[00:00:00] Speaker A: Welcome to Second Sense. I'm your host, Allison Mitchell. Every episode we explore the complex supply chain behind the mobile device industry, from data driven decisions to sustainable solutions and how smarter systems can give tech a second life.
Because when you trust your data, second life tech just makes sense.
Welcome back to the podcast. I have as our guest Andrew Kroger who is co founder at CypherBlack and Cypher Black is a powered by Appcuto ecosystem partner. So welcome to the podcast, Andrew.
[00:00:38] Speaker B: Thanks Alison. Grateful to be here and excited to be part of the team.
[00:00:42] Speaker A: Well, Andrew, to kick us off, I would love to have you share some of your background with us, how you got to Cypher Black and just your career trajectory to.
[00:00:55] Speaker B: I love where we're at today and I love kind of reflecting on my history that got me here. Ironically, I was actually talking with my son about this last night when he heard me over chatting with the head of Microsoft Data Centers and he's like, how do you get into that space? As you know, everything's a journey. You know, my personal journey started back in 1997 when I went to the VAR space with CDW and started to lead large teams there. But it was really about that solution, understanding the needs of the customer and right. Sizing the technology platform that they would require to kind of to support their business.
So I always loved and was fascinated by how technology could help people achieve their business goals and enable success. And kind of my mantra always has been help the customer solve some problems and a byproduct is going to be sales, revenue, profit, all those things that, you know, business cares about. But kind of fast forward, you know, after cdw I went into data center and cybersecurity. Continue to be fascinated by the space and the implications. And I love kind of reflecting back on that particular moment because when I was in the data center space, it was all about putting in these cool, high volume blinking lights in the data centers, cool toys, technology everywhere. But like so many in our space, American, out of sight, out of mind, right? We don't ever kind of think what happens after this is done. In fact, if you had a refresh after three years, amazing. I'm that much closer to quota, right? All I knew about was putting in more blinking lights. And about eight years ago, a little over eight years ago, I had one of the CEOs I worked with in cybersecurity asked me to come on board to a company called Blancco. And I knew nothing of Blancco. And I said, well, what do you guys do? And at that Time he's like, he's like, well, we do data sanitization of retired IT assets. I just kind of looked back at him and said, that sounds incredibly boring. I had zero interest in it. What my view of that was, I had no understanding of the implications. But fast forward, once I started to look at the implications and understand the impact of that, it's created such a passion in me because it is so much more than that. That is kind of the entry point. But then you start getting down into all these narratives, understanding sustainability, truly looking at esg from an environmental, social. A lot of times people forget about the social impact and from the governance. And if we kind of look at things that are happening in the world today, it is just producers, more technology, everything going out. And people have heard landfill avoidance, these types of things. But again, that time at that industry, it was really kind of transactional broker based where a lot of people were like, well, I can make money off your it. They didn't understand these C suite type discussions that we get to have today. And that's why I'm excited. How our industry has evolved is because it isn't just about acquiring used assets and reselling them for a profit. It's truly about world impact implications. Basically 60 million metric tons every year going into landfills, which is equivalent to the Great Wall of China, just.
And that's crazy. And then you start to understand the impact and the human toll it takes on people in Southeast Asia, South Africa, the geopolitical undertones that are associated with it in basically child and slave labor that's being run by ownership from China of mines across the globe, with the Wagner group from Russia running security on these. So when you start to look at all these things and see this snowball, it really comes down to just a personal sense of responsibility, like, what can I do to impact this space? Who can I work with? Because I'm not going to do it alone. And that's part of the reason why I'm so excited to be part of the powered by app Kudo ecosystem. Because I can't do this alone. And consequently, as I move through my journey with Blancco onto another company and with Cypher Black, it's really about just looking around, being curious, seeing where challenges exist today and how can we solve them. There was no one that was able to solve the smartwatch issue. And I think that's also something that's really interesting because we talked about 60 million metric tons going into a landfill. That's a lot of smartwatches.
But now you have to start understanding what that value chain is, because it's not just about the physical asset itself. It's like, what did it take to make that? Who are all the different players involved, what resources were consumed, what mining implications, power, water.
And that just becomes magnitudes bigger from an impact standpoint. So for us to kind of come in and solve that gap that no one could solve beforehand was really exciting.
And again, we need more of that. I think in our industry today, we still have a lot of people that are in that old mentality, legacy mentality of I need everything. For me, all we have to do is look around right in your room right there and say, look at all this technology. It's coming from hp, from Dell, you know, from Samsung, from Apple, from Google, you name it. The big OEMs, those are many, many billion dollar companies, almost trillion dollar companies at this point, that every year are just putting out massive amounts of technology.
So for us to think that from a single reverse logistics channel, that it needs to be one person that's going to solve this, it's not going to happen.
We have to do such a better job partnering to keep up with all these people. And it truly goes back to that mindset that was instilled in me from my VAR days at cw, which is it's better together, some positive. We have to work together, we have to collaborate, we have to partner. So when App Kudo had reached out to us and said, hey, we like what you guys are, would you be part of our ecosystem or have an interest in it? And I've known of AppCudo over the past eight years since being in this industry and I absolutely love what the company is doing from a platform approach and from key foundational elements. I myself was never going to create robotics and automation. Huge, right? Massive. We understand the challenges that exist in our industry today. When you actually have a human that's involved, awesome. Love it. Want to support humans and employees having jobs, but at the same time you also have a commitment to quality that is happening with these devices. So where is the right place to actually leverage human capital versus robotics and automation so you can ensure the integrity and quality of this asset as it goes back out in the secondary market and then all these different data feeds and we can actually go on this forever. But essentially Appcuto represented that opportunity to have a core platform with actually supporting hardware infrastructure that could solve the vision and grading, which is the highest requirement needed to really enable these things out into the circular economy.
And again, then you can actually start Looking at different ways to bring in all this different data to execute on what you're seeing from vision and grading, from physically touching that asset and honestly where it flows and the disposition channels. Do you react, repair it, do you refurbish it? And what I really like to see is with this whole device passport initiative is now we can actually start going back beyond just the environmental but also including social.
So for instance, these days people are very familiar with a cut line. And if you have old technology that has come in, end of life, well, legacy thinking is hey, you know what?
It's going to cost me 25 bucks to process that. It's only worth $20 on the secondary market. I have no use for it, recycle it, get rid of it. But if what we can start doing now is aggregating insights from everything and we know like the Fortune 500 and that's another exciting part is mobile resell. Mobile resell has, which is an app Kudo acquisition. They actually built and focused relationships with the Fortune 500.
So now it's not just hey Fortune 500 company, do you have 8 year old assets that aren't going to be valuable on the secondary market that you'll send down to some kind of social cause? You know, I personally am a board advisor for cell phones for soldiers. But there's schools in Kenya, there are schools, you know, in Southeast Asia. There's schools right here within the US and underserved communities. We've heard about closing the digital divide. Now I can't expect a company to have eight year old equipment that would qualify. If we know a company at Fortune 500 that has ESG social impact, you know, initiatives and we can go to them and hey, you know what? We see this, we actually now have the intelligence and the network that as these things hit our system, we can just start pulling these apart and just start creating quantities that can address your need. And that is actually how we start elevating into C suite discussions. So that old iPhone X, let's say, you know, maybe a company doesn't have 500 of them, but we'll see those hit up Kudos systems and over the course of a couple weeks, month, whatever, we can go ahead and aggregate those and package them so we can now send them to that place that can help close the digital divide. And it might have cost the company $5,000 but from a social capital and impact is huge and then consequently they actually have the marketing information to actually show like hey, we are actually executing on how we actually solve this issue.
So I know I went off on a couple different things there, but I love the industry we're at implications and having this platform that is apkuto and this shift that I'm seeing in our industry that is going to allow us to start working together because we have to. Right? It's not up to me, it's not up to apcuto. It has to be an entire partner ecosystem coming together to address all these challenges. We just have to be more conscious.
[00:10:20] Speaker A: You saw an opportunity in the secondary life, end of life for smartwatches and created Cypher Black to address that. Can you tell me a little bit about the technology, the enhancement to that space that made the fit with app Kudo such a perfect fit?
[00:10:42] Speaker B: I'd first started hearing about companies that were interested in processing smartwatches back in my Bronco days, five, six years ago initially and at the time it was really to address some of the governance and certification requirements like upgrading. We can't actually send data bearing assets out in the secondary market. So how can you just kind of check a box, enable these to be resold? And they're way more challenging than your traditional mobile phones because of the fact that these things are meant to be paired with a mobile phone. Right. I can tell you that Samsung Google warehouse devices operate differently than Apple devices. And how do you actually create an operational process that streamlines this, doesn't create so much overhead from an operations perspective and allows it to be efficient while addressing governance, certification, all these types of things.
And you know, the fortunate part was when we started Cypher Black I'd worked with a couple of the large insurance companies.
The top one reached out and said would you be interested in solving the smartwatch issue for us?
And at the time they were processing on behalf of Samsung about 300,000 smartwatches a year.
It was taking them nine minutes with the OEM tools per smartwatch.
And as you can imagine that is a huge cost for a company. And I also didn't even get get them the deep information that they needed to truly take these out to the secondary market. And I can talk to you a lot about some of the other journeys but you know, the other stuff I will say is almost everyone today is still processing these things manual and as a result you have about 20% RMA rates that are happening when it comes to the e commerce sites and, and here's where I have to get outside of just smartwatches. When you have a weak link like that and a consumer goes out to a back market or Rebelo Amazon renewed, Walmart marketplace, you name it. And their first experience with a refurbished product is they don't even have the asset information correct. This thing doesn't work. Their response is refurbish is garbage. I'm never going to go this route again. And it decimates and hurts our entire industry. And the implications of that are many. It also means the fact that carriers weren't going after trade insurance because they're also concerned about security and their brand is too much at stake.
So these things were just kind of leftover. We'll handle them. Not in the most efficient process, but it created a lot of risk and challenges for our industry.
And we're at a point now where we have so many different iterations of these. We're no longer Gen 1, Gen 5, we're Gen 11, 12 in these. So consumers are looking for trade in. Right. They want to uplift from the early generation one to an asset that works. But to do that you have to enable and empower the reverse logistics ecosystem and having a sufficient tool. And admittedly we thought this was just going to be a one off project and we would transition to something else. But the interest and the demand and just continuing to see the challenges and the problem. When we started it, there was no total addressable market or refurbished smartwatches. We just knew that we had people that were interested, we knew people were processing manually and it wasn't going so well.
And now we're looking at $26.7 billion for refurbished smartwatches by the year 2032. That is growing faster than mobile desktops, notebooks, you name it, it's the fastest growing category.
So to be the first ones to kind of trailblaze and say, let's sort this out. I was very fortunate over the past eight years to say, all right, where are some really incredible software engineers? And to solve something like this, you can't just be software engineering because that is surface level. You have to go deep into the actual asset itself to get into lower level comms, understand the hardware, how these things communicate. And the other big issue that we faced was to date there had not been any assets that had been approved and certified from a data clear data sanitization perspective because there wasn't a physical port access. So we first solved it for Samsung and how we had to do that. And then with the newer generations of Apple smartwatches, which starts with the Series 7 and later there's no port access. So how do we communicate with these things? How do we do a data clear diagnostics and have that forensic analysis to the point where we had to engage very closely with Adisa for three months to blaze a trail. Because it's one thing for us to be able to create the data sanitization and say, yep, we did it, here's the record. You also have to forensically validate that. So Adisa had to do it in converse and say, all right, we have to figure out how to communicate with this and certify what you're doing, because that's Adisa's brand. So I love the fact that we got to work closely with them and it's just exciting to be able to deliver that first product, to see what the consumer experience and feedback has been. And the one thing about our brand is our brand is excellence, right? From the teammates. From what you see, the ui, the ux, you know, we want it to be beautiful product that works and makes everyone's life easier. So, you know, we take a lot of pride in it and so does Epcuto. Right? So I love the fact that, you know, our customers have responded, but also Appcuto has responded and said, hey, we love what you're doing. And beyond that, we want to understand how you can actually leverage your team to continue to innovate and build new tools on behalf of the Power by App Kudo ecosystem. For us, that's exciting, right? Because we've had people say, oh, are you going to create a mobile solution? Are you going to create a desktop solution? Notebook, Mac? We've built those in the past. Could we? Yes. Does it make sense?
No, because those are served right. I would rather partner with people that have good solutions there instead of trying to compete with everyone, be all things, all people. Like, how can I be part of a platform which Appcuto represents? And now we've actually been empowered to go out there and say, all right, what's next? What's the next smartwatch solution? And right now we are actually working on Sonic Shield, which is addressing Hearables. And we can talk about the unique challenge with Hearables. So whether it's AirPods, Galaxy Buds, the biggest issue with Hearables is the fact that about 50% of them that are sold on marketplaces are fraud. How do you ensure the integrity that These hearables, these AirPods, that you think you're buying on ebay, Amazon renewed the marketplaces. How do you ensure that they are legit from Apple?
So there has to be a lot of intelligence integrity checks that you can actually say, these are legit consumer. You can go ahead and buy these with confidence.
And there's obviously regional implications, right? And I will tell you, that's obviously a much bigger issue over in the APAC region than it is here. But I think it's continuing to be fascinated by this industry and how you can enable the circular economy.
And if we just look at the future of society, where we're heading, everything is going to have data on it, right? And not just trivial data. This has your personal information, credit card financial information on it on a watch.
So consumers also need to have confidence that, hey, if I turn this in, I need to trust what happens next with it. And that goes for the phones. That goes for anything. That's why so many people have phones in their drawers, right?
So our industry needs to come together and there's so much education to be done to really just let the world know about conscious consumerism. This industry has come together to create a safe channel for you to go ahead and take those old assets, send it through the proper channels. We will do the proper diligence, and we will make sure that when this goes out into to get its second life loved again, that you don't have to have any concerns. And hopefully you also get to feel good about the fact that you've done your part in being a conscious consumer. I also think that's some of the legacy thinking that we have in our industry, is the fact that our industry, when it first started, used to have this mantra of, oh, well, if you can afford new, well, you can buy this used. That's not the right way to think about it these days. We've got such advanced technology. Do I need the latest and greatest? I love the fact that you're starting to see generational differences too. Your millennials, your Gen Y, your Gen Z. These people are starting to choose, you know, refurbished devices over new, not because of just the discounted price. Sure, there is that, but it's because they're more conscious consumers. They understand the implications, right? Like what's going on with the environment, the earth. You know, if that's something that they care about, hey, this is a good way to have an impact, right? They understand about closing the digital divide and what this, what that can mean. They understand about stripping the resources, but I also love about the work that we're doing is really. It impacts everything.
Earlier this year, I was advising darpa, and DARPA is a Defense Advanced Research Program.
And essentially it became a national security thing. It wasn't about the environment. It was, wow, you know what? China's got over a 90% monopoly on these rare earths. And we have a lot of advanced technology that is dependent on them. So what can we as a nation do to reclaim rare earths or not use more rare earths and you know, in unnecessary manufacturing? How do we create closed loop systems? How do we have supply chain resiliency? How do we have elemental traceability of these things?
So that is why I just think this thing's fascinating because the implications are massive. I don't care who you're working with, whether it's the federal government, if they're pro environment or anti environment, if it's a consumer and kind of where that we have the ability to address and service so many needs.
And again, that's why I'm so passionate about it, is because people ask me kind of what I do and sometimes I just say tongue in cheek like I don't know, just trying to save the world. And it sounds crazy, but I believe it. And I want to work with other people that have that passion that also are on this journey to say how can I do my part in making this a better place?
And by all means we are absolutely going to continue to mine and dig and acquire resources.
You have third world countries that are looking to become first world countries. Exploding demand out of Africa, out of Southeast Asia and look, they have a right to it just as much as we do. But the first thing we have to do is keep our house clean, right? We can't keep filling up landfills and implications with 60 million metric tons, less than 20% of that being recycled. So the first thing you have to do is keep our side of the street clean. Let me embrace the circular economy. How do we get there?
And it's technologies, platforms like Epcuto, but all the others in our industry as well, that's part one. But such a big part of it is education, educating consumers, educating companies because most of them are in the same position I was eight years ago. Like out of sight, out of mind. Never think about it, I'm just going to buy new. What happens afterwards? No clue. Never had to think about it in this industry. And I'm grateful that I've been awoken to it is the fact that I was forced to look at it.
So you're looking at problems, you're seeing the implications and you just continue to look around and it's amazing once you have that awareness. So it's cool to actually start working with people and to see how it's been elevated. And for those people that are making it a C Suite discussion and how we tie it to business impact, national impact, global impact and who are the trade organizations and various stakeholders are coming together to look to solve this. And we just get to play a part of that role, a very big part. And I'm excited to continue to make it bigger and work with other people to do so.
[00:22:09] Speaker A: You mentioned, you know, the basically starting from no market in the smartwatch space to creating a market and the increased collaboration amongst industry partners. What gets you most excited about what's coming in the future?
[00:22:26] Speaker B: I think exactly that. Right, is we've gone from the legacy thinking where everyone is like keep everything close to the sum zero, there's a winner and a loser in everything to how do we become some positive, how do we collaborate some positive one plus one equals three.
And along those lines, that's what I love about moving towards more of an ecosystem. How do we partner, how do we create best of breed solutions, how do we work together, how do we share information that's part of Appcuto's device Passport? And it's not going to be something that we generate solely on ourselves. It's going to be through collaboration. So I love the fact that we have transitioned so much from where I thought it was eight years ago and where it realistically was to where we're at today. And we are just at the cusp of so much more. And the fact that we are starting to actually have a front and center stage and the upswing is huge in the sense of all right, the White House cares about what we're doing, EU Commission cares about what we're doing. You're starting to see governance with implications.
So the EU Commission and what they're doing with the European Green deal, also California, Even here with SB253, I think one of the amazing things that we have the opportunity to do is let's just say you care about the environment or scope three governance. California's SB253 says that by 2026, 2027, now that you need to start reporting on scope three which is backed by the big tech, Google, Microsoft, Meta and what is Scope three? Scope three means that you have to start understanding what the implications are of basically your greenhouse gas footprint and not just directly in what you consume, but your entire value chain. And if you look at the Ellen MacArthur foundation and I'll be there next week, one of the co is a lot of people are looking for stuff up there in the ether and they're like, oh, how do I kind of take all this stuff out There, distill it down and come up with some kind of metrics that will say, here's my Scope three footprint. Well, we actually represent something physical and this is something beautiful about the work that we do is we provide solutions for so many different things. But I just think about the impact that's going to have on not just your Fortune 500, but just so you know, SB253 says that if you are a company in the US that is doing more than $500 million in revenue in California, by the way, you don't have to have a physical footprint. If you transact any business with California or want to, then you have to start reporting on Scope three. So all of them have to figure out how they navigate this. Well, technology, end of life isn't everything. But what I can tell you is any asset that goes back into the circular economy, we can actually measure and create metrics around that shows Scope three data. Because anytime that you actually preserve an asset and put it back out in the secondary economy, there's nuances. But essentially that's a 90% greenhouse gas carbon footprint savings. That is your embedded carbon. So if you're an enterprise and you're like, I'm looking for something tangible and real to kind of address Scope three, well, let's first look in our own house and say right there, we can address this. Where does it go in our end of life? And we can support that and others in this industry can support that. But it's something where they don't think about it. It's sort of like, oh, I was looking out there for happiness, right? They're like, oh, have you ever looked inside for happiness? Spiritual gurus. And I think the same thing can be said for this and kind of the role that we have the opportunity to play.
[00:25:48] Speaker A: Well, thank you, Andrew, for being on the podcast today and sharing with us your journey about basically chasing your curiosity, seeing an opportunity within the marketplace and working with partners to help address it. Apkuto obviously being a key part of that partnership and what you're excited about in the future for smartwatches, but really beyond, I think it's an exciting time to be in this industry and I agree with you that I think the partners, the folks in this industry are starting to lean into more collaboration. And I think it's going to be an exciting few years ahead as we start. You know, some of these, not just legislation and reporting requirements come to fruition, but the awareness around the ability to get our hands on and keep control over these important elements, minerals and materials that go into these devices that you know, and we know what the devices are that we're dealing with today, but we don't know what the devices of the future will be. And so getting it right now is important to be able to put in place these processes, these expectations of quality of experience for customers, to be able to keep these products, you know, a secondary market, very healthy and viable for generations to come, not only of the devices, generations of devices, but of people, generations of people to come.
[00:27:17] Speaker B: You're welcome. And by the way, I think you actually mentioned something that also struck with me is as I think of your journey, I think of my journey, right? And once you kind of come in this space, you look around and you are excited, right? And it has something for everyone. So I've been, I've had so much fun introducing people that like me, never thought of this space because most people are like, why do I want to deal with garbage? You're like, well, let me show you. And if you've had the opportunity to introduce people into this space, you get to see that aha moment. Much like we've probably both encountered and they be. And they become committed and they're excited to kind of do their part in the role. And it can be any number of motivations.
And I honestly, I think about some of my friends that have been entrepreneurs and they're like, bored as to what next. I'm like, have you ever thought about this? And I brought a couple of them in and I'm like, trust me, it's not boring. And they will vouch for that. And I think anyone in our space can truly vouch for that.
[00:28:07] Speaker A: It's exciting. And the more people that come in with that collaborative mindset, the better, because that is ultimately what we need to do. And the shift you mentioned, that shift from protective and keeping everything insular to working together, I think that is, I think that's really at the heart of what the app Kudo platform is all about. It's like we all have to work together to do our own specialized parts of this, this process, this life cycle, these devices.
We need all of the help we can get so we're stronger and more effective and quicker if we work together.
[00:28:43] Speaker B: And by the way, one of the things that we can both attest to is that's been part of our own journey and learnings too, right? Is we haven't always been better together type of company, but we now understand that importance. And that is the shift that we're excited to be part of with others that are leading that charge. So again, sometimes you have to just reflect and be like, is this the way that I've shown up in the world? Yeah, not necessarily. Right. But it is what I'm committed to and I understand it. So let's kind of change things and how we work together.
[00:29:11] Speaker A: Yeah, absolutely. That's a great note to end the podcast on. Andrew, thank you again for sharing your perspective and expertise and we'll keep in touch with you and maybe have you on again as we take on some of these challenges and expand our footprint with partners. So thanks again and we'll see you at the next one.
[00:29:32] Speaker B: Awesome. Thank you Alison. Excited for it.
[00:29:34] Speaker A: Thank you for listening to this episode of Second Sense. Learn
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