The Growth Rocketship: Using AI and Human Expertise to Build Tomorrow’s Leading Brands With A-Frame

Haim Zaltzman: Hello and welcome to Connected with Latham, where we discuss ideas, legal developments, and business trends shaping the global economy. I'm Haim Zaltzman, Partner and Global Vice Chair of Latham's Emerging Companies and Growth Practice.

In this episode, I'm joined by Ari Bloom, Founder and Chief Executive Officer of A-Frame Brands, an innovation and product development platform for the world's top brands. Ari, welcome to the episode.

Ari Bloom: Haim, it's so good to be here. And I must say, you really have the best radio voice I think I've heard in all the legal profession.

Haim Zaltzman: That is the kindest thing I may have ever heard. Not to mention, I think that's—

Ari Bloom: Maybe you should let me finish the sentence. You also have a face for radio.

Haim Zaltzman: I knew it was coming. As our audience will be able to tell from this episode, I've known Ari for a very long time. I think it's actually 25 or more years. 2001, maybe 2000. Right? Is that right?

Yeah, we go way back, when we were both students pre-grad school and then post-grad school, and we've been working together, I actually looked back, for well over a decade. Yeah. It’s been in multiple firms before A-Frame.

Ari Bloom: That's right. This is my fourth company I've done with you. I'm including the company that I was on the board of, I said “we have to work with Latham, they’re the best. I brought my friend Haim.”

Haim Zaltzman: He's beyond kind. And for all the audience, that's what we expect from all our clients — that attitude.

Ari, I really appreciate you being here. But before we dive into A-Frame — and we're going to go through the business model and some more detailed questions down the line so folks understand what it means to be a product development and innovation platform — I want the audience to get to know you a bit, and your journey and your worldview on product development.

If you could just start out with why you're so passionate about brands, how you got into the brand world, your background and experience, from the early stages at Gap on through the line. It would be great to hear that history. Try not to make it too long, because I know it's been 25 years and that's a lot of history.

Ari Bloom: There's a future too, that probably includes me going to law school and joining Latham. Don't laugh. I'm not kidding.

Haim Zaltzman: Oh my God. I would hire you and fire me any day.

Ari Bloom: That's fine. I couldn't work with you anyway. I started actually studying to be a hospital administrator. I don't know if you knew that.

Haim Zaltzman: I did not know that.

Ari Bloom: I was an econ major at Brandeis University. I was also on the varsity track team, which you might have known.

Haim Zaltzman: I did know, but I'm trying to block that out because you don’t look like a track guy anymore.

Ari Bloom: I was one of the top triple jumpers, actually, on the East Coast. No joke. And I think, you know, it's probably a metaphor for my life. I picked the triple jump because nobody else would do it, and so I was pretty good at it. It's the same reason I played the bassoon in middle school.

Haim Zaltzman: I could see you as a bassoon player.

Ari Bloom: Also, it's the hardest instrument in the orchestra. “Does anybody want it?” Nobody raised their hand, I said, “I'll do it.”

So anyhow, back to my background and my experience. I was studying to be a hospital administrator. And the reason was I was looking to do well and do good. That was kind of my M.O. I wanted to do something that was going to be positive. I wanted to help people, and I thought being a hospital administrator or a healthcare businessperson would be a great way to do that.

Interestingly, I spent the summer before my senior year shadowing the CEO at a hospital, and I hated it. It was a really tough job. I think a lot of folks did not like that guy. He was not the most popular person in the building — probably the least popular person in the building. And I think I realized that, as much as the idea of it was positive, I think the execution of it was not.

And so, I was kind of an aimless senior in college trying to figure out what I was going to do with my life. I'm a musician, as you do know, and my mom's a musician, my grandfather's a musician. So, I’m really drawn to creative fields. And when I was looking at career opportunities at Brandeis, the career center was not the most robust.

Haim Zaltzman: It’s much better now, I'm sure. The Brandeis career center now is excellent.

Ari Bloom: Yeah, call me. What's interesting is this was 1999 when I graduated college, and this was one of the first years they had put the career centers online. And I had this hunch that I could actually look at other career centers, because why wouldn't you have the information open to the entire public? So I went to Harvard, I went to Yale, I went to Princeton, I went to Stanford, and I looked in their career centers at all the jobs that they were posting for, because they did not password-protect the site.

Haim Zaltzman: That's amazing.

Ari Bloom: They had not thought to do that.

Haim Zaltzman: And to all my associates, this is how you add value.

Ari Bloom: This was the scrappiness factor that helped me to get a role at the Gap, because I saw this great program. It was an executive training program at the Gap, and I applied for it through, I think, another school actually. But I did end up getting an interview, and I think they liked the fact that I had gone through some hurdles to get to the interview process, and I ended up getting the job. It was a really competitive process, it was great.

I did a year at Gap right out of college in a cross-functional rotational training program. It was amazing. And I think it really scratched the itch for kind of creative and business. In a lot of ways I fell into it, but it was a really good experience. I think also, those who knew the Gap at that time, late ’90s early 2000s, it was really one of the best companies.

Haim Zaltzman: It was the best, right? I'm the opposite in terms of — just for the audience, my wife basically picks my clothes. So, the fact that I was very aware of the Gap is a huge sign of how dominant a market they had.

Ari Bloom: That's right. I just envision your closet as like a lot of polo shirts with Latham logos in different places.

Haim Zaltzman: 100%.

Ari Bloom: Anyhow, so when I got to Gap, it really was not only the best brand on Earth at that time, but it was also the best company. Great place to work, really progressive in the way that it was organized, really professional. I also think ahead of its time in many ways — things like offering same-sex benefits at the time in the late ‘90s, and it was just a really diverse place to work. There were a lot of women in leadership roles, and I think that was not necessarily the norm, but I didn't know any different because I'd never worked anywhere else.

I had a really great experience there. And interestingly, after seven years, I eventually decided to go back and get an MBA. I had a very high-risk strategy. I applied to one school. I applied to Harvard.

Haim Zaltzman: A very good place.

Ari Bloom: I got in. Yeah, it was pretty good; I had a great experience there. But I was 30 when I started, which was great. I think I was kind of the tallest kid on the hockey team, to borrow a Malcolm Gladwell metaphor. It helped me, I think, to get the most out of that experience.

I think it also let me know that I was actually an entrepreneur, which I just didn't know until I went there. I think that was because there were a lot of great things that happened at Gap. One of the benefits of working in a place like that is there's always opportunity. That also can be a detriment — there's always opportunity, there's always something else to do. It didn’t stretch me enough. I needed to do different things, and I just didn't know it yet because it was easy. It was great there.

But I went to business school, and I realized actually I had the confidence, the ability, all the skills that I needed to start a business or to be an entrepreneur. And I happened to graduate in 2009, which was not a great time to graduate business school.

Haim Zaltzman: For everybody who's not as old as I am and doesn't remember, that's the Great Financial Crisis.

Ari Bloom: Yes. You know, imagine 2007 — for everybody, maybe I can compare it to, I don't know, 2017 or 2018, like great times. Just really, really strong economy. Is that a good year to compare it to? 2022 maybe?

You know, like these really boom times. You show up to HBS and you've got literally fliers in your mailbox from every consulting firm saying, “Come to an event in Monaco with us, expenses paid.” It’s a very different environment. And then 2009 was there’s nothing. You know, you go back to your old job, you start something. A lot of people started things.

I think that was a really good, fertile ground to come out of business school and have to start something. I started a consulting agency. Some people started businesses. My class and the class right after us were really famous for some great brands and companies that came out of it. Things like Cloudflare was one of the companies in our class; Rent the Runway; I think Blue Apron was from our class; Grubhub. There were just so many. It was great. And I'm sure I'm forgetting some of the great ones.

Regardless, I started a small consulting company, and it was great. I learned a lot, and I did it for six years. It was a really good experience because I saw a lot of small companies, saw a lot of big companies, and I helped a lot of people do some really interesting stuff. But I was essentially offering services kind of comparable to what the bigger strategy consulting companies would do, but I did it on my own. I had a really good industry experience from being in fashion and retail, and I was able to apply that into other industries like food, which we worked on together in the food industry.

I worked with restaurant groups, I worked with CPG companies, I worked in media, I worked in hospitality. Interesting parallels between all of these different industries that I was able to take from one experience in retail and fashion and apply there.

Then I was able to, at some point, become a CMO of a tech startup. I moved back to the Bay Area from New York at that point, and I was with a company launched by Ron Johnson called Enjoy. And so I was employee number 7 or 8 — I can never remember. I always actually had that battle with Walter Haas. He's a friend of mine now from that time, but we were hired around the same time. I think I actually was hired first, but we started on the same day, and he got the number 7 and I got 8, if I remember correctly.

Haim Zaltzman: It's a lucky number.

Ari Bloom: It's a good number, so no complaints there. It's a really good number. And Walter's doing great. He just bought Graffeo Coffee, and I'm really proud of him. He's doing amazing work there in San Francisco.

But it was a great experience. Coming up with essentially — it was an Apple retail crew that started this business. It's a great idea. Ron's a visionary. He had a great idea for it. You had every one of the top investors in the Valley in it. The board was crazy. You know, I stepped from Brooklyn being on my own, working in whatever way I wanted with all these cool companies and kind of doing a different thing every hour, to sitting in an office and being in board meetings with Marc Andreessen and Larry Sonsini and — I can't remember who was from Kleiner Perkins — but it was just a real who's-who of the Valley, and a great experience to see that.

And then I got an opportunity about a year and a half later to be CEO, recruited by Khosla, to come in and be the CEO of a company called Avametric, which was a retail technology company. I was a CEO there for three years, and we worked together on that as well, where we sold that business to Gerber Technology in 2018.

Haim Zaltzman: That's crazy.

Ari Bloom: It's crazy. And that was the second thing we worked on. I guess we skipped Wise Sons, which my brother Evan started, and you've been very involved in with Latham.

Haim Zaltzman: I'm your best marketer, I think.

Ari Bloom: Yeah, I think you are.

Haim Zaltzman: I think I’m crushing it.

Ari Bloom: You are very good at it. So, you have a next career as the Chief Brand Officer.

Haim Zaltzman: 100%. I just ate half of the chocolate and caramel—

Ari Bloom: All the gifts that you were supposed to give away.

Haim Zaltzman: Yeah, I gave some away, but I ate a lot.

So, this is a great segue to the next question on my list, which is, is that what led you to create A-Frame? Because you obviously had unbelievable touchpoints with brands, and I mean just the ones you named and the ones you probably didn't even name in that career spectrum. Was that the starting point?

If you can give the audience just a little — we'll talk about the business model later, so hold on that — but a quick snippet, what A-Frame is at the top, and then why you wanted to create A-Frame.

Ari Bloom: A-Frame is the confluence of 20-plus years of work coming together into a nice package. I think Eurie Kim, who's the lead investor from Forerunner behind A-Frame, said to me a few years ago, “You finally figured out how to institutionalize Ari.” And I think that's very much the case.

I think it was many conversations with my co-founder Hill Harper, who you know as well. And he's a wonderful guy. He's an actor and activist and author. I'm actually reading his latest manuscript right now for an amazing book that he's working on that I'm very excited about.

He and I talked a lot about just kind of the, I would say, disconnect between our personal and professional experiences. We had very rich, amazing personal experiences. We were both new fathers at the time, relatively new, and we talked a little bit about just the experience we had in the boardroom with investors, with C-suite, and just feeling like they were still a little bit more exclusive than our experience had been personally.

And Hill has been incredibly successful in many ways. He's also a Harvard Law graduate. He also has a degree from Kennedy School.

Haim Zaltzman: I won't hold the Harvard Law thing against you.

Ari Bloom: Yeah, I'm sure you won't. So, he really was the catalyst for me, because we looked at just the disconnect between the brands that were coming to market ultimately because of the lack of diversity and the lack of, I would say, life experience that's represented in most C-suites. And while VCs were challenged especially at the time — they're getting better at it, I think, but we really felt like there were brands that weren't coming to market because the size of the market was not recognized, because they were thought of as small, or minority, or a subset. And really, they were becoming the market in a lot of areas.

I think it's normal business intuition to know that as generations change and populations age, the demographics change and the shopping habits change. And I just think we didn't see that happening quickly enough in a lot of consumer products and consumer brands.

And so, we decided to focus in on the — we'll call it formulated products — but that's essentially personal care, beauty, fragrance, things like that. And coming from fashion, that was great, because these are brands and products that you need to buy more regularly. Fashion is discretionary — you might go once or twice or four times a year on average — whereas personal care, you're probably there every week, if not every month.

These were categories where we thought there was a business opportunity, there was a demographic change that was pronouncing that opportunity, and then there was a societal need. It was back to the original story of me wanting to be a hospital administrator. It was how do you do well and do good at the same time?

Haim Zaltzman: I don't know if I'm going to charge you enough for what I'm about to say, but the way I sometimes explain it for folks is, you know, I do quite a bit of health care and biotech work: What you are to products is basically what a biotech is for rare diseases. It used to be you couldn't take rare disease cures to market because the market was too small. It was really hard to do it. They were like the orphan drugs that no one would actually touch. But obviously the need, even if modest individually, is significant and great. We've been able to, as a society and a market, figure that out. And that's why I think biotech is to rare disease what A-Frame is to products. You guys bring on products that would, by themselves, maybe not have the huge TAM, but the need is definitely great there.

Ari Bloom: Yeah, I think also maybe one other metaphor — I'll take it a step further and say there's probably diseases that are thought to be rare that are not as rare as we think. So, the first brand we did, and I'll talk more about what the platform is today and where it's heading, because it's also pivoting and evolving, but I think the first brand we did was a great metaphor for that, and that was Proudly. That was a baby care brand that we did with Gabrielle Union and Dwyane Wade. It was really specifically made to center the needs of families of color.

It was because we looked at the data: as of 2014, more babies were born with at least one parent who was Black, brown, or Asian — it was 50.2%. And so that percentage just increases year over year. You and I are both a part of that demographic, and we see that there's different skin care needs for kids that are 0-5 that might have a little bit more melanin or pigment in their skin.

Just that simple fact of saying there's a majority of kids who have a little bit darker skin tone, they have a little bit more moisture loss because of the nature of their skin, so they need more moisturization and they need more skin-barrier protection — those needs are centered in all the products that we developed for that brand. It doesn't mean those products can't be used by everybody; it's just recentering where we start.

That was a great metaphor for what we did initially. We built some brands, and we really used the celebrity model to build those brands. This was the early 2020s, so very different market. Celebrity brands are now very saturated — a lot of stuff out there — and the retail landscape has changed quite a bit.

What happened a couple of years ago is, I was on our third brand. We'd done a suncare brand with Naomi Osaka, we did Proudly that I mentioned earlier, and we did Loved01 with John Legend. I got called by a retail president, somebody I'd worked with at Gap — basically everybody running every retail company now — and they said, “Hey, I'd really love to do some brands with you. I see what you're doing at Target and Walmart, I love that. Can you develop some brands to sell here?”

I started talking to her — because I knew her, I could be really candid — and I said, “Look, the economics of me developing a brand in-house, operating that brand, procuring inventory, warehousing inventory, sending you inventory, dealing with any markdowns or chargebacks or fees or anything that happens — that doesn't work for me, and I can't scale that as a holding company. But I see the opportunity in your retailer,” which at the time was, you know, 1,800 stores. It was a big deal, billions of dollars, very loyal customers, millions of them. There's an opportunity to get into new categories you don't already do that I actually have real expertise in, and I can build the brand and the product and everything and bring it to you and drop it in your distribution center. But I think at that point you really need to manage it.”

Essentially, I was describing an evolution of the private label business. They were really into it. So, we did our first two brands with them, and that business has actually become the focus of the company, because we have the full infrastructure, we have the knowledge. We're like a bolt-on team, especially for apparel retailers.

A big trend in apparel right now is to move into fragrance and beauty and personal care products. You know, you can add 5% to 10% incremental sales onto your business by adding products that your customer already wants and they're going to go buy somewhere else. It's not to say that every product is going to work with your own brand or a house brand, but there are a lot of products you can do — lip products, fragrances, things like that — that work really, really well. And they're just incremental revenue. You've got the shelf space, you've got the traffic.

Haim Zaltzman: Incremental revenue is gigantic in all this stuff, particularly in a business that has traditionally had pretty stressed margins for a very long time. Being able to increase margin but also add the incremental is huge.

Ari Bloom: Yeah. One conversation — and it's illuminating, also, just talking about how the economics of the retail business are changing. When I worked in retail, you know, we would assume usually somewhere in the neighborhood of 50% to 60% sell-through at regular price. Right? So we're marking down 40% to 50%, maybe even sometimes 55% to 60% of the inventory. It's going on clearance essentially, right? And so…

Haim Zaltzman: Repeat that stat again for the audience, because that's just…

Ari Bloom: Yeah. Most retailers plan, they assume they're going to sell roughly half at full price. There's going to be some discounting, promoting, bundling, or just clearance — straight-up clearance — to get through inventory. If you think about that, you've got thousands of SKUs coming in every year. It's nuts. The economics of having to price something at an initial margin of maybe 70% or 80% so that you can get to a 40% or 50% eventually — that's not great math. That's not a great way to run a business.

When you're in the apparel space especially, they start at a 70% or 75% margin and they end up at 45% or 50% out the door. You look at products like beauty and fragrance — you don't have to mark them down so much, if ever. You can bundle them; there are other ways to create value. Again, it just increases that margin significantly. You can start at a 75% or 80% on those products, and you can probably be out the door at 65%.

And so that's kind of — it's interesting, because it's gotten very technical, the business. We have a supply chain, we have a team having all of the margin conversations. We're really just good at building brands and seeing opportunities. We use AI for that. We've developed a full AI system. I actually hired a CTO, which is crazy for a 12-person company in the brand space.

Haim Zaltzman: And don't worry, we'll talk plenty on the AI stuff. The fact that you figured it out and you said math, it leads me to one of my more interesting questions that I have. I do want to frame on this question, then we can move on to some of the other stuff we talked about.

Who is the biggest nerd who figured this out? Who's your biggest nerd at A-Frame? And it could be you, but I kind of doubt it. It's got to be someone in there that's a bigger…

Ari Bloom: I'm going to call out Ryan, our CTO, only because I think it's funny. First of all, Ryan was not a CTO before this. He was a marketer who really was great at technology and did a lot of digital technology within the marketing space.

But he's been doing a lot of technical work on the side, and he had a little consulting agency. He's got a great life. He lives in the French Alps. He's really living the dream. So Ryan, hats off to you, man.

He has done a really good job of developing a process with us that I think is very replicable. And I'm happy to talk about this — I'm always an open book. I believe in open-source management. It’s really simple. He came in and he talked to every single person on the team, and he asked them about their pain points. And he got to know the process and the pain points that were consistent. And he looked at — there's a really great way of encapsulating this — high-skilled workers doing low-skill work. Where is that happening, and how is that slowing down the work that they can do every day?

And he was just able to really quickly figure out what we do, how we do it, and how we could do it quicker. To give you an example, this morning I woke up and I have a Slack message from Ryan to the whole team and it's, “Hey, I just updated our system so that we can now put all of our partners into a form and it will disseminate throughout all of our communication tools, and here's how you do it.” He literally walked us through on a video. It's all video. He leaves it in our inbox in the morning. It's a video instruction — it's three minutes long.

And then at the end he said something that really caught me, which is: okay, and so now Nelly, who's our Senior Manager of Logistics and Operations, can cut down this process from two or three days into a half hour. That was it. And he did that overnight. So I would say he's the biggest nerd on the team that way.

Haim Zaltzman: I mean, I'll take that. CTO, nerd — easy answer. The bigger question then, if we can zoom out again, because we talked about it a little bit. Tell us more about the evolution of A-Frame’s business model. You obviously touched on it. You started out with some of these singular brands — doing that for Gabrielle Union and Wade, John Legend, etc. — to the more white-label model. Give us a little bit more detail on that. What does it mean now for what A-Frame does on a business level?

Ari Bloom: Yeah. I'm going to be really proud someday when I look back on my career and I think about this chapter of my career where I was at least fortunate enough to be experienced enough to see around corners and really think about that. And that's something I think, until you've done the CEO job once or twice, it's really hard to sometimes kind of understand these pressures and the cycles that you go through.

It became apparent to me a couple of years ago that the business model that I had was not going to be sustainable, and I couldn't continue doing the same thing I was doing and hope for a different outcome. The brands were doing well, but they were not going to get profitable until they were at a much larger scale.

Haim Zaltzman: I mean, it always reminds me of one of the favorite lines ever from Alice in Wonderland — the Mad Hatter — you know, you’ve got to run hard just to stay in place, right?

Ari Bloom: That’s right.

Haim Zaltzman: Figuring that out for folks is oftentimes, when I look at all the businesses that I work with, all the clients, that's a theme: You can never rest on your laurels. Just in order to keep what you're doing, you have to work really hard, and you have to look at different pivots because nothing will stay the same.

Ari Bloom: That's right. And this was a big one. And I think one of the required skill sets of being an entrepreneur is tunnel vision. You have to be steadfast in your vision of what you're doing, and you have to hear a lot of “no” and keep going. And that's a hard thing to do in the first place, and only certain people are wired for that. But because of that, 90% of companies fail.

Haim Zaltzman: Again, to remind the audience — how many?

Ari Bloom: 90% plus of companies fail, or they go out of business. “Failure” is a very broad term, right? It's not always a failure; it's that they don't survive. It's creative destruction. So if you think about that, my theory would be that of the 90% that don't survive, maybe 30% of them could survive if they were more proactive about seeing when things were changing in front of them and reacting quicker.

One of the things that I think comes with the experience of having run a startup before is you kind of start to see signals, and you can't ignore those signals if you want to survive. Some entrepreneurs are just going to stay on that track until they burn it down or it’s hugely successful — it's binary. I'm not one of those people. I'm one of the people who's probably a little bit more cautious around what am I hearing, and do I need to make a change?

And it was lucky for me that I also got that call that I talked about earlier from my friend who ran another retailer who said, “I want to do brands with you.” And I said, “Let's do them differently.” For me, I was looking at — I can see the fundamental economics of having a house of brands that aren't going to be profitable for three to five years isn't going to work, because I can't continue raising capital for unprofitable brands, even if they're doing well. And I had chosen not to just focus on one thing and try to build it up. I had a portfolio approach, and I realized my portfolio was going to need to get supplemented by some other pure-margin plays. It was just like in my business, where sometimes we would bring in partnerships and licensing for a brand; I needed to do essentially the same thing at the A-Frame level, and the private-label business was exactly that.

It was playing to all of our strengths. We had a full infrastructure set up. We had domestic production set up. We have 35 suppliers in the US that we work with for our existing brands. We brought all of that infrastructure, all of that knowledge, expertise, and leadership into a business that let us do what we do best. And the part that we don't do really well, that's really hard at our size, is managing inventory and logistics. That's a really hard play and very expensive.

I looked at the math with my CFO, and it was like 20 to 30% of sales that we were spending on shipping, receiving, warehousing, and then fulfilling.

Haim Zaltzman: Is that right?

Ari Bloom: Which is crazy. Yeah, that's just the freight and labor and space rentals that we have against our inventory.

Haim Zaltzman: In every business, this is largely the case. And I want to refocus here for the audience what Ari just said. Everybody focuses on the glitz and glamor of what you see at the top. You hear John Legend and you focus on that really way-too-good-looking human standing next to your products. But the stuff that gets done to get him there — all the logistics, everything — is a huge part of that business. It's a huge part of every business, and it's something that's not really focused on. And the people who actually succeed don’t forget that, because you can't get to the glitz and continuously perform at that platform level without doing that.

Ari Bloom: That's right. And, you know, it makes me always say — I joked at the beginning about going to law school and becoming a lawyer — but the notion of making money off of services or time, that's really attractive when you're sitting in a consumer products business and you're looking at managing inventory and having to produce things. They have to look perfect and execute perfectly. It's a hard business to be in. It's a fun and rewarding business, and when it works, it works really well. But I think I was just — I guess I was lucky that I was able to see around that corner, and at the same time an opportunity came up to do it differently.

And now we're really good at this. And we also got the challenge from Eurie Kim — I give her credit every time — who said to me, “Ari, you've got to figure out AI for many reasons.” And that was the challenge for me also, even this year, I guess in 2025, where I had to change the framework for how the business was going to scale. Because she looked at me and said, “Okay, if the business is going to be X million dollars in the next five years, how many people do you need? How much capital do you need?” And when I first looked at it, it was like I might need 100 or 200 people to do that. With AI, A) we got better, and we can talk about what AI can do.

Haim Zaltzman: Actually, why don’t we just go ahead and talk about AI, what A-Frame is doing with AI, and how you see it going forward. Obviously, there's not a day that goes by without the models getting better, the tools around the models getting better — it's just crazy. Even for what we do at Latham with AI and how it's developed more and more. Part of me just wants to put my hands over my ears and be quiet for a year and see where it's at. Obviously, that's not a good solution — so don't worry, Latham management, that's not what I'm doing with my team. But tell us more about what you're doing and how you're stewarding all the tools and the rapid change for AI.

Ari Bloom: I don't think I've ever seen anything like this since the advent of the internet. This really takes me back to right when we got out of college and the internet was just starting to impact brands and businesses, and you saw a lot of businesses that did not embrace it and went out of business or got eaten by their competitors. You know, Netflix and Blockbuster is always the classic example.

Haim Zaltzman: I try to explain to my kids what a Blockbuster is, and it's an awkward explanation. They're like, “What do you mean, you took it and you went somewhere…” And the worst thing is rewinding. Remember the VHS and “Be Kind, Rewind”? We don't want to date ourselves any more than we already have. So back to AI.

Ari Bloom: So, AI is disrupting everything we do in a way I haven’t seen in a generation. That’s the short of it. And we’re just at the beginning. It's moving really, really quickly, moving way faster than the internet even did. It's going to create so many opportunities for companies. It's going to kill a lot of companies, too. People talk about job loss and killing jobs. I don't think it kills jobs, but what I think it does is it eliminates people who don't understand how to master the technology. It's a necessary part of working now.

What we did was we looked at, again back to Ryan's study of what are the hardest parts of the job that can be automated? We've got this great technology that can make things go faster. How do we use it to do better work? If we think about what we have to do when we meet with a partner and they say, “Okay, I'm a $1 billion apparel company and I want to get into fragrance,” and we say, “Okay, great,” that’s the first conversation. We're tasked next with coming back to them with the plan for how to do that.

That would have taken — before AI — that would have taken me a month. We would have gone through iterations, maybe done some research, maybe done a focus group, done field visits — all these things that we would have done to get back that information. We now can do that in a matter of days.

Haim Zaltzman: Is the AI taking out the iterations? Is it taking out the field work because it already has that built in? Or is it all of the above?

Ari Bloom: It’s everything. Humans still need to be in the loop, or it would be minutes. If there was none of the human component and there weren’t field visits — which are very important, and I feel strongly about that and I’m very old-school that way — you could do it in minutes. But we deal and partner with companies that have hundreds, if not thousands, of stores, and you do need to be in their stores looking at everything that I learned as a merchant from the great Mickey Drexler, who was the first CEO that I worked for at Gap. You watch traffic patterns. You see, do people walk in and turn right? What do they do when they're at cash wrap? Is there usually a line at the cash wrap? How do the associates feel about things? I talk to associates every time I walk in the store. “What would you rather have in here? What are the brands you like?” You’ve got to continue to do that.

But the research that we would have to do and the different sourcing we would have to do to get to the information is all done so quickly now. And the beautiful thing is Ryan set up a system where we use Fireflies, and so we record every single call. If I've talked to a partner and we've had a conversation with them, we ask all the same questions, the right questions, like: Tell us about your customer. What are the categories you're interested in? Are you hearing feedback? Who are your competitors? Do you have a loyal customer you want to serve? Do you want to serve her daughter? We’re asking all these questions. That's all going into the database.

And we also ask, “Can you send us a brand book or guidelines or a concept board for the season this is going to deliver — pictures you’ve taken in the store?” It all gets uploaded into the same database. And so, in addition to all of the research materials, it’s referencing all of that information, within seconds, to essentially come back to us and say “Based on everything I know and their goals, here's what we would do in terms of categories and products that would be the right fit for them.”

Haim Zaltzman: A couple of questions. One is how do you control the data that feeds into it? And then the second question is it obviously comes out with an output — the AI. How much time have you and Ryan spent feeding it, iterating with it? One of the conversations we have is we're so used to doing that with humans. At the law firm, we have associates, we're used to using their work, we mark it up, they learn from it, here’s where you made mistakes — that is totally normal.

I think what folks miss is that in this AI world, you need to oftentimes do that with the AI, with the machine, to teach it. But we’re lazier. “Here's a software program, we'll just plug it in and it's a go. I don't teach my iPhone how to like the apps on it — it's just there and it works or it doesn't work.” But AI is different.

For you, two things: how do you make sure that the data you get in is the right data? And second, how have you guys developed internally? And I’ll add a third, since it's on the table. How good is the output data getting for A-Frame, in the sense that it’s becoming a competitive advantage, a moat?

Ari Bloom: I would say there's no bad data. I'm actually going to challenge your question.

Haim Zaltzman: No bad data. You heard it here, everybody. Ari: no bad data. Love it.

Ari Bloom: You have to have good humans in the loop and some filters to interpret. But it is data. It's all information. And AI is smart enough to pick it up. We had a conversation this morning and we were talking about one of our brand partners and putting together their assortment. That's a human — there's a human component to that. The AI might say, “Here are the categories you should get in,” but then we need to build a line plan and say, “You should be doing four SKUs, or four colors, and here's what we're going to sample for you. We're going to sample six to get the four.” That's a human exercise.

But funny enough, we were talking about price points and cost targets within there, and AI actually started to reference back to us in this conversation in real time: “Oh no, the president of that brand said that they want an 80 margin, not a 75,” because we were talking about cost targets at a 75 margin. And it recognized the history and said, “That's actually the wrong answer.” So that is data to me. I think sometimes you just have to be smart about reviewing it. Rarely do we get many mistakes, but that is data. Your second question was about?

Haim Zaltzman: The second question was about training it so that you get the output you want. With humans, we mark up their stuff. With the machine, we’re lazier — we just expect it to be a software program. What have you and Ryan and the team done to teach it, because there's no way the output is perfect the first time.

Ari Bloom: That's right. No, we actually have a lot of heavy brand standards in how the output is shown to anybody outside of the company. I think we've spent a lot of time teaching the systems, and Ryan's probably the person that really has the expertise to answer exactly how that's getting done. But I can tell you, we have iterated a lot on what the output of the research looks like. You know, it came out in a very kind of stock format. We all know when somebody's done some work in Claude right now because it all looks the same.

Haim Zaltzman: Yeah, it really does.

Ari Bloom: There's a format that comes out of Claude. And so when we do research, and if we're using AI tools — which we inevitably will — we still have to be able to translate that into our branded format. That's an A-Frame branded format that's also appropriate for whatever brand we're talking to. There's a lot of training in how to take the information and make it look like us and look like the brand that we're presenting to.

Haim Zaltzman: I mean, that's actually a super important lesson for the audience. What Ari just said — aside from “no bad data,” which is hugely important — is the fact that taking AI and packaging it is exactly what needs to be done in order to make it work for the ultimate audience. And that packaging — I'm not saying “packaging” in a negative way, I mean it in a very positive way. Everything we do in life is branding, rebranding, packaging, and so on is key. And finding the right way to do it, so that it's an appropriate product for the end user, is key.

Ari Bloom: That's right. Even to give a really practical example, I'm doing a column for Inc. It's a monthly column that I'm going to start releasing, I think in the next couple of weeks — the first one goes out. There's a very clear policy, which I really appreciated, because it said nothing can be originated by AI, but AI editing tools are okay, which I think is the right policy. I think that's correct.

Interestingly, I wrote my first column and then I asked AI to polish it, to go through and look for grammatical errors and things like that. And it's funny because I love to use dashes. AI loves dashes. I don't know what it is about that, but it really uses a lot of them.

Haim Zaltzman: I like dashes a lot too.

Ari Bloom: I can always tell if something's coming from AI by the overuse of dashes. But I guess the point I'm making here is: the work cannot just be AI. You have to have a human in the loop, but it's also you in the loop. It still has to be your work. There are absolute tells right now that something is coming directly from AI and hasn't been reviewed. I see that a lot from people, especially service providers. I've seen a lot of just, “I clearly just did this in Claude and sent it to you and didn't notice that there's a sixth finger on this,” or whatever. It still makes those mistakes. But it’s also the formatting. They have very noticeable formatting. I just think we've got to be aware of that.

Haim Zaltzman: Last question on this, once you get the output and you guys are building it out, is this becoming a really — and this is a softball for you — is AI becoming a serious part of your moat? Is it becoming the A-Frame secret sauce, the reason business leaders do this, because you’ve now developed a “go to” for being able to brand, as you laid out?

Ari Bloom: AI for A-Frame is absolutely going to be the moat. And it's not just for how we develop brands and synthesize information. We're also creating order management systems and project management systems and production and sourcing tracking and things like that that, for most companies in the retail industry, are still done via spreadsheets and emails.

And so we were talking to one of our team members, and Ryan was doing a study to develop an order-management system in-house in a matter of weeks using AI, and he was asking her, “How many correspondences do you have for this one topic of, say, a fragrance approval?” And she had something like 52 emails that had gone back and forth between the brand and her on approvals.

That's a very bad way to be tracking millions of units and tens of millions of dollars. It's a terrible way to do it, yet it is still the norm in this industry, specifically. So, I think we were able to actually build some amazing tools that are really basic — it's not crazy stuff — but it replaces what is so antiquated. Having worked in the industry, it moves very slowly. There's a lot of tech debt. Our quote-unquote technology, which to me is very basic, is actually game-changing just for this industry alone.

Haim Zaltzman: This may lead to a new expression. We've already talked a little bit about AI, so I want to separate that to ask what is, right now, Ari, in the macro realm, the most challenging aspect of the A-Frame business? Is it more tech-company-specific execution on your side, or is there broader macro factors: oil, gas prices, inflation, whatever? What's keeping you up that's the hardest thing for you to get A-Frame out there for the use of brands?

Ari Bloom: I think the hardest part is not what you would think it is. I think that there is a collision course happening in consumer markets right now, because we have artificially kept prices incredibly low for most products, and prices have just been going up and up and up for decades. But we have these shocks that happen, like we had them in COVID. Supply-chain shocks consistently happen every five to 10 years. You have something major that happens, and we're dealing with one right now. It is really hard to maintain these price levels.

If anything, you know, we still talk to retailers who are like, “I need my price point to be under $30 across the board,” or “that's my out-the-door price point, a $24 average.” These are really low for the reality of how much it costs to do business.

Haim Zaltzman: So why is that? Is that just human psychology? It’s cultural where prices are really sticky?

Ari Bloom: Prices are very sticky. And, you know, there's a problem also because a lot of brands — the big brands, the big CPG companies — for the most part, they don’t sell through their own retail, they sell through mass-market channels. The mass-market channels are real estate essentially, right? They're selling shelf space or renting shelf space essentially to these brands. The brands have to perform, and a lot of the products are loss leaders. They're not making money; they're losing a lot of money because maybe they'll make it back on something else.

But I think we are on a sugar high still in terms of the price points that the consumer will bear versus what the costs to make things are. And I think we're getting to a place where it's just getting unsustainable. It’s been getting closer and closer every year. I think COVID and the tariffs/oil shocks that we're dealing with right now, I think we're close to the edge where prices are going to have to go up, because companies cannot continue to lose money on products, and I think they are losing money on most products.

Haim Zaltzman: Interesting. Very interesting. So the solution is just prices will go up, which has always been the solution, right?

Ari Bloom: Prices will go up, I think, and that we're back to an inflationary cycle. And that's never good for anybody, especially politicians.

Haim Zaltzman: It's never good for politicians, for sure. We’ll try not to delve into politics too much in this. But it does lead to the next big question for you that I have. You use capital, obviously, like every business — how you use capital, how the cash comes in, etc. What is your approach to capital allocation within A-Frame, and how you allocate it to various investments?

Ari Bloom: Yeah. Right now, with the model being focused on private label, my capital is going to people for the most part, and it's going to technology build, which is people.

Haim Zaltzman: Which is internal.

Ari Bloom: Yeah, exactly. So, you know, there's really no CapEx in the traditional sense. We don't have any hard assets. And it's a virtuous cycle for us. It's one of the things that really encouraged me to get out of building a lot of operator brands. We may do some in the future, but right now we're kind of pausing on operator brands. It's because all the capital went into inventory, and inventory is not the kind of asset you want to be committing venture capital to.

Haim Zaltzman: What you're trying to say is the cost of the capital is nowhere close to the ROI that you can get from holding inventory, especially because inventory is a very low-IRR-producing asset. So, the mismatch between the capital and the return is not something that can be sustained.

Ari Bloom: That's right. It's always difficult also to raise capital in consumer markets for consumer brands, because really the money goes into inventory. And if you have stores, it goes into the stores, which maybe are a little bit different assets, but inventory is still taking up so much of that capital. It's something that should be fundable by debt, but then the debt markets are kind of difficult.

And at the same time, you think about the cash-flow cycle. If you pay a factory to ship you products and they ship products — and most companies are going to be working overseas, so they're looking at a transit time of 30 to 60 days — in most cases you pay for product, you get the product 30 or 60 days later. If you're a wholesaler, you're sending it to somebody else and you're probably not getting paid by them for 90 to 120 days. If you have your own retail, you're selling it, maybe you're getting paid quicker because it's on credit cards, but you're looking at a gap, at the minimum, of probably 90 to 180 days to get paid back. That is not a great cashflow cycle.

Haim Zaltzman: What's going to be the solution for that? And I know this is a longer form, I think this is also a cultural thing, “what the market can bear” is the answer to that. Either we're going to have to do something on the debt side, where we're going to make the assets more fungible, i.e., more AR type stuff that you can finance more easily, where the products become more fungible, where if you do have to foreclose as a debt provider, you can take the product and reuse it for somebody else, which is difficult. So not that I know that's going to happen, right, because that takes too much. So, is it just the price mechanism?

Ari Bloom: I think there’s — well, there’s a couple of things. Pricing is one of the things. I think you'll see more domestic production. We actually do all of our production domestically now.

Haim Zaltzman: Yeah, we've been hearing that a lot — aside from the more security-related stuff, obviously the critical-minerals world that’s been hitting the stage. But clothing is not one of those, you wouldn't think. But notwithstanding that, what you're saying right now is we're actually seeing more of that because it creates a virtuous cycle of reducing the cashflow.

Ari Bloom: Yeah. And producing here in the US is actually not more expensive. There's a bit of a fallacy. And that’s not to say that every category is this way, but in our categories it's actually not more expensive, and it's quicker. So, it's great. I do think you're going to see more onshoring.

I also think AI is going to have a big part to play here, because it will optimize supply chains. It will also optimize — we talked earlier about just the notion that you assume you're going to mark down half of the product you sell. AI can help with better forecasting and things like that, so you're actually more efficient in what you buy.

Haim Zaltzman: Why is that? Is it because the AI has more access to the data that's hitting the market? I hear that a lot, and I get it on a high level. For the audience, I'm raising my hands up right now, like pointing to the skies. But are you saying it's because it's just constantly absorbing all the information that's out there?

Ari Bloom: Yes. I've been a planner and a buyer. I did that for a while. It is a very manual process with not-great tools. AI is orders of magnitude more powerful than just a person looking at an Excel spreadsheet. It’s all of the information that it can synthesize instantaneously and give you a better sense of, first of all, taking the emotion out of planning your buys. It's a tool that allows for a lot more precision.

The other piece we haven't talked about is more of the customization of the production. AI should theoretically also allow for you not to have to produce 10,000 units to sell one. You actually can sell one-of-one using AI in ways that we just haven't been able to do in factories, because the economics weren't there. There are a lot of different forces and outcomes here that I think are going to happen.

Haim Zaltzman: You know, I rarely think of that one, that it just reduces the economies of scale, so to speak. I mean, that's a really interesting concept.

Ari Bloom: Yeah. Think about a factory line. I've visited a lot of factories in my life. These are literally lines, and they are lines using the same patterns. They're human, usually, or a robot is cutting to the same exact pattern. Being able to instantaneously change the pattern and customize it because of artificial intelligence? That completely changes the way that things are made. So, there is that potential, and I'm sure that will happen and that will be another outlet.

Haim Zaltzman: Cool. All right, well listen, we can't talk forever. I'm sure we could do this for hours. So, I'm going to push us to my favorite part of the episode. It's what I call the speed poker session.

Ari Bloom: All right.

Haim Zaltzman: You only get one answer. Okay? I know you're going to want to answer more. I'm allowing one word, then you can explain it. The first one is what's the biggest professional obstacle you faced?

Ari Bloom: Indecision.

Haim Zaltzman: Yeah, I would explain a little bit more.

Ari Bloom: I thought it was one word.

Haim Zaltzman: Great single answer, but you get to explain it more. That actually caught me off guard, which rarely happens. But wait, what do you mean by indecision?

Ari Bloom: I like to talk about the privilege of having options. I think that's always been a curse for me. It would be easy to go down five different paths or take five different jobs or start five different companies because I can. And I recognize that that's a privilege. But it also can be handcuffing for me and for a lot of folks. I think it's sometimes hard to be steadfast when you know that there are multiple options, and you can see multiple options. I talked earlier about tunnel vision. That's where some entrepreneurs are just great, because they don't think about anything else. They make a decision and they just go. I sometimes struggle with that.

Haim Zaltzman: Does that mean you put a big premium on a bias for action, notwithstanding your concerns?

Ari Bloom: Yes, so how do I phrase this. Ideas are really cheap. Execution is king. I think if I really step back and think about it sometimes, you just need to have a thesis or an impulse, use data and information — which is great for AI now — but once you have that information, you do have to have the bias for action, as you said. I think that's right, Haim. You've got to be able to jump in and see something through.

Mickey also taught us a lot about this when I was first starting out of college and I was a new merchant. It was that everything you do is a read-and-react situation. If you're not read-and-react, and we talked earlier about just having a business, there are little micro-pivots that happen every day. One of my business school professors, did I mention I went to HBS?

Haim Zaltzman: Yes

Ari Bloom: I went to school in Boston.

Haim Zaltzman: Yeah, you did.

Ari Bloom: Anyway, one of my business school professors said something that I thought was very wise, which is that entrepreneurship is a series of controlled experiments. That's why some level of indecision is not a great feature for an entrepreneur.

Haim Zaltzman: Super interesting. I love that point. Next question. What's your ideal teammate? You can pick one of these virtues: education, experience, or temperament. Which one?

Ari Bloom: Experience.

Haim Zaltzman: More?

Ari Bloom: Oh, I get more words?

Haim Zaltzman: Well, you get to select one and then explain it.

Ari Bloom: Why do I pick experience? I think if you'd asked me this a couple of years ago, I might have had a different answer because of the stage I'm at. Right now, I really need subject-matter experts. Also, to get the experience, you have to be somewhat successful, so it's a virtuous cycle. In order to get more experience, you have to do well at it, and you won’t get experience without being successful. So, I think if I had to pick one, it's experience.

Haim Zaltzman: Interesting. For whatever it's worth, temperament is the one that's most often selected. Almost no one says education, which again hurts the Harvard Law and Harvard Business School crowd. But experience, honestly, I can make the argument that experience leads to temperament. Interesting that you would pick that. That makes a lot of sense, particularly in, you know, a world where you're in a field that is more old-school but is facing a lot of pressures from the current technology stack, and how to deal with that probably matters more to you than the once-in-a-while outbursts of bad temperament.

Ari Bloom: I agree. I also think a really good leader can work with anybody. I'm not bothered by people who are jerks. I can deal with them.

Haim Zaltzman: Present company excluded, hopefully. As someone who’s seen you deal with multiple companies in different situations — good, bad, or ugly — because that's what happens with every company, particularly over such a long period of a career, I’ll give you personal kudos. You definitely deal with a lot of people, and you deal with them really well.

Ari Bloom: That’s the best compliment I've ever heard from you.

Haim Zaltzman: Yeah, don't get soft on me for the rest of the day. My next question is my favorite one, the poker table question. As you know, I love poker. I'm a decent player, and I love it because it's stochastic. You may have the best hand; it may not matter. You may have the nuts, but if you don't know how to play, it doesn't matter. You may have all the chips, you’ve got to really manage them because the players around you, the table dynamics, how much you've had to drink or not, whatever, there's lots of things that matter. And that's the best metaphor for life. A lot of things matter; a lot of things don't. Combined, they play the game and you play the probabilities.

So, my poker table question for you is you're sitting at A-Frame today, and you get to change just one thing. Is it the game itself, i.e., the broader economy? Is it the table, i.e., the advertising/brand industry, is there something' wrong with that you want to fix? The house, i.e., the regulatory regime, government, something in the system? You can't hire fast enough, you can't get permits, whatever. Is it the stack of chips, i.e., how much cash you have? Or is it the other players, i.e., is someone not playing fair, not coordinated enough, whether that's brands, competitors, etc.? One thing out of all of those.

Ari Bloom: The easy answer is the chips.

Haim Zaltzman: Yeah, it is easy. Everybody wants more cash.

Ari Bloom: I don't want to answer that because it's too easy. And in fact, I think about what would I change? Maybe nothing. The reason why is because all of the things that are “wrong” give me the opportunity. You know, I could say there are flaws, but that's why I'm in business, to be honest. I think if people were doing it perfectly, they wouldn’t need me.

Haim Zaltzman: Fair enough. I wish you had said the chips. It would make you buy me a better lunch.

Ari Bloom: Yeah, yeah. I thought you were buying?

Haim Zaltzman: Oh yeah, I am. Although you're making me get a salad — my wife always makes me get a salad for lunch.

Ari Bloom: You’re welcome.

Haim Zaltzman: Which is a great segue to what's your favorite food to eat at work and while playing poker?

Ari Bloom: Salad, I mean, come on.

Haim Zaltzman: You kill me. Ari’s a super healthy and really good influence. So, what is your favorite?

Ari Bloom: You know what I love and is the perfect food? Sushi. It's packaged perfectly. It's got the right blend of some starch and flavor and protein. I'm a big fan of Japanese food generally and Japanese culture, but I just think sushi is such a good food. If you have to eat at your desk, it's got everything you need.

Haim Zaltzman: Love it. Cannot go wrong with sushi, either at work or the poker table. Ari, I'm going to close out. I just want to thank you for your time, for coming here, for dealing with me, and kindly loving Latham for all these many years and all these many companies. Really appreciate it.

Ari Bloom: Hey, you know, it's my pleasure to be here, Haim. This is probably the cheapest hour I've ever spent at Latham. You guys are paying me, right?

Haim Zaltzman: Touché, touché. All right, well with that, thank you for checking out this episode of Connected with Latham. You can subscribe and listen to new and archived episodes of Latham's podcasts on lw.com, Apple Podcasts, Spotify, or anywhere else you listen to podcasts.

If you have questions or would like additional information, please email us using the links located in the show description. We hope you'll join us again next time.