#350 - Mike Beckham - Co-Founder & CEO @ Simple Modern - A Former Pastor Built One Of The Fastest Growing E-Commerce Businesses In The US

Chris Powers: Mike, thanks for joining me today. 

Mike Beckham: Great to be with you, man. 

Chris Powers: You said something at lunch that would be a great place to start. And one thing you said, I said, I had done a lot of research on you, and you said, well, tell me what you gathered from the research. And then you said something: one of the greatest things about starting a company is you get to make the rules.

And then I told you that some of the things I was interested in researching were that your way of thinking about starting Simple Modern was different from how most folks had started. So we should start there. When you were starting Simple Modern, you had to create the rules. How are you thinking about what those rules would be?

Mike Beckham: Yeah. When people create companies, they're usually just trying to figure out how to make money. Fortunately, I was at a point in my career when I had been involved in some successful ventures, so I wasn't as hyper-focused on how much money I could make.

I realized that all of these other things—the qualitative aspects of a company, the culture you're a part of, who you work with, what you're doing, the impact the company was able to make outside of finances—actually really matter when it comes to experientiality and how much you enjoy it as a founder.

And I mean, this entrepreneurship is just hard. You put a pound of flesh into anything you build. And so I felt like, okay if I'm going to build something, I want it to be something I want to be a part of. I want to get my money's worth out of the time, effort, and passion I'm trading in.

So, I took stock of what that would even look like. If you could draw it up however you'd want it to look, what would that be? It doesn't matter if it's atypical. Another great thing about entrepreneurship is the tremendous freedom to build companies however you want, as long as you can satisfy market demand and make them cash flow positive.

It can look however you want. And what I came back to was a couple of core things. Who I do things with dictates my enjoyment and satisfaction, probably even more than what I do. It is only true for some. There are some people where it's like, hey, if I'm not doing something quantitative, then I'm just not going to be happy.

But for me and my personality type, it was true that, Hey, if I'm with the right people, I could work on an assembly line if I had the right co-workers and be happy. And so, who I surrounded myself with would be a big part of it. And it makes sense. For example, when you build a start-up, there are so many hours.

There's so much stress and tension, and I'm learning that who you build it with matters a ton. The other thing I felt strongly about is that we'll get into this. My career has two halves: a non-profit half and a for-profit half. During the non-profit half, I had stretches where I raised my salary.

And I was a terrible fundraiser, by the way. But I had like my first year out of college. I raised my salary of 18,000 and struggled to raise that 18,000 salary. So when I left the non-profit world, one of the indelible marks I left on myself was that great people are doing important work in the non-profit world.

And if I was going to be in the for-profit world, I wanted to be able to funnel resources toward people who were doing significant things. So I knew that generosity and giving, I wanted that to be a part of it. There were some examples out there, the toms of the world, kind of like ideas, people were starting to kind of experiment with, Hey, Is there a way to have business as a mission or to have kind of stakeholder mindset where, like, it's not just about the shareholders?

Those were probably the two biggest things. The other piece is that you have to have some perspective on how I amell in the market. What are my competitive advantages? At that point, I'd been involved in many sales in e-commerce, so I knew that my co-founders and I were good at e-commerce.

We knew that Amazon was ascending and that e-commerce was probably the future. Even in retrospect, eight or nine years ago, this was 2015. It's become even more true that e-commerce is a great place to be positioned, and it's as true today as it was then.

I've told people that building the company needed to be more sure. Many people thought it was stupid based on the market we picked. What's funny is that 20 or 30 years from now, I'm sure people will look at what we built and say, Oh, it was so obvious.

 You started selling on Amazon in 2015 and picked a great category; any idiot could have pulled that off. And maybe that's true. We didn't feel that way then, but we knew we wanted to use some of those e-commerce skills that gave us the best chance to succeed.

Chris Powers: So you wanted to start with folks you wanted to work with. You wanted that before you even wanted to know what you would be selling. Absolutely. So you got the gang together. These are guys that you had worked with. How did you get to this is what we're going to sell? What was the process?

Was it process by elimination? Because of what you landed on at the time, and like you just said, it's easy to look back and go. Well, that was an easy category. You picked a cup or a thermal mug. At a time when Yeti, you had just like own the space. So how'd you get there? 

Mike Beckham: We started because we knew there was a real opportunity to sell on Amazon and that we were good at e-commerce.

We started asking, like, what could we sell? What would be some different products we could do? And we had a weekend where everybody was like, I will brainstorm a list, and we will come back and compare them. And I can't overstate that there were some terrible ideas like bankruptcy.

 If this was a choose-your-own-adventure, 40 of the 60 ideas led to bankruptcy, but insulated drinkware was on the list. We had a few different criteria we were looking for. One was that we wanted something there. There was a lot of volume for that. We knew people were going to buy the product.

In some ways, it's easier. Suppose people want to buy the thing that you have. Now, what comes with that, the trade-off, is there will be competition, which makes it seem suicidal from the outside, everybody looking in. It was like, you have got to be out of your mind to think that you can go in and compete with all these established companies.

You're so undercapitalized compared to them. We bootstrapped. So, Yeti is rampaging at this point; they're worth hundreds of millions, if not more. There's Hydro Flask, and the list goes on and on. It's an interesting particular vertical because it's one of the most fragmented consumer verticals.

Nobody owns more than 10 percent of the unit volume in the vertical, so we were walking into the most cutthroat market. Even the technology, if you want to call it the thermal insulation, that this is built on is out of patent. So what I loved about it was that I knew many people wanted to buy this, which will continue forever.

Warren Buffett says that people always, or maybe it's Bezos that says, people want to know what will change in the next ten years. And I'm interested in what's going to stay the same. Or Warren Buffett has this thing about if you went to space for 50 years and came back, what would be the same?

I'm sure people are going to be drinking water. In that respect, it's like a big market with many people. It's not going anywhere. Crazy competitive. And to be an entrepreneur, You have to have confidence that I, it's like borders on irrational belief in yourself, it's naive to some extent.

If you didn't have that, you'd never start because you would know the odds and decide you shouldn't do it. So we were. We allowed the potential of the market to be the dominant factor we looked at. The other thing that we had was an observation about the actual vertical, which showed that, at this point, Yeti was still selling stainless steel.

It could turn into a fashion product where functional fashion products, like a watch, wallet, or shoes, are bought to do something, but also because of how they look. Even for us, we didn't know which of those it was likely to be. Is it likely to be like a purse where you have two, or is it likely to be like shoes where you might have 20?

The thing that's caught us off guard in a good way has been categories turned more into shoe categories that everybody listening knows, and I'm sure this is the case at your house. You ended up having 50 of these things in your cabinet. And so we were fortunate.

In retrospect, you always want to say, Hey, we had it all figured out. We did not, but we had at least the kernels of the right insights when we started. 

Chris Powers: To be clear, was there anything you tried that didn't work before you got to it? 

Mike Beckham: Yeah, so our first couple of products. We did a tea infuser, and then we did a silicon baking mat, and we made dozens of dollars. So, they gave us just enough confidence that, Hey, there's something here, and we could do this. Along the way, we've tried lots of stuff that didn't work for one reason or another.

We've had a real Bias towards launching products. One reason it's fairly obvious once you say it, but from the outside, I don't think it's as obvious to people is that consumer products companies are very asymmetric. If I come up with the design for this water bottle and buy a thousand of them, it doesn't work.

If it works, I might be at a hundred thousand dollars, but it might be a hundred-million-dollar or a billion-dollar product line. Then, I can make that bottle and hammer it out one after another. And so it's uniquely asymmetric in some ways, launching products is a little bit like.

The VC model is one in which you're not worried about your zeros. It is only important that you catch some of the real winners. So we've had a bias towards trying things and being okay with failure and things not working because that's how you get the things that work. Amazon's platform is great because of a couple of things, one of which is traditional retail.

There are gatekeepers that you have to go through. For example, if you're the buyer, I have to convince you, as the buyer at Target or something, why you want my thing on the shelf. And even then, let's say I go into a meeting and convince you that it might still be 18 months before it gets on the shelf.

It's going to be at least a year. It just moves much more slowly with Amazon. There's no gatekeeper, and you can move as quickly as you can make this stuff. We could develop an idea, create a mold, have it shipped within 90 days, and then try it and sell it digitally.

So, we were fast at the feedback loops of getting information and figuring out what was working and what wasn't. That agility helped us compensate for some areas where we would never be as good as our competitors. We didn't have the capital. We didn't have the scope.

We needed the marketing budget. Another thing worth mentioning is that we didn't have the money to spend millions of dollars on awareness campaigns. So, we had to figure out how to acquire customers inexpensively. That led us to the strategy of really approaching all of these existing sales channels and figuring out how to leverage all of these existing sales channels.

And it's strategically why the company's done so well. 

Chris Powers: I thought of this, but I'm thinking of this cup. I'm looking at it, and you guys have been selling it for nine years. Do you all have a team focused on that cup, like a product team?

Are you constantly evaluating its performance? How can we improve it? Do we change the shape? Do we? You can wrap it in different designs. We can make it so the water comes out better. Or do you reach a point where it's good as it is, and all we will focus on is selling?

I'm just asking questions in the essence of something so simple. How much thought do you have to put in the product year after year? 

Mike Beckham: At this point, in our particular product category, there was a period when the product was getting much better, and the market was figuring out what it wanted.

It's really clear. People want to drink out of straws 90 percent of the time. That's what people want: a tumbler, a water bottle. They want something like a straw. Early on, that needed to be more obvious; it was like, maybe people just had that little slider.

But now, most of what you see in the market incorporates straw in some way. Some things like that weren't obvious at first, but at this point, it's more about creating different looks than better looks because we've got products that work great. It is a good example because it is more of a fashion trend category.

Last year, with the Stanley thing, they had this huge 40-ounce thing and put a big plastic handle on it. And the first time I saw it, I was, frankly, that's ridiculous. That is just an absurd amount of water, and that thing is big and clunky, but our market research said that for whatever reason, this is gaining steam, and our customers really like this.

So we developed our version of this, which is a great product. I'm proud of it. It's the best product out there, propelling our success. But it'll be something different three years from now, whatever's hot. It's going to look different two or three years from now.

You're trying to stay on the front end and be positioned. One of the analogies I'm using with my team right now is that we can't control the wind, representing the trends of what people want and the viral nature of demand. We can position ourselves in the water and have our sails up so that, when the wind shifts, we're ready to take advantage and capitalize.

So that means what you said. You're coming up with a lot of ideas, and you're making a lot of molds. We do a lot of internal and external work with partners to continue developing new ideas and try to have the best products. 

Chris Powers: If you just took the Stanley example, which I think I told you, my seven-year-old daughter wanted one thing for Christmas: a cup, I would be baffled.

What does that tell us about the consumer? They wanted a handle that they liked having more water. What did the data suggest? If you had to imply, why could something like that become so popular out of nowhere? 

Mike Beckham: Yeah. So, I have a theory. Nobody knows the first answer. And it's a head-scratcher for many people. I've talked to a lot of people in and around the industry. Even in consumer products, Stanley is the story of 23. And everybody's kind of, what's interesting is the company sold in 2019 or 20. And it was not an easy sale process.

People were not excited about buying that brand. And then, from the grave, this hundred-and-something-year-old brand suddenly caught fire. And so it caught a lot of people off guard. One of the things that, in retrospect, was happening was that there was this trend towards having more fluidity, and there was this post-COVID trend that people are going to be in their cars a lot more and will be moving around a lot more.

That set the stage for something big and cupholder-friendly that became the thing. For whatever reason, Stanley ended up being that thing. And so, some of it is just a function of how society moved around.

We saw a real demand shift when COVID-19 started. People suddenly stopped buying water bottles because they weren't going anywhere. It was all tumblers, things you'd hold and have at your desk. And then, similarly, when people move around more, they want it to be bigger.

They wanted it to fit in their cup holder, so there was some of that. Certainly, Stanley did a really good job of using influencer marketing. It's super interesting how different brands are leveraging that. So we're dissecting it and looking at what they did, what's replicable, and what's not.

We've experienced this with TikTok and Instagram. There is, and you know this: you're on social media and write a thousand posts, and the ones that go viral sometimes are like head-scratchers. Like, what in the world? That's the thing. And there is a nature of randomness in what goes viral and what does not.

Since you can't predict, you're looking for shots on goal. And so we had some of that last year, where somebody posts something, and somebody shows one of our products, and they're like, look, I can turn it upside down. It doesn't leak, and suddenly, it gets whatever, 5 million views and your sales explode.

In a world where social media is viral and random, you're trying to increase your surface area of luck and allow good things to happen. 

Chris Powers: Humans are complex. The things that draw us are sometimes the most obvious.

Mike Beckham: Yeah, well, and they're herd animals. Your daughter probably only needs 40 ounces of water. It would be a lot for her to drink that much. 

Chris Powers: She likes the cup because we started putting stickers all over it, which became, as you said, a fashion item.

Mike Beckham: Interestingly, there are some good books, such as The Innovator Dilemma and The Innovator Solution. However, one of the things they talk about is that people hire a product to do a job. To sell effectively, you must understand what job people are hiring for your product.

I can hire this product to help me not be thirsty or to help keep me hydrated. Your daughter could also hire a product to help her communicate her status or something about her personality. And that's certainly happening in our category as well. Whether it's the ornamentation and the colors, I want this to match my outfit, and I want to come across as trendy or have this particular brand because this signals a certain thing to my friends or whatever else.

So, there are several things people will hire this product to do for them, which is part of why the category has gotten a lot bigger than anybody would have guessed.

Chris Powers: Have you done any influencer marketing?

Mike Beckham: We've done just a little bit, but we're just starting to dip our toes in because, for years, like I said, we didn't have the budget.

It's like, but sometimes you want to look back and say, Oh, we were so smart. But the reality was you didn't have any choices to begin with. We didn't have the option that the average direct-to-consumer brand would spend somewhere between 25 and 50 percent of their revenue on marketing.

Historically, we've spent 2% or 3%. So we needed the money. If we were going to be able to grow when you have an inventory business, you have to fund the growth. So if I want to grow from 10 million this year to 20 million next year, I've got to go and buy all that inventory before any of the sales show up.

And that's expensive. It requires taking all my capital and profits, rolling them all in inventory, and then hoping you sell them. So, for years, that's where we've been. We've just reached the point where it makes sense to dip our toes and do other stuff.

But part of our strategy was, if we don't have money for marketing, let's make this so inherently attractive, either through the colors we choose or the price points or whatever else, the quality, that we don't have to do a lot of telling people why they want to buy this because otherwise, there's no way for us to compete with Yeti, who has a, whatever, 300 million, 500 million marketing budget.

We have to make it inherent in the product. And so, that's an example that people sometimes need to consider: pricing is like a form of marketing. As a result, like our margin structure, Yeti's public, you can go out there and look at their numbers. Last year, we had an industry-leading margin structure, which people would be shocked by because you look at our price points, and it would be like, well, how are they doing that?

Part of the reason is that we need to spend money convincing people they need to buy our product. 

Chris Powers: Okay. Back to creating your own rules. One thing you said was that you didn't risk just money. Your first 15 hires were for 13, or 14 were friends you had made along the way.

And if you spend time on Twitter. Sometimes you'll read that tweet occasionally, somebody saying, don't hire people you can't fire easily, or you can't break it off easily. You are breaking that rule, but you can create your own. Tell me how you came to that conclusion. 

Mike Beckham: Generally, when starting a business, you amass all the capital you can. That's financial capital, intellectual capital, relational capital, whatever you have. What can you muster for the mission? So, I put much of my life savings in as the bootstrap money. But as you mentioned, the other thing I did is I went to all the smartest people.

It is this way: There were smart people I knew who weren't part of the company but were well-equipped and well-situated to be a part of it. I went to all of them and personally recruited them to the company. And was that smart?

Was that stupid? Could that have gone? Could it have blown up in my face? Absolutely. You risk a lot when you start a company. You're risking years of your life. You're risking financial capital. There are a lot of ways if it doesn't work out, it's going to be bad and painful.

My thought process was, hey, I know the downside will be painful, but the upside is worth it. And you have to think that way. To be an entrepreneur at all, you have to believe. What we can create is so worth pursuing that, if you know what, I have to risk a lot to get to that. In some ways, it was like, if I'm already putting up all this money, I should leverage everything possible.

I should bring everything I can to the table to give this the best chance of success. So that part of it is that like, hey, like. Going and recruiting somebody who knows me, I've got a better shot at a yes of a, you know, a plus level candidate than just some random person you know that just graduated with an MBA or is coming from a hot start-up x. If they don't know me, what are my chances of recruiting them to my insulated drink wear company? There's a funny aside.

I teach at OU. I'm an entrepreneur in residence with the entrepreneurship college. And during this time, I'm starting the company. I'm also teaching about entrepreneurship. And one of the classes I taught was that I would teach at once every semester, and the teacher said, hey, it'd be great.

At the beginning of the class, I always have a group look at a potential start-up and then deconstruct it and say whether or not they'd invest in it. Why don't we give them simple modern before you speak, but we won't tell them it's your company. So I go into this class, and I watch about 15 minutes of 19-year-olds just Telling me my idea sucks.

They give all the reasons why I will get crushed by Yeti. So, anyway, I teach the entire lesson. Ultimately, I'm like, Hey, that was my company. And here are some additional details you didn't know, and the class is like, well, wait a minute.

Can we want to change our minds? And I'm like, no, you're dead to me. But it's like; it was really funny because it was just a microcosm of, like, if you didn't believe in me or know something about my track record, the idea was not inherently a winner on the surface, which this is a lot of entrepreneurship.

Very rarely is the idea so good that you will win with it. It's about execution. You will see this online: What's more important is the idea or execution? And it's the execution. It's the doing. So, by going to people I knew, I could go to people who knew my ability to execute my ability to lead.

But the other piece, and I know we want to get into this, is that I wanted to build a particular culture regarding values. The only way I knew to do that was to get people I had personally seen to demonstrate those values in their lives—not just for a little period but for an extended period.

So yeah, the first 15 hires—14 out of the 15—were people I had known for a decade or more and had seen them walk out the things we wanted to be about for an extended time. So again, go back to this idea of risk, right? I took on more risk by bringing on people than if I had to let them go.

It was going to be painful. If the company went bankrupt, I, like many of my close friends, would now be out of a job but think about the risk I traded in. I didn't have the risk of getting people who weren't aligned or getting people in the company who, after six months, you realize, wow, this person really can't pull their weight.

They don't belong here, so I often consider trade-offs and conclude they are worth it. Yes, you're giving up some things when you bring in people you have relationships with, but you also gain many things. Fortunately for us, it's worked out.

Chris Powers: Do you think that puts a different type of pressure on you? 

Mike Beckham: Absolutely. Yeah. Maintaining those relationships is crucial. Also, to return to this idea of trade-offs, the biggest risk in the business was that I would eventually become the person I didn't want to be.

Operating at the level that we are talking about, operating businesses requires a very particular type of person, a particular type of drive. It can gravitate towards transactionality, ego, and pride, a whole bunch of things that I didn't want to be true of my character, at least not dominantly.

And so not only was I bringing in people where I knew they had the ability, I knew they had the character, but I also brought in people who knew me well enough to be willing to say hard things to me. And this is an important thing. I wanted people that respected me, but we're not in all of me. We're willing to say, Hey, you shouldn't have said that. Hey, like that was not; I did not like how you handled that. Unlike somebody you hire off the street, they might need to give you that feedback. And so interestingly, when I think about the last eight or nine years of building the company, the person that I've developed into a large part of that is that I've been surrounded by people that care about me enough and have enough relationship with me that they've had the card conversations.

I had one early on, as an example, here. Of airing my dirty laundry, one of my co-founders, Brian Porter, who is also active on Twitter and one of the more authoritative voices in e-commerce, is about as much about selling on Amazon as anybody. Brian had worked with me and under me at the previous company that we had worked at, and now we were co-founders.

All my track record and experience with Brian had been him as somebody who reported to me. There was a power dynamic there. We started this company, and I realized about two years in, thanks to some feedback from him, that I was often treating him like a subordinate.

He was my partner, a co-founder, but I was not treating him that way. Brian is a very humble and gentle guy, but he was able to help me understand how I was treating him and how it was making him feel, which led to a huge correction for me. And it was a light bulb moment. Wow, okay, I've got a blind spot here.

So now we have a very different relationship than in the earliest days, but you know what it required, Chris? It required me to be willing to hear that from him and for him to be willing to say that. And often, you don't have that kind of relational equity in start-ups for people to give that kind of feedback.

So, I think one of the things that I'm the most proud of with Simple Modern is that usually, when you build a company like this, there are bodies in the wake, and we don't have those. But many reasons we don't have them are not because we're perfect or better people. It's because there's been a lot of apology and conflict resolution.

There have been a lot of hard conversations. Perfect companies don't exist because perfect people don't exist. Everybody has flaws and things that are difficult to work with, but it is really powerful when you're surrounded by people willing to help you and call you up instead of calling you out and telling you these things.

One of the real gifts I've taken from simple modernism is that I've grown. And I've grown as a result of people speaking into my life. 

Chris Powers: Okay. It would be a good spot for the sidebar. You've mentioned non-profit a few times, and we'll talk about what's happened since then when we get back to the business conversation, but you created your own rules.

You've mentioned non-profit. You're the first person to come on who was a pastor for ten years before getting into entrepreneurship, and there are not many circumstances where being a pastor leads you to get into the business. So, let's spend some time on what you think you took from those ten years in the non-profit pastor world that is infused into the company today.

We've talked a lot about them. One, how did you even make the transition? And what did that part of your life do for the company you're running today that continues to go on today? 

Mike Beckham: Yeah. I have joked that if you at 22 said, I want to at 44, I want to have This big company that I'm CEO and co-founder of, what would you do right out of college?

And I think that going to work for a non-profit Christian ministry where I raised my salary would not be on the list—it wouldn't be far down the list. Ironically, I think it has been uniquely responsible for my success and how I've dealt with it.

As you mentioned, right out of college was a big period for me; even though I grew up in the Bible Belt and around the church, this was not important to me when I went to college. I was in college for five years, and halfway through college, I had a major life-changing moment. I became a Christian, which completely changed my worldview.

Reshaping my dream for what I hoped my life would be about was a big part of who I married. And so I was still thinking I was going to do finance. I was a finance major. I still thought I was going to do that at graduation. My wife had one more year of school for a master's degree. She was doing an accounting.

So, I knew I would be a Norman and got an opportunity to do a one-year internship. I said yes and was shocked by how much I enjoyed investing in others. You and I share this: we're achievers driven to accomplish and build things.

So, it was a new experience for me. Like that success, my job involved investing in and pouring into other people's lives. And it shocked me even more that I loved it, in some ways, because it pushed me towards a version of myself that I liked better than the hyper-driven version I've seen previously.

And so what ended up happening was that one year turned into, Hey, I'll do this one more year, I'll do two years. And then that turned into my wife saying, Hey, I like what you're doing better than what I'm doing in accounting. And it's doing it together for seven more years. And so my twenties became fully devoted to non-profit and ministry work.

Some of the things that came out of that one were that my wife and I made a decision fairly early on when we established what our marriage would be about. It won't be about something other than possessions or acquiring stuff for status because I can't overstate this.

There were not a lot of status possessions or income in being in, but there was, and I'll tell you a funny aside here. So even as I was doing this, I was still investing because I still had this financial part of my brain and some gifting there, and I had a full ride to OU, so I graduated with college.

I didn't have any debt. I had twenty thousand dollars, so in our first year of marriage, I was making eighteen thousand dollars, but I had this twenty thousand dollars saved up, and I decided to invest it in one stock. I'm going to concentrate. I'm going to buy one stock, and I finally find the stock.

I put it all in, and you know what? It was a good choice—the stock, I think, triples. When we arrived that spring, my wife and I wanted to buy a house. We lived in the Hillcrest Estates in our first year, which had the unique designation of being the cheapest place you could live in Norman, Oklahoma.

That's why we were there. We were in this place but wanted to move into a house. We found this for-sale-by-owner house, 105 000. It is 2004, so this is before the market lost its mind. We went to the bank, and the bank said the only way we'll give you this loan is because Heather has yet to start working.

And I had an 18,000 salary. We'll only give you this loan if you put 40 percent down on the house, or it was 50%. It was a big enough number. It was like, you've got to be kidding me.  If I sold the stock, I could only make that 40 or 50%. And so I tell people that the most expensive house I'll ever buy was my first house because I sold what would today be about 40 million worth of Netflix stock to do the down payment on my first house.

So there you go. I don't know what the moral of that story is other than that I sold a bunch of Netflix stock in 2004. We weren't, but we weren't in it for any of those things. We got very motivated by the idea of impacting people's lives.

It can't be overstated that your dream for your life is where meaning, purpose, and satisfaction come from. Having a clear vision is a very, very important piece to having a fulfilled life. If you need a clear vision of where those things come from, how could you hope to experience them?

And so, with all that stuff, we clarified those things fairly early on. And even now, like, With how we're situated, it's different, we're situated pretty differently, but I still think back about some of those days were great, like living in that crappy apartment, we had our date night was we got off work and we went and bought a five little Caesars hot and ready. We watched something on free TV, and it was great.

It was formative that I realized that my circumstances and possessions aren't going to dictate my happiness or how purposeful I feel. So, one of the big things when I finally moved into the business world was knowing that the money and the staff didn't make me different from it.

It wouldn't bring the satisfaction I hoped for, which was helpful. I also learned from working in ministry that I am very good at reading people. I mean, you and I just had an awesome conversation before this. All day, you did great.

It was great, Chris, because you're an authentic person. All I did every day for about nine years was sit across the table from people and talk to them. And so you learn a lot about yourself, a lot about people, and a lot about how to judge people.

And so that was powerful. I learned a lot about sales; like you, you don't think about it, but using your words to persuade other people is just a superpower, right? When I can help you see where you want to be in the gap and how you can get there, And so I never thought about myself as a salesperson, but then whenever we started simple modern, I'm like in these meetings with, the targets and the Walmart’s and Sam's club of the world.

My ability to sell was pivotal in getting several yeses early on, and much of that came from that period. But the biggest thing is that your twenties are about establishing the foundation of who you are, your character, and where you're headed. And I managed the success of the last 15 years very well because of those years.

There's an analogy that I'll use sometimes. We have yet to talk through the whole 15 years of business, but the first venture I participated in got very big quickly. And it was overwhelming. It was like a force of nature, like how it happened, how quickly it happened, and how it impacted people.

I was searching for an illustration. How do I communicate to people what it's like? The rush—you know what it's like when it's just like, wow, it's just like everything is working. It is so overwhelming. It's intoxicating. And on Oahu, there's a beach where, for whatever reason, the waves just crash, like these huge waves crash right on the shore.

I am still trying to determine its official name, but the nickname they have for it is Breakneck Beach. They call it Breakneck Beach because many people break their necks on the beach every year. And anyway, being a 20-something-year-old guy, I'm like, well, I must swim in it.

So I would go, you go out there, and these waves, they were so powerful that if you're standing on the shore when the wave comes in, it'll just rip you right off your feet, and it'll just suck you out. And, like, there's this very short period of like maybe three or four seconds where the water stops going out and pulling you out before it starts to before the big wave hits, where if you want to get out of the water, you have to sprint and try and beat the next wave.

But a lot of times, you wouldn't get out of the water in the next way would hit you and suck you right back out. And I use that to illustrate what it's like to have a successful business: for the first time, you feel like, wow, there's this force, and it's almost overpowering.

And you can lose yourself. You can lose perspective, you can lose bearing, you can find yourself saying things like, I never thought I would say that, or I would never get that frustrated or stressed or whatever. Building companies and hyper-growth for many years has been overwhelming, but having a compass and foundation to work through has been helpful.

Chris Powers: Okay, then let's talk about hypergrowth because you mentioned the first company, and Simple Modern has been another one of those stories of massive growth. What do you know about hypergrowth? Why do you think it's not luck? What have you seen multiple times over and over that you think is creating that?

Mike Beckham: Yeah. So, one of the easiest answers is just. I'm in a G1 of the Internet, as if the Internet makes exponential growth possible in a way that was not possible until this point in human history. For our first business we had our first sale on October 23rd, 2009, by December, and by Thanksgiving of 2010.

We had our first million-dollar revenue day. Thinking about that ramp and how quickly things can ramp up is absurd. Simple modern has gone from its first water bottle sold in March of 2016 to a couple hundred million in annual revenue this year. So, like, that's a crazy ramp, but a lot of this is that the hyper-scaling is possible because I'm standing on the shoulders of what a lot of other people have built.

So, and I think that the other side of that, that's also we're saying is that we're grappling with as a society, just as an aside, is that it's clear that what technology does is it makes the big winners even bigger winners and it makes the power curve even more, unweight or even more kind of extreme towards the end.

There's always been a power curve of outcomes, but now it's even more extreme. When you win, you knock the absolute cover off the ball. And then, for many people, it's like you could get a better or better outcome. I've been fortunate enough to be in two or three situations where we had the right idea at the time.

And then the Internet was the backbone of it. And so the ability to scale it, so I've gotten good at scaling things, but there's another interesting kind of idea in here. Have you ever heard, I mean, a founder myth? If you talked about this before, okay. So, like, the founder myth is basically this idea that when you build something, there's the real story, and then there's the story that gets told, like the kind of mythological version of like how things went, where you kind of things were intentional and, like maybe you omit some of the details. You build it up to be this great story, and it's rarely true.

And so, when we talk about building a company like Simple Modern or some of the things I've been through, it's easy to build it up as something that it wasn't. And with my story, you could look at it on paper and be like, wow, okay.

He's had two or three massive successes in a run like that's wild. Here's the part that people need to learn. I've been this close ten other times, probably and below it somehow. Think about what happened from 2009 to 2024, like the iPhone app store, which came of age. The iPad didn't even exist; there was just that one thing. I missed out on all that.

I was right there, and I missed out on everything app store-related. There were a thousand ideas, and my brother and I looked at many of them like, Oh, it'd be great if there was an app that did this, and then we didn't do it. And then you look up three years later, and you're like, Oh yeah, they just raised it to a billion-dollar valuation.

So, it's important to tell the story that way, where it's easy to be like, Oh wow, you hit, hit, hit. You must be great. And a better framing of it is I was in the proximity of opportunity a bunch, probably 15 or 20 times. I started things that went to zero.

I had other things that could have gone better if I had taken a slightly different approach. But because I had enough surface area of opportunity and enough at-bats, I've had a couple of things where I made contact with the ball, and then I've known what to do with it. Once we got that. 

Chris Powers: And, on that app store comment, do you think we're living, is there something in the world going on today that's like an app store moment? Is it AI right now? 

Mike Beckham: Yeah, it's not hyperbole to say that they will consider right now, probably this 10, 15, or 20-year period we're in, an inflection point of human history.

And it's interesting because I'm a futurist. I think I am the person you ask: what's going to happen five years from now, ten years from now, that I have the best track record. of being able to do that? For a long time, I've been able to look out for and make predictions that have a good chance of being true.

I can't do that anymore. We are still determining what's coming next. It's interesting, too, to draw an association. Currently, conspiracy theories have exploded, and there's a reason. Here's the reason why they've exploded. One is that the Internet has just made information more available, and people are getting information from various sources.

They're skeptical, but the underlying driver is that people want to believe that there's cohesion and organization in how things are happening in the world and that somebody, some shadowy figure, is in control. And the truth is much more scary than no humans in control.

Like what's happening here, if somebody's in control, it's God. But no government or group of people orchestrates what's happening. There's a lot of stuff happening simultaneously and in many different places. And nobody is kind of the puppet master pulling the strings. And that's a deeply unsettling thought for most people.

And that's where we're at with AI. It undoubtedly will happen in the next five years. You'll get two or three mind-blowing breakthroughs in nature, whether that's like, wow, we just eradicated Alzheimer's, or boom, like we just figured it out.

AI helped us achieve this breakthrough we would have never reached otherwise. And then you're going to get two or three positives, and you're going to get one or two negative ones, wow. Like the government just accidentally launched a nuke, something terrible. It's almost inevitable that you'll get a mixture.

So we're living in a really interesting period where the future will look different. AI is going to create a ton of opportunities, and people are still determining exactly how it's going to go down. And then, interestingly, as the world gets increasingly digital, this speaks to what you do; the physical world, in some ways, maybe the quickest appreciating asset.

Like the things that technology can't do if you believe technology is just going to get exponentially better, then that makes all the things in the physical world it can't do just at a higher and higher premium, the jobs that robots can't do, that rely on people that rely on judgment.

And we saw this during COVID. We saw the first part of this, and everybody was like, Oh, it's all digital. All that matters is the digital world. And then all the supply chains are broken. It was like, no, it's not like the physical world matters. 

Chris Powers: Are you excited about that as an entrepreneur? Does it? What do you think about it?

Mike Beckham: Yeah. I have a balanced view. There are risks, and we want to look back on our time in history and say we are the most intelligent and advanced in thinking of anybody who's come. When it comes to our technology, there are no arguments.

We are, but I don't believe that's true anywhere else. If you looked at the Levels of depression in our society and compared them to, I don't know, Ireland a thousand years ago, I would guess that even though they had significantly worse circumstances in a bunch of different ways, you probably had lower, less depression.

Many concerning data points suggest we have started to lose our scent as a society. When you talk about the amount of isolation that's going on and the way that technology seems to be making people less and less connected with each other, there's this quote I love.

I think it's a former NASA president that said it, but like our ancestors were not all morons. They had good thoughts about what we need to live a good life, what it is to be a human, and the needs that come with that. And the extent to which we've disconnected from some of those things, especially when it comes to relational connectedness, is at our peril.

So those, that's the worry. The worry is that we're the places where we're walking away from the things that have been true of humans for thousands, tens of thousands of years, and it's not likely to go well for us. But conversely, like, man, it's exciting to think about what might be possible, the suffering that could be eliminated, and the ways that the world could get better.

I have a techno-optimist view. A techno-optimist view is that we're at peak screens right now, which means that technology is very present in our lives but very distracting. You want to look at your phone; you want to get information. It's like you put a screen between you and me, breaking our communication.

My optimistic view is that technology may recede into the background. That is, it may become more advanced. It may become more embedded in our lives in a way that does not disrupt connection. And so we'll see. I don't know. That's what I'm hopeful for, but undoubtedly, historians will look back on this period and write extensively about it. Okay, when the Internet first showed up, this massive disruption event, let's study everything that happened.

Let's study the first generation of people they just put on social media. They put kids from five years old on social media and look at what happens to their brains. Look at all the things we learned, unfortunately. Our generation—it's interesting that you'll hear phrases like being on the wrong side of history.

Everybody alive right now should get comfortable with the idea that you're going to, and we'll probably be reflected poorly by future generations. They're going to be like, man, I cannot believe that they did that or didn't know how damaging this X or Y would be.

We're figuring it out, but it makes sense. The Internet has been the most disruptive event in human history, and AI is behind it. And so we're figuring it out in real time.

Chris Powers: Okay. I want to go to a story about licensing, and you said how I described the licensing community to people is like a castle. There's a moat, and the drawbridge is up. You're trying to get into the castle. They're shooting arrows at you, throwing rocks and boiling oil over the side. And then if you somehow get into the castle, they're like, here's the throne for you, and they treat you great because you're making them money.

How did you start getting into licensing? And what do you know about licensing today that you didn't know when you started? 

Mike Beckham: This is one of the greatest entrepreneurial stories I have from Simple Modern that I'll tell here. It's a story about bias to action, long odds, and doing whatever it takes.

So I had this idea pretty early on, even before we'd sold a single drinkware unit that, like, man, if you could make insulated drinkware that was high quality and affordable prices with, like, I lived in Norman, like OU on it, for example, like people would want to buy that. And when I looked out there, everything was either overpriced or it was crappy quality.

Usually, I would do both, so I looked into it. And that was me getting on Google. I didn't know anybody in licensing. I knew nothing about anything. I got on Google; I searched for it. The extent of my research is that I'm able to figure out on the collegiate level that there's a licensing board that a lot of the universities outsource the heavy lifting of this.

They asked this board to give them recommendations on what to do, and then they just did it. So, I found that getting licensed with that board was impossible. They wouldn't talk to me, but they did have this very special carve out called something like a local license, and the way that a local license worked is if you worked with if your business was located within an x number of miles of a local university you could go to the university and apply directly to the university for like just that university.

So I’m like, hey, I teach at OU and have been a part of some entrepreneurial success. Surely, OU would give me a local license. No problem, I'll get that, and then I'll figure it out. So, let me say right now that if you had shown me the compound probability of failure, I would have never done this.

I would have never done this. It was to say it was one in a thousand, one in 10,000. It may be overstating my chances. It was extremely long odds—so long that I would have never done it if I had known the odds, which is like entrepreneurship, right?

Like you spend if you spend too much time thinking about why it won't work, you'll never do anything because the deck is weighted against you. But I can do this. So, to apply for this license, I had to create samples. I had to ship it off to an office in Atlanta, and then I had to find a way to contact the licensing director at OU.

So, I got China to make some samples, ship them off, and submit the application, and I am still waiting to hear from OU. I'm calling them, not hearing anything, and eventually, it gets to the point where it's like, these people are just not, they're just not, they're going to ghost me.

And so I started loitering around the licensing office. Can I bump into somebody at this point? I'm trying to get anybody to pay attention to me. I finally bump into somebody, and this is like the assistant's. Okay, we'll set up a meeting. So I get a meeting set up, and basically, this meeting is like for me to try and sell them on making me a local license, which I'm I've come to find out even though like I'm an alum and stuff like is not by any means a sure thing.

So, how do I convince these people that I'm credible? In the licensing industry, these people are always coming in like they've got big dreams. Oh, I will do all this stuff, and they never do. It's all talk, so these licensors have been conditioned to think people are full of it and will never follow through.

At this point, we had not sold a water bottle. So, how do I convince these people that I have credibility when I've zero revenue or nothing? So here's what I did. I took the one product we had, which was a tea infuser. It is such a funny story. I took the tea infuser.

I set up a Shopify website, then went on Google and turned on a bunch of super inefficient advertising. I was losing my butt on every sale, but I turn it on right before I go into this meeting. Shopify also has an app that has the best push notification sound. Have you ever heard this?

It is an old-school cash register. Ching is the best push notification. You can imagine the dopamine you get while running an online store. You get a push notification. You have to sell. It's amazing. So anyway, I walk into this meeting. I've just ramped up my ad budgets and intentionally left my phone on full volume.

So, I went there and started the meeting with the licensing director. Candace and my phone's going off to Ching to Ching. And I'm just letting it happen. And then, after about five minutes, I'm like, Oh man, I'm so sorry, that's our online store. We're having a lot of sales.

Let me put that on mute. And then I continued the meeting, but it was just such a great example of how to appear puffer fish-style. How do I appear to have a business here when we only have a little of a business? Anyway, I could return to what I learned in the non-profit world.

I learned how to read people, sell, and convince her to give us a local license. I got my local license and worked with our overseas manufacturing partner. I made about 40 or 30 samples. I could pitch the vision to them in front of a mass retailer.

I didn't know anything about mass retail, either. So I called the one person I knew who knew something, a guy I'd known from college. He worked for a candy company and led up their sales to Walmart. He connected me with an agent, who connected me with Sam's Club and got me a meeting.

I went into a meeting, and this is where the fate or luck piece of entrepreneurship comes in. I did not know that this was when the Yeti and Rambler were so hot, and this buyer had just started selling members' mark two-pack stainless steel tumblers. They were selling a pallet a day in Sam's Club.

And so this buyer walks into the meeting, like, I have to buy more insulated drinkware. And I walk in with, like, literally these samples of a thing I've never sold and pitch her on this idea. She was the sporting goods and the licensing buyer. During that meeting, she said, I want to do two programs with you. It would be about eight million dollars in sales if you can get the licenses, which I didn't know at the time, but I was never going to get the licenses, or I, I shouldn't have thought I was going to get the licenses, but I'm like, great I'll get them. 

So, I called the organization in charge of all the licenses. I'd love to meet with you about getting licensed. And they're like, It will not happen. There is no way this has never happened. You're wasting your time. Please set up a meeting. I finally convinced him to set up a meeting.

I walk in there and give the presentation of my life. And at the end, the decision maker says to me, We have set with 18 different drink-wear companies in the last year that wanted to get licensed, and we've turned every single one down, but we're saying yes to you. And we're saying yes to you because you showed up with an 8 million PO, and you can't say no.

We are fully licensed with all the OU universities. Then, that turned into the following year, when we got licensed with the NBA, then that turned into Disney, and then that turned into the NFL. And now we're known as one of the biggest players in the licensing space. But it all started with convincing a single person at OU before we'd sold a single piece of drinkware that they should give me a local license.

It's just a great example of everything entrepreneurship takes. What do I have to work with ingenuity, bias to action, and not getting intimidated by the odds? And so it's really fun to see where we've gotten. And now, of course, people come to us, right?

For example, the licenses we're at usually come from people coming to us, but certainly not that way at the beginning. 

Chris Powers: And then once you have the license for the drink where you can call them and say, we got a, I don't know, a new, a new cup, let's license that. You can start funneling products under the license.

Mike Beckham: Absolutely, it's super interesting because it's intentionally an oligopoly in that the licensors intentionally will only pick three or four people. And then they'll, they'll say, okay, okay. Simple modern, we want you to be our solution for Amazon. So, when it comes to NFL drinks, we're on Amazon.

Only two companies have the right to sell it. It was interesting because we were in an industry where, like, where are the competitive advantages? Where are the modes? And licensing could be a source of one of those, and fortunately, we could execute on that.

Now, there are all kinds of challenges associated with that, but if you can get there, it's great and motivating. 

Chris Powers: Okay, let's call this next section modes because I was going to tie it into one thing you've said: that just selling on the Internet when you were in G1 allowed for hyper-growth.

How long have we been buying on the Internet? Twenty or twenty years. One question: Are we still in G1 or moved to G2? 

Mike Beckham: No, we're getting past G1. In some ways, we may be in G3 or G4. Like G1, to give you an example, it is like Google has yet to learn what they're doing.

Facebook has yet to learn what it's doing. If you want to spin up a website, you buy servers, and then you buy a box in Atlanta with a lock on it that you put your servers in. Sometimes, our servers melt. We had times when our website got knocked offline because the server melted.

And now, in the world of AWS, it's different from how any of this stuff works. If you wanted to build a website, you wanted to build an e-commerce website, you hired developers and custom-built it. Now, I can go in for 15 dollars, have Shopify, and have a professional-looking theme.

The upside of that is that the services and the use of the cloud have exploded. It's made it much easier to start an Internet business and made the bar for success way higher. So early on, success had a lot to do with it. Can you market? Being early now, it's like you've got to execute. We joke about this to people who are in the e-commerce profession and who like to be good at e-commerce. You have to be good at about 60 things in some ways; it's like, I'm so envious of real estate. It's like real estate. You have to be good at three or four things and be good at them, but it's like it's a limited list of e-commerce.

Let me tell you some things you need to know. You need to know about digital marketing, product development, sourcing, logistics, and whatever tariffs, as well as a cursory understanding of sales tax law.

When you start making a list, you must understand lifetime user values, Deal with chargebacks and fraud, and be somewhat competent in at least 50 things. You've got to have a le. You've got to be legal. There are a lot of different things you have to know.

The positive aspect was that I described my early years as just like an MBA on a crack in the internet world. I learned about fifteen things simultaneously at a rate you would never intentionally do, but you're just drinking out of the fire hose.

I was forced to be competent, so I developed a wide range of subject matter expertise. Mobile technology has been disruptive, and there are big questions about what will happen in the next generation and how AI will change things.

The other big thing in e-commerce is that the amount of digital things sold keeps increasing. That's a lot of what people buy. If you, like my son, for example, we've got him on this app called Greenlight, where he has his debit card and earns his allowance.

I bet he spends 70 percent of his money on digital goods, but he saves up money. Then, he has a game on Oculus that he uses to buy whatever avatar or character tool he wants. And when we were kids, that's not how we bought baseball card packs.

So, the normalization of buying digital goods is another piece. It is challenging to make money selling physical things online. There was a gold rush a few years ago, and much VC money went into D2C, direct-to-consumer companies. Right now, VCs view that as an uninvestable asset class.

You can't do well doing that. And it's really hard, as customer acquisition costs are high. Shipping is expensive, and returns are brutal. There are just a lot of reasons why it's very difficult. One of the things that makes Amazon so impressive is the way that they've been able to make it all work.

A trend you will see is that people are increasingly trying to figure out how to blend physical and digital things so that I get margin profiles that work. Straight physical e-commerce is hard and challenging. If you go back to 2009 or 2010, many things looked promising.

It looked like you were going to have this diverse e-commerce ecosystem. Fast-forward to today, and it didn't happen at all. Amazon ate it all. Some companies, such as Walmart, have struggled to turn drop-shipping e-commerce into a profitable business.

It's been really interesting to be a part of that entire evolution and see what's coming in the next wave. 

Chris Powers: As you become more successful, is Amazon still taking more margin for your products? 

Mike Beckham: There are two different ways to sell on Amazon. You can sell on the marketplace, which is a consignment.

It's like there's no gatekeeper; you show up, you're in charge, and you can send them inventory however much you want. They have a whole fee structure, raising the bar for those sellers. They're asking them to be more and more competent in the supply chain, demand forecasting, and other related areas.

If you think about the marketplace and deconstruct it and how it works, Amazon has this problem: In an inventory-based world, how do we grow our selection and keep pricing competitive? And the marketplace was a genius stroke of what if other people financed it?

What if we want to add 600 billion of inventory? What if we got other people to pay for it instead of us? And. So what that did is it allowed Amazon to have this incredible product selection and price competition. If you search for a water bottle on Amazon, you don't need 7,000 results.

You won't be going to look at all those, and you won't be looking at page eight of the search results. You need, I don't know. 

Chris Powers: Is anybody looking at page eight? 

Mike Beckham: No. In fact, inside of Amazon, I've been told there's a joke about where you hide a dead body. It's on page two of the Amazon search results. So Amazon's more aware of that, like, Hey, this idea of the quote-unquote endless shelf.

We don't need an endless shelf. We need 30 or 40 good options in some categories, much less than that. And so there's been this period of total expansion. There are 12 million people who have sold on the marketplace. That's a lot of people. And now you see that there are not so many.

I don't see Amazon doing this out of greed or trying to improve its profit margins as much as Amazon raising the bar for sellers. We sell directly to Amazon. It's more of a traditional wholesale relationship, and in our relationship with Amazon, our fee structure has stayed the same for several years, but we're growing.

Many retailers are willing to make this trade-off. If you provide growth, we won't come to you for margins. If you're stagnant, you must help us grow the business and its output. And so you need to be there.

Improving your margin profile has been similar for physical retailers for a long time. They grow their store count, but at this point, Walmart's target is pretty big. They have a lot of locations, So that's going to provide little growth. The other one they would use is, hey, we're going to white label more stuff like we're going to, and you can see this on the food section as Walmart and Target or Target, Clothing section like it's almost all white label.

They hit that strategy for a while to grow earnings. But at this point, they've taken that as far as they can go. So it'd be really interesting to see what happens. Does that mean, and to some extent, that it leads to more inflation? How does that go? Certainly, the way that it's gone the last two or three years.

Chris Powers: Why would that lead to more inflation? 

Mike Beckham: Well, cause they've got to grow, they have a fiduciary duty, their shareholders. And so how do you do that? You must expand stores and increase your margin profile and what you're already selling. You either go to sellers and say, Hey, I've got to have better prices from you, more fees, which you're alluding to, or you get people to buy more.

Those are your levers. Walmart and Target have moved towards maturity. Even Amazon is asking the same questions. The difference with Amazon, as I noticed, is that they have this unbelievable advertising business, AWS, and a logistics business.

So, they have more levers to continue growing profits. 

Chris Powers: Did you build that relationship with Amazon because you were selling enough, like wholesaling to them, or was that just a strategy out the gate? 

Mike Beckham: Yeah, no. We sold with Amazon right out of the gate because it was the only person who would sell us.

It was a pretty easy decision, and no buyer would say yes. Who's the person that will say yes? And we got to a scale by 2019 where Amazon said, you're getting big enough. We need to have a direct relationship with you. Interestingly, there are three P sides, which are the consignment side and the marketplace side.

They compete with each other because they're one P wholesale side. Even though they're the same company, they compete with each other. However, the wholesale side of the business recruited us, and we decided to do it. We knew switching to a direct seller with Amazon would be extremely disruptive.

And so we plotted this all out, Chris, where we were going to do a deal of the day, and then on a Friday, we were going to flip the switch kind of, and everything would break, but it'd be broken for like a week or two, and then Amazon would have a lot of people there to help, and then we'd be back up and running.

The week that we picked was the second week of March 2020. So, we do a deal of the day, flip the switch, and everything breaks four or five days later. COVID goes wild, and there are the stay-at-homestay-at-home orders, and Amazon is all of a sudden just totally gasping for air, trying to keep up with demand, and all of our stuff is broItnd it was easily one of the scariest times in the bus. Like a Greek tragedy, this incredible business we built with Amazon almost overnight had fallen apart because of external circumstances. Then Amazon was so overwhelmed with demand that they had to go through rough and couldn't have two days of Prime on their entire catalog.

So Amazon decided that we'd pick our top 10 percent of SKUs and offer two-day delivery on those. We'd limit everything else to a month or two of delivery. So we woke up one day, and a portion of our catalog had two-day delivery, and it was now selling at three X or four X the pace we were ready for.

Then, the other chunk of our catalog was now delivered in one to two months, and nobody was buying it. And so that could have been better; it was not a great period. It was challenging. 

Chris Powers: What did you do? From a leadership standpoint, how did you say like this Greek tragedy where the whole business is melting down? What did you do?

Mike Beckham: Well, the first thing I did was message the team that I believe we will get through this. If we have to cut back, it's coming out of leadership first, like my salary is declining. The leadership salary is going down first. I am not going to lay people off. I'm going to do everything I can to retain people's jobs.

Fortunately, the other thing we did was, and it was noteworthy at the time, our company committed to giving 10 percent of profits. And we realized this is about as good a giving opportunity as you'll ever get. There was a week when the unemployment rate went from 5 percent to 16. So we decided to go ahead and do all of our giving for the year, even in light of all this uncertainty. It was a foundational moment because you know your company values are real, and you can point to times when they cost you something.

To hold those up, and you can tell those stories. And that was an example for us. We say we're about generosity. Is that generosity when everything's selling and everything's great? Or is that generosity like when there's an actual need, and it's scary outside? Another thing that happened during that same period was Target came to us and said, listen, we're not making a commentary on the relationship's future, but for the next few weeks, we can not buy from you.

We've got to put all of our POs towards essential items, such as masks, hand sanitizer, and stuff. And so it was probably the first time I was like, Are we going to be okay? I needed clarification. It was especially frustrating because in the very early days, at least in our company, it always felt like the company could die.

It felt like we were a couple of bad orders away from real financial trouble. And we had just gotten over the hump. As we went into 2020, it felt like, Oh, okay, we're not on life support anymore. We've got some margin. And then that was right when COVID hit.

And so I felt like, Oh man, right when I thought we were kind of out of this period, we weren't, and yet we decided, Hey, it doesn't matter. We're going to lean into what we say we're about. And then that matters on the other side. You know that it is a way for everyone.

It's part of your organization or team to know you're serious about what you say. So, the defining memory was that that month, and we were lucky, COVID became obvious quickly. We wouldn't have some zombie apocalypse, and everything wasn't falling apart.

Things came back online. It worked out, but we still made some intentional choices that have impacted the culture even today. 

Chris Powers: All right. Why in 2023 did you decide to become an ESOP? 

Mike Beckham: So there are two or three different answers here. The first is that my net worth exceeds what I need, and listen, I'm a huge believer in capitalism.

It creates profits and capital for investment so that we can build things and enjoy a standard of living that would be impossible otherwise. However, the idea that no responsibility comes with that is also flawed. There's a verse in the Bible: Those who much is given, much is expected.

One of the ways that I communicate this often is by listening; I get the opportunity, but I also have the responsibility to be thoughtful about money. I've just been fortunate financially, and I'm in a very fortunate position. And there are a lot of people who built that company with me who don't have equity.

So I've got this outcome where I'm making this crazy number with a whole bunch of zeros, and they're earning a regular salary. On paper, it was as simple as I might come out with 90 percent as much as I would otherwise, but I make a transformational financial difference in the lives of those who built this with me.

And my marginal utility—I think about this a lot—my marginal utility for money after a certain amount, and it's not a very big number. After you get to a few million dollars, it's like, unless you're just actively trying to spend money as a pastime, like you and I both know, there's no more marginal utility to be had.

And so my marginal utility for money at this point is just about zero, but the ability for that money to make a really big impact in non-profits or a team member of mine is pretty big. And so it's ironic ironic that two things are true. Number one, I should think that way. Still, also number two, I get marginal utility out of money again, like going from 100 million to 200 million offers me no marginal utility. Still, if all of a sudden I can take that money and I can improve a whole bunch of people's lives, and I can feel good about that, and I can know that I'm making a difference like all of a sudden that money comes back into play and is like helpful for me again.

So that was one thought: Hey, yeah. There is opportunity and responsibility for the people who help build this. Another thing: A lot of people do ESOPs. I learned this beforehand, but many companies do ESOPs because they provide a way to sell the company without selling it to an outside party.

And, when you build something and put your blood, sweat, and tears into something, it isn't easy to imagine turning that over to somebody else. Giving is a big part of what we do. If PE came in, the very first thing they're doing is the giving is going away, and a lot of the things that made the culture special, those are going away, and they're going to want to lever this thing up, and they're going to want to run it for cash flow.

And then they're going to want to sell it to somebody else, and like, wouldn't it be awesome if there was a way for the original ownership group to get liquidity without putting it in the hands of somebody who's not going to respect it and run it the way that we would want to?

And the ESOP was a really interesting way to do that. And then the third reason is it's just heavily incentivized. There are many things by the government depending on how you structure it and listen you could. I've read a lot on ESOPs. I've been in a bunch of meetings.

You can about fill the Grand Canyon with everything. I still need to learn about ESOPs. There are people like this as their whole job, but there are a lot of structures where, more or less, the government takes a lot less out in taxes if you're willing to do this. And there are some examples in my market, the Oklahoma City market.

They've become fully SOPs, so the company is completely tax-free. As you can imagine, a company generating significant EBITDA that's completely tax-free becomes an absolute machine in acquiring or investing in things. And so there are some compelling options there.

But more than anything else, it was, and I'll say one more, like, listen, you're aligned. You want people to think like owners. Make them owners. All the time. We'll hear entrepreneurs like, why can't you think like an owner? And it's because they're situated differently from you.

They need the upside you have. And so, I want all of our people to think like owners. Again, going back to the selfish benefits for me, Well, if I've got an organization full of capable people who think like owners, I'm not handcuffed to the business, you know? And that's for me, people will ask me sometimes.

How do you sleep at night? How well do you sleep at night? I sleep like a baby, and I don't worry about stuff. I've got a lot of capable people who are incentivized the same way that I am and who are running the business. And so I still have a reasonable stress level and a good quality of life, even though the company's gotten quite complex.

Chris Powers: Is there a reason you did it in 2023? Was there an inflection point where employees asked for this? Like, why didn't you do it out of the gate? I'm really curious how you came. Why was 2023 the year you did it? 

Mike Beckham: So our company had a massive valuation spike in 23. We went from being about 150 million company to about 300 million company.

And so, the incentive, if you're really like in it for your employees, then you want them. To get it, it's just like a stock. The earlier they buy in, the more upside they have. And so there was a point where we looked at it in early 23, and I just said, Hey, we got too much going on. I'm not going to do it. Then I saw how much the business grew, and it was like, okay, there is a real incentive to be decisive here and to be earlier rather than later because I want them to be able to capture the upside they're creating. 

Chris Powers: If you were to start a company tomorrow from scratch, would you start that way, or do you think it's good to do it once a business has shown maturity and shown a team that's quote, unquote, built the company?

Mike Beckham: Early on, almost 100 percent of effort and focus should be focused on getting a product market fit, customer acquisitions, free cash flow, and so on. If you're spending a lot of time debating the, Hey, what do we do if we make a lot of money questions, then it could be better spent.

Here's the sad truth: The vast majority of equity issued in small businesses is worthless. Small businesses' default state could be better. So, it takes a lot of work for potential employees to value that as part of their compensation and to count the cost.

It made sense for us that we were at a point where it was like, Hey, this is a multi-decade company. We've established this thing's here, and it will be here. And so, when you do an ESOP, just for people who don't understand, they get that money at retirement. 

So, it's a long game. You're saying, Hey, we're going to put you into this thing. And the company is growing, plus you are serving here. You'll acquire significant money, but it will happen in your fifties. So when you're talking to a 20-something-year-old, it's like, well, that's great.

But I could use another 500 today. So, the ESOP and how it'll be experienced will be an appreciating asset as everybody we've built the company with ages. Their ESOP accounts get bigger, and they get closer and closer to realizing, wow, a big chunk of my retirement got taken out and provided for by this, and their appreciation for it will grow over time.

Chris Powers: Okay. Two more things. China, or let's call it outsourcing overseas. You've brought a lot of domestic manufacturing; we can talk about that if we want. Interestingly, a worldwide supply chain is breaking in an inflationary environment, and a restructuring has occurred over the last three or four years. I assume a lot of your products come from overseas. Is that back to normal? Is it easier than it was before COVID? Or is it still very challenging to work overseas? 

Mike Beckham: COVID was the most disruptive event we've seen in the supply chain for a long time. It was torturous, but it was also a wake-up call.

It was a wake-up call that the way the world has structured its supply chain is fragile and brittle in some ways. It just got strained in some areas and flat-out broke in others. When it comes to people getting their water bottles, that's unfortunate, but in certain areas like antibiotics, it was okay, but this is scary.

So some of it was just like, the supply chain is not particularly able to deal with disruption because what happens is you get almost like a wave, you get a little wave, and then that creates a disruption that causes a bigger wave, which causes a bigger wave, and it just kind of ripples all the way through for an extended period.

And in the Covid period, it was years. So, that was a wake-up call. The other piece of this is that the U. S. and Chinese governments have an interesting relationship, at the very least. And I would say, probably the most diplomatic way you could say it is, the U. S. has interests, and China has interests, and this is a Venn diagram, and I don't know how much overlap there is in the middle, but there's a lot that's not overlapping.

Taiwan would be a really good example. I heard this analogy, and I loved it. It's from somewhere on Twitter. But somebody said, imagine a world where everything runs on magic. It's a special magic dust, and there's only one place where you can get it. There's a little island where you can get this magic dust, and that's the only place you can get it. The entire world runs on it. How would people view that island?

How much would people want to control that island? Okay, that's semiconductors, and that's Taiwan. We live in a world where if you want to make semiconductors, you must do so; almost all of them come from Taiwan. You cannot quickly spin up more semiconductor production. And China views Taiwan as belonging to them.

People are still determining what happens. If you're in almost anything, but especially if you're in physical goods, the biggest question is: Did the U.S. and China's interests ever diverge enough that trade stops or is greatly restricted? And if the answer is yes, nobody knows what happened.

Nobody knows what will happen, but many people are trying to mitigate risk in case that happens. For example, you see Chinese manufacturers building other factories, but they're building them in China's sphere of influence. You've even seen some of them go to Mexico and build factories through joint ventures or Chinese-funded projects.

Mexico is exploding right now. Let's say we do get into a conflict with China. Does the U.S. government allow goods from a Chinese factory in Mexico to be imported just because they are in Mexico? I don't know. I'm skeptical, but I don't know. Therefore, people need to learn how to mitigate the risk. It's interesting because by being a part of this push into domestic manufacturing, I end up in a lot of conversations that are kind of above my pay grade, and I can say that at a, I would say a governmental level, there is some real.

There are real concerns that China will proceed with Taiwan and that there will be some strained relations. Some of it is just straight-up risk mitigation. We must be able to make some stuff here and do some things in the physical world.

In our case, printing and laser have some advantages, and domestic production has some real advantages. But it's one of those things, Chris, where it can be challenging. In COVID, we learned something that every entrepreneur would do well to take from.

Let me give you a hypothetical example. Let's say I came to you in January 2020 and said, Chris, COVID will hit the U.S. in mid-March, and there will be stay-at-home orders. Could you have profited from that information? And the answer is that even that incredible insight into the future would not have been as helpful as you thought because you'd say, I'm going to go short socks.

But if you'd stayed in short socks for even 15 days too long, you would've gotten your head cut off. Or, we could talk about real estate or different things. We saw this in many different markets, and even if you had known that, if you hadn't known some of the second—and third-order effects, it wouldn't have mattered.

And this was the interesting thing about COVID. It was all the second and third-order effects. So, what are the second and third-order effects of strained U.S.-China relations if you're an entrepreneur? I don't know. Like, one of the hypotheticals I've given people is, let's say China and the U. S. get into a hot conflict or cold conflict, like, does that mean I'm making all my water bottles in the U. S.? Maybe it might mean that I'm making drone parts in my factory, it's like, it's so hard to understand how the world looks in that, world that it's difficult to plan for.

But anyway, we've gotten into that world. Manufacturing is hard, and it's easy to understand why American companies don't want to do it. It's capital intensive, and Wall Street likes something other than capital intensive. Wall Street has said it likes asset-light models, and employing people is hard.

Getting good, committed people at that kind of hourly wage is challenging, and the hourly wages keep increasing. States are passing this kind of minimum wage. It's an interesting thing that's happening. Who do you think is buying the most robotics in the world?

There's one country that is buying more robotics than anybody else combined: China. Interestingly, you would say, well, if the U.S. is going to get serious about manufacturing, we would be buying robotics like crazy. But it's not us. It's the people with lower wages. China is ahead of us in that respect.

They are Modifying and automating their supply chain and manufacturing much quicker than we are. And a lot of it's just a willingness to invest. So we'll see, but it's been insightful for us, and we are finding ways to make our business successful.

I've talked to quite a few. I've also gotten to talk to quite a few entrepreneurs who are excited about this and who are focusing on spinning up manufacturing. So we'll see where it goes. 

Chris Powers: All right. My final question is: We've talked about all the advantages of being online, and you've been doing this for 15 years for somebody starting today.

What are some of the disadvantages of selling online? You can relate that to it; it is a resurgence in selling in physical retail. Like you said, everybody was investing in D to C. Now, it's uninvestable. What has created many of these disadvantages, and how do you think about it from that perspective?

Mike Beckham: A couple of truisms come into play here. One is that the more competition, the harder it is to be successful and the higher the price. When you're starting as an entrepreneur and learning how to be a great operator, I saw this advice before and believe it.

It's like picking a niche market with few competitors and where you're operational. As you're learning operationally, that's not a huge negative for you, and you can be successful. There are still plenty of markets, whether these are geographical constraints or regulatory constraints, that don't have great solutions.

One of my thoughts is that the world always needs more excellent companies. That should be a piece of encouragement to any entrepreneur listening to this. There's always a need for more excellent companies, but I suggest finding something where you have some built-in advantages. The geographical ones are the easiest ones to focus on.

For example, if you can get good at running a rental house company in a market you're competing with, Yeah, you've got competition. Still, you're competing against the cap capital from only some over the United States or the world. You can often find, like the nuance, how to value homes in that neighborhood.

You have informational advantages compared to an out-of-market investor. When you go to the Internet, you compete with everyone. It is just like Amazon; anybody wants to sell, which is extremely competitive. So the upside is really big.

The size of the prize—I mean, we grew a company to a couple hundred million in revenue in a very short period. That's pretty big, but for everyone, it is simple and modern; a hundred and a thousand other companies tried it and didn't get traction because it is so competitive.

I was fortunate to develop as an operator in a more niche market. And then, when those skills had crystallized, I took my shot at a much bigger market. So that's one thing: It's just like a lot of the world is coming online, and you're, it's a Total, like, competing against, I don't know, tens, hundreds, millions of people, lots and lots of people.

There's another dynamic going on with digital. If you look at where people advertise, it's a few places. It's like Instagram, Facebook, and Google, and that's limited ad inventory. Only so many hours are spent on Instagram, so it's a market and an auction system.

You have a fairly stable inventory as demand grows for people to advertise their products digitally. Facebook can't cram more ads on a page now; more people are bidding for that. An example of this from my world is the kind of e-commerce D-to-C world; we will have an election.

Biden and Trump will want to spend much money and bid whatever it takes to get that ad inventory. So you might have an e-commerce business that is fine when paying 8 dollars a CPM, but guess what? Now, on August 24, it's not 8 dollars a CPM. It's 18 dollars a CPM, and now all your models don't work, and your business is broken.

Another difficult thing is that even if you're in a particular vertical with your business, when you advertise, you're often advertising against everybody else; it could be you bidding against Toyota for some ad space. And obviously, you've got a very different lifetime user value.

Those are some of the dynamics that make it more challenging. And yet, the other part of the Internet is that the long tail is freaking long. So, I heard this analogy once, and I loved it. If you go to Japan, there will be, like Tokyo, there'll be stores like 80s vinyl records.

That's all they sell. And you're like, how in the world? That is so specific. How does that work in the world? And it's like, well, it's in Tokyo. There are so many people that even this specific thing can work just because of the volume of people. Well, the Internet's like that. You can be like, you know what?

I am like the world's expert on whatever Pikachu Pokémon cards were made in the '90s, and I'm just the expert, and you can probably have a good living; you're not going to be doing 200 million in annual revenue, but you could probably have a business there by doing that. And so that's the cool thing about the Internet.

If you have something you're passionate about, the Internet brings something like, Hey, there might be one person out of every 100,000 who cares about your Pikachu cards, and this time, specific Pikachu cards. The world has 8 billion people, which might be spread worldwide. Nobody would come to it if you created that shop in the middle of Norman, Oklahoma, but on the Internet, right?

All those people can come to it, and there might be only a few thousand of them, but that's enough to have an awesome business. And so that's the power of the Internet. Most of the successful entrepreneurs can build communities around that. They're not trying to attack the really big markets.

Instead, they're picking a manageable niche, which allows them to attract many people from around the globe. 

Chris Powers: And, real quick, many people would say that, for my limited knowledge of e-commerce, it's as much about marketing as anything. The product has to be good.

When Apple changed the algorithm, Twitter, for months, was like, it's, Oh my gosh, Facebook ads are going wild. Has everybody evolved from that? Did that put a permanent dent in ad spending? What did that do, and how have people evolved from it? Or what do you all think about your ad spend? 

Mike Beckham: It just keeps raising the bar. That is how it is to be competitive.

Sadly, that was the executioner for many businesses. It took many other profitable businesses to break even. As the Internet continues to mature and more people become online, the bar for success will increase as competition increases.

So now I love competition, but part of building a business is that, hopefully, it's sustainable, and you're only sometimes dealing with people who could take your market share. I would end with this when I advise potential entrepreneurs. The two things that I hammer on are you should think about moats and competitive advantages, sustainable competitive advantages now before you get started, because the most depressing idea in the world is you put all your heart and soul into something, you build it, you get traction, and then you realize you can't hold on to it.

Second, you have to figure out how to acquire customers. Most business plans' fatal flaw is figuring out how to acquire customers at an affordable rate and acquire enough of them. If you have those two things, whether we're talking about a digital or a physical business, you've usually got enough to build something valuable.

Chris Powers: Mike, this was awesome. 

Mike Beckham: Great talking, Chris. 

Chris Powers: Thanks.