The Exchanges

Q So you would take these used bottles and I guess you, people would, would start to donate them and you, will you like wash them out, clean them and, and slapped Your label on it?

A Yeah. So the way we got the bottles, that's exactly right. Um, we would first begin by going to schools and saying, hey schools, you know, you may not have a recycling program, you know, would you like to start collecting your soda bottles for us? And schools were quite interested. We would cover the shipping to get it to us. We even made a small donation to them for every bottle they, they collected. Those would come in. Then we would take off the labels, clean them out, sort out anything that was already crushed or deformed or something like that. Then fill it up with the liquid worm poop and put on a label and put on a trigger sprayer, and that became our finished product.

AI assessment note: “that's exactly right. Um, we would first begin by going to schools”

Q So you would basically take food scraps from the dining hall at Princeton and you would put them in a container in your dorm room with worms in there?

A That that's exactly right. So think like a massive, uh, Tote type container, and that basically fit our fireplace, and, uh, we were putting all the scraps in there, and then trying to harvest worm poop. I mean, let, let's be clear, it was smelly, we had lots of flies, you know, we were really trying to figure it out, um, yeah, but I was hooked on this idea, you know, to me, it was the fascination, because we were taking one of the classes that, that semester was introduction to economics, and we had been drawing supply and demand curves in that class at Nauseam, and, uh, It always fascinated me, like, why can't you find the supply and demand of garbage on, on, on one of these graphs? And it turns out it's because there is, while there's massive supply, there's in fact negative demand. And so in this worm poop concept, the simple business model was, wait a minute, we can get paid for the input, because that's in a way the definition of garbage. People are willing to pay to get rid of it, and then make this phenomenal fertilizer on the other side. Um, And that sort of kept, kept, kept this all moving in that really exciting fashion.

AI assessment note: “That that's exactly right. So think like a massive, uh, Tote type container”

Q And I guess, what, initially, you sold it to, like, local gardening centers?

A So, this was another, it's funny you ask that, because this is another sort of major moment of desperation that occurred. Um, we couldn't afford any packaging at all. And so, uh, we went through all the recycling bins in the Princeton area, which is sort of sketchy. We were doing that at like two in the morning, going through people's garbage, and we thought maybe we could just temporarily package the worm poop we had in these used containers, and then exactly, as you say, sell them to local gardening centers. And this sort of desperate moment led to this phenomenal breakthrough that it turns out in, in beverage containers, um, there's not many shapes and sizes. I mean, certainly different shapes, but there's, Half liter, 20 ounce, one liter and two liter volumes. And in each of those sizes, the more, the most important context of shape, like its height or its width are identical, whether it's a Coke or Pepsi bottle. And that then truly became our first product, a liquid worm poop packaged in a used soda bottle.

AI assessment note: “and then exactly, as you say, sell them to local gardening centers.”

Q And so, how'd it go? I mean, Home Depot or Walmart, I mean, how did, how did you eventually get in the door?

A Well, so the, the first one, uh, was, uh, Walmart, and the whole thing was a little bit crazy because, so we got the meeting just through persistence, I would say. You know, I think we were calling every day from different phone numbers, so different numbers would pop up on the buyer's phone, and, uh, We were doing this for sort of six weeks straight, and finally he gets on the phone and says, you are these guys who keep calling, I mean, fine, come down, have a meeting. I think part of it was, what is this all about that these people keep calling so often, and maybe to have us stop calling? Um, so they, you know, he said, look, at eight o'clock on this day, come down to Bentonville and, and talk to me. And so, of course, we were super excited, and there was this, like, crazy travel moment where, I remember I'd, we'd booked a flight from Newark, uh, to go down to, uh, to Fayetteville, uh, seeing Walmart. And by the time I got to the airport, the flight had been canceled because it rained out. And so right away, we're like, assuming we're not going to get another meeting, so we rebooked the flight, you know, at an airport two hours away, get there, it cancels. Then I look at my friend, and we're like, look, if we drive 10 miles over the speed limit and take this number of breaks, we can get there right on time, driving from New Jersey down to Arkansas, and so off we went. And we …

AI assessment note: “we got the meeting just through persistence, I would say. You know, I think we were calling every day”

Q So I think one of your first partnerships is with, uh, Stonyfield and Clif Bar, and, and explain how that would work. You would, uh, they would, uh, pay you to create a program for them for people to, what, send in the Stonyfield yogurt cups or drop them off somewhere? How would it work?

A Yeah, that's exactly right. Very similar concept as how we were looking to, or how we were collecting the soda bottles in the worm poop days. We said, and we had some experience on how to do that. So we went to, uh, the folks at Clif Bar and Stonyfield and Honesty. Those were the first three partners that, uh, that chose to back us. And we said, look, you guys have non-recyclable packaging forms, juice pouches for Honesty, all the way to bar, you know, wrappers for, uh, for Clif Bar. And we'll set up a national platform for you where schools and other community organizations, you know, Places of worship, um, fire stations, uh, libraries can sign up, put out a collection bin, fill it up with that category of waste. Uh, so it wasn't just for say Stonyfield branded yogurt cups, any brand of yogurt cup could be put in through that program, then download a shipping label, send it in. And then we'd give a little bit of an incentive to that organization, a little money, uh, to be donated to them or any charity they want. And that's effectively how all this waste would come in, in this, in this first iteration.

AI assessment note: “we'll set up a national platform for you where schools and other community organizations”

Q What, what do you, I mean, right now, given that there are no financial incentives or penalties, right, what have you discovered is the best incentive to get consumers to, to participate?

A I find that there's really sort of two type of incentives that really move consumers. There is, uh, consumers certainly who care about the environment because it's the right thing to do, and we're seeing that trend in the right direction. It's just not for a hundred percent of people today. The other incentive, Uh, is creating benefit for their community. So we do a lot of programs where we say, hey, collect toothpaste tubes and toothbrushes, and then they get turned into playgrounds that may benefit a community near you. We see that drives a lot of motivation or donations to charity. And then the third is the odd one, which is making it fun and exciting. I'll give you a case study of this. You know, we did a study at a train station. I think it was in some, uh, in New York, perhaps. Like a busy train station, and we put out very well marked recycling bins, and very well marked trash bins right beside each other. And we noticed how many people would put an aluminum can or a soda bottle in the right bin, and it was 50%. And that's crazy, because they're right beside each other. Then we just inserted a little bit of fun, where when you put the, ah, something in the recycling bin, the recycling bin would light up and give like a sound effect back. And immediately it moved to 90% of people put the, ah, the recycling in the right bin. And so fun and excitement is also important, ah,…

AI assessment note: “I find that there's really sort of two type of incentives that really move consumers.”

Q good fight. Um, but you're, you're also running a business and it has to be a sustainable business. Tell me a little bit about the, the economics of TerraCycle today. I know I've seen different numbers about, you know, I know you raised about twenty five million dollars, um, in 2020. I've seen different numbers about your revenue, 40,000,050 million. Um, I mean, are you a profitable business right now?

A Yes. Um, so to give you a couple of statistics, in 2015, we turned profitable, and we haven't looked back since, so we've been able to post profits every year since then. Um, this year, you know, we'll do about 75 or eighty million in revenue, somewhere between those two numbers. And every year, this is our 20th year, we've achieved straight revenue growth every year. Now, Mind you, I'd still say just under a hundred million is a small number compared to the opportunity and the level of the issue. So we think we have a lot in front of us, um, but we have been able to achieve, uh, good stability, uh, and good foundations, uh, from a PNL balance sheet, all those vectors that you would look at in just, is it a good business model?

AI assessment note: “Yes. Um, so to give you a couple of statistics, in 2015, we turned profitable”

Q But Tom, what was the argument you made? I mean, how did, you know, what were you saying to the team? Like, we have to do this because?

A Well, for me, it was, look, we started TerraCycle because we wanted to create business models that solve garbage, and fertilizer was a good example of that. But we were not in our core trying to, you know, set out to create a fertilizer company. And if we become a consumer product company, where our role is to make products from garbage, then the business hero of that equation is the product, which means we're going to have to find the very best inputs so that we can make the very best product. And how are we going to solve waste if we're only going after the very best of the garbage? That, that was the foundational issue. And so, My hypothesis was, look, we need to make not the output, the product, the hero of the business equation, but the input, the garbage, and really think of how can we make sure we create business models that can deal with everything, all the gross and difficult things out there.

AI assessment note: “we need to make not the output, the product, the hero... but the input”

Q So, I mean, how do you, how do, how do you change? I mean, if, if, if it's a matter of economics, right, if it costs more to recycle than to use raw virgin materials, How do we fix that? I mean, essentially, can we fix that, or, or will companies simply have to choose to just pay more because it's the morally right thing to do?

A Well, I think there are two ways we can manifest change. We can have mandatory change. Let's call that regulation legislation, and we see that coming in the world of waste. We've seen certain things get banned, like the plastic bag in certain states and countries, plastic straws, disposable dining ware. That we'll call mandatory action, and we should do as much of that as Fast as absolutely possible, and it's good that we see some of that coming. After that, I think what's left is voluntary action. That's where, for example, TerraCycle sits, and there we have to seduce companies and convince them to invest in something they have no legal obligation to invest in. And with each stakeholder, it's, it's a different sort of types of value that we have to show. So for a brand, you know, our goal is to say, hey, you have this big issue. You can create A solution to it, but maybe you can also attract consumers into your brand versus a competitor that may not be offering that investment. Or if you're a retailer, maybe by offering recycling solutions for certain waste streams, you can attract more foot traffic. And in each case, it's about using the dynamic of business to think through what is the value that's being generated by funding the solution to that externality.

AI assessment note: “there are two ways we can manifest change. We can have mandatory change.”