Fidji Simo - Creating Delightful Consumer Experiences - [Invest Like the Best, CLASSICS]
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Welcome to this classic episode. Classics are my favorite episodes from the past 10 years, published once a month. They're end-of-one conversations with end-of-one people. In the midst of our transition to OpenAI, we're spotlighting the force that is Fidgisimo. I hope you enjoy it. ♪

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Hello and welcome, everyone. I'm Patrick O'Shaughnessy, and this is Invest Like the Best. This show is an open-ended exploration of markets, ideas, stories, and strategies that will help you better invest both your time and your money. If you enjoy these conversations and want to go deeper, check out Colossus Review, our quarterly publication with in-depth profiles of the people shaping business and investing. You can find Colossus Review along with all of our podcasts at joincolossus.com.

Patrick O'Shaughnessy is the CEO of Positive Sum. All opinions expressed by Patrick and podcast guests are solely their own opinions and do not reflect the opinion of Positive Sum. This podcast is for informational purposes only and should not be relied upon as a basis for investment decisions. Clients of Positive Sum may maintain positions in the securities discussed in this podcast. To

To learn more, visit psum.vc. - My guest this week is Fiji Simo, the CEO of Instacart. Fiji grew up in a small town in the south of France and was the first person in her family to graduate from high school. Since then, she's had a dazzling career with stops at France's leading university, eBay, and Facebook. Fiji spent the better half of a decade at Facebook where she led the Facebook app before joining Instacart in mid-2021.

We talk about Fiji's consumer product experiences, Instacart's role within the grocery ecosystem, and delve into her personal leadership philosophy. Please enjoy this wide-ranging discussion with Fiji Simo. Fiji, I've been so excited for this conversation ever since Ravi Gupta introduced me to you. I've so enjoyed learning about you, your history, the business, where you might be taking it. And as I toyed with ways of open

opening our conversation, I can't help but open with a comparison between your experience running the Facebook app at Meta and your initial experience at Instacart, in part because it's going to let us talk about AI first, which I think is just such an interesting topic for any big business that interacts with lots of customers. What was that experience like for you? Arguably going from one of the all-time great business models to one that I think everyone knows has

a much harder business to get to scale. And then maybe all the benefits come at great scale, just wildly different businesses. And I'm really curious what that initial experience was like shifting gears so aggressively.

Thanks for having me, Patrick. My pleasure. I would say Facebook was the ride of a lifetime because it really taught me how to combine this long-term vision with short-term excellent execution because you never get to your long-term mission and vision if you don't have this excellence in the short term. And it also taught me how to build great consumer products. And so I definitely brought that to Instacart. But to your point,

It is a widely different business with many more constraints. Just to give you a funny anecdote, during my first week at Instacart, I remember joining our weekly business review and there was a team that had managed to save one cent per delivery through a set of optimization. And as soon as they announced that, the whole room erupted in applause. And I remember thinking, oh, we celebrate cents here.

And at Facebook, let's just say we weren't focused specifically on the cents. And I actually think that that culture of sweating the details, sweating literally every penny is what has made Instacart successful and has put us in a position where our unit economics are really strong in a market where there's been a lot of attempts at doing what we do and attempts that have been unsuccessful. So I've taken that culture to heart. And I actually think that

constraints sometimes create just a better business and better operations. I find that people, when you set some hard constraints, like you need to be profitable, you need to have great unique economics,

it raises the bar on the type of talent you attract, the type of execution that you get in a way that differentiates the good companies from the great ones. You mentioned that at Facebook, you learned what it meant to build great consumer products. What does that mean specifically? What's the dimensionality of those lessons? I think it was a lot about understanding exactly what consumers wanted and also understanding latent demand. And what I mean by that is

What was the playbook at Facebook was really understanding what users were already doing with a product that wasn't necessarily built for that use case as a sign that there was something there that you could productize and do something bigger with. And that has been the case at Facebook over and over again. If you look at Facebook Marketplace, people were already using the core Facebook product to try to exchange goods. So we built Facebook Marketplace as a result of that insight.

People were already posting links to YouTube to share videos. Oh, actually, it might be better to create a real video experience. But there was always a seed of something that we would build upon. And I've taken that to heart at Instacart in really understanding what are the things that people are already trying to do. And at Instacart, it translates into

They're trying to figure out what their meals for the weeks are. They're trying to actually come up with new recipes to diversify their diet. And every time we see something like that, we just build a product experience around it to help users with the things that they're fundamentally already trying to do.

Again, it's a great excuse since you've in both cases been at a business with just enormous amounts of data, first-party customer data, interaction data, clickstream data, just so much going on. And I think obviously that's an incredibly important ingredient for applying these new AI tools effectively to improve your business or improve your product. And I love this question, are you ready for AI? For every single business to be asking themselves that question feels quite critical.

Because this appears to be maybe one of those platform shifts that everyone's always writing about and talking about that create new opportunities. So what does that mean for you in the Instacart context specifically? And how do you think about that question more generally? If you were giving advice to a company you were on the board of, what would you say is the right way to prepare for AI if you're a company? In the context of Instacart, we've already been using AI for pretty much everything. If you go to Instacart.com,

Search is obviously powered by AI or replacement algorithm. If something isn't available in the store, what we recommend instead, that's powered by AI and informed by the massive hundreds of millions of data points we have on what people choose as replacements.

Same thing with how we connect shoppers to the right store and so that they get to you as soon as possible. All of that is powered by AI. And for us, it meant a very big investment in our data infrastructure because fundamentally without unique data and data that's easy to feed into models, it's really, really hard to take advantage of these new technologies. All of that unique data sets that we've built

over the last 10 years of understanding customer preferences, having incredible catalog data so that we know for millions of products exactly what's on the shelves, at which retailers, what is the nutritional information.

All of that is an incredible data set to build AI experiences on top of. That's really the part about the readiness. Now there's a question of, okay, how do you build new delightful consumer experiences on top of that? And I think the biggest change that we're seeing with generative AI is the shift towards natural language. Because if you think about commerce fundamentally,

It is a pretty weird experience online because you already need to know exactly which products you want, go into a search box, type their product, select their product, add it to a cart. It is not how people think about their lives. They've gotten used to it because that's all we could do with the tools that we had. But fundamentally, when people think about feeding their families, they think, okay, I have a budget of...

$200 for 10 meals. I have a family of five. One of them has food allergies. We all like Mexican food. What can I make this week with all of these constraints? That's the way you think about managing your family.

And then ideally, you would have an engine that tells you, okay, with all of these things, this is what we would recommend for breakfast, lunch, and dinner. And in one tap, you can add all of these ingredients to your cart. That is a much more natural way of thinking about the problem of what's for dinner. What are we going to put on the table than the current search experience?

So we are really rushing towards this ideal use case of helping you with all of the questions that you have to run your family and helping you answer them in a much easier way thanks to generative AI.

In order to really embrace the shift, you need to think about what it would look like to go AI native. And what I mean by that is having AI not bolted on on the side to your current experience, but thinking about if you were solving the problems that your company is trying to solve now from scratch with the tools that are currently available, how would you rebuild your products?

Would you rebuild it the same or would you rebuild it in a completely different way? Would you have full conversational experience instead of having a search box? And that is really important because that echoes an earlier stage of my career where I was asked to figure out how to monetize mobile at Facebook during the shift to mobile. And there was a clear difference.

contrast between the companies that were embracing the shift to mobile by taking their web experience and desperately trying to shrink them on a small screen versus the companies that were really using all of the tools that a mobile device had from location awareness to ability to take pictures and all of that to create a really unique mobile first experience. And I think we're going to see the exact same thing with AI.

I would encourage companies to think from first principles. With this new tool set, would you rebuild your products in a completely different way? And then the second piece of advice would be, I fundamentally think that AI is going to make software development easy. And that means that there's going to be fewer barriers to entry. So when I advise companies, I always tell them, focus on doing the hard things.

It was for 10 years, we have had the luxury of creating a lot of value from fairly easy things in consumer software. And now I think it's going to come down to really creating much deeper technology. And even for us at Instacart, the way I see it is that we are this unique translation layer between the digital world and the physical world. The whole thing that we've built is

is connecting to 80,000 stores across the US, connecting to 1,100 retailers, and this ability to translate your intent of cooking something for dinner into products showing up at your doors within two hours, because the physical world is still going to remain pretty difficult to navigate even in an AI-enabled world.

I think that insight is really fascinating that the barriers to entry to creating software are going way down because this has been something people have talked about, that there just aren't enough engineers in the world and they get paid so much and blah, blah, blah. What does that mean? Make that tangible for us through the Instacart lens. What is an example of tackling a harder technical challenge than just simple software that's going to become much easier?

This is a point that I made about data earlier is a good example where creating these experiences on top of large language models is going to become, again, fairly easy. And then on top of that, you're going to have a lot of tools to help the software development process itself.

But if you don't have incredibly rich data to start with, that becomes a lot harder. And so for us, building a catalog of millions of items where you know the availability all across the U.S., where you know the nutritional value and all of the ingredients that go into every product, that is a very hard thing that takes years to build, takes a lot of work.

And becomes the foundation for any other experience, because fundamentally, any AI experience that we can think of in the context of groceries is going to result at some point into translating whatever recipes or meal plan is into a set of ingredients.

Understanding the catalog of these different merchants is absolutely critical. I encourage companies to really think about what is the thing that's the data set that's going to create most value or the experience in translating the digital into physical experience in the world that's going to be really hard. And then you can combine these really hard things that you've done with all of the magic that's coming out of AI. And that's when you can create really amazing experiences.

I think in this era of software being such a great business model and the margins being so high and all these things, we've lost sight of the fact that we create software for a reason, to serve a customer's end goal. And I've heard you describe yourself as a pragmatic technologist before, and I like that term, but I'm also curious what that means to you and how that term applies in this shifting world.

I grew up in a family of fishermen, so I was always very down to earth, very much thinking of technology in the context of literally at the time putting food on the table. So even when I joined the tech industry, I always thought about technology being used to solve real human problems.

I joined eBay early in my career, and I never thought of eBay as this technology. I thought of it as this network where people would be connecting around their various commerce interests and communities. Then Facebook was the same thing. Incredible technological feat, but fundamentally what I cared about was, oh, I could stay in touch with my family and friends very easily.

I always go back to what is the fundamental problem that we're trying to solve. And in the case of Instacart, this question of what's for dinner is a question that every family asks themselves every week, pretty much since the dawn of time. And yet it is still a very complicated thing to do. That's why, you know,

A lot of people consider grocery shopping a chore because it is a complicated set of questions that you have to answer before you put food on the table. So again, AI technologies can fundamentally change that and make it easier because you can align them with a fundamental human problem. And I think where we go wrong is when we start thinking of technology for technology's sake.

And when the debate gets very theoretical, and we're seeing that play out with AI right now, where you have so many of these theoretical debates on the robot's going to kill us. When fundamentally I'm thinking of any technology as having a lot of potential for good, a lot of potential for bad. And our job is to make sure we maximize the good and minimize the bad. And the way to maximize the good is to really anchor on these technologies solving real human problems.

Your personal history is so interesting. I think you grew up in the south of France, you said in a family of fishermen. And I think you're the first person to go to even high school from your family, let alone college. I'd love to just hear how you got this bug. What was the story of you encountering the possibility of some of these technologies and these tools and riding that interest into the obviously incredible career that you've had?

I would say the answer will be so incredibly disappointing, but I think media helped a lot because as I grew up, I wasn't exposed to much. I grew up in a small town and this world wasn't really even visible to me. And a big part of my career at Facebook was spent in the entertainment category because I have a deep appreciation for the fact that

Media and the availability of media can expose people like me to the rest of the world. And I'll tell you, I was, I think, nine or 10 when I saw a documentary about HEC Business School, which is the top business school in France.

And I didn't even really know what I wanted to do. I didn't even know which jobs existed in business. That wasn't a thing. I remember going to my high school counselor and asking them, hey, what kind of jobs would I do if I go in business? And they were like, well, you can work at City Hall.

It was not a very expensive view, but I saw this documentary of all of these people who seemed really in charge, really having a view on where the world should go and driving it to the lens of business.

And I became really interested in following that path. And so initially in my early years, it was literally just as simple as I saw the documentary. I just wanted to go to that school. It turned out to be a pretty high bar, given that it literally is the number one business school in France, but I made it.

And then it was a game of discovery of what I didn't know before. So once I made it there, I realized I hadn't traveled the world at all. And again, the media made me see the U.S. as this land of possibilities, this land where everything's possible. And I became really enamored with it. And I ended up doing an exchange program with UCLA, which is literally taken out of the movies. It was the perfect setup.

And then technology came as a way, again, to expand my horizons. I'm incredibly curious. I want to learn. That's the thing that drives me the most. Technology was a way to really understand how could we change the world and change these core human problems, leveraging technology. And that explains why I call myself a pragmatic technologist, because I didn't come out of it building my first computer when I was seven.

That wasn't my path. My path was very much really wanting to solve big problems for the world and figuring out which tools did I have at my disposal to do that. And business was one of those tools. Technology was one of those tools.

That is the furthest thing from a disappointing answer. I think it's an incredibly important answer. And I think sometimes about the utility of what we do here with shows like this is for free trying to show people what's possible. And I think it's incredibly powerful that media was a through line for showing you what's possible. And obviously your story is a testament to just how far that can be taken. As you think about the landscape that you're now operating in with the chance to have that impact that you just described,

I'd love you to explain how you see the landscape that Instacart seeks to build within and address and improve. And the major key players of the industry, almost like an industry map as you see it, because it's complicated. It seems simple, but there's so many stakeholders and players and regulations and all these other things. And I'd love to hear your simplified map of how it all works.

If you take a step back, grocery is the largest category of commerce. We're talking 1.1 trillion in North America alone. It's a massive, massive retail category. And yet it's category of commerce that is the least penetrated online. It was 3% penetrated online before the pandemic. And then post-pandemic, we are at 12% online penetration.

And it's interesting because everybody was, oh, you know, after the pandemic, everybody's going to go back to stores and fundamentally we've reached peak online penetration for grocery. But what they don't realize is that at 12% online penetration now, we are still vastly behind every other category of commerce. If you look at fashion, if you look at beauty, electronics.

They're all in the 25 to 30% online penetration, which is kind of weird because I don't think you have many people who are saying that groceries in store is so much more enjoyable than going and buying electronics or buying fashion.

A big part of why that has been the case is because this is an industry that hasn't been technologically enabled. A lot of the large players resisted online transformation until it was absolutely needed. And now the big change that we're seeing is that there isn't really a grocery retailer who isn't embracing online and

realizing that it's going to be a third of their business at some point. That's really the big shift that has happened. That's fundamentally why I joined the company, Patrick, because if it had just been an online grocery delivery service, which is what Instacart is known for,

That would have been less interesting to me than this idea of building a technology platform that can help the entire industry make their digital transformation. And that's why we don't just build the Instacart app. We actually take the software we build for the Instacart app

And we make it available to every grocer that wants it on their own and operated properties. So if you go to Sprouts.com, that's powered by our technology. We build these e-commerce sites. Publix.com, same thing. That's a way for us to take everything we're learning about what it takes to create an omnichannel customer.

and distribute that to the entire grocery industry to accelerate that digital transformation. And that digital transformation isn't just happening online. It's also happening in stores. And that's why we made acquisitions like Keeper Cards, which are smart cards that allow you to skip checkout

Because we think that grocers are going to need to really embed these technologies inside their stores because customers are going to expect a rich, personalized experience, not just online, but also inside the stores. That move to omni-channel is really what the next 10 years are all about in grocery.

How would you explain the balance from the grocer's perspective? Maybe this is a similar question I talked with Tony Hsu about at DoorDash, which is obviously the grocery store wants what any business wants, which is more sales at higher margin or something. And that Instacart represents an obvious sales channel for them. But I guess if you could get all the same volume inside the store, I think they would take that. How do you think about that balance of how you are

serving the grocery store as both a compliment and as a customer, and sometimes both. I'm just really curious about the relationship because it seems good, but potentially maybe strained at times. And I'd love to hear how you manage that.

The thing that's really interesting is that there's tons of data showing that an omni-channel customer that shops with you both online and in-store is more valuable, more retentive, more profitable than an online-only customer or an in-store-only customer.

The thing that I work with with grocers is telling them that it's not about shifting an in-store customer to be an online-only customer. It is about shifting someone from being in-store only to purchasing on all channels because fundamentally that shift is coming. There isn't going to be a possibility to just let the e-commerce trend on the side fundamentally change.

This is coming no matter what. And what bosses need to do is to embrace that trend so that they really reinforce the loyalty that they have with their current store customers. There's also a lot of data that shows that

the first grocer that you end up buying online from is a grocer that you stick with. And so for grocers who tend to try to push back against that shift towards online, they're at risk of losing a lot of share because if other grocers are way more aggressive in capturing that online customer and that online customer sticks with them, that's a massive opportunity for share loss or share gain in this industry.

Fundamentally, I think our incentives are completely aligned with our grocers' incentives because as they move these customers online, these customers become more valuable to them and we can help them do that. What about data? It's always been valuable for Instagram. You're built on algorithms and algorithms like a lightweight way of saying AI.

I think more and more people are becoming wise to how valuable data is on their customer. And I'm curious how that works with the grocer. Because again, if you're the interface layer, which you so often are, at least in our house, for the customer to the grocer, you're capturing data. But what about the grocer? Do they push back on wanting that same data? How do you think about the role of data in this relationship between the two constituencies?

So first off, we do share quite a bit of data with grocers, obviously, within the boundaries of privacy laws. But also, because we power the online experiences of grocers on their own properties, they're collecting a lot of data from their customers there, where they can build a completely direct relationship with our customers on Publix.com, Sprouts.com, etc.,

And that's really important to them because to your point, they do want to build that direct relationship. They do want to be able to remarket to their customers. And what we are doing with that is just helping them take the best technologies that we build for our own app and making that available to them on their own properties, which is valuable. The thing that's important to understand is that there are different types of customers for different use cases. You're going to have some customer who are

so deeply loyal to Kroger that they're just going to go straight to Kroger.com, they're going to order from Kroger.com, and that's going to be their one mode. And then you have customers who actually really want the convenience of a marketplace where they're going to get our membership program, which offers free delivery, and they want to use that on many different categories, not just grocery, but also for

maybe doing that at Sephora, Dick's Sporting Goods, all of the retailers that we have on the platform. And grocers want to capture both customers. So we have options for them to do that on their own properties and on our marketplace, which tends to be extremely incremental to their own and operated business. We've had many surveys showing that it is actually capturing a customer they just wouldn't capture otherwise if they only focus on their own website.

When we talked last, we talked a lot about this notion of scale. And I'm interested in the idea of scale around the core original business first, which is the shopping or picking business. And what you've learned about that, I had a funny experience with John Collison from Stripe, where he said early on, they felt they were going to disrupt everything. And all the old farts were telling him, well, payments is a scale business. And he said, ah, it turns out payments really is a scale business. And it seems to me, this is a similar story where

The march for Instacart, as I understand it, towards good unit economics is a story of achieving scale. I want to understand that in as much detail as you can explain it. How does this thing march towards great unit economics? What role does scale play in that?

Scale is absolutely everything in this business. We used to lose money on every single order until we got to 100 million orders. That's a lot of orders. It took a lot of investment to get to the point where we had delivered enough orders and we had enough density that we could turn a profit.

And the way it works in our business is basically having density of orders at the store level so that we can batch orders. And what I mean by that is that we send a shopper to the store and instead of picking just one order for one customer, they might be picking two orders and then delivering that to the end customer.

which saves a lot of cost, as you can imagine. And that's something that's really unique to grocery because most of the time you don't need the items to arrive at a certain temperature.

That's much more the case in restaurant delivery. With grocery, you can actually batch orders and pick multiple orders at once without any issue. And so that's a very big driver of our unit economics and something that can only be achieved when you have so many orders within a given store that you can combine that. The other thing is that

Scale gives you a lot of data. Well, back to the data topic where with a lot of data, you can optimize much better. We now have shoppers that have gone down the aisles of grocery stores

hundreds of millions of times. And that means we can tell them exactly how to optimize how they pick products, in which aisle, where they should go, which products they should pick first, so that we minimize the time that they spend in the store. And therefore, we can be more efficient with that time.

All of these things combined lead to the superior unit economics. But to your point, it is a game of sense. You optimize based on the data you have. You continue collecting more data. You optimize again. And every time new orders come in, you can figure out a way to batch them more efficiently and ultimately turn a profit.

I'd love to understand the difference of the role of the shopper for Instacart versus the more general delivery driver. I would think of it as delivery driver, someone that's delivering restaurant orders or driving someone between point A and point B. What are the key differences to understand about the people doing this work, how they do their work, their costs, any other big important differences? Because I want people to understand why one is not the same as the other.

Our shoppers are just incredible and they are very different from the rest of the app-based economy. If you look at our shopper demographics, about 70% of them are women. That's really not the case in other apps. More than 50% of them are moms. And a lot of what we hear is that they first feel safer doing that kind of job than the other jobs.

A lot more of the time is spent inside the store in the case of Instacart because about half the time is actually spent picking the items. Only half is spent delivering them. That's really important because that makes the job very different. And also that means that the cost of fuel and all of these things that shoppers have to accomplish

account for is less in the case of Instacart than in the case of other platforms. That matters a lot. And then the last thing we hear a lot is that a lot of our shoppers really love the customer service aspect of Instacart. I know you're a user, Patrick, but very often our consumers end up inside the chat talking to their shoppers and problem solving. Oh, I was wanting to make pasta for dinner, but the tomato sauce is out of stock.

Let's figure out how we can adjust. And that requires a certain type of shopper who likes interacting with customers, who really thinks of themselves not as, to your point, drivers, but really as customer service people and wanting to provide the best customer service. And that's why we end up with just incredible stories, I think,

Last year, there was a story of one of our shoppers delivered items to a house and she saw an older gentleman looking a little confused and disoriented. And instead of just leaving the item, she actually reached out to

to the person who had placed the order was actually the daughter of this gentleman and said, hey, that doesn't look good. I don't want to leave. And the daughter arrived and it turned out there was a gas leak. If Scharper hadn't picked up on that, God knows what would have happened. We hear every day

stories of shoppers going the extra mile because they really consider it a job where they exceed customer expectations all the time, which is why I'm so proud that we have these people, 600,000 shoppers delivering for Instacart.

Why is there not a grocery store that's a technological revolution and whether it's robots or something built into the structure of the store that just extracts out, you can program into it what you need to get out of it and it just parcels it up or packages it up. So much of this seems we're advancing forward versus working backward from an ideal solution. Why doesn't something like that exist? Is it just too hard to do?

I would say there's a couple of things. First, there are some places like that that exist. The reality, though, is that the thing that matters most to the end customer is, are you a brand that I trust? And are you going to get my groceries delivered on time and quickly?

And when you think about that, the fact that we have already 80,000 grocery stores that are close to the customer, that is fundamentally the biggest advantage. You are completely right, Patrick, that if we were starting from scratch, meaning no grocery store in the country, you build it all from scratch, we would likely build a mix of fully automated facilities and the grocery stores as we know it, usually, I would imagine, co-located.

so that you could have your high-velocity items in the automated facility, and then for the more specialty items, you could go and manually pick these items from the live grocery store nearby. That's the ideal situation if you start from scratch. You're perfectly right. But we're not starting from scratch. We're starting from a place where these massive stores already deployed, and that means that they are already close to the customer, and it is actually relatively inexpensive to

to send people to a store to collect these items and deliver them to the customer, compared to the capital intensiveness that it takes to recreate an entire warehouse, put a lot of robots into it, have that warehouse be probably further away from the customer because you want to have a lot of orders going through that warehouse. So you have to aggregate and that means you're going to be many hours away from the customer.

And that's what we're seeing play out. If you look at the people who are investing in this automated model, what's happening is that they're usually many hours away from the end customer and therefore they offer very often next day delivery, which there is a market for, but that's not by any stretch the majority of the market. So if you want to offer

delivery in the next one to two hours, leveraging the 80,000 stores that already exist to do that is by far the most optimal solution. It's a fascinating reality that you have to operate within and makes perfect sense. We haven't talked much about the brands that are wholesaling into the grocers and the role that they play in this entire ecosystem. And I think maybe about one

wanting to listen to my favorite band on Spotify or something. And if my favorite band's not there, I get upset. Same thing if I go on Instacart and I want a certain brand of XYZ, that diminishes the experiences for me. So how do you think about your relationship to the end brands themselves? And in what ways do you work with them from a business perspective?

So brands are going through the same massive digital transformation. They are seeing a business that used to be fundamentally just in store.

move online at a very fast clip. So they are all adjusting to the same reality of how do we go capture this online consumer, especially since we're seeing the same phenomenon we're seeing with retail brands, which is when a consumer finds a brand that they like online, they tend to stick with that brand. And so you really want to be first to make sure that you maintain your category share if you're a category leader in, let's say, cream cheese or gain share if you're a new entrant. So

The way we work with them is by offering them a set of marketing solutions to be able to attract that customer. One of them is sponsored products, which is if you type in our search engine cream cheese, you can appear at the top in a sponsored unit. That's very typical advertising, but also more storytelling capabilities. We recently launched what we call shoppable display and shoppable video ads, which

where brands can have full video messages about the attributes of their products and then within one tap encourage people to buy them. We're seeing a lot of momentum with brands leveraging these products and we just released new studies that show that by using Instacart ads, brands are able to see a 15% sales lift.

which is actually really massive in that industry. And so we know that our advertising solutions work. And in fact, during these interesting market conditions, what we've seen is that brands have tended to cut down on unmeasurable top of the funnel advertising and put more dollars behind very high performance targeted advertising.

And where exactly that you can literally advertise right as a person is building their cart and get your product in the end of that person within two hours. That's the most magical experience you can think of when you think about ads. Compare that with the way a lot of consumer packaged goods companies have been advertising over the years where you see an ad on TV and maybe they hope that a month later you're going to go into a grocery store, remember that ad and buy that.

That's very, very different. And that's why you're seeing a massive rise in what's called retail media networks and the type of dollars going towards that. We're really helping brands with that transformation. And one thing I'm really excited about is that

It also gives a shot to totally emerging brands, because if you're a really small emerging brand, you have just developed this one amazing product. Good luck figuring out how to spend your money on TV or radio or all of these channels that are just incredibly costly. Whereas with us, if you're carried at a couple of grocery stores, you can put money behind that.

and make sure that customers that shop online for that grocery store discover your products. And then you can move your products off the shelf at retail by doing that. And so that's the holy grail for these emerging brands who are trying to get these expansions at retail stores and are trying to spend their dollars in very measurable channels.

You mentioned AI native before and businesses needing to build AI native. What would it mean for a new food brand to build Instacart native? If you could give advice to a new brand that said, okay, part of what I want to do is make sure we build this company in such a way that will be really successful on Instacart. Does that mean anything? Is that predictable? Are there features that you notice of brands that do better or worse on Instacart?

It's all about tapping into a category of products that consumers have demand for. I think it's a little bit upstream of just designing for Instacart. It's more designing for the online consumer, which we are a proxy for. And there's this company, full disclaimer, I'm an investor, but it's called Starday Foods.

And I love that company because basically what they've done is really thought about how do you build emerging food brands with all of the new tools that online allows you to do? And what would it take to build a CPG product like we build software products? And what that means is that the A-B test, the name of the products, the A-B test, all of the colors of the packaging, everything.

Instead of having a focus group of five people, they put that through Instacart ads instead. And through Instacart ads, they tried to figure out, oh, okay, when the product is this way,

Actually, people react better when it's that way. People react worse. And they optimize our products the way you would optimize a feature online. And I find that approach fascinating. It's very hard to do with physical products. And a lot of companies are not built that way. But because your push was, if you were to build it from scratch, how would you build it? I think it's all about leveraging all of the data that online gives you access to so that you can create a product that consumers are really going to love.

in a niche that's not oversaturated.

Could you talk a bit about the big chunky pieces of your vision for where Instacart could go from here? Because we've got a product that's just so familiar to probably just about everybody listening, they've used it or their families used it before. And you mentioned earlier that the shift towards becoming infrastructure or a software platform for other partners, grocery partners, Sprouts, you mentioned as an example. Is that the major initiative that you're focused on as you look forward?

building on what the amazing data and infrastructure and lessons that you've already learned? Or are there other major pieces to that vision too? There's a few pieces. The first thing I'll say is our number one job as a market leader is accelerating that shift from install only to omnichannel. That's the core of our business. We are always going to be focused on that. We

We're still in an open-ended market. So having a lot more consumers end up adopting the Instacart we all know and love is the primary mission. But I think there's a lot of ways in which you get there. And one of the things I talked about is going and expanding our technologies to the store. And so how can we be helpful to our retailers and to our customers by developing in-store technology, whether it's smart cards, whether it's

in-store mobile technology so that the experience is much more seamless between online and offline. So that's definitely something we're thinking a lot about. Another thing that we've launched recently is called Instacart Health. And what it is, is taking our entire infrastructure of, again,

access to 80,000 stores, 1,000 plus retailers, and making it available to the healthcare industry so that they can scale food as medicine. And what I mean by that is making it really easy for doctors and providers to prescribe food as easily as they prescribe medication and have that delivered to your door the same way you would have a prescription delivered to you. Because it is pretty crazy when you think about it that

About 87% of health care costs come from diet-related diseases. And yet, to this day, it is much easier for a doctor to prescribe medications than to prescribe a diet. For us, what we are thinking about is, hey, we've built that entire

technology and platform infrastructure so that anyone in the U.S., we reached more than 85% of the U.S., can get fresh food in under two hours. How can we put that in the hands of a hospital system or for doctors so that they can just prescribe food as easily as they prescribe medication? And how can we enlist payers of

health insurance companies to reimburse the cost of fresh food because it would save them so much in health care costs down the line. There's this recent study that came out that showed that if health insurance companies were funding the cost of fresh food for people

who are food insecure and people who have conditions that are diet related, and they were just literally funding the cost of that fresh food, they would save $185 billion in health care costs down the line from people not having to go to the ER, from people saving on medications down the line. And so that's a pretty major shift that will take

many years to play out, obviously. But we're optimistic that we can accelerate that shift as a technology player that makes it really easy for the healthcare industry to start, again, prescribing food and funding the cost of fresh food as easily as they reimburse and prescribe medication.

You mentioned earlier the relationship with Sprouts and this notion of being a technology platform for other retailers. Can you say a bit more about that? Because I'm assuming it's early days there, that's a small percent of your revenue. What could that look like in the future? Is there a chance that a major or majority part of Instacart's revenue in the future is through that channel, that you are just the big behemoth enabler and infrastructure provider to those 80,000 grocers and all the brands there?

Actually, a fairly sizable part of GMV comes from transactions that happen on our grosses sites. We monetize it the same way as we monetize our core app, which is through a mix of fulfillment and advertising. But it is already very meaningful. And that goes back to the point I was making earlier, which is that

You have a set of customers that are going to want to go to a marketplace, but you also have a large set of customers that want to go straight to Publix.com, which we power, or straight to Wegmans.com that we power. And that's part of the market that we want to serve.

We have partnered with a lot of grocers to make sure that the technologies that we build and perfect with our marketplace, knowing that we reach millions of customers, we can take all of these innovations and put that on their own properties. A good example, by the way, is ads, where I was talking earlier about this massive trend towards brands wanting to spend on retail media. And that's a massive opportunity for grocers to turn their income

commerce website into advertising platforms. But that requires a massive investment in technology. We can provide that for them. In fact, we just announced that we are doing that with Sprouts where we power advertising on sprouts.com.

And that means that overnight, Sprouts can start getting some of that advertising revenue directly to them. And for us, it's also beneficial because that means that we can take the customers that are very loyal to Sprouts going straight to Sprouts.com and also monetize that customer base. So...

All of these technologies are already part of many retailer sites. And we do that in a modular way. Sometimes we power the whole website plus the fulfillment, plus the ads. Sometimes we just do the fulfillment connected to a retailer's website. So we have multiple models to really adapt to where the retailer is at in their own digital transformation and what they want to build themselves versus what they want to complement with our technologies.

If you put your capital allocator hat on up against everything we've talked about, could you describe your principles of capital allocation? I know you're passionate about this topic and have read a ton about it and thought a lot about it.

And given the amount of connective tissue there is for the Instacart ecosystem, it just seems like a capital allocator's dream that there's lots of things that you could outlay time, effort, and capital against, and that the skill will be choosing which to do and which not to do. So what are the principles that will guide you in those decisions?

Fundamentally, we want to create value for everyone in our ecosystem. And when I came to Instacart, we revamped our values and the value I cared the most about is this value called Grow the Pi, because I fundamentally believe that the best companies are really making an entire ecosystem rise and creating a lot of value for other players around them and then end up benefiting a lot from that value.

And that's why you're seeing me invest so much in making our retailer partner successful, making our brand partner successful, working with the healthcare industry. To me, it's all ecosystem that when they rise, we will win. And a lot of the things I think about is, one, we are in a market where it's even more important now to show financial discipline, to show that this is a model that is already profitable, but can be even more profitable over time. I also think a lot about

The fact that the tech industry has very much gotten a pass in the past for talk-based comp, and now we need to hold ourselves to a much better

and actually think about stock-based compensation as actual compensation, really wanting to be profitable net of stock-based compensation. And once we clear all of these milestones, really thinking about the cash that we have in terms of opportunities to fuel the business and grow, and that can include M&A, but that can also include investments

investing in a lot of the experiences that I have mentioned, because we fundamentally believe that we're in the early innings of that industry and we want to continue to invest to grow and capture more share. But the thing that never serves you poorly is focusing on free cash flow. And as a result, we're very focused on that because that gives us a lot of options in the future to reinvest in all of the different ways to drive growth.

What do you think if I got 100 investors and other business people in a room that had some sense of Instacart, what do you think the most common misperception would be about the business?

I think, you know, first off, there is still a big cloud over the industry of thinking of these models as fundamentally unprofitable. And I think it's up to all of the players in that industry to show that that's not the case and that these models can actually, at scale, be very profitable. That's the thing that I'm spending a lot of time on and showing how

how we get to the type of unit economics that make us a really successful business. So that's, I think, a very, very big thing. I think the other thing might be that Instacart really is only the app. And so that conversation shed a spotlight on the fact that that's not the case and that our network of partners are actually contributing a lot to our business. And that's also very important.

There might also be this perception that I think is outdated of grocers not fully embracing the relationship with Instacart. And I think when I arrived in the job, I spent a lot of time with our grocer partners to really try to understand what were their fears, what were their hopes, how do we align incentives? And I think we're now at a place where it's very clear that

Our success doesn't come at their expense. In fact, the incentives are aligned. And by driving this customer online, we are actually driving their business for the future and making sure that their customers remain loyal and increase their share of wallet with that grocer. And so that I think has really changed in the last couple of years where that tension used to exist and doesn't exist that much anymore.

You've said to me before that part of your management philosophy, maybe a driving part is to see the magic in people. It sounds very nice. And I would love to understand what that means in practice. What does it mean to see the magic in people? Why is that valuable? What do you do about it? I would love to understand this method of yours.

The thing I mean by that is that I always try to focus whenever I have a new team member on trying to understand what is the thing that that person really spikes on. The thing that makes them really unique and map problems we have to solve or opportunities we have to tackle to that person's unique strengths.

And that seems very basic, but sometimes it requires going beyond the thing that this person is obviously good at. So I'll give you a concrete example. My chief comms officer is obviously exceptional at communication, but she's also exceptional at creating a team that has a very high bar and very high consistency in their health output.

And that's the thing that it's very useful to have in ops. It's very useful to have in product. When I picked that up, hey, I actually want you to go teach that to all of your other peers because they can apply that in a lot of their areas. Meanwhile, when I look at my CEO, for example, she's obviously the best operator I can think of, but she's

very good at taking a complex problem and figuring out how to organize teams around how to solve it. And again, that can apply to finance, that can apply to plenty of teams she doesn't manage. I organize

These dinners with my team where I push them to talk about their superpower. No one will volunteer, oh yeah, I'm amazing at blah, blah, blah. So I usually just push them a little bit. This is what I see you do really spectacularly well. How do you do it? Try to articulate it for someone for whom that's not a natural skill and try to give them tools so that they can become good at that.

And I think that has made us all around the table better. That has allowed us to change our playbooks, step up our games, and also create an environment where even when you're at the top of your game in one field, you can still feel you can learn and you're expanding in other territories.

How do you keep learning? In a position like this, I'm always amazed by just the sheer amount of stuff to do. There's just an unlimited buffet of problems and things that you could do that are great, fires you could put out. How do you continue to learn as you also manage a business like this with so much complexity?

I learned first a lot from my team. And my team will tell you, I am never ashamed of stopping a meeting and, hey, sorry, dumb question. I do not understand this. I want to learn. And that has helped me a ton because constantly

Coming from Facebook, it was interesting. I was running a team of 6,000 people, so larger than Instacart. The Facebook app by many dimensions could be thought of as bigger jobs than running Instacart. But when I came into a CEO job, there were a lot of things that I had to ramp up on really quickly. We just talked about capital allocation. That's why I read so many books on it because I

When you're a product leader at Facebook, that's not what you spend all of your time thinking about. I had to ramp up on HR matters and things like that. I think having the humility to say, hey, I don't know this. I want to learn. Spend an hour with me. Explain it to me top to bottom. That has helped me a lot in ramping up in a lot of areas. And whenever I talk to someone new, I try to spend a lot less time talking about what I'm doing and really instead

listening about, oh, okay, tell me more about your world. And I think that helps when you have that attitude. The other thing is that I try to connect the dots between all of my different passions. So to give you a concrete example, as a passion project on my weekends, I've partnered with two co-founders to create a medical and research center around complex chronic conditions. And

I had to learn a lot about health care in that context. And this is knowledge that I was able to bring to Instacart when we were trying to figure out, OK, how do we crack getting into partnership with Medicare and Medicaid programs so that Instacart would be one of the reimbursable benefits as part of that?

all of that healthcare knowledge came into play. And that's what I love about it. All of the parts of my life end up adding to each other. And I constantly take what I learn in one area and apply it to another. I'm on the board of Shopify, for example. And again, great example of learning from one of the best commerce companies and applying a lot of that knowledge to Instacart and vice versa, taking all of my

lessons at Instacart and hopefully bring that to Shopify as well. So a lot of cross-pollinating of the different passions in my life. What was the most surprising thing that you learned in your education on healthcare as part of that process?

I think you need another one-hour podcast. Give us a teaser. I think it's that fundamentally, we have a healthcare system that for many reasons hasn't been optimized to really serve patients. And I think a lot of it has to do with sometimes misalignment of incentives, sometimes oversimplification of things

the complexity of the human body. And so to give you an example, it's about 80% of healthcare costs come from complex chronic conditions that affect multiple body system. And yet the healthcare system is still organized by specialties that look at you as if you were just one organ. You go to a cardiologist and they look at your heart. You go to the neurologist and they focus on your brain.

But a lot of complex chronic conditions are actually at the intersection of immunology, cardiology, rheumatology. And that's why patients are bouncing around from specialist to specialist with no one looking at the full picture.

And that's one of the things that we are trying to solve with my medical and research center. But it's, I would say, a micro example of the bigger problem in healthcare, which is so many different silos and myopic views that don't serve the whole patients very well. If you think across your entire business career, at what point did you feel the most helpless?

helpless is just really not one of the emotions in my repertoire. I always think about it as anytime something happens, there's a solution, just gonna find it. And sometimes it's pretty hard to find, but I know it's there and I'm gonna find it. I'm incredibly stubborn that way, which is a less generous view. But I think there's always some obstacles. I remember

At Facebook, I had made a very big pitch for creating a video destination inside Facebook called Facebook Watch. And for about a year, it really wasn't working at all. No one was going there. And it took many pivots to be able to get it to a place where it's actually now an incredibly successful product that's responsible for a large chunk of Facebook's time spent.

But at the time, I remember I called that time my walk through the desert because I was really looking for solutions and not finding many. But I'll tell you, this thing that made me feel helpless at the time wasn't that the problem was hard.

It was more that I thought my own leadership wasn't up to what I wanted it to be to solve the problem. The stress was getting to me. I was trying to solve the problem by just pressuring the teams harder. And that's never the right solution when you want to solve a hard problem. And one of my team members took me aside. It was a 10-second conversation.

Hey, I've seen you at your best. This is not your best. And we're going to need your best to solve this problem. Bye. And a little slap in the face. She is one of my most trusted team members.

yes, I need to bring my A game. And that means no fear, no stress, none of that. And we ended up obviously solving the problem. But I think fundamentally, you go to helplessness when you feel you don't have the resources in you to solve a problem. And I would say it's just focus not on the problem, but focus on the leadership that's needed to solve the problem and you'll find a path.

I heard Charlie Munger described recently by my friend David Senra as indifferent to problems, having seen so much in his life and career. Ah, another banking crisis, whatever. We'll get through this. And it sounds like you've got sort of a similar powerful mentality. I knew that Facebook would definitely do that to me. When I arrived at the second, they called some minor press saying, oh, this is a crisis. No, you have not seen crisis.

We talked before about the role of AI and maybe generative AI even more specifically. Can you dream a little bit with us about the experiences that that might allow for an Instacart customer? You mentioned that you might be able to input your constraints and that it would produce solutions, and that's a general summary of it. But maybe get a little bit more specific because I do think we're going to start to see these real use cases pop to life and they will feel like magic. And you're in an especially unique place to be able to do this. And so I'd love

So I'd love to hear your personal dreams of what might be possible. Well, I think in the very short term, we've already released a plugin for ChatGPT, which allows you to go and basically start talking about anything you want to do. I'm organizing a birthday party and I need snacks for 15 kids. What do you recommend?

Boom, you get an answer and you can order it in one tap on Instagram. That's pretty magical. Same thing for entire meal plans, which I find amazing. My favorite one, because we were collecting those from employees, was my very judgmental in-laws are showing up in two hours. What can I make to impress them?

Same thing. Apparently, ChatGPT recommended a caprese salad, which means that ChatGPT really hasn't met my own in-laws. They would not be impressed by that. All of these use cases are actually very magical when you go from natural language to a set of ingredients, to these ingredients showing up at your door. I think that's incredible. On meal planning specifically, the ability to say,

this is my budget, these are my food restrictions, these are the number of meals I need to plan, and have a set of suggested recipes, and then being able to, again, in natural language, iterate on that and say, you know, the thing you recommended for Tuesday, that's not really my jam. Can you suggest something else that's maybe a little less spicy and have something else show up? That's really, really magical. I think going forward, there are some things that are...

really incredible where you can take a picture of your fridge and you can get an immediate answer on, well, with what's left in your fridge, this is the recipe that we would suggest. Or, hey, you took a picture of your fridge at the beginning of the week and now this is a difference. We can reorder all of these items. That would be pretty cool. You can imagine taking pictures of recipes on a recipe book, the recipe book we all have on our shelves and never open.

You could take a picture of that and now the ingredients show up because it is very cumbersome to open a recipe book, try to take a list of all the items, order them online. All of that could be completely automated. And then I think there's a lot of applications in health, wellness, and nutrition where you could imagine having nutritionists being able to make a lot of recommendations in a way. And

Right now, if you are someone who wants diet advice, going and seeing a nutritionist is a very luxury experience that's not affordable for most people. If all of that knowledge is captured by an AI assistant, you can make nutritional advice completely democratized, which could be totally game-changing for the type of problems we have in the country where health fundamentally starts in the kitchen.

So I'm really excited about that as well and really reach the promise of having a diet that is completely medically tailored to your exact needs and all of these ingredients showing up at your house. I think we're way further away from that because every time you touch health, it is obviously very scary to make any mistake. And I don't think the technology is there yet for us to trust that.

So we still need human intervention in the process. But over time, I'm hopeful that we will be able to democratize experiences like that. Your point about the nutritionist reminds me to ask about content. At Facebook, you must have just learned an unbelievable amount about the power of content, different content form factors, what it can do. How do you think about the role of content in business, generally speaking? Because it seems it's just at the center of everything in our lives these days.

And I'm curious about Instacart specifically, but even more generally, just given your experience, how do you think about content plus business?

I'll give you a fun stat. People spend way more time watching content about food than preparing and eating food. That tells you everything you need to know about the role of content. But the way I think about it is that content is fundamentally inspiration. And I think when you develop a business that is based on inspiration, not just utility, you have a fundamentally more valuable business.

And this is something that we're trying to crack with Instacart where Instacart was a fairly utilitarian business. You already had to know everything you wanted to order for the week, put it in your cart, and that was a chore. And we're trying to move to a model that is much more based on inspiration because when you ask people, what do you not like about the things you eat every week?

Very often people tell you, well, we eat the same thing every week. We are just in a rut. We don't want to think about it. We just eat the same meals over and over again.

Content is a way to make it easy for people to get out of that, inspire them to change their diet. Maybe it's the healthier diet. Maybe it's the more diversified diet. And so that's why we integrated recipes very deeply into the Instacart experience. That's why we also launched lists, which is influencers, celebrities, nutritionists being able to create this list of products. So if you're on a low-sodium diet, these are the products that you should buy.

All of these things are a way to inspire people, nudge them in a direction of the experience being a little bit more exciting and nudging them towards products that they would not have thought to buy otherwise. And so that's the role that content plays. And I think the real question with AI is which content gets fully commoditized.

versus which content ends up being truly unique. And I don't think we've fully seen that play out yet. But if you think about recipe content,

You can now, with AI, create entirely new recipes that do not exist in the world. You can just create recipes that are very specific to your taste and your family, et cetera, and AI will generate that for you. I think that there's going to be a really interesting transition in what we think of in terms of content experiences and how

Now, this blocker of content needing to be produced and spending a lot of time doing that, some of that in some categories of content is going to go away and allow for an explosion of these much more inspiring experiences. So interesting. And AI seems like a question that just about every company has to grapple with to some extent because we're just all so in the stream of content.

And one other thing that I found super interesting is we're still with AI in the very early innings of what personality looks like. If you go to chat, the personality of that chat is fairly generic because it is a generic experience that needs to work for everything. But if you think about what that can evolve towards in the context of food-specific experiences or travel-specific experiences,

We're going to see a lot of evolution of what we call content.

because it's not just going to be, oh, it's a podcast or a video. There's a traditional way of thinking about content, but it's also going to be about what is the character of the AI? What is the personality of the AI? And so imagine if you could go to Instacart and select that actually the chatbot you want to interact with should have the personality of an arrogant French chef and you want your real plans coming from that person versus

It's like Gordon Ramsay yelling at you all the time. Exactly, exactly. Or you want the personality of a very warm and amazing grandma cooking come-cook meals. And that's what you want doing your meal planning. I think what we call content is going to evolve towards being much more personality-driven. The next wave of creator content might be these different personalities for different chatbots.

Also the IP that already exists. My mind goes Gusteau from Ratatouille or something. That's what my kids would want. They were cooking something and just the power of deploying IP is going to be amazing. It's such a rich area to think about. Well, Fiji, this has been so much fun. I really enjoyed talking to you, learning about the business, learning about your philosophy. I ask everyone that I talk with the same traditional closing question. What is the kindest thing that anyone's ever done for you?

I think it's take a chance on me. Give me a shot when I didn't even believe I was ready, but see the magic in me and make a bet. It sounds like you're paying that magic thing forward over and over again. So a lovely place to close. Thank you so much for your time. Really appreciate it. Thank you so much, Patrick. Thank you.

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