Latest / Cheeky Pint / Ambrook CEO Mackenzie Burnett on American agriculture, rural resilience, and carrying 50lbs of fresh pork on Amtrak

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Ambrook CEO Mackenzie Burnett on American agriculture, rural resilience, and carrying 50lbs of fresh pork on Amtrak · Cheeky Pint

• John Collison (01:09): I just want to start with Ambrook. Many people who are not in farming will not know what Ambrook is. Tell us the Ambrook product story and how you got here. Mackenzie Burnett (01:20): Yeah, so Ambrook, we build financial management software for farms, ranches and increasingly other, I would say, industrial mom-and-pop shops. So these are more complex businesses, typically family-run in the US. What financial management software means is it’s accounting software, payments, and banking. A lot of that is built on Stripe’s infrastructure and is, I think, made a lot more possible to be able to bundle a lot of that. I think you had sort of the bundling, the great unbundling, and now you have the great rebundling that has been enabled by a lot of embedded infrastructure tools, but that is what we build. The broad mission is: How do you help American family businesses become more profitable and more resilient? And resiliency is both economically and environmentally resilient. And we had started by trying to help a lot of farms access working capital during the pandemic. And then we pretty quickly realized that while we could help them with these one-off pandemic relief programs, which are actually designed to be extremely simple to apply for and simple to get the money, even then a lot of businesses were struggling to get those checks. We found that trying to help them with the more routine working capital, whether or not through public or private lenders and grant givers, it was just basically a lot of these businesses didn’t actually have the financial record-keeping that you needed to. And it wasn’t because they were behind on technology, necessarily. It’s because their businesses have a level of complexity that you would see… if it was a startup, it would have a CFO. That was a big unlock in realizing that a lot of when we were asking, “Oh, you actually do have all these tools that are built for a lot of these… SMB accounting software,” and they still weren’t able to put together their balance. They couldn’t produce a balance sheet, which you need for a loan. John Collison (03:18): OK. So farms are very complex businesses. You started off helping them with COVID stimulus essentially, and then as part of that you realize that it’s very hard to understand the farm’s finances, which got you into financial tooling. Mackenzie Burnett (03:31): Yeah, exactly. And we spent the first year and a half just trying to access the problem. I think that’s what I talked to the team about is, your first job as a founder is to get access to the problem. And sometimes people get it right pretty quickly and sometimes it takes a little bit to get access to the right problem. So the first thing was just get access to the problem, talking to hundreds of farmers and the whole ecosystem around them. So we would talk to a bunch of ag lenders and we’re like, “Well, how do you do it?” And they’re like, “We drive to the farm and we put together balance sheets.” John Collison (04:00): And see what? They’re like, “Yup. A lot of fences.” Mackenzie Burnett (04:02): Yeah, they actually drive… so they drive to the farm and they sit down at the kitchen table and they actually put together their balance sheet with the producer. John Collison (04:10): I see. So as an ag lender, you have to actually get in there and help them understand the finances. Mackenzie Burnett (04:15): Yeah, exactly. I would say that’s more typical than not. There’s actually a level of complexity here for farms and a lot of these types of, I would say, resource-intensive businesses where you’re dealing with locations, inventory, loans. So you’re dealing with a balance-sheet heaviness of it, and it’s what we call multi-P&L. So you have multiple business lines, multiple PIN out payment methods. Even the rise of the pandemic, for example, I think increased… accelerated the complexity of a lot of these businesses because suddenly you could actually have an online shop. John Collison (04:51): Totally, yeah, yeah. We’ve got a lot of Snake River Farms steak during the pandemic. It was really good. Mackenzie Burnett (04:57): Exactly. Yeah, no, exactly. And that is a nightmare to bookkeep for. John Collison (05:01): Yes, yes. Because individual transactions. It’s not just one supplier. Mackenzie Burnett (05:05): Exactly. You need to reconcile it against what actually hits your bank account. And so yes, it’s great. All these tools have accelerated business’s ability to do business, but it’s also increased the complexity of business. And a lot of these businesses, because they’re so low-margin and have tons of pressures on both sides in both input suppliers and the market—the marketing side of things—that are squeezing margins for a lot of these small businesses, they have to diversify in order to be able to—it’s smart business to diversify—but it also makes it a much more complicated business to actually figure out where are you making and losing money. John Collison (05:38): So I have so many questions. I want to ask questions about your business and Ambrook. I also want to ask questions about the general direction of agriculture in the US, but maybe let’s start with… What segment of the market are you addressing? Mackenzie Burnett (05:49): Can you guess how many farms in the US make more than $5 million a year in annual sales? There’s 2 million farms in the US … 1.8 million. John Collison (05:59): How many make more than $5 million a year in annual sales? 10,000? Mackenzie Burnett (06:04): Yeah, so it’s about 10,000. John Collison (06:05): Oh, OK. Mackenzie Burnett (06:06): Which is an extreme power law. So 10,000 out of 1.8 million means that the majority of commercial farmers are doing somewhere south of that. And so they have a level of complexity that might be sort of the $15 million business, but they are at $500K in annual sales. John Collison (06:26): OK. So you’re mostly targeting farms that do up to $5 million-ish. Mackenzie Burnett (06:31): We started there and now we’re starting to work with farms that are larger, but if you just go out and market a product to farms, you are going to get the majority of producers that are in that range between the $250K a year to about $5 million. John Collison (06:45): And does the product work for everyone? Almond farms in California and dairy farmers and the huge crop farms in the Midwest? Is there any kind of particular segment? Mackenzie Burnett (06:56): Yeah. We actually deliberately started pretty broad. It’s unusual if you think of us as ag tech software, it’s not unusual if you think of us as just financial management software. John Collison (07:05): Yeah, QuickBooks is not specific to anyone. Exactly. Mackenzie Burnett (07:08): Exactly, we were pretty deliberate in the beginning to make sure that we were working with some ranchers, some row croppers, some more diversified… veggie producers to make sure that we weren’t accidentally building something for just one vertical of that. And actually I think the thing that was a really happy accident that was an example of the customers pulling us into a much broader TAM or part of the market was, our second customer was a cattle-feeder operation in Arizona. And we drove… this was when our first 10 customers, we onboarded by hand so it was a big deal when we moved to video onboarding. They were about two hours outside of a regional airport. So we drove there and we got them onboarded and they were like, “Great, really happy to be onboarded. Now can you help us with our other four entities? And by the way, none of them are farms.” And so you had a trucking entity, you had a custom service entity, which actually just looks like consulting or a very invoice-heavy business. And so we immediately realized that in order to well serve agriculture, we actually had to serve and think about a lot of these other industries, which now is enabling us to expand to a lot of these adjacent or other types of industries. But in the beginning we kind of realized that we had built something that could help a husband and wife couple be able to handle a five-entity business. That’s pretty complicated. John Collison (08:33): For an ERP system, multi-subsidiary support is a pretty advanced feature for something like a NetSuite. And what you’re saying is you need that even for— Mackenzie Burnett (08:41): Exactly. Right now, we’re going… I would say the main competitive software that folks are switching from us is Intuit software. Eventually that will be something more like a NetSuite, but I think the thing we actually realized was that there wasn’t something in between. We are building for those businesses that have effectively outgrown Quickbooks, but don’t have the teams or resources to onboard to a Sage or a NetSuite. John Collison (09:07): Are there farms that use NetSuite? Mackenzie Burnett (09:09): There are farms that use NetSuite. Yeah, they’re in the north of the $5 million. John Collison (09:13): That’s a big farm. Yeah. Mackenzie Burnett (09:14): It’s a big farm. It’s when you have teams of people who can afford to implement and then maintain that type of software. John Collison (09:20): But that’s really getting into agribusiness. Mackenzie Burnett (09:22): Yeah, exactly. And so they tend to be much more vertically integrated. They’ll have a processor component or something like that. You realize that actually, I think, to go against something like an ERP, it’s a huge feature floor. If you talk to most of those businesses, even the really complex ones that are using something like an ERP, are only using 10% of the features. And so the game becomes what is the 10% and what can you pull down for a different audience type. I think one of the key differentiators we decided to build toward, I think correctly, in the beginning, was instead of building for the financial professional, we built for the business owner. John Collison (10:00): Yes. When you think about it, it’s kind of funny that ERPs became so horizontal. Because for context for people, ERP is enterprise resource planning software, which doesn’t really tell you anything but my understanding—tell me if you think this characterization is correct—is it is a combination of financial software where it’s the three financial statements and a huge amount of automation around the stuff needed to produce those financial statements. And so if you think about it, if you run a factory, to be able to produce the balance sheet, you have a bunch of inventory, but to be able to know what should be in that inventory line in the balance sheet, you actually have to know how many widgets you have sitting in bins in the facility in Cleveland. And so it becomes this all-singing, all-dancing, multi-tentacled system with very complex implementations and everything like that. And I’d say really grew up in a manufacturing paradigm and yet Stripe has an ERP system and lots of regular companies have ERP systems. And so it feels like it’d be much better suited for them to be vertically specific where there should be farming ERP and there should be manufacturing ERP, which is much more the traditional design center. Mackenzie Burnett (11:07): Yeah, I think the modularity is what hasn’t actually been brought to the SMB level. It does exist at this much larger enterprise level. And I do think that as software becomes easier to build, and that’s not just from AI, but it’s also from a lot of the embedded infrastructure. There’s tons of reasons why it is much easier to build the version of what we’re building today than it would’ve been 20 years ago. Even cross-platform, a choice that we made really early on was to build on React Native, which immediately just gives you … it means we have not had actually a full-time mobile engineer on the team because everyone has just learned React Native and you immediately get a cross-platform— John Collison (11:48): And I presume you have a huge amount of mobile usage, because people are up and about all day. Mackenzie Burnett (11:50): About a third of our customers use exclusively mobile to do all of their bookkeeping and accounting, which is insane for the level of complexity that they’re dealing with. John Collison (12:03): Totally. For doing accounting, it’s like that’s a laptop kind of activity. Mackenzie Burnett (12:06): Totally, totally. So I think very early on we built for the type of person who didn’t have a lot of financial professional training, who was spending more time in the field than in the office. He was dealing with a level of complexity that typically these ERPs were better suited for. And we brought all that into a package that was affordable and accessible. And we also do a ton of financial-literacy training and education and we wrap a lot of what would otherwise be a custom journal entry in these types of workflows. You can really think of an ERP or sort of this system as: get the data in, do something with the data, get the data out, and the get the data in… John Collison (12:52): It’s kind of a thankless task. Mackenzie Burnett (12:52): Exactly. Those are all the workflows tasks. Yeah. John Collison (12:55): And so you rock up to a farm—you’re off in Visalia or somewhere and you are visiting a farm—and they’re on QuickBooks or they’re on Sage—or maybe not Sage—something, and you say you shouldn’t be using your existing system. You should instead switch to Ambrook. What is the “wow” feature? What gets people to switch? What’s the point in the demo where they’re like, “OK, I’m in”? Mackenzie Burnett (13:23): Yeah, totally. So there’s a couple of things. There are what’s in the software and then there’s the advantages we have of just being a startup that can care harder. In the beginning, you can just care hard about everything, but a couple of the core things that we have built differently. The first is that when you look at the software, it just looks cleaner. It doesn’t sound like that’s a 10x feature, but we solved a thousand tiny paper cuts so that when someone looks and interacts with Ambrook for the first time, it’s a little bit of a breath of relief. The second thing is that we enable a type of multidimensionality in the software. So QuickBooks has a concept called Classes. We enable essentially a type of multiple-tagging system and splitting of every transaction in a way that you can slice and dice your data without having to kick that out to a spreadsheet and you can do it in your own language. And so we kind of help folks set up… OK, this is my cattle enterprise, this is my hay enterprise in their own language, and it’s very clean in the interface of how to do that. So again, it’s the get the data in [that] we made a lot simpler and cleaner, but they’re actually doing quite complex analysis when they’re doing that type of work. And the last thing is actually mobile. The number of conversations that we had with producers who would describe an actual shoebox of receipts that they would take at the end of the year to their accountant, and that was their financial management system. We built a lot cleaner workflows around receipts—around paper, basically—receipts, checks, those types of things so that you can take photos of things, categorize them immediately. That is actually one place that folks are really using a lot of AI features to do a lot of that type of matching and categorization of those things. But those are the breath of fresh air when you first see the software and then it’s what it enables you to do. It’s the simple but powerful workflows. John Collison (15:11): What’s an example of a kind of analysis that someone might not do on their farm, but for this software? Mackenzie Burnett (15:17): Understanding your cost per acre is extremely challenging to get to in something like a QuickBooks. There’s a reason why there’s a whole category of startups that are funded to do FP&A on top of QuickBooks. You don’t have to do that with Ambrook. It’s built in. And the reason why those startups exist is because QuickBooks did not actually have the underlying data architecture in a specific way that we chose to do native in the beginning. And so we can do way more complex unit economic analysis and in those types of things. And I think essentially without requiring someone to have financial professional training. John Collison (15:50): So I’m running a farm and there’s 100 acres for sale across the road. The decision as to whether I should buy that 100 acres really depends on: what is my cost per acre right now? So I know what is the outlay until that becomes productive. Mackenzie Burnett (16:03): Yeah, totally. John Collison (16:04): But I can’t work that out unless I know my existing— Mackenzie Burnett (16:06): Totally, yeah. I think that’s exactly right. And it’s… can you put together your balance sheet and stuff in time in a professional way so that you can convince your lender, your banker, to be able to give you the loan to buy the 100 acres across the road. John Collison (16:22): Got it. OK. So this better accounting is a significant reason people are coming to the product today. What are the other reasons that people come for the product or maybe will come to the product in the future? Mackenzie Burnett (16:35): I think about startups as you have pre-distribution opportunities and post-distribution opportunities. And the pre-distribution opportunities are: what can you do to convince enough nodes to join your network and the post-distribution opportunities of what you do when you have enough nodes. Ambrook is just now crossing over in some regions. We have enough regional density with some of these nodes to get into a post-distribution world for some of our customers. But I think in that world of you have enough nodes in the network, it should be instant and free to transact within the Ambrook ecosystem. And I think a lot of what we are doing, or the vision is to be able to keep more capital in local communities. And I think that has been something that I’ve become increasingly passionate about, which is, for example, 90% of payments in US agriculture still go through paper check. And it’s not because they’re behind the times, it’s because digital payments can be expensive for a lot of these producers. And I think actually something that we’re building with… because of the Stripe Treasury network, is the ability to do these instant free payments within the deposit ecosystem. And ideally, those are within the ERP system they also have the context on both sides of the ERP. So my invoice is your bill. You don’t have to actually do the ARAP shuffle. Everything is reconciled on both sides. In the future we could say, OK, this category in your system actually maps to this chart of accounts category in this system. You can imagine a lot… what could you do when you actually have really rich metadata that’s going through the network? John Collison (18:12): No, we think about this distinction a lot. I think it’s a very good one for startups of pre-distribution versus post-distribution. How do you get people using the product and then how do you make it better when you’re using the product? And when we started Stripe, we were very much building stripe in a single-player mode where you have your Stripe account and the fact that other people use Stripe is, well, they didn’t at the time. We were small. Whereas now a big part of how we can make the products better is the fact that there is so much internet commerce running on Stripe. I mean a very simple one, but it’s really started working, is Stripe Radar where it is now the case that most credit cards on the internet we’ve seen before. And so we know it’s suspicious if a credit card comes to us from a totally new device and totally new IP address and things like that. But that’s the kind of post-distribution thing where you can’t build that product initially, but when you have scale, it becomes very significant. Mackenzie Burnett (19:00): I think one of the most rewarding things about building for small businesses is that you are able to build these real relationships with people who are entrusting you with their numbers and their future. And what can we do when we are translating just not just in the individual context of a single-player world, but the multiplayer world is communities. And I’ve just been thinking a lot about that, which is, what does rural resilience mean? What does economic resilience mean for a lot of people? John Collison (19:25): What does rural resilience mean? I think there’s a general view that the economics of US agriculture are really hard and it’s challenged from a labor point of view. There’s all these different challenges and so maybe you can talk about the landscape and that rural resilience. Mackenzie Burnett (19:42): I think rural flight, which is the opposite of rural resilience, which is what you’re seeing in a lot of places. You’re just seeing a brain drain from a lot of rural communities around the world [that] does impact local communities. But I think the thing that is usually underdiscussed is how it impacts national or global communities as well. But when it comes to rural resilience, what I mean is when you have nodes of family businesses that can sustain multiple generations of passing down the business, for example, or people want to stay in the local communities, basically. And I think that is something that we’re really interested in and we have seen work well for some of our customers. They’re actually able to make the succession planning work. They’re able to build a business that can be passed down through multiple generations. John Collison (20:34): As in, you think we need to be more serious about preserving farming as working… as an important part of the US economy? Mackenzie Burnett (20:42): Yeah, absolutely. I think sometimes the free market optimizes for too small of a unit. And if we instead optimized for a community unit, for example, how would that change the way that we made decisions? And that community unit, I think, actually is what sustains local economies through time. If you are just optimizing for the very short-term turnaround, which makes total sense actually for an individual to say, OK, that this is my only sort of retirement is to sell to this developer. I think that’s a world that I would love to be able to build more business resilience so that they don’t have to feel like that’s their only option. John Collison (21:24): You’re saying farming produces positive externalities. Like if the cartoon villain, private equity, slash-and-burn costs and make the products worse and raise prices … if that’s at the full negative externalities end of the spectrum, farming is much more at the positive externalities. Mackenzie Burnett (21:37): Yeah, I think there’s a lot of positive externalities for it that are underaccounted for. John Collison (21:47): How do you make a medium-sized farm work in the United States? Pick your favorite example, whether it be crops or dairy, or beef or what have you. What is required to make—because again, it’s a hard business—what’s required to make it work? Mackenzie Burnett (22:01): I’ll take a cattle ranch, for example. For a cattle ranch, I think, to work in the US—a couple of things. One, a lot of farming are these boom-bust cycles so they’re subject to commodity markets. They’re also subject to input prices, inflation, those types of things. And so you do see this boom-bust cycle throughout the economy. So one, there has to be a resilience and ability to weather that. That’s one piece. I think the second piece is to get access to the inputs perspective. So you can think of inputs as access to grazing land, access to feed, access to a lot of these other things. John Collison (22:38): A lot of ranchers ranch on BLM land, right? Public leases, which helps get access to the amount of land you need. Mackenzie Burnett (22:44): Exactly. For context, a cattle ranch requires quite a lot of land. And there’s a way to do it in a way that is actually better for grasslands management. John Collison (22:55): Why is it better for grasslands? Oh, it’s fire management? Mackenzie Burnett (22:57): It can be. There is such a thing as overgrazing, right? But I think a lot of what people talk about with rotational growth—it’s called rotational grazing—just a lot of labor to move the cattle every day to be able to do that. But it actually does build back up the soil in a way where the cattle graze and then they poop and then the poop becomes better soil and you can move throughout and there’s a lot of interesting and virtual fencing to be able to make that easier. But there is a way in which good healthy livestock management also creates healthier soils, and it is possible. It just is technically… you have to be trained and understand how to do it, and there is some capital barriers or labor barriers to be able to do that. So there is access to the type of capital that would create the incentives to be able to make that possible. And then you have on the other side, access to markets. Historically, if you’re just sort doing wholesale, you’re going to get wholesale prices. This is where you see the rise of D2C really help and when you’re able to have access to higher-margin markets—so a lot of online payments actually has helped that a ton. You just also need to be able to manage your books in a way that can actually make that easier to manage. Again, what I’m talking about is diversification, right? And whenever you introduce diversification, you also introduce complexity and risk. John Collison (24:11): Can any farm do D2C? I would’ve thought maybe it requires some minimum scale to make sense or it’s just reasonably labor intensive—the packing and shipping of individual shipments to individual customers. Mackenzie Burnett (24:24): Yeah, totally. There’s actually a whole spectrum of different ways in which you can make it work. You can do it all yourself but there’s also a lot of co-ops, basically, in which you can share infrastructure. It just requires a shift in incentive structures, infrastructure, those types of things and that sometimes can require a lot of public investment. John Collison (24:44): What are things that people should buy directly from farmers as opposed to in the supermarket? There’s some things that travel pretty well. Beer travels pretty well, actually, and so you don’t need to brew your own beer for quality purposes. You may want to just because it’s fun. I was surprised. I thought the steak in the supermarket I assumed would be pretty good— Mackenzie Burnett (25:00): I would say meat. John Collison (25:01): We have local supermarkets, but yeah, the direct-to-consumer meat was really good. Veggies as well. I think the local stuff will be better than the long supply-chain stuff. Mackenzie Burnett (25:07): I think you’d be surprised. You can just call up a local farmer and most likely they’ll figure out a way to sell you half a cow. John Collison (25:15): Well, to find an easy online payment solution. Mackenzie Burnett (25:18): Yeah, exactly. I think actually the biggest thing people don’t really think about is freezer storage or something. John Collison (25:22): Half a cow is bigger than people expect. Mackenzie Burnett (25:24): Yeah. That feeds a full family for a while. Actually, there’s a lot of things you can buy direct. John Collison (25:31): But what should you buy direct? Mackenzie Burnett (25:32): I think meat is a big one that makes way more economic sense to buy direct if you just are willing to— John Collison (25:38): Not just economic sense. Gastronomic sense. Mackenzie Burnett (25:39): Totally, it’s so much better too. Something that I did with my team that one of my teammates found and suggested, which was really awesome, was… Have you ever been to a traditional pig harvest? John Collison (25:51): I have helped butcher a pig once. That was quite an experience. Yeah, I think we didn’t see all the steps, but yeah. Mackenzie Burnett (25:58): Yeah, we saw all the steps, and so that was a really interesting experience of participating in that. Then we ended up butchering the pig at the end, and we took home that meat. It was like 50 pounds that we carried on the Amtrak. John Collison (26:13): You’re the person that people love to have sitting next to them on Amtrak. Mackenzie Burnett (26:18): That was awesome. It was by far the best pork I’ve ever had. John Collison (26:20): Annoyance level 1 is people playing music without headphones on their phone. Annoyance level 8: carrying half a pig. Mackenzie Burnett (26:28): Yeah. That farmer we went to is a customer now, so it was yeah, it worked. John Collison (26:33): OK. So direct-to-consumer is a big thing, but sorry, I’m trying to rewind to where we were. We were talking about the economics of farming in this day and age. Labor seems really hard. Mackenzie Burnett (26:44): Yes, labor is especially hard right now but it’s hard for a couple of reasons. I think there’s a lot of immigration-related issues that a lot of folks are facing right now. But the second actually— John Collison (26:55): Sorry, and that is tightening of immigration, meaning less labor? Mackenzie Burnett (26:58): Yeah, so tightening of immigration means that you have less labor because a lot of farms rely on seasonal labor. Farms and processing facilities actually, which people don’t think about, which is if you can’t sell your product, then—for a lot of livestock, for example—and that was the issue in the pandemic too, is a lot of processing facilities shut down. But the other side is actually skilled labor. It’s not just seasonal labor, but it’s, particularly, skilled labor has been harder and harder to get even before the pandemic. John Collison (27:30): What’s an example of some of these specialists? Mackenzie Burnett (27:32): I think there’s actually quite a lot of skill in knowing how to pick a crop without bruising it, for example, at the speeds that you need. Or for example, animal husbandry, or a lot of these other types of skills that, again, this goes back to how do we make it so that there isn’t so much rural brain drain and rural flight. A lot of the labor might not actually want to live or work in those areas, even if they’re not seasonal immigrants. John Collison (28:02): From a policy perspective, if you were in charge, if you were running, I don’t know, USDA—both your parents worked for USDA—what would you be waving your magic wand to do? Mackenzie Burnett (28:13): Oh, interesting. I think there’s actually two. One of them is outside the USDA. One of them is within the USDA. I’m really interested in a lot of the stuff that’s happening with open banking regulations. I think actually the cost to a lot of what we’re seeing or doing is the lack of—accounting software is just an attempt—all we are doing is trying to get external data sources in and make them all make sense. And what we were talking about with the metadata and all that before, there’s so much information that could actually be really helpful for our customers that is not being shared or is really expensive and difficult to get. That is something that I am super interested in how things are developing there. John Collison (28:52): So you’re saying concretely there—in many countries it is mandated that banks provide structured access to financial data for their customers. They say it’s the customer’s own data, banks have to give it on request and in API formats and things like this. It’s actually a very live topic in the US right now, and there’s lots of debates over this rule 1033 and things like this. But you’re saying it would be very useful for Ambrook to have some open banking mandates where you guys can reliably get data in a sensible format? Mackenzie Burnett (29:22): Yeah, it is not just useful for Ambrook. It’s useful for our customers. That is ultimately who we’re trying to serve. John Collison (29:29): Yeah, it’s their data. Mackenzie Burnett (29:29): It’s their data. And all we’re trying to do is get the data from someone else and give it back to them actually, which is a crazy thing that we have to fight for that. But yeah, I think that is something that if I could wave a magic wand, honestly, I think that would actually help more than people think. And I know that you asked the question about the USDA, but I actually think that that would be my top. But I think on the USDA side, there’s a lot of hoops that people have to go through in order to be able to get access to funding or programs that might be useful for the type of incentive structure alignment that I was talking through. And I think the simplification of a lot of that, which I think a lot of people want, but— John Collison (30:09): We have our thumb on the scale, but we could at least do it in a more efficient way— Mackenzie Burnett (30:12): Totally. Yeah. John Collison (30:13): Would you tweak farm subsidies up or down? Mackenzie Burnett (30:18): To be honest, I think farm subsidies are so sticky that what I would do instead of tweaking up and down is I would just be extremely deliberate about when we just choose to introduce a farm subsidy, what are we doing? And if this was still around a hundred years from now, would we be OK with it? When you are designing these incentive structures, there’s whole livelihoods and politics that are built around them and they last through decades. John Collison (30:43): And they’re going to be sticky. Mackenzie Burnett (30:44): They’re going to be extremely sticky. So it’s more like, “Be careful what you wish for” is the response I have to that. John Collison (30:55): Are carbon credits a big revenue line for a lot of your customers? Mackenzie Burnett (31:55): They’re not the biggest revenue line. John Collison (31:58): But a relevant revenue line for a lot of your customers because you get into forestry stuff or a lot of land management. Mackenzie Burnett (32:04): For many of our customers, they do participate in carbon-credit programs but it’s not as many as you might think. It still is a relatively small part of US agriculture, despite them being really big in the public consciousness. Carbon payments are on very long timeframes and they require you to maintain the same behavior over about a 10-year period, otherwise you get clawback provisions. And so actually I think it— John Collison (32:32): Locks you into a plan. Mackenzie Burnett (32:33): Locks you into a plan when you might actually want to be adaptive or versatile in that. And I actually went to a sustainability and ag conference last year and something that one of the producers there said really struck me, which was: It’s not enough to have a 1x payback. You have to prove that these programs can have a 3-4x payback. Otherwise why would they do it? They should just do something else that is going to be able to better improve their bottom line. And I think that that just goes back to a lot of our thesis, which is this idea of pragmatic environmentalism. You just cannot… you are not going to see the level of change that you might want to see or need unless it makes sense for the bottom line. John Collison (33:19): Yeah, climate is a very politically charged topic in the US. You studied climate security at Stanford. Most of your customers are in red states or the red part of blue states, such as in California. But I also think that people’s views on these topics tend to be pretty nuanced. I bet San Franciscans couldn’t effectively steelman the views of your customers on such climate topics. So what do your customers think on climate topics? Mackenzie Burnett (33:48): It’s a great question. Our customers think a bunch of different things, so I wouldn’t be able to summarize with just one statement, though I will say that one of my favorite articles that Offrange, which is our editorial independent media publication, published was an article titled “Where Soil is Holy, and Climate Change Is Seldom Mentioned”. And I think that it’s talking about climate sometimes feels like talking about politics or money. And yet these producers that this article talks about, and a lot of the producers that we work with, just around the US are actually doing the type of things that you would put under a climate umbrella. John Collison (34:32): Just not branding it as such. Mackenzie Burnett (34:33): It’s just not branding it as such. And I think a lot of what I’ve learned from our customers is that a lot of people want the same things. They just aren’t talking about it in a way that might feel familiar to someone who grew up in or around San Francisco, for example. John Collison (34:50): We’re talking a lot here about the insights into the business that Ambrook allows. One of my favorite books about accounting is the End of Accounting, which talks about how GAAP is basically poorly suited to this day and age. And one of the things it points out is that accounting is trying to do many jobs. If you’re an equity holder, it’s trying to help you figure out what the future returns on your equity might be. If you’re a debt holder, it’s helping you figure out will you lose all your money or will you get paid back. If you’re the IRS, it’s helping you figure out how much taxes this business owes. And then this management accounting, which is helping you understand, like you were saying, a P&L view of hay or the dairy side of the operation or something like that. And so it’s helping management make better decisions. But in particular, people tend to have a view that there is this God-given truth of just what the business is. Whereas, in fact, accounting is a tool for a job and the job you might want to do with accounting actually really varies. And so I’m curious how you think about that… which are the jobs that you want to help firms do? Are you helping them pay their taxes? Is it all about making different decisions? And yeah, that idea that accounting is a bit overloaded these days. Mackenzie Burnett (36:11): Yeah, totally. Actually, I think the way that we talk about it internally is there’s four types of accounting. The first layer is just cash. It’s like if you did a snapshot, what’s happening? And actually many businesses in the US file cash basis. The second layer, which a lot of startups are subjected to because they meet the threshold requirement for this is filing accrual, which is we suddenly introduce the idea of time into accounting. So the idea of accounts receivable, accounts payable, ARAP, etc. The next layer is enterprise accounting, which is that idea of an entire business line basically. So hay, cattle, etc. And then the final layer is managerial accounting, which is truly unit economics. It’s like, what is my cost per acre? How much should it cost me for a dairy to produce a pound of milk? That type of accounting, and the way that we think about it is we have customers who come in at every layer. I think actually the beauty of building accounting software is that it can scale. Like yes, GAAP might be overloaded but at least it is standardized and it scales. And so we have folks who come in who are coming off of actual pen-and-paper and a shoebox of receipts who are interested in adopting software for the first time to do their accounting, to get tax prep to be done easier or maybe go from cash to accrual. And then we have folks who are at the accrual, enterprise layer who are interested in actually getting to the unit-economic analysis. I mean, dairies are extremely complicated businesses. They’re like a cow-calf operation, which is your typical cattle ranch and then some. They’re a very complex cow-calf. And I’ve seen dairies hire ex-bankers to get to that level of managerial analysis. And I think that is what we are building for Ambrook, is we have customers who’re able to get to all four layers of accounting because of the way that we just architected the data structure in the beginning and the way that we are trying to wrap and de-jargon a lot of the complexities of doing your books correctly. John Collison (38:29): So you want to walk people up the inside curve and take wherever they’re currently operating, and make it easy for them to reach the next level. Mackenzie Burnett (38:36): Exactly. We consider customers to be successful in Ambrook if they just hop one level up. John Collison (38:42): That makes sense. People might think of you as a software business, but I got a sense that you identify in a significant way as a fintech business. Is that a fair characterization? And maybe you can expand on that. Mackenzie Burnett (38:54): Yeah, for sure. I typically think of fintech businesses in two different ways. The first way is, are you facilitating payments? And so there’s a sense of, are you in the payments flow? The second way that folks typically talk about fintech businesses is, do you hold deposits? Do you lend? Basically deposits and lending. Maybe also cards would be part of that. And so for us, we actually, from the very beginning, saw them as inseparable. We were just interested in solving our customers’ problems and in order to be able to get more accurate data into the ERP, being in the payments flow just made it a lot easier to be able to do that. And I think building with a lot of the fintech optionality enables us to have a lot more of the options to solve more of the problems with capital that we were talking about earlier. So yeah, I think about that as inseparable. I think that the choice that we didn’t make though is—and we are just now getting into credit—we decided actually early on not to give away free money. John Collison (39:59): Controversial in startup land. Mackenzie Burnett (40:02): I think it actually was controversial at the time and we grew slower in the beginning because of it. And the thought that I had was that—and we had raised in the very beginning—it started during ZIRP. And so the thought that I had was basically I did all these financial models and I was like, “I just don’t see how this makes sense actually. If I’m trying to get to a healthy margin business—” John Collison (40:33): The free money part makes it challenging. Mackenzie Burnett (40:34): Exactly. I don’t see how this works if interest rates change even a little bit. A piece of advice that I got that I thought was really, really helpful and helped me shape this, which is I wanted to actually get the hard parts right first, which I think is the SaaS side of the fintech side. And I wanted people to be adopting us because they like the software and we got the workflows, not because we are giving away free money. We can always give away free money. We can turn that on when we want and when we have enough of the partners to be able to do that. And I think because we actually did the slog of building accounting software that has a high NPS that people actually like using, we now have way more optionality to be able to leverage the fintech side of the business. John Collison (41:18): And when you say free money, do you mean below-market loans? Do you mean free payments? Do you have a specific free money, you mean? Mackenzie Burnett (41:26): Oh yeah. I mean below market anything. So below-market anything, I think that you can give away free payments that actually cost you money. So it’s anything that requires you to have negative unit— John Collison (41:40): It is how a lot of founders fool themselves that they have product-market fit when they don’t. Are users coming for the product or are they coming for the subsidy? You can build MoviePass and movie aficionados love unlimited free movies but the economics make it challenging. Mackenzie Burnett (41:52): Yeah. And I think maybe it would’ve all worked out if I was willing to do that. I just… John Collison (41:58): You’re old-fashioned in that way. Mackenzie Burnett (41:59): Just old-fashioned. I was like, I thought we were supposed to be building for 70% gross margins. And so that’s what I was doing. That was what we ended up building the business around. John Collison (42:09): You seem unusually passionate about instant money movement compared to most people. I know. Mackenzie Burnett (42:18): Ninety-ninth percentile on instant money movement. John Collison (42:21): Is it a reflection of what you’re hearing from your customers or… ? Mackenzie Burnett (42:23): Yeah, I think it’s also a first principle. The idea of if I’m actually thinking about solving the problem for what we’re trying to solve, it seems like actually a lot of the issue is that money movement is slow and expensive and contextless. So it’s instant money movement and high-context money movement. And I think there’s just a lot of dead money sitting in the economy that’s just for some reason in transit between middlemen. John Collison (42:51): We’re too accepting of that. Mackenzie Burnett (42:53): Yeah, I think it is something that people are used to but if you think of a check sitting in the mail for 10, 14 days, yes, maybe it’s floating someone’s ability to get that. So it’s cashflow management. I think that’s a legit thing that I think you have to solve for if you’re saying not every business wants instant money movement. I do think that there’s also a sense of having to go through any set of ACH hops doesn’t make sense. I was joking with Jackson on our podcast that the takeaway I had from Stripe Sessions was instant money movement. I was like, all right, that’s going to be a solved problem. What’s the next problem we can solve? And I was talking to some Stripes afterwards and they’re like, no, it’s actually still really hard. I was like, I’m thinking five years in the future, you guys have got this. John Collison (43:44): No, I think we will make a lot of progress there. It feels like many things are coming together. John Collison (43:59): I’m curious, well, maybe you can explain briefly how you guys use Stripe to set up my actual question, which is if you were running Stripe, what would you do differently? Mackenzie Burnett (44:07): I think you guys are doing a great job running Stripe. John Collison (44:09): No, no. But actually. Mackenzie Burnett (44:11): I wrote a whole document. John Collison (44:10): I know. I read it. Mackenzie Burnett (44:11): My sense is that Stripe strategy in the long-run is to figure out how to transcend the constraints of traditional money movement. How much do you participate in the traditional financial institutions that have been set up and how much do you transcend that and build something novel? I think a lot of what actually Stripe is doing with building its own payments network, somehow building its own deposits network, which I think you still need to partner with banking institutions on to do that, so you’re still anchored with that, but I think that’s actually where stablecoins becomes quite interesting because it’s permissionless. And so, who does Stripe need to—I think the way that I would kind of think about it is who does Stripe need to get permission from today in order to exist in the way that Stripe wants to exist? John Collison (45:03): Yeah. I think the thing that we think is interesting about financial infrastructure is it’s, by its nature, multiplayer. You look at old ecommerce systems and ones that even might’ve been on-prem or just the software is very outdated, and Shopify came along and built an amazing product and said, “Here’s a much better rate to manage your ecommerce store and manage your inventory and build a nice storefront and everything.” And they were able to really clean up a significant part of that market because you could replace your old ecommerce system with Shopify. What’s interesting about what we’re doing is payments—and to a large degree financial services—are by their nature multiplayer where every payment is with some counterparty. And even if it’s not, if it’s something like where do you store your money or how do you do AP or something like that. There are lots of banks out there that people have their deposits with or people wave their hands and say, “Oh, crypto will obviate this.” But when people have money in crypto, they will store it in Coinbase, or in Binance, or what have you. And so our view is that for whatever job is being done, there will be a whole bunch of other counterparties that we are going to integrate with and work with. And so an interesting part of running a business like Stripe is that you’re working with all these partners and you can actually pull things along and make them way more modern. We’ve done that in a bunch of areas, but it’s much more of you’re the captain of a sports team as opposed to you’re Alex Honnold doing solo rock climbing. It’s a different kind of sport. Mackenzie Burnett (46:52): Totally. But there are players that Stripe will just be deeply competitive with who will not want to play on your sports team. I think there’s a difference between who do you partner with and who do you generally have to run through in order to be able to build a better version of financial infrastructure that is open, does actually move on modern rails, is actually ultimately net better for everyone, is not incentivized by value-capture. But I think there’s a lot of sense of how can you get more of the ecosystem cheering you on. It’s the transcendence from Stripe as the upstart startup to Stripe as the champion that’s pulling everyone into the future. John Collison (47:31): Yes. So maybe what you’re saying is Stripe previously provided easy access to the existing financial system and now we’ve gotten to a point where Stripe can actually have some voice in shaping, and has the scale, where we can have some voice in shaping the future financial system. And you’re saying that we have to take that seriously that that is now where we are as opposed to being a passive participant in, I guess, this industry exists. Mackenzie Burnett (47:58): Totally. Yeah. I think this is the thing that, I mean, we’re at a very different scale than Stripe, but the thing that I have been talking about lately with my team is the company changes under our feet. It’s like one day you wake up and you’re like, “Oh, it’s like the rules are different actually.” People are caring about different things than they did before, and the voice that we have in the ecosystem is different in these types of things. And I do actually think that Stripe is pretty clearly a leader on a lot of these axes, but I haven’t heard as much of the voice in terms of what is the vision in which we want to build. I see a future in which there is a vision of the world that I want to exist and Stripe is uniquely in a position to be able to make that vision true, and I want to sign up for that. John Collison (48:48): Yeah, I think maybe also, you’ve probably picked up on this dispositionally, we’re just not naturally drawn to pre-announcing products before they’re anywhere close to—we like to do a thing and hopefully we get it right. Mackenzie Burnett (49:04): Totally. John Collison (49:04): And our view is you can’t meme your way to a product being good. You put out a version of it that’s imperfect and then you gradually iterate on it over time. And so maybe also we’ve just been a bit too leery of what we think are grandiose statements as a product development methodology. Mackenzie Burnett (49:20): Yeah, I think that’s the piece of what feels missing is a sense of the painting the picture of what the world could look like if Stripe wins. John Collison (49:30): What is your answer to this question? Mackenzie Burnett (49:32): What does it look like if we win? I want more people to believe in the American Dream. My grandfather believed in it when he emigrated from India to the US, and he built up his own—he was an entrepreneur, built his own engineering practice, and that was what put his five kids through school. My mom believed a version of it when she immigrated when she was eight with her family and with my grandfather, and went into public service because she told me a couple years ago it was because she wanted to give back to a country that had served her… had given so much to her. And I’m doing a version of it because I think I went to a school that got me involved in tech and then I moved to San Francisco and I became familiar with capital markets and I have access now to a version of that. But I see so many of our customers that are trying to live a version of that and are struggling. And I want there to be many different types of American Dreams that are possible. John Collison (50:37): When you say making the American Dream accessible, you’re in particular talking about where Ambrook can help, is making entrepreneurship and wealth building broadly accessible. Mackenzie Burnett (50:51): Yeah. Broadly accessible, and not just of folks who know how to raise venture capital. John Collison (50:54): For tech businesses. Mackenzie Burnett (50:55): Yeah. John Collison (50:55): Who have you learned from as you’ve built this business? Mackenzie Burnett (50:59): I think two of the people who come to mind are, one of them is Josh Kushner at Thrive, who took a really early big bet on me and the vision that we were building for the team. And I think the thing that I have always really admired about Josh is he’s so precise. If you’ve ever talked to Josh, he’s thoughtful in all of his words but he is enormously ambitious. There’s a level of quiet ambition in what he does, and he has over the course of even the past couple of years, become much more widely recognized in terms of his ability to put his finger on the macro, I think. John Collison (51:40): Yeah, I mean he came from… Thrive was founded how long ago? And now they’re one of the leading multistage firms. Mackenzie Burnett (51:49): Yeah, exactly. So I think the thing that I’ve learned from him is the sense of you can be quietly ambitious and that fits my style much better. I think the second person actually that I’ve learned a lot from is Dylan Field, who just led a big investment in Ambrook. And Dylan is so able to… if you’re ever having a conversation with Dylan is one where he can connect the strategic to the tactical and back up in the same thread. He can go from 40,000 feet to 5 feet and back up to 40,000 in the same sentence in a way that doesn’t create any whiplash. And I’ve actually found that to be extremely rare in both investors and operators to be able to do that. John Collison (52:33): People are either in the weeds or— Mackenzie Burnett (52:34): Or at the 50,000-foot view that it’s not very helpful. And Dylan is able to go back and forth between the two in a way that I’ve learned a lot from and I think I’ve gotten a lot better at. John Collison (52:45): Is that dispositional by him or because he’s running a public SaaS, scaled company? Mackenzie Burnett (52:52): It’s a good question. I’ve met a lot of founders and operators who can’t do it, so I think that his ability to build Figma has probably taught him a lot in that. But I also think that there must be something more dispositional about it. John Collison (53:06): Yeah. Last question. Why are you building Offrange, your media property? Mackenzie Burnett (53:11): Offrange started out as an experiment called Ambrook Research. It was before we had built anything that we could really show people. And so I wanted a way for two reasons. One, I wanted a way to talk about our brand and put something valuable out there that would be useful. And so we started out by just doing some… we’ve published a couple of very, in-the-early-days research articles with academics using some of our early anonymized data from a lot of the work we were doing. And then it turned into actually this editorial independent media publication that has become wildly popular in its own right. I’ve always wanted to build my own version of a research or academic journal. A lot of the research I did when I was in grad school on climate security actually, in particular, was looking at the co-production—it was called the co-production of actionable science. And it’s how do you create knowledge in a way that involves all the stakeholders and gets them all on board in the knowledge that is created. And so it’s not just creating these ivory towers. And I always thought that if I could, I wanted to build something that would evoke that type of ethos. And Offrange was my attempt at doing that. And it now is stewarded by a really wonderful editor, Jesse, and has its own life in that. But in the early days, it was really this idea of, I wanted to create actionable science that would be useful for people to be able to make better decisions. John Collison (54:44): What piece are you most proud of? If people want to check it out, what should they go Google? Mackenzie Burnett (54:48): Well, I already said I really love the piece that we wrote. Eve Andrews is the author. “Where Soil is Holy, and Climate Change Is Seldom Mentioned”. I love that piece. Yeah. That’s an old but good one. It’s one of my favorites. John Collison (55:03): Okay. Well, Mackenzie, thank you. Mackenzie Burnett (55:05): Yeah, thank you.