Memo: On Coffee and Enlightenment

When author David Perell published the brilliant short essay “Beer Mode, Coffee Mode“, I began to research the history of the dynamic between the two beverages. Perell’s work was a figurative look at the creative impulses around fun and focus, not the consumption of the products themselves. Once upon a time, caffeine overtook alcohol as the drink of choice. This is a memo on coffee’s first period of great European influence. The adoption of coffee culture and non-alcoholic beer consumption could mean something similar for today.

What happens when alcohol consumption falls and coffee consumption increases during periods of instability and new forms of community? If history would have it, we’re in for a period of lasting social, economic, and scientific innovation. There is a passage in Steven Johnson’s The Invention of Air that is relevant to this thought. The book is about the protégé of Benjamin Franklin, who had a notable thought on the European 17th century.

The impact of the introduction of coffee into Europe during the 17th century was particularly noticeable since the most common beverages of the time, even at breakfast, were weak ‘small beer’ and wine. Those who drank coffee instead of alcohol began the day alert and stimulated, rather than relaxed and mildly inebriated, and the quality and quantity of their work improved. Western Europe began to emerge from an alcoholic haze that had lasted for centuries.

The innovations that come of today’s Web3 era of the internet may influence decades of human existence. History doesn’t repeat but it rhymes, and two consumer trends may be to thank. We are consuming more coffee and we are drinking less alcohol. We are more social and mindful. We’ve seen this relationship between beverages once before, during The Age of Enlightenment. PhD philosopher and professor Stephen Hicks once wrote:

As a contributing factor, coffee (and tea) certainly gets credit on physiological grounds. Also contributing was the development of European coffee house culture, the coffee houses bringing businessmen, artists, and scientists together for drinking and socializing. The great Lloyd’s of London company, for instance, had its beginning in Edward Lloyd’s Coffee House in London, which dates from (possibly) 1685 or (more likely) 1688, the year of England’s Glorious Revolution and John Locke’s return from exile in Holland. [1]

We are sitting at the confluence of two rivers: mistrust in our institutions and the emphasis on mindfulness. That intersection is strikingly similar to the “long 18th century”, a period of remarkable change from 1685-1815.

The Enlightenment produced numerous books, essays, inventions, scientific discoveries, laws, wars and revolutions. The American and French Revolutions were directly inspired by Enlightenment ideals and respectively marked the peak of its influence and the beginning of its decline. [2]

Europe’s long century was of the most consequential to our contemporary economies and cultures. Then, it was the French Revolution of 1789, Adam Smith’s liberal economic theories between 1776 and 1789, the adoption of the printing press, new forms of travel, and the proliferation of member clubs, salons, and the European coffee house. There are similarities between the spirits of then and now. Both Europe then and America today faced massive cultural shifts against the backdrop of what we now politely call “consumer bifurcation”: the rich getting richer and the poor are sinking lower into poverty.

Web Smith (📜, 📜) on Twitter: “Coffee is an underrated bedrock of modern civilization. Without the European coffee house, there would have been no Age of Enlightenment. / Twitter”

Coffee is an underrated bedrock of modern civilization. Without the European coffee house, there would have been no Age of Enlightenment.

Many of today’s cultural shifts are emblematic of the upper echelon of society risking investments across a spectrum of assets. Consider the move from fiat currencies to crypto protocols, from named online users to the pseudonymous economy, from physical artwork to the non-fungible, from centralized narratives to decentralized storytelling, and from government galactic to civilian intergalactic. We are in the midst of another Age of Enlightenment thanks to a mass migration from physical to digital agglomeration.

Unlike 1685-1815, the European cafe is no longer the venue for the exchange of ideas.

Back then, the apex of the French monarchy crashed thanks to a bifurcation of wealth elevating an aristocratic class while the neglected suffered from impoverished conditions. Meanwhile, the European cafe became the resort for “those with wit,” removing mostly men from the patterns of drunkenness and debauchery. A generation of perpetual drunks shifted from alcoholism to the sobering and mind-altering benefits of caffeine. This trend away from one and towards the other influenced many great social, academic, and political advancements.

The European cafe encouraged information synthesis in ways that universities once exclusively held monopoly over. They promoted conversation, debate, and authorship. The shift from alcohol to coffee was the catalyst.

Today’s subtle cultural shift: beer down, coffee up

Coffee has never been more popular in the United States. There are a record high 15,000 Starbucks franchises in the United States. There are over 37,100 coffee houses in total, generating some $22 billion in 2020 retail value. By that same year, over 40% of US consumers had a single-cup coffee system in the house, up from close to 10% in 2012. .

In a period between February 2019 and February 2020, $1.25 billion in Starbucks frappuccinos were sold in the United States. According to Mordor Intelligence, the American coffee industry can expect a CAGR of 4.8% through 2025. Of that growth, nearly 70% of consumers prefer in-home coffee. They note another key insight:

A gradual shift has been observed from soft drinks to coffee drinks among consumers in the region in recent years.

Of those in-home coffee systems, Cometeer near the forefront. Former computer scientist Matt Roberts co-founded Cometeer in 2015 along with Doug Hoon and Karl Winkler, who each possess extensive backgrounds in engineering and product development. The brand went on to raise an initial $50 million and today, backed by a strong direct-to-consumer and subscription strategy, the brand is reported to be on track for high eight figures in annual revenue. In 2019, my alma mater Gear Patrol wrote about the brand: 

Not much is known about Cometeer Coffee Capsules, but what we do know is encouraging. Its site promises specialty-grade coffee frozen “in peak state” and ready to brew with or without K-cups (plus, it’s recyclable). The collection of high-profile roasters are already on board may be even more telling — co-signatures from craft coffee roasters like George Howell, Bird Rock, Equator and CounterCulture don’t come easy. [3]

Just a few years later and it is showing up in New Year’s Resolution product rundowns on Snaxshot by Andrea Hernandez. Herproduct site is of the foremost authorities on interesting, qualitative consumer developments. But equally as interesting is this figure on non-alcoholic beer import volume:

According to IWSR Drinks’ Market Analysis, a data and intelligence company that tracks worldwide alcohol trends, non-alcoholic drink products increased 22.6% in 2020 and is expected to grow over the next four years. IWSR anticipates a CAGR of 9.7% in this market through 2024. The trend towards decreasing alcohol consumption is emerging in predictable and unpredictable places. First the predictable by the IWSR:

Beer continued annual volume declines with a -2.8% loss in the US in 2020, as volume gains in imported beer weren’t enough to sustain losses in domestic beer volume. Nonetheless, imported beer grew market share in 2020. No- and low-alcohol beer proved a bright spot for the category, however, and the category is expected to continue to grow.

And the less predictable, a recent report by The Guardian notes an NA movement in high places:

The Virgin Mary, which started serving alcohol-free drinks in Dublin a couple of years ago, is expanding. [4]

And while Cometeer is making headlines in the in-home coffee market, Athletic Brewing has emerged as the DTC media darling for the non-alcoholic movement. A recent CNBC feature on founder and CEO Bill Shufelt was amplified by investor Darren Rovell, who aptly saw the DTC beer brand as a worthwhile investment before this trend was clear to many in the consumer investment industry.

Nearly four years ago, I chose to give up alcohol altogether. My reasoning was personal but the gist of it was that I wanted to maximize every day that I had left. Gone was the mental fog and some of the anxiety commonly found in entrepreneurs. Meetings were more productive, ideas were more potent, and I grew more confident in my ability to synthesize unrelated ideas. These attributes are the foundation for what made the Age of Enlightenment collectively great, it took unfulfilled drunkards and turned them into alert and witty thinkers. The best of those thinkers changed the world.

Consumer trends can be leading indicators. And while there is no guarantee that this trend away from alcohol and towards coffee will continue, there is precedent for what happens if it continues. And the early signs point to that outcome. We’ve experienced an extraordinary period of innovation over the past several years. The best and brightest are feverishly reading, writing, executing, and synthesizing the work of others just to keep pace with the many innovations across economics, health sciences, communication, and art. You can never call your own time one of enlightenment or reason. But something about today seems different than the years that preceded it. Maybe what we drink has a role in all of it.

By Web Smith | Edited by Hilary Milnes | Art by Alex Remy and Christina Williams 

Memo: The Digital Country Club

When 2PM Executive Member and CPG investor Magdalena Kala first explained Bored Ape Yacht Club as a social signal, I balked. That was months ago and she was right. The key ingredient to any social club is FOMO and FOMO is exactly what many consumers feel right now – me included. Who needs a Country Club membership to signal upward mobility when your Twitter avatar does that for you. Look at this recent tweet by Shopify App entrepreneur Dennis Hegstad, for instance. Hegstad’s satirical tweet highlights the levels of FOMO observed around the NFT market. A year ago, few of us would be able to conceptualize this. The “social signal” class of Non-Fungible Tokens is one that you’re going to want to study. Not only will its social impact have an effect on the burgeoning world of online community (ahem, the metaverse) but it will play a substantial role in brand retail.

There is a chance that your favorite brands will build NTF-based social circles of their own and these tokens will be the buy-in. This strategy won’t just be for the traditional brands, Shopify recently enabled NFT sales on its platform to much praise from the cryptocurrency community. The timing couldn’t have been better as brands look for new ways to foster community (and revenue) amidst supply chain and COVID disruptions. I explained as such in The Digital Supply Chain.

NFTs have always been tied to access. The purchase of a digital good mystifies some who don’t understand the real-life value of an old YouTube video or NBA clip. It makes more sense when you think about NFTs as gateways to digital communities steeped in exclusivity. Today’s feature report explains the idea of the NFT boom facilitating the era of the “digital country club”.

​​People are buying community. People are buying access to events and experiences. The most successful projects have been about creating a community. Think of it like a digital country club. The price of admission is the cost of the NFT. And that’s a one-time cost.

Country clubs have always been places where members can flaunt status and mingle among a select group. NFTs are making that possible for an internet-bound generation. That’s playing out across platforms in a number of ways. CryptoPunks, a collection of unique character avatars on the Ethereum blockchain, is now allowing users to rent out their avatars, essentially opening up a revenue stream while granting access for a limited time to newcomers. The idea that NFTs were crashing as an asset class is beyond laughable at this point.

NFTs will continue to underscore the exclusivity and accessibility of the community while giving outsiders a glimpse inside the world they’re now vying to enter. There are a number of retail applications, here. As mentioned above, there’s also a clear tie-in to luxury brands, whose value is steeped in exclusivity. Burberry and Louis Vuitton have both recently launched NFTs in gaming worlds where insiders are in the know and outsiders don’t get it. Within these digital worlds, status blooms when you can buy a digital luxury skin.

Through these NFT plays, access can be teased and played with. New experiences will unfold only for NFT holders. This will become a sign of brand loyalty, a new meaning for VIPs. Shopify’s recent move will open up NFTs to more mainstream merchants, but there’s still a level of knowledge, resources and commitment one must have to get involved. From there, fear of missing out unfolds.

By Web Smith | Editor: Hilary Milnes | Art: Alex Remy 

Memo: Anatomy of a DTC Acquisition

We strive to have a rhythmic and healthy heart. Athletes push for lung capacity. The consumer packaged goods industrial complex champions the importance of one’s gut health. And here we are, ashamed of the way our own brains work.

There is a pang that I feel when I allude to my own mental health struggles in public. There is a stigma associated, an acknowledgment that none of us are as strong or as tough or as sound as we believe ourselves to be. Ten years ago, I would have thought it was a failure to express any thoughts on the matter, publicly or privately. Five years ago, I would have burdened my best friend for help at the risk of an intensity in responsibility that isn’t healthy to distribute or accept. But today, I try to communicate to those who listen that it’s just a part of being a human being, a creator, a parent, an entrepreneur, and a soul.

I have had dozens of head injuries and resulting neurological issues. I suffered from post traumatic stress, crippling social anxiety, and a depth of depression that I wouldn’t wish on my worst foe. Many young women and men are taught to train to peak physical performance and to ignore any signs of mental or emotional weakness. Some coaches say things like, “Silence the brain.” Imagine thinking this way for three decades. It is, above all else, an acknowledgment of our failures as a society that the body adapts to work and rest and nutrition. This is all changing and it will continue to in the years to come.

Your brain deserves the same attention as the rest of your organs and the world is finally catching up to the fact that it can be as injured or as malfunctioning as any outwardly visible muscle, bone, ligament, or tendon. Enter one of the quiet but meaningful acquisitions of the past year: Hyperice’s deal with Core Meditation. For the first time in an industry overcrowded by health and wellness devices, one company chose to marry physical recovery with mental improvement. From the acquisition announcement:

Core is designed to help people find calm, improve focus and inner strength. Unlike other meditation apps, Core is both an app and a handheld meditation device designed to track heart rate and stress levels

Sarah McDevitt, CEO and co-founder of Core, is a friend of mine. The 5’11” guard and former New York University basketball player is one of those quiet and steady stoic types who rarely wears her weaknesses on her sleeve. Over the few years that we’ve known one another, I have observed how she’s handled her own pressures. She must have been under incredible stress for a time. Her growth plans were halted by a once in a century pandemic. Her team turned over. And the conversation around the importance of meditation was on the fringes of the health and wellness industry. Few took it seriously before recently.

Core was incubated within the walls of Bolt VC in San Francisco (also an early believer in Tonal) by co-founder Brian Bolze and McDevitt. The value of Bolt’s early involvement was priceless: the access to facilities, technical designers, and developers helped to establish Core as an entrant into a field rarely pursued by independent operators. In a 2019 memo, I covered the prospect of her success:

Core is launching a meditation device that actively measures its effects by tracking HRV, a measure that allows consumers to quantitatively measure the strain on their central nervous system. Entrepreneurs and other high risk professionals have used this measure to discuss their levels of stress and depression for a time; however, HRV’s interest is growing quickly in non-athletic spaces.

But adoption was always going to be a problem without tens of millions in capital to spend on demand generation. She simply didn’t have that. She also didn’t have much luck. Her meditation trainer was well-designed and well-received, winning an honor at 2020’s CES convention. But the question has long been: how does Core compete with meditation apps and less capable but wider-known physical devices? The antidote for anonymity is usually the highest visibility partnerships you can purchase, which is buy-in from professional athletes and entertainers. It is not customary for venture firms (outside of perhaps A16Z) to be able to provide such introductions. And at a certain point, there isn’t a venture raise that can fund a company’s way into the world of professional sports. At just $4 million raised since 2016, the company was undercapitalized and underappreciated. But on occasion, luck and timing do begin to work in your favor.

The Luck and Timing of Now

By the time that Naomi Osaka had announced her decision to sit out at Wimbledon, McDevitt and team were already in conversation with Hyperice CEO Jim Huether. Another fortuitous connection would emerge. Jason Stein of SC Holdings is a fierce advocate and board member at Hyperice. He’s also an NYU basketball alum. Sometimes, luck swings in your favor and the shared experience between the McDevitt and Stein certainly helped.

In many ways, Osaka jump-started the current national conversation around mental health when she announced in May that she would not participate in mandatory press conferences ahead of the French Open. She later withdrew from the tournament, explaining that “I am not a natural public speaker and get huge waves of anxiety before I speak to the world’s media” and that she had faced “long bouts of depression” since 2018. [1]

Several weeks later, Simone Biles announced that she would be bowing out of her upcoming events at the 2020 Olympics, shocking fans and citing the need to prioritize her mental health. In one statement, she disappointed many of those observers simply by doing what was right for her. The online chatter around both Osaka’s and Biles’s personal decisions was insatiable: cable news hosts lamented them as figures with poor character. Trolling was even more relentless from gentlemen who might have once scored a single basket or remembered catching a single, JV touchdown pass back in high school.

But what these very public displays of defiance represented was a shift away from the shame of mental health concerns. Two of the strongest and most accomplished athletes in sports chose to mend the invisible scars. Just a decade prior, it would have been unlikely to see athletes make these decisions at the tops of their games. Now here we are, with mental health atop the list of athletic concerns. And as the national conversation continues to develop, Core has a new resource in Hyperice to bridge the divide between the mental and physical. More importantly, Hyperice and Jason Stein offer access to elite athletes and entertainers. Just a year ago, Stein’s SC Holdings invested in Mav Carter and Lebron James in Springhill Company, for instance.

When I was notified of the company’s decision to join Hyperice, I was ecstatic. Not only for Sarah McDevitt and team, her previous investors, and her new business partners but for the message made to the greater athletic community. The timing of the marriage between physical and mental health disciplines are long overdue. The shame around it is still dissipating; you can still sense the hesitancy in athletes. A recent statement by Aaron Rodgers:

The mental side of it is so important for all of us athletes. I don’t think it’s talked about enough. But taking time to work on yourself is, I think, the best gift any of us can give ourselves.

In three years’ time, athletes like Rodgers will no longer tip-toe around the anguish of depression, anxiety, and post-traumatic stress. He will give a full-throated analysis of his mental health, no differently than he’d discuss a strained MCL or tendinosis. The commercialization of mental healthcare will be viewed as before and after its stigma and 2021 will be a pivotal year in that story. The Hyperice acquisition of Core will be remembered as a part of that change. A little company with $4 million in funding and fewer than 10 employees lived up to its original goal of impacting a greater industry. Its original investors and supporters should be proud that the Core team set aside the ego and thought big enough to partner with one of the prominent and well-connected companies in athletics. It’s a category that will be redefined.

By Web Smith | Editor: Hilary Milnes