CEOInterviews.AIWonder’s Marc Lore On Vibe-Coding Restaurants, Drone Delivery, & Becoming "The IPO Guy"

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Marc Lore0:00

One 2500 square foot kitchen operating more than 1,000 restaurants. I think sometimes the best negotiation is to know when not to negotiate.

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Shelley Banjo0:09

What happens when there's 1,000 drones in the air?

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Marc Lore0:11

Yeah. I mean, well, there's going to be a lot of drones in the air. No question.

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Shelley Banjo0:15

So, if you're vibe coding the recipes and your robots are making the salads, do you just like take the joy out of food? I've learned this lesson that anything fun, you know, in life, you usually lose money on until sports. I've been doing this. It sounds crazy, right?

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Marc Lore0:32

It does sound crazy. I was that guy. I'm not that guy anymore. I'm the IPO guy now. We're taking Wonder public. We'll be prepared to go in about 11 months.

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Liz Hoffman0:45

Welcome back to Compound Interest from Semafor Business, a show where we explore the ways that business and finance are changing. I'm Liz Hoffman, Semafor's business and finance editor, and joined today instead of Rohan by my colleague, Semafor's deputy editor-in-chief, Shelley Banjo. Hey, Shel.

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Shelley Banjo1:00

Thanks. I'll try to fill Rohan's shoes.

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Liz Hoffman1:02

They're very nice shoes. I dragged you onto the show today because you know our guest really well. You covered him and the e-commerce industry that he sort of helped build and poke and prod for a long time. So, you are perfectly positioned to tell our audience who Marc Lore is and why we're talking to him.

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Shelley Banjo1:17

Yeah, maybe more so than anyone else who's not named Jeff Bezos. Marc Lore was sort of ahead of the game on every single retail and consumer trend. He spent five years building Walmart's e-commerce operations which actually really worked somewhat improbably to some of us who were covering the rise of Amazon and downfall at the time of Walmart. And then he left in 2021 right as the pandemic had sort of brought all these big changes about and launched Wonder which is sort of this digital food hall. It's like part restaurant delivery app, part ghost kitchen, part meal kit business. Essentially trying to do for restaurants what he did with retail, which is to hack the logistics of food delivery. You know, we both spent a lot of the 2010s as reporters just watching food delivery companies just incinerate like huge amounts of money. You know, DoorDash was unprofitable for like a decade. I think finally turned a small profit in 2024. Uber Eats still loses money almost everywhere. I'm very curious how Marc plans to crack the code here. And we also want to talk to him about where e-commerce is right now. Where do the robots and the drones fit in? When are they going to start, you know, chopping the cucumbers faster than us? How we're going to start getting these deliveries by drones? And how he's going to make this whole enterprise actually profitable. Want to also talk to him about his side hustles to professional basketball teams with Alex Rodriguez. And I think he is still building or planning to build this very futuristic walkable city somewhere in either Appalachia or the desert west. The um is designed to like annoy Republicans on the internet. So this will be a lot of fun.

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Liz Hoffman2:50

Yeah. The neon of the US.

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Shelley Banjo2:53

The neon of Appalachia.

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Liz Hoffman2:55

Well, with that we'll take a quick break and we'll be right back with Marc.

Marc Lore, welcome to the show.

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Marc Lore3:36

Hi. Great to be here.

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Liz Hoffman3:39

You are trying to do something that like very few people have done before, which is run a profitable food delivery business or at least get there in short order. Can you just start by telling us like what is Wonder and how is it different from Uber Eats, DoorDash kind of on the one hand and you know the sort of proliferation of kind of highly branded bougie companies on the other. What is this company?

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Marc Lore3:59

So there's a lot of players out there doing the delivery piece of it. We actually own the restaurants and do the delivery and do the cooking and stitch it all together with tech. So, in a 2500 square foot kitchen, we operate 25 different restaurants across every cuisine type. From a high-end steakhouse, Bobby Flay steak to Jose Andres Spanish tapas to burgers, barbecue, Chinese, Thai, American, Middle Eastern, fried chicken. We've systematized the cooking of just about every type of food you could imagine. And we're able to replicate the quality of some of the best fast casual, and even fine dining restaurants, all out of the same kitchen. We sequence the cooking so that all the food finishes cooking at the same time. Everybody in the family could order from a different restaurant and we set a really tight delivery radius. Six minutes in the city, 10 minutes in the suburbs. So you get it faster, more on time, great quality food that is hot. You know, we've sort of decoupled the restaurant from the kitchen. So our kitchen is called a programmable cooking platform. And think of that as a data center that is all the equipment and robotics to be able to cook across these cuisines and a 700 wide ingredient library. The ingredient library is fixed and then any restaurant that's built on the platform is nothing more than recipes in a brand. That's all a restaurant is in our world. Recipes in a brand. And so we envision in the not too distant future one 2500 square foot kitchen operating more than 1,000 restaurants out of the same 2500 square feet.

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Shelley Banjo5:31

You're saying sort of the difference is that it's vertically integrated and I'm curious like why that's most companies go out of their way not to have a lot of employees, not to have a lot of physical assets, right? There's a super capital light business and the one you're describing is not that at all.

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Marc Lore5:44

No, I've always built businesses that are capital intensive. I think that's where you can build a real moat around the business and that's where you can differentiate. It's harder to replicate, capital becomes also a barrier to entry and helps build a moat. So I do like to work backwards from the customer experience. How do you optimize customer experience and I think the only way to optimize it in food is to do the cooking and do the delivery and own the restaurants.

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Liz Hoffman6:11

Obviously this part of your whole stick is like how do you make this profitable, right? Like you're doing algorithmic cooking in a way. And we've seen food delivery just sort of light enormous amounts of capital on fire.

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Marc Lore6:23

It's a very efficient model that you're able to get, you know, more sales per square foot. So, your rent percent is lower, your fixed labor is lower, and we're also investing aggressively in robotics in the back of the kitchen to reduce variable labor as well. So we just bought Spice Robotics which was the infinite kitchen from Sweetgreen which makes any bowl concept perfectly made with no labor. So that machine, you know, obviously would take out 20 points of labor. We could put that back into price and we also get an accurate bowl every time. That's one example. We have an infinite sauce machine that'll go live next year that could make 80% of all sauce recipes on the internet on demand. Everything from an arrabbiata to a curry to a mole to a pesto. And then at the end of this year, we launched Wonder Create which would give anyone in the world the ability to plug into our platform and create a restaurant of their own that they own from just an AI prompt. So you say, build me a fast casual Mexican restaurant for Gen Z. It'll build the entire restaurant, do the branding, images, name it, come up with all the recipes, build a whole restaurant in under a minute. You can then publish it as the owner across all Wonder locations instantaneously for $10 a month per location. You make a 10% profit. We make a really nice profit as well. But imagine any influencer in the world that has a following could build their own restaurant.

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Shelley Banjo7:51

But why do you need the other people to vibe code the restaurant? Like, can't you just vibe code the restaurants yourself?

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Marc Lore7:57

We could, but we really like the fact that each influencer has their own followers that they're sending to Wonders, so we don't have to do any marketing. So, if you're a big-time influencer, you have a big following, you could spin up a restaurant, and it doesn't cost you any capital at all. 750,000 roughly restaurant owners in America today, but in the future there's going to be tens of millions of restaurant owners because of the ease at which somebody could open a new restaurant.

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Shelley Banjo8:24

Some of the pushback to sort of the AI proliferation and there's content everywhere is you see people kind of returning to tastemakers and gatekeepers and sounds like you actually don't want to be in that business that you're not in the curation business. You're kind of in the let a thousand flowers bloom business.

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Marc Lore8:38

Yeah, I mean if you're a customer on sort of the Wonder app, it'll be a very curated experience and we're going to personalize the experience to you based on your food preferences, based on the kind of things you like, we might have 100,000 salad concepts we can make available to you and you might only see five or 10 of them. But if somebody wants to search for my daughter Sierra, Sierra's grandmother can search for Sierra salads and buy salad from Sierra Salad. So there's that long tail of sort of micro influencers.

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Liz Hoffman9:06

And what does that do to your customer acquisition costs? How does that compare to maybe DoorDash?

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Marc Lore9:10

Incredible. We have, you know, no acquisition cost if all the followers are sending customers to us. And remember the more volume we do in a particular four-wall box, the lower your fixed expenses as percentage of revenue are. So, we in the full automated infinite kitchen as we call it, we'll get up into the mid-40s four-wall margins including delivery, which best-in-class is call it mid to high 20s. So, it's just way more profitable.

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Shelley Banjo9:39

So, if you're vibe coding the recipes and your robots are making the salads, do you just like take the joy out of food? I mean, how do you keep joy in food?

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Marc Lore9:51

You go to a restaurant and you go out to dinner and we're not trying to disrupt the experience of going out to dinner on a Friday night with your friends and having that social experience and order off the menu. We're talking about how you eat on an everyday basis. And we're bringing down the price point on great quality food. It could be, you know, chicken skewers from a Michelin starred restaurant and bring that to suburbia. We're open till late night, so you can get a salad or fast casual Mexican bowl, which is much healthier than fast food at two in the morning in the suburbs. We just started drone delivery, so we could even bring it to even more rural areas. Now, next year, half of our deliveries in Texas will be via drone. That's really what we're all about. That's the mission. But it won't replace your point that going out to dinner.

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Shelley Banjo10:39

I have a question about the drones. So, I live in New York, so I'm like a little anti-food delivery just because I think like a thousand e-bikes on all of the streets has just made the city sort of a worse place to be. But like, what happens when there's a thousand drones in the air?

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Marc Lore10:51

Yeah. I mean, well, there's going to be a lot of drones in the air. No question. Now, fortunately, they're very quiet, so you won't hear them. They stay at 300 ft up in the air, and you can't really see them that well. And then just a wire will just drop down with the food and then quickly the wire goes back up. So, I don't think it's going to be intrusive as people think. It's going to be a long time before we have them in the city, but that will come as well. In China, I was just there and they had the drones flying around the city and going to buildings and things. The great thing about drone is you can deliver it to a boat, you can deliver it to a field, campsite, you could be camping and just have your, you know, burger dropped in for lunch. You know, your cookies and burger.

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Shelley Banjo11:38

Shouldn't you be grilling the burger on the... It's not the point of camping.

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Marc Lore11:44

Yeah. Well, camping, I guess, right?

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Liz Hoffman11:47

That'll be my kind of camping. Speaking of other businesses that you've bought, it's hard to sort of remember now, but Blue Apron was worth $2 billion at one point. You bought it for a hundred million. What was the thinking there?

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Marc Lore11:59

The crux of what we're focused on today is food for now. Get your food delivered hot in 20 minutes. But that's only a couple times a week that people are ordering cooked food. You know, the vast majority of the time you want a much lower price, more convenient option. I think meal kits and more specifically oven ready meals that you could just sort of pop in the oven that are healthy. They're a lower price point. The kind of things that you could eat, you know, many more times a week. We can cut down the cost by delivering your food for later with your food for now because you're already paying for the delivery. So, I think there's a big advantage. We can use the robotics off peak hours to create these oven ready meals. And then ultimately, you know, we'll have groceries on Wonder as well. So, it'll be a full meal time platform with cooked food, meals, and grocery. And we're building and launching in the fall an AI wrapper. We'll come to your house. We'll take your blood, check your biomarkers. We'll take your body composition. We track all that. We set your health goals. You set a budget. And then we onboard you with AI to understand your food preferences. And if you want, you can once you set all that, you can just let it go and we will autonomously feed you, you know, 21 meals a week according to your health goals, your budget, your preferences, and then you basically grade us, you know, on every meal or AI in every meal and tell us what you liked and didn't like, and it just keeps getting smarter. I've been doing this. It sounds crazy, right?

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Shelley Banjo13:22

It does sound crazy. Also, are you going to put me on GLP-1s too while you're like at it?

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Marc Lore13:27

Yeah, sure. Why not? But the last year, I've been doing this personally. So every meal I eat when I'm not eating at a restaurant, every meal I eat is AI directed. Breakfast, lunch, and dinner. It tells me exactly what to eat. Keeps me healthy. Keeps my blood biomarkers in check. Starting this fall, it'll open in beta.

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Shelley Banjo13:45

I love that. I'm this close to having one of those like capsule closets where I have to think about what to wear. So, I'm just going to slowly outsource more and more my daily decisions to AI.

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Liz Hoffman13:54

See if it frees up some brain cells for other things. What's the grocery piece of this?

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Marc Lore13:58

Yeah, we have an exclusive deal with Instacart now. On, you know, all the groceries are on Grubhub and then we're going to bring those groceries onto Wonder as well. We'll send you the groceries and send you the recipe for every meal. And as long as you just, you know, replicate the recipe and cook the food, you know that all the ingredients will be in your fridge and AI will make perfect use of all the ingredients so you're not wasting food. So, if we send you eight carrots and we know you used one at lunch, we know you used two at dinner, we know you have five carrots left, like AI will make 100% efficient use of every grocery that we send you without you having to even think about it.

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Shelley Banjo14:36

Wait, how do you know I have five carrots left?

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Marc Lore14:39

Because if I send you a bag of eight carrots and I gave you the recipe for lunch and for dinner and you followed the recipe, I know you have five left. Now, don't eat any carrots as a snack, though. If you do, you got to tell AI. No snacking on AI.

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Liz Hoffman14:52

You also bought Tastemade. There's not a deal people talk about much, but it's like a food streamer pretty far from logistics and delivery. Do you want to be a media company, a lifestyle company? What's that about?

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Marc Lore15:01

No, I think there's a real benefit, you know, to getting exposure of the restaurant brands on Wonder, but also when we have creators creating new concepts, they can plug into Tastemade to get more visibility for the concepts they create. So, it's just a helpful, you know, marketing venue for brands.

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Shelley Banjo15:21

You also bought an actual restaurant, Blue Ribbon Fried Chicken. Why did you choose that one?

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Marc Lore15:26

So, it's an iconic fried chicken place in New York City and has one location, does phenomenally well. We plug it into our, you know, what we call the data center, the programmable cooking platform, and instantaneously we're able to launch it across hundreds of locations. So, you buy something for six million bucks and then next year it'll be 100 million in revenue brand. So that is a really key part of our strategy is to go and identify some of the best, you know, brands and food out there to acquire them, including the brick and mortar, and then blow them up on the Wonder platform.

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Shelley Banjo15:58

But why do you need a brick and mortar?

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Marc Lore16:00

We think of that as sort of a marketing billboard for the brand that pays us. And if it's losing money, you're right. Then we would just flip it into a Wonder location, flip it into another brand, or sell it or close it or whatever. But if you're buying a brand that has, you know, 20 locations, they're all generating cash. Great. That's our marketing, but it also we get cash flow and then we put it in hundreds of Wonder locations and the arbitrage is absolutely incredible.

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Liz Hoffman16:27

So you have a restaurant, you have the app, you have the grocery, you have the media property, the meal kits, the blood testing. What's after that?

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Marc Lore16:36

Building out the robotic platform. We have talked about the sauce machine. We've got the infinite beverage machine that can do foaming and layering and blending and can make, you know, just about any coffee or cold brew drink you could imagine. We got a robotic retrieval system that's going live in the back of the house next year and then on to automated woks, automated oven, automated fryer. Like the goal is to have it completely automated.

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Shelley Banjo17:03

Are the robots as good as chopping up cucumbers as the humans?

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Marc Lore17:06

No. Well, so the robots are not humanoid and I think that's maybe that's people immediately think the humanoid robot is very, very, that's very challenging. Anything that requires like the dexterity of a human hand like we're still doing with humans like rolling a burrito, assembling a burger that's still done by humans. What we're doing is we're creating special purpose robotics that could eliminate the need for even needing a human. We're looking at first principle thinking. So like an automated fryer, you could get a kind of robot humanoidish to kind of do what a human does and how they put the fries in the basket and drop the basket and pick the basket up and dump the basket. Or you could think, okay, if we didn't have any humans, how would we do automated frying? Well, if you started with a clean slate, you wouldn't use that fryer. If you want to automate frying, you wouldn't use the fryer the way a human does. And I think we're caught because if you're McDonald's, are you going to rip out 45,000 fryers and put in a new fryer that doesn't involve human or do you just try and automate what you already have? And I think a lot of industries are kind of seeing this play out where people are building robotics to replace what a human does because the infrastructure is already there. What we're doing is rethinking and saying first principle, I'm not going to replace what a human does. If I was starting from scratch and automating this process, how would I automate it? And it's never the humanoid, you know, unless you get to like assembling a burger maybe, but even that is so hard and so expensive. I don't think it's going to be worth it for at least the next 10 years. And when it is one day, we'll be the first ones to adopt it.

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Shelley Banjo18:49

Don't tell Elon Musk that.

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Liz Hoffman18:51

Yeah, exactly. How many humans are in your kitchen today?

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Marc Lore18:55

So the thing is we could operate all 25 restaurants and even a thousand restaurants in the future in one kitchen. We could operate it with as little as three people if the volume's low like late night and then when things really heat up we get up to as many as 12 to 15 people.

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Shelley Banjo19:09

We're hearing a lot I think from companies who are like I have X employees and I'm never going to hire another one. Like I have what I need and the robots or the AI is going to sort of do all the incremental work. Does that sound true to you?

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Marc Lore19:19

Well, with the 12 to 15 people, we can go, we're at 7 million capacity now. We can go to 20 million with the infinite kitchen. So, the same workers could do three times the volume, but we're also opening, you know, two locations a week now. And that'll increase. And every location we open, we still need to hire, you know, 12 to 15 people. So, yeah, we're not going to be laying anyone off. But we will be getting a lot more efficient.

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Liz Hoffman19:47

Marc, I'm old enough to remember when you sold Diapers.com to Amazon and then Jet.com to Walmart. You are not the IPO guy. You are the convince a huge behemoth company to buy my super innovative startup, but this one feels different.

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Marc Lore20:05

I was that guy. I'm not that guy anymore. I'm the IPO guy now. We're taking Wonder public. We'll be prepared to go in about 11 months and, you know, we'll see what the markets look like. But yeah, no, we're taking this public. This is going to be a big public company one day. I'm sort of committed to seeing the 2040 vision play out when we have 10,000 locations across the US. This is really exciting. I'm really driven by our mission of making great food more accessible.

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Shelley Banjo20:33

Why not sell it to Amazon, though? Prepared food is like the one thing they don't deliver. They've sort of tried and failed a couple times.

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Marc Lore20:39

I've already done that. I already checked that off the bucket list. Sold company at Amazon. I'm done with that.

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Shelley Banjo20:46

So there's no price that could come to you?

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Marc Lore20:48

Honestly, there's no price. I mean, I can see the path to this being, you know, one of those generational companies. And as an entrepreneur, it's not always about just money and shareholders like it's building something that's going to endure for decades or even potentially hundreds of years. Like that really gets me fired up.

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Liz Hoffman21:08

Speaking of food cost, what have you seen on your input?

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Marc Lore21:11

I mean, we've been seeing ingredients be inflated, but we're more than making up for that with automation. So, like I said, the bowl making machine will take 20 points of labor out. So, we've actually launched two concepts, a salad concept, Pop Salad, and LDS, fast casual Mexican. It's basically 30% cheaper than the competition. Same quality, same portion size. We just took the labor savings and put it back in price.

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Shelley Banjo21:37

One more here. There's like sort of a truism in New York that a company is over the second it starts advertising on the subway. I've been seeing Wonder ads all over the subway. I'm curious what is the ROI on a subway ad in New York City.

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Marc Lore21:46

No, we don't even look at ROI on the subway ad itself. But what it does is it ultimately increases your conversion on the channels that are easily trackable, whether it be direct mail, social, search, even just word of mouth. Maybe somebody, you know, got a direct mail piece and they were just throwing it away and they somehow don't even remember seeing on the subway, but they did and they recognize it and it looks more familiar to them.

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Shelley Banjo22:10

It's inception is what you're trying to do.

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Marc Lore22:14

Guess it's working.

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Liz Hoffman22:15

We're going to take a quick break and we'll be back right after this.

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Rachel Oppenheim22:19

Welcome to What's Working, the show within a show featuring Compound Interest season partner Amazon Business. I'm your host, Semafor Chief Revenue Officer, Rachel Oppenheim, joined as always by Doug Gray. Doug, I feel like you must have a very unique vantage point as Amazon Business's VP of technology. Looking ahead to the next era of business buying, what do you think is going to separate the companies that pull ahead? Is it lower cost, faster speeds, better data, or is it something else completely?

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Doug Gray22:46

Well, when I think about it, I think it

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Marc Lore22:48

It starts with a simple truth. You don't get the world you want. You get the world as it is. And our job is to get from the world as it is to the one we want. Constantly reassessing and modifying our processes because the things that worked yesterday have to change for tomorrow. And that's what we're building for our customers at Amazon Business. We're helping customers adapt fast without adding risk. Priorities flip overnight. Maybe you planned ahead, but suddenly you need 20 pallets tomorrow and you're willing to pay more to get them fast. Our AI and automation can react with you, making those pivots easier. And we meet customers where they are with a foundation that integrates to their existing systems while giving buyers flexibility and procurement the controls and visibility they need.

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Liz Hoffman23:40

Let's switch gears a little bit and talk about your roots in e-commerce. How did Walmart get so far behind in the first place? And so what did that strategy look like when you joined in 2016 when you sold them Jet?

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Marc Lore23:51

I know when I showed up, it was growing fairly slowly and the value prop was not at par with Amazon. So I think it is a commodity business. Amazon, Walmart, Target, like selling most of the same products. And so I think it's important to at least get to par. You got to nail the fundamentals. You got to get the two-day, one-day shipping. You need the assortment. You need to get the prices right. Just all fundamental stuff. And then it was really, how do we play offense with the physical stores, which is a big advantage for Walmart over other ecom players, and really leaning into that. And then leaning into the fact that Walmart was the biggest grocer in the country.

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Liz Hoffman24:32

I think at the time I wrote this column called Walmart's $4 billion man when they hired you. And like, could you do it? And you did it. Like, how did you do it? How did Walmart get right? And conversely, how has Target gotten this sort of all wrong?

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Marc Lore24:48

Yeah, I mean, I can't take credit. I had an incredible team there. I think probably the one thing I did get right was helping change the narrative inside of Walmart and externally so that we were able to hire some of the best people in the world into Walmart, into ecom. I'm really amazed at the progress since I left there.

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Liz Hoffman25:14

But you were hemorrhaging money. I mean you guys were not profitable for many, many, many years. Like how did you convince the Walton family to just let you operate this thing unprofitably?

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Marc Lore25:24

It's a scale game. Bigger you get, the lower your delivery cost. The more SKUs you can carry. The more SKUs you can carry, the higher margin that comes with those SKUs because the longer tail SKUs have higher margin. But in order to be able to sell that, you need to have enough volume and enough people to be able to sell those longer tail SKUs. You need to add marketplace which also increases the assortment, increases the profit. There's just a playbook that we followed there in ecom. But you do have to believe, right? You have to believe the math. You have to understand the economics. You have to understand how things scale. And I think Doug McMillon and the board did a great job in really understanding the nuances of the business, asked a ton of questions.

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Liz Hoffman26:13

Jet was an early proponent of dynamic pricing, algorithmic pricing, whatever you want to sort of call it. Now it's gotten a pretty bad rap. How do you think about that now?

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Marc Lore26:24

Yeah. Well, it's interesting at Jet, we were empowering people to save money by teaching them how to shop smarter and the dynamic pricing always went in favor of the customer. So, it was, hey, you bought something from this warehouse. Now, all the products in that warehouse drop in price because the marginal cost to ship is now very, very small because a box is already leaving that warehouse. There's dynamic pricing where it leads to customer benefit. And then there's dynamic pricing where you're trying to extract more money from the consumer based on the willingness to pay. That I'm not a fan of. I'm always wanting to figure out ways to reduce prices for customers by teaching them how to shop in a way that pulls costs out of the system that we can share back with consumers. And we're doing the same thing at Wonder. We're looking for ways to reduce costs so that we can lower prices, not gouge customers with higher pricing. We have no delivery fees as a starting point and then if you get the Wonder Plus membership, you have no service fees and priority cooking, so we'll cook your food first.

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Liz Hoffman27:33

You mentioned that membership model. I'm sort of obsessed with the idea that every company wants to be a membership club and everything has a whatever plus and some monthly fee. Like do you think that consumers are getting tired of subscriptions? Is there a limited number of walled gardens that they want to live in?

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Marc Lore27:49

It's definitely getting harder. People don't want to have a ton of different memberships. They just want to have a few that are most important. So, I think the challenge is how do you add enough value into the membership where they pick you as one of the top two or three that they want to have. Fortunately for us, we're in food. But I think food delivery alone is challenging because you have multiple delivery players, but when you start to layer on meal kits and oven-ready meals and grocery and you overlay with AI and you have priority cooking and you have no service fees, like you're trying to pull all these things together in a way that makes it a no-brainer for customers.

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Liz Hoffman28:29

When you were at Jet, one of the ways that I could get a cheaper order is if I promise not to return it. Is there a way that I can get money off my Wonder if I promise not to call and complain?

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Marc Lore28:38

Yeah, they haven't gone there yet, but I think you're on to something.

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Shelley Banjo28:42

Be a less needy customer, Liz.

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Liz Hoffman28:44

Yeah, I'll take 50 cents off. Yeah, there you go. That's an idea for free. Putting your e-commerce hat back on. I was looking the other day at e-commerce as a percent of retail sales over time and it was going up in the 2010s and obviously it spiked massively during the pandemic and interestingly now it's kind of back to where it would have been on that trend line, maybe a little higher, but there's a sense that the pandemic which we all thought would maybe kind of fundamentally reshape consumer behavior actually kind of just pulled it forward. And I'm just sort of curious like as you look out where you think kind of the natural end point of where e-commerce versus brick and mortar kind of nets out, how much room there is to run there?

M

Marc Lore29:23

I don't think we're anywhere close to the end. I think we'll continue to see penetration increase over the next decade. When do customers get to the point where they're in the house all the time and they really enjoy the experience of going out. If you make retail or even food experiential, I mean, restaurants are already experiential, but you don't really have the same thing on the retail side. Do you see a trend in future generations toward some more experiential shopping as something that's fun to do and like a social event like a restaurant is? I don't know. But I do know in the next decade, the trend we're on and the generations that exist today, they're going to do more and more shopping online versus in store. And it's sort of self-fulfilling because then brick and mortar stores can't exist. They close, which just moves that volume online, right? So, I think we're going to have at least another decade of that and then we'll see when people sort of get tired of staying home.

L

Liz Hoffman30:23

We live in New York. You live in New York. What is the future of the New York City bodega?

M

Marc Lore30:27

That's a good question. I mean, I haven't been to a bodega in a while.

L

Liz Hoffman30:32

Well, they haven't changed since you were there last. I promise you.

M

Marc Lore30:37

That's tough. I mean, the convenience is always a need for convenience, but with some of these fast commerce players and things being able to get stuff to you quick, I think that would likely be challenging for them. But honestly, I haven't really thought much about it. As one of the reasons why I went into food, I was looking at these fast casual margins and comparing them to e-commerce and thinking, well, if there's any business that has high margins, but there's really very little technological disruption or automation, like that seems ripe for me. Because on the ecom side, you have all this automation because you have to fight for every basis point. And then here in the fast casual, we have these nice fat margins and no automation because you're like, well, we don't need to. We got nice margins. But if you think about it, like really the high margin business with high labor, that should be the area to attack, right? That's a big opportunity.

L

Liz Hoffman31:37

Well, there's real resistance to the now $18 lunch bowl. So maybe people have to find some religion around costs. Are you worried about Gwyneth Paltrow? Apparently, she just launched a Goop Kitchen. You worried about Goop Kitchens?

M

Marc Lore31:52

No, I'm happy for her. She was on our board for a long time and I think it's a great concept and we'd love to maybe one day get them on the Wonder platform.

L

Liz Hoffman32:04

You and Alex Rodriguez obviously bought the Minnesota Timberwolves and the Lynx in 2021, a deal that Glenn Taylor famously immediately regretted and I think it finally just closed kind of last year after a bunch of hand-wringing. We're seeing more and more sports teams trade hands. Any lessons in franchise M&A that you took away from that whole thing?

M

Marc Lore32:22

I've learned this lesson that anything fun in life, you usually lose money on, except sports. But I mean, I did the vineyard thing. That was a disaster. I've done horse racing. Disaster. Fun. Both fun. And I just assumed like if you're going to have fun, you're going to lose money. And then I thought, huh, sports ownership, that's very fun. And you're telling me it goes up in value every year and it's uncorrelated with every other asset class. Sign me up. And so when we had this opportunity to get the team and Alex and I met with Glenn Taylor and he said, this is my price. I want 1.5 billion. And he had told us the story about the three previous people that tried to buy it that tried to negotiate and he didn't sell it to them. So me and Alex caucused for a minute and said, hey, I think this seems fair, man. I think we should just tell him yes to everything and then just do it. And Alex said, yeah, all right. Let's do that. And so we just said yes. And then he said, well, I want all these other terms. And we're like, yes, yes, yes, yes, yes, yes, yes, yes. What do we sign? And he literally said to us, well, I guess you're not giving me a reason not to do this deal. And we said, exactly. Yes.

L

Liz Hoffman33:39

So no negotiating at all.

M

Marc Lore33:41

No, nothing. Zero. I think sometimes the best negotiation is to know when not to negotiate. You know what I mean?

L

Liz Hoffman33:47

But then why was he mad about later? Like he has some regrets about how that went down.

M

Marc Lore33:52

No, he was just mad because the team had gone up so much in value and the team had gotten so good, you know. So that was it. It didn't have anything to do with us negotiating because we didn't negotiate at all.

L

Liz Hoffman34:06

That's funny. We had Mark Cuban on the show last week who also has some regrets about his basketball sale because he also didn't negotiate and thought he would end up with more control over the basketball of it all with Mary J. Blige. So it sounds like you cannot negotiate and end up with very different outcomes because you certainly got the better of Glenn on that one.

M

Marc Lore34:24

Yeah. I mean, anytime it's something that is like a once-in-a-lifetime opportunity, which I felt like it was and Alex did too, it's not worth negotiating. If you think big picture, if you think the NBA is the right sport, you think the valuation of the team is right and you just hold it for a decade or two or more, like it's going to go up in value, and you're going to have fun doing it, right? So, I think they're still undervalued, sports teams, because they're still too much fun to go up in value. It's got to go the way of vineyard and horse racing at some point where people buy it and then they sell it for a loss, but they had a lot of fun. At some point it's got to go there because it just doesn't make sense that something so fun would go up in value.

L

Liz Hoffman35:11

What do you think the teams are worth today?

M

Marc Lore35:13

Oh, I don't know. The Forbes valuation I think is 4 billion, four and a half billion, something in that range.

L

Liz Hoffman35:19

Are you a forever owner of that?

M

Marc Lore35:20

The Minnesota Timberwolves and Lynx?

L

Liz Hoffman35:22

Yeah.

M

Marc Lore35:22

Oh, I mean I'm having a blast. I couldn't imagine selling it, you know. So, and I think Alex feels the same way. Though I guess you'd know now that if you put out a number and somebody says yes right away, you need to be asking for a higher number.

L

Liz Hoffman35:37

If they win this year, do you have a sense of what that does to the value? Like a ring?

M

Marc Lore35:42

Oh, what that does to the value? I mean it maybe is over multiple years, you know, winning more fans, see prices go up, could attract better players. Yeah, it would definitely help, but I don't think it's a step change overnight or anything like that.

L

Liz Hoffman36:00

How do you and Alex divide the work? You know, this sort of co-owner thing. Do you take one part of the business and he takes the other?

M

Marc Lore36:06

No, we're both really good friends and we kind of just talk about big decisions together and we're almost always aligned and if one of us isn't, the other person will convince the one of us. We both have different skill sets, you know, obviously his career in sports and mine in entrepreneurship and we both want to learn from each other and stuff like that. So, I'm really focused on Wonder right now. So, he's bearing the brunt of a lot of stuff with the Timberwolves and Lynx and that could flip in the future. He could get busy on stuff, but any big decisions we talk about together and make decisions together. And if we disagree, it's more like we're both no ego on it, doesn't have to be my idea or his idea. It's like let's just talk it through, like what's the right answer, why, let's talk and then every time we talk something through we always seem to land on the same answer. So that just shows that we think very similarly, we have a similar set of values and a lot of times there's like values misalignment and things and so you're guided by your values. Sometimes it's not always the right financial decision and you make a decision that's values-oriented and not financially motivated, but we're so aligned from a values perspective that we seem to come to the same answer every time with a smile. So, it's been great.

L

Liz Hoffman37:25

What's a decision you've made that you thought was like probably a loser financially but was like the right or the fun thing to do?

M

Marc Lore37:32

Um, I mean, you know, paying 100 million in tax last year, luxury tax, you know, it arguably didn't help winning that much. I mean, I think it did, but certainly not 100 million worth.

L

Liz Hoffman37:49

One last one. You have this idea for a planned city of the future based on a reformed version of capitalism. Like, A, what does that mean? And B, where are we on that?

M

Marc Lore37:59

Yeah. So it's called Telosa, from the Greek word telos, which is the highest purpose. And really this came out of just being frustrated with the polarization that we're seeing in the US and thinking is there a better model for society than capitalism. It's great, like elements of capitalism, and don't want to lose that. But after reading the book Progress and Poverty by Henry George, this 19th-century economist, I was sold on the fact that land ownership is basically a monopoly and there's a finite amount of land. Soon as the workers start making more money, the landowners extract more value either by charging more rent to the businesses that then have to keep wages lower, however. But he proves it with economic theory. And so he basically says as a byproduct of capitalism, there'll always be a class of people just getting by no matter how prosperous we get. And I thought that doesn't seem fair. And so I had this concept of equitism, like a more equitable form of capitalism where the land, we would go and buy worthless land in a desert and we would basically have the Telosa Foundation own the land, build a city of 5 million people and the handshake with people, like why would people move there? You'd say, listen. We're all in this together. You move to the city, the land is going to appreciate like crazy. Desert land versus city of 5 million people. All the appreciation of the land is going to go into this Telosa Foundation. You'd have an estimated 500 billion to a trillion dollar sort of endowment that would earn 25 to 50 billion dollars a year and then you just pump that back into these social services, free healthcare, free jobs training, free education. And you would have all these incredible social services that are funded by the appreciation of the land that was helped created by the people that moved there, which seems only fair. And then you create this incredible flywheel. So the city would be run like a startup, but it would be open to anyone. You'd have the Telosa pride in the hat and t-shirt and yeah, we're all for this mission of equitism and a better form of capitalism.

L

Liz Hoffman40:13

Have you picked a spot? Last I thought I'd read is maybe in the desert or maybe in Appalachia or something.

M

Marc Lore40:17

Yeah, there's a team, I'm so focused on Wonder, but there is a team that's out there looking for land as we speak and that is a long-term kind of legacy thing. I got to get through Wonder, get through the IPO, take this to 2040, but I still love the idea of testing a new model. Like America started out as a test and we just were so innovative and tried so many things in the early days and now we've kind of gotten to be sort of like a big company, right? We're not trying things. We're not testing things when it comes to like capitalism and society. And I think more people need to take some shots here.

L

Liz Hoffman41:01

Mark, this sounds like a kibbutz.

M

Marc Lore41:04

Is that...

L

Liz Hoffman41:05

This is the Israeli kibbutz. Find a place in the desert. Get some land, put all the stuff together, everyone gets a share.

M

Marc Lore41:16

The thinking is to build it like a university class and have applications and say okay we're going to build the class of 50,000 people and then on a certain day the city opens maybe phased like okay doctors show up then teachers show up then thing and it has to be all done at once because if it's not 50,000 people at once it has the problem of being a cult or like a certain type of demo gravitates there, right? It needs to be really well-rounded, needs to feel like a normal American city.

L

Liz Hoffman41:48

But you know, every city of 5 million people needs a professional sports team. So, I have an idea for what you could donate to the foundation, the Timberwolves.

M

Marc Lore41:56

Yeah, you gave me a lot of ideas. And then the paid not to call customer service. I like that.

L

Liz Hoffman42:02

That's a winner. And some homework. Go to a bodega. See how it feels. See how you would improve the experience. Just keep the cats. Listen, thanks a lot, Mark. This was really fun. Appreciate you coming on.

M

Marc Lore42:12

All right. Thanks, Liz. Thanks, Shelley. Bye.

N

Narrator42:17

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L

Liz Hoffman42:46

All right, Shelley. Did he convince you that this thing can make money where others have not?

S

Shelley Banjo42:53

I think so. I remain skeptical, but I got to say my mind was blown when he starts talking about counting calories and giving the AI the meals and taking your blood and suddenly I'm like, wow, you are taking control of my entire life.

L

Liz Hoffman43:08

Yeah. Yeah, we're going to have to go back and watch the video because I'm pretty sure my eyebrows went like up here when he said we're coming to your house to take your blood. But no, I mean I think like he sort of talked about cracking, I mean the two biggest expenses that have really killed food delivery apps in the past are labor and marketing, acquiring customers and paying people to do it. And if he's actually cracked both of those through I guess respectively robots and influencers, like okay. I did like that he just totally anticipated our question. He was like I am the IPO guy now I'm reinventing myself because he has just done this twice, just convinced huge companies to pay really big prices for businesses that he built into being like sort of just big and believable enough. But I actually have a question for you because you covered those sales and the companies after, like did Jet really change Walmart? Did Diapers.com really change Amazon? Or were they just sort of acquired at that key sort of point of fear of being left behind. We got to do something.

S

Shelley Banjo44:15

Oh, I think there is no doubt in my mind that Jet.com was transformational for Walmart because like he said, you had to really change this culture of this like backwater Arkansas. We don't sell anything unless we have a profit to we are just going to hemorrhage money for a decade until we can make this thing profitable. I mean that's just such a mind shift and Walmart would not be where it was today without that.

L

Liz Hoffman44:37

I remember Walmart as being sort of the one low price with the smiley face with the cowboy hat. Did they adopt that dynamic pricing? Like what are they doing now?

S

Shelley Banjo44:45

No, I mean they sort of threw out Jet as a concept. It was more of how do we operate e-commerce? How do we move fast? How do we sell stuff? How do we build a marketplace? All the things that they sort of landed on. Jet as a concept died. But I think what he did was bring Walmart into this sort of e-commerce era. But I mean he does have something to prove, right? That was a staunch I am the IPO guy and I couldn't do it once. I couldn't do it twice. This is third time's a charm. And so it sort of showed that this is emotional for him. Yeah. But we'll see if he takes the inverse of the Glenn Taylor advice when someone shows up and just offers him like a bag of money for Wonder and he says no.

L

Liz Hoffman45:24

It's pretty rare for someone to speak so publicly about a date of an IPO date. Most founders are pretty coy about that kind of thing.

S

Shelley Banjo45:32

No, this is legacy for him. This and the city in the desert.

L

Liz Hoffman45:35

Well, that's it for us this week. Thanks for listening to Compound Interest from Semaphore Business. Our show is produced by Josh Binsson with special thanks to Anna Pazino, Katherine Bilgore, Claire Einstein, Rachel Oppenheim, Tory Core, Volana Wang, Garrett Wy, Stephanie Chang, Roan Gowwami, and Daniel Ha. Our engineer is Bob Mallerie and our theme music is by Steve Bone. If you like Compound Interest, please follow us wherever you get your podcasts and feel free to review us. And if you want more, you can always sign up to get Semaphore Business in your inbox.

Wonder’s Marc Lore On Vibe-Coding Restaurants, Drone Delivery, & Becoming "The IPO Guy"

About Marc Lore