Join us for VISIONS Summit NYC  - June 11
Episode 177
October 2, 2020

Capital and the Creator Economy

Today, Sari Azout from Level VC and Check Your Pulse joins us. This episode is a bit unique. We recorded the first part of this interview with Sari before COVID and then sat with her again this week to revisit our discussion. 

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this episode sponsored by

Human Centricity

  • Sari is an early stage investor, a lead strategist at a startup studio, and a newsletter writer. 
  • “To me, being human-centered means you’re far more obsessed with the problem you’re solving than you are with a product that you’ve built. And what that gives you is the flexibility to evolve with your customer.” - Sari Azout
  • “Being human-centered ultimately means that you don’t really sell your product. You sell your purpose.” - Sari Azout
  • The brand ‘story’ is important for longevity. Brand stories and purposes are what resonates with consumers.
  • “The story can’t be the marketing. The story has to be the strategy.” - Sari Azout

The Degrowth Movement in DTC Capital

  • “They’re not tech companies, they’re tech-enabled companies.” - Sari Azout
  • Retail vs. software company investments should be valued differently because of marginal costs of physical goods.
  • The internet and DTC brands have allowed brands to be much more niche, so Sari suspects we are going to see “more like 5,100 million-dollar-brands and less like a billion plus outcomes.”
  • The business model for VC relies on those billion dollar outcomes; however, we see in retail that the VC’s need billion dollar outcomes, but the founders do not. The founders are better off with smaller outcomes varied throughout smaller niche businesses which results in lower risk. 
  • Sara speculates that we’ll see an innovation in the way VC’s invest in these smaller, niche brands and that traditional VC will kill more companies than it creates.

Generational Brands: Can the Brand Afford the Consumer?

  • Gen Z is a different kind of consumer because of their digital nativity. In the past, ‘luxury’ items were brands based on status; now, symbols of status are changing to identity conscience - like podcasts or activities that individuals engage in and identify with. 
  • On Gen Z consumers: “They are self-interested as humans are, but they’re also spending with a conscience, as long as [the brand is] doing something that feeds their ego and identity and self-interest and also has a common good.” - Sari Azout
  • Companies like Amazon have set the expectations for a lot of consumers which lean towards consumers ‘winning’ the margin - with things like free shipping, free returns, etc. But this is based on consumers with convenience as their highest priority instead of conscience or community.
  • On conscious consumerism: “Where we need human ingenuity and innovation is ‘How can we build for a consumer that is increasingly conscious but also doesn’t want sacrifice?’” - Sari Azout
  • The consumerization of enterprise and the enterpisation of the consumer: Transitioning from the gig economy to the passion economy, creators who previously didn’t have ways to monetize their talents are now seeing tools emerging to facilitate that monetization and make that possible. 

Part 2 - Post-COVID

  • The world now is ‘post-place’ - everything is happening online.
  • “I think the opportunity to build the tools for a world that is post-place has really opened up.” - Sari Azout
  • “In the world of eCommerce, we’re realizing that the eCommerce infrastructure that we set up in the US was one hundred percent search-based. It wasn’t recreational. It wasn’t emotional. We optimize for price and speed and the Amazon kind of effect.” - Sari Azout
  • The idea of ‘luxury’ has changed and is much more centered on accessibility than status. Brands are shifting from being exclusive to being membership-driven with shared ideology.

Shifting Trust from Institutions to Individuals

  • On the difference between influence and influencer: “Influence these days comes from authenticity, which ultimately comes from trust, whereas influencers are the result of commoditizing social media reach.” - Sari Azout
  • Sari notes that Gen Z is reacting to this in seeing brands that are relatable, participatory, and welcoming as more appealing than the manufactured lives of influencers.
  • There’s a distinction between the “participatory” economy and the influencer economy - consumers/fans are sharing in the connection and value with creators instead of being unidirectionally influenced. 

What Direction are Consumer Brands Headed?

  • “I think what people are more interested in these days is far less individualistic and much more collective.” - Sari Azout
  • As the economy moves online and continues to change, the lines between media and commerce and services get blurred.
  • “What’s most exciting is being able to truly involve your customer in the creation of the product.” - Sari Azout
  • Sari suspects we’ll see less venture-backed brands and more organically grown brands due to the niche demographics that brands can authentically serve in our ‘post-place’ world.
  • “People will always gravitate towards what is easy. If you believe that, then that means if we create different toolkits that are equally easy… then brands are going to do it. And by doing so, they’re going to shape culture and create a different future… Tools matter.” - Sari Azout
  • Sari states that raising venture is easier than other forms of debt, but as our tools change, new funding tools emerge which change our outcomes. 


Have any questions or comments about the show? Let us know on, or reach out to us on Twitter, Facebook, Instagram, or LinkedIn. We love hearing from our listeners!

Phillip: [00:01:30] Today, we have an awesome episode for you. It's the first of its kind, actually. We're bringing you an interview that we did with Sari Azout from Level VC and from the Check Your Pulse newsletter, which, by the way, if you're not on, you should subscribe to it. So we sat down with Sari back in February at Future Stores Miami, and we had this amazing conversation that was really broad and sort of all over the place, wide ranging, and covered a lot of ground and it just never felt right to publish it. And we sat on it for many, many months. The world changed dramatically after that event. It was actually the very last live event that I was ever at. And yeah, so we just felt like it wasn't right to publish it. But I spoke with Sari this week and the idea of publishing that interview came around and we thought, you know what we're going to do? Let's do sort of a before and after and sort of recontextualize some of the things that we talked about and how Sari feels about things that she's thinking about now. And so there's two parts to today's episode. The first part is my conversation with her back at Future Stores in February. And the second part is a conversation I recorded with her this week. Monday, we sat down and talked about her newest newsletter, some of the things that she's been thinking about, the passion economy, creator economy, what it's like to parent during COVID... We cover a lot of ground in that second half as well. So stick through both parts, sit back and yeah, don't be like me. Turn your notifications off and tune in to my conversation with Sari Azout of Level VC.

Phillip: [00:03:16] Hello and welcome to Future Commerce, the podcast about cutting edge and next generation commerce. I'm Phillip, and I'm live at Future Stores here in Miami with Sari Azout from Level VC and from Rokk3r. Thank you so much for joining us and welcome to the show.

Sari: [00:03:31] Thank you. I'm so honored to be here.

Phillip: [00:03:33] I couldn't tell you, I've been gushing for the past three or four weeks about how much I love your newsletter, which I have been subscribed to for a little while, for a number of months. But that's how I know you. But I'm sure maybe you can help the rest of our audience become acquainted to who you are and what you do.

Sari: [00:03:52] Yeah, of course. So I do a lot of things. I'm an early stage investor. I am a lead strategist at a start up studio, a newsletter writer, as you know me. But I think what kind of unifies my work is less the title and really my kind of overarching interest in building things for people and not just the technology, but the people behind the technology whose building it. What problems we're solving for people and really looking at technology and innovation through the lens of people.

Phillip: [00:04:23] And so especially on the investor side, it sounds like you enable entrepreneurs, founders, to bring their visions to life. What are the kinds of things that you're interested in on that side of your work today?

Sari: [00:04:35] Yeah, for sure. So Level Ventures is a family office backed fund. I run the consumer side, and the thesis there really is we look for old, stodgy industries and where there's kind of a low MPS score, high friction kind of incumbent with a very kind of with the legacy infrastructure that really prevents them from innovating. And we look for founders that are obsessed with customer happiness. So for us, kind of an old, stodgy industry with a founder that has kind of like customer happiness in their DNA and then some form of kind of technology or insight to enable growth. That's what gets us really excited. So if you look at our portfolio, we've invested in companies and on the insurance side, education, CPG, retail. So the unifying thread there is really customer happiness in an old, stodgy industry.

Phillip: [00:05:29] Ok, and what are some of those sort of success stories or what are some notable brands that you've invested in?

Sari: [00:05:36] Yeah, so I guess I'll name a few. So probably one of the best examples or the breakout company in our portfolio is a company called Hippo on the insurance side.

Phillip: [00:05:46] Oh yeah.

Sari: [00:05:46] So if you think about insurance, the average insurance agent is 60 plus years old. They're asking you to fill out a form that's like dozens of pages. Hippo came in and say, here's 10 questions, and with that, we'll give you a quote. So the experience is a lot more human. It's an insurance company that you don't kind of dread interacting with. And really fundamentally, they just understand people. And so it's just a delightful experience behind that. There's a lot of technology to enable that. But in the front end, it's just a company that clearly understands people and how to make people happy, if that makes sense.

Phillip: [00:06:27] I think that aligns really well with what your sort of stated mission is, is to bring the human centricity back to the side of, not just investment, but I think in pretty much everything you do. Being human centered, what does that mean to you? Because I've heard that a lot recently. Everyone thinks they're authentic.

Sari: [00:06:46] Yeah.

Phillip: [00:06:47] What do you think that human centricity means today in the consumer space?

Sari: [00:06:51] Yeah, it's such a good question. I think I get to spend a lot of time on the studio side with a lot of people that have ideas for things they want to build. And on the VC side with a lot of people that are like have built ideas and have decks. And what [00:07:07] I think I've realized over the years is that most people are obsessed with their product and their technology and not their problem or their customer. So to me, being human centered means you're far more obsessed with the problem that you're solving than you are with a product that you've built. And what that does actually do is it gives you the flexibility to evolve with your customer. [00:07:29]

Phillip: [00:07:29] Wow.

Sari: [00:07:30] So I spend a lot of time, like when I see a deck that says, "We are building AI for legal work," like, I don't care that you're using AI as a human. If AI allows you to solve a problem for me, that's fantastic. But tell me what problem you're selling. [00:07:47] So to me, being human centered ultimately means you don't really sell your product. You sell your purpose. Because humans are not driven by products. We're driven by purpose. As [00:07:59] people, what moves us is like, how are you going to transform my life? And so I think what's so interesting about eCommerce and retail, this world that you know very well is that I think the number one skill that you need today to build a company is storytelling. It's the ability to sell purpose, to make a story not just be part of your marketing, but strategically be like the one thing that you're focused on. And if you think about incumbents, you can't put a COO and a CFO in a room and like architect a company like Mad Happy.

Phillip: [00:08:35] Right.

Sari: [00:08:35] It's like obsessed with like optimism and authenticity. And like it's just this thing that it's very kind of in the founders DNA that just cannot be born in the boardroom of like Unilever, or PNG, or any of the big companies.

Phillip: [00:08:47] In thinking about that, at the same time, I think there's never been a better time to try to build a consumer brand in that maybe there's more openness on the consumer side to try things that are outside of the world of what just exists, of whatever is on the shelf at their local shop. So I'm curious, in that world of consumer investment, as they're building sustainable businesses or building businesses that are focused around certain ideas or products or needs, how can they organize? Do you think it really just comes down to that founder vision of like having to solve something that is a real problem that they care about? Or can astute, technically capable founders try to go in search of a problem to go solve? I'm curious about that.

Sari: [00:09:35] Yeah, I mean, I don't know the way that I see the DTC space right now is I think there's such a big opportunity to build exciting brands. And if you think about retail 20 years from now, like, no, I don't want to shop where, like, my grandparents shopped, and this new generation is going to shop so differently. That said, do we really need another cookware brand? You know what I mean? So I just think that...

Phillip: [00:10:00] We certainly didn't need any more mattress brands.

Sari: [00:10:02] We certainly didn't need more mattress brands. And clearly, it's timely time to discuss that, because the outcome for Casper, I would say, was disappointing for many. So I don't think that just hiring Red Antler or like any of those top notch agencies, putting up a Shopify site, and then spending a lot of money on Instagram. I don't think that recipe is going to yield longevity. Can you find like a hole where you can arbitrage into short term, like generating a few million dollars? Yes, but I think to build like a category defining brand, like it's never been easier to launch a brand. But I think to build a category defining brand, you really need to go back to like what is that unique insight about your brand story? And you know what's interesting is it could be like a product enabled enhancement, like maybe you're selling a mattress that has IOT and like you can measure your sleep. And so, like, maybe that's like and there's defensible tech there. But for the most part, these companies don't really have, like, defensibility built into the product.

Phillip: [00:11:07] Right. Right. It's the brand.

Sari: [00:11:08] It's the brand. So if it's the brand then you better have a story that's going to resonate. And consumers are fickle. So how do you build longevity? And I think that comes down to authenticity and a unique insight, not just like, oh, everyone's building DTC brands, how do I find like a Casper for X or a Warby for X? I just don't think that formula is going to yield a lot of success.

Phillip: [00:11:32] So one thing that I picked up from Check Your Pulse in the newsletter is this idea that brands have kind of they fit into that Maslow's hierarchy of needs and that there are sleep brands who may thrive because they are part of the basic function of a need in life. But there's others that stand out in the way that you sort of outlined. This hierarchy is like Headspace, which are speaking more to the self actualization and trying to solve the internal need of peace of mind. I'm curious how you think that plays out in this DTC era and if there are brands that are mindful of trying to appeal to universal basic need versus a more top end of the market or a self actualized consumer.

Sari: [00:12:23] Yeah, yeah. And I think to me, the way I came to this is I started seeing all these brands that just were boasting about belonging and meaning and meditation apps are like a very explicit example of that. But then you have companies the Grand. It was founded by a few folks that were previously in VC. And if you go to their website, like their stated mission, is to help people find their purpose. And so I was like, wow there are businesses that are VC funded that help you find your purpose. And so as I was sitting with this thought, I was like Maslow's hierarchy is actually a great way to kind of frame this. Because if you think about humans, sleep and food and shelter, the reality is that although social media may lead a lot of people to think that we're worse off than before, objectively speaking, we're so much better off. Hunger has been, for the most part solved. We have like a place to sleep. We've just made so much progress on our basic needs. But I think, as a generation, we're still kind of collectively unfulfilled. And and so I think that the next kind of wave for businesses is to figure out like, hey, we already have given people food. They already have a place to sleep. The psychological needs around status, they've already been somehow met by Instagram and Tinder and Bumble. But what about, like, our need for belonging, for meaning, for self actualization? And I think that's like to me, what explains the rise of all of these platforms. And so on the one hand, you have like these meditation apps which explicitly try to do that, but then you have like the Patterns of the world. Pattern with like Equal Parts and Open Spaces. I think going back to our previous conversation, they are using those values as a way to build a consumer brand. So they're all about belonging and domestic coziness and all of these values that I think historically a CPG brand wouldn't really build their business on. I think the few brands that are able to do that authentically will resonate. And it goes back to like a question about story. [00:14:39] The story can't be the marketing. The story has to be the strategy. The strategy to lead change. People can change. Brands can change people. And you have to lead with a story to enable that. [00:14:50]

Phillip: [00:14:50] I fully believe that, too. It's interesting, I think about the like story arc and it's terribly dated probably at this point, but a story arc of the way that Don Draper would pitch to a company. And the idea is like it comes from an emotional place that was tied to some part of his childhood. It came out of him as that's the thing you saw in an episode of Mad Men. And I believe rather than that being pitched from the ad agency from like a yesteryear example, we're actually seeing founders who are bringing and drawing on their own need for... And that's what I guess is connecting in that authentic way.

Sari: [00:15:35] A hundred percent.

Phillip: [00:15:35] What would you say about this notion that the future of consumer brands needs to be slower, bootstrapped, less about scale and the way that we build technology or Venture has invested in technology and more around this idea of, I think you called it the degrowth movement. Is that the right term?

Sari: [00:16:02] Yeah. Yeah.

Phillip: [00:16:02] Tell me a little bit about that. And does that pose a threat to the way that we're building consumer brands today?

Sari: [00:16:07] Yeah, I mean, it's such an important time to be talking about this. I think that a lot of traditional investors jumped into the retail bandwagon trying to kind of apply the same thinking that they apply to software companies, to retail companies. But if you think software is like zero marginal cost, like Zoom for video conferencing. If I use Zoom and a thousand people you Zoom, it doesn't really Zoom more money for millions people to be using it. Whereas I think with retail and eCommerce, there's a marginal cost. There's like physical goods involved. And I think that like we have not, as an ecosystem, really respected the laws of like retail physics. And we see it with the public markets don't value DTC brands in the same way that the private markets do. It's just a different animal. So I don't think that that means that there's not an opportunity to build these brands. I just think we have to be a lot more kind of rigorous about how we value them. They're not tech companies. They're tech enabled companies. But I think the multiples... If you over find a company, and Purple and Casper are perfect examples of that. Purple raised two million. Casper raised over three hundred million. And so clearly, you don't see that there was like a lot of operational discipline with the extra capital. So I also think that the Internet allows brands to be so much more niche. So whereas before, you know, you can build, like Lululemon, a massive company and reach like a lot of people. Now there's Lululemon for like this type of person and that type of person. And so I think that as the Internet enables that, I personally think we're going to see more like fifty one hundred million dollar brands and less like a billion plus outcomes.

Phillip: [00:18:02] Right.

Sari: [00:18:02] If that makes sense.

Phillip: [00:18:03] Does that box out Venture in some way? Because the typical method of Venture would be to look for those really big outcomes. Does Venture change? Tell me what that looks like.

Sari: [00:18:17] So I think the business model for VC relies on having these billion dollar outcomes. It's power law driven. What we see in retail, though, is that the VCs need the billion dollar outcomes, but the founders don't. Like in fact, the founders would be better off with one hundred million dollar outcome, with far less risk than like, hey, take two hundred million and build a billion dollar business with a lot more risk.

Phillip: [00:18:41] Right.

Sari: [00:18:41] So what I think we're going to see is a new wave of businesses, of VCs that are going to be built around funding these retail businesses and that they're going to be structured around not requiring these billion dollar outcomes. And then we're going to see other forms of funding. So you have Clearbanc or Assembled Brands. I think the stat was like 40% of VC funding was going to Facebook and Instagram ads or something like that, which is ridiculous. You don't need to fund that with equity. So I think we're going to see a lot of innovation in how we fund these companies for sure. And I actually think that the traditional VC model will kill more companies. That model will kill more companies than it will create. So I think traditional VC will do that, but I think we're going to see a wave of VCs, and we're already seeing that, that are kind of going to adjust their model towards like these 100 plus million dollar outcomes, which makes sense in this ecosystem, but don't really fit squarely with the traditional model.

Phillip: [00:22:10] You touched on something there that made me sort of think, if you are building a brand today, are you building... You probably thinking to yourself that we're maybe on a hump of appealing to multiple generations simultaneously and becoming more niche in the way that we deliver brands might not yield the largest outcome for an early stage investment in particular. It's also at a time where it seems like early stage is starting to do late stage, late stage is starting do early stage. It all feels very frenetic, especially in investment space. What do you think is driving some of that? Is there just uncertainty in the world and uncertainty in the markets, especially in the retail consumer brand space? Or do you think, like, are we winding down that era and now we're moving on to building different types of things?

Sari: [00:23:08] Yeah, I mean, I think there's a lot of capital in VC right now, and I think that's a function of the macro environment. The world is yield starved, period, and that just means there's a lot of money. And so what we're seeing at the seed stage is that a lot of... There's actually fewer companies raising seed rounds, but the seed rounds are larger. So it's not that... Before ten thousand companies raised the seed round and today twenty thousand are. Actually that number has remained relatively flat. What we're seeing is larger seed rounds and that's really the reality is that quality is more important than quantity and that's driving valuations up at the very early stage. So it's common to see a pre launch brand raising at a 10 million dollar valuation or more. I think that's potentially dangerous depending on how you look at it. But it's just the reality of kind of the venture environment today.

Phillip: [00:24:08] Shift gears a little bit. If we're thinking about that next generation, you and I were talking a little bit about Generation Z or this idea of like the emerging next generation. We've spent 10 years building brands trying to appeal to the millennials. We have millennial pink now. We had a whole generation of consumer brands that all kind of look like each other because they're produced by two agencies.

Sari: [00:24:34] Yeah. Totally.

Phillip: [00:24:36] Do you think that we're breaking out of that? And have you thought at all about Gen Z and what that consumer really needs or wants?

Sari: [00:24:47] Yeah, I mean, it's a different consumer because they're digitally native in an entirely different way. What I think is that human beings... Human nature doesn't change.

Phillip: [00:25:00] Right.

Sari: [00:25:00] We've always wanted status. But I think what yields status is changing. So whereas before, carrying like an Hermes bag or like some luxury thing was a symbol of status, I think today, the symbols of status are changing. So they might be like, I listen to this podcast, or I go to pottery classes, or I meditate. There's all of these kind of like the types of brands you engage with. They don't have to be luxury brands. They signify status in different ways. So I think tapping into that is really important. The things that yield status are really changing. Saying that, I don't know... You like read this one thing or listened to this one podcast is the right way to signify who you are and your identity. And I think broadly speaking, this is a generation that does spend with their conscience, but they don't want to sacrifice. And I think that's the key thing. Before there's all these eco friendly brands that try to sell green products, and it didn't work for a long time because they didn't really have the esthetic sensibilities that this customer wants. So I think the key is, yes, have like something sustainable or something that speaks to their values, but they don't want to sacrifice. They still want... Convenience is table stakes. Esthetics are table stakes. The brand better be amazing. And I think actually a great example of that is Magic Spoon, the cereal brand.

Phillip: [00:26:34] Yeah.

Sari: [00:26:34] They're branding appeals to this like nostalgia. Their visuals are amazing and it's healthy. And there's a lot of people that tried to do that cereal thing before. That's the thing about consumer brands. It's like hard to predict success. Hindsight is 20/20. But it's easy to see why they've kind of managed to break out a little bit. [00:26:56] So I think for Gen Z, it's like really tapping into the kind of... They are like self-interested as humans are, but they're also spending with a conscience. As long as you're doing something that feeds their ego and identity and self interest and also has a common good, I think that's like the sweet spot.  [00:27:14]

Phillip: [00:27:13] We had mentioned in the pre show that we both read the Chips and Dips newsletter by Emily Singer. And I discover so many brands through Chips and Dips. In our episode that we recorded with her a few months ago, she said brands, modern brands, either build community or they have a conscience. And I would add a third to that, which is I think they deliver convenience. And if I were looking at the world of consumer expectations that Amazon has created for us, it's that products should be lowest possible price in the marketplace and delivered incredibly quickly for little to no additional cost. And I'm curious, [00:28:05] we used to ask the question if the consumer could afford the product. And now I'm really concerned whether or not the brand can afford the consumer. Because the consumer's expectations are sort of outsized. [00:28:18]

Sari: [00:28:19] It's such a good question. I mean, I think from a macro perspective, I do think that the ultimate winner of this retail reorganization is the consumer. A lot of the margin is going to the consumer. And frankly, like Amazon set those expectations, like free shipping, free returns... I've built an eCommerce company before. I've invested in several. There's like a real hard cost to all those things. And I think Amazon has led people to believe that returns and logistics are free when there's like a real hard cost behind that. So convenience is table stakes. So I think from a macro perspective, I do think the true real winner is the consumer. Do I think there's opportunities for brands to win? I think Amazon wins in products that are commoditized. But there's certain things where I think consumers are willing to pay a premium. Amazon is not community. It's not experience. It's not curation. And so I do think there's like pockets of places where the consumer is not so price sensitive. I mean, you look at like MSCHF...

Phillip: [00:29:25] Yeah. Right.

Sari: [00:29:28] It's like it's insane. They just drive these cults. Can they scale? Can they be like Venture scale outcomes? I don't know. But I do think that there's room for those. But ultimately there's more consumer surplus than there will be, and I love the way you framed it, like, can the brand afford the consumer? It's a really good question. And frankly, a lot of that I think boils down to distribution. When will we see a platform shift or some way for brands to acquire consumers cheaply? Because right now it's just a race to the bottom with like Facebook, Instagram...

Phillip: [00:30:04] It really is.

Sari: [00:30:05] Yeah, it's really the Wild West out there.

Phillip: [00:30:09] There's this political cartoon sometime ago that said, you know, for a brief moment in time we created a lot of value for stakeholders, but it was like the end of the world. You see around it, like 50 gallon drum keeping warm in a fire. Some naysayers might say that this has been a magical time for public pensions to fund and the coffers of Amazon's marketing program and Facebook's display ad technologies. And I wonder if that's true. I don't know. I think that's an incredibly cynical outtake.

Sari: [00:30:45] Yeah. Yeah.

Phillip: [00:30:46] But I wonder if that's true. Do you think that there is for all of this parroting and trumpeting of brand ideals or values, do you think that there is such a thing as conscious consumerism? Can you be a conscious consumer? Or are those two phrases somewhat at odds with each other?

Sari: [00:31:09] Yeah, I mean, the way I see it is consumers are not going to consciously consume if it implies sacrificing something. Right? Like if it implies paying too much at the expense of convenience... So I think convenience and all of these things are table stakes. But the beauty is, if you can find a way to... Like my husband recently bought a Tesla. He feels amazing about the fact that he's driving a car that's electric. And it's just feels better for him. And he feels great about the fact that he doesn't have to go to the gas station every week, etc.. So those are things that people really, truly, fundamentally want as long as they're not sacrificing something. And that's where I think that this is... Like consumers want to have their cake and eat it, too. They're not willing to like, oh, let me spend with a conscious, but I don't want to wear something where I don't look well, but even if the brands like very kind of ethically sourced and produced. So and that's like I would say where we need human ingenuity and innovation is how can we build for a consumer that is increasingly conscious but also doesn't want to sacrifice? You know, you want value, you want price, you want status. And so the stakes are higher for sure. But I think there's a lot of brands out there that are proving that it can be done.

Phillip: [00:32:43] Yeah, I think there's a lot of innovation to be had, for sure, in a lot of this space. I think it comes down to sort of the nuts and bolts of... I look at what's happened in textile innovation, especially in sustainable textile innovation in the last 10 years. It does seem like it's easier than ever. Look at what's happened with food recently and in plant based proteins. So I do think that we're heading in the right direction. I'm fascinated. What are some things that you think are emerging trends or things that we should be keeping an eye out for in the next three to five years? We are called Future Commerce. We like to look at the future a little bit.

Sari: [00:33:26] Yeah. There was this chart that was put out, I would say maybe like a year or two ago, that essentially looked at how over time the prices of certain kind of categories of consumer spend were changing. And so electronics and clothing and all those things were clearly trending downward. But there's these few buckets of consumer spend like health care, education, child care, which have dramatically increased over the last decade or so. And that's what I think is really interesting, is why haven't the benefits of technology accrue to those sectors? And what can we do to kind of like enable more value creation for the consumer in those sectors? I think a lot about education, for example. In education, it was assumed that, oh, all content is now on the Internet. There's like free content. And so the Internet is going to displace traditional schooling. But the reality is that going back to the human side, content alone is going to really solve the problem. Humans need accountability, and trust, and community.

Phillip: [00:34:33] Right.

Sari: [00:34:34] And all of these things. So that's one of the things I'm thinking about is how can we drive change into education from the outside in? And then health care is like another big category, right? Where if you think about like the primary customer in health care, it's not the patient. It's the insurer. And if you think about how that misaligned incentives, it's pretty wild. And so I'm really interested in companies like Modern Fertility or NURX or Hims and Hers that are really kind of creating consumerist health care platforms and driving change from the outside in. And another really interesting thing is I recently heard these terms, the consumerization of enterprise and the enterprisation of the consumer. So I think across the board, what's interesting is that as we see this consumer innovation with like Amazon and Uber and these companies that really set the standard, those standards are going to kind of pervade everything. All areas of our lives, from work to outside work. And so I'm really interested in the people that would have been building like a consumer social app years ago, might be building something for the workplace right now, but it feels like a consumer thing for some reason. So just applying those principles to other segments I think is really, really interesting. And then lastly, I've been really following Li Jin's work at Andreessen Horowitz.

Phillip: [00:36:09] Yeah.

Sari: [00:36:09] She wrote the kind of one hundred fans instead of one thousand fans. And I really... You know, this idea of me is a service and how like we're shifting from this gig economy, which was commoditized work and just like dehumanizing people, because frankly, when we talk about automation, we're trying to protect the people, not the jobs, really. There's just some jobs that really don't have a lot of dignity. But [00:36:37] what I'm excited about is as we transition from this gig economy to this passion economy and we're really empowering creators, what does that mean for people that have a talent but previously didn't really have the tools to monetize that? And so, in the last couple of years, we've seen Shopify democratize commerce for a lot of creators. But I think the next wave is like you don't need a lot of people, but what if you have some unique talent or skill or creation that you can monetize? I'm just really excited about the tools that are emerging to facilitate that. [00:37:10]

Phillip: [00:37:10] Wow. Probably the best five year outlook that I've heard yet, this has been phenomenal. I am just so excited to have met you. I'm so glad that you're here and local.

Sari: [00:37:22] Thank you. Yeah.

Phillip: [00:37:23] If people wanted to find you on the Internet or subscribe to your newsletter, where could they get that?

Sari: [00:37:27] Yeah. So my newsletter right now is at It's called Check Your Pulse. And also on Twitter @SariAzout, and on Instagram @SariAzoutBaka. It's pretty complicated, but maybe you'll add it to the show notes.

Phillip: [00:37:41] Oh we'll link it up. Yeah. For sure.

Sari: [00:37:42] Yeah, yeah.

Phillip: [00:37:43] And you'll see it on a newsletter forthcoming. It's been so lovely to have you. Thank you so much.

Sari: [00:37:46] Wonderful. And it's great to see somebody else local.

Phillip: [00:37:49] Thank you, Sari. And thank you so much for paying attention. Thank you for watching and listening to Future Commerce. We want you to lend your voice to this conversation. You can do that at And make sure that you subscribe to Check Your Pulse, but also to Future Commerce Insiders, where we're talking every single week about topics just like this. What are you doing in your business to do arbitrage against Gen Z or the changing consumer mindset? We want to know. So drop us a line at Thanks for watching. And remember, we're not here to predict the future, we're here to help you shape your future.

Phillip: [00:38:33] The last time we talked was, wow, seven months ago in person. You were one of the last people I saw in person. At the Future Stores Miami. And the world changed quite a bit. And your writing has continued. There's so many things that I'd love to talk to you about, but I'd sort of love to just ask you right off the top, what's important now? And how does that contrast with seven months ago? Who are you now versus who you were the last time we talked?

Sari: [00:39:06] Yeah, fascinating. The world is really, really radically transformed since then. They say things happen gradually, then suddenly. And I think we've really witnessed that. Yeah. I think a couple of things. I think that in a world that is what I call post place, a world where everything is happening online. I think in particular in the world of eCommerce, we're realizing that the eCommerce infrastructure that we set up in the US was one hundred percent search based. It wasn't recreational. It wasn't emotional. And that we kind of optimize for price and speed and kind of the Amazon kind of effect. And [00:39:54] I think part of what we are seeing kind of a renaissance of is more online places that give us those moments of delight. Because if Amazon is buying something, then what is it shopping? What is that kind of moment of delight? And the reality is, I think we didn't really have that in the US in contrast to other places like China that are far more developed as far as that goes. So I think that the opportunity to build the tools for a world that is post place is really kind of opened up. I [00:40:30] think beyond that, the business of aspiration has really changed from a values perspective. So if you think about both staying like high budget editorial's or yachts and private planes and spacious real estate, all of that just feels like so out of line with reality. I just think everyone is so much more aware of... I mean, there's now kind of consensus that this is a K shaped recovery and that we're living in kind of two economies. And so I think that that has a lot of implications for luxury and what it means to build a luxury brand in a world that really kind of prizes accessibility over everything else. One interesting thing I'm seeing in that space is brands like Louis Vuitton and Gucci really kind of stepping to the forefront of the Direct to Avatar movement and realizing that you can kind of bypass supply chain management and logistics and kind of the physical world to really do exciting things in the world of gaming. And I just think that's an exciting space to watch, and it really speaks to how luxury is going to evolve. Yeah, I think that the idea of like posing in a rented private jet today seems flat out ridiculous.

Phillip: [00:41:54] {laughter} Yeah.

Sari: [00:41:54] And so I think that what I'm excited about is brands that go from being like these really kind of exclusive kind of Supreme, Gucci type brands to things that are more inclusive but still feel like membership driven, still feel like they're a cult and there's a shared ideology. And I guess the brands that come to mind would be companies like Mad Happy or Starface. So, yeah, that's something I've been thinking a lot about, is kind of how membership can be the vehicle for a different type of aspiration economy.

Phillip: [00:42:34] It's funny in your newsletter, which the newest issue just came out about an hour ago. I love it. And I know we mentioned it in the first part of this show, from the before time when we sat down last time. It's called Check Your Pulse. And if you aren't subscribed to Check Your Pulse, you should check your pulse, because I think you should be. But you mentioned two things that I find interesting that kind of fits into what you just said, which is in issue 51 you addressed a trust shift away from institution toward individuals. And sort of on the continuum of that trust shifting, we sort of had the influencer economy, which put trust into institutions via individuals. So my question would be, where are we on the continuum? And do you think that there's an eventuality where we lose trust in institutions in altogether? Is there a waning trust in institutions of all kinds, from government institutions to enterprise to...? Is the creator economy, is it just individuals all the way down from here on out? How does that layer on top of what you were just saying about technology that gives us access or gives us scale to individuals?

Sari: [00:44:01] Yeah, it's such a good question. I think the first thing I'll say is that [00:44:05] I think we have to draw a distinction these days between influence and influencer. Because they're becoming two completely different things. I think that influence these days comes from authenticity, which ultimately comes from trust, whereas influencers are really kind of the result of commoditizing social media reach. [00:44:26] And I think that Gen Z is really kind of reacting to that. And the idea of brands being relatable, being participatory and welcoming is a lot more appealing than these kind of like manufactured lives that we see on Instagram. So there's definitely something there. And that's where I think that there's a distinction between the creator economy and the influencer economy. The creator economy is kind of a more recent term. But what's interesting is that it was coined at a time when we've been able to reflect on kind of the dominant business models of the previous era. And whereas influencers monetize from sponsorships and reach [00:45:22]. I think that the creator economy is more about that affinity between the creator and the fan, and that just creates a whole new level of trust and authenticity that doesn't really exist in what we traditionally call the influencer economy. [00:45:36] So I'm very excited about kind of what I call the participatory economy and how creators can play into that. And to me, that really means that we are transitioning from this kind of unidirectional, one to many, brands speak at you instead of with you towards something that's a lot more like bidirectional, where the fans have a share in the value and are connected to the creator. And I just feel like that's where we're seeing across industries, from commerce to marketplaces and education, just a really exciting shift in how we perceive influence from something that is kind of more authoritarian and one way to something that feels like many to the many and much more participatory, if that makes sense.

Phillip: [00:46:30] It reminds me, one of the the first people that I had ever heard about arfa from was from you. And Henry Davis is actually coming on the show in just a couple of weeks time to talk about sort of the participatory nature of running a consumer brand and this idea of co-developing products. It's been said that the previous era of direct to consumer really focused on communities or causes. And I'm curious if you feel like we're sort of post causal? Or are we sort of lower down on or a little further down as to meeting the the psychological or outside of the emotional needs of the customer? Or are we kind of back to meeting basic needs as consumer brands? I'm curious your take on that and how that contrasts with how you may have thought about the direction of consumer brands, say, like a year ago.

Sari: [00:47:36] Yeah, it's interesting. I think that what people are more interested in these days is far less kind of individualistic and much more collective. I think people want closeness, they want belonging, they want knowledge, expertise. And so I think that the most interesting kind of consumer brands are not really thinking of themselves as product, like physical products, businesses, but rather kind of still delivering on some sort of like emotional need, but across different channels. So the best consumer brands are going to become media brands. And I wouldn't be surprised to see companies like Goop begin to think about like mental health services. If you like, really kind of preach one thing, then why not kind of deliver along the spectrum of that? So I think to me what's most interesting is that as more things happen online, you start to kind of blur the boundaries between media and commerce and services. And I think that the best brands are going to kind of trespass all of those boundaries and be able to serve their customer in whatever way they want. I think that the cause thing... You know, it really depends on... I think it goes back to authenticity. I think a lot of the brands that were kind of a product of Venture funding and kind of trying to mimic the Warby Parker for X phenomenon and just kind of attach a cost to that, I think that that's kind of dead. But I do think that the consumer is like very socially concerned. And so I think as long as you do things with an eye for authenticity, I think we'll see a lot more brands with a point of view around ethics and things like that. But [00:49:37] ultimately, what's most exciting is being able to truly involve your customer in the creation of the product, because I think that we talk a lot about community, but Instagram is not really community. I mean, these brands are talking at their customers. There's not a ton of feedback loops, or at least I think that this kind of forthcoming wave we're going to see a lot more of that customer participation, [00:50:07] whether it's the arfa business model that actually gives a portion of the equity upside to a select group of customers. But there's just a lot of interesting models around this. And I just think that for a while we've been saying, oh, this is community community. But I just think we've kind of like poorly defined what community is. And in so many ways, we are kind of redefining that now in a in a kind of post social media type way.

Phillip: [00:50:38] Do you think that... Let me put it in my terms, a year ago I might have said that we were on a trend line towards more and more and more consumer brands. Now I wonder if that's true. I think maybe the trend line is heading the other direction. I think, not that they shouldn't exist. There's been a lot of writing about that, but maybe the market can't really withstand having so many brands that supposedly stand for so many things. Do you think that the free market is capable of sussing out who is real and who's a poser in an era that might see brands still launching around causes or trying to be community based? We've seen an era now that it was basically whatever the false, the antithesis, what's the word I'm looking for? We'll fix this and post. {laughter} I'm tongue tied. This idea of a counterfeit of that. Right? Sort of this manufactured authenticity. Do you think that the market will see fewer of those brands by nature? Is it just harder to build that kind of a brand?

Sari: [00:51:57] Yeah, I think we'll see far less Venture backed brands. And I think that'll also be a result of realizing that the outcomes are just not Venture scale for the most part. And those to me are kind of, the VC backed ones, and there are certainly exceptions, are the more kind of predictable look alike of all of them. I think that we'll continue to see more brands that kind of grow more organically and we'll probably continue to see... There's two categories that I think are exciting. One is categories that historically had very low online penetration. So things like food, for example, I think there's a lot to do in food. And yes, I think food is is one thing. And then the other thing is that I think we've kind of... A lot of these brands that we speak about that are kind of these traditional VC back brands for the most part, based in New York, LA, things like that, are really targeting these kind of young, high earning, knowledge workers in cities, the kinds of people that like spend ten dollars on green smoothies and kind of think about optimization and high performance. [00:53:10] I think what is missing, and what I hope happens, and where I think there is an opportunity is now that eCommerce has really accelerated, what about targeting audiences with the different kind of social capital? Whether it's like plumbers in Detroit or a schoolteacher or the elderly? I just think that we've really ignored a big segment of the population. [00:53:36]

Phillip: [00:53:36] Right.

Sari: [00:53:36] And a couple of months ago, you could argue that the online penetration rates across those segments were low, but you can't argue that's the case anymore. And so to me, what's most exciting is building for a different kind of audience that is so underserved. And the reality is that most... I guess that that kind of plays into the diversity in Venture. But the reality is that most people that have been funded by Venture can't really kind of imagine how to serve these audiences. So to me, what's most exciting is precisely diversifying the pool of people that receive capital and really reaching audiences in meaningful ways, because I think with the kind of high earning demographic, how many brands of toothpaste with different positioning could there be in the market, you know?

Phillip: [00:54:31] Right. I mean, apparently a bunch. {laughter} At least right now. I'm curious. You mentioned something earlier. Actually, no. It was in your newsletter just earlier today about tools shaping us. It's something we say a lot at Future Commerce. Our tagline is Shape Your Future. Our thesis is that because everybody touches commerce, commerce has a unique place in all of our lives. We all have to engage in commerce. And so part of that is how can we engage in commerce with equity? So that treats everybody like a person and not a consumer. But that also means that brands that engage in commerce have the ability to shape the world. And that's our thesis at Future Commerce. So if brands have the ability to shape the world, you said something in your newsletter, the tools shape us. And in turn, it either constrains us or expands our thinking and consequently shapes outcomes. I'm curious what your thinking is around the ability. This idea that brands can shape the world, or shape us, and then we shape the world. How is that progressing right now?

Sari: [00:55:51] Yeah, for sure.

Phillip: [00:55:52] Are we on a good path?

Sari: [00:55:54] Yeah. You know, I think that a lot of people are really deterministic when they look at the existing landscape and they think that the way we do things today is the we will always do them. But the reality is and what kind of prompted that post is really kind of thinking that so many of the things that we use today and that are the defaults across everything are the result of historical accidents or the agenda of a specific person, and that those things can be changed. And so if you think about like if you're going to start an online store today, you're going to start at Shopify. It's not because Shopify is the best possible way we could imagine to sell things online, because it's not. I mean, and I think we're kind of seeing new ways to transact in kind of game like settings, in AR. But people start with Shopify because it's easy. And so I think that the kind of point that I was trying to drive is that [00:56:52] people will always gravitate towards what's easy. And if you believe that, then that means that if we create different toolkits that are equally easy, if we create very easy ways for any brand to do what arfa is doing, to kind of share equity with their customers, then brands are going to do it. And by doing so, they're going to shape culture and kind of create a different future. So I think the tools matter. [00:57:23] I think there are people that think tools don't matter. And the point I was trying to make is that, yes, we shape tools, but then they shape us and that means they shape culture. And so if we use a different toolkit, we can fundamentally kind of transform that. And I think in the context of consumer brands, I think a lot in terms of kind of the interfaces that we use to transact, also the tools that we use as far as like cap table and financing goes. The reason people raise Venture is because it's far easier than credit card debt, and you can't get a bank loan. And so what's left? So I think that as kind of new funding tools emerge, those things have kind of the potential to radically transform kind of the default tools that we use, and they have a downstream impact. So I think that to me, that was just kind of like a way to just be a little bit more optimistic around not just assuming that the way things are today is the way they'll always be, but really just thinking about how if we change the underlying tools, we can change the outcomes.

Phillip: [00:58:38] Well, I think then that's a great place to leave it. It's been amazing to have you back and thank you for giving context around your last time on the show. It's been so great to have you back.

Sari: [00:58:52] Thank you so much, Phillip. Thank you for having me. It's been a pleasure.

Phillip: [00:58:56] Thank you.

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