The genius of Costco’s $1.50 hotdog, 'Founder Mode' impact, and Why lean startups grow faster

Let's talk about the genius of the Costco $1.50 hot dog. Have you have you had one recently? I don't know. Oh, you can't eat hot dogs. That's right.

But I know they lose money on hot dogs from my understanding. But it gets people in.

This is from Truong Van. You know Truong Van on Twitter? No. So he's he's a funny guy. He's got like a lot of subs. He's like parody account almost. But Truong says this is the image over here. It's Costco founder mode. So talk about founder mode again. Everyone's talking about founder mode now, right? So Seattle Times says. If that price of the hot dog combo goes up, what will it mean? Costco founder Jim Sinegal says that I'm dead. It's amazing how creative we have been to figure out ways to keep the price down. It was a Sinai hot dog and now it's a Kirkland Signature hot dog. It's actually 4.4 ounces, so it's slightly bigger than a quarter pound now. It's a drink and a free refill on the drink for $1.50. We used to sell the soda in a can. We put in soda machines, which took the price down. We improved the cost of the condiments. We purchased better on buns and things like that. It's the same quality hot dog, all beef, the best ingredients that you can imagine. I know it sounds crazy making a big deal about a hot dog, but we spend a lot of time on it. Seattle Times says, why is it a big deal for you? So this is the genius of the Costco $1.50 hot dog, because everybody talks about it. People look at that hot dog and say, $1.50, that is unbelievable. It's the same thing you'd spend $7 or $8 at the ballpark for and not get the same quality dog. It's one of those things that we're known for. When you get customers who are delighted with something, it's worth your time and energy to make it work. So it is remarkable because the way I talk about it with you, like I've had it before. I'm like, it is, it's a pretty damn good hot dog. And you get the drink too, $1.50. You can't even get that at like Burger King or McDonald's right now. It's like $5 for that.

It is a remarkable marketing strategy. I wouldn't recommend people to eat it because it's probably terrible for your health. Yes.

Okay. That aside, okay. We wouldn't eat hot dogs today, but like the fact, like that is remarkable marketing.

It's remarkable marketing.

Yep.

It's a loss leader. That's what they call it in marketing. You're losing money on something to bring them in the door and then you're selling them other things that make you an arm and a leg. And if you look at what Costco has done very well is they created this Kirkland brand and their margins are much higher on it and they sell it like hotcakes and it produces billions and billions of dollars in revenue.

Dude, you know what? I think we should talk about how founder mode will shift the tides of business and how it relates to marketing because And this is exactly what we're talking about because, for example, I'll give you a little background on founder mode, but let's just use Airbnb CEO Brian Chesky. So Brian Chesky, maybe a couple of years ago, 2020 actually. 2020, he's hearing everyone is like, okay, I think they're about to go— 2020, that's when they almost like— business went down a lot, right? Because of COVID the shutdowns and everything. And he's hearing from everyone. He's hearing from his board. He's hearing from his employees. He's hearing from all these people. You should do this. You should do this. You should do this.

You should do this.

So he started listening. You should do this. So, he started doing all these things that didn't feel natural to him. And I think he ended up not liking what he was doing. I think he ended up hating work, right? But he decided at a certain point, hey, I'm going to take— I'm going to get super involved with details again. Screw delegating everything. I'm going to get involved with all the details. I'm going to get involved with the product launches. We're going to— I think we're going to remove like layers of management and we're going to have a cohesive team, right? Because we had too many silos going on. So, with Airbnb, Once he started doing that, once he started getting involved with everything again, like everything just started moving up and to the right. So when Paul Graham wrote a post this past weekend on founder mode, and we've kind of been talking about this, we just haven't articulated this over the last couple of years where it's like, if we're involved, it's just a different company at the end of the day. And if you like, you're really good at this, like you just do what feels right to you. And sure, you might talk to other people, but if other people tell you what to do and you're not listening, like if there's no data or anything, you just don't listen to them.

Right.

But point is, if you're following your intuition as a founder, usually you're going to do the right thing. And as long as you're not abdicating and you're getting involved with big initiatives, the new things, the big things, the broken things, things end up working out, right? Again, like this is the fastest we've grown this year, like versus a couple years ago, it's like, oh, we were in trouble, right? But it's not that you and I are special or anything. It's just there's a special blood in founders that make things happen. And then everyone over the weekend was just like, You know, Austin Allred, all these people, Morning Brew founders, everyone's like, yeah, when I turned off, when I started listening to all these people, all these outside stakeholders, my business started crumbling. But when I turned it back on again, business went up and to the right.

Well, I never understood about that post from Paul Graham, and you sent it to me, thank you for sending it to me. And it's just a recap of what he got from Brian Chesky's talk.

It's like a 3-hour talk, yeah. Yeah.

When he's talking about founder mode, I'm like, I don't know what's new about this. This has been old and it has existed for a long time, and now everyone's talking about, oh, there's this new thing called founder mode.

There's this new thing. It's not new. It's just you and I have known this, right? We've never really articulated it fully. So I think the thing is, Paul Graham has said in that post too, and I recommend everyone reads this. I think we can both say it's a pretty good post. It's that it's the beginning of starting to really push this forward because again, people like you, we've known this. It's in our heart, but we haven't articulated it. And now that it's out there, I think there's going to be more and more literature coming around this stuff. And then I think future founders will be more prepared because you and I have been through that pain of just randomly listening to people. You have for sure. I have for sure. Right?

I've always, I've always been a founder who's very involved and never really stepped away and had a big executive team and just delegated and let them do their thing.

No, I will say, I mean, let's go to, let's go back to Kissmetrics. So Kissmetrics in that scenario, that felt, I could feel it from a mile away, right? You and Hiten, like you guys are used to kind of running your own thing and really not That was one of the first times you guys raised money, right?

Yeah.

It didn't feel like you guys. That's my point.

No, but we had a lawsuit and an FTC investigation. This was a long, long time ago. We won the FTC investigation. The lawsuit, funny enough, insurance. It was cheaper to go through insurance and settle it than fight it and beat it in court because insurance paid most of the money and we were just out $50 grand, which is way cheaper than our legal bills. And what happened with Kissmetrics is they put in a new CEO. It wasn't we chose to not be in control of the company.

We didn't have a choice. I'm saying before the lawsuit because I know the lawsuit came a little while later. But even before that, my feeling was because I was observing from afar, like we're still in our mid-20s, right? I felt like it wasn't you guys. You know what I mean?

I think it was.

Really?

We cranked hard. I would go into the office all the time. We would do our offsite meetings. Like I was heavily involved. I was even writing blog Yeah. And managing the team.

You were— both of you were working really hard. I just, I don't, I don't— you can correct me if I'm wrong.

And the business was doing financially well.

Yeah.

After we raised $1 million first, then $3 more million, we were financially profitable and we had cash in the bank account.

Cool. So you, you, so you, you feel like you had full control in that situation?

We did. Investors were happy with us. They were telling us to burn more money and we didn't. And we were really scrappy. Things were going really good. It was the moment the lawsuit hit.

Yeah.

Everything changed in the business and we lost control.

Got it, okay, yeah. I mean, even in that situation, see, you lost control, right? But I mean, the lawsuit is like the lawsuit. It's like you couldn't have foreseen that.

Well, we lost revenue right then and there. We needed more funding. And then with the dilution came loss of control over the business. And I don't think this is the investor's fault at the end of the day. It's our faults as founders. And eventually we lost control. CEO got put in. CEO didn't understand the product. A new CEO eventually got put in. He hired his girlfriend and spent $50,000 redoing a logo. And a lot of things like that just happened that made the business crumble. Then I went in there and I scooped up the domain name, kissmetrics.com, for half a million bucks.

That's a good buy.

And I was just like, give me the traffic. You don't know what you're doing. It buys you more runway. He was really happy with the deal. I closed it really quickly and took over the domain name and had more traffic and monetized it way better than they could.

I got to take a minute to tell you about the Agency Owners Association. Peer group for agency owners. Think YPO or EO but for agency owners. And I just wanted to read you a couple of testimonials. So this first one comes from Carrie, and we asked her, what do you like most about the group? She said, having a group of people to discuss and bounce ideas. The leads are great too. Yes, we share leads in this group as well. This one from Ollie, and he says, the ability to really post whatever I want and need and the group responds. Great experienced members. Getting a lot of insights from conversations with other members, getting a lot of value from sessions from Eric, getting advice from others as well. And so if you want to grow your agency faster and you want a peer group to do so, just go to marketingschool.io/agency. This is a group that both Neil and I created, and our hope here is to create a vibrant community of agency owners and do a lot more with it in the future. So again, marketingschool.io/agency, and we'll see you inside. I think my, one of my takeaways from all this, just listening to the KISSmetrics and the founder mode stuff is When you have the more and more stakeholders you have, or the more money you raise, the more you're susceptible to outside forces, right? You've got a strong will where like, you know, you'll take things in, you'll listen, but you probably won't listen to a lot of things.

Yeah.

I think more early-stage founders are more susceptible to listening to outside force. Oh, you have more experience. Oh yeah, maybe we should hire people with experience. Oh, I have a board over here. I should listen to them. Oh, I have these experienced employees, right? The more Stakeholders you have again, and the more junior you are, the more susceptible your business is. Yes.

And I also have a personality where I'm stubborn. It's hard to persuade me to do something else unless A, you have a ton of experience in the field that I'm exactly in, and B, you have stats and data.

As long as you— it's more number 2 than anything.

Yeah, it's more number 2. If you have stats and data, I don't really care about what I think or how I feel. I'm typically one who makes decisions based off of data versus gut.

Yep.

But yeah, dude, this morning I was talking to my co-founder and we're in 19 different countries. Some of the countries are struggling with sales. Not that they're not generating sales, but if you look at how many leads they're getting versus how much they're closing, the numbers are just not as great as they should be. So I was talking to him, I was like, you want to know how we have a really good 2025? He's like, what? I'm like, You should go to Europe and help a lot of the teams with sales. And he's like, yeah, I got my summer trip. I'm like, I know, we already talked about you going next summer.

The whole year.

No. And I said, how about you go now? I'm like, just go now. He's like, I just had a baby. I was like, cool. What do you need to get your baby and your wife to go along with you? And how much cash do you need? Yeah, that simple. Yeah. And then he called me back. He's like, I actually figured out a better way instead of me going there for a month or 2 or 3. I'm going to have everyone meet up with me in London, have people fly to me and do just hardcore training for 1 week. I was like, cool. And then I'm like, then you should go back the next month and follow up with people, let them know that this is happening so they improve their metric numbers throughout the whole funnel. And then let them know you're coming the month after and you're going to go over and you expect to see improvement.

So he's going to go once a month for a week at a time?

For 3 months.

Okay.

And he's like, cool, done. Right?

Like— That's not what you wanted originally though. I think you wanted him there longer term, no?

No, but this works out because he's going to go, They're going to go and implement and then we should see results. But they know that he's going to end up coming back within 30 days.

Yeah.

So their feet are held to the fire.

Yeah, but it's still very different than having someone full-time there.

It won't make a difference for this role. He's pretty much going over the sales process.

Oh, got it, got it.

Not actually selling, but the process of how many calls you need to make a day and just checking in.

No, I thought this was a much higher level, executive level, but—

No, this is actually for the people working on sales. Yeah, that should be fine.

That should be fine. Yeah.

But yeah, it's— I'm a big believer you have to be involved. It doesn't matter how much you raise or you don't raise. If you're involved, shit just is better. If you're not involved, it's not as good. And if the opposite is true, that typically means you're not a good entrepreneur.

I just think that the people that tweet about this stuff saying, oh, all I did, I have a holding company and I just hired these operators and I just got out of their way. And you end up seeing these operators, they end up like quitting in a couple of years or so. Even the Snowflake CEO, as much as like we've— I've talked good about him, when things started getting tough, he resigned, right? And so like, there's a place for CEOs for sure. But I think there's magic when you have the CEOs and the founders involved.

Yes. And some people aren't meant to be CEOs. Like, I'm not the CEO of any of my companies. I never have been. I'm a terrible manager. I tend not to want to be a CEO, but I work very closely with them. And I focus on what I'm good at and have them focus on everything I suck at.

Yeah, you're a good chairman. Yeah, that's what you are.

All right.

Quick note. This is about my company. It's called Single Grain, and Single Grain is an ad agency where we're focused on driving innovation. I want to talk about a couple of new strategies. And if you need help with marketing, great. If not, here are a couple of new strategies that you should try out. One is programmatic CRO. So we are doing programmatic conversion rate optimization on our site. So it's building products that will automatically optimize your site to increase conversion rates. We're also auto-optimizing, auto-updating from an SEO standpoint, and we're constantly thinking about what else we can do in terms of enriching the visitors that are hitting your website and also tailoring custom messages for them using AI. And so there's a handful of things that we're doing from a marketing standpoint. And our mission is just to drive more innovation. So if you want to learn more, just go to singlegrain.com, grain like rice. So singlegrain.com to learn more. And we'll see you inside. I actually have the graph over here, Neil, on startups that raise less money grow revenue faster. So this one is from— it's actually a Silicon Valley Bank thing. You can't see it.

I'll read it to you.

So, it says that other than the smallest startups, companies that raise less than 12 months of runway generally experience substantially more revenue growth than those raising more than 18 months worth of runway. It's impossible to infer too much from a few bars on a chart, but one implication is that less is in fact more when it comes to funding. Why might that be? Because if you have 12 months of runway or less, then you have neither the time nor the money to be complacent. Getting a little gritty might just be the key to survival. So sometimes, you know, it's like you wake up in the morning, you go to the gym, you're putting some stress on your body, you go to the sauna, you maybe do the cold plunge, right? You're getting your body ready for battle. But when you raise too much, you get fat and lazy. That's what happens sometimes.

And I believe that when people say you need money to build a company is a bunch of baloney. I do believe there's some businesses, like if you want to build Something like OpenAI, yes, it requires too much server power and resources to do it without—

Like, to do it with an agency, low CapEx.

Yeah. And with our agency, years and years ago, we had a really good call with Sequoia Capital. And at this time, Sequoia Capital invested in a company called Pilot Accounting, which their goal was to automate accounting. And we were telling them our goal is to automate marketing.

Is that still your goal?

Uh, no, it's adjusted. And when we were talking to them, and it was just a casual conversation, we didn't need money. At that time, Pilot raised money at a billion-plus dollar valuation, and Bezos Expedition, which is Jeff Bezos's company, just put in money. So when I was talking to Sequoia, they were just like, yeah, we're Sequoia. We can help with X, Y, and Z. And they're pitching me, and I'm not saying we were a good fit for Sequoia or anything like that, or that they would give us a check or not give us a check. It didn't get too far. Um, but when they were end up breaking down Pilot and their numbers were public because there was news articles about Pilot, and during the conversations I'm like, yeah, so we're a year younger than Pilot and we generate more revenue than them and we didn't raise any money and we're profitable.

No.

No, at that time I had a call with Sequoia. Yeah, I think we were at that time not the quickest but one of the quickest startups from $0 to $100 million. We achieved it in roughly 4-ish years, a little bit more than 4 years in revenue. And I was like, yeah, we bootstrapped it. And that is kind of a lie, but it's kind of the truth. I say it's kind of a lie because I put in—

You injected.

I injected over time, you know, originally it was very little money, hundreds of thousands, then it was $3 million. And then I put somewhere close to $5 total. But I was taking money back out. But in total, I put around $5 million max of my money into the company. So that's why I was saying it's technically bootstrapped because it's my own money, but it's kind of a lie because not too many founders are willing to put up to $5 million of their own money to come up.

I think injecting that amount, because it's $5 million is a— it's, it's, yeah, let's not take it away. It's a lot of money, but at the end of the day, it's not a lot in the grand scheme of things, right? When you're backing a business, I think that little injection goes a long way. But when you put too much, right, it's, uh, people start to get lazy. They start to get cavities because eating too much candy. Yeah. It's like when you give your kids too much candy.

I've never heard of that one. If you get lazy like cavities because you're eating too much candy.

Yeah, yeah. All right, that is it for today. Please don't forget to rate, review, subscribe. Go to marketingschool.io/agency. It is now application only, so you can't even pay to get in if you wanted to get in now. You have to apply. Um, and so that is it for today, but other than that, we'll see you tomorrow.