Making garbage useful with Tom Szaky of TerraCycle

Hello and welcome to How I Built This Lab. So How much garbage do you throw away? And how much of it is actually reusable, and I don't just mean recyclable, lots of things come in plastic packaging that says it can be recycled. But how many products come in something that can actually be used again and again, like a glass jar or a stainless steel container? Well, not many, and so garbage piles up.

And that's where today's guest sees opportunity. Tom Zaki is co-founder and CEO of TerraCycle, it's a recycling service that collects an assortment of waste and turns it into raw materials, materials that can be used to make other things. Terracycle was started back in 2001 actually as a fertilizer company. Tom started the business during his freshman year at Princeton. When he and a couple of buddi made a surprising discovery. After they took an interest in growing a certain type of plant. in a basement.

Let's just say they're much more legal today than they were back then. Yeah. Um story short, my friends took the plants to Montreal. They were going to Miguel, and so they set up the shop there and started uh trying to make the plants work and I got this exciting call from my friend Pete who goes, Finally they're working, you gotta come visit. And I walk in and yeah, the plant was doing phenomenally well and uh that was really exciting, of course. But I asked Pete, like, you know, so what did you do? And he uh took me very proudly to his kitchen where he was showing me how he was taking his food scraps. And feeding them to red worms.

And then the worm poop that you know came out as a result is what made these plants flourish. And That really was the first moment. I became foundationally fascinated with this idea of garbage, uh, because simply speaking, he was taking garbage and making it into something amazing and solving this problem that we couldn't solve until then. Alright, so basically they get their

marijuana plants to thrive by e by basically feeding food scraps to worms, using the fertilizer to feed the plants. And and you're just blown away by this. I mean so blown away that you go back to college, you go back to Princeton And you you can't stop thinking about it. Like you want to do something with this idea. Oh absolutely. Yeah. I mean the first thing was like has anyone thought about this? And so we were scouring the internet on are there any big w big worm poop companies out there? And it turned out there was no one who'd really looked at taking the idea of warm poop and really commercializing it on a very, very big scale. And

You know, we even set up a little worm composting unit in our in our dormitory. This is like you and a roommate or a friend or Yeah, I always had like the knack to sort of get folks to join up with my ideas. So uh it was uh uh a friend of mine and then a couple of other folks got involved and helped out and you know, within a few months we were basically tending to worms in our dorm room, uh taking the scraps from the cafeteria and showing that we could do it and you know, writing a business plan and all these things you do as you sort of explore an idea at the beginning. So you you would basically take food scraps from the dining hall at Princeton And you would put them in a container.

In your dorm room w with worms in there? That that's exactly right. So think like a massive uh tote type container, and that basically fit our fireplace. And uh we were putting all the scraps in there. And then trying to harvest worm poop. I mean, let's be clear, it was smelly, we had lots of flies, you know, we were really trying to figure it out. Um but I was hooked on this idea. You know, to me it was the fascination, because we were taking uh one of the classes that that semester was Introduction to Economics. And we had been drawing supply and demand curves in that class at nauseum and uh It always fascinated me, like why can't you find the supply and demand of garbage on a on on one of these uh graphs? And it turns out it's because there is while there's massive supply, there's in fact negative demand.

And so in this worm poop concept, the simple business model was Wait a minute, we can get paid for the input. because that's in a way the definition of garbage people are willing to pay to get rid of it. And then make this phenomenal fertilizer on the other side. Um And that sort of kept kept kept this all moving in that really exciting fashion.

And the idea here was, uh I guess, from the beginning, to see whether you could scale this. Like there was no one Making fertilizer from worm poop. On a commercial scale and you thought Well I've seen how it works, I've seen how well it works. This could be a business, a a big business.

Absolutely. That was entirely the goal. Alright, so summer of two thousand one. Guess you go on a local radio station in Princeton. You were talking about this idea. And a caller calls in and was like, I'll invest in you.

Yes. Yes. Uh and we were desperate. Let's you know, let's be clear at this moment. I had already taken all the money I could borrow from anyone that would talk to me and we invested it in this uh it was like a twenty thousand dollar machine that we had dreamed up that could take the organic waste. And feed it to worms very quickly. Uh huh. And It was all chips in. Every dollar we had was invested in this, and we were basically going broke. And honestly the last ditch effort was uh this radio station was interested in the story and uh we thought it was actually the last hurrah. Honestly, walking in it was like, well at least we'll end with uh

With a nice piece on on the local radio. And from that An investor called and showed up the next day and wrote us a check and Kept us alive. It was a two thousand dollar check.

It was. It was. But it was enough to pay rent. It was enough to uh you guys were really close to the end. If if that two thousand bucks was like, All right, we got another lease on life. Oh yeah, yeah, yeah. It bought like thirty more days on the clock, you know. And uh and then from there it you know a little bit more word came out and a few other angel investors came in, but it was Gosh, those early days, the the touch and go nature just keeping the company solvent was really challenging. Because you know, as a as a twenty year old guy, everyone is expecting you to do a dot com of some kind, right? And no one was interested in hearing about a a waste management infrastructure fertilizer idea. So Basically the idea was you would take this fertilizer um

And and it would be in bags like like regular fertilizer, or how how are how are you gonna sell it? Also the interesting thing about worm poop as a fertilizer is that unlike conventional fertilizer, let's say like Miracle Grow, it's jammed with a huge amount of beneficial microbes. And so we had to think through what's the right way to deliver that. And where we landed was to actually make it into a liquid fertilizer, sort of like a T. And so we would take the uh worm poop, brew it into a tea, and then you would purchase that uh effectively as a uh liquid or spray on fertilizer. And and you call the company Terracycle from the from the beginning? Exactly. Yeah. And it was think you know, Terra Cycle came out from a worm poop concept, Terra Earth Cycle. Even the logo, um I originally drew as a worm. That was its intention.

And I guess what initially w you sold it to like local gardening centers? So this was another it's funny you asked that,'cause this was another sort of major moment of desperation that occurred. Um, we couldn't afford any packaging at all. And so uh we went through all the recycling bins in the Princeton area, which is sort of sketchy. We were doing that at like two in the morning, going through people's garbage, and we thought maybe we could just temporarily package the worm poop we had in these used containers and then exactly as you say sell them to local gardening centers.

And this sort of desperate moment led to this phenomenal breakthrough that it turns out in in beverage containers, um, there's not many shapes. I mean certainly different shapes, but there's half liter, twenty ounce, one liter, and two liter volumes and In each of those sizes, the more the most important context of shape, like its height or its width are identical, whether it's say a Coke or Pepsi bottle. And that then truly became our first product, uh liquid worm poop packaged in a use soda bottle.

So you would take these used bottles and I guess you people would would start to donate them and you you like wash them out, clean them and and slapped Your label on it. Yeah, so the way we got the bottles. It's that's exactly right. Um We would first begin by going to schools and saying, Hey schools, you know, you may not have a recycling program, you know, would you like to start collecting your soda bottles for us? And schools were quite interested. We would cover the shipping to get it to us. We even made a small donation to them for every bottle they they collected. Those would come in, then we would take off the labels, clean them out, sort out anything that was already crushed or deformed or something like that, then fill it up with the liquid worm poop and put on a label and Put on a trigger sprayer and that became our finished product.

Meantime, you dropped out of Princeton. That's right. I was able to first start by saying, look, I'm gonna take a semester off. And then Princeton has this funny thing where you don't drop out, you just go on indefinite leave. So it was less so of like the spectacular exit and much more um me just continuously extending the sleeve, which one day turned out in the end to become permanent. And it was a it was the most gentle way to bring my parents along who

Gosh, uh for years and years didn't understand why I was doing this. They pro probably like when are you so when are you gonna go back to school? Oh yeah. Oh yeah, absolutely. They they thought it would be a nice little adventure. And uh luckily by the time you know two, three years rolled around, we were, you know, growing enough that they saw that no, this is making sense and it's not just a hairbrained idea. Alright, so you take a leave of absence from school focused entirely on this and you

I think you were you were working with um another student named John Byer. That's right. Yeah. So you've got this machine and you start to package The

the liquid fertilizer and who who are you selling it to? Yeah. Well, so we tried, you know, at at the beginning when we were getting advice in the you know from Lawn and Garden folks on how do you do this, they sort of said, look, the way to do this is you gotta go to independent garden centers, then you have to build up your brand, and then maybe one day you get a shot at Home Depot or Walmart. Right. And when I looked at the at who controls the fertilizer market. It's only four retailers control the vast majority of it, which in the US is Home Depot, Lowe's, Menards, and Walmart. And so our answer was wait a minute, if they are the ones who control the volume, I mean, let's go there. And uh that became a key focus was just calling and calling the buyer at Walmart and Home Depot and uh

We did that incessantly for gosh, like weeks and weeks on end until they finally gave us a meeting and off we went. And so How did it go? I mean home depot or Walmart, I mean how did how how did you eventually get in the door. Well so the the first one uh was uh Walmart and

The the whole thing was a little bit crazy because so we got the meeting just through persistence, I would say. You know, I think we were calling every day from different phone numbers, so different numbers would pop up on the buyer's phone and uh We were doing this for sort of six weeks straight, and finally he gets on the phone says, You are these guys who keep calling. I mean, fine, come down, have a meeting. I think part of it was What is this all about that these people keep calling so often and maybe to have us stop calling? Um so they, you know, he said, look at eight o'clock on this day, come down to Betonville and and talk to me. And so of course we were super excited and there was this like crazy travel moment where I remember I'd we'd booked a flight from Newark uh to go down to uh to Fayetteville, uh seeing Walmart.

And by the time I got to the airport, the flight had been canceled because it rained out. And so right away we're like assuming we're not gonna get another meeting, so we rebook the flight, you know, at an airport two hours away. Get there. It cancels. Then I look at my friend and we're like, look, if we drive ten miles over the speed limit and take this number of breaks. We can get there right on time, driving from New Jersey down to Arkansas. And so off we went. And we had to like make you know make these time gates. And during that whole time.

We were looking for a flight, you know, maybe from Ohio or somewhere to pick up and and and take the rest by plane, and we did find a flight. We book it in cash and and uh I think I get to the airport at like three AM for this five AM flight. get through security, you know, I'm sitting at the gate, taking a little nap, and then they call for boarding. And I get up and board and they say, you know, because you bought your ticket in cash, you have to have a special security screening, which they never performed on you when you came in, probably'cause it was three in the morning and everyone was really tired. And I made this like really impassioned plea to the gate agents saying, like, look, we're these students, we have this worm poop, I had the worm poop with me and everything. And they call the security team over uh to uh pat me down, get on the plane, and then finally make it in.

And uh at eight A. You know, we're there having the meeting with the buyer, and we explained this idea of, you know, this is all about purposeful capitalism. You know, we're taking organic waste, feeding it to worms, packaging and use soda bottles that schools nearby are collecting. And then tell him this whole travel story. And he looks at us and it was this amazing moment. He walks over to his planogram where he's setting, you know, what the fertilizer set for the next year will look like. He takes off one of the uh the products, maybe it was like a miracle grow or something, and puts one facing of uh the terracycle worm poop on the shelf and he goes, you know. It's entirely your passion that that has caused me to, you know, give you this national placement, and let's see what you guys can do with it. Wow. And that's how we got our first purchase order.

When we come back in just a moment, Tom takes his growing fertilizer business and completely shifts focus. to garbage. Stay with us, I'm Guy Roz and you're listening to How I Built This Lab. Welcome back to How I Built This Lab, I'm Guy Raz. So Tom and John have convinced a Walmart buyer to carry their Terracycle fertilizer spray in reused soda bottles, but now they actually have to fulfill the order. Imagine the scene where, you know, all these dirty bottles are coming in and it's all my friends from Princeton were cutting labels off, washing them out.

pouring the worm poop in with a with a jug. The hardest part in this manual process was actually getting the labels on,'cause there were heat heat shrink labels,'cause they had to contour to is it a Coke bottle or a Pepsi bottle. And since we couldn't afford a tunnel, like a heat tunnel to do this, we built this little rig where imagine four hair dryers are placed on like this plywood pointing in a center direction, and if you dip the bottle into this hairdryer tunnel just right it will shrink the label on beautifully. Uh you know, you may burn your hand in the process a little bit. Um, but that's how it all went out. And it was like a truckload of this stuff. And and so Walmart carry different kinds of bottles of this? I mean it it's just

it seems unbelievable. Like they would you would imagine that they would expect like a standard size and a standard bottle, but you had different Shapes of bottles. That's exactly right. Yeah. So it was all twenty ounce. That was the that was the volume they wanted. But if you think about twenty ounce bottles, that's like what you know one would find in a soda bottle in a vending machine, for example, if it's a plastic bottle. Um they're all different contours, like your Dr Pepper bottles different from your Coke, different from your Pepsi. But the key things are the same. So the heights are the same, diameter is the same, the tread on the cap is the same. So you could

do effectively mass production of mixed use soda bottles. And that way the cases all look the same, everything was moving out. It worked nicely on the shelf, but then when you touched it, you were like, wow, this is a different contour than the other one. Alright, so you get into Walmart and and eventually into a few uh of these other big change with his product um And um

And it that does pretty well. Like I I read that by two thousand five you you know, your your sales were projected to be around three million dollars that year. Um but I guess. within about two years, around two thousand seven You decide to change the business model and move away. From

From the fertilizer, from the the worm poop. That's right. Yeah, by then, so we had grown uh up to about six million in in revenue on doing Warm Poop, uh, all the major retailers carrying us in the US and and Canada. And There was this big moment of reflection, you know, I had started Terracycle really thinking through how can we use business to create solutions to garbage. And I woke up four or five years later effectively running a fertilizer company. Where yes, technically the input was garbage, but the part I was struggling with, like

When you take input of soda bottles, we had to sort out any soda bottle that had some level of damage on it. You know, maybe it was uh a car had driven over it or there was a dent in it,'cause then it wouldn't look good on shelf. And the same for the worm poop. We had our our scientists at that time had to pick certain types of organic ways to feed the worms to get the right type of poop. So when we were making cactus fertilizer, we fed the worms a different diet than if we're making tomato fertilizer. And so we were really cherry picking the very best of the garbage. I mean all technically garbage, but it we know, we were never gonna contemplate to take cigarette butts or dirty diapers or really what makes up, you know, uh waste out there. Um and that led to a big struggle. You know, it was like are we gonna be a waste

solution organization. Or are we gonna be a fertilizer company and Where I really wanted to take Terracycle was no into innovating and solving waste. And so we had to pivot away from fertilizer at that time. that meant that you were you I mean, your entire process was going to change, right? Because you're moving away from Obviously

worm poop and essentially f a form of composting to Becoming a recycling facility, essentially, I guess. That's right, yes. And this had a lot of challenges. You know, you can imagine the investors who invested. Some of them, you know, like this idea. Some said, Why not just keep doing what you're doing? The same with our management team. Um you know, in retrospect, of course, I can sit here today and say, you know, I think we did the right decision, but it was

very traumatic, uh uh during during that moment. Hm. Traumatic because for not just for the investors, but presumably for the people involved in Terracycle. Yeah, yeah. Half the staff thought I was crazy. The other half thought it was a great idea. And I think that split was about the case across all the major stakeholders, you know, the board, investors, uh our team members. You know, we lost and had to change a lot of people in that process. You know, uh it was a very big metamorphosis, not just an evolution. But Tom, what was the argument you made? I mean, w how did you know What were you saying to the team like we have to do this because

Well, For me it was Look, we started Terracycle because we wanted to create business models that solve garbage and fertilizer was a good example of that. But we were not in our core trying to, you know, set out to create a fertilizer company. And

If We become a consumer product company. Where our role is to make products from garbage. Then the business hero of that equation is the product, which means we're gonna have to find the very best inputs so that we can make the very best product. And how are we gonna solve waste if we're only going after the very best of the garbage?

That that was the foundational issue. And so my hypothesis was look, we need to make not the output, the product, the hero of the business equation. But the input, the garbage. And really think of how can we make sure we create business models that can deal with everything, all the gross and difficult things out there. Alright, so Given that you were going into the recycling business, was the idea you had to build a a recycling center or or were you gonna work with existing

So We figured three things have to come together. We have to somehow collect the waste, then to process it to make sure it turns into a recycled output. And then most importantly, to get someone to go out and fund all that. And our beginning point was going to manufacturers and brands because they tend to be the first in line for w uh when someone points a finger on why

Is that object a waste object? It tends to go to the brand. So we thought that's a good place you know, uh a good place to begin to try to get funding. So I think one of your first partnerships was with uh Stonyfield and Cliff Bar. And and explain how that would work. You would Uh they would

uh pay you To create a program for them. For people to What? send in the Stonyfield yogurt cups or b drop them off somewhere, how would it work?

Yeah, that's exactly right. Very similar concept as how we were looking to or how we were collecting the soda bottles in the worm poop days. We said, and we had some experience on how to do that. So we went to uh the folks at Cliff Bar and Stonyfield and Honest T, those were the first three partners that uh that chose to back us. And we said, look, you guys have non-recyclable packaging forms, juice pouches for Honest T, all the way to bar, you know, wrappers for uh for Cliff Bar. And we'll set up a national platform for you where schools and other community organizations, you know, places of worship, um, fire stations, uh libraries can sign up. Put out a collection bin, fill it up with that category of waste. Uh so it wasn't just for say Stonyfield branded yoga cups, any brand of yoga cup could be put in through that program. Then download a shipping label, send it in.

And then we'd give a little bit of an incentive to that organization, uh a little money uh to be donated to them or any charity they want, and that's effectively how all this waste would come in in this in this first iteration. Right. Okay. So the idea is to get brands to to finance this and and recycling doesn't necessarily mean melting it down all the time. It it could mean just cleaning the containers and returning them. to the company so they could reuse them? Uh absolutely. So generally speaking, if you think about comparing recycling and reuse, um recycling is where you recover the materials an object is made from, and then those materials are now new inputs for other products. Reuse is more where the package is cleaned. And then refilled.

At the beginning with with these brands, uh, most of what we were looking at was doing recycling based outputs or what's sometimes called upcycling, think like sewing juice pouches into a backpack or uh folding energy bars into um a bracelet or something. So what would you do with recycled energy bar wrappers? Like how how does that I mean Are they melted down? I'm trying to imagine how they're Recycled. Yeah, absolutely. So the way the process for that would work is we'd first get in the the wrappers, we would shred them, then run them through a washing cycle. So all the residual oils, foods and greases and so on would come off.

Then we would create what's called a compounded pellet where it all gets melted down, and then we would look for manufacturers that could use that material instead of buying new new materials. So an energy bar wrapper may turn into a watering can or a dog food bowl or a plastic bench or something like that. Got it. Okay. So over time you began to Presumably to find other partners. Other brands. that were interested in doing this. And you and so You would essentially set up a program for these brands.

Right. They they'd have a terracycle logo on it and And how would you like as a consumer, right, if I went and bought I don't know A cup of Stonyfield yogurt, right? Or a cliff bar, how would I know? 'Cause instead of just throwing it away in the garbage of my house, how would I know

that I could do this. Yeah. Um creating awareness was really important. So we would go out, I mean we're a small organization, we would create as much awareness as we could by talking to the media, our own social media presence, things like that. And then the brands would also promote it by putting the Terracycle logo on their package, maybe sharing it on their assets like their social media pages, websites and so on and people would then become aware that, hey, there's this option of what I can do with this package beyond just throwing it away. So Tom, explain how I mean, this is not a nonprofit business. I mean, this was a for pr and is a for profit business. So the business model depended and depends entirely on

partnering with brands? Not just brands, but yes. I mean so and by the way, my advice to mission driven entrepreneurs is typically just try to do this that stuff in a for-profit context. Because Access to capital. is way easier in a for profit. Yeah. So our job is to go out and find as many stakeholders that are willing to fund. So brands as one area, it could be retailers, it could be office buildings or campuses, all the way down to even individuals. And so what we're first focused on is

How do we create as many methods of collection as possible? Our mail-in programs are one today of about two dozen different ways that we're able to do collection from doorstep all the way to retail collection. And then because these waste streams cost more to collect and process than the results are worth. It's about finding folks that are willing to fund. And there's many different stakeholders, but each one our job is to figure out, hey, will you pay for this externality, noting You have no legal obligation to do that today. It's sort of crazy, right? Like as a consumer, I can throw something in the garbage and I get no fine if I put a recyclable in the in the waste. I have no obligation. Right. Manufacturers have no obligation to fund this externality, nor does any other stakeholder. And so

We're out there sort of saying, Hey, take voluntary responsibility over this and then we can set up a solution that people can access. Alright, so you have this This model, right? And as you say, these companies are not required to do this, right? Like when we when I get a a a bottle or whatever it might be, or anybody does, a a a tub of yogurt or Anything that we consume, a snack.

It's our instinct as humans to just find the easiest way to dispose of it. And most of the time It might just be the nearest trash can. Right. I mean it there's no cost to us as consumers. to throw things away. I mean I mean there are obviously huge environmental costs, but we don't actually get penalized. The companies don't get penalized. And so

Right now there's no market solution. to there's no sort of market fix, right? Because you could create a mark around this. You could say, well, you have to do this or you'll be penalized. And then everybody would change their behaviors. But But right now it's entirely voluntary. Exactly. And this is a foundational flaw in the entire concept of waste is that As a manufacturer today, let's say you and I started a company, we can invent

Anything Guy and Tom's cool new pen. And we would have no responsibility over its end of life at all. And there's no regulatory body we even have to go through to approve that that pen is okay to exist. And and we think this is normal, right? Like like this is just how businesses operate. But but essentially if you think about it, like in a hundred years from now, we might look at this and say, Wow, that was a That was a period of chaos in human history.

But we just allowed everybody to make whatever they wanted without thinking about the consequences of of disposing of that product. Right. And I I if I can zoom out for a minute, I think you have nailed the foundational issue in all of sustainability versus business, which is that Бізнес in almost all the externalities it produces. Not just waste, but you know, deforestation, uh species extinction, everything emissions does not have to be responsible for those externalities. So effectively they're going and being paid for by the plants and animals that inhabit this world that have no

point of view uh or you know, on whether this stuff should happen and future generations. Net net, I mean, that would be the solve is all these externalities being somehow embedded. The challenge, of course, is that the price of products would explode. Right. And so I would say that I would argue that it's not just companies and corporations, it's it's consumers too that are getting a free ride. Yes. Because uh the the cost to us is not is also very low. Like we get cheap consumer products and You know, right?'C if if companies had to do that, if corporations had to do that, they'd have to raise prices and we'd have to pay for that.

Which You can make the argument that that we should. Everybody should should be doing that. Companies, consumers. Yeah. Yeah. Yeah. Exactly right. I mean, that is I if if you gave you sort of the uh a dream state for me from a legislative point of view, that would be what would happen is that all the externalities of creation of products would be in their price, which of course would mean that everything, as you just said, would get much more expensive, which would mean we would consume less. And consuming less is the actual answer to every environmental issue we face. Let me come back in just a moment. More on strategic consumption and why Tom's actual goal?

is to put himself out of business. Stay with us. I'm Guy Raz, and you're listening to how I built this lab. Welcome back to How I Built This Lab. I'm Guy Raz. So Tom is the founder of Terracycle, a company that works to recycle and reuse packaging.

The problem though is that creating new plastic is often cheaper than recycling old plastic. Today, plastic is still cheaper to make new than to collect it and process it and then to use it as a recycled uh material, which is why we see the The use of virgin plastic increase year over year over year. So I mean how do you how do how do you change I mean if if if it's a matter of economics, right? If it costs more to recycle than to use.

raw virgin materials. How do we fix that? I mean uh essentially Can we fix that or or will companies simply have to choose to just pay more because it's the morally right thing to do? Well, I think there are two ways we can manifest change. We can have mandatory change. Let's call that regulation legislation. And we see that coming in the world of waste. We've seen certain things get banned, like the plastic bag in certain states and countries, plastic straws.

disposable dining wear. That will call mandatory action, and we should do as much of that as fast as absolutely possible, and it's good that we see some of that coming. After that, I think what's left is voluntary action. That's where, for example, Terracycle sits, and there we have to seduce companies and convince them Two invest in something they have no legal obligation to invest in. And with each stakeholder

It's it's a different sort of types of value that we have to show. So for a brand, you know, our goal is to say, hey, you have this big issue, you can create a solution to it, but maybe you can also attract consumers into your brand versus a competitor that may not be offering that investment. Or If you're a retailer, maybe by offering recycling solutions for certain waste streams, you can attract more foot traffic. And in each case, it's about using the dynamic of business to think through what is the value that's being generated. By funding. The solution to that externality.

Wha what do you I mean, right now, given that there are no financial incentives or penalties, right? What have you discovered is the best incentive? To get Consumers too.

I find that there's really sort of two type of incentives that really move consumers. There is uh consumers, certainly, who care about the environment because it's the right thing to do. And we're seeing that trend in the right direction. It's just not for 100% of people today. The other incentive is creating benefit for their community. So we do a lot of programs where we say, hey, collect toothpaste tubes and toothbrushes, and then they get turned into playgrounds that may benefit a community near you. We see that drives a lot of motivation or donations to charity. And then the third is the odd one, which is making it fun. And exciting.

I'll give you a case study of this. You know, we did uh a uh study at a train station, I think it was in some uh in New York, perhaps. Like a busy train station and we put out very well marked recycling bins and very well marked trash bins right beside each other. And we noticed how many people would put an aluminum can or a soda bottle in the right bin, and it was fifty percent. And that's crazy'cause they're right beside each other.

Then We just inserted a little bit of fun where when you put the uh something in the recycling bin, the recycling bin would light up and give like a sound effect back. And immediately it moved to ninety percent of people put the uh the recycling in the right bin. And so fun and excitement is also important uh uh to instill in these programs to get good participation. Tom, we've had many businesses on how I built this that are beverage companies or, you know, food companies that use plastic.

Um And You know, occasional I've asked them, you know, why don't you switch to aluminum or to glass? I I I interviewed somebody who's got a you know, beverage company and they said, um look, you know, aluminum creates more actually more pollution, you know, and uh you can recycle plastic and also the weight of glass creates more carbon emissions. I mean there are all kinds of arguments you can you can make, but

I mean, do you think We would be better off if most Uh, food brands and beverage brands just used aluminum and glass rather than plastic? No, I don't think so, because I think every material type has pros and cons. We're in a moment right now where we are, um, I think rightly so, really projecting a lot of negative onto plastic because of microplastics, ocean plastic, all these things that are correct.

But there's also externalities of everything. And so The right found uh answer that we have to think about um is the hardest, which is a meditation on our relationship with consumption. We are voting for all this environmental destruction to occur by buying things.

And we're buying things at a phenomenally unsustainable volume. That's gonna be I think some a point in time. that will have to be really reflected on. And I think it'll either come from us voluntarily reflecting on it. I hope that's the case. But if not, it's gonna come through the earth.

effectively punching us in the face quite a bit and forcing that that reflection to occur because I mean it's gonna come to us one way or another. the material choices we make, I think, need to be less about is it an alloy or glass or plastic? It's much more about how do we eliminate the need of packaging if we can. Then how do we shift to reusable packaging, where the packaging is just cleaned and refilled, which eliminates the need of extracting it.

Every time from the earth. And then if we use disposable packaging, how to make sure that that material can still be honored by going around as many times as possible, perhaps into different applications and just getting away from This hyper disposability where it all ends up in destruction, whether a landfill or an incinerator. Yeah.

Alright, so You're obviously tr fighting a uh the good fight. Um but you're you're also running a business and it has to be a sustainable business. Tell me a little bit about the the economics of Terracycle today. I know I've seen different numbers about you know, I know you raised about twenty five million dollars um in twenty twenty. I've seen different numbers about your revenue, forty million, fifty million Um

I mean are you A profitable business right now? Yes. Um so to give you a couple of statistics. In two thousand fifteen, we turned profitable and we haven't looked back since, so we've been able to post profits every year since then. Um this year, you know, we'll do about seventy five or eighty million in revenue, somewhere between those two numbers. And every year, this is our twentieth year, we've ach achieved straight revenue growth every year. Now Mind you, I'd still say just under a hundred million is a small number compared to the opportunity and the level of the issue. So we think we have a lot in front of us. Um, but we have been able to

achieve uh good stability uh and good foundations uh from a P N L balance sheet, all those vectors that you would look at in just is it a good business model? Tom, h here's sort of a weird question. Um and and I'm sure at some point you've thought about this, which is Essentially your mission is to you know, in a perfect world is to eliminate waste, right? And so we would all be going to the market and refilling our glass bott bottles with, you know

uh apple juice or peanut butter, whatever it is, right? And If that were the case, your business is obsolete. Like In a sense, your mission is to make your business obsolete, to to bring your revenue down to zero. I mean I mean i if I am I

Kinda right there? No, you're not just kinda right, you are Absolutely right. And this is entirely why we invested in doing this. So it's not just passively. We've put all of our profits and investment. into uh our third division, which is uh called loop, and it's all about transitioning from disposability to reusability. And if loop were to really succeed in a grand way, Our first division, which is focused on recycling, would disappear.

This obviously came up when we created Loop. It's like, Wait a minute, this is gonna cannibalize our first unit. And to me it was sort of like, Well, when Netflix created streaming, it destroyed their mailing system for D V D but it was the right decision. Right. So division one is recycling, division two is turning the those recycled materials into other products, but the div the newest division that you launched in in twenty nineteen called Loop, uh or you announced it, you I think you launched it in twenty twenty. This essentially is a uh what what you do is you partner or you're partnering with some big companies. like Tide Laundry Detergent or Haganda's ice cream. And you are creating a program to uh f what

for for them to reuse the containers or to Like Basically for consumers to reuse the containers. Tell me how it works. Absolutely. So we work with brands. Uh today 200 major consumer product companies have joined, even Nestle and PG are now investors in this. And they basically create reusable versions of their brands that are there today. Our job is to approve and make sure it can flow through and it really is reusable. So uh let's take something like uh a Tide Laundry Detergent, right? Today Tide comes in that iconic orange plastic bottle. Sure. Yep.

In select stores at Walmart today, you can find it through Loop in a beautiful stainless steel container. And They have to design that container to fit the rules, which it must be able to handle ten reuse cycles or more. Uh that one uh particular ones rated to be much more, but we say ten is the minimum, uh to be countable as reuse. And of course, what is really reusable, I mean one could argue it's more than one use, but we uh worked with a lot of NGOs and stakeholders and said ten is a good number to say, you know what, at 10 you are reusable. Yep. And so they have to do that. Sort of like um similar to the concept of organic, where people have to farm in a certain way and then someone says, now you're an organic farm. We do the same, except we say now that's reusable. And the way it works for a consumer, uh uh for example in Arkansas, you can get this in Walmart today where you w can buy these products, whether it's uh Heinz ketchup all the way to Tide Laundry Detergent.

You pay a deposit uh for the package. And then when you're done, without sorting it, without cleaning it, you give it back to loop, say in a drop in at the store, or if it's e com it's picked up from your home. And then we return the deposits to you in full. Uh we sort them out. If needed, we clean them.

And then they go back to the manufacturer who refills them. And around it goes again. And one of the nice things here is then there is no waste. Um and at the end of the life of that container, one of the rules for loop is that it must be able to be recycled back into itself. So that those molecules always stay in the context of that package. So I mean there and there are versions of this, like um in California here in Northern California you can buy Strauss milk, for example, in glass bottles. And

uh you know, you pay two two dollars and fifty cents, I think. per bottle. Um, but you know, that's an incentive to bring it back'cause it's a lot. I mean these are very heavy, thick uh glass bottles. And so That's the basic model here.

Yeah, think of it as the milkman, which is the example you just uh you just shared. But it can apply to any product from insect repellent all the way to your favorite ice cream. And and do these containers need to be made out of something other than plastic or are they s sometimes still made out of plastic? Three sort of material types we see work really well in reuse. Obviously glass, like the milk bottle you mentioned. Alloys are great, like stainless steel, aluminum, those work very well. But also engineered plastic. So think like um a plastic sports water bottle is a reusable vessel, and we use it all the time. And in different applications, uh it's very appropriate. So for example,

In a bathroom environment, let's say you have shampoo and conditioner. Glass is is dangerous because no. You don't want to shatter it on your Shower floor. Oh my God, can you imagine, right? Or alloy. Uh imagine if uh you know uh uh it's slippery. And it falls, it can hurt your toes much more than a plastic container. So in something like shampoo conditioner, a thicker, more durable

But polymer container is is the right choice. So Tom, as as the the brand, a terror cycle, you know, begins this transition over time to to loop, right, let's say, where in the future ideally every product we buy is gonna come in a container that's re that's reusable, right? Let's say that's the future. what does that mean for your for your business? I mean I mean do you see this as a a billion dollar business? I mean is it I mean how big can this

Can your business become If this transition works. I think much bigger than recycling. I think this is gonna take a long time, mind you, uh, because we have to do it product by product, country by country. It's a it's a big transition uh to get this all to occur. But let's say academically we did get there. The

The amount of jobs and the amount of revenue created on reuse? is bigger than recycling, just like recycling is more jobs and revenue than landfilling. And so over time you see yourself ideally getting out of the recycling business and and focusing on the reusable business. Yeah, I would say I look at this this transition as recycling is what we can bring at scale today. And let's do that while we're able to get everyone to shift to reusable.

nothing we spoke about is really the answer to waste. And I think this is really important. It's the biggest realization I've had in twenty years of doing this is that Recycling is a band aid, right? And it's better than landfilling and incineration. It's a step in the right direction. you know, reuse is an even better step than recycling. But in the end the only answer is gonna be a significant reduction of of buying things.

And It's the conversation that gets spoken about the least in the multi-stakeholder dialogues and all the halls of business because it is inherently anti-business. But I think it's so important for us to realize that, especially as citizens who are voting. By buying things, right? That vote is what fuels all this, and we have to shift it.

Tom, thank you so much. Thank you so much as well. It's Tom Zackey, co-founder and CEO of Terracycle. Hey, thanks so much for listening to How I Built This Lab. Please make sure to follow the show wherever you listen on any podcast app. Usually there's just a follow button right at the top so you don't miss any new episodes and it is entirely free.

If you want to contact our team, our email address is hibt at id.wondery.com. This episode was produced by JC Howard with editing by John Isabella, research by Carrie Thompson, and music by Ramteen Arab Lui. Our audio engineer was James Willits. Our production team at How I Built This includes Casey Herman, Alex Chung, Liz Metzger, Elaine Coates, Chris Massini, Carla Estevez, Sam Paulson, and Ramel Wood. Niva Grant is our supervising editor.

I'm Guy Raz, and you've been listening. How I built this.

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