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Support for this podcast and the following message come from the Glenn Lovett's new Caribbean Reserve expression, a new single malt with a bold tropical twist. Learn more at the Glenlivet dotcom 20-20 imported by the Glenlivet distilling company, New York, New York. Hey, it's guy here.

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And before we start the show, I just want to tell you about the how I built this book. It's coming out in just a few weeks. But if you preorder before September 30th, I will send you a signed book plate for free. If you love this show, if you love the stories you hear on it, if you're inspired by them, if you're looking to start a new business or just thinking about it, well, you may want to check out the how I built this book.

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It's full of inspiration, ideas, stories and insights. Preorder your copy of how I built this by visiting Guy Raz Dotcom or how I built this dotcom. For more details.

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Hey, everyone, and welcome to how I built this resilience edition on these episodes, we're talking with entrepreneurs and other business leaders about how they're thinking creatively during this disruptive time. And today we're going to hear from the co-founders of Wayfair Nereid Shop and Steve Conine. We first feature Niraj and Steve on the show in April of twenty eighteen. And we've just republished that episode. So it's near the top of your podcast. Q You should check it out. They have an amazing story.

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Anyway, since we talked to them in twenty eighteen, Wayfair has become profitable. And despite anticipating huge challenges during this economic crisis, Wayfair has actually done pretty well as people start to beef up their home offices. I spoke with Neeraj and Steve about wayfarers unexpected success during this economic crisis and how that's changed their business practices.

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Let's start by taking us back to sort of March. How did you begin to plan for presumably the worst at that point? What were some of the steps you took, Nirj?

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Yeah, so obviously when covid started, there was a whole lot of uncertainty. We kind of decided a few things. One was how do we keep our supply chain up and running so we can take care of our customers? And so we implemented a lot of safety protocols that actually worked out very well because we were able to keep running and keep everyone healthy and safe. Second thing is, from a liquidity standpoint, we didn't know what was going to happen next, so we actually decided to raise money.

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So we raised five hundred thirty five million dollars. In hindsight, we didn't need but at the time you don't exactly know what's going to happen. And so we did that and we did that very quickly over a two week period. And so I think that put us in a great position. And then, you know, we had a big scramble to get everyone productively working from home who was involved with the supply chain. And so over 3000 people in customer service and our whole corporate team.

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And and so there was kind of like a bit of a kind of mad dash in the beginning to get everything well situated, that we have a great team. And they really rallied and did a fantastic job.

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It sounds like you had anticipated that you were going to face a serious slowdown, and that's why you raised the cash to presumably to help you through what you anticipated was going to be a slowdown.

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Well, our worry was actually, you know, we didn't even know what the governmental regulations were going to be. Might perhaps we would be shut down. You know, we didn't we didn't actually know governments and what was essential, what was not essential. There is a question at some points about perhaps the carrier networks won't carry certain types of packages, not other types of packages. And so we didn't have an answer, but we had uncertainty. And so we reacted to that.

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And then the notion of a slowdown certainly was on on our minds. Obviously, what's happened is quite different. It's been more of a boom, but we didn't know that at the time.

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Before we talk about what's happened, what were you able to do to keep warehouse employees safe? Because you've got warehouses all over the country. How do people stay safe in those environments?

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We did a few things. So we we changed the scheduling of how shifts worked so that shifts didn't overlap. And we went to more shifts per week so that we were able to basically take care of the volume without having to have folks in a situation where they're overlapping other shifts than within the shift. We put in place temperature checks. We actually made a lot of the walking paths one way aisles that we actually were able to support social distancing in the buildings.

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And then we also increased the cleaning protocols. We actually raised the rate of pay. We we did a lot of things to support the families of the folks who are working. For example, we put in place at dinners to go program twice a week. Everyone who worked in one of our buildings was taking home a family meal for their whole family. And so and that helped the local independent restaurants who are popular restaurants next to our locations continue to have volume.

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So we kind of did a variety of things, some things helping the community, some things helping our team, some things about health and safety is interesting.

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In March, a lot of businesses really saw a steep decline in revenue. I assume that maybe happened to you, too. But pretty soon after sales just not only picked up a dramatically picked up. Right.

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What happened in mid-March. So from basically March 15th through the end of March, we actually saw sales rise, but they rose in very specific categories. So things like refrigerators and freezers, kitchen cooking utensils and pots and pans, home office desks and children's playroom and children's furniture and then outdoor recreation, you know, trampoline swing set. So very specific categories that you can easily attribute to the immediate sort of stay at home type situation that it transpired. So even though they rose, we didn't know what was going to happen after that.

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But to your point, what happened next is more, hey, folks are at home, they're not traveling, they're not going out for entertainment. And every customer has a list of things they want to do to improve their home. And we work across all those different categories. And so there was basically all of a sudden people start tackling those items off their list.

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I mean, you're your second quarter of this year was the first time you got to profitability. I mean, your your stock price over the last year is also dramatically increased. I mean, in a way, it seems counterintuitive, right, that so many of us assume that the retail sector in its entirety would be really crushed. I mean, did either of you ever think that that was going to happen to Wayfair? You know, it's very interesting in March.

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I mean, I think we were definitely as leadership and as a company worried about the business. It was a surreal sort of experience to go from feeling like we have to worry about this thing going to zero to, oh, my gosh, we are one of the beneficiaries. So what's our responsibility there? How do we help support the team? How do we support their family? How do we support the local communities? How do we make sure that we're giving back?

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And quickly, you start to realize, like, why you're having success, because obviously everyone's in their homes. They're spending on their homes. They're thinking about their homes. Their travel budgets are no longer there. And so they have discretionary money to spend. And then obviously a government stimulus comes along and that's another positive impact to consumers wallets. And it's been fascinating. And as you said, we went from pretty normal runway to basically all of a sudden you're running at these peak promotional day levels day in and day in and day in.

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And you're kind of not sure if you can keep up with it, if you can handle it, you know, if the team is going to be able to function well. And so you're navigating and kind of, you know, whatever on a daily basis. I mean, that kind of helped us all. Well, I think as we work from home, because it was very much faced with a pretty intense period of effort.

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I want to ask you about the long term strategy you guys had, because essentially you were not profitable until this latest quarter in large part, from what I understand, because you were spending a lot of money building up logistics and technology, which I guess paid off at this moment.

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Yeah, it's funny how the timing lines up, because we built the company by bootstrapping. So we were profitable for the first decade plus of the business. But then when we raised money to build up the Wayfair brand, then we're losing money. And we were then fairly shortly after that presented with two really big opportunities. One was replicating the business model in Europe and the other one was building out the logistics network. And those two are investments. I mean, we make lots of different investments, but most investments we make our five million or 10 million or 20 million dollars a year.

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The magnitude of international and logistics were massive. And so we've been losing a lot of money when you look back over the last few years, really building out those two capabilities. And one of the things that we had announced at the end of last year was that we were now at a scale at a point where we could actually be profitable and continue investing because we'd gotten up to over 10 billion in revenue. And so just the contribution margin that generated was now enough to both fund investments and be profitable.

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But what's ironic is all of a sudden it's covid hit rather than us. You know, we said at 20 percent growth would be profitable. All of a sudden the growth came in at eighty four percent and we were massively profitable. So those two trends ended up sitting basically on top of each other.

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Yeah. I mean, have there been any supply chain issues at all in terms of keeping up with customer demand?

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Significant. Significant. I mean, as you can imagine, when demand grows that fast, everything from the carrier capacity to do the deliveries to on our team, our customer service team did an amazing job of rallying to handle the volume because frankly, you know, we had the same number of customer service folks the day before was the day after, but the volumes grown dramatically. And as you can imagine, the delays in the carrier networks just create even more calls.

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So there's a lot of challenges. And then I mentioned in the beginning part trampoline swing sets were examples and freezer's of categories that took off early. Well, within a few weeks, they're sold out nationwide. And so now you have months where you have short supply. So there's a lot of supply chain challenges. And so we started working on that right away. And so that as you go through the weeks go by, all of a sudden you do see out-of-stock rates recovering.

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You do see transportation getting better, but it doesn't happen overnight. So you have a team rally through a really tough period.

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It's a little bit of a kind of an odd position to be in. Right, because on the one hand, of course, it's great your business is doing great in the midst of a general economic crisis. So, I mean, is there something a little weird about that, that you just kind of have to navigate in your own mind?

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Yeah, yes, there definitely is. I mean, I think you don't want to be seen as a group that's like taking advantage of a situation that's sort of been out of your control. And so, you know, I think giving back to the community and the meal program NERD'S has talked and some of the programs we've done to really support employee giving employees donating their time were things we got right on. And, you know, we continue to make sure that, you know, we're encouraging the team and pushing and talking about what we can do to help support the communities.

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I think that worked out pretty well. Our team just has so much empathy, whether it be for the customers or the communities we're in, that the immediate reaction everyone had was about how can we help? And so that was uneven, unrelated to the fact that we're doing well. And because we're doing well, we're able to do even more. So we were able to we raised millions of dollars for a couple of global covid relief charities. Our employees actually donated a lot of money to covid relief charity.

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So there were a lot of things that we were able to jump in and do just because of the ethos of the team we have. And I think that certainly, frankly, not just doing those things, but doing them very early on, I think helped a lot, because I think as time went by, governments and others started helping do a lot. But I think the very beginning, we felt like we were able to help make a difference.

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What happens if the housing market starts to soften and with a softening housing market, you could have a softening furniture market? Essentially, are you prepared for that possibility, depending on what number you want to take the run rate of, you know, we're 13, 14, 15 billion dollars in annual revenue, but that compares to an end market that's eight hundred dollars billion. So we're still less than two percent of the end market in 2007 to 2010 during the financial crisis.

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That was the worst time for the furniture industry since the Great Depression and the Great Depression. It shrunk 35 percent from the top to the bottom in the financial crisis. It actually shrunk. The furniture industry shrunk by 30 percent, three zero. And so it's really devastating. What was interesting, though, is online, except for an immediate shock at the very beginning, online actually grew through it. And the reason is customers who maybe weren't as keen on buying online also and were more curious about value, more curious about availability.

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You know, we don't root for a bad economy, but I think we will be able to do well. And we have great relations with our suppliers. And because we're sort of their ability to go to market and reach those customers, they basically lean in in periods of disruption even more than they will on a normal basis.

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You know, the other thing I do think this period of time has showed us that even though you're big, you can still change quickly. And so I think we have a team that can react dynamically and we have a very entrepreneurial culture still. And I think innovation favors entrepreneurs during a time of change. And so I think those are both sort of been a reaffirmation of like we have a great team, we can navigate this stuff. And so uncertainty, it's something that we do well as a company navigating regardless of what the future looks like.

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That last question I asked you about anticipating downturns, I it was a question we got from Megan Rawling. So, Megan, thank you for that question. A couple questions about the environment. We had a question from Elizabeth Leonard from Stefanie Moran. What are your plans to make your company more environmentally friendly? A lot of questions about the so-called fast furniture business and its impact on the environment, not only on producing furniture in mass quantities, but shipping it across the world.

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So can you talk about that? I mean, there's no question that the industry you're in does have a significant impact on the environment. Absolutely.

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A lot of what we're doing is around streamlining the supply chain. So actually, if you look at how it works today, it's highly inefficient. We're effectively goods are shipped through multiple destination points. Customers are then driving to a store and they're then navigating the store. Then they're buying something, then that items then put out for delivery later and often has to transit a long way because a lot of these goods that are becoming special order type items that have to travel again from a different destination, we move the items in bulk very efficiently, very close to the end customer.

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We then deliver it directly to them. We are able to take out a lot of the transportation legs which have the benefit both from an environmental standpoint, from a cost standpoint, and improve the speed of delivery. And so we're actually trying to do a lot to do that. And then that's separate from all the things we're trying to do around waste materials and how we can use more recycled materials. The thing I would add to is just, you know, Wayfair is kind of it's a platform for literally tens of thousands of entrepreneurs who make products.

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There is definitely a very keen eye to this topic. A lot of the French manufacturers care deeply about and we're really trying to help surface that so that consumer demand preferences shift. They can be very aware of who they're buying from and what the products are. And so, you know, really trying to surface the stories of our suppliers. There are some amazing people in our supply chain doing some really great things around sustainability, around better manufacturing and conservation practices.

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We know they care about it and our team cares about it a lot as well.

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When we come back in just a moment, Neogen Steve talk about their role as a national brand with a platform and what they hope to take away from this moment in time. Stay with us. I'm Guy Raz, and you're listening to how I built this resilience edition from NPR.

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Support for this podcast and the following message come from the Glenn Levitt's new Caribbean Reserve expression, a new single malt with a bold tropical twist that is selectively finished in barrels that previously held Caribbean rum, offering a sweet and smooth taste. Learn more at the Glenlivet Dotcom, the Glenlivet Caribbean Reserve, single malt Scotch whisky. Enjoy our quality responsibly. 40 percent alcohol by volume 80, proof 20 20 imported by the Glenlivet Distilling Company. New York, New York.

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Support for this podcast and the following message come from the American Jewish World Service, working together for more than 30 years to build a more just and equitable world. Learn more at A.J. W.S. Dawg. Hey, welcome back to how I built this resilience, Ed.. So last month, Wayfair was the target of a false conspiracy theory, which was debunked immediately, but still pretty troubling for everyone involved, especially Niraj and Steve. I want to shift gears a little bit and talk about two challenges that you faced.

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And one is surfaced recently this summer. And I hesitate to ask about it because I don't even want to I don't even want to shed any light on it because it's so disturbing and distressing. But there is a conspiracy theory movement in the United States. And this movement this summer began to spread a conspiracy about Wayfair products, hiding children in them, trafficking children in them. I think they were these large industrial sized cabinets. It's something that is so disturbing and distressing that it's it's not even funny.

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How did you respond to it? I mean, I'm sure your initial response is like, oh, this is nonsense. But but it actually you had to really respond to it. What what did you do?

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Well, you say you never want to be the target of a baseless conspiracy theory that is effectively engineered and spread by folks who are very adept at social media and that that is, in fact, what happened. I think the real damage ends up being caused to the actual real victims of the victims of child trafficking, who basically, you know, the hotlines where they can get help or overrun with calls from folks who are basically tying up that bandwidth just with non content.

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What we did is, you know, frankly, just be honest and forthright and basically point to the fact that it was baseless and with a very basic amount of investigation, you can prove that it's baseless.

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And what we saw, it took a couple of days, but then you see credible news sources, whether it's the Associated Press or Reuters or The New York Times who have come out and basically debunk it, point out that there's no content there, and basically also kind of highlight the forces that are at work that are causing some of these things to happen and spread. But I think it's a challenge because I don't think the average person is necessarily as keenly aware of what happens on social media and what perhaps is rooted in fact and what isn't and how to discern one from the other.

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So I think it is a challenge we have in our times.

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I mean, is this the new normal, Steve? I mean, are companies and businesses going to have to prepare to contend with these insane conspiracy theories? I mean, is is this par for the course now?

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You know, when we started this business, the thought of saying, hey, you know, we're trying to build a beloved brand for home decor and furniture and more, and you're going to get pulled into things like this are targeted for various things. There's part of me wonders if you're building a great brand, is this just part of the journey? And if you look back at other great brands have been built in the US over the years, they certainly go through periods of good press, bad press, different things.

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Right. We are certainly in a period today where these things can be amplified quicker than they ever have been. And so there's a concern I have there and there's a concern of how long does it take us as a civilization really start to digest how these new channels of communication should be handled. And we're certainly in the middle of that. And so I think, yeah, I mean, anyone who's building a big brand is going to have to be aware that their brand can be used to amplify messages.

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And that is going to be something they have to contend with and think about and learn how to navigate. It's been fascinating for us to learn how to navigate that and figure it out.

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Let me ask you about something that is not a conspiracy theory, something that happened last year when hundreds of Wayfair employees walked off the job. They were protesting against some furniture that was sold to a detention center in Texas that was intended for migrant children. And you had to deal with this. I mean, you had employees who were making demands of the two of you. They were saying, we demand our company be better. So how did that affect the way you think of leadership and the way that you run the company?

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First of all, when this came to your attention, what did you do?

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You know, that was it was an interesting period. And now I think the core thing we really did and the core thing that led to better communication with the team, you know, we have a very thoughtful team and we have a huge diversity of viewpoints inside the organization as well. Looking back on that period, we did a much better job of figuring out, OK, issues that people care deeply about. How do we raise them in a way where we can actually have a constructive outcome and we can have a dialogue about it and can make changes that the team feels feels good about.

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And so coming out of that, we created an orders perspective group and we really did a lot of soul searching as a company to really think about, OK, how do we think about who do we sell to? How do we you know, you don't want to get in the business of judging the morality of your customers necessarily, but there's clearly lines that you want to hold firm on as a company. And so, you know, that spurred some really good dialogue inside our organization.

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That has made us a lot more thoughtful about how we communicate and how we make change inside the company and talk to each other about it.

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You know, and that was not a conspiracy theory. But it does also kind of point out that, you know, stories the way information spreads is not always accurate. It is actually mattresses sold to a nonprofit of five one C3 that operates refugee shelters all over the world, in Africa and in the United States and Europe. And they were actually operating three shelters along. The southern border, but the point I would make, actually, is what Steve said by tightening the communication with our broad team.

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It really, really helped. And so we now have a group that basically internally helps also try to provide proactive thoughts on things we can do. And one of the things that came out of that, we actually encouraged Jesus really more than everyone votes. And one of the causes we've really been pushing is just that everyone should take the time to vote, whether it's a local election, whether it's a national election, whether it's a primary. And it makes a difference because your vote, if everyone voted, you know, we would get broad outcomes that maybe not everyone would be happy with, that they would reflect everybody.

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But when only a small portion of people vote, you don't really get that broad based outcome. And so one of the things we did is we basically said on election days in each geography, we're going to arrange for everyone to have time off so that they can vote. While that might be easy for someone who, you know, is a software engineer, has a lot of latitude in their schedule, might not be easy for maybe someone who's working for one of our warehouses or on a fixed shift in customer service.

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So we said, well, we're going to figure out how to handle it. So that shift wise with paid time off, everyone can actually go vote. We signed a petition and hopefully a lot of companies take that approach of kind of saying, hey, it's not required that you do that, but why not do it, you know? And so I think there's good ideas that we really, as a team, we want to be one of those companies that can help make a difference, you know.

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And Steve, I mean, for for a long time, big companies and their leaders really kind of shied away from taking political and social stances because didn't want to upset their customers. But that's changing. I mean, you look at PayPal, for example, they did platformed, you know, hate groups from there. They don't allow conspiracy theorists to use PayPal, et cetera. There are other companies that are really taking a stand. And when it comes to taking a stand on certain issues that you believe in, is there an argument to be made that you should be doing that?

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I think it's important to take a stand on issues you believe in. And there's certain things like I'm on the topic of racism and actually being proactively, you know, fighting against racism and making sure that we're rooting out unconscious bias. That's something we've been very proactive on and we believe in very significantly. There are other opinions that I have personally that I don't know that the company should take a stand on, because, frankly, there's two sides to a lot of topics that in our mind, there is not just one side that reflects everyone's reasonable views.

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And so one of the things that's interesting, as you mentioned, our customers have a broad range of views. Well, our employees do, too. And so what we did with this group is we actually amassed a group that actually broad based across our workforce. And so what's interesting is then it becomes really clear on the broad things everyone does agree on. And these are things that we feel like we should go actively pushing the example. Voting is one example of that, and there's many others.

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And then there's other things that the group would not all agree on. But they would then through that course, realize that it's reasonable that people could have other opinions. And on those things, we don't necessarily feel like the company should go and take one perspective. And so there's a balance, I think, between these two different types of issue.

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You know, one of the themes that we hit on in our original podcast episode was this idea that the product doesn't always have to drive the founders, but that the challenge should drive the founders. So you guys were not that passionate about furniture or home decor. You said that on the show, but you were really motivated by solving the problem of how to get people access to a wide selection of these products that were available in big cities, but to make them available to people all over, all over the place.

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And that's really what motivated you.

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Do you have any advice for people watching who are thinking about starting something now and how to seek out the right business opportunities for them?

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The thing I would say to entrepreneurs right now is that there are a lot of very traditional things that people you may love, like maybe you love furniture. You know, we're obviously not industry. Maybe you love cars, maybe you love crazy, maybe you love biking, maybe whatever it is, I think we are at a point in inflection right now where you could likely start a restaurant today and do very well with it because you're going to be forced to operate within the constraints of today.

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And they're very different than a lot of your competitive set is. And so if you love cooking now, it could be a great time to actually go to that industry. On the surface, it seems like it could be a terrible time. Same thing with a lot of the different industries that are under stress. I think, you know, an entrepreneur has a lot of times get mired in trying to come up with a great big new idea and missing actually their hard work and effort on something that that is kind of in front of them can oftentimes make the biggest difference that can really lead to success.

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I would just say two things. So I do think you need to be excited about the idea you pursue. So even though we didn't start our entrepreneurial journey, which is this company, by saying, oh, we want to do something in home and furniture and decor, we did get excited about the idea. So I think you need to be truly excited about the idea. And then the second point is just simply that the right time to start something is often the time that seems the least obvious.

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So, for example, we started this business, which is an e-commerce business in 2002, right after the dotcom crash, right after e-commerce was viewed as a bit of a fool's errand by a lot of folks. But we believe that that wasn't true. We found data that supported our view and we thought, in fact, there was a real opportunity. Well, if you look back on that, what happens is less companies get started pursuing that opportunity during a time when it's viewed as out of fashion or a bit unwise or risky.

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Then will in a good time and so so innately you basically both build better muscles dealing with that adversity and frankly, you have less competition. And so I would encourage folks to not worry about the macro factors, instead worry about, you know, is there something they're excited about that makes sense? And if there is, then then that can, in fact, be a great idea and a great time.

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How have you kept your partnership so strong over all these years? What have you you guys been able to do that has worked so well? Is it about strictly demarcating who does what? How do you explain it, how to actually say it's a bit the opposite.

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So we're trying to demarcate who does what didn't work quite as well. We kind of took a shot at that. Within a few months of the very first business we started, we found that we gravitated to doing different things that we each both enjoyed and were better at, but we got lucky. Those things happen to be highly complementary. And so on one hand, we really appreciated each other's advice and business judgment. And so in that sense, really, we're good partners.

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But at the same time, we actually enjoyed working on different areas of the business. I think it's tough if either you don't trust each other's judgement and want to listen to either one or if you're both drawn to the same stuff and don't want to do the other stuff. I think those are two common failings and we were lucky not to have either of those two.

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I would just add we've done a good job with communication and I think any relationship communication matters a lot. And we both got very good early on being very blunt and not taking it personally with each other. And then the other thing is, I would say we both had been very nonjudgmental of the other one. So in other words, nears has interest that I'm kind of I don't have the interest in. But at the same tone time when I see him choosing to do it, I'm supportive and excited about it.

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And I'm not sort of like, oh, why are you doing that? And, you know, we've just developed a, I don't know, a healthy relationship through the years of interaction and kind of having different skills and different interests, not actually paired well in business because you tend to cover a lot more topic areas that matter to the success of the overall organization in five years from now.

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When you look back, what do you want to take with you from this time into the future? What are some of the things that you've actually done better that you want to make a permanent part of Wafer's culture?

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One of the things I would say just, you know, in the beginning it was unnatural, but it sort of felt like it really important to communicate a lot broadly to the team, just knowing that the uncertainty, even though you didn't necessarily have answers, they had questions. And so trying to do your best to help them understand how you were thinking about things and what what you saw was happening and just seeing how valuable that is. I think there's always an ongoing under appreciation of the value of communication.

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And so the questions like how do you keep up that higher cadence of communication, just knowing how much energy it takes and how do you do in a productive way? And I think that's something we continue to get better at that I think helps us be a really tight knit team that we're we're certainly working on.

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Yeah. The one thing I would add to that is just I think there's a certain, like, intimacy of life or like realism of life that this period has brought into business maybe more than it would have historically, where you're just forced to have more of a recognition of people's complexity of life and whether that's kids at home or work set up, you have or it's distractions you have during the day. Those have been really brought into I think the interactions in the office plays a lot more than they ever have.

[00:28:23]

And I think that's a healthy thing in that we shouldn't lose that. As we go back to a more blended interaction environment, I find that hopefully be helpful to overall work life balance is for people.

[00:28:33]

Steve Conine, Nearshore, thank you so much, co-founders of Wayfair. Thank you. Thank you, God. Thanks, guy. That's an excerpt from my conversation with Nereid Shah and Steve Cona and the co-founders of Wayfair to see our full interview. You can go to Facebook, Dotcom, how I built this. And if you want to see all of our past live interviews, you can find them there or at YouTube, dotcom, NNPA.

[00:28:55]

If you want to find out more about the how I built this resilience series or other virtual NPR events, you can go to NPR presents Drag. This episode was produced by Candice Lim with help from Wil Mitchell, Matt Adams, Jeanna Cappadocia, John Isabella, Julia Kanae, Neva Grant and Jeff Rogers. Thanks for listening. Stay safe and I'll see you in a few days. I'm Guy Raz and you've been listening to how I built this from NPR.