Titan of Trash: An Interview with Tom Szaky
TerraCycle makes things that are non-recyclable, recyclable. While that concept may sound basic, and frankly unrealistic, the practice of innovation at TerraCycle makes it neither. Last year was the ninth straight year of growth and the company’s revenue reached $18.5 million. With just over 100 employees spread across offices in Trenton, NJ; Toronto, Ontario, Canada; London, England; Sao Paulo, Brazil; Monterey, Mexico; Buenos Aires, Argentina; and Tel Aviv, Israel, TerraCycle has inspired 33.8 million people to collect waste in 90,000 locations worldwide.
The Trenton headquarters is a physical embodiment of TerraCycle’s mission, company culture, and journey from a worm-poop mill in a college apartment to a multi-national, multi-million-dollar industry disruptor. While the warehouse space located off Route 1 probably once looked exactly the way you’d expect a recycling or waste-management company to look, today the old industrial building is a canvas for local and international graffiti artists. Every summer, the exterior of the building is painted black and artists are invited to participate in a Graffiti Jam. By the end of the event, the exterior is completely different.
This isn’t much different from what’s happening behind the cinderblock walls. Garbage goes in. Designers and scientists reimagine what the material could be used for and out come products with renewed purpose. Inside, there are very few offices or conference rooms, in the traditional sense. Central to an engineering lab, a design studio, and the PR office is a huge concrete workspace with desks and tables. In the middle, surrounded by curtains made of clear plastic bottles, is TerraCycle CEO and founder Tom Szaky’s desk. You’d be hard pressed to find a more literal interpretation of transparent management style and an open door policy. The one-time collegiate entrepreneur now has a three at the beginning of his age and though he still dons a hoodie, Szaky has grown up as a leader and the company has grown along with him.
TerraCycle has created partnerships with giants such as Colgate, Target and L’Oreal. They collect all types of waste from baby food pouches to cigarette butts and reuse, upcycle or recycle it. This eco-capatalist business has effectively diverted 2,465,422,777 units of waste from land- fills across the globe.
The success of TerraCycle, the energy with which the company pursues its mission, and the company’s marketing muscle have made Szaky somewhat of a celebrity. In addition to being a frequent guest on news programs and garnering sponsorship deals, Szaky’s first book, Revolution in a Bottle, was published in 2009 and his next book, Outsmart Waste, is scheduled to be published in January 2014. This latest book will focus on how people can better understand waste, change how we create it, and rethink what we do with it. TerraCycle also is the subject of a reality show, and they are currently filming the second season.
NYER executive editor Daria Meoli recently spoke with Szaky about thought leadership, negative-cost marketing and how both he and the company have evolved since the start in 2001.
Daria Meoli: How has the business changed since you started it?
Tom Szaky: TerraCycle’s first product was liquid worm poop in a soda bottle. We still make it, but we always wanted to solve [the problem of] garbage. The worm poop is made by feeding organic waste to worms. The bottle it is packaged in a used soda bottle. We had a lot of interesting realizations when making that first product. We found out about the standardization of garbage.
We innovated more and more products. We got into making bags and other things but we always approached it from, “How do we make a great product from garbage?” So, we would decide that we wanted to make a bird feeder, then we back- tracked to figure out what type of garbage we could use to make a bird feeder. And then we realized, in about 2008, that the question wasn’t about how do we make products from waste, but should we start with the waste? We realized our product should effectively become our by-product.
Ever since that realization, this is the way the business has worked. We start with waste as the issue. Either we get approached or we approach a company about their waste chain. We then look at how we can manipulate the waste to make it into something new. So, first we have to figure out how to collect the waste. Then we figure out how we can take that collected waste and make something new.
There are five things you can do with garbage—landfill, incineration, recycle, upcycle, or reuse. TerraCycle will never do landfill or incinerate. We only look at cyclical solutions. Reuse is finding another use without changing the waste. We refurbish electronics, use old soda bottles for the worm-poop fertilizer, and we’ve used tens of millions of old butter and margarine tubs as planters. That’s reuse and it’s limited to about one percent of the waste we collect. Four percent of the waste we collect is upcycled into fun, promotional stuff, like a backpack from drink pouches or speakers from candy wrappers. These products are developed in our design department. We have an in-house design studio here and they innovate for reuse and upcycling. And then, our science department looks at the recycling, which is about 95% of what we do at TerraCycle. We’ve invented many world’s-first solutions. We invented how to recycle cigarettes, chewing gum, and the list goes on because no one focuses on the area of non-recyclable waste. We’ll never do things like paper because there’s a solution for that, already.
DM: Do you have competition?
TS: No. The closest thing to competition is when a brand may run the program them- selves. An example would be Nike. They do “reuse a shoe” in 24 countries.
DM: How does your theory of “negative-cost marketing” work?
TS: Right now, marketing is about creating great content and buying space to put that content out there. The brands that do well have the best content and the best media buying. But, I always like to look at problems by taking a step back, and looking at the system. Why is there advertising? Why does a newspaper or magazine have advertising? The advertising funds the editorial. So, we really changed our perspective on this and asked, “Instead of being in the business of buying advertising, why don’t we be in the business of getting paid to be- come the content?”
Our marketing department is a revenue center, not a cost center. We don’t advertise whatsoever. We really focus on creating a marketing system and a whole marketing platform that’s all about becoming the con- tent. The way that starts is we drive a lot of publicity. Albe [Zakes] runs the global media team. We average 21 articles world- wide per day including weekends, but not including syndication. We only count the original articles, not how many times it appears in syndication.
DM: How are you able to generate that much press: So many people don’t approach publicity properly. They do news wires, which no one reads. They hire agencies, and agencies are not in the business of getting you press, they’re in the business of getting your retainer. The way we get press is much more formulaic. We profile a community collector or a collection contest we are running. If you look at the world of media right now, you have an ever-growing volume of media that needs to be filled, but an ever decreasing number of journalists, especially at local papers, because they don’t have resources. They mostly syndicate from AP and Reuters. There are forty thousand local papers in the US and there’s very low staff count at most of them.
The trick to media, I think, is to make it really easy for the journalists by going to them with a beautiful high-res photo, and line up the interviews—even offer to write the article. What is important to keep in mind when you do negative-cost marketing, is that it has to be about servicing the content first. It’s not about, “Hey, we want our message out there. How do we get it out?” It’s about how we make sure we accomplish what the journalist is looking for, in a way that also accomplishes our goal.
We can demand a certain amount of press from each publicist, because they’re all internal [employees]; we don’t use agencies. But that’s not true negative cost, because we have to pay the staff to create content and get it out there.
We address that cost by formulating the press we generate as a benefit for our clients. For example, we work with Colgate to run a variety of press campaigns, online activations, on-pack advertising, and col- lection-based contests. So, if a local paper runs an article all about an oral-care packaging collection (packaging from toothpaste, tooth brushes, and floss) at a school, there is something in the article about Colgate because they are our partner. We say to clients, if you create a recycling program with us, we can help you promote it. There is a fee that goes with it. But, the whole thing also promotes TerraCycle.
Getting publicity is phase one. Phase two is asking certain media outlets if we can blog for them. I write for the New York Times, Huffington Post, and Treehugger. Some publications pay us for writing like at The New York Times. It’s a great way to get our content out and generate income at the same time. When we blog, it’s not just about creating propaganda, it’s about servicing the content. My blog at The New York Times is about small business, so I write about lessons I’ve learned in my business. But, there is also a benefit tied to TerraCycle.
The phase after blogs is books. We have a number of books out and we have maybe three more that we’re working on. The publisher pays us, and we are creating awareness at the same time. Press, blogging, and books all benefit each other and get you intrinsic awareness.
Another phase of negative-cost marketing is the creation of marketing modules. We work with agencies and media outlets to develop media assets that we can then sell to our partners. We can’t just sell advertising; it has to be something very different. For example, we teamed up with Target to create an ad for the inside front cover of Newsweek magazine. It had a shipping label, and when you ripped the cover off, folded it and taped it, it became an envelope. You fill it up, in this case, with plastic bags and mail them to us. We take the plastic bags and make them into a more heavy-duty shopping bag, fused together by that plastic. It was tremendously successful, and won some major advertising awards. We repeated it inside People magazine. That’s totally negative-cost advertising, because we generated revenue from the client—Target—and it’s a TerraCycle advertisement because our logo was on it. I could never afford advertising on that scale. That’s a lot of print buy.
Then you get a whole new layer of negative-cost modules as a thought leader, which is speaking gigs and endorsements. We get paid for doing speaking engagements, and I’ve done a bunch of commercials for GAP, HP, and other places. We view certain team members as assets that we invest in, making them thought leaders as well. So, it isn’t just me out there as an expert. We have a team of experts.
We’re also looking into the possibility of creating a private-label magazine and we are in season two of our reality show. A TV show or a movie may be the pinnacle of negative-cost advertising, because you’re getting so much exposure and you’re get- ting paid by the network.
Leadership and Innovation
DM: As the founder and leader of the company, your role has evolved tremendously since you were filling bottles with worm poop in your apartment. How have you kept up? What challenges did you feel like you really struggled with and had to overcome to be successful in role that you have now?
TS: I’ve gone through so many mistakes and so many challenges, it would take hours to rattle them all off. But when you first start a business, you do everything yourself. You’re the one-stop shop. When we started to grow, I struggled with letting go and letting other people handle things. I didn’t want to let go of anything. Now, I’m trying to hire as many different people as I can to take on as many different functions as I can. Ideally, I’m hiring people who are way better than I am at those things, and that can be a challenge for a leader to go through.
The other challenge for us was that our business model has been very fast- evolving. And I think that makes people nervous. We went from a manufacturing company that manufactures fertilizer, that just happened to be made from waste, to becoming a really innovative waste-management company. That’s a monumental shift. I believe in the philosophy that we want to solve garbage. That’s our purpose. How do we eliminate the idea of waste? But, we don’t now, and will never have, the perfect model to do so. We’re going to constantly iterate and keep adding more and more ideas to get there. We always have to agree internally, as a group, that we never have the answer. That was an important realization for me: be flexible in the model, but stay true to your core.
DM: How do you encourage innovation among employees?
TS: We need to encourage innovation across all parts of the business. I think an innovative culture comes from a number of different things. One is the physical space. The space has to inspire innovation. Every one of our offices around the world looks like the Trenton office, with no exception.Every TerraCycle office in every country must adapt to the same aesthetic. It doesn’t actually cost us any more to make all the offices re-create this aesthetic. It’s cheaper. But, it’s incredibly important to create a very open environment where we work. We don’t like doing any sort of closed environments. We really standardized that all across the world to be able to bring the same culture to all of our business units.
The second way we encourage innovation is to be very transparent as an organization. For example, every department lead, or every country lead, must submit a detailed monthly report to the entire business. So, every person even in relatively low-level jobs, in every country gets the exact same reports I do, without any exception. Then, we do detailed reviews on all these reports. The feedback, which is very frank and very transparent, goes to every team member, without exception. So, employees get every report and all the feedback and this openness and transparency invites innovation from all across the company.
You have to make sure the culture of the business embodies the innovation you want. Take my office. Anyone can walk in here and many people can hear what I’m saying at any time and that’s purposeful, so that everyone knows what’s going on. We are very transparent and very flat.
The third, and maybe the most important thing we do to encourage innovation is we are open to failure. Embrace failure, not by seeking out failure, but be open to test and fail. And let other people fail, too, because when people are worried that an idea won’t work, they don’t want to bring it up and that hampers innovation. We are the opposite—test, test, test, test, test.
DM: Can you talk to me about some things that you’re looking to do in the next year or two.
TS: If you distilled down the TerraCycle platform, it’s a three-legged platform— collection, solution, and promotion. Any waste stream can be solved with these three legs being put together. Without collecting it, there’s nothing. Then, you have to do something with it, and that is our core. But, without people knowing about the solution, they won’t collect. It all has to come together.
We are thinking about different models of collection. I’ll give you an example of a model — the Zero Waste System launched this month in Maple Ridge, British Columbia. There are paid and free bags for waste with different levels of separation. Consumers can separate out any waste they can possibly think of, from human hair all the way to toys. The waste bags are put directly in their blue recycle box, and get picked up by our partner in Canada, a garbage company called Progressive Waste. Progressive Waste recently bought 20 percent of our business in Canada. They then sort it out and send those bags to us. So, for the first time in modern human history, you can have a home that is 100% recycling. It’s the death of the garbage can.
The second part of our focus is to continuously be highly innovative in our solutions. We have been known as being one of the most innovative garbage-solution companies, but I want to become the Dow or DuPont of garbage. We’re constantly hiring R&D experts and scientists. I want to take the number of people on that team and put a zero behind it to become the powerhouse of R&D for garbage, because, currently, there isn’t any. People burn it or bury it. Waste management is a $13 billion dollar industry, and those are the two functions. Look at how much innovation exists in consumer products or how much cool stuff is going on in the media industry or any industry. Look at what’s going on in garbage. When have you ever been floored by something innovative out of the garbage industry? So, R&D is the second area we really want to continue to grow and advance.
The third part is to continue to innovate in marketing. How do we create more and more sophisticated ways of generating marketing value?
We’re focused on those three parts of the platform, and then, of course, going into more countries. We’re about to open in Japan and South Korea. We want more general growth, more volume. I really think that we’re at the very beginning. I still view ourselves as a very small company, compared to where we hopefully will go. How do we become the Google of garbage?