This interview argues that a brand isn't just marketing spending—it's an investable asset. Investor Michael Duda says the market's mistake of treating brands as expenses creates opportunities. He looks for categories where consumers hate existing options, like eyewear, hearing aids, and plus-size clothing. Key picks: Harry's (razors that got 120,000 users before launch via brand story), Warby Parker (glasses that turned customer service into its best ad), and Function of Beauty (custom shampoo with 29 trillion combinations).
Michael Duda, in Episode 117 of Invest Like the Best, explores the core role of brands in business and investing. He defines a brand as a vehicle for emotional connection with consumers, emphasizing its critical impact on companies such as Birchbox, Casper, Harry's, Citibank, and Google. The central
Michael Duda is the co-founder of Bullish, an early-stage consumer investment firm, and a former executive at the advertising agency Deutsch. The central thesis of this issue is: Brand is not a marketing expense, but an investable asset—Duda’s core judgment is that the market treats brand as an "expense" rather than an "asset," and this cognitive bias creates opportunities for early-stage investors to generate excess returns.
Duda argues that a brand is the net result of "what the brand does" and "how consumers feel" — not a logo or an advertisement. He quotes the chairman of Quaker Oaks from 1900: "Give me a brand, and I'll give you bricks and mortar, and my days will be much better." — The value of a brand lies in its ability to drive consumers toward irrational choices.
Key arguments:
Patrick O'Shaughnessy's quantitative perspective: Brand strength ultimately manifests in "excess returns that should not exist" — if the product itself can be replicated (e.g., a cola formula), yet the company still consistently generates high returns on capital, that is the brand at work.
Duda emphasizes that brand building begins with the founder, not with advertising. He cites Harry’s as an example: founders Jeff Raider and Andy Katz-Mayfield aimed not to “sell razors more cheaply,” but to “offer men a fairer shaving experience.” The brand name Harry’s, the mascot (a woolly mammoth), and the “you have to figure it out yourself” marketing campaign secured 120,000 users before the official launch.
Five-Step Process:
1. Immersive Listening: “God gave us two ears and one mouth for a reason” — first, understand the target audience, competitive landscape, and current state of the category.
2. Category Map: Analyze existing players, sales channels, and consumer profiles — not “adults aged 18–34,” but something as specific as “a substitute teacher who drives a late-model Volvo” (Trader Joe’s classic positioning).
3. Differentiation Exploration: From logo and color to brand name — every color carries deep meaning (red is a neutral and powerful color in China).
4. Brand Soul: Transparency is key — “you can’t fake it.” If Xerox sold paper while cutting down the Brazilian rainforest, consumers would find out.
5. 360-Degree Execution: From company values to advertising and partner selection — “brand is much deeper than advertising.”
Key Insight: In the DTC era, brands can build direct relationships with consumers — something traditional CPG companies (whose customers are Walmart and Kroger, not end consumers) cannot achieve.
Duda’s investment framework does not rely on quantitative models but on three core filters:
Look for categories where consumers do not love existing brands. Kind Bar has an NPS of 51, while other brands in the category score only 14 or even negative (compared to Apple’s 95). The best-performing brands in Bullish’s early-stage portfolio all had NPS scores above 80.
How painful is the consumer’s purchasing process? Cases:
Duda does not invest in "good products," but in "good businesses." He looks for:
Disagreements with market consensus:
Duda admits "all asset classes are expensive," but early-stage valuations remain relatively reasonable. He focuses on:
Duda believes marketing has shifted from "mass communication" to "precise targeting + trust building":
Duda's proudest marketing case: A physical retail campaign for Nike targeting 19-20 year olds who "hate media." Leveraging Instagram and YouTube, it became the number one organic ad on Twitter, YouTube performance exceeded expectations by 3.5 times, and sales surpassed the target by 22%.
| Position | Guest Sentiment | Key Data |
|---|---|---|
| Harry's | Bullish (Investment Case) | 120,000 users before launch; after entering Target, only 25% shelf space but captured 50% of sales |
| Warby Parker | Bullish (Benchmark Case) | Stopped advertising and invested in customer service, found customer service ROI higher than advertising; physical stores viewed as "marketing" rather than "operations" |
| Birchbox | Bullish (Investment Case) | Rejected by Silicon Valley VCs before receiving investment from Bullish |
| Function of Beauty | Bullish (Investment Case) | 29 trillion shampoo/conditioner combinations |
| Clare (paint) | Bullish (Investment Case) | 55 colors; aims to shorten the 135-day gap from "deciding to paint a wall" to "actually doing it" |
| Casper | Bullish (Investment Case) | No specific data provided |
| Peloton | Bullish (Mentioned) | No specific data provided |
| Nike | Bullish (Client Case) | Physical retail campaign exceeded sales target by 22% |
| Tide | Neutral (Case Analysis) | Lost share due to pricing after 2008, but no new brand has truly challenged it |
| Under Armour | Neutral (Case Analysis) | A child said, "When I wear Under Armour, I can do anything" |
| Victoria's Secret | Risk Warning | 30% market share but fails to resonate with younger consumers |
| Gillette (P&G) | Risk Warning | Accounts for 9% of P&G's revenue but 34% of its profit; challenged by Harry's/Dollar Shave Club |
| Dress Barn | Risk Warning | The category leader's name itself is the problem |
| Luxottica | Risk Warning | Monopolizes the eyewear market (owns LensCrafters, Ray-Ban, Oakley) |
| Netflix | Neutral (Trend Mention) | "The operating system of TV" |
| Wendy's | Bullish (Marketing Case) | "Sassy tone" on Twitter positively correlated with sales |
| Kind Bar | Neutral (Data Reference) | NPS of 51; other brands in the category had NPS of 14 or negative |
| Trader Joe's | Neutral (Positioning Case) | Target customer: "A substitute teacher driving a late-model Volvo" |
1. "A brand is the net result of what a brand does and how consumers feel" (Duda) — not a logo, not advertising, but behavior × emotion. In blind tests, consumers cannot tell Coke apart, but preferences shift immediately once the label is seen.
2. "NPS flaws are the best signal for early-stage investing" (Duda) — look for categories where consumers dislike existing brands. Kind Bar NPS 51 vs. category average 14; Bullish's best early-stage brands all had NPS above 80.
3. "If you say 'that's just how it is,' that's probably the opportunity" (Duda) — hearing aids at $4,500, eyewear monopolized by Luxottica, painting a house taking 135 days — these "taken-for-granted" inefficiencies are the entry points for disruption.
4. "I don't look at CAC, I look at consumers" (Duda) — a divergence from market consensus: not using customer acquisition cost as a core metric, but instead conducting surveys, building consumer personas, and going to Enid (Oklahoma) and Boise (Idaho) to ask, "Can a $12 juice sell here?"
5. "The best marketing isn't advertising, it's customer service" (Duda) — Warby Parker shut down all ads due to capacity constraints, redirected spending to customer service, and found that customer service had a higher ROI on acquisition than advertising. The power of apology: when a brand sincerely apologizes, consumers turn into evangelists.
6. "A founder saying 'I want a 10x exit' is less valuable than 'I want to see Unilever and P&G burn'" (Duda) — the "chip on the shoulder" of Function of Beauty's founder is more valuable than financial targets. Duda likens himself to a "point guard who doesn't score" — making the other four players on the court better.
7. "63% of consumer goods searches happen on Amazon — that's equivalent to marketing within six feet of your product on the shelf" (Duda) — if he were a CPG company, he would shift nearly all Google budget to Amazon.
8. "Consumers are excellent liars" (Duda) — during the 2016 election, women said in surveys, "I don't need anyone to tell me what to do," but their voting behavior was completely different. Bullish's "The Why" consumer research tries to uncover the "why" rather than the "what."