How To Turn Your Passion Into A Business Without Sacrifice - James Hoffmann

James Hoffmann 0:00 So the hero bullshit of entrepreneurship of like I must grind myself down. I'm a fucking hero working super hard. I'm doing it right. And it's such bullshit. And it's such a toxic aspect of all work and I hate it. But I definitely worked 110 hour weeks for months, ground myself down to the point of deep misery and there is no quicker way to hate a thing you love than to work like to work on it like that. Right? Like, I really love coffee. I definitely got to the point I was like, I should quit coffee. I should just I hate this. I hate this. I hate my life. I hate working in this I should just do something else. Because I worked in a stupid way. And I burnt myself out physically and emotionally because people do that. Because the world says good for you get the grind. Are you I mean, what's your thing? It's yours. pour yourself into it. Like No, don't. Don't do that. That's really bad. What you should do is start with enough capital that you can hire people to work with you pay them properly, and then work in a healthy manner. Do you mean like just to have work and home, be separate? That's helpful, turn off, don't work at weekends or don't work some days a week. It's very satisfying and he does to pull yourself into a business. It is rewarding. It's enjoyable but you just burning through yourself so fast. And so why regret not starting with probably twice as much money hiring more people out of the gate and going home at five o'clock. Ali Abdaal 1:17 Hey friends, welcome back to deep dive. If you're new here, my name is Ali and in each episode, I chat to entrepreneurs, creators, authors and other inspiring people about how they got to where they are, and the strategies and tools that can help us along our shared journey of living healthier, happier, more productive lives. Now many of us dream about turning our passion or hobby into a business but very few of us managed to successfully do it and at least keep it fun while we're doing it. One person who seems to really nailed it is World Barista Champion author creator, James Hoffmann, who is one of the most famous people in the world when it comes to coffee. He's got his own coffee shop, he's got his own coffee roasters. He's got his own YouTube channel with 1.2 million subscribers. He has hundreds of 1000s of followers across all the other social media platforms. He's written a best selling coffee themed book. And in this episode, we talk a lot about how he's managed to build this empire themed around this passion. This hobby of coffee, we talk a bit about how to actually build a bricks and mortars like physical goods, coffee roastery type business completely from scratch. And we talk a little bit about James's regrets when it comes to hustling and burnout. I definitely enjoyed the conversation. We could have talked for hours and hours more because there was so much more to unpack in James's story. So we're definitely going to have him on for a part two at some point. But in the meantime, I hope you enjoyed this conversation between me and James Hoffman. I want to understand how how do we get here? How did you end up becoming the world's most famous coffee person on the internet? James Hoffmann 2:28 I don't think I can say I'm the world's most famous coffee person. Howard Schultz still will maintain like higher. Ali Abdaal 2:33 Howard Schultz. Never heard of him, there's James Hoffman, and then there's like, I don't know anyone else in the coffee world. So you're in a category of one as far as far as I'm concerned. James Hoffmann 2:42 How did this happen? It's a good question. So I've been in coffee since 2003. 23 you got into coffee got into what we did before 23? Oh, I worked as a croupier in casinos. Ali Abdaal 3:08 What's a croupier? James Hoffmann 3:11 So if you go gambling I would do that. Ali Abdaal 3:16 Did you go to university? James Hoffmann 3:17 I did go to university for no real good reason. Ali Abdaal 3:19 What did you study? James Hoffmann 3:21 I have a combined Arts degree in philosophy, Central and Eastern European area studies and East Asian Studies. Okay, from Durham University, which gives me the extra letters on the end. No one's it is I think no one's ever asked to see my degree. I don't regret going to university. I should not have gone to university. Okay. Again, nothing other than debt. And wait. That was my good friend's life experience all that stuff. But academically? Yeah, total waste of time Ali Abdaal 4:00 after university where you're like, I have this combined Arts degree in philosophy and stuff. What am I doing with my life? James Hoffmann 4:04 Totally. There was a job demonstrating domestic coffee machines and a house of Fraser department store that paid weekly and, you know, paid six pounds an hour. And I was like, whatever. I don't drink coffee, that how hard can it be? And so I got this job. And what I've always done, it's a sort of weird sickness for me is wherever I've worked in, I've tried to kind of read up upon so when I worked as a crew PA, I got really into like the history of card shopping and kind of a little bit of magic stuff. cheating at cards. Sorry, card shopping is the sort of broad term. This is a really interesting history around that. Anyway, coffee, same thing. I started buying whatever books I could find about coffee. And I read a couple that just really interested me. There's a book called The Devil's cup. That's kind of essentially about coffees journey from Ethiopia as it spread throughout the whole world and it was kind of the way infects and binds itself into different cultures. Just really interested me as a coffee is way more interesting than I thought. It's not just Nescafe. That was my kind of limit of understand And so I decided I would learn to drink coffee. And I did. And I just sort of fell in love with it. And I tried to work in wine when I was little bit younger to the university time and just sort of hated that industry. Ali Abdaal 5:10 What was it about you that makes you want to kind of get because I mentioned, if you're getting like a sixth grade on our job, most people wouldn't think you know what, let me read up about the history of coffee so I can understand it more. James Hoffmann 5:19 I mean, it wasn't a lot to do much at the time was one part of it. And I didn't know like, I've always been a reader. Yeah, an aggressive kind of reader. And so I was like, well, I may as well know what I'm talking about. I dislike, you know, I'm not a comfortable liar or or bluffer to a point. And so I just, you know, started reading about it. And then I just kind of fell into this rabbit hole where it just fascinated me and I started working my way up that companies kind of start doing training and teaching for that kind of company. So I looked up to kind of demonstrators and like Selfridges, and has Fraser and all that kind of big department stores here. And then I got a job training for a kind of big commercial Machine Company, but other than domestic ones Ali Abdaal 6:01 And so how old were you at this point? James Hoffmann 6:03 24? Ali Abdaal 6:06 So in about a year or two years sort of worked your way up to house of Fraser, a department store hierarchy to be a demonstrator of coffee machines. Yeah. And then you did a sort of lateral move... James Hoffmann 6:14 To teach people about coffee, right? So I would then go around the UK, I had like a big commercial machine in my car, projector screen, I would turn up and do these trainings. Because the coffee scene in 2005 was, wasn't really there. You know what I mean? It was growing, and it was kind of being fostered. And there were these things called barista competitions. So I went in my demonstrated job, I'd met this guy who was the UK Barista Champion. And I didn't know that much. I did know that he would come in, I would clean everything, prep it for him, he would work for hours and then leave and I would clean up again. And he would earn more that day than I did that week. I was like, tell me more about these competitions. And so I got into the competition thing and I won the UK Barista Championship. Ali Abdaal 6:53 What is the barista competition? James Hoffmann 6:55 It's kind of part cooking competition part simile, a competition dog show, like you don't show its performance, right? Like you're sort of assessed on your performance as well. So you make this for judges who your customers. And you make them each and espresso each cappuccino each what's called a signature drink, which is a non alcoholic coffee cocktail of some sort. They judge you on your drinks, are they delicious, on your knowledge on your presentation skills, there's a couple of other people who judge your technical skills. And the best barista in this weird game based on coffee wins. And so I competed in 2005, one in the UK in 2006, and ended up winning the World Competition in 2007. So it was kind of coffee. So this is kind of really important. Coffee was so young, in some ways at that point, that a kid could come in and start drinking coffee in 2004, and be a world champion in 2007. That shouldn't be allowed, right? Like, I have not some sort of savant in the world of coffee. It just was an immature industry that if you were willing to work hard, and you got lucky, and I got lucky, then you could sort of have these kinds of breaks. So yeah, it's kind of weird to me. Ali Abdaal 8:02 Is that a thing now? Like, could someone listening to this decide, You know what, I'm going to become world coffee champion in the next two years. James Hoffmann 8:08 It's so much more competitive now. Like it's a much more developed thing where people might train for a long time, the competitions are just much harder, the standards keep going up and up and up. So you know, the nice thing about winning the world is that they put you out to pasture you're not allowed to compete again, so, so great, you undefeated, and you know, Ali Abdaal 8:26 it's not like every year, you have to sort of fight back and retain your title. James Hoffmann 8:29 Exactly. So you're not you're not welcome. And that's good. It's also bad. And every year, you dilute the pool of World Champions one more time. So you are less interesting every year, which is kind of a something I worked out quite early on. And that wasn't really a pursuit of like being a world champion for whatever. So in 2008, I started a business. Ali Abdaal 8:49 Okay, can we rewind a bit to Yeah, you're doing the selling industrial coffee machines and training people on how to use coffee machines? And then you discover that there's this thing called the barista championships, roughly. And so what was the process from from the oh, there is a thing such as this to I'm going to actually start competing in this thing. James Hoffmann 9:09 I mean, pretty short. So you know, the community was very small entered, finding people who knew about the competition's was pretty easy. I began to work with people who understood them or judged in them, all that kind of stuff. And my boss at the time was hugely supportive of them. And they were doing work to kind of get these competitions happening, because they saw that if coffee boomed in the UK, if you sold commercial machines, you would benefit so their job was very much to kind of fanned the flames of getting coffee going in the UK. So I was kind of supported very much by that employer, which is kind of unusual. In some way. All was back then. I ended up quitting my job before I competed in 2007. Sort of if you go and tell people what to do for a long time, there is a point at which you should be like, just go and do it. Like Stop, stop. Just go and open a coffee shop and that's what we were going to do. So myself, my business partner, we're gonna open a coffee shop in Shoreditch, we're gonna run As the coffee on site, and we quit our jobs, and I was going to compete, I didn't think I would win went to Tokyo where the competition was one that kind of ruined everything because suddenly I had to, you know, this kind of responsibilities and travel and opportunities when you when that pushed us back until 2008, which was kind of good in that we were about to sign a lease, just as the global economy tanked. And so we didn't sign a lease. And we were like, This is desert, just a bad time to sign a 10 year lease. And so we took her like a little railway arch in there's loads of co workers, so they were cheap spaces back then in London. And we started roasting coffee there and trying to wholesale it into London cafes. And that worked and that, you know, that turned into a whole other thing. Ali Abdaal 10:41 To what extent are independent coffee shops concerned by the cost of them the Starbucks of the world, we're going to take a very quick break to introduce our sponsor for this episode, who is brilliant, I've been using brilliant for the last few years. And they're a fantastic interactive platform with online courses in math, science and computer science, my personal favourites of the computer science courses, I think, absolutely fantastic. And when I was initially applying to med school, I was actually torn between applying to medicine and applying to computer science. And I ended up going with medicine in the end, which I really don't regret. 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James Hoffmann 12:06 Not hugely unless they're in most independency or independence competition. By and large. They are they are trading on the idea that you're buying from them something of higher quality made with better ingredients made with more care. Cost of is trading on it's convenient and and relatively inexpensive. You know what I mean? And that's a different audience who is prioritising one thing over another, you know, independence or more focusing on space experience, you're not supposed to go and hang it right, it's important that you want to be in a space for an hour should be a nice space, I don't particularly enjoy being in most chain coffee shops for an hour. I don't like the space, they want me to move on. They need me to move on because you know where that's part of the business model. Whereas I think it's kind of different independent businesses. Ali Abdaal 12:56 Does the coffee from Costa or Starbucks just taste objectively worse to you then coffee from an independent place? James Hoffmann 13:03 I enjoy it less. Let's go with that, like better and worse, it gets very subjective. It gets easily quite preachy of like, well, this is why I think it's bad or judgy, or those kind of things. And look, people enjoy coffee from Starbucks, millions of people enjoy coffee or even McDonald's, right. And the fact that I don't enjoy it is not a reflection on them. If I say it's, it's worse than what I drink, that is a reflection on them. If I say I don't enjoy it as much, it's not. And that's kind of an important. I think one of the things that kind of has helped me in the kind of growth on YouTube is having an attitude of like, I'm not trying to judge what you drink. But if you want it to be better, I want to help you. That's the that's the kind of the vibe they're not this is what you should drink. This is how to be correct. This is what you should order. None of that nonsense. It's just no one likes it. So yeah, I don't enjoy it as much, it's a different product. It's just a different thing. And it's got a different intended sort of target price point process than what you would see at a good independent. Ali Abdaal 14:02 Okay, so it sounds like I guess with any, even with the kind of business model I'm more familiar with, like starting a YouTube channel. It's very hard to do unless you have a way of differentiating differentiating yourself in the market as it were. And even then, it takes a large amount of consistency and effort and sticking with putting a lot of stuff out there and not making much money for a very long time. And then when once you get that product market fit as it were, you then benefit from kind of good things happening. James Hoffmann 14:30 Yeah, I think there are successful coffee shops out there that make people a good living, and they enjoy running that business. But I think you've got to want to enjoy running the business. Ali Abdaal 14:42 Like if you enjoy baking, you shouldn't necessarily open a bakery, because those are two very different things. Absolutely. James Hoffmann 14:46 And, you know, I think the best operators are people who love hospitality, and they understand coffees place within that as food place in that. You know, it has signage works that has a place in the experience hospitality and those are the Best operators to me, they're also the most profitable most successful, because they're, they're kind of the holistic operator, not just the coffee obsessive, who's like, I'm gonna save the best coffee in London, and then they're kind of bummed that no one cares. Because the wait is long, but it's not comfortable. It's not enjoyable. It's not what I need, necessarily, from the coffee shop. I don't need every time I go out for coffee to for it to be the single best cup of coffee of my life. I'm often with someone I want. I want coffee as a social lubricant. I want it as a little caffeine. I want it maybe as an intellectual experience like, Oh, this is interesting to taste. But you know, it can't be the sole focus of business. And I think it's taken London Coffee shops and globally coffee shops, maybe 15 years to work that out. Oh. Ali Abdaal 15:43 Yeah. There's a lot of thoughts that sparked through through that. How have you come across the E Myth? James Hoffmann 15:48 Oh, yeah. Oh, big. That was, that was a super early read for me. So I to go back to sort of starting a business. I was a classic. I was a coffee obsessive. I was like, Well, I understand coffee. I'm good at making coffee. I should open a coffee business. And very quickly, it was like, oh, then there's the business of business? And how rapidly can I get good at the business of business to build the sort of the machine underlying that? And I didn't have time to do anything other than read and read? I did. And so yeah, Michael Gerber's book, I think was super, super informative, very relevant to me and further encouragement to work on the business or in it, which becomes slightly glib when you said, but it's so, so important. Yeah, I got I got, you know, what I mean, I can't emphasise enough that the need to get out from the the the daily of the manufacturing of a business, whatever it is that you make and sell and do into a higher level. Think, also a thought process. To understand the model and mechanics of the, it's a machine, right, you're tweaking cogs, and you're you're kind of making it work just nice. That's hard, and you need to get good at that. And that has nothing to do with coffee. Yeah, has nothing to do with coffee, and everything to do with understanding everything from people through to sort of marketing, sales, economics, finances, reading a balance sheet understanding of the impact of decisions you make on your balance sheet on your future, and your cash flows, all of that sort of stuff. I really enjoyed it, which is fortunate, lots of people are immediately turned off and go to the safe space of the thing they know and care about. And that's, you know, not healthy for the business long term. Ali Abdaal 17:22 Yeah, yeah. I think that's an insight that so many people have, only once they have started a business. Yeah, when you realise Oh, actually, I don't know, like, bit, I guess, I guess YouTube is a different example. Because you do actually make money from it. But like, you know, just being good at making coffee does not does not make me a good owner of a or, or manager, operator of a of a coffee business. And so I first read the E Myth, I think in like 2019, or something, and I'd had a business at that point had been going for five years. And I was like, My God, I wish I'd read this book five years ago, because all of the mistakes under the sun. And the first time I came across that phrase that, you know, you should be working on the business, not in it, I was just like, my mind was completely blown. And now it's just so it feels so standard to me that I almost can't remember a time where I didn't know that that was the thing, right? And even now, when kind of coaching YouTubers and stuff, this is the thing, I try and encourage more creators to think a little bit more businessy. Because I think creators are very easy at thinking like, oh, it's about the craft, it's about the video, I want to make sure it's about how it makes me feel, which is fine. But I also think if you have if you want to turn it into a business, there is a level of let's actually approach this from a slightly more business angle. James Hoffmann 18:28 It's, it's, you know, coffee, has historically had a difficult relationship with profit. Because, you know, a lot of specialty coffee ran as a kind of counterculture to commercial coffee, which is coffee for profit. Yeah, right. And so, when specialty coffee emerged, it very much was like the it's not about the money, it's not about profit, it's about the coffee. And to focus on the money was not to focus on the coffee. And that was to dilute the purity of what you were trying to do. And it made you something of a charlatan, or just someone looking to extract money from the system, which is not what it's about, you know, the ethics of coffee aside and the challenges there aside, you know, it took me a little while to get comfortable with the idea of like, I need profit, to do the things I want to do. Like it's the enabling factor in being able to pay people properly, hire more people do more interesting stuff, improve what we do, you know, however you feel about the model of capitalism aside in this model, I need to make profit and good profit to have a sustainable business. And that you know, I think a lot of people certainly in the coffee industry would have heard the whole like, you know, you need to make profit but like No, no, no, I need to make great coffee. I need to find my, my customers. I need to build relationships and like Yeah, but But what keeps you going what builds a sustainable business is an underlying profit you can choose to focus too much on that show and you can compromise your product but but they can be mutually beneficial if you kind of do it right. If you're really in Investing if you're if you're, you know, creating profit for a purpose, other than personal, you know, gain or all that kind of stuff. Ali Abdaal 20:08 Yeah, I guess profit is often seen as a bit of a dirty word. James Hoffmann 20:11 It is in many situations, right? Like lots of terrible things are done in the name of profit. Absolutely, like, loads of big businesses do terrible things for for the benefit of shareholders for to maximise profits. And I think that's that I'm uncomfortable with that. But at the same time, you know, we end up in this very binary sort of world of black and white profit is good profit is bad. Well, it's sort of, it's sort of agnostic of that what you do with it can be good or bad. And think, yeah, but there shouldn't be the kind of shame that a lot of business businesses have around making money in order to do good things. Yeah, that's how I feel about it. You know, I think I got very interested in the idea of sustainable businesses. No, because I, how do you build a business that exists outside of the people that work within it. And this in coffee is a particular challenge, because go back to this, I promise to make sense of it. You do loads of barista training, as a coffee roaster and supply you train loads of people. And what you end up feeling is that you're just pouring water into a bucket with a hole in it because you train too much people they leave because they're just there for a little bit. And the business itself doesn't retain the knowledge. And you look at businesses that are hundreds of years old, how did they, how did they exceed the will or the ideas of one person and become this thing where they are almost a living entity themselves. And you get into the boring answers of like systems and structure and you build a business that is able to retain knowledge independent of the people that work within it. And that isn't a bad thing that doesn't strip people of their value or utility that makes their job easier, more enjoyable, because they can still access that information and knowledge. But when they leave, half your business doesn't work out that that for me became a very interesting sort of thing to think about of like, how do you treat it like a thing that can learn independently, right? Can you teach a business and we got really interested in this with a bunch of customers like, Okay, we need to stop just trading a bursters. We'll keep doing that. But we need to work with you in a way of collecting and Systemising the knowledge that we are delivering so that it's yours, regardless of who's executing it. And that sounds dehumanising, but but I don't think it is, I think it's about creating a much healthier environment for to work in, where you don't feel like you can't leave. Because you'd break the business. That's a really, unless people have felt that way of like, I can't leave when I want to, I want to do something else. But I feel stuck here because I know, too much of this company rests on me. And that's an awful thing to do to someone that's not good retention. That's a bad, it's a bad thing. So yeah, I think not enough people talk about that the idea of like, you know, be at a founder or key people or you know, the business itself has to retain information knowledge, it has to have a purpose bound into it. To be sustainable long term. Ali Abdaal 22:56 We are going to take a little quick break from the podcast to introduce the sponsor of this podcast, which is curiosity stream. If you haven't heard by now curiosity streams is the world's leading documentary streaming subscription platform, founded by John Hendricks is the founder of the Discovery Channel. And on Curiosity stream, they've got hundreds of really high quality high budget documentaries, covering all sorts of things from science and technology to history and ancient civilizations to food and medicine and meditation, like all of this stuff in between. 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So if you enjoy the sorts of conversations we have on deep dive, you might like to see, you know, a whole year before we started this podcast properly once the pandemic stopped, what sort of conversations I was having with people on Zoom, I've also got a series of videos in nebula called workflow, which is where I deep dive into some of my favourite productivity tools and on nebula you also get early ad free access to my videos and videos from a bunch of other creators that you might be familiar with, like Thomas Frank and Tom Scott and legal eagle and Lindsey Ellis. And the really cool thing is that because curiosity stream loves supporting independent creators, we've got an A bundle deal, which is that if you sign up for an account on Curiosity stream, you actually get free access to nebula bundled with that so if you head over to curiosity stream.com forward slash deep dive then for less than $15 a year you can get full access to curiosity streams, incredible library of documentaries, and also free access to all of the stuff on nebula bundled with that. So head over to curiosity stream.com forward slash deep dive to get the bundle deal. So thank you curiosity stream for sponsoring this episode. Yeah, I think this is again one of the one of the things that you only really start to appreciate once you have a business. And before when I was reading about businesses, systems, structure processes, HR values vision, what the hell is all that bullshit? And then as soon as you start like, oh, okay, now now I see what's what's happening now. I see why I like it. You know, with with my first business, it's bad that I'm I am the one staying up until 12 Midnight making sure that I book deliveries for our course, which is happening in Manchester tomorrow have actually arrived because I'm the only one who knows how to deal with the supplier. That's probably bad. Figuring out all these things like, oh my god, like, what started off as me enjoying teaching courses for medical applicants. Now, turning into turning it into a business is actually a lot of the quick boring stuff, which then, at least for me, became the fun stuff when I realised how much there was to learn, and how much of a kind of what the learning curve was like, and that every new book I was reading, I was just my mind was blown, like, Oh, my God, businesses have been solving these problems problems for decades, if not hundreds of years. There's there's a system behind this and I can learn the system. James Hoffmann 25:44 You know, I think for me, though, I read loads and loads of those books, but there was still the kind of lag of the conversion of information to knowledge through the application of it. You don't I mean, like, it took me doing it, messing it up, doing it again, messing it up, to kind of get to the point where like, okay, now I truly understand the ideas here and how they work. Ali Abdaal 26:01 Yeah, yeah. Like, it's all it's all well and good to read a book about hiring but until you've done it, and made mistakes a bit. James Hoffmann 26:06 Yeah, absolutely. And, you know, like, uh, you know, I come from, I suppose a family of entrepreneurs. So I was fortunate in that I had, in my family people to be like, hirings gonna be the hardest bit. You know, only advice they gave me I was like, a little bit blase about at the time, it's gonna be really hard study medicine is really, really hard. Got it. Great. And then, like a year in, you're like, This is really hard. What can you tell me in the like? And then hiring is going to be a hardest bit, and it stays the hardest bit forever? And you're like, Man, I'm not gonna be the person. I really great. First few people. Yeah. Anyway, this is fine. This is easy. And you're like, No, no, no, no, you learn a bunch of awful lessons. And, you know, it still remains the hardest part. And especially if you want to, you know, I think that there are businesses out there that still want to find a human extract the value on you go, you know, it's not, as far as not that interesting. We're just in development, enjoying where you work, satisfaction, all of that kind of stuff a bit. You know, it's the slightly trite line of like, we want to be the place where you do your best work. But I think that's very true for what we truly aspire to. But that obviously, it does make things harder, it just changes the challenge and changes the sort of focus. Ali Abdaal 27:19 Okay, so let's go back to 2008. You're 27 ish years old ish, ish thing. When deciding I become World Barista Champion. I'm gonna start a coffee shop. What's like the dream? They're like, is this gonna become the next Costco the next Starbucks is gonna become like independent Pro, like, what? What's going through your mind to make you decide, You know what, starting a coffee shop is the way forward. James Hoffmann 27:40 I often think about the staggering lack of long term thinking that I had, and how that might have saved me multiple times. I think, you know, we had when we started, we had a five year plan that was kind of revenue based, like we want to get to this kind of a revenue and if we get there in five years, that'd be really super successful. And we'll be really happy with that. And that will be it and we'll do that through wholesaling more coffee and I think once we focused on coffee roasting and not coffee shops, because economy tanked forget about the shop, those roast, simpler, lower overheads become like a b2b service almost, but it's super b2b service super, like just providing roasted coffee beans to write Starbucks up until the pandemic, we were still 80% b2b business. Okay. And then obviously, that changed. Ali Abdaal 28:29 On that front, like, I've never once had the dream of I want to become a, you know, a coffee roaster, selling coffees to companies. I don't think many people have it, like people have a dream of starting a coffee shop, but not a dream of becoming a coffee roaster, I think. James Hoffmann 28:41 mean, most people dream about coffee, generally. It's weird industry. No one has aspirations. people aspire to work in wine, or, you know, whiskey, or Ali Abdaal 28:50 a bunch of my friends want to start coffee shops, or bakeries or restaurants, right? No one is saying want I want to supply flour to two bakeries. The thing I want to start is the bakery. James Hoffmann 29:00 But if you get a bit of a sickness for wheat grains, then yeah, I can totally understand how you would want it. Okay. You can't really get into ours for babies, the industry of wheat, you know a lot about actually ancient provenance and flavour and terroir, and traceability and taste of place and all of these things that can totally suck you into ingredient obsession. Ali Abdaal 29:19 So when you're a layman you want to make the shop when you're a pro you want to make the product of that. James Hoffmann 29:26 It's a different sort of obsession or a different sort of passion, I guess. So okay, so what we wanted to do super early doors is we had been part of this global culture of specialty coffee that hadn't really kicked off in London, you know it. We maybe talk about this later. I'd been part of it online for a number of years, and I'd felt part of a global specialty coffee community but didn't really exist in London back then. There was like Monmouth had been going since 1977. And there was like a little place called flat white and SOHO and that was sort of the beginning and end of coffee in London in 2008. That's unfair to a couple places. Clemson and Sundancer. But there wasn't much for a city of 8 million people that wasn't much. And so our goal was not to sell leadless coffee. Our goal was to foster a community of specialty coffee in London to help drive the consumption of Eicher of good coffee. We wanted great coffee to be part of the city's experience and DNA. You know, that was so we named the business square mile because between 60 and 50, and 70, and 50, London was the greatest coffee drinking city in the world, it had a totally unique culture, we had more coffee shops per capita than anywhere else in the world. We had this really unique culture here. And we didn't in 2017. And then we had the Americanized Italian version of coffee. But we didn't have something that was London's coffee culture. And we wanted to sort of help foster that. And we did that through working with cafes. And you know, that was the route that we did it. And so yeah, we kind of grew as a wholesaler. And our job was to give good ingredients and help coffee shops succeed, because if they succeeded, we succeeded. They sold way more coffee. So did we. So we were motivated to do a good job with product and then in our customer relationships, you know, to help them win, that was the goal. And if they won great, and that also meant helping competitors when they didn't use our coffee, more shops meant more culture, rising tide lifts all boats kind of thing. Very true with coffee shops back then. So yeah, that was the kind of goal. Ali Abdaal 31:25 How much was culture, the main, like, we want to develop this coffee culture versus I need a job to make money. James Hoffmann 31:33 So it wasn't necessarily early days, it was community, not culture was the thing. We wanted to bring people who felt weird about coffee together. And then you know what I mean, like, make them coherent. We figured that was a great way to grow the business. But also it was what we wanted. We were people who were weighed about coffee, who wanted to find like minds, and it was a really strong, really coherent community. And the advantage of that is that if you are a deeply passionate person, if you're a lone voice, you go right at the back end of the news, right before they did the summary again, with a check out this one weird person, he's really into, I don't know, water bottles, and he's gonna you know, he's really into it and his way personally, yeah, really into water bottles. How nice is that? How hilarious. And they treat you as the one lone obsessive. But back then, like magazines like timeout, or, you know, the newspapers would talk to the one crazed person about coffee, who'd then be like, You got to go and talk to these five other people, and then talk to them and then talk to those five other people. And it made the sort of the voice or the voices of the community much louder, more coherent. And suddenly, the media paid much more attention to coffee, because there was this coherent voice of coffee can be good. Yeah, if you can be better coffee could be interesting. And that really supercharged London and London just exploded, compared to most of the rest of the world had density, it had enough money. But it also had this really coherent community. And London led the world for a little while in terms of coffee culture, everyone else caught up. I mean, Melbourne was way ahead, Australia, all that sort of stuff. But London had this really interesting explosion, certainly in Europe, also the northern hemisphere, that made it a focal point for a lot of other places. Ali Abdaal 33:10 Okay, question on that front. When when you're starting a business like now that you've done this a few times, and you've been in the in the game for a while. It's it sounds like you had a vision or a mission that was bigger than just I want to make money. Sure. In that you want to create this coffee community. How important do you think it is if let's say someone wants to quit the job and start a business today, for them to have a wider altruistic, somewhat vision behind it, that's other than I need a business to make money because I want to try and quit my job and do something that's fun. James Hoffmann 33:44 If they wish to derive satisfaction from the work they do, I think it's essential, because earning from I mean, it's for a certain sort of mind, just just extracting wealth is satisfying. They see the number gets bigger, and that's satisfying enough. But for most people, it's quite hollow and empty and unsatisfying. And they end up doing work. They don't like because the number goes up, but they don't feel good about it, and they look for something else. So I think having a purpose or meaning behind it, for me is essential, like what am I? You know, I mean, I don't really believe in legacy. But I think it's a shame not to leave something better than you found it. That seems, you know what I mean? Like, the decent thing to do is I want to improve things or be have a positive impact. And so that's driving a lot of the decisions I might make around starting businesses or doing stuff like that. And I would say that people who enjoy their work the most. I've met miserable billionaires, you know what I mean, like miserable people, because they're just what the numbers very big. So what now slightly bigger, like, what is that? That is you're just miserable. I have no aspiration for that. So yeah, for me, I think it's essential if you want to enjoy the work you do and feel like it has meaning and purpose. Yeah, there has to be vision. Ali Abdaal 34:52 Nice. And is this how you were feeling in the early days as well? Or is it something a philosophy that's developed over time? James Hoffmann 34:56 That's a good question, I think Like, I'm aware that I grew up middle class. And so I grew up with a safety net, and that I started a business and I was never going to go to zero. You know what I mean? I think that that's always worth noting, in people like me, who took risks started businesses, there was a safety net, I was gonna be okay. And I, you know, I mean that, that changes your relationship with money. I think if you don't have a safety net, then I, I'm much more open to the idea of like, no, I need money, I need to build my safety next. I don't have one. But But I was aware I did. And so for me, you know, as a very passionate person about the product, I just really, really enjoy coffee, I get very excited about it. And so that was always a driver for me. But I also like learning stuff. And so you know, learning to build a business was satisfying learning to sell or market or do the other things that went alongside that so big with YouTube now, like learning to shoot better films, do better audio light properly, all of those things. I enjoy that process. That's just part of me, I like the constant obsession. It's just, it's just very satisfying to get better at something. I like that I'm always going to like that, as is what it is. So yeah, I think I wasn't super money focused. I didn't earn very much from the business for a long time. And you know, even now, I think my my, because we've always been bootstrapped. So the coffee companies Bootstrap, everything has really been bootstrapped. I have left it in a lot of the time, like I like, especially going into pandemics or going into whatever the economy is going to do. Now, having cash inside of business is a good thing to me. And that's just because I don't like to be responsible to other people, because I suppose I have a bit of a control freak aspect to me. And some of that, like, I'm against investment, or I'm against, you know, raising money in different ways. But I just like the control. It's just how we've always done it, like we've done everything out of cash from the beginning. And you would argue, and I would hear you and say, you're probably right, that was not the best use of that money that we could have, you know, borrowed, leverage the business a little bit borrowed a tonne of cash grown faster, done all those things. But if the goal is the goal is to make better stuff, and feel good about it, then that was not a route we needed to go. So So yeah, like, historically, you know, we can talk about money, I guess a bit. I've never really pulled tonnes out of the business, which is maybe foolish, you know, I mean, I've never really cashed the chips in so to speak. But, you know, I'm interested in the businesses that that I work with, doing the work and being long term sustainable. So So yeah, that's been the general approach. Interesting. Ali Abdaal 37:37 Yeah, there's a good book by Matt McCree, the great CEO within one of the things he says is that his he does a lot of coaching for like, tech founders, Silicon Valley type. And he says that basically people want to go, people want to work or start a business for three reasons, to make money to have fun and to help people. And but if you ask them that, if they if they could only pick one, it would be to make money. At that point, once they've ticked that box, if they could only pick one, it would be to have fun, generally. And once they've ticked those two boxes, at that point, people then shift to, to the the helping people thing. And I think that's certainly true for me. Like, it's, it's very nice that right now, the thing that I'm doing does all three. But I think, yeah, when I was starting out, I was like, You know what, affiliate marketing, to selling T shirts on the internet, I'll do whatever I can to make money, that it was cool. I'm making money now do whatever I can to have fun while doing this. And it's only kind of now that I've done it for a few years that I'm now shifting to actually to realise this point about how having a wider mission is ultimately the thing that makes it most satisfying. James Hoffmann 38:40 Yeah, I think purpose is kind of everything for me. And that the bit, you know, I suppose I have enough time to look back on what we have 13 years old or whatever else like the it's the same, it's ultimately it's the same as YouTube metrics, like subscriber counts are deeply unsatisfying. Hitting a million subscribers isn't rewarding in any way. Not Not a single way. It's, you know, it's coming deep down when it happens. And then you're like, oh, yeah, but it really doesn't feel like anything. And it's the same sort of thing for me in businesses essential thing like, like a big fat balance sheet at the end of it. Sure, good, fine, whatever. It's an indicator. Same as an audience, you can do something with it if you want to, but it's what you're going to do with it. That's more interesting, more satisfying than than the accrual of the number. Ali Abdaal 39:28 So let's go back to coffee roasting business, just getting off the ground. Just again, because I'm totally new to this space. If I decided tomorrow, I want to make the Ali Abdaal coffee roasting business. What what does it take to make a coffee roasting business? I guess, like how much would it cost to get started and what do you actually have to do? James Hoffmann 40:02 There's a lot of coffee tourism that happens under the guise of buying but it's really anyway you would need a coffee roaster, a machine that roasted coffee they will call it depends how big you want it to be per the old metric used to be per kilo of capacity would cost about 1000 pounds that's an EMI 2000 pounds so if you want a 15 kilo roaster that's pretty 30 grand. Ali Abdaal 40:28 That is roasting 15 kilogrammes of raw coffee in one go to turn it into those nice brown beans that you see in coffee shops. James Hoffmann 40:36 So that's sort of the biggest capital expenditure was probably the roaster. If you're in London, you probably need to treat the smoke coming from the roaster because no one likes that. So that might be another 10 through 20 can be quite a lot more. Ali Abdaal 40:51 Yeah. Oh, well, I don't think the smoke less bad for the environment. Yeah you either sort of reacted away or feet of pure elegance, you burn it. Down we yeah, we burned smoke, which is net better than that. In terms of greenhouse emissions. Burning smoke is better than just letting the smoke out because there's things in the smoke that are very bad, worse than carbon, carbon dioxide. But yeah, it's not you try and build them as efficiently as you can. But yes, you have what's called afterburners that burned smoke and owning these is the dumbest thing you'll ever do. But it is what it is. James Hoffmann 41:34 How big is a coffee roaster? Like if we wanted to make one here? How about what like a 15 kilo roaster would occupy this space of this rug? So it's not huge? I did want to get a someone's Brooklyn loft conversion. And they've somehow managed to get a 15 kilo roaster into their Brooklyn. Yeah, which is highly illegal. But it was pretty impressive. Anyway. So you need you need roasters which creates smoke, you need machines to package coffee at least two way coffee, you can not fancy packaging and buy bags and put coffee in but you need to wait probably it would need to be trading Standard certified, you'd need to you know, I mean, if you're selling by weight at some point needed to prove the weights the weight. Allowing a scale on Amazon using a mat is not adequate for Trading Standards unless it's a properly calibrated and you have a calibration process. It happens now and again that roasters don't pay attention to calibration and end up selling you 230 grammes instead of children 50 That's illegal. You get in trouble trade standards for that if you get caught doing it, because what does trading standards do? Like what Transcenders is the body in the UK that regulates how people trade and the units they trade and that kind of stuff? So if if someone is selling you 230 grammes of coffee and a 250 grand bag, that's who you report them to? Oh, and they would investigate? They probably wouldn't if it was a mistake, they probably wouldn't. But you know, obviously, that's a very cheeky way to make money. You can short someone a product, they're probably not going to check. You know, I mean, when's the last time you checked how much granola came in the box. Ali Abdaal 43:12 So my 50, grand bag Walker's or whatever it is, James Hoffmann 43:15 right? You know, it's a lot of trust. But you know, until you need Ali Abdaal 43:19 some kind of special calibrated scale, and thank you, so you can take the box of regulation, you are James Hoffmann 43:24 Anyway, that's very boring. I'm sorry. Ali Abdaal 43:27 This is interesting. Like, it's, I find it so interesting getting an insight into bricks and mortar businesses, because you just don't hear about them like so what was it like to own it frickin coffee... James Hoffmann 43:36 So starting in 2008, all of the startup stuff, and I didn't know what a startup was actually, you know, I didn't know what how was that different to normal business, I would see this word startup. I'm like, what exactly is a startup? It's a question. I feel like no one's really good at answering it either. But I was trying to start this coffee roasting business. And all of the books were about online startups. Yeah, everything was about online startups. Like no, but I mean, how do I, what is what is my model? Like how, you know, no one would tell me how much money to make. No one would tell me how much is the appropriate amount of money? A profit? What's the mall? You know what I mean? It wasn't out there, which is very frustrating. Ali Abdaal 44:11 Yeah. Which I get? I guess it's kind of unusual, because you can bricks and mortar businesses have been going on for loads longer than online businesses. Right. But I mean, it was all the stuff is written by the online business owners and yeah, the videos and the podcast, the whole shebang. James Hoffmann 44:24 It was all about us. It felt weird. I felt like you know, what, what I will say is that that bricks and mortar is satisfying, in a way that digital is not a lot of us. The day could be summarised into I have slightly less digital stuff now than I did earlier this morning. And I'll have more tomorrow because all I've done is write emails today that Jeremy like that that's that's a send a bunch of emails as I have slightly less in my digital to do list. If you've manufactured a wall of coffee that you're going to sell for more money than it costs to make it that's quite satisfying. Here's the thing, I made it, I packed it myself, I sealed the bag, I waited out, I put it in a box, I send it to someone, and they paid me and I made money on that, because I created value as part of this process. That's rewarding in a way that that I struggled to find the same level of sort of manufacturing satisfaction videos are different, because because it's different. But certainly other jobs or roles, or you know, that there's been less, you know, I guess. Ali Abdaal 45:24 I guess that's the thing with being like an affiliate marketer, you don't really see the tangible output of anything that you're creating. James Hoffmann 45:30 And for while, you know, when I was doing more office based stuff as the company grew, occasionally, I would just want to go down and pack coffee for an hour, because that felt more satisfying than the seven hours of staring at a laptop. For me, you know what I mean? And that's just, you know, anyway. Ultimately, I suppose you need raw material. Initially you buy it from important so they There are companies out there that source this stuff bringing in warehouses in the UK, and you can look at a shopping list and be like, I have one bag of that one bag of that two bags of this one bag of that a bag being 60 to 70 kilos of the kind of jute sacks. And you would need to for your first order probably buy 10 bags of coffee about 700 kilos. Ali Abdaal 46:28 So this is a business that requires large amounts of upfront capital. In fact, it's a lot of bricks and mortar businesses. James Hoffmann 46:34 absolutely. And you know, we the great lesson from my point of view is that we didn't start with enough because I work too many hours. Yeah, so I fell for the classic. What's that? Can I swear here? Yeah. Oh, great. So the hero bullshit of entrepreneurship of like, almost grind myself down. I'm a fucking hero working super hard. I'm doing it right. And it's such bullshit. And it's such a toxic aspect of all work, and I hate it. But I definitely worked 110 hour weeks for like months, ground myself down to the point of deep misery. And there is no quicker way to hate a thing you love, than to work like to work on it like that. Right? Like, I really love coffee, I definitely got to the point I was like, I should quit coffee. I should just I hate this. I hate this. I hate my life. I hate working in this, I should just do something else. Because I worked in a stupid way. And I burned myself out physically and emotionally because people do that. Because the world says good for you get the grinder you know, I mean, what's your thing, it's yours, pour yourself into it like no don't, don't do that that's really bad. What you should do is start with enough capital that you can hire people to work with you pay them properly, and then work in a healthy manner. Do you mean like just to have work and home, be separate, that's helpful, turn off, don't work at weekends, or don't work seven days a week. It's very satisfying. It does to pull yourself into a business. It is rewarding. It's enjoyable, but you just burning through yourself so fast. And so I regret not starting with probably twice as much money home while people are at the gate. And going home at five o'clock. Do you mean like just be done, just turn it off, turn off the go home, enjoy life, you can build this thing, you don't have to sacrifice yourself for this. The downside is you need more money to start with. So that's that's the trade off. We didn't have that money. We didn't know we needed it. We had enough to buy the physical things, not enough to build the systems hire the people. And so we just worked ourselves to the bone and it was miserable. And I regret it. And it was a mistake. Ali Abdaal 48:31 On that point. So I feel like sort of, at least in the online online discourse around starting businesses circa 2013 to 2019 was the era of the hustle culture movement saying that like you're starting from nothing, your 20s are for hustling, you've got to grind yourself to the ground, work on weekends work on evenings to make that to stop that thing. Since pandemic I think has accelerated this, there's a lot more like that kind of approach of actually sustainability is important, etc, etc. But what a lot of the kind of pro hustle people say is that look, when when you don't have that startup capital, like, and you're working your crappy job, and you need to start the business, there is not much you can do other than kind of work between, I don't know, 7pm and 2am, and also work on weekends, and all that kind of stuff. And I guess you're just hoping it's just a season of time so that you can build up money build a business off the ground, because it will take blood. Theoretically, it takes blood sweat and tears to get a business off the ground from from moment one. And a lot of entrepreneurs that I've spoken to who have done that kind of grinding themselves to the ground say that, yeah, it wasn't ideal. It wasn't really a happy time. But without that period of crunch, which for several years, potentially the business wouldn't have gotten off the ground. So I guess my question to you is, do you think that you would have been able to do it in a more nicer, sustainable way? Or do you think it was necessary to put in the blood to to get this get this off the ground? James Hoffmann 49:56 I think I think the tricky bit is that if I had had Understanding that I have now and a little bit more capital than yes, we could have built the same business far more enjoyably. I don't think it had been a bigger business necessarily, but it would have been a more enjoyable process to do that. And I think certainly, you know, I may start more businesses in the future. And I know that I got a little bit hustler when YouTube started to kick off for me and I you know, I mean, I was gonna feed this a little bit because you know, he feels we need you when it feels like you pouring just straight gas on flames. And this just, every everything you put in comes back 10 times you like, more more Mama mom? Yeah, but then you still end up with a world where you going with this? Like, what's the Yeah, all the big questions. It doesn't you might get where you don't you get to a point slightly quicker. But what's the point? You're trying to get to do this anytime quicker? Is that better? So you look, I'm not saying that. There's a perfect way right like to back in 2008. To raise another 100 grand would have been really hard. You know, the, the system that we live in, makes it much easier to raise 1 million than 10 grand. We couldn't get a 10 grand bank overdraft. But I feel like if you go and pitch big and you make big promises, you can raise lots of money on the on the promise of lots more later. But if you want like a 10 grand overdraft, please the bank's like no. Yeah, like I turn over like 30 grand a month and they're like, ah, like 10 grand. You know what I mean? Like pre financial crisis you could get like amongst turnovers overdraft was the sort of rule of thumb Yeah. And post financial crisis. The banks were like, nah. Which is really unhealthy for for loads of small businesses. It was it really restricted access to capital from 2008. Probably 2015 was really difficult, right? If you wanted less than 100 grand, the moment you wanted serious cash to make big promises to roll out this giant thing that little IPO or there'll be an exit much easier, Jeremy and for a while as I could easily raise it 2 million quid Yeah, in a way that I couldn't raise 200 grand. That's what that's messed up. But that's that's the way it was back then. Ali Abdaal 49:57 This reminds me of that quote, which is that I think you probably will have come across it that if you owe the bank 200,000 It's your problem. If you owe the bank 200 million, it's their problem. It's weird, weird system a couple of. James Hoffmann 52:20 Like, it's messed up. And you know, but yeah, so you know, I'm perhaps talking about this idealised world where I could have found another 100 grand, somewhere in a way that that didn't result in me signing over control or direction, or, or you know, what I mean, some aspect that would be later important, but I do know that it had we accrued more capital at the start, we could have worked in a way that was less damaging to our physical and mental selves. Yeah. And, you know, I think you can justify us to culture all you like, I just, I don't think I'm proud of those years. The way that I worked. Chairman. Am I proud of where we got to? Yeah, maybe Sure. But I don't like that. That was the route and I certainly wouldn't wish that on anyone else. And I would wish for, or encourage a system or a way of working that wasn't that, gentlemen, like, I would hope for other people. You know, I don't feel like I suffered, you should suffer too. That's a sickness that infects our culture. I'm a, I suffered, I would like you not to suffer, because this sucked. That's sort of my feeling about life. So yeah, I'm not saying it's a perfect way. It's a messed up system. But that's my experience and how I feel about it at the end of it. Ali Abdaal 53:29 So I guess, okay, so let's see if we, if we could rewind 13 years, and you have the same understanding you do now. But you're in those market conditions? Yes. It sounds like you probably would have spent more time trying to figure out how do I actually raise the startup capital I need such that I don't burn myself out, rather than, Oh, come on. 100 grand. You know, there's always other things we could do if we knew the value of it. But I guess, at the time, when you're at that stage of life, you're like, oh, I'll just, I'll just work harder. James Hoffmann 53:55 At Yeah, that's absolutely. And certainly the everything around me told me that was the right thing to do. You know what I mean? That was the culture around entrepreneurship was yeah, you work. You can, but there's, no one else can do it for you to your business. Get out what you put in. And I believed it. And but I don't you know, I don't want someone watching this to hear me say, Yeah, you should hustle. Yeah, you should suffer. You know what I mean? I don't feel comfortable saying those words to someone. Ali Abdaal 54:24 Were bits of it fun? James Hoffmann 54:26 Yeah, lots of it was fun. It was growing. We were part of this booming thing, like, you know, we felt like we were making an impact. You know, I mean, like, we felt influential, that was very satisfying. We felt like, you know, I mean, like, we felt like we were pioneering in some ways that feels very arrogant to say and awful, but it felt that way at the time. It's not really a phrase you get to use about yourself. But that's how it felt it felt like we were kind of pushing new ground and it was people were excited about it. And I think that we would Having a wider impact and growing more than just our business. So yeah, that was that was good. Ali Abdaal 55:06 Yeah. Because I think this is the kind of conundrum I find myself in sometimes with this business and the team that we've got here where, like, it's very easy for things to feel very frantic, that, Oh, we're doing all these things, we're launching a product. And if these are things, let's get on that, you know, ABCDEFG. And, like, you know, the other day, I kind of good just got a bit of an impression that everyone was just a bit like, sort of working flat out. And I kind of stopped and took a step back was like, Why the hell are we working flat out here? Like, this is a this is supposed to be calm. The reason I left medicine is because I didn't want a life and death job. I didn't want something that was like massively stressful, right? So why are we creating these these like constraints for ourselves where we have to be wedded to, oh, this course needs to come out in q1, because 31st of March is an arbitrary deadline that we have decided. And if we push it back two weeks, that's the end of the world and therefore we have to burn the midnight oil. And I think without a it's when I guess, you know, I seems fairly young average age, like 27 ish, when you have like a youngest team of people who are, you know, hungry and keen and hopefully enjoy the jobs, it's very easy to unchecked it sort of to turn into this flywheel of front sort of Frantisek franticness and stuff. And it needs a bit of a moderating influence like a coolant to be like, Hey, hang on, let's just actually think about why we're doing this. Yeah. You know, are we all happy, broadly happy with how much money we're making? And to the extent that we're not on the poverty? Poverty line? Yes. Cool. So then chasing more and more for the sake of like, I don't know, an extra, an extra dose of revenue or profit or whatever. At the risk of sacrificing our mental health and burning out and stuff. Probably unsustainable. Let's, you know. James Hoffmann 56:47 Yeah. I think it's, I think it's back to the idea of, you know, your best work does not happen in that environment. You're in I mean, like, yeah, you might occasionally pull out something from the bag under pressure. But constant pressure. Yeah, no, no one does their best work like that, you know, what I mean? Like, you need space, you know, like, you need to just have for everyone needs a little space in their work. I've just like I'm not, I can have time to think and read and be bored briefly. And those things are really important, really useful, especially in creative work. Ali Abdaal 57:20 So going back to a roaster. So we've contacted one of these wholesale suppliers of like raw coffee beans, yeah, needs to be roasted. Now you have a wall of coffee beans needs selling? Yes. What do you what do you do that? Do you go to Starbucks calm and be like, Hey, do you want some coffee, like, out of the work James Hoffmann 57:38 Bilanz you're gonna sell to independent businesses, at Starbucks already have their own system that makes roast their own coffee, they've got a massive facility in the Netherlands that supplies most of like European and most of Europe out of it anyway. So you're probably going to sell this either online, which is once sort of challenge or you're going to sell to other coffee shops. And I think it was a little bit different when we started. But But these days, it's back to having a bit of a problem in that most people who start coffee roasting companies are very passionate about producing the best coffee they can. And so they'll think that because they have what they believe is better coffee, that's going to be quite easy to sell. But the problem is that if you go to a coffee shop, and you say, Hey, I've got better coffee, one, you're saying the the coffee that you've chosen to serve so far is not very good. And two, that's probably not fixing a problem that a business owner has, right? Like sales is solving problems to me. And so if you think about what problem a coffee shop might have better coffee, probably not one of them actually, like they probably already chosen coffee. They're like, and so why would I buy your better coffee. Ali Abdaal 58:47 Yeah, if it's not a problem, people aren't going to pay to solve it. James Hoffmann 58:50 So then you're into, okay, well, what do you do that's different, and that's a much more complex thing. And that's also why a lot of small coffee roasters struggle to grow because they don't have a compelling answer to a problem that a cafe owner might have. But yeah, that's, that's you're gonna do, you're probably quite early get stuck in the trap of credit, where you might say, Oh, you even let someone get the coffee and pay you 30 days later. Ali Abdaal 59:12 Oh, yeah. That's the kind of thing isn't it? Like invoice terms? And yes, but normal businesses non online businesses have to deal with. James Hoffmann 59:19 And that historically has come from larger businesses leveraging capital to gain customers like what's the problem the coffee shops got not enough cash flow. Great. Let me solve that from for if you signed with us this binding contract to buy coffee from us for 12 months, we'll give you 28 days from invoice so you'll order coffee through January, we'll send you an invoice February 1, and on the 28th of February that coffee is due because we've got enough cash that we can lend you this much cash and you've got loads of time to sell that coffee, make the money and have a bit of cash flow back. Ali Abdaal 59:48 Okay, so this sounds good and bad. Yeah. What are the I guess the good part is that you can then get the product without paying for it. James Hoffmann 59:55 So for the coffee shop is great. I can I can get 500 pounds for the coffee and the or I can sell that turn that into 10,000 pounds, obviously gonna pay wages are going to be rent or the other stuff, but I get a chance to do that. But I have to pay off the bill for 500 pounds at the end of it. That's that's the upside, then also, however, I'm a bit stuck, because I can't buy anyone else's product because they weren't given the terms on its binding agreement. So essentially, they've bought my loyalty, but they've solved a problem for me, which is cash flow. And that's a very common problem in you know, a business that, you know, coffee shops have big fat quarters, you know. They'll often have a large vat bill at the end of each quarter to pay to the government. Yeah. And then that was the cash flow issue, right, it's often a cash flow issue for businesses that don't make large margins and aren't occurring a lot of cash at the bottom. So having suppliers give you credit terms, essentially gives you liquidity. The problem is that if you're a small coffee roasting company, it's very easy to get into that. And then coffee shops, well, they often fail. Okay, at that point, if they go into administration, you know, best case for liquidating might be 10 P on the pound kind of thing of your your debt, if you've managed to get to the top of the pecking order of like who's getting paid out by those would you weren't, so you're getting nothing. So this used to be a straight bad debt, and Ali Abdaal 1:01:10 you've given them the coffee, you can use that heat, they promise to pay you 60 days from now, right? But in that 50 days, they go bankrupt. And we've already given them the coffee, that low you can't do anything about that James Hoffmann 1:01:21 classic, this happens all the time loads of bad debts out there. And chances are actually, you probably kept they probably missed the payment, February 28. Like no, no, we'll get it to you, we'll get it to you just keep sending us coffee, we're sorry, we messed up, we forgot to write the check or someone messed up or whatever other story, and you might get 90 days of product to that customer and then they go bust and then you're out that much money. If you're a giant coffee company, the cost of doing business, it's built into the price, it's fine. If you're a small independent coffee roaster, we haven't built that margin. And because you try to be competitive with pricing, you can you can have a five or 10 grand debt that would take you down to because that might be your cash flow gone. And then, you know, historically, we were always taught bricks and mortar is like it profit is one thing cash flows everything. Right? Like if you don't have you go under, because you run out of cash in the bank, not because you weren't profitable, but you ran out cash in the bank. Because certainly, you know, we got we were never not probably we're always profitable, but we got real close on running out of cash. Because you do if you're growing, you know, the roasters buying stock by bags, we're not getting the same sort of terms. So we're laying out much larger invoices we've got, you know, say 100 grand of stock. That's cash out, we've got all these other outgoings and we're still waiting for money coming in. And that's profitable money coming in. But there's a gap. And so, you know, that doesn't exist as much in the online world. But But bricks and mortar businesses, cashflow is the main concern, which is why credit is such an appealing way of selling coffee. So yeah, that's the sort of that's the bit that you create quite a fragile market. And certainly, you know, right now there's a lot of debt in the market. You know, I mean, there's lots of businesses that are struggling for cash that will owe money to suppliers. And they'll owe money to fruit and veg suppliers, milk suppliers, takeaway cup suppliers, coffee suppliers, Ali Abdaal 1:03:10 and they're hoping the restaurant or coffee shop or bakery will do well enough to be able to pay those to make it through it is quite, that's quite hard from that firm from their perspective as well. Yeah, it's incredibly stressful. Yeah, you're like always running in the red. And at the end of the month, you're like, Oh, my God, we just need to wait for tomorrow. But like, oh, but the person paying our invoices of six. We can't we can't we can't do payroll this month, James Hoffmann 1:03:26 Or we can't afford payroll? Yeah, we're not the cash in the bank for payroll. And then all the employees are like, well, I need to pay my mortgage. I'm not coming to work if you're not gonna pay me. Yeah, it's, you know, it's Yeah, then this, but this is reality of a highly competitive, yeah, old industry. It's been going a long time, it's developed certain bad habits. And certainly, I think credit is one of them. But I mean, that's, again, further encourage people to underprice product, you know, coffee is probably too cheap. But you know, it's cheapest people can make it and still just about survive. That's kind of how pricing ends up being a highly competitive market, which isn't in anyone's best interest long term, but it is what it is. Ali Abdaal 1:04:02 So how did how did square miles succeed? James Hoffmann 1:04:06 I think initially, it was a different sort of approach. Our problem. Early doors was like people aren't really drinking specialty coffee. And people didn't really know how to build businesses doing that. And we had a background of teaching and training and education and like, we're going to help make you successful. Our goal is not to sell you. Beans. Our goal is to make you a successful Cafe, and we'll work with you on your training programmes. We'll work with you on equipment or anything else. Oh, but our goal is selling them coffee. Yeah. Well, that's, that's that was our approach. And everyone's problem is I'm not successful enough. Yeah. So if you focus on like, we're gonna increase your top line, aim to increase your bottom line to somewhere in there, you buy some coffee, but what we're trying to help you build a better business. That was our initial kind of golden, you know, it's changed over time. And, you know, at some point, if you have a more recognisable brand, the problem you can fix is my customers don't trust me, because I'm a new coffee shop. And the answer is I buy a Random coffee that they do know, they might trust me, they see the logo of X Coffee Company, oh, this is probably good coffee, right? That solves a problem. It's a difficult problem because other brands have the same problem. It's not as effective. But But yeah, I think that was what was our approach of like, we want to help our customers succeed. It feels disingenuous now, like, you know, I did all the sales, early doors three easy for me to talk about that time. I don't do the sales now. You know, I mean, like, it feels like I'm speaking on behalf of people, which is, you know, I don't want to minimise that more complex, early days where, but Yeah, certainly early days, that was our kind of approach. And I think we had some experience in what great coffee wasn't, I suppose I had this weird title to be like, well, I know what good coffee is because I'm on the stupid dog show. So so like, you know, that's, that's how that went. Ali Abdaal 1:05:45 Okay. So the way you you differentiated yourself in this crowded potential credit competitive market was not, not actually competing on the quality of the coffee. But in fact, being like, the whole, the service as a whole, where we help you be a better Cafe solves a problem that you're having. And by coincidence, by the way, we also sell some of these things. Yeah, kind of. James Hoffmann 1:06:05 Yeah, I think so. It was designed to be more collaborative relationship. And not just his box has my check. See next week. Ali Abdaal 1:06:12 So what's happening with the square mile these days? James Hoffmann 1:06:15 Well, it's, you know, it's been an interesting couple of years. Obviously, when, when the first lockdown came in, we, you know, 80% of our revenue stopped. Because every cafe shut initially, well, a handful stayed open, but almost everyone shut, because that was the thing to do, and businesses shut down. And I think we're very fortunate that over the years, clearly, people had developed an attachment to our coffee through the business that they were buying it from, because when when b2b disappeared, online exploded. And so we've very rapidly transitioned into being very focused on, you know, we're a much bigger online already, but suddenly, there was just a bigger market for that. And I think we had a lot of growth. And that was, you know, something that we worry about quite a lot in that it's been a really busy successful two years. And that's definitely put a strain on people inside the business. And I think, you know, like, focus for this year is not rampant growth, in terms of top line or any of that kind of stuff. It's a kind of has to be a year of consolidation. And I think a year of making a stronger company and a stronger company is not necessarily growing the top line at all costs, a stronger company is looking after the people inside it, making sure that they enjoy coming to work or not exhausted by the process. I think we all have like, a layer of fatigue globally from the pandemic, like there's, there's a, I think everyone feels fatigued by it or suffer. Yeah. I think that impacts every everything. Just it's been draining. It's been emotionally draining and physically draining for lots of people. And that's regardless of where you work or what you do. And I think you can't ignore that fact, when I think if you've been successful in that time, and you've had that, then I think it's maybe the temptation will be we just got to go harder again, and harder again, and harder. Again, I'm just not sure. I think we're not sure that that's the right way to go. And I think we want to build a healthy, strong company. Because again, we're interested in sustainability. We're not working to an IPO, we're not working to an exit. We're just trying to do what we're doing. Do good meaningful work, but sustain and last, you know. Ali Abdaal 1:08:22 So it sounds like square miles kind of growth from 2008. To 2022. To set things seem to have gone pretty well, sure, with pandemic transition to talk to online and stuff. When did the other stuff that you do fit into the timeline? James Hoffmann 1:08:37 That's a really good question. So I've so, you know, I sort of took on a de facto managing director role and square mile in the early days, we didn't really think in those terms, but I suppose I did those kinds of things. And I have also worked with other companies as a kind of collaborator in terms of designing or promoting equipment and those kinds of things. And so by 20, I want to say 2013, maybe I was like, early 30s. Yeah, travelling enough. 2013 2014 I want to say, I was travelling enough that we realised that if anything, inside the company was reliant on me being in the building, it's broken, because I wouldn't necessarily be in the country. I was in Melbourne for a month. At one point, I was travelling all over the place, like it was just a lot of travel a lot of away time. And I think that the jewel factors combined of the kind of person who might be good at starting a company is not necessarily the kind of person who's good at running a small medium sized company. You know what I mean? We were initially a small company, and then we got to be a big small company and then when I was in school on now is about just under 30. Okay. But but but I think the role of running a business changed and I think it wasn't what I was very good at. And again, I wasn't always there and I think they have a broken system. Yeah, that's bad. So I stepped out of the managing director role and the managing director stepped in. She'd been with us for a while. Very capable, and she was the company still. And we began to work out how that relationship would work and be healthy for both the company and specifically actually, for her in that role. You know, if you talk to a lot of founders, who, in theory move out of operations, they often love a medal. They love to come back, set some fights, and leave. Right. And so we, you know, we've tried to learn other people's hard, easy way. Yeah. And so really early doors were like, how do we stop this happening? Okay, Jeremy, what are the ground rules? Yeah, of how I interact with the company now, but I'm not operational. Ali Abdaal 1:10:44 Do you don't have a thing of like, okay, so I have this problem where it's all in good trying to get other people to do stuff. And then you see something that you think this seems dumb? Why are we doing it that way? And then you start meddling? James Hoffmann 1:10:56 Yeah, yeah. But I'm not allowed. Okay, that's the deal, right? Let's do it. If I want someone to take on this mantle, and to work with me, and then be satisfied by the work, let them do the work. And I have to move into a more passive role of how am I useful to you? Right, but it's a Yeah, sure. There's times where I'll, I'll be like, I've been my boss about something. And I'll be like toto talk in the office? Can we talk about this? And but that's the first point of contact, it's not me going to the person in the role, man, like, can you just go and do this? Because I've seen this, and I want this and do that? Yeah, I did that a little bit. In fact, I'll get told off good. Because I shouldn't be left unchecked. Because it creates a really difficult dynamic in a business. Because ultimately, I'm a founder. And if you're a founder, there's a different sort of relationship you have, if you work in the business, the founder walks in the door. That's different, right? And so it's easy to accidentally override or derail a direction that the managing director is, is dictating correctly. Don't mean to be like what, you know, I, it's easy to come in, and like, oh, I don't think about this yet. And you can set someone off on a task for a week. And, you know, then at the end of the week, AdventureWorks was like, so where are you with this? And I'm like, Oh, I'm way over here. And you're like, Why are you over there? Because we're going over here? Is it what James said. And that's really unhealthy. That just that's a company working against itself. And that's bad. So the rule is very simple. I can be called upon by the team. Yeah, if they want something from me, they can take something from me. Yep. And that might be ideas for marketing, that might be ideas for products that might be knowledge or specific things or whatever it's going to be. But anything that I wish to inject into the company has to go through the managing director, and appropriate time where we sit down and talk about my ideas. And then those that that are deemed worthwhile. Yeah, I can then be taken in further, but I am not allowed to come in and give direction to anyone in the company about anything. That's the deal that we made. And that's because I'm saying you're in charge of this company. I have to mean it. Otherwise, they're not. And then it's just a very, I'm not in charge of the thing. And I have all the responsibility of running this thing. But I'm not actually able to steer the ship, because someone's got their wheel on it. And they keep pulling it to the side every five minutes. I'm trying to go over there. And they've just had a moment of like, but I want to go here quickly. Yeah, it's unhelpful. And I think it's bad. I am not perfect in that regard. But I try really hard on we talk about it a lot. And we make sure that that we are constantly aligned, because you just can't have the bit of like, Well, you said this, but he said that. Yeah. Which one do we believe, which is the truth, really unhelpful, right? If I'm to be useful, then I have to be a resource, I have to be passive. And I have to be respectful of what I've asked someone to do in that role of running the company, and which is, please let me run the company. If you want me to do the job, let me do the job. That's the deal. Ali Abdaal 1:13:48 So you need quite high confidence in that person that you have hired them to run the company, they are competent. James Hoffmann 1:13:53 And they also should be comfortable saying, I need a little help with this, but I'm not sure of this. And you know, like, the person I speak the most to in the company is the Managing Director, we talk a lot about everything. And it's just great for me to feel connected. And also for her to have a sounding board and you know, another person she can talk freely to about any aspect of the business. That's that's a good healthy relationship, I think without a business, and I think it allows us to be very coherent, and it just stops me setting fires. Want to don't get me wrong, like I see stuff. And I'm like, I just want to go and meddle with that. But I know the deal. And I can't have it both ways. It doesn't work. Gentlemen, I can't have the freedom so to speak of the responsibilities and then all of the fun meddling that just it's that that just breaks the thing. Might be fun for a year but it breaks the thing. Yeah. meddling, meddling. Ali Abdaal 1:14:39 I have so much stuff on ask you about this more, but I think we're getting we're getting into weeds that is not applicable to most of us. Sure. Sure. So if I can take about so when when did the YouTube channel start? James Hoffmann 1:14:51 So I pretty familiar I blogged early days I started a blog in 2004. I felt very isolated and lonely in my coffee obsession. And the internet was People, enough people that I could connect to, you know, like, like a healthy version of flat Earth, right? Where there's one isolated person being like, I really love coffee and no one else cares. But the internet cared. And so I started a blog, she sort of chart what I was learning to, you know, go through the classic process of if, if I understand it, I can explain it to someone, right. So, and in sharing it with someone else that's valuable. So that's why I'll write this blog. And the winner of the blog, which is a bit like YouTube, I kept doing it. And I just kept doing it. And for years and years and years, and years, and years, and years and years, I kept doing it and blogs came and went. But I sort of was consistent throughout. And consistency has this really fascinating value. And it wasn't that I blogged every week, I wasn't Seth Godin doing every day, like, you know, it was I was just regular, I kept going. And it made it more rewarding for me and also more valuable and as a thing. However, by 2016 people have moved from blogs to video, and I'm a little I feel late, I feel late actually 2016 like Casey Neistat is exploding at that point, Jeremy like, and I should have, I guess I should start on YouTube, I guess, you know. And I knew people that were like, starting to spend money with influencers, and I was like, what's going on? Is there an economy here? I didn't really know about no one takes YouTube very seriously, at that point. Outside of people already in YouTube comments. And so yeah, 2016 I started uploading videos, which were initially like, I bring up Neistat, because, you know, like, it was a really easy thing to copy. Yeah, right. And so I tend to style that's very, I'll do like, I'll do like vlogs. But I do a weekly vlog, I call it my week, you know, put some like head nodding hip hop in there. And you know what I mean? I'll do that. And I'll try and work out how to do that. And I did like 12 weeks of that, I guess. I was like, Okay, I, you know, I wanted to develop a practice of making videos. But these are the videos I actually want to make. Like, I'm not actually interested in sharing my life that much. I missed in kind of communicating with that. And really early days, I wrote a blog post about takeaway cups and how they're not that bad, and what the actual impact of them is. And I made a video about them. And like time on site on the blog, it's like a minute and a half, on average, it did like, I don't know, 10,000 views. And then back then, that video did like 15,000 views on YouTube, with like a six minute timeout. And like, all the attention is on YouTube is on video. And so if I want to communicate with people, if I want to learn and share and teach, I have to move to video. That's just what it is. And I've made little videos in the past. And I feel like that like I liked it. But I wasn't very good idea back then. So I started making videos on YouTube. And you know, a couple of really interesting lessons early on for me was that moving audiences between platforms was almost impossible. However, many subscribed, like 20,000 followers on Instagram, and I could not get them to go to YouTube. I was like, but I'm making videos and like you have like Instagram, same or Twitter, same sort of proof 30,000 on Twitter, couldn't get anyone to go to YouTube. Ali Abdaal 1:18:05 And you've got an initial audience through the blogging through just being well, the initial effect. James Hoffmann 1:18:09 I got to 2000 quite quickly. And then I flatlined for a long time. And it was really like, you know, it took me a long time to get to 10,000 subs from that point onwards. And that's the clock that's YouTube, right? Like, it's just the graft, and it's just it's a it's a difficult place to be discovered. takes time. You've talked about this a lot. It is what it is. And that was again, totally my experience too. So yeah. I think by 2019 I crossed the 100,000 grant mark three years. Yeah, that's, that's great. Yeah, I'm not mad about that. Ali Abdaal 1:18:42 Because I think I think I think I think people have a lot of like, unrealistic expectations super about YouTube, like, you see the big YouTubers, and often they're the ones that sort of broke out earlier on. And then I find you know, we have hundreds of students going through a YouTuber Academy have a cohort and people who are like, Oh, I'm on video number 32. And I'm still only on like, 3000 subscribers, like, bro, to be 50 videos to get to get my first 1000 Like, what are you talking about? And even you would with that inherent unfair advantage, as it were of being a World Barista Champion, running a coffee roasting business of like, being very, very pro at this thing, talking about the thing that you're pro at, still took three years to get to 100 Yeah, that's great. I love that. James Hoffmann 1:19:21 It took me a long time to get better at making videos to understand how to you know, I've done a lot of presenting of my life. I've done a lot of talks on stage. I did you know, in the in the job, my first kind of training job on with the commercial machines. That was a lot of presenting essentially it was to to our talk, I would give several times a week so I got comfortable presenting which is a whole other skill that I guess I had a lot more practice at coming into YouTube than is normal, I guess, which maybe helped a little bit so yeah, that that that took a while I had a few videos do really well. But but you know, the weather. You know, it was interesting to me that weirdly, coffee is a part of some people's lives and coffee is a part of loads of bloggers lives and bloggers lives and you would see a lot of people have a little coffee part of the videos, but actual coffee content on YouTube, there wasn't very much. And quite early on on National Coffee Day, like YouTube's Twitter account was like, go and watch James. And I was like, wow, that's cool. But also, you don't have many choices. This is a really empty niche. It's changing very quickly now, as the sort of niche fills in inevitably. But that's good. That's really helpful. So yeah, like, so yeah, for the first three years, it was like a lot of space that I used for making videos and also a sort of office near home far enough away that it was healthy, but still convenient. And then there was a bad studio, and it was sounded awful. And slowly, we've sort of improved that. And then it kept going and going and it sort of gained momentum. And for a long time, it made no money. And I took me a long time to discover that I had somehow at some point, I'm ticked a box on AdSense. That was like the the essentially the box of like, Can Google serve people custom ads to who they are. And for some reason, I don't check this, I have no idea when I checked it. But basically, Google couldn't serve as tailored ads, which meant that my AdSense was pulling really like a polling. For the views that I was doing. I was earning like a fifth of what normal AdSense would have been for those kind of things. I don't really know. But the point was, I had a job, I had a living. And this was like a thing that I was doing, because I was passionate about teaching and sharing and communicating and doing that kind of stuff. And then it grew and grew. And, okay, now this is a business and I have to sort of switch my thinking in this to being a business now. And I still struggle with that part of it. Because my My instinct is to try and build a sustainable thing. And you're constantly wrestling with YouTube of like, when when do I get the top of the bell curve? When am I gonna see the decline? How do I build a sustainable thing, but then you sort of listen to other channels. I think Mark has been particular interesting on this front, he's just like, No, I'm just gonna build a production company, in an inch in a sector. That's always interesting. And we're just gonna go, and maybe that's because I part of me is like, Okay, this is this is, am I gonna be a YouTuber in 10 years? Ali Abdaal 1:22:13 Yeah, I think about this all the time. James Hoffmann 1:22:14 I don't know. But but I'm genuinely enjoy making videos and producing them and sharing them or doing this kind of stuff. So like, maybe I want to do this in 10 years, I don't, I don't know, my career has taken so many weird routes. And you know, like, I've done so many odd things, as part of the stuff that I've done. I am very bad at predicting the future. So two years feels like a long time to be predicting for. But yeah, so now I'm trying to understand how to build this into a sustainable thing. What that is what that looks like, how much time I spend doing that, like I have quite a condensed workweek, probably more so than most people would think I'm sort of, for various reasons, I probably get everything done that people see me do and about 25 hours a week. And then other stuff, the other part of the week, and a trend sleep, but whatever. Be at 2530 hours is my kind of active working time in a week on this sort of stuff, and this tangential stuff of that as well, you know, this sort of advisory work that I do or other things that are off topic. So yeah, I'm trying to work out what what what, you know, it's better the ideal day, what do I want? A week of making videos to look like? What do I want the day to look like? I've always enjoyed having no structure to my life. It's just easier. I don't have any routine. I've don't know what I will do tomorrow. I do tomorrow. But I mean, tomorrow going to get on a plane and go to Italy. That's not so you know, like, you know, there's no rhythm. And I'm sort of okay with that. To some extent. I've lived that way for a really long time now. So yeah, it Now YouTube is a thing, I have to pay attention to it. And I feel a responsibility with it. You know what I mean? Like, I feel like I, especially as a large creator in a small niche. I have a disproportionate influence, I think is unfair and inappropriate. But that's the nature of having a loud voice in a in a relatively quiet room. So that's, that stresses me out a bit. But yeah, mostly I just like, I like making videos. And I think I have ambitions to be better than that, as well as the stuff inside that might just I don't know, do I want to be a director? No, but also kind of Yeah. Anyway, yeah. Ali Abdaal 1:24:16 So what is your overall like business portfolio as it were look like you've got YouTube channel, you've got the roastery. Do you have other stuff going on? What are the streams of income? James Hoffmann 1:24:30 Lots of them aren't income if that makes sense. I don't take anything from them at this point. Ali Abdaal 1:24:36 Okay. What are the streams of revenue? James Hoffmann 1:24:39 Revenue is probably fine. So a square mile is one square mile owns most of a cafe called Prufrock, which is another business square mile also. We sort of have an investment in a espresso machine distribution company in the UK, they so I collaborate with the manufacturer in Italy, and I've helped them design and build and sell machines. I haven't built them, but they've built them. I've designed espresso machines that sort of I've had input into these things. And so that relationship has led to kind of, I was beginning to import those machines into the UK. And then they've mostly taken over that business, that's branch office for them. But we're still sort of involved a little bit in that business does YouTube and the sort of bucket of YouTube that is also things like money from books. So I wrote a book in 2014, that continues to sell in a way that I don't understand, but I'm very happy about. It's one of those ones where they sat me down early doors, I'm like, You're not gonna make any money. You'll have a beautiful business card, but you will not make any money. And I was like, Cool. And then it's done, like 300,000 copies, and everyone's a bit like, Oh, well. And that's what he Ali Abdaal 1:25:46 recently got into the publisher side three on top of that a hell of a lot of James Hoffmann 1:25:48 That's since 2014. Ali Abdaal 1:25:52 In a way that's the markets approach to selling books. It's gone really well. Your Atlas of coffee. James Hoffmann 1:25:56 Yeah, so just finished another book. We wrapped the photography on it last week, little command August. So, of course, of course, you know, it's just about making coffee. It's kind of the YouTube channel as a book. Yeah. And kind of fleshed out in a different sort of ways book anyway. Ali Abdaal 1:26:14 So we showed the 300,000 number, like, does that, like how much do you make on a royalty from a book sale? Are we talking pennie? James Hoffmann 1:26:24 So okay, so I think I'll make less than a pound a book at best, okay. And often less than 50 per book and hold on less than that, because a lot of them have been in translation. And so the way the licencing of translation works, because the Atlas is very image heavy is kind of cartography, tonne of licenced images, the word component, little piece of the book, so the words don't earn that much money. And that's okay. Like, you know, over those eight years, it's been, it's been really nice to have that revenue come in, and it's money I never expected. And it's been really nice. But yeah, it's not, I haven't earned 300,000 pounds from it. Just, you know, part of is I should write fiction, that seems to be much better. So yeah, no, the book. But the book has been a great way to sort of, I don't know, the book was written to be not about me, which is kind of weird. There's my pictures, not in the book, I think about square miles in the book, it's built to be useful to anyone interested in coffee. And that can be competing businesses to mine. I'm sort of on the name on the front. And that's the only time I'm really in the book is that there's the name on the front thing. And that's sort of the theme of the YouTube channel. Obviously, I'm not there to advertise the coffee company, because I want to be useful to coffee companies everywhere. Who can be like, Oh, you want to know about this? What is James's video about that? If it's a political that work much better. Anyway, so that's the book. I'm bouncing around a bit. So yeah, the book and sort of other sort of royalties or other things like that would fall into to sort of the UGB business, we have a merge business separately, called 10, hundreds 1000s. That's one thing. And then there's a few kind of investments. In some cases, we've started and sold some businesses in the past, and those have gone different places. And one of them was a kind of part cash part paper deal. So I have a little investment in one company that bought a businesses in mind, and they have several investments in various things. invested in account coffee beverage in San Francisco call taker, who have kind of a coffee and adaptogens and a cam. And it's great, it's very good. If you could get it here, we'll be able to do some work with Danish booze created called empirical spirits who do really interesting stuff. There's a non alcoholic brewery in the UK, who I think are amazing, called big drop a tiny investment with them. There is this interesting software as a service platform and coffee. I'm working with a little bit called beans who are doing interesting stuff, but really on like business to business, coffee stuff, and a few other bits and pieces. I think out there. I'm not really an active investor in that regard. But I'm interested in seeing cool businesses do cool stuff. And there's times where I'm like, Yeah, okay, I'd like to be a little bit involved. But I'm not writing big checks. You know, I mean, like, the little checks, little tiny checks. And it's been interesting to learn about that world. Yeah. You know what I mean? Like, most people never have to worry what a convertible note is. And that's probably for the best and then you get into blind trusts and like, you know, like, the whole deal of preemption rights, don't things. I don't log into this. I just have lots to learn about that particular. Yeah, I'm not sure. It's certainly not something I'm interested in deepening my involvement in meaningfully. But yeah, like, that's the sort of sort of, you know, I run a very boring, I have a decent pension, a little bit of money and like a like a Charles Stanley asked kind of thing. But historically, I've just chose not to pull much money out of my companies. And so yeah, that's been a kind of Ali Abdaal 1:30:13 a high paper net worth, but not necessarily. James Hoffmann 1:30:14 Yeah, I don't have a particularly extravagant lifestyle or demands for one really, you know what I mean? So, it I don't know, a part of me is that you should get the chips off the table that kind of deal up together, the gambling part of me is like, you know, like, cash out a little bit cash out cash out, but I don't? I don't know. Like, so yeah, like that's, that's maybe not the healthiest approach to money, but it is, it is mine. And like, I don't know, I I'm not driven by accruing an enormous amount of wealth, because I don't know what I would do with it, I'd probably aspire to give a bunch of it away or use it helped, you know, sensibly, because I don't, I didn't want very much, you know, what I mean? Which is something I'll try and maintain it just I don't know, again, I had interesting talks with incredibly wealthy people. And they're not very happy, miserable people, I got a bunch of miserable people. And, you know, that doesn't appeal to me. Just I don't know, I think you very easily get into just make the number bigger. And that's the least rewarding game in the entire world. So that's, I'm like, How do I not play? Like? I don't know. And I also affect, like, I think I think generational wealth is important. But I also think you easily cross alignment, just like, the easiest way to destroy a human is give them an enormous inheritance. I don't think there's ever evidence of that going particularly well. So like, like, I believe people should be able to build generational wealth. But I also think there's these kind of points where it gets a little screwy. And I think, I don't know, like, you know, I was never promised any I was given a safety net growing up. Sure. But I was never promised. There's never going to be like, you know, but I imagined how it must be to grow up. But like, at some point, I'll have 100 million quid I think. I don't think it's good. Yeah. Is that good? I don't think that's good. I'm not sure that's good. You know what I mean, you can do with your money, what you want to do, but I don't I don't know if giving an enormous amount of money to someone will help them lead their happiest life. I think about that quite a lot. So anyway, no bit like the day with nothing thing, right? A little bit similar to that, like urine. I don't think you should. It's a world where you might want to pass on enough that your kids get on the housing market, or, you know, I mean, like they can get through university debt free and not, you know, carry a student debt throughout their entire life unnecessarily as stupidly crippling. But I don't know if millions of pounds at some point is like, good, unhealthy question. Ali Abdaal 1:32:37 One standard, well, somewhat standard piece of business advice is stick to your core focus, stick to the thing that you could add to your hedgehog concept or whatever, your unique ability, etc, etc. We've been thinking about this, I think about this a lot when it comes to setting up a kind of merch company. Sure. So I was very inspired when you gave a talk at the ziggurat summit a few months ago, actually, around how you have this separate company 10s of 1000s, which does your merch as it were, but it's not like it's not like a T shirt with your face on it. Although this would sell. It's more like these cool products, like the decks of cards and stuff like that. And I like the idea of making physical products. And in fact, we have some physical stationery, which you do is around here somewhere. But I also see the advice of, you know, the physical products are a bit of a side hustle. Like, I'd love to make my own mechanical keyboard, I'd love to make my own everyday carry a laptop bag, like frickin love keyboards and bags, and pens and journals and you know, the daily productivity kit. But it's not our core focus, and that when we as a team, we're not very good at making physical products, we'd have an expertise in it. And the thing we do is content. So one argument is double down and think you're good at. There's another argument for diversification for building a brand outside of me, necessarily that I can be the marketing director of but not necessarily the managing director of or not so intrinsically tied to the brand that it is unable to function without me in the room. But it's like, yeah, any any thoughts on that balance between stick to what you know, and do content around the thing? Versus branch out into multiple things where you might not necessarily be an expert, like physical product? James Hoffmann 1:34:11 You sure I mean, like I, we do it because the actual creation process is very enjoyable, like making fun, new things, is satisfying. I think that's why we do some T shirts and posters, but we also try and do more interesting stuff that's just kind of satisfying in that regard. You know, I think the reason we kept a separate is again, it's that kind of part of like, how do you build a sustainable thing? Well, I want it to have a relationship with its audience outside of me, I can do the marketing for it. In some ways, that's good, but I like the idea of it being its own independent thing, that it can grow a team inside it can have development for the people inside that. No, it doesn't have to be huge doesn't have to turn over millions of pounds. It can do that as a smaller business and still be satisfying. And at the end of it to be like we made some cool stuff and people really enjoyed using it. And that for me is a probably a bigger motivator than it generating 1000s of pounds of profit or payout. But that's just, you know, going into this because I've had a job from the beginning. And this hasn't been lifeblood stuff. I've had a stronger feeling of like, what's the thing I want to do that I enjoy? You know, I mean, like, I have no doubt that the essentially stuff has been very satisfying. Yeah. Sitting down with it and using it. Yeah, I get to use it every day. Right. Like that's, that's, that's enjoyable. That doesn't make much money. But it's one word at the end of the year, that may be a moment that you reflect on emulate. I've enjoyed that. Yeah, that was it. That was that was, you know, like, that was a return on whatever I put in, I felt a return on that. And I think that's, that has its place, I think, you know, running around trying to do 6 million different T shirts and mugs and all the rest of it can easily be a distraction. It's not a great margin business. Unless you get deep into the manufacturing. And then that's yeah, building the manufacturing, you're gonna start paper factory. There's a whole other thing, you know, you'll make a lot more money on each little diary. Yeah. But you'll have had to build a paper factory to do it. Like, you know, that's the that's the trade off. So, you know, yeah, I think for me, one of the requirements of business is, I enjoy it, I'm satisfied by it. And I think this is a great way to do that. And again, I think I'm also interested in poking around in the places that people aren't there gonna be like, no one's really making trays for dosing coffee and to be put in your grind. Yeah, lots of people are making T shirts. And so the t shirt, real estate available to get my T shirt on a body is limited. I mean, like, you're gonna have to pick and we still make them and I enjoy them. And we just have some fun with them. But like, it's T shirts are not as satisfying as like, we've got a some botanical prints coming like botanical drawings, an artist who works for Kew Gardens a lot. Like, it's like legit botanical drawings turn into like these posters. I want to own it, actually, okay. If I don't want to own at the end of it, we don't make it. If I don't wear the merch, we don't make it. If I don't want to drink out of the mug. We don't make it like that. I didn't want all of it. And I really want to own these prints. Yeah, because I love botanical drawings. So we're gonna make it and you know, like we can and why would you not? If you could, that's that, to me is the better? Why would we do this? Because we want to and we could we have the opportunity. Like, I think switching to YouTube for a second, like I'm in a weird place where I can I have the freedom to make videos that really no one else in my industry can make doesn't, you know, like I from AdSense or Patreon or other things, I can spend money to make videos. So I feel like I have a moral obligation to make things that no one else can, because they don't have that opportunity. And I would be squandering the opportunity to make stuff. So that's what we want to do like it doesn't, I'm going to fly to Italy. Tomorrow, I want to talk to someone who's the biggest collector of vintage espresso machines in the world. Like they have a museum. They are like the person I want to buy a vintage espresso machine. And ultimately, I want to put it on bar in London that people drink coffee from machine made in the 50s and have like a really, that's a nice thing. You know what I mean? But that's, that's the upfront cost of that. And actually, it will lose money as a video, but it doesn't matter. I can do it, I should do it, then that would be cool. Because I want to do it. That's a weird metric for making decisions. But it's very satisfying. Ali Abdaal 1:38:28 To think about it. Yeah, if I think of the keyboard, and I think of the bag of the stationery. It's like, it's, it's cool. And I want to do it. And I know it's not gonna make much money. But I think I need to start shifting my thing from the thing that we should be doing is the highest ROI thing. Roi is measured in things other than profit. James Hoffmann 1:38:44 Yeah, you know, it shouldn't be damaging for the longevity of the business. But you know, I think that yeah, it's not. It's easy. It's a nice metric, which makes it very appealing. Yeah. But I don't think it's always the best metric. Ali Abdaal 1:38:56 Yeah. And I really like the idea of, for example, spinning this off into another company that that can have its own team that have ownership, they have equity, etc, etc. So that it feels like and it you know, I think it's the one that you described sounds like you are the owner of a multi multiple businesses, but not necessarily operator have multiple businesses, and that you're very good at it. Yeah, I feel interesting. I think I'm kind of like you. And I like the idea of starting stuff and making the vision initially. And then when it comes to the day to day stuff. I'd much rather someone else deal with that. James Hoffmann 1:39:24 Yeah. But you know, I think it is important to understand that that there has to be a trade off in that. And that there's days where, yeah, there's days where I want to get in the nitty gritty and I just can't shouldn't that's just that's that's part of the trade off. But yeah, I think I'm not very good at a bunch of stuff. I'm quite good at certain things. And I think I'm most useful if I'm doing creative stuff. I'm kind of good at ideas and ideas of valueless without execution and I'm not the world's best executed so I need to work with could execute is to be vaguely useful to anyone. And I think we over value ideas. You resign NDAs around ideas you sign awesome. It's a nonsense. They're worth nothing until they're executed upon. Ali Abdaal 1:40:06 Do you worry about like, money these days? James Hoffmann 1:40:09 No. I mean, yes or no, like, you know, going into the current economic future. Yeah, we have to go through if we get into the spiral of inflation and all sorts of other stuff. Yeah, that's concerning. That's a worry. But yeah, I don't, I don't really meaningfully. Well, I mean, I've worried about it in the past, you know, like, I've sold food, so clothing items, or vinyl to pay rent, and you know, like, uh, uh, don't worry about it the same way now. But I'm, you know, what I'm aspiring for is just, I want the brain space back to think about other things. So yeah, I think that's, but that's easier if I don't want a tonne. And I think if I had a lot of, I'm trying not to get into the hedonic adaptation of that stuff, where you just consume more complements with that stuff. Again, I'm desperate to learn other people's hard lessons, the easy way. And you, you don't always you, you intellectualise it, you understand them. But you still kind of get sucked in. And then you know, two years later, you're like, oh, no, this is the lesson I need to have learned two years ago. Now. I can't learn it on paper, I have to learn it by making mistakes. Ali Abdaal 1:41:16 Okay, so I'm I'm 27. Right now, probably in a similar position that you were probably a few years ago, just getting started with all this stuff, not taking all the cash out of the business because reinvestment etc, etc. I'm noticing a tendency of lifestyle inflation in myself where it's like, you know, 1000 pounds a month rent is good, but 5000 gets you a really nice apartment. Oh, I wonder what 10,000 etc, etc. We were talking about espresso machines, we like when like to get into this as a hobby. And I and I see the warning, like the warning signs of like, hang on, the more the kind of baseline, how much money I need to comfortably live, the more that increases based on just hedonic adaptation and lifestyle, inflation and stuff, the more worries about money, I will have further down the line. Whereas if I can actually be very comfortable living a slightly more frugal life, keeping in mind the principles apply with zero, then it would free up a lot of headspace because right now, I spent a lot of time thinking, Oh, shit, what, what's the business going to look like three years from now? Are we still gonna be profitable, I'm still gonna be a YouTuber, etc, etc. Any advice? Just I think that will lead to you. It's really James Hoffmann 1:42:18 paying attention to the dissatisfaction, or the lack of satisfaction that comes with spending more money sometimes. You don't I mean, like, you buy the nice thing. Yeah. And you're like, taking nice camera, you buy the nice camera that is nicer. But I'm not satisfied. And part of your brain goes it didn't spend enough, right? And so that's the answer is you can't spend enough, your this feeling is inevitable. You can't you can't spend it away. So it's when you have that feeling. I think it's really useful and nice, but I Okay, that is oh, there isn't there isn't what I what I'm looking for is not here in the thing. And I think I think a nice, I'm not picking on you, because so you buy an asset, but, but I think that's a good example of that, like that, that feels nice to us. And there's moments where it feels special, but it's left you feeling like what do I get for even more, right? I suspect Ali Abdaal 1:43:10 like the q2 is nice, but like the lack of q3 is gonna be even better because it's gonna have a way of recharging via USB or the Leica M whatever that has film. Oh, hello, James Hoffmann 1:43:17 do you know and it's that's the wrong diagnosis of the symptom. You know what I mean? And it's just trying to catch yourself in that loop of like, oh, I can't I can't upgrade my way into a more into satisfaction gentlemen, it isn't there and stop chasing it gentlemen like but at the same time lean into the things that do give you real satisfaction. I really enjoy food I really enjoy restaurants I don't want you know, I think the fun thing about restaurants is that the really super expensive ones a terrible value for money right you can eat incredible the cutting the most interesting food is not certainly most expensive so if you want to get a Noma or you want to go to the Fat Duck that's that's unexperienced but I think really interesting food doesn't have to be very expensive but and that can be satisfying discovery is just straight deliciousness you don't I mean, that that I'm happy to lean into and spend on because I find a strong return on that particular thing you know, and and try not to fall into food as fuel or just like whatever else happens because you've got stuff to do and I eat at my desk like most people that's wrong and messed up but the trade off of trying to work more in less time. So yeah, that that that's a kind of piece of it. I think of just like where are you finding genuine satisfaction and not just the nuts good? I enjoy it. But and they like that's a dead end. And you can go for it. You just it's a dead end down there. Yeah, the minute you buy the nice thing and it's not quite what you wanted and you want more? Not Not gonna happen. Ali Abdaal 1:44:49 Yeah, I guess Ramit Sethi has this kind of idea he called he talks about figuring out what is your rich life like what what are the areas for you in which the addition of normal does in fact lead to more enjoyment, satisfaction, etc? And it sounds like for you being able to just eat at whatever restaurant you want is a significant value add. Yeah, absolutely. That's what other people happy with, like the local fried chicken joint. That's not a thing that they should spend money on, because they're not gonna bring them any satisfaction. James Hoffmann 1:45:14 But I think that's, you know, it's understanding where your passions kind of intertwine like, I'm a flavour person, you know what I mean? So that's unsurprising that I'm getting food and things like provenance and story. And all these kinds of things get woven into good food, good restaurants. ZOMO fried chicken nuts. But yeah, I think that's it for me. And just like thinking about budgeting for those things separately, but also understanding them well enough to buy them. Well, you know what I mean? Like, I love food, it doesn't mean I should be spending 500 pounds a meal to be satisfied. That's a different. That's just the wrong shortcut. You know, what I mean? Ali Abdaal 1:45:49 What is your sort of vision these days? In what regards because he said that before, you had this idea that this vision of like building a community of coffee lovers or equivalent, and you were agnostic about the details of the execution? Sure, do you have a similar thing for like your life, or what you want to do personally, James Hoffmann 1:46:08 I think there's a bunch of, you know, I work in a deeply broken industry. Coffee is messed up, coffee is built on colonial wealth extraction, coffee is ethically highly questionable, bad. Even if you're paying better prices, you're still working within a system designed to extract as much wealth as possible, from producing countries and capture it and keep it in consuming countries. That's not very good. That's a massive imbalance of power. It's ethically highly questionable. And while we try and operate within that, ethically, it's a more extreme version of there's no ethical consumption under capitalism, right? Like it's for I'm, I'm, I'm very uncomfortable with that being a part of my life. And I don't know how you change that. But I'm interested in working towards coffee being a better industry. On my end, I feel like I have a an opportunity to have people see coffee as being more valuable than they do. Could the coffee industry spend 100 years teaching you that coffee was cheap, easy, commoditized gets your caffeine and a bit of bit of taste, and it's fine, and that isn't true. And I need people to see it as being a bit more valuable. Because they enjoy it more. That's the secret. If you enjoy it more, then then you've got a bit more space to spend money on it, because it's rewarding, and you enjoy it. So that's my kind of raison d'etre for YouTube is to like to have people enjoy coffee a little bit more. So they see it as being more valuable. Because coffee needs to get more expensive, because it's just too cheap. And it's wrong. Yeah, and a story. And then I have responsibilities further back in the chain, to how we buy and that kind of stuff to do a better job. But I don't feel like I should necessarily lump ethical challenges onto the consumer who just wants a cup of coffee in the morning, if I get you enjoying it, delighting in it, it's a very positive experience for you, then that's easy for me to develop that relationship. If I just tell you, you should feel bad about yourself for buying coffee, that again, dead end things a little bit. So that's kind of a thing. So I Yeah, to make a coffee, sustainable, coffee has to be much more expensive, that money has to go to producers, they need more power in a more sort of equity in the whole supply chain. And the end low. That means a more expensive cup for consumers and I need them okay with that, seeing the value in that, to sort of have that happen that can't do this on my own. Yeah. But it's a role I can play. That's very cool. The tiny, important to some days unsatisfying, and wonderful and others. And that's just the nature of this. Yeah, it's Ali Abdaal 1:48:23 like you're not being so grandiose, like I want to change the world single handedly. But it's like wanting to only make the world a slightly better place in your own way where you're kind of leaning into the things that you're good at the things that you enjoy, and the platform that you built, therefore, the opportunities and privilege that you have to make this change happen, or what you James Hoffmann 1:48:43 think so I think that's a pretty good summary of the aspiration of the project right now. Ali Abdaal 1:48:48 Yeah, I think it's a good place to end the conversation. Thank you very much for coming on. I feel like we could we could talk for hours and hours, it will be it would be good to do around to some time where we go more into. I'm very curious about the ethics of coffee, we kind of went a little bit into the whole like Nestle stuff, which I still, like, have so many unanswered questions about. And I'd love to learn more about the sort of more specific the business side of things that you managed to pull the strings of. But I think yeah, there's been great. I think people have gotten we get a lot of value from the conversation. Hope it was fun. coming along. Yeah. Great. All right. So that's it for this week's episode of Deep Dive. Thank you so much for watching or listening. All the links and resources that we mentioned in the podcast can be linked down in the video description or in the show notes depending on where you're watching or listening to this. If you're listening to this on a podcast platform and do please leave us a review on the iTunes store. It really helps other people discover the podcast or if you're watching this in full HD or 4k on YouTube, then you can leave a comment down below and ask any questions or any insights or any thoughts about the episode that'd be awesome. And if you enjoyed this episode, you might like to check out this episode here as well which links in with some of the stuff that we talked about in the episode. So thanks for watching. Do hit the subscribe button if you don't already and I'll see you next time. Bye bye Transcribed by https://otter.ai