I think this was a helpful comment in that it demonstrates a sophisticated awareness of and an attempt to grapple with a key challenge of PFG models (as I see it). I can’t speak for anyone else, but I feel like some of the material I’ve read in the past promoting PFG doesn’t pay enough attention to how competitors might be able to exploit PFG’s challenges in raising capital.
Do you think it’s fair to view [large potential market + bigger profit margins + market that is naturally prone to centralize on a few dominate players] as a set of circumstances in which competitors would be more willing to commit large sums to sinking a PFG upstart? Unfortunately, those are probably also factors that give a PFG enterprise the best shot at delivering massive amounts of money to charity. This does seem to be the high capital-at-risk / high potential-reward quadrant of potential PFG enterprises. Let’s call that playing on hard mode. In contrast, competitors in the market for (say) premium-ish salad dressings have weaker incentives to burn lots of money to bury a competitor.[1]
From your last paragraph, it sounds like a lot of your theory of change comes from showing the world that PFG is a solid model and spurring other founders to choose a PFG model. Given that, I’m curious why you’ve chosen what seems to be a “hard mode” field. Do you think the “hard mode” problem permeates (almost) all potential PFG opportunities, or do you think the added impact of succeeding on hard mode is worth the added risk?
I’m just a public-interest lawyer (so not wealthy), but if I were a potential investor one of the questions I’d be asking here is whether the showing-the-world objective could be obtained for less financial risk in a market where competitors are less able and/or less motivated to subsidize than the likes of eBay. By analogy to how we fund global health work, I’d ask why we couldn’t run a less capital intensive pilot as a trial (cf. an RCT) before committing to something that risked deep coffers (cf. funding at scale).
In that example, presumably Newman’s Own had its own subsidy, too—free use of a strong celebrity endorsement. But the point is that (say) 5% market share can still be a success in the salad-dressing market for Newman’s Own, and that it isn’t a kill-or-be-killed market like (e.g.) social media.
Replies in bold. It’s messy, unedited and I’m tired, so keep that in mind!
I think this was a helpful comment in that it demonstrates a sophisticated awareness of and an attempt to grapple with a key challenge of PFG models (as I see it). I can’t speak for anyone else, but I feel like some of the material I’ve read in the past promoting PFG doesn’t pay enough attention to how competitors might be able to exploit PFG’s challenges in raising capital. By far the biggest bottleneck I have come across when talking to dozens of entrepreneurs trying to get PFGs off the ground is the lack of access to capital. Getting founders to start PFGs is not the biggest problem (our cofounder job applications had great pipelines), getting great employees is certainly not the problem (we hire less than 1% of applicants) and customers see the model as an extra reason to buy. From the PFGs I talked to this seems to generalise, although I did hear a view having some trouble finding cofounders. They all struggle with raising capital, and they raise less than their for-profit competition. I do think this can be solved, because philanthropy is hundreds of billions, but we need some of it to go to testing this model more rigourously.
Do you think it’s fair to view [large potential market + bigger profit margins + market that is naturally prone to centralize on a few dominate players] as a set of circumstances in which competitors would be more willing to commit large sums to sinking a PFG upstart? Unfortunately, those are probably also factors that give a PFG enterprise the best shot at delivering massive amounts of money to charity. This does seem to be the high capital-at-risk / high potential-reward quadrant of potential PFG enterprises. Let’s call that playing on hard mode. In contrast, competitors in the market for (say) premium-ish salad dressings have weaker incentives to burn lots of money to bury a competitor. I don’t have a prior but I do expect that they’ll try to sink a PFG upstart, but I’m not sure if they would try and sink it more than a for-profit upstart. They will also have to do it in stealth mode, because otherwise we’ll drag them through the PR dirt. On another note companies are still run by humans and I’m not sure how comfortable they would be with actively trying to kill a company that’s here to save kids’ lives. It’s hard to say but I don’t think they’ll try to kill us any harder than other startups doing it for-profit, and we have benefits they cannot match (tax benefits, hiring mission driven employees, employees willing to work harder/smart, free software, advice etc.). Overall I don’t see this as the biggest risk. I see the biggest risk as underfunding as opposed to the competition. My main worry is another company does the same thing with 50 million in venture capital model and we’re too slow because we only have 1% of that.
From your last paragraph, it sounds like a lot of your theory of change comes from showing the world that PFG is a solid model and spurring other founders to choose a PFG model. Given that, I’m curious why you’ve chosen what seems to be a “hard mode” field. Do you think the “hard mode” problem permeates (almost) all potential PFG opportunities, or do you think the added impact of succeeding on hard mode is worth the added risk? There are successful PFG upstarts who’ve done up to a couple million in donations with easier modes. I think the real change comes when you can show that you can do a PFG unicorn. That will start raising everyone’s eyebrows and get people thinking. There are billion dollar PFGs (Bosch, Patagonia, Carl Zeiss) but they only turned PFG when they had the cashflow to do it. The most successful PFG startup that made it is Newman’s own but they did not have the funding bottleneck. I think that’s an amazing case because it was a hyper competitive market and they made it work, perhaps because they were the only unique one with their business model. Commodities in general can be interesting. If you can buy 1 liter of detergent for 5 bucks or 1 liter of detergent for 5 bucks that donates to [charity you like], I think people will start choosing the PFG. The problem is getting to that stage with a funding bottleneck.
I’m just a public-interest lawyer (so not wealthy), but if I were a potential investor one of the questions I’d be asking here is whether the showing-the-world objective could be obtained for less financial risk in a market where competitors are less able and/or less motivated to subsidize than the likes of eBay. By analogy to how we fund global health work, I’d ask why we couldn’t run a less capital intensive pilot as a trial (cf. an RCT) before committing to something that risked deep coffers (cf. funding at scale). We only need 2 million to break even (we can likely choose earlier break even but at the cost of growth and future impact potential) and 500K right now (we can do with less, even 150-200K but would be suboptimal). I wouldn’t consider that massive as opposed to the funding other EA orgs get, which is very often within or (far) beyond this range. I think we can only get EA funding if the upside is massive. If I start a PFG clothing line it might do reasonably well, but it might only move a million to charity when successful, and I don’t think EA funds things that move a million when successful.
I think we’re at a stage where PFG already has had some good trials with good results (preliminary research showing they live longer and hint to higher profitability). The date on the massive PFGs is that they outperform the competition. I think these results are good enough to warrant a slightly bigger bet in the range of 500K-2M I talked about above.
A potential problem for EA funding this I believe is their lack of knowledge on judging startups. There aren’t many EAs who can judge the profit potential of a for-profit startup correctly, and they often don’t deeply understand the business, market and business model so they end up too unsure and not funding this. I should also note that there are two EA entrepreneurs who are skeptical but supportive of this idea. Both haven’t been updated with our progress in a year so they might be less skeptical now. We might not be funded because people think our team and/or business sucks, and if they are right that’s fine. However, from the PFGs I talked to they don’t seem funded by PFGs, even the ones I talked to who I thought had great teams and ideas and who I believe would certainly be funded in the for-profit space. They usually end up unfunded, finding funding outside of EA from startup investors, either as a PFG or when they turn for-profit.
BOAS has had serious interest from for-profit investors (3 last round accelerator declines and multiple investors hinting they would invest if it was for-profit), and we were often asked to go 50⁄50 or for-profit and me donating shares. I’m reasonably confident that we would have already been funded or in a good accelerator if this was for-profit. This also means we’re moving slower and competition with funding might start to catch up with us.
If fundraising fails, I might restart a similar company for profit and donate almost all my shares, but 90% of shares (if successful) would not go to charities and there would be zero impact of showing the model works and getting more PFGs to start, and it would be strong evidence for others not to start PFGs. However, if that company secures funding quickly from reputable investors/accelerators, it would have been a strong sign that EA missed out on an opportunity, and maybe it would signal to investors that they should invest other PFGs.
The most successful PFG startup that made it is Newman’s own but they did not have the funding bottleneck. I think that’s an amazing case because it was a hyper competitive market and they made it work, perhaps because they were the only unique one with their business model.
Newman’s Own is a difficult case study to evaluate for me because of the Newman factor. You could see Paul Newman’s very public commitment to the brand as a mix of three sorts of advantages that most PFG enterprises wouldn’t have:
A subsidy: how much was / is a celebrity endorser worth? AFAIK, Newman’s Own got the value of Newman’s goodwill / name recognition for free in addition to the market advantages of being PFG. You could model that as equivalent to a subsidy in the lesser of the value of the Newman endorsement or the cost of securing a similar endorsement.
A difficult-to-clone feature: Are there other A-list celebrities who would be willing to put their face on a bottle of salad dressing even for money? Even if there were, would they be willing to do so after Newman had set the standard for what putting your face on a salad dressing bottle means? Taking millions to put your face on Kraft, while consumers know that Newman was putting his face on Newman’s Own for charity, would likely cheapen the A-lister’s brand.
A legible guarantee of charity: Newman’s involvement with Newman’s Own gives the customer a stamp of approval from someone they feel they can trust (and whose reputation would take a major hit if the charity connection was overplayed or bogus). There’s enough charitywashing by plain old for-profit organizations to expect some cynicism from consumers that the PFG enterprise is the real deal.
Stated differently, how well does Newman’s Own work without Paul Newman?
I think it’s quite likely that the Paul Newman’s endorsement had a large effect. It’s impossible to say how well the brand would have done without his endorsement. My best guess is that it would have made it with just the charitable destination of profits, because it didn’t have a funding bottleneck. I do think it would have grown slower without Paul Newman actively endorsing it.
Celebrities are very often willing to put their face on anything for money. There’s literally millions of examples of that. I’m at least 99% sure you could get a celebrity to put their name on a sauce for the right amount of money, I haven’t googled but I’m sure there are examples of celebrity people on food packaging. How well it would work is hard to answer though.
Some people are cynical towards PFG’s. We were endorsed by one of the most famous authors in The Netherlands (Rutger Bregman) and there was some cynicism in the comments (I believe there were around 300 comments), but the vast majority of people seemed positive. The difference I think is really between giving away all your profits or just donating a small part to charity, which can be seen as charity washing. I have talked to a bunch of PFGs and they really do seem to enjoy great reputations. I specifically asked if they ever had to deal with bad PR and none had. For the major PFGs like Patagonia and Bosch, I’m aware that Patagonia had some negative PR about PFGs being a way to evade taxes, but the reporting on that was much smaller than the positive new (and you could say that any press is good press, which I’ve usually found to be true for the sales of brands after press, even negative press).
Celebrities are very often willing to put their face on anything for money. There’s literally millions of examples of that.
Yes, but it’d still be difficult for a for-profit salad dressing company to fully clone the Newman endorsement. I think the Newman endorsement is synergistic with Newman Own’s PFG status—the consumer understands that Newman is endorsing because he really stands behind Newman’s Own and its mission, not because someone is lining his pockets. It’s like the difference between repeated favorable press coverage in the New York Times and buying advertisements in the New York Times—they aren’t really the same thing. Moreover, I think whoever is hawking Kraft would face some unfavorable comparisons to Newman, and would thus demand a higher fee than in the counterfactual where Newman doesn’t exist.
I have talked to a bunch of PFGs and they really do seem to enjoy great reputations. I specifically asked if they ever had to deal with bad PR and none had.
I don’t think my main concern is “bad PR” per se. It’s my view that companies with characteristics similar to BOAS often run at a loss and/or need to re-invest almost all their profits into the business for an extended period of time. I think that is particularly likely where established market players will try to muscle it out, and a competitor could arise with easy access to VC money (both analyzed upthread). The PFG value proposition is much less legible if the company has been around several years and little has been donated to charity. So the crux here is how much time consumers will allow BOAS to start actually delivering meaningful sums to AMF, and how quickly BOAS can do that. My priors are skeptical, but I don’t claim expertise in evaluating specific business plans.
Companies like Bosch were—i assume—already profitable when they transitioned to PFG, so they could immediately show (rather than tell) their charitable plans. Part of my point about Newman was that his involvement may have provided reassurance to early-stage consumers that this was eventually going to work out and monies would eventually flow to charities. So neither would give me a strong sense of how long consumers would give BOAS a “PFG boost” without big donations flowing to AMF.
Incidentally, I own a Bosch dishwasher, which is not a minor purchase (~$1000), and had zero idea that they were predominately PFG (92%). They don’t seem to be advertising on that.
Celebrities are very often willing to put their face on anything for money. There’s literally millions of examples of that.
Yes, but it’d still be difficult for a for-profit salad dressing company to fully clone the Newman endorsement. I think the Newman endorsement is synergistic with Newman Own’s PFG status—the consumer understands that Newman is endorsing because he really stands behind Newman’s Own and its mission, not because someone is lining his pockets. It’s like the difference between repeated favorable press coverage in the New York Times and buying advertisements in the New York Times—they aren’t really the same thing. Moreover, I think whoever is hawking Kraft would face some unfavorable comparisons to Newman, and would thus demand a higher fee than in the counterfactual where Newman doesn’t exist. I agree with all of this.
I don’t think my main concern is “bad PR” per se. It’s my view that companies with characteristics similar to BOAS often run at a loss and/or need to re-invest almost all their profits into the business for an extended period of time. I think that is particularly likely where established market players will try to muscle it out, and a competitor could arise with easy access to VC money (both analyzed upthread). The PFG value proposition is much less legible if the company has been around several years and little has been donated to charity. So the crux here is how much time consumers will allow BOAS to start actually delivering meaningful sums to AMF, and how quickly BOAS can do that. My priors are skeptical, but I don’t claim expertise in evaluating specific business plans. We thought about this a lot. We allow voluntary checkout donations (no cost to us) which is already generating donations. We can also work with donation matching from a philanthropist. Suppose you’re a philanthropist that donates to AMF already, it would be interesting to do that partly through BOAS (e.g. for every purchase we match a €5 donation), where it wouldn’t be riskier or costlier, but you have the benefit of helping BOAS grow, with the potential to make large sums for AMF. We’re also transparent about needing money to grow so our donations will be relatively low. Transparency, donation matching and voluntary donations add up to amounts that seem significant to customers (e.g. a €10.000 total charity donation might seem substantial when you’ve only had €1 million in sales). Many PFGs, in my opinion, donate too much too early and hurt their future profit/donation potential. It might be because their customers demand it, but I don’t have data or knowledge on that. If customers demand earlier/higher donations that hurt growth, that might be an argument against PFG. On the whole we’ll have to see what the value of better employees and more loyal customers is as opposed to the negative value lower odds of raising funding and the potential necessity to donate.
Companies like Bosch were—i assume—already profitable when they transitioned to PFG, so they could immediately show (rather than tell) their charitable plans. Part of my point about Newman was that his involvement may have provided reassurance to early-stage consumers that this was eventually going to work out and monies would eventually flow to charities. So neither would give me a strong sense of how long consumers would give BOAS a “PFG boost” without big donations flowing to AMF. The successful large PFG’s, with the exception of Newman’s Own indeed pivoted to PFG when they had the cashflow/profits to do so. Based on what I’ve learnt from BOAS and talking to other smaller PFG’s I haven’t seen issues where customers would stop believing in PFGs. They either do well and donate some money to charities (in our case, voluntary donations and hopefully donation matching) or they die for various reasons (possibly sometimes because they’re not funded because of their PFG model).
Incidentally, I own a Bosch dishwasher, which is not a minor purchase (~$1000), and had zero idea that they were predominately PFG (92%). They don’t seem to be advertising on that. AFAIK no one I talked to knew about Bosch and they don’t seem to advertise with it. Employees of Bosch sometimes know but not always, and the region where they spend their profits does seem aware. I’m interested to know why Bosch decided to not actively promote their PFG status, where usually PFGs do. The same goes for Carl Zeiss. I believe it’s because they either don’t know the value and/or want to be modest families who rather give in silence. In Europe it’s not common to be vocal for philanthropists about their giving.
I think this was a helpful comment in that it demonstrates a sophisticated awareness of and an attempt to grapple with a key challenge of PFG models (as I see it). I can’t speak for anyone else, but I feel like some of the material I’ve read in the past promoting PFG doesn’t pay enough attention to how competitors might be able to exploit PFG’s challenges in raising capital.
Do you think it’s fair to view [large potential market + bigger profit margins + market that is naturally prone to centralize on a few dominate players] as a set of circumstances in which competitors would be more willing to commit large sums to sinking a PFG upstart? Unfortunately, those are probably also factors that give a PFG enterprise the best shot at delivering massive amounts of money to charity. This does seem to be the high capital-at-risk / high potential-reward quadrant of potential PFG enterprises. Let’s call that playing on hard mode. In contrast, competitors in the market for (say) premium-ish salad dressings have weaker incentives to burn lots of money to bury a competitor.[1]
From your last paragraph, it sounds like a lot of your theory of change comes from showing the world that PFG is a solid model and spurring other founders to choose a PFG model. Given that, I’m curious why you’ve chosen what seems to be a “hard mode” field. Do you think the “hard mode” problem permeates (almost) all potential PFG opportunities, or do you think the added impact of succeeding on hard mode is worth the added risk?
I’m just a public-interest lawyer (so not wealthy), but if I were a potential investor one of the questions I’d be asking here is whether the showing-the-world objective could be obtained for less financial risk in a market where competitors are less able and/or less motivated to subsidize than the likes of eBay. By analogy to how we fund global health work, I’d ask why we couldn’t run a less capital intensive pilot as a trial (cf. an RCT) before committing to something that risked deep coffers (cf. funding at scale).
In that example, presumably Newman’s Own had its own subsidy, too—free use of a strong celebrity endorsement. But the point is that (say) 5% market share can still be a success in the salad-dressing market for Newman’s Own, and that it isn’t a kill-or-be-killed market like (e.g.) social media.
Replies in bold. It’s messy, unedited and I’m tired, so keep that in mind!
I think this was a helpful comment in that it demonstrates a sophisticated awareness of and an attempt to grapple with a key challenge of PFG models (as I see it). I can’t speak for anyone else, but I feel like some of the material I’ve read in the past promoting PFG doesn’t pay enough attention to how competitors might be able to exploit PFG’s challenges in raising capital. By far the biggest bottleneck I have come across when talking to dozens of entrepreneurs trying to get PFGs off the ground is the lack of access to capital. Getting founders to start PFGs is not the biggest problem (our cofounder job applications had great pipelines), getting great employees is certainly not the problem (we hire less than 1% of applicants) and customers see the model as an extra reason to buy. From the PFGs I talked to this seems to generalise, although I did hear a view having some trouble finding cofounders. They all struggle with raising capital, and they raise less than their for-profit competition. I do think this can be solved, because philanthropy is hundreds of billions, but we need some of it to go to testing this model more rigourously.
Do you think it’s fair to view [large potential market + bigger profit margins + market that is naturally prone to centralize on a few dominate players] as a set of circumstances in which competitors would be more willing to commit large sums to sinking a PFG upstart? Unfortunately, those are probably also factors that give a PFG enterprise the best shot at delivering massive amounts of money to charity. This does seem to be the high capital-at-risk / high potential-reward quadrant of potential PFG enterprises. Let’s call that playing on hard mode. In contrast, competitors in the market for (say) premium-ish salad dressings have weaker incentives to burn lots of money to bury a competitor. I don’t have a prior but I do expect that they’ll try to sink a PFG upstart, but I’m not sure if they would try and sink it more than a for-profit upstart. They will also have to do it in stealth mode, because otherwise we’ll drag them through the PR dirt. On another note companies are still run by humans and I’m not sure how comfortable they would be with actively trying to kill a company that’s here to save kids’ lives. It’s hard to say but I don’t think they’ll try to kill us any harder than other startups doing it for-profit, and we have benefits they cannot match (tax benefits, hiring mission driven employees, employees willing to work harder/smart, free software, advice etc.). Overall I don’t see this as the biggest risk. I see the biggest risk as underfunding as opposed to the competition. My main worry is another company does the same thing with 50 million in venture capital model and we’re too slow because we only have 1% of that.
From your last paragraph, it sounds like a lot of your theory of change comes from showing the world that PFG is a solid model and spurring other founders to choose a PFG model. Given that, I’m curious why you’ve chosen what seems to be a “hard mode” field. Do you think the “hard mode” problem permeates (almost) all potential PFG opportunities, or do you think the added impact of succeeding on hard mode is worth the added risk? There are successful PFG upstarts who’ve done up to a couple million in donations with easier modes. I think the real change comes when you can show that you can do a PFG unicorn. That will start raising everyone’s eyebrows and get people thinking. There are billion dollar PFGs (Bosch, Patagonia, Carl Zeiss) but they only turned PFG when they had the cashflow to do it. The most successful PFG startup that made it is Newman’s own but they did not have the funding bottleneck. I think that’s an amazing case because it was a hyper competitive market and they made it work, perhaps because they were the only unique one with their business model. Commodities in general can be interesting. If you can buy 1 liter of detergent for 5 bucks or 1 liter of detergent for 5 bucks that donates to [charity you like], I think people will start choosing the PFG. The problem is getting to that stage with a funding bottleneck.
I’m just a public-interest lawyer (so not wealthy), but if I were a potential investor one of the questions I’d be asking here is whether the showing-the-world objective could be obtained for less financial risk in a market where competitors are less able and/or less motivated to subsidize than the likes of eBay. By analogy to how we fund global health work, I’d ask why we couldn’t run a less capital intensive pilot as a trial (cf. an RCT) before committing to something that risked deep coffers (cf. funding at scale). We only need 2 million to break even (we can likely choose earlier break even but at the cost of growth and future impact potential) and 500K right now (we can do with less, even 150-200K but would be suboptimal). I wouldn’t consider that massive as opposed to the funding other EA orgs get, which is very often within or (far) beyond this range. I think we can only get EA funding if the upside is massive. If I start a PFG clothing line it might do reasonably well, but it might only move a million to charity when successful, and I don’t think EA funds things that move a million when successful.
I think we’re at a stage where PFG already has had some good trials with good results (preliminary research showing they live longer and hint to higher profitability). The date on the massive PFGs is that they outperform the competition. I think these results are good enough to warrant a slightly bigger bet in the range of 500K-2M I talked about above.
A potential problem for EA funding this I believe is their lack of knowledge on judging startups. There aren’t many EAs who can judge the profit potential of a for-profit startup correctly, and they often don’t deeply understand the business, market and business model so they end up too unsure and not funding this. I should also note that there are two EA entrepreneurs who are skeptical but supportive of this idea. Both haven’t been updated with our progress in a year so they might be less skeptical now. We might not be funded because people think our team and/or business sucks, and if they are right that’s fine. However, from the PFGs I talked to they don’t seem funded by PFGs, even the ones I talked to who I thought had great teams and ideas and who I believe would certainly be funded in the for-profit space. They usually end up unfunded, finding funding outside of EA from startup investors, either as a PFG or when they turn for-profit.
BOAS has had serious interest from for-profit investors (3 last round accelerator declines and multiple investors hinting they would invest if it was for-profit), and we were often asked to go 50⁄50 or for-profit and me donating shares. I’m reasonably confident that we would have already been funded or in a good accelerator if this was for-profit. This also means we’re moving slower and competition with funding might start to catch up with us.
If fundraising fails, I might restart a similar company for profit and donate almost all my shares, but 90% of shares (if successful) would not go to charities and there would be zero impact of showing the model works and getting more PFGs to start, and it would be strong evidence for others not to start PFGs. However, if that company secures funding quickly from reputable investors/accelerators, it would have been a strong sign that EA missed out on an opportunity, and maybe it would signal to investors that they should invest other PFGs.
Newman’s Own is a difficult case study to evaluate for me because of the Newman factor. You could see Paul Newman’s very public commitment to the brand as a mix of three sorts of advantages that most PFG enterprises wouldn’t have:
A subsidy: how much was / is a celebrity endorser worth? AFAIK, Newman’s Own got the value of Newman’s goodwill / name recognition for free in addition to the market advantages of being PFG. You could model that as equivalent to a subsidy in the lesser of the value of the Newman endorsement or the cost of securing a similar endorsement.
A difficult-to-clone feature: Are there other A-list celebrities who would be willing to put their face on a bottle of salad dressing even for money? Even if there were, would they be willing to do so after Newman had set the standard for what putting your face on a salad dressing bottle means? Taking millions to put your face on Kraft, while consumers know that Newman was putting his face on Newman’s Own for charity, would likely cheapen the A-lister’s brand.
A legible guarantee of charity: Newman’s involvement with Newman’s Own gives the customer a stamp of approval from someone they feel they can trust (and whose reputation would take a major hit if the charity connection was overplayed or bogus). There’s enough charitywashing by plain old for-profit organizations to expect some cynicism from consumers that the PFG enterprise is the real deal.
Stated differently, how well does Newman’s Own work without Paul Newman?
I think it’s quite likely that the Paul Newman’s endorsement had a large effect. It’s impossible to say how well the brand would have done without his endorsement. My best guess is that it would have made it with just the charitable destination of profits, because it didn’t have a funding bottleneck. I do think it would have grown slower without Paul Newman actively endorsing it.
Celebrities are very often willing to put their face on anything for money. There’s literally millions of examples of that. I’m at least 99% sure you could get a celebrity to put their name on a sauce for the right amount of money, I haven’t googled but I’m sure there are examples of celebrity people on food packaging. How well it would work is hard to answer though.
Some people are cynical towards PFG’s. We were endorsed by one of the most famous authors in The Netherlands (Rutger Bregman) and there was some cynicism in the comments (I believe there were around 300 comments), but the vast majority of people seemed positive. The difference I think is really between giving away all your profits or just donating a small part to charity, which can be seen as charity washing. I have talked to a bunch of PFGs and they really do seem to enjoy great reputations. I specifically asked if they ever had to deal with bad PR and none had. For the major PFGs like Patagonia and Bosch, I’m aware that Patagonia had some negative PR about PFGs being a way to evade taxes, but the reporting on that was much smaller than the positive new (and you could say that any press is good press, which I’ve usually found to be true for the sales of brands after press, even negative press).
Yes, but it’d still be difficult for a for-profit salad dressing company to fully clone the Newman endorsement. I think the Newman endorsement is synergistic with Newman Own’s PFG status—the consumer understands that Newman is endorsing because he really stands behind Newman’s Own and its mission, not because someone is lining his pockets. It’s like the difference between repeated favorable press coverage in the New York Times and buying advertisements in the New York Times—they aren’t really the same thing. Moreover, I think whoever is hawking Kraft would face some unfavorable comparisons to Newman, and would thus demand a higher fee than in the counterfactual where Newman doesn’t exist.
I don’t think my main concern is “bad PR” per se. It’s my view that companies with characteristics similar to BOAS often run at a loss and/or need to re-invest almost all their profits into the business for an extended period of time. I think that is particularly likely where established market players will try to muscle it out, and a competitor could arise with easy access to VC money (both analyzed upthread). The PFG value proposition is much less legible if the company has been around several years and little has been donated to charity. So the crux here is how much time consumers will allow BOAS to start actually delivering meaningful sums to AMF, and how quickly BOAS can do that. My priors are skeptical, but I don’t claim expertise in evaluating specific business plans.
Companies like Bosch were—i assume—already profitable when they transitioned to PFG, so they could immediately show (rather than tell) their charitable plans. Part of my point about Newman was that his involvement may have provided reassurance to early-stage consumers that this was eventually going to work out and monies would eventually flow to charities. So neither would give me a strong sense of how long consumers would give BOAS a “PFG boost” without big donations flowing to AMF.
Incidentally, I own a Bosch dishwasher, which is not a minor purchase (~$1000), and had zero idea that they were predominately PFG (92%). They don’t seem to be advertising on that.
Replies in bold.
Yes, but it’d still be difficult for a for-profit salad dressing company to fully clone the Newman endorsement. I think the Newman endorsement is synergistic with Newman Own’s PFG status—the consumer understands that Newman is endorsing because he really stands behind Newman’s Own and its mission, not because someone is lining his pockets. It’s like the difference between repeated favorable press coverage in the New York Times and buying advertisements in the New York Times—they aren’t really the same thing. Moreover, I think whoever is hawking Kraft would face some unfavorable comparisons to Newman, and would thus demand a higher fee than in the counterfactual where Newman doesn’t exist. I agree with all of this.
I don’t think my main concern is “bad PR” per se. It’s my view that companies with characteristics similar to BOAS often run at a loss and/or need to re-invest almost all their profits into the business for an extended period of time. I think that is particularly likely where established market players will try to muscle it out, and a competitor could arise with easy access to VC money (both analyzed upthread). The PFG value proposition is much less legible if the company has been around several years and little has been donated to charity. So the crux here is how much time consumers will allow BOAS to start actually delivering meaningful sums to AMF, and how quickly BOAS can do that. My priors are skeptical, but I don’t claim expertise in evaluating specific business plans. We thought about this a lot. We allow voluntary checkout donations (no cost to us) which is already generating donations. We can also work with donation matching from a philanthropist. Suppose you’re a philanthropist that donates to AMF already, it would be interesting to do that partly through BOAS (e.g. for every purchase we match a €5 donation), where it wouldn’t be riskier or costlier, but you have the benefit of helping BOAS grow, with the potential to make large sums for AMF. We’re also transparent about needing money to grow so our donations will be relatively low. Transparency, donation matching and voluntary donations add up to amounts that seem significant to customers (e.g. a €10.000 total charity donation might seem substantial when you’ve only had €1 million in sales). Many PFGs, in my opinion, donate too much too early and hurt their future profit/donation potential. It might be because their customers demand it, but I don’t have data or knowledge on that. If customers demand earlier/higher donations that hurt growth, that might be an argument against PFG. On the whole we’ll have to see what the value of better employees and more loyal customers is as opposed to the negative value lower odds of raising funding and the potential necessity to donate.
Companies like Bosch were—i assume—already profitable when they transitioned to PFG, so they could immediately show (rather than tell) their charitable plans. Part of my point about Newman was that his involvement may have provided reassurance to early-stage consumers that this was eventually going to work out and monies would eventually flow to charities. So neither would give me a strong sense of how long consumers would give BOAS a “PFG boost” without big donations flowing to AMF. The successful large PFG’s, with the exception of Newman’s Own indeed pivoted to PFG when they had the cashflow/profits to do so. Based on what I’ve learnt from BOAS and talking to other smaller PFG’s I haven’t seen issues where customers would stop believing in PFGs. They either do well and donate some money to charities (in our case, voluntary donations and hopefully donation matching) or they die for various reasons (possibly sometimes because they’re not funded because of their PFG model).
Incidentally, I own a Bosch dishwasher, which is not a minor purchase (~$1000), and had zero idea that they were predominately PFG (92%). They don’t seem to be advertising on that. AFAIK no one I talked to knew about Bosch and they don’t seem to advertise with it. Employees of Bosch sometimes know but not always, and the region where they spend their profits does seem aware. I’m interested to know why Bosch decided to not actively promote their PFG status, where usually PFGs do. The same goes for Carl Zeiss. I believe it’s because they either don’t know the value and/or want to be modest families who rather give in silence. In Europe it’s not common to be vocal for philanthropists about their giving.