shoe company. That's one path for them. If you're gonna go way on a detour, even in AI, maybe use AI or technology to do something that was inherent to your company. So if, you know, if you believe in sustainability and the clean side of things and go into clean side tech, go into windmills, make them look like birds. If you want to keep the bird in there somewhere, go into the, the responsible part of, of AI where you know, we all know throughputs and all these things are energy draining. But maybe you're, you're using that to look, look, look across your, your loyalist base. You've got some of the best minds in the country. Maybe pull them together like a, like a think tank or a council and say, what do we do about this, this guide us here? Because we, we don't, you know, let's admit we don't know what we're doing quite yet, but we want to, and we want to emerge from this as an AI forward company and really understand, you know, what, what's, what's the entry point to stay viably financial and responsible to our investors? What's the underserved market need here and what can we uniquely contribute as a company that no one else is doing? There's a lane there too, but pick one. You know, obviously if you're out, if you're over it and you're no more shoes anymore, then don't pretend to be a shoe company and increasingly make the customer service experience worse and start to cut your product lines because people won't buy that. They won't like anything about you anymore. And if you're going all in on AI or clean tech or something really, you know, make think about why you're there, why, why make that very clear. If it's anything beyond a cash grab or just a way to stall for time or anything, be, you know, be real with everybody and explain how it connects to your company values. How are you going to see those through? Don't ask the board to secretly erase some things that you know were tied to everything that you stood for. It's just, there's just not going to happen. But there is a responsible way to swap what you're doing and say, we're closing this store and guess what? We're opening another store or another line of business here and this is the way we're doing it, and here's why. And here's the evolution, you know, for marketing. It's a story. Here's our evolution and our story, and here's why we're gonna do the way we're gonna do this, the way we're gonna do it, and why the market just, you know, needs us to do this right now. And it's gotta be all pick a lane shoes or AI or tech. But, Melissa, if we handed that all that advice over to them, do we fix the situation?

C (56:07)

I don't think it's going to get fixed. I'm just going to say that I think all birds has already shot themselves in their sneakers, in their foot. So I feel like they're going. They'll be done very shortly. But I think there are glimmers of opportunity for people that are interested in the Allbirds fire sale. So what I mean by that is, you know, they're gonna go down, but somebody could come in and take what has already been built, that brand, the name, you know, buy that at a very discounted price and take it and do some of the things that we've talked about, where we've said, look, let's lean into our. Our overall sneaker mission and what our loyal customers and we can look at how do we be, you know, how do we grow from being just the affordable sneaker to something else? What if we're the online choice? What if we're, you know, a corporate logo choice, whatever. Whatever it might be. So I think there are opportunities for Allbirds to kind of rise like a phoenix. I do think if they stay in this crazy pivot lane that they said, I don't think they're going to be able to build operational credibility fast enough. I think, Todd, you've talked about the unit economics. It doesn't make any. Like anybody who's taken econ 101 knows that this is not the path you go on. And I think, Erin, you brought up a really good point of, you know, and Chino, you brought this up very early on in the conversation, but narrow their focus to stay on one clear AI wedge, whatever that might be, if that's what they want to do. But again, I don't think that they made the right choices by not carrying forward something believable from their old brand to the new. And I do think, though, those are some of the things that could rise from the ashes in the future for somebody who is looking to make, you know, something great out of of, you know, a disastrous situation here.

D (58:14)

So.

A (58:15)

Okay, well, Melissa, you put another option on the table so they can if they want to cash out, sell your brand, sell your logo, sell your. Your supply chain contacts while it's still worth something, and someone will scoop it up and write you a check. All right, so that's a third option. Chino. We gave them three pathways that are different from what they're doing. If they take anything that we. They're going to do what they're going to do. If they take anything that we've asked them to do, do we fix it?

D (58:40)

No, not currently. We didn't fix this one. They need money. Even with the AI path, you need to raise a billion dollars is what Todd shared is just like the market entry Point. You're $70 million in debt in lieu of this, $50 million that may or may not come. I do think identity continuity. Continuity is kind of the theme of this. If they can take that identity and bring it forward somehow, whether that's through a fire sale, whether that's remembering that they are shoes, and if you can lean into that at a time where people are open. Yes. Other than that, this AI play is not going to work. You just don't have the money. When you do, maybe we'll do another episode on this, but right now it's not the way to go.

A (59:33)

Okay, we got a rare no from Chino. I'll take the hit. Todd, do you think out of, out of what they were proposing that allbirds do next, do we give them a second path and do we extend their life trajectory compared to what they're setting out to do?

B (59:50)

Only if they revert back and they embrace AI but they use it to their business advantage of selling these shoes. If they go down that path, then they will survive. They will do well. They will. They actually will expand. But to reverse course and try your. Your hand in something that is completely foreign to you. No, not gonna work. It never works. And that goes with anything that it can be professional or personal. I'm all for expansion and trying to try new things. However, you have to put be practical and in this case, not a good idea for them. So I think they need to push. They have to pull this thing back, utilize AI, help themselves expand further, increase their market share, and they'll be fine. But like I said before, that train has left the station. I don't see them coming back anytime soon.

A (60:44)

Probably not. But if Todd, if we follow what you're saying and Melissa, and she knows there's still money to be made in those shoes, don't ditch them yet. Well, that's going to wrap up our allbirds episode. Well done, everyone. Before we go, I'd like to give a big thanks to Todd Schoenberger. Thank you for being our guest today, Todd. Let us know how can we all keep up with what you're doing?

B (61:08)

Actually, the best thing you could do is go to YouTube, go to the Crosscheck Media channel and click subscribe. We always have shows and videos up there that are educational, especially in the world of finance and Wall street. And we'll talk about subjects like Allbirds, of course. So definitely welcome everyone to go there and you can follow us.

A (61:27)

Fantastic. Thank you, Todd. Thanks, Chino. Thanks, Melissa. To our listeners, I hope you enjoy this episode. If there's another company out there that you think is long overdue for reinvention, hit us up. Let us know. We fixeditpod.com we love hearing from you. If we learned anything today, it's that AI is still in the wild west phase where anything can happen and everyone wants a piece of it, including Allbirds. So next time you go in for a checkup, your dentist might try to sell you some AI on the side. Be prepared for it and we will see you next time. We hope you enjoyed this episode of We Fixed It. You're welcome. We go into every episode somewhat cold and nothing we say should be construed as legal advice, financial advice, or anything that would get us in trouble. All trademarks, IP and brand elements remain property of their respective owners. Footing off replacing your window treatments because

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