Kelie Morgan 4/23/20 Kelie Morgan 4/23/20

The Weekly: Edition #41 - April 17, 2020

Responsibility

"Uneasy is the head that wears the crown." - William Shakespeare, King Henry IV

In times like the present, taking responsibility for past or present decisions has never been harder to swallow nor easier to shirk. Pending corporate bailouts prove it. This week we'd like to highlight an open letter by the CEO of Carta, Henry Ward, for admirably taking responsibility as the leader and CEO for making the difficult decision to layoff employees.

One of the hardest parts of being a leader is the consistency with which you find yourself standing between a rock (shareholders) and a hard place (employees).

"In a town hall a couple of weeks ago I said that there were two perspectives when making decisions about layoffs. The first is the shareholder perspective where reducing costs and protecting cash are what matters most in a recession. The second is the employee perspective where nothing is more important than saving jobs and helping employees as the world heads into unemployment levels the world has not seen since the Great Depression. In each of these two perspectives, shareholders and employees have clear visions that are both unambiguous and morally correct even while at the same time being diametrically opposed. That is the conundrum for CEO's. CEO's sit between shareholders and employees and wish they could do both."

As a leader, you can avoid the pain your decisions cause, or you can rise to the occasion and ease the burden of those most affected.

"Every CEO who is planning a layoff has to address this moral conflict. I chose to manage my conflict by taking the shareholder perspective in deciding who (and how many) should leave and taking the employee perspective on how to help those who leave."

A great leader will find a way to deliver on promises made.

"Third, if you have been with us for less than one year, we have removed your cliff and extended your PTE to 1 year from today. You joined Carta to create owners and to become one. Everyone affected today will be an owner of Carta."

The one who passes the judgement should swing the sword.

"Once the lists were created, they were sent to me for approval. It is important that all of you know I personally reviewed every list and every person. If you are one of those affected it is because I decided it. Your manager did not. For the majority of you it was quite the contrary. Your manager fought to keep you and I overrode them. They are blameless. If today is your last day, there is only one person to blame and it is me."

Taking responsibility is easy when stakes are low. But that is not the case at present. True leaders handle difficult decisions with as much equanimity, responsibility, and ownership as possible. Over the long run, there are only a small handful of important decisions that will define you as a leader. It starts with taking ownership.

The team at Permanent Equity wants to know how you have been affected through the COVID-19 outbreak. Whether you are an employer, an employee, or recently laid off, we put together a few surveys and hope you will take 3 minutes to share your recent experiences with us:

- for business owners
- for employees
- for those that have lost their job

Remote working trends report: meetings (Microsoft)

+ "Researchers like Dr. Fiona Kerr have found that eye contact and physical connection with another human increases dopamine and decreases the stress hormone cortisol. Her research shows that you can even physically calm someone down simply by looking them in the eye. So as the world works remotely, it is no surprise people are turning on video in Teams meetings two times more than before many of us began working from home full-time. We’ve also seen total video calls in Teams grow by over 1,000 percent in the month of March."

Google Meet supports two million new users each day (Google)

+ "Last month, we made advanced Google Meet video-conferencing capabilities available at no cost to all G Suite and G Suite for Education customers. We’ve now extended that availability to September 30, 2020 to ensure businesses, organizations, institutions, and educators continue to be supported during this time."

Build a better small business budget (Permanent Equity)

+ "We wrote and intended to release the following article about small business budgeting before the spread of COVID-19 became the full-blown crisis that it is today. While we’re all operating amid uncertainty, it’s still important -- perhaps even more important -- to have a financial plan that is realistic, simple, dynamic, logical, and useful, which is why we are still opting to share it. Given the current reality, a stretch budget isn’t something most businesses would find useful to put together right now, but an austerity budget focused on cash flow is highly relevant."

US Jobless claims top 20 million since start of shutdown (WSJ)

+ "Since mid-March about 13% of the labor force has sought jobless assistance, far outpacing any prior four-week stretch on record. The latest weekly data from the Labor Department released Thursday suggests that the wave of workers filing for benefits has passed its peak, with the total new number of claims filed in the week ended April 11 declining from higher totals that approached 7 million in each of the prior two weeks."

Wealth tips for founders (Daniel Gross)

+ This is a tidy list of tips and tricks for optimizing personal and business finances for founders.

7 behavioral shifts that will persist past the pandemic (Mohanbir Sawhney)

+ "My wife is a portfolio manager for an investment firm. She typically spends an hour in each direction to commute to work, even though she mostly works on a computer or phone connected to a network. Once she acquired the necessary hardware and set up her private workspace at home, she is more productive than she was before. She is also more relaxed without the stress of commuting. Her firm is now considering allowing employees to work from home permanently at least one day a week."

COVID-19 and forced experiments (Benedict Evans)

+ "Every time we get a new kind of tool, we start by making the new thing fit the existing ways that we work, but then, over time, we change the work to fit the new tool. You’re used to making your metrics dashboard in PowerPoint, and then the cloud comes along and you can make it in Google Docs and everyone always has the latest version. But one day, you realise that the dashboard could be generated automatically and be a live webpage, and no-one needs to make those slides at all. Today, sometimes doing the meeting as a video call is a poor substitute for human interaction, but sometimes it’s like putting the slides in the cloud."

Global impacts of COVID-19 (Luke Wroblewski)

+ The virus outbreak is affecting every aspect of life: education, crime, work, transportation, traffic, pollution, sleep, exercise, the environment, consumption and more.

Lettuce left to die in California fields as produce demand withers under COVID-19 (Forbes)

+ "Normally at this time of year his farms that sprawl across more than 10,000 acres in California, Arizona and Mexico, would be sending out 120,000 boxes of iceberg lettuce, romaine, green and red leaf lettuce, broccoli and cauliflower a week. About 70% of that would be going to food service companies and 30% to supermarkets. “We’re lucky if we harvest much over 60% of what we have ready and scheduled to harvest the last couple weeks.”"

We'd love your help.

If you stumble across something great, send it to weekly@permanentequity.com.

If you know an owner, operator, or someone who works with SMB's, please give us the highest compliment and send them our way. You can find previous The Weekly issues here.

Kelie Morgan 4/10/20 Kelie Morgan 4/10/20

The Weekly: Edition #40 - April 10, 2020

Step Changes

“There are decades where nothing happens, and weeks where decades happen” - Vladimir Lenin

Most of life appears on the surface to be a continuous, flowing experience. Children move from one grade to the next. Jobs are given; companies are created; money is lent, spent, and recycled. People work, move, create, consume, and occasionally clash.

But once every quarter century or so, there tends to be an exogenous event that removes the illusion of fluidity and stability in life and reveals the ruggedness of reality. A world war, an oil shock, a terrorist attack, a deadly pandemic. These represent the rare step changes in life that are nearly impossible to predict with any hint of accuracy. We live in a world that is as fragile as the illusions we keep and preach.

When these step changes occur, we must begin to question assumptions of daily life and ask 'what next?' What happens after our government prints trillions in (necessary) stimulus money? What happens after our economy opens up for business again? What happens to the trillions in corporate debt sitting on balance sheets that isn't being paid? How fast can we put people back to work again?

Economic data, like a heartbeat, has a certain rhythm to it. But occasionally, hearts stop. Bringing a lifeless body back from the brink often brings with it other unforeseen consequences both positive and negative.

As we attempt to understand the effects of COVID-19 on business, government, and life in general, we'd like to highlight a piece by Tyler Cowen titled 'World 2.0' that raises interesting questions about what kind of step changes we could potentially experience in a post-COVID-19 world. Adding to these thoughts, we are also asking these questions:

- Unemployment - how long will it take to reach full employment again? V, L, U, or square root shaped recovery?

- Physical to Digital work - will we return to fully in-person work as if COVID-19 never occurred?

- Education - will students return to fully in-person classes in higher education at the same sticker price as if COVID-19 never occurred?

- Healthcare - is this telemedicine's moment?

- Real Estate - will residential real estate begin quoting beds, baths, and home offices? Will retail come back as strong as pre-COVID-19?

- Food - will people go out to eat as much? Will cooking in be the new way that family supply chains adapt to a post-COVID-19 world?

- Manufacturing - will people be willing to pay a premium for guaranteed delivery vs. just-in-time delivery or low-cost internationally-produced goods?

- Supply Chain and Logistics - will the increased demand for home delivery of goods continue post-COVID-19 or will it moderate?

- Technology - how does the 'break up big tech' movement continue after Amazon works overtime to deliver necessary goods to millions of American households, and Google and Microsoft enable millions to work from home?

- Sports - are they losing their sheen and status in the public eye? What do we make of the esports revolution that has now taken center stage?

- Government - how will this shape global and domestic elections (we haven't forgotten that it's also an election year!)?

- Insurance - what forms of new insurance will be produced coming out of the viral outbreak? How will insurance companies navigate their current claims and financial loads?

- Media - does COVID-19 strengthen media institutions' brands or hasten the the decline of Main Street's trust?

- Transportation - will oil and gas markets see a return to pre-COVID-19 demand?

If you have a particular insight into one of these industries, we'd love to hear what you are seeing on the ground. And as always, if we can be helpful to your business at this time with capital or navigating the mire that is COVID-19, please reach out. Step changes are inevitable in life, but our response remains our choice. Ours will be to dig in and settle in to the new reality before us. It indeed is a brave new world.

Navigating an Economic Crisis: Q&A with Permanent Capital's Emily Holdman (Middlemarket Growth)

+ Our own Emily Holdman spoke with Middlemarketgrowth.org this week about how COVID-19 is impacting the private equity space, dealmaking, and how we are aiming to assist and partner with businesses during these turbulent times.

Restaurant Thamee's struggle to weather the pandemic (Slate.com)

+ "As the U.S. economy staggers under the weight of the coronavirus pandemic and its attendant lockdowns, the hospitality sector is hemorrhaging jobs and revenue. Thousands of restaurants around the country have shuttered or curtailed operations under orders from state and local officials. In a recent survey of 5,000 restaurant operators, the National Restaurant Association found that 44 percent had temporarily closed their businesses, 3 percent had permanently closed, and 11 percent projected that they’d have to close for good within the next month. The association estimates that 3 million restaurant workers were laid off in the first three weeks of March—about one-fifth of the entire U.S. restaurant workforce."

The Federal Reserve is stepping in to buy junk bonds and lend to states amid the COVID-19 crisis (Bloomberg)

+ "The Fed said Thursday it will invest up to $2.3 trillion in loans to aid small and mid-sized businesses and state and local governments as well as fund the purchases of some types of high-yield bonds, collateralized loan obligations and commercial mortgage-backed securities."

The National Multifamily Housing Council reports that 69% of renters have paid rent in April vs. April 2019 collections (NMHC)

+ "The National Multifamily Housing Council (NMHC) found a 12-percentage point decrease in the share of apartment households that paid rent through April 5, in the first review of the effect of the COVID-19 outbreak on rent payments. The Tracker found 69 percent of households had paid their rent by April 5; this compares to 81 percent that had paid by March 5, 2020, and 82 percent that had paid by the same time last year."

Google Search's Twitter thread on FAQ for business listings and advertisements on Google's search engine (Google)

+ This will be useful for those with business listings on Google and need to make changes to hours or policies visible to the public.

The Hollywood agents signing all of the new age influencers (New York Times)

+ Young consumers are more likely to look to YouTube and TikTok stars for inspiration than they are to traditional media: “The next wave of talent, all future waves of talent, aren’t going to come from traditional places,” said Jad Dayeh, co-head of digital at WME. “The younger generation creates, self-broadcasts and shares it with the world. They don’t wait to get their audition shot and wait for someone to discover them.” “It used to be, I want to get famous on YouTube or Vine, so I can have a career in traditional entertainment. Now, this is a career,” said Greg Goodfried, co-head of digital talent at United Talent Agency."

The Founder's Field Guide for navigating this crisis — advice from recession-era leaders, investors and CEOs currently at the helm (First Round Review)

+ This is an 8 part guide to managing during the COVID-19 crisis including topics ranging from cutting costs to raising capital to supporting your team remotely.

How to keep your team motivated, remotely (Harvard Business Review)

+ "We also identified three positive motivators that often lead to increased work performance. We believe these are in danger of disappearing in easy-to-miss ways during the current situation. Play, the motive that most boosts performance, could decrease if it continues to becomes harder for people to get things done from home. For example, people may miss the joy of problem-solving with a colleague, or the ease of making a decision when everyone is in one room. Purpose could also decline with team’s decreasing visibility into their impact on clients or colleagues, especially if no one is there to remind them. Lastly, potential could decline if people can’t gain access to colleagues that teach and develop them."

Planning and managing layoffs (Andreessen Horowitz)

+ No business owner ever wants to face a decision on whether or not they must layoff employees to survive, but when faced with such a proposition, you must be prepared. This is a well-developed guide to managing the situation as best as possible with your employees.

The Maine farmer saving the world’s rarest seeds (Down East)

+ "He has donated specimens from his collection to researchers at the USDA-administered National Plant Germplasm System, sold them to seed companies like Fedco, and distributed them worldwide through print and online platforms, some of which he’s been instrumental in launching. His work, which he calls the Scatterseed Project, has been covered in multiple books and one Emmy-nominated PBS documentary, and it’s earned him something like icon status within the seed-saving subculture. But these days his collection is dwindling. In part for lack of funding and staff, Bonsall hasn’t kept up with the cycle of replanting needed to regenerate new seeds. And he isn’t getting any younger."

Kelie Morgan 4/3/20 Kelie Morgan 4/3/20

The Weekly: Edition #39 - April 3, 2020

Adapting and Expanding

It's about as hard to find a shred of positivity these days as it is to find a small business not hurting from the COVID-19 pandemic. So instead of perpetuating negative vibes, we'd like to highlight small businesses adapting to and even expanding during the new normal that is COVID-19.

From selling curbside pick-up, to online consultations, to retooling production lines for hand sanitizer, small businesses rock. We'd like to highlight a few examples below.

Adapting:

- "accuRx have developed a video consultation service (in the space of a weekend!) and made it free for all frontline NHS staff. Patients don’t need to download anything and doctors don’t need fancy webcams or anything to use it. The statistics and feedback are incredible."

- "BrewDog has transformed its distillery in a bid to help with the shortage of hand sanitisers, by creating a new one for giveaways to those in need."

- "3D-printing companies like Massachusetts-based Markforged and Formlabs are both making personal protective equipment like face shields, as well as nasal swabs to use for COVID-19 testing."

- "Brownsboro Hardware & Paint, with locations in Louisville and Prospect, Ky., has long offered free delivery of its grills, within certain areas. While hardware stores are considered essential in Kentucky and remain open, Brownsboro added curbside pickup, as well as delivery of a wider range of items. That allows customers who prefer not to come within the store to still access the inventory,” says owner Jim Lehrer. “We want to keep people safe and as comfortable as possible.”"

" 1Rebel, London-based fitness club has announced that it is willing to offer its gym spaces to the NHS for extra beds during the coronavirus pandemic. 1Rebel co-founder James Balfour has said that he believes the gyms have space for up to 400 beds."

Expanding:

- "“We didn’t see it coming,” said Ryan Lupberger, the co-founder of Cleancult, a venture-backed startup that manufactures natural cleaning products in zero waste packaging. “People are just not finding cleaning products in stores,” said Lupberger in New York City, where half of the 15-person team is working remotely, the other half is in San Juan, Puerto Rico. Cleancult’s Amazon sales have increased eight times over in the past several weeks, according to Lupberger, tripled in retail stores and doubled on Cleancult’s website."

- "Tushy saw its bidet sales skyrocket when consumers began to have a collective melt down about toilet paper scarcity. Founded by Miki Agrawal, Tushy makes portable, self-installable bidets, allowing users to clean themselves with water rather than toilet paper. Bidets are popular in many countries, but have yet to catch on in the U.S."

- "When Ashley Tyrner, the founder of Farmbox Direct, a subscription service that delivers boxes of fresh produce, woke up on March 14, she thought there was some type of bug in her computer system. “There’s no way we could have taken that many orders overnight,” recalled Tyrner recently, “but we did. We are doubling the company every 24 hours.”"

- "Scough, a mash up of “scarf” and “cough,” is a Brooklyn-based company that makes stylish wrap around scarves and bandanas in funky patterns with attached hidden masks. The immunosuppressant community has typically purchased Scough masks, according to founder Andrew Kessler, as well as airplane travelers, motorcycle and bike riders. In early March masks were in such high demand that Scough’s entire stock sold out."

In addition to these small pockets of light, we've tried to contribute to the efforts through our writing and new partnership platform. Specifically, we've written extensively on the implications of the new CARES act, created a small business pandemic toolbox, and opened up a new partnership platform for businesses that are struggling during this outbreak and would like to explore options around a long-term partnership. We will continue to bring value to the small business community in the coming weeks and hope that you will reach out for specific requests on how we can continue to assist you in these times.

Viral prohibition, eminent domain, and the path ahead (Permanent Equity)
+ "As new information is released daily, we’re trying to digest and update our priors. In an attempt to make sense of what we’re experiencing, two analogies have been helpful to me: Prohibition and Eminent Domain."

Small business pandemic response toolbox (Permanent Equity)
+ We’re using this page to collect tools and resources to help SMB owners/operators navigate the COVID-19 pandemic, the resulting economic conditions, and the government’s response.

What the CARES act modifies in FFCRA (Permanent Equity)
+ This is our legal team's interpretation of how the CARES act modifies the FFCRA.

What the CARES act expansion of unemployement insurance (RWACA) means for small business (Permanent Equity)
+ This is our legal team's interpretation of the RWACA and what it means for small businesses.

What the CARES act paycheck protection program means for small business (Permanent Equity)
+ This is our legal team's interpretation of the paycheck protection program's implications for small business.

The economics of a pandemic: the case of COVID-19 (London Business School)
+ A long, detailed look at all things COVID-19: the science, the policies, and the economics of a pandemic.

The anatomy of the $2 trillion COVID-19 stimulus bill (Visual Capitalist)
+ This is a striking visual of how the new COVID-19 stimulus bill breaks down from small business to employees to corporations.

Chinese mask entrepreneur reaps $1.9bn coronavirus bonanza (Financial Times)
+ "With an estimated market share of 40 percent for the speciality fabrics used in masks in China, shares in Shenzhen-listed Dawn Polymer soared by 417 per cent in the six weeks following January 20, when the Chinese nation was alerted to the spread of the virus. The value of Mr Yu and his wife Han Limei’s holdings in the company they control surged by more than Rmb13.5bn ($1.9bn) by March 9 to about Rmb16.8bn, based on the most recent disclosures."

Tom Colicchio Spent 19 Years Building a Restaurant Empire. Coronavirus Gutted It in a Month. (Marker Media)
+ "Now New York is facing another unthinkable catastrophe — this time, along with the entire world — and the restaurant industry is threatened as never before. Last week, Danny Meyer, Colicchio’s one-time partner, shut down all 19 of his storied establishments, laying off 2,000 people — some 80% of his workforce. Thomas Keller furloughed 1,200. And Colicchio has done the same, laying off all but a few of his 300 employees."

Adapting Episode 1: Canlis Restaurant (Acquired)
+ "Mark Canlis joins us to discuss how the world-renowned Canlis restaurant in Seattle is adapting by simultaneously closing their 70 year old dining room service, and launching three brand new, no-contact concept restaurants in just one week to keep their staff employed and the city fed."

COVID-19: $800+ million to support small businesses and crisis response (Google Blog)
+ "$340 million in Google Ads credits available to all SMBs with active accounts over the past year. Credit notifications will appear in their Google Ads accounts and can be used at any point until the end of 2020 across our advertising platforms. We hope it will help to alleviate some of the cost of staying in touch with their customers."

Don't just throw together a webinar — the virtual events crash course you need (First Round Review)
+ "See what resonates with your audience and if it works, keep doing it. Don’t be afraid to make mistakes right now with virtual events — the bar isn’t very high."

The end-of-the-world business is booming (The Hustle)
+ "In recent weeks, doomsday businesses have been flooded with phone calls, emails, and bulk orders — not from survivalists, but soccer moms, professors, and orthodontists. There is suddenly a backorder on everything from 20-pound rations of dehydrated peaches to multimillion-dollar private bunkers. For the moment, doomsday prepping has gone mainstream."

Kelie Morgan 3/27/20 Kelie Morgan 3/27/20

The Weekly: Edition #38 - March 27, 2020

Partnerships and Negotiations

Last week, we wrote about the importance of locking arms during the COVID-19 outbreak as the medical and economic damage mounted.

As we all adapt to a new reality of remote work, isolation, and safety precautions, many small business owners are also being forced into difficult conversations that often involve negotiations. Whether it is with employees, suppliers, vendors, or customers, the COVID-19 outbreak has thrown a wrench in the otherwise normal flow of business owners' relationships.

We've written about negotiating deals in issues #9 and #29, and would also like to draw your attention to the Harvard Law piece below on crisis management in negotiations. The HLS piece presents a useful framework for negotiating win-win partnerships in the midst of crises using a patient, long-term mindset. The framework focuses on establishing ground rules prior to a crisis, controlling emotions in the midst of a crisis, and working patiently towards a solution that strengthens the relationship after the crisis.

These are essential points to keep in mind for small business owners who wish to solve problems in a manner that is supportive of a long-term relationship.

In the same vein, Permanent Equity is launching Safe Harbor, a new platform for small and medium-sized businesses that can responsibly utilize $3,000,000 or more in capital during these turbulent times. We take negotiations with potential partners very seriously, maintain confidentiality throughout the interaction, and work towards a long-term mutually beneficial partnership:

"Stylistically, we have zero interest in loan sharking, or being a necessary evil. Long-term, win-win relationships have and always will be our objective. When we structure a deal, we want it to be fair, equitable, and profitable for everyone, creating greater opportunity in which everyone shares. There are no hidden agendas or hidden fees. We want deals to be simple and straightforward."

If we can help you think through strategic negotiations with a counterparty or you would like to discuss how Safe Harbor could benefit your business, please don't hesitate to reach out.

What is Crisis Management in Negotiation? (Harvard Law School)
+ "Prepare for the crisis... Establish ground rules... Confront emotions head-on... Don't rush the process... Strengthen the relationship."

Permanent Equity launches a partnership with small and medium-sized businesses (Safe Harbor)
+ "Professionally, Permanent Equity exists to support small and mid-sized businesses, and the need for immediate help is increasingly clear. Even the best of businesses -- big or small -- are not built for rapid and sustained decreases in revenue. Forecasts are becoming irrelevant. Receivables are being stretched. Strong balance sheets are already wearing thin. Supply chains are breaking down. Layoffs are becoming inevitable and commonplace. It’s a tsunami."

The real-time impact COVID-19 is having on small businesses and workers (Homebase)
+ "At Homebase, we are in a unique position to see this impact happen in real-time and want to make this data publicly available so that governments and communities can understand and support the people who are most impacted."

Digital Payments Soar Amid Coronavirus Restrictions (Wall Street Journal)
+ "In Italy, one of the first countries to order residents to stay home in a bid to prevent the virus from spreading, e-commerce transactions have soared 81% since the end of February, according to estimates by McKinsey & Co."

Amazon wants to hire 100,000 new workers to meet coronavirus demand (The Verge)
+ "Amazon is looking to hire 100,000 new warehouse and delivery workers to meet increased demands for shipments as a result of the novel coronavirus pandemic, the company announced on Monday. It will also increase the hourly pay of workers employed in these positions by an additional $2 in the United States through April. As more Americans stay indoors to protect themselves from the coronavirus outbreak, they’re turning to e-commerce stores like Amazon to purchase groceries and household supplies."

Amazon Prime delivery delays are now as long as a month (Recode)
+ "On Sunday, customers and Amazon merchants posted on social media platforms saying certain nonessential items were showing April 21 delivery dates, even though they were listed as in-stock and shipping with Amazon’s Prime express shipping service. During normal times, Amazon Prime deliveries typically arrive in one or two days in the US. Now, some Prime deliveries for in-stock items are showing five-day delivery promises on the lower end, but those waits are as long as a month on some items."

The Wing is a women’s utopia. Unless you work there. (The New York Times)
+ "“I was the connector, the friend, the therapist, the mother, the sister, the live-in coach,” one former employee says. “I was treated like a human kitty-litter box.” Another says: “We were ‘the help.’” When staff members tried to exercise their membership privileges, on breaks or after their shifts, members would hand them dirty dishes or barge in on them in the phone booth. Some screamed at employees about crowding in the space and cried over insufficient swag. A common member refrain was that it was anti-feminist not to give her whatever perk she desired."

The incredibly simple reason working from home may be here to stay (Fast Company)
+ "For some offices, those reservations may be institutional. Managers who believe employees are more productive at the office are now testing that hypothesis at scale, or will soon have to, and companies that value their office culture will have to try replicating it virtually. Along the way, they may find that remote work isn’t as detrimental as they thought. But there’s also a more mundane reason that working from home could become a lasting option for office workers: Companies are finally investing in the technology they’ve always needed to make remote work possible."

The Waffle House Index just hit a code red (The Hustle)
+ "Usually, the Waffle House Index is used during natural disasters… During Hurricane Katrina, the most damaging hurricane in US history, Waffle House closed 107 locations across Louisiana and Mississippi. In this case, many of the 418 closures were clustered in the Midwest and the Gulf Coast regions. The company said it was seeing few customers and “rapidly losing the ability to offer enough work hours” to its employees."

Kelie Morgan 3/20/20 Kelie Morgan 3/20/20

The Weekly: Edition #37 - March 20, 2020

The Humanity in Business

Too much debt. Bad culture. Product failure. Lack of leadership. Poor execution. These are some of the more typical explanations for why businesses fail.

Viral outbreaks? Not so much. Strategies for handling viral pandemics aren't typically included in business school courses, an owner's manual, or prized wisdom from grizzled veterans. This is something else entirely, something exogenous to the economic system, something foreign.

Here at Permanent Equity we have a light-hearted joke that small business is a daily knife fight given how tough competing in the jungles of capitalism can be. But the COVID-19 outbreak is no mere skirmish. It is an existential threat to many small businesses across the country. To the extent that we can help owners think through their responses to this once-in-a-lifetime event, we have written three pieces this week on "Banking and Liquidity,” "How to Cut Expenses", and “What the FFCRA means for Small Business” and plan to publish more as time and resources permit.

While the viral outbreak has caused significant economic pain across broad swaths of society, we are hoping that it reveals the lighter side of humanity over time. Businesses will have to retrench to survive, but also should to take into account the effects on their employees, their suppliers (and their employees), their customers, and their communities. Because this effects all people in all industries, businesses owners must recognize that we are all in the same boat, fighting to survive physically and economically against the virus.

Being in the same boat forces everyone to recognize our shared humanity in these turbulent times. Those who choose to grab turf in the short-term may win the battle, but others who survive the war will not remember their war-time decisions kindly. Now is the time to recognize our common humanity. There are no businesses without customers, there are no customers without jobs, and there are no jobs without businesses. Do your part to ensure that symbiotic relationships continue as best as possible - this is the only hope for recovering our nation's thriving small business ecosystem.

Coronavirus has disrupted supply chains for nearly 75% of U.S. companies (Axios)
+ "For a majority of U.S. businesses, lead times have doubled, and that shortage is compounded by the shortage of air and ocean freight options to move product to the United States -- even if they can get orders filled."

This founder built startups in 2008, 2016 and 2018. Here’s what he’s learned about resiliency (Founder Review)
+ "Their startup set out on a journey with just about everything working against it: inexperienced first-time founders, a crushing economic environment and a big bet on where the industry was heading. The path was twisty and full of challenges, but by 2016 the duo had amassed hundreds of customers and RJMetrics was scooped up by Magento."

COVID-19: implications for business (McKinsey)
+ "Being optimistic about demand recovery is a real problem, especially for companies with working-capital or liquidity shortages and those veering toward bankruptcy. Troubled organizations are more likely to believe in a faster recovery—or a shallower downturn. Facing up to the possibility of a deeper, more protracted downturn is essential, since the options available now, before a recession sets in, may be more palatable than those available later. For example, divestments to provide needed cash can be completed at a higher price today than in a few weeks or months."

How to cut expenses (Permanent Equity)
+ "You can’t cut your way to growth. When bringing a new company into our family of businesses, cutting expenses is not on our to-do list. Most expenses exist for good reasons and we’ve found that after patiently taking the time to fully understand how a business operates, we end up keeping almost all of them."

Q&A: banking and liquidity (Permanent Equity)
+ We received many questions via Twitter on liquidity and banking during times of distress and have summarized our thoughts in this brief Q&A.

What the "Families First Coronavirus Response Act" (FFCRA) means for small business (Permanent Equity)
+ "The FFCRA is an expansive piece of legislation that provides resources and financial assistance to businesses, families and individuals who have been impacted by COVID-19, and aids the efforts of those trying to contain the spread of the virus. The FFCRA has provisions addressing access to free COVID-19 testing, increases to federal Medicaid funding, relaxation of regulations on providing meals to the underprivileged, and emergency grants to enhance state-level federal unemployment insurance assistance. "

Advertising in a downturn (Samuel J. Scott)
+ "Crucially, further data was presented to demonstrate that two key constituent brand relationship metrics – brand usage and brand image – suffered considerably when brands ‘went dark’ (i.e. ceased to spend on communications) for a period of six months or more."

How to market in a recession (Harvard Business Review)
+ "Consumers will be poorer or feel poorer. They will be more frugal and cautious in their expenditures. Reassuring the consumer, holding her hand in a “we’re going to get through this together” manner is a vital ingredient of successful marketing during a recession."

A guide to managing your new remote workers (Harvard Business Review)
+ "Social isolation. Loneliness is one of the most common complaints about remote work, with employees missing the informal social interaction of an office setting. It is thought that extraverts may suffer from isolation more in the short run, particularly if they do not have opportunities to connect with others in their remote-work environment. However, over a longer period of time, isolation can cause any employee to feel less “belonging” to their organization, and can even result in increased intention to leave the company.

6 tips for working from home (Fast Company)
+ "The virus has forced many employers to be far more trusting than perhaps they generally are. And under normal circumstances, it’s one of the biggest stigmas of remote work: The fear that you’re just going to sit on the couch watching TV all day. If you’re working for someone who isn’t completely comfortable with overseeing off-site workers, see if you can structure your actual job so that it builds trust on its own. One easy way to do that is to deal in deliverables if you can.

15 questions about remote work, answered (Harvard Business Review)
+ "First, you should have a group conversation about the new state of affairs. Say, “Hey, folks, it’s a different world. We don’t know how long this is going to last. But I want to make sure you all feel that you have what you need.” This should be followed by a team launch to jump-start this new way of working. Figure out: How often should we communicate? Should it be video, phone, or Slack/Jive/Yammer. If you’re not using one of those social media systems, should you? What’s the best way for us to work together? You’ve got to help people understand how to do remote work and give them confidence that it will work."

Kelie Morgan 3/13/20 Kelie Morgan 3/13/20

The Weekly: Edition #36 - March 13, 2020

Antifragile

This week, we detailed our thoughts on how COVID-19 would impact small businesses. From labor shortages to supply chain interruptions to financing needs, the impact of the coronavirus remains to be seen, but the cracks are beginning to show.

Some risks represent potential, quantifiable events (risk of losing a customer, financing risk, hiring and firing), but other types of risk live so far out on the probability curve (an asteroid, epidemics, and nuclear wars fit this bill) of possibilities as to be impossible to predict.

But in boom times and in times of extreme uncertainty, the principles of durability remain the same. Playing conservative with probabilities is probably the best way to ensure your business lasts for multiple generations.

Maintain a fortress balance sheet. Sustain long-term thinking. Lean into partnerships. Maintain access to capital and liquidity. Lack of key-man risk. These are the building blocks of a strong small business.

We know that not all businesses are able to check each box. This is what makes small business so difficult - often you are your own financier, CEO, and CFO. You build AND run your business. But times of uncertainty offer opportunities to build new or develop deeper relationships by serving your customers, suppliers, and employees - by going the extra mile.

Planning and preparing provides an opportunity to act out of choice and not out of need. In these turbulent times, Permanent Equity is working closely with leadership at our family of companies and trying to be supportive in every way possible. As operators ourselves, we understand and share in the stress, anxiety, difficult decisions, and long hours. If we can help your business in any way, please do not hesitate to reach out.

Operating in limbo, investing as usual - notes on COVID-19 (Permanent Equity)
+ "Pandemics are not something small businesses plan for. As we have light-heartedly referred to in the past, most businesses are loosely-functioning disasters and small business operators are in a day-to-day knife fight. There is rarely time to contemplate what-if scenarios generally, let alone one as specific, uncontrollable, and seemingly unlikely as a global pandemic. Nobody could have expected the coronavirus or its widespread impact. In fact, to the contrary, based on market dynamics, and our discussions with sellers and those opting not to sell, there was an expectation that good times would keep rolling in 2020 and beyond."

Barnes & Noble’s New Plan Is to Act Like an Indie Bookseller (Bloomberg)
+ "The test will be whether each bookshop can be mindful enough of the community it’s attempting to sell to and curate a stock appealing enough to bring back readers. At the New York flagship, changes as small as displaying more softcover books than hardbacks, which are less practical for reading on the subway or in a nearby park, can drive sales. “I don’t want every Barnes & Noble to become a version of Union Square,” Daunt says. “I want Union Square to be the obvious store to have on Union Square, in New York City, where it becomes really sophisticated, metropolitan, urgent, vibrant, young, energetic, sharp-elbowed—because that’s what’s going on in the city out there.”"

How the Assoulines made their name on books to be seen (and occasionally read) (The Cut)
+ "The family looked to fashion and luxury for inspiration early on. Martine was the director of communications for the French fashion label Rochas; Prosper was running a creative agency specializing in advertising for luxury brands. “At the time, shoes were very important, and it was the beginning of Louboutin, et cetera,” Prosper says. “Everybody was crazy about it. And the price of the shoes was $600; it was huge.” Assouline saw that a book, properly made and marketed, could be sold the same way, in the same places, to the same clients."

What can be done in 100 days? (Grant Thornton)
+ "In surveying the PE community, it became clear that almost 90% of PE firms use the 100-day plan. And further, plans are most likely created during the diligence process by an array of people, including operating partners and fund team members. What’s more, during those key first 100 days of implementing the plan, PE firms usually make changes to financial operations and reporting systems, working capital lines, IT systems, supply chain and purchasing agreements"

Carlyle Group’s $1.4 billion folly: inside the biggest buyout loss In Washington, D.C. firm’s 33-year history (Forbes)
+ "The Acosta bankruptcy is a cautionary tale for today’s frothy private equity boom. America now hosts thousands of PE firms and, according to PitchBook, a quarter of their deals involve private equity firms on both sides of the transaction. So long as the U.S. economy grows and the stock market continues to rise, this precarious game of swapping companies among themselves, often at increasingly higher multiples, will persist. But eventually, the music will stop."

Why all the Warby Parker clones are now imploding (Marker Media)
+ "But for anyone familiar with the harsh realities of the DTC model, it’s affirmation of something much more fundamental: Once you get past all the shiny objects in the DTC category — the plump VC rounds, the sleek sans serif designs, the experiential storefronts in hot retail locations, the podcast ad blitzes — it turns out it’s extremely difficult to actually make the economics work. Ever since the godfather of the DTCs, Warby Parker, emerged on the startup scene in 2010, venture firms have funded hundreds of startups trying to mimic that model — from makers of hearing aids and strollers to paint and erectile dysfunction medication. According to eMarketer there are now more than 400 DTC brands. Since 2012, consumer brands have raised more than $3 billion, Digiday reported last year, with about half of that capital raised in 2018 alone."

Stripe teardown: how the $35B payments company plans to supercharge online retail (CB Insights)
+ "Stripe is focused on capturing a growing share of future payments volume in an increasingly internet-based economy. The global e-commerce market is currently estimated to be worth $4T in 2020, according to eMarketer. Stripe often states that less than 8% of total commerce occurs online, suggesting roughly $26T in global, omnichannel retail sales."

The universe's biggest gear reduction - one googol gear reduction (Daniel De Bruin)
+ "This machine has a gear reduction of 1 to 10 a hundred times. In order to get the last gear to turn once you'll need to spin the first one a googol amount around. Or better said you'll need more energy than the entire known universe has to do that."

Kelie Morgan 3/6/20 Kelie Morgan 3/6/20

The Weekly: Edition #35 - March 6, 2020

The only certainty in business? Change.

This week, we shared our latest thinking on managing change within an organization.

Change in business is a certainty. Corporate governance will change, executive leadership teams change, industry dynamics will change, consumer trends will change, and technology will change. Navigating change is the top factor in whether a business survives for multiple generations. We'd like to highlight two additional pieces that we think will be helpful in framing the way you think about change in your organization.

Internal change is meant to reposition your organization for greater success. Whether this is in the marketing department, your balance sheet, or your operations, all change is meant to improve your business.

But not all change is good.

Take, for example, the consumer retail industry, which is awash in a sea-change of direct-to-consumer trends and companies. When direct-to-consumer came into vogue, many believed that this change would result in significant business opportunities. However, in the piece by Luke Weston below, we note three broadly applicable principles to which all companies should aspire: profitability, scalability, and durability. But in the DTC changes that swept through the consumer retail industry, many companies forgot basic principles of business.

Directly from Weston, good businesses possess:

"(1) Viable business model - can you make decent profits on the unit economics? (note: this means that DTC winners will, by and large, be premium-priced, with decent basket sizes, with efficient cost structures, and have repeat business with a customer rather than just one-off transactions)

(2) Scalability - can you stretch the company to scale its potential? (note: this can be any combination of additional sales channels beyond DTC and/or additional relevant product categories, and/or new geographies)

(3) Competitive advantage - do you have something unique which is hard for others to replicate? (note: brand positioning/messaging can be a feature of this, and first-mover advantage definitely helps if it gets traction, however ideally it will have novel features or capabilities that are challenging to replicate and solve an unmet consumer need)"

In addition, we work with many family-owned businesses as they transition ownership from one generation to the next or as the last generation retires. Boston Consulting Group has put together a framework for setting clear expectations, rules, and governance around family-owned businesses to ensure proper management from generation to generation.

BCG on ownership changes:

"Ownership Structure. Family members should get a baseline understanding of the current (and future) ownership structure. For example: Is ownership concentrated among a few family members or many? Are there two or more potential successors? Is current leadership near retirement age? Are family members deeply involved in running or overseeing the business, and do they want to be? Are members of the next generation capable of and interested in running the business? The answers to questions such as these can confirm existing norms and help decide if the family’s engagement structure with the business should change."

The bottom line is that change is inevitable in life and business, but with the right tools and strategies, you can ensure that your organization drives productive changes that will increase the profitability, scalability, and durability of your business.

How to manage change (Permanent Equity)
+ "Want to know a secret? We’ve never invested in a perfect company. In our Investment Criteria, we’ve built a framework that we believe helps us invest in healthy businesses. But over the course of nine acquisitions, we have yet to invest in a company that didn’t benefit from meaningful change. We’ve also never invested in a company that didn’t have significant advantages in their products, processes, and people. So how do you effectively introduce change in an organization without doing harm to what has produced its success?"

A potentially unpopular opinion on the future of DTC (Luke Weston)
+ "Fawning media lavished praise on the early movers... but how many of these new brands had products or business models that solved an unmet consumer need, or were truly better or truly different or truly breakthroughs? Better aesthetics, usually yes. More interesting brand messaging, usually yes. But how about viable business models, scalability, and competitive advantage? These normally critical parts of business success were largely ignored. Meanwhile, these upstart brands chased all-out growth, often at all costs."

Great family businesses need good governance (BCG) - H/T Stuart B.
+ "The role that family businesses play in advancing economic growth is hard to overstate. (See “An Economic Bedrock Through the Ages.”) In many major economies, family-owned businesses account for a significant share of all companies. Our analysis of Indonesia, India, and Germany found that family businesses represent 48% to 74% of all manufacturing companies. (See the exhibit.) They also create millions of jobs through direct employment and millions more indirectly. And they inject significant revenue flows into these economies. In Indonesia, family-run businesses generate more than $100 billion (roughly 10% of GDP). In India, that figure climbs to nearly $670 billion (about 25% of GDP). And in Germany, family businesses contribute a massive $1.8 trillion in revenue (approximately 49% of the country’s GDP)."

Do beauty-centric private equity firms need a focus? (Glossy)
+ "“From a competitive advantage perspective, having a specialty and proving you can deliver in a Sephora or Ulta or QVC moves the needle,” said Brian Thorne, Silas Capital partner. Silas Capital’s brands largely sell in those retailers. “Twenty-five years ago, L. Catterton’s differentiating factor was that it was practically the only dedicated consumer fund. Now there are a lot more out there. There is a vast amount of capital today than there was in the past, so when talking to founders, you have to prove your value add to win.”"

Is the music copyright business worth more than ever? (Billboard Insights)
+ "The total global value of the music copyright business reached $30.1 billion in 2018, an all-time high in nominal terms, based on the best available information, although still shy of its 2001 peak once inflation is taken into account. Currency fluctuations and the lack of exact statistics make it impossible to directly compare more than two consecutive years, but this 2018 total represents a 9.3% increase over 2017 — and an increase of $2.6 billion when measured in constant currency. (2018 is the most recent year for which accurate statistics are available.)"

Facebook advertising decoded in 15 Minutes (James Chadwick)
+ "The strongest mobile ads are built with ABC blocks — Attention, Benefit, CTA.
A — Does it grab Attention?
B — Does it communicate a meaningful and believable Benefit?
C — Is there a low friction Call-to-Action?"

Email marketing: the ultimate guide for 2020 (Buildapreneur) - H/T Lewis P.
+ This is a helpful guide that covers building, managing, and operating an email marketing list.

Managers, take your 1:1s to the next level with these 6 must reads (First Round Review)
+ "When it comes to holding more impactful 1:1s, asking better questions is key. But so is an ability — and a willingness — to go the extra mile as a manager."

Why America is losing the toilet race (NPR)
+ "Japanese toilets are marvels of technological innovation. They have integrated bidets, which squirt water to clean your private parts. They have dryers and heated seats. They use water efficiently, clean themselves and deodorize the air, so bathrooms actually smell good. They have white noise machines, so you can fill your stall with the sound of rain for relaxation and privacy. Some even have built-in night lights and music players. It's all customizable and controlled by electronic buttons on a panel next to your seat."

Kelie Morgan 2/28/20 Kelie Morgan 2/28/20

The Weekly: Edition #34 - February 28, 2020

Scarcity

In a time when business is good and capital is abundant, why write about scarcity? Well, take a look at our weekly links below, and you'll note five pieces which capture the essence of economics - scarcity. One story of a financial scam caused by perceived scarcity (Plantfluencers), two on inherently scarce resouces (Mount Everest and California groundwater), and two on the dangers of scarce leadership (Trivia HQ and Homepolish).

The business of scaling Mount Everest is simple yet interesting in the fact that there is only one Mount Everest. Only one peak can claim to be the tallest point on Earth. After the Nepalese government opened the mountain up to foreign expeditions, the demand for a trip to the summit completely outstripped supply. The scarcity of the experience allows trip guides and companies to charge upwards of $100,000 per person a journey to the top.

In a tale of crops, water, and drought, Mark Arax drives home the point that scarcity drives commodity markets and can be a real zero sum game at times. Make no mistake, the concept of scarcity applies in every industry, but in different ways.

"He did learn one lesson. You can plant only so many acres on ground that has no groundwater. From now on, they’ll grow on land that offers a double protection against drought. “State or federal water isn’t enough. We want good groundwater, too.”"

The story of the plantfluencers is reminiscent of the tulip bulb mania of the 1600's, with similar maniacal demand for various horticulture specimens being driven by social media posts.

"Growers like Maloy can’t just dash off thousands of these plants at once—it takes time to propagate and grow them—which has driven their price up even more. The monstera oblique sold for $10 a decade ago. Now, it can sell for over $2,000, according to a report from the Toronto Star."

Homepolish and Trivia HQ were both businesses with a classic lack of leadership which resulted in ships without a direction (or captain). The importance of human capital at the top of an organization cannot be overstated, and the amount of quality labor for executive level positions is probably more scarce than most realize.

"The founders could be “intimidating and scary” to the young employees who worked for them, says an early former employee. Santos frequently raised his voice and “would openly threaten people, saying, ‘If you don’t do this, we can replace all of you.’”

Scarcity creates the potential for both economic opportunity as well as economic pitfalls. Scarcity of a certain resource or relationship can be the reason you win in business (if you own it), or the reason you fail (if you lack it). And sometimes, scarcity can be avoided altogether through win-win partnerships. If you can locate where scarcity exists in your industry, this is most likely the best point to leverage your time and energy to compete effectively and avoid the creative destruction of capitalism.

Why you can't sell your business (Permanent Equity)
+ If you've ever wondered what the top hurdles to selling your business are, look no further.

A kingdom from dust (California Sunday Magazine)
+ "Stewart Resnick is the biggest farmer in the United States, a fact he has tried to keep hidden while he has shaped what we eat, transformed California’s landscape, and ruled entire towns."

Bain's global private equity in 2020 (Bain)
+ "Prices set all-time highs in the US and remained near record levels in Europe, raising the bar for investors looking to create value. Holding periods declined as investors attempted to take advantage of higher prices on the sell side and exit before any impending recession. Fund-raising remained healthy, but the market skewed to larger, more experienced investment firms. And, while returns were attractive, they continued to come under pressure as the industry matured and competition intensified."

Millenial women made LuLaRoe billions. Then they paid the price. (Buzzfeed)
+ "LuLaRoe is now facing a $49 million lawsuit from its old supplier (LuLaRoe countersued the supplier for $1 billion) and a class-action lawsuit from angry customers alleging they were sold defective clothing they couldn’t return. Another $4.5 million lawsuit was filed in California in November 2019 on behalf of a group of consultants, who are alleging LuLaRoe is running an illegal pyramid scheme. The state of Washington is also suing the company for operating a pyramid scheme. Last fall, the company laid off all 167 workers in their Corona, California, warehouse and permanently closed it. And according to both the company’s former chief merchandising officer and its former supplier, DeAnne’s husband, Mark Stidham, has threatened “multiple times” to ransack the company’s coffers and flee to the Bahamas rather than admit wrongdoing in court."

How Mount Everest became a multi-million dollar business (The Hustle)
+ "Realizing that there was a business opportunity in leading Western adventure seekers up Everest, climbers like Rob Hall (Adventure Consultants) and Scott Fischer (Mountain Madness) convinced Nepalese officials to expand foreign access. John Krakauer’s 1997 bestseller Into Thin Air, which chronicled the death of 8 climbers (including Hall and Fischer) on one of these early expeditions, only further stoked demand."

Meat trimmings are a health food now (The Atlantic)
+ "Over the past decade, the gospel of meat and spice has not only endured, but flourished into a shelf-stable-beef extravaganza. Slim Jim’s sales have nearly tripled since their 2010 dip, and new companies have sprung up to offer organic, grass-fed, or minimal-ingredient protein batons virtually everywhere: corner stores, airport newsstands, office snack deliveries, the ads slotted between Instagram Stories. To put a meat snack in every hand, snack purveyors have pulled off a trick that might have seemed impossible in the days of the Macho Man: They transformed surplus beef into health food."

The marketplace 100 index - the top 100 consumer-facing marketplaces (a16z)
+ This is a useful list of the top digital marketplaces for consumers.

Inside the seething boardroom drama that poisoned HQ Trivia (Bloomberg)
+ "Its most famous former employee, quiz show host Scott Rogowsky, tweeted a post-mortem for the company the day after it shut down. “HQ didn’t die of natural causes,” he wrote. “It was poisoned with a lethal cocktail of incompetence, arrogance, short-sightedness & sociopathic delusion.”"

The untold story of how Homepolish’s extremely Instagrammable house of cards came tumbling down (Marker)
+ "But behind the company’s glossy Instagram feed was a much messier reality, according to Marker’s interviews with some two dozen employees and contracted designers — most of whom requested anonymity due to nondisclosure agreements or fear of having their reputations tarnished by association. They say Santos was an inexperienced CEO whose obsession with image led him to alienate his employees, his designers, and his customers. Instead of building a design juggernaut, the founder constructed something much more precarious — a fear-based culture where sound strategy couldn’t flourish, and where the pressure to grow led to reckless decision-making."

The Princess, the Plantfluencers, and the Pink Congo Scam (Wired)
+ "In the past three years, houseplant sales have grown by 50 percent, according to the National Gardening Association. It’s now a billion-dollar industry, and an increasing share takes place online. Plants that weren’t rare before are now in high demand. Growers like Maloy can’t just dash off thousands of these plants at once—it takes time to propagate and grow them—which has driven their price up even more. The monstera oblique sold for $10 a decade ago. Now, it can sell for over $2,000, according to a report from the Toronto Star."

Kelie Morgan 2/28/20 Kelie Morgan 2/28/20

The Weekly: Edition #33 - February 21, 2020

The Internet and Differentiation

The internet changed everything. It opened lines of communication that never existed prior. It helped relationships form that may not have formed otherwise. It has allowed Permanent Equity to connect with investors, companies, intermediaries, and 'scouts' like never before. But this is all obvious.

What isn't quite as obvious is how quickly the internet revealed the need for (and sometimes the lack of) differentiation for a company's service or product. In the internet era, the cost of search and comparison in terms of time, effort, and money declined towards zero. Let's explore what this means for businesses.

What do direct-to-consumer companies and WeWork have in common? Many of these companies made the mistake of believing that a physical goods or services (retail, real estate) business model + the internet = technology company (with the attendant growth and valuations). DTC companies took the traditional retail model and transitioned it online and voila! - branded ecommerce. WeWork took an old model of subleasing office space, combined it with an online presence and presto! – physical network effects.

But these novel ideas were quickly exposed as indefensible in the competitive landscape of the internet as competitors crept into the marketplace. For exmaple, there are currently over 175 direct-to-consumer companies in the mattress space alone. In WeWork's space, various competitors such as Knotel, Spaces, Industrious, and Regus all competed for the same short-term office users.

Before the internet, knowledge of competitive products and services traveled much more slowly – word of mouth, newspapers, mailers. But with the dawn of the internet and ecommerce, comparing similar products, services, and companies became instantaneous. The cost of search declined precipitously towards zero, meaning consumers became much more aware of the benefits of competitive products and services as well as their costs.

M.M.LaFleur, a direct-to-consumer company specializing in women’s corporate and professional attire, seemingly succeeded where others had failed. With $70M of revenue in 2018 (although unconfirmed profits), it seems that M.M.LaFleur may be on its way to brand status. Why? They solved real problems for women – 1) they solved the ‘I have nothing to wear and no time to decide’ problem in a way that 2) didn’t break the bank and 3) looked professional without 4) revealing too much, fitting too tightly, and allowing comfortable movement. And yet, in the age of the internet, even M.M. LaFleur must continue to solve their customers problems and build trust in their products or risk becoming a commodity in a sea of competitors. The NPR story below is well worth a listen for an in depth look at the company.

For businesses to effectively compete in the age of the internet, they must solve real consumer problems in a differentiated manner. Your business must answer four questions:

- What are you offering that your competitors aren’t?

- What can you do that competitors can’t?

- What relationships do you have that others don’t?

- What parts of your product or service allow you to maintain your pricing or underprice your competitors in sustainable ways?

Understanding how your business stacks up against competitors in the age of the internet is becoming more important as the cost of comparison and the cost of starting an online business declines over time.

Idea burnout: as more DTC brands enter the fray, founders struggle to differentiate (Modern Retail)
+ "The first successful DTC companies mastered customer acquisition via Facebook. The second used those growth hack tactics to “sell a bunch of commodities,” he said. Now, brands are realizing it’s no longer enough to just sell goods online, since there are already so many choices. The businesses must figure out a way to telegraph that their product is superior — or that they offer some kind of service that makes it different from the rest."

How I built this: M.M.LaFleur (NPR)
+ This is the inside story of Sarah LaFleur's direct-to-consumer women's corporate dress venture, M.M.LaFleur.

What we learned from reading Jeff Bezos' patents (Harvard Business School)
+ "Despite this secrecy, Bezos’ patents offer clues about the technologies the CEO considers important to the company's future. Previous studies have shown that CEO time is notoriously oversubscribed, so understanding Bezos’ patent interests could indicate the areas that are critical enough to merit his individual attention. For example, a cursory reading of most of Bezos’ patents shows that they focus on e-commerce, logistics, devices, and digital content—all core areas of Amazon’s business."

Brooks Sports and Brooks Brothers peacefully co-existed for 4 decades - now they're at war (The Fashion Law)
+ "The Brooks-centric suit is not the first to come about in connection with an agreement between two like-named brands to make the peace. In July, Valentino S.p.A. filed suit against Mario Valentino, arguing that the similarly named brand was running afoul of the co-existence agreement they entered into in 1979 due to the fact that they have “similar names and overlapping goods” and “experienced issues of consumer confusion” as a result."

Inflation is at historic lows, so why do things seem so expensive? (Fortune)
+ "To dig deeper, you have to look at how inflation is calculated. And what the government measures, versus what the average person paying for housing, healthcare, school and childcare (categories that have grown anywhere from 18% to 65% faster than disposable income) experiences, are two very different things."

The WeWork debacle is a symptom of a much larger problem (Marker)
+ "This is, in effect, the platform fallacy: the idea that a platform business is inherently more profitable than any other kind of business. Amazon struggled for years to become profitable and, even today, makes most of its money from cloud computing, not its retail platform. Uber may never hit break even. Sure, there have been some tremendous successes, such as Facebook, but platform-based companies fail all the time.

The streaming shake-up (PWC)
+ "Once a revolutionary shift, streaming has become commonplace—90% of consumers are watching video content over the internet. Consumers have seemingly settled into their video service portfolios, having curated a selection of services that meets their content needs."

Kickstarter workers vote to form first union in tech industry (CNBC)
+ "Kickstarter United will now be formally recognized by the management after a vote held by the National Labor Relations Board, in which workers voted 36 to 47 in favor of unionizing. It is the first union comprised of white-collar, full-time employees in the technology industry."

Retail workers are trying to escape the merry-go-round as jobs disappear and prospects dim (Time)
+ "Employment in retail in January was down 8 percent from the same time last year, according to new Bureau of Labor Statistics (BLS) data released Friday morning, at the same time, jobs in transportation and warehousing, industries critical for e-commerce, were up 28 percent. Department stores have shed 241,000 employees in the last five years, according to BLS data, and clothing stores cut 67,000 jobs."

The legend of John Holmes Jenkins (Texas Monthly)
"He was a notorious deal maker known for bringing priceless pieces of Texas history back to the state. He was also a suspected forger and arsonist. Thirty years ago, he was found dead in the Colorado River near Austin, and to this day a question remains: Could John Holmes Jenkins have masterminded his own death?"

Kelie Morgan 2/28/20 Kelie Morgan 2/28/20

The Weekly: Edition #32 - February 14, 2020

Customer Needs, Market Opportunities

In the competitive jungles of capitalism, businesses are constantly shrinking, growing, dying, and being born. But one thing remains constant: a business's purpose remains to satisfy the needs of its customers. A business that fails to do so won't remain in business very long.

We'd like to highlight two pieces in this week's edition pertaining to customer needs and market opportunities to illustrate how keeping a pulse on the market can be the difference between life and death for a business.

Under Armour, while still a formidable apparel company, has not exhibited the explosive growth recently that it once did. In classic "innovator's dilemma" fashion, it missed a large opportunity in "athleisure" because it didn't pick up on growing customer needs until it was too late:

“The fashion cycle moved away from them. They stayed true to their muse, performance footwear and apparel,” said Matt Powell, an analyst with the NPD Group. “But that’s just not where the business is. Right now, it’s all about fashion and athleisure.”

And instead of investing in an adjacent area of expertise - 'athleisure' performance apparel - it attempted feats outside its core competencies:

"But interviews with several current and former Under Armour employees as well as competitors, advisers to athletes, and financial analysts also point to a company that tried to do too much too fast. It expanded into sports in which it had little expertise and failed to articulate a strategy for its expensive tech acquisitions. It eschewed the athleisure trend, which has buoyed sales at Nike and Adidas, and struggled to translate its brand to an international audience."

Glossier's founder, Emily Weiss, on the other hand, realized that the next generation of millennials weren't taking their cues for style from established brands, but were instead exploring new styles on social media. She saw a market opportunity in the form of simple, direct-to-consumer beauty products in the age of Instagram.

"When Instagram took off, the trend only grew stronger, yet Weiss recalls beauty companies telling her they weren’t planning to hire a social media editor at all. She pauses, incredulous: “Can you imagine?”

Rather than continue to play interpreter between old brands and new audiences, she decided the time was right to build a new beauty company from scratch that would lean into this changing dynamic. It would be digital-first, operate a direct-to-consumer (DTC) model, and emphasise communication with its customers, even involving them in the creation of its products."

In addition, Glossier's product was different from the typical heavy makeups in the market and satisfied a growing desire for a cleaner, minimalist look:

"Around the time Glossier launched, its pared-back “skin first, makeup second” approach tapped into a trend, concurrent with a new wave of popular online feminism focused on female empowerment, that saw people move away from the idea of using makeup to cover up perceived imperfections and towards a fresher, cleaner finish."

As a business owner or entrepreneur, keeping a close connection to customer needs must remain core to your company's strategy for long-term durability.

How Under Armour lost its edge (New York Times)
+ "There is no one cause of Under Armour’s struggles. Some factors, like the bankruptcies of the retail giants Sports Authority and Sport Chalet in 2016, were out of the company’s control. But interviews with several current and former Under Armour employees as well as competitors, advisers to athletes, and financial analysts also point to a company that tried to do too much too fast."

How Glossier turned itself into a billion-dollar beauty brand (Wired)
+ "From the start, Glossier has operated as a direct-to-consumer brand, meaning you can’t buy its products elsewhere. Aside from a few limited experiments, such as a temporary fragrance shop in some outlets of the US chain Nordstrom, it does not have a presence in department stores or beauty retailers, and online sales are conducted through its own e-commerce site at Glossier.com."

How a reality TV producer became a rainmaker to the $300 billion Saudi Arabia fund (Wall Street Journal)
+ "In Los Angeles, she worked for a movie producer and later helped produce “Keeping Up with the Kardashians.” Ms. DiBello has spoken publicly about her friendship with Kim Kardashian and work on the show, and in Harper’s Bazaar Arabia wrote that Ms. Kardashian is one of her “best friends.” After working on a Dubai film festival in 2005, Ms. DiBello had started spending time in the Gulf, she wrote in Harper’s Bazaar Arabia. A story about her last year in a Gulf publication said she had been going to Saudi Arabia since 2014."

Family builds $3.8 billion fortune, one pint of blood at a time (Bloomberg)
+ This is the story of the Grifols family, the plasma business magnates.

A parking space is selling for $100,000 in San Francisco (Business Insider)
+ "This parking spot in San Francisco's South Beach neighborhood has been listed since mid-December, and the price isn't necessarily outlandish. Realtor Bill Williams told SFGate that another space in the same garage sold for $90,000 in November."

How private equity buried Payless (New York Times)
+ Finance driven investing works until debt becomes too big a burden to bear. At Permanent Equity, our focus has always been and will always be to maintain sustainable practices both in financing and operations of a company.

Benedict Evan's annual technology presentation - ecommerce, mobile, media, and their effects on society (Benedict Evans)
+ Benedict Evans presents annually at Davos and this year's presentation highlighted how a mature technology industry's effects on society will most likely become more and more regulated over time.

The Amazon effect is causing us to drown in trademarks (New York Times)
+ "These “pseudo-brands,” as some Amazon sellers call them, represent a large and growing portion of the company’s business. These thousands of new product lines, launched onto Amazon by third party sellers with minimal conventional marketing, stocking the site with disparate categories of goods, many evaporating as quickly as they appeared, are challenging what it means to be a brand."

What it takes to be a CEO in the 2020s (The Economist)
+ "Few subjects attract more voodoo analysis than management. Even so, studies suggest that the quality of an American firm’s leadership explains about 15% of the variance in profitability. But boards and headhunters struggle to identify who will do a good job (see Briefing). Perhaps as a result, they tend to make conservative choices. About 80% of ceos come from within the company and over half are engineers or have mbas. Most are white and male, although that is changing slowly."

Writing in a business context (Jerry Neumann)
+ This is a short, concise memo on writing clearly and persuasively in a business context.

How the laptop ruined our work-life balance (The Atlantic)
+ "The first iPhones sold 10 million units. Google launched its first Android phone, setting up the key rivalry that still animates the American smartphone market more than a decade later. As those world-changing devices made their way into the hands of millions of curious people, another mobile gadget quietly rose to the top of its market. Some disagreement exists over whether 2007 or 2008 was the first year that laptops outsold desktops in the general market, but 2008 was the first year that American employers bought more laptops than desktops."

Corporate headhunters are more powerful than ever (The Economist)
+ "The bosses of 311 of America’s 3,600 listed firms left their jobs in 2019—the highest share on record. Someone needs to find their replacements."

One man's quest to bring the DeLorean back to life (The Hustle)
+ "In a workshop in Humble, Texas, Stephen Wynne is attempting to revive one of history’s most beloved and beleaguered cars."

China pledged to build a hospital in 10 days and its close (New York Times)
+ As the world watched in awe, China pulled off an impressive feat of coordination, construction, and project management by building a functioning hospital in little more than 10 days.

Kelie Morgan 2/7/20 Kelie Morgan 2/7/20

The Weekly: Edition #31 - February 7, 2020

Operating Systems

Most folks know the term operating system to apply to computers, phones, and hardware. But any complex system, from individual humans to companies, have routine procedures and norms that when taken together form its operating system. At Permanent Equity, our top order of business is to continuously improve our portfolio companies' operating systems. But as is normally the case with change, questions arose over what this actually looks like in practice from a seller's perspective.

This week we published a new essay on what to expect from us as a seller post-closing. Well, the answer is, in a nutshell, not much. We don't like to get too far into the weeds where industry-know-how trumps our lack thereof, because we are already buying businesses that operate well in their space (read: they generate excess free cash flow).

These businesses have routines, procedures, and practices that have been built over years of experience. But there are generally changes that can be made to boost efficiency of decision-making, operations, financing, hiring, firing, and everything in between. We try our hardest to optimize our companies such that everyone from employees to executives are doing more of what they are best at - running their operations.

We improve our portfolio companies' operating systems with both high-tech and low-tech solutions. We seek to improve their technology stack by implementing the right solutions to capture the low-hanging fruit. Whether it is a fully or semi-automated marketing funnel, a new CRM, an improved accounting solution, or a proprietary talent pool, we support our portfolio companies by helping free up time and capital. In addition to technology solutions, we also support our companies in non-tech related areas including legal counsel, negotiating financing, and strategic planning. The beauty of our portfolio approach is that it is relatively easy to roll out an operating system solution that solves a general problem across the portfolio fairly seamlessly.

At the end of the day, it all boils down to our mission as long-term owner-operators: to let the operators operate, to help them as needed, and to grow the family over time.

Claire's offsite toolkit (coda.io h/t Justin Hales)
+ Offsites are useful for three purposes: helping teams bond, evaluating progress towards goals, and long-term strategic planning. This 'toolkit' will help guide you through your company's next offsite, soup to nuts.

What to expect if Permanent Equity buys your business (Permanent Equity)
+ "The day after we partnered with a business, the CEO (who remained in place and from whom we bought our stake) called us up to share a problem with a longtime customer. After describing the issue (which had to do with spending a few extra dollars to deliver on that customer’s expectations), he asked what he should do. Our response was simple: Do what you would have done two days ago."

Todd Hitt’s shameless con: how Washington society got scammed by one of its own (Washingtonian)
+ Trust, but verify: "Even as Hitt worked the room during Washington’s most glittery weekend, he had yet to pony up for the party—and he never would. Not two months later, he would become the target of a federal criminal investigation. By fall, the FBI would unmask Kiddar Capital as a multimillion-dollar Ponzi scheme and rebrand Hitt as a shameless con man."

The economic effects of private equity buyouts (Harvard Business School)
+ "We examine thousands of U.S. private equity (PE) buyouts from 1980 to 2013, a period that saw huge swings in credit market tightness and GDP growth. Our results show striking, systematic differences in the real-side effects of PE buyouts, depending on buyout type and external conditions. Employment at target firms shrinks 13% over two years in buyouts of publicly listed firms but expands 13% in buyouts of privately held firms, both relative to contemporaneous outcomes at control firms. Labor productivity rises 8% at targets over two years post buyout (again, relative to controls), with large gains for both public-to-private and private-to-private buyouts. Target productivity gains are larger yet for deals executed amidst tight credit conditions."

Ad-targeting tech goes old school — with snail mail (The Hustle)
+ In the age of email and text overload, could it be that paper is back in style?

The year startups took over the Super Bowl (The Hustle)
+ "On January 30, 2000, a single sentence set against a yellow background appeared on the TV screens of more than 130m Super Bowl viewers. “This is the worst commercial on the Super Bowl,” the advertisement said. It was homemade by the founders of a relatively unknown startup called LifeMinders.com in just 6 days. It lasted 30 seconds — and cost $2.1m (watch it here). If it sounds unusual, it wasn’t: Not that year, anyway. Eleven startups spent millions for 30-second spots in Super Bowl XXXIV. The very next year, 8 of these 11 companies had either gone bankrupt or been sold in fire sales."

After 15 years as a product leader, CEO and now VC, here’s the advice I always share with future founders (First Round Review)
+ "Gmail’s user interface. Facebook’s Newsfeed. Twitter’s timeline. Dropbox’s bottom-up revenue engine. In his 15-year-career, Todd Jackson has helped build some of the biggest products in tech that hundreds of millions of people use every day."

The coronavirus has forced world's largest work-from-home experiment (Bloomberg)
+ Sniffles are permitable in the office, but when a country-wide pandemic strikes, companies take measures to necessary extremes.

Authorities find longest southwest border smuggling tunnel In San Diego (KPBS)
+ "U.S. Customs and Border Protection said the tunnel featured an extensive rail/cart system, forced air ventilation, high voltage electrical cables and panels, an elevator at the tunnel entrance, and a complex drainage system."

Kelie Morgan 1/31/20 Kelie Morgan 1/31/20

The Weekly: Edition #30 - January 31, 2020

The measure of your life

Clayton Christensen, long-time Harvard Business School professor, family man, and author of The Innovator's Dilemma, passed away last week at the age of 67 after a long battle against leukemia. In 2010, he wrote a piece titled How Will You Measure Your Life and penned his own answers to the three key questions he posed to his business students over the years:

- How will you ensure that you will be happy in your career?
- How will you ensure that relationships with family become an enduring source of happiness?
- How will you ensure that you stay out of jail?

All individuals must reckon with their purpose, work-life balance, and personal responsibility at some point in their lives.

These questions also apply to business owners as well. How do you as an owner or operator, ensure that your employees answer these in the affirmative? Do your employees find a sense of purpose in their work? Do they enjoy meaningful relationships outside of work? Do they conduct business in an ethical manner?

As a business owner or operator, you must wrestle with how to create a culture that promotes positive employee answers to these questions. Collectively, your employee's candid answers represent your company's culture.

Purpose, work-life balance, and ethics. It doesn't take a rocket scientist to notice that these three areas are the most important areas for young prospective employees today. Creating a winning, self-sustaining culture begins with how you articulate your business's values for new hires, how you reaffirm them for current employees, and how you lead by example:

"Families have cultures, just as companies do. Those cultures can be built consciously or evolve inadvertently."

First, Purpose and Happiness. Businesses can't ensure employees are always happy but can ensure that they are motivated by opportunities for growth in responsibility and through deserved recognition:

"One of the theories that gives great insight on the first question—how to be sure we find happiness in our careers—is from Frederick Herzberg, who asserts that the powerful motivator in our lives isn’t money; it’s the opportunity to learn, grow in responsibilities, contribute to others, and be recognized for achievements."

Is your company dedicated to a specific space or cause? Don't be shy about it. Be crystal clear with prospective hires:

"Clarity about their purpose will trump knowledge of activity-based costing, balanced scorecards, core competence, disruptive innovation, the four Ps, and the five forces."

Next, Work-Life Balance. This concept may be controversial depending on the industry, but at the end of the day, you can't sprint a marathon. Every moment an employee spends overworking results in additional fatigue and stress that eventually takes its toll on relationships outside of work. As an employer, you have a choice: encourage balance, or attempt to sprint the marathon that is life.

"People who are driven to excel have this unconscious propensity to underinvest in their families and overinvest in their careers—even though intimate and loving relationships with their families are the most powerful and enduring source of happiness."

Finally, Ethics. The question, says Christensen, often elicits laughter. But some of the smartest classmates of his - e.g. Jeffrey Skilling of Enron - started out as 'good guys.' So where did they go wrong? They cut the small corners first:

"If you study the root causes of business disasters, over and over you’ll find this predisposition toward endeavors that offer immediate gratification."

And once they chose to cut corners, their discipline grew weaker and weaker:

"The lesson I learned from this is that it’s easier to hold to your principles 100% of the time than it is to hold to them 98% of the time. If you give in to “just this once,” based on a marginal cost analysis, as some of my former classmates have done, you’ll regret where you end up."

Purpose, Balance, and Ethics combine together to illustrate the true measure of a person's life. Christensen sums up beautifully that the measure of your life is not found in external success, but in the amount of lives positively impacted:

"Don’t worry about the level of individual prominence you have achieved; worry about the individuals you have helped become better people."

The woman shaking up the diamond industry (The New Yorker)

+ "Lahri, who is small and voluble, with a bright, forthright manner, is a trailblazer: a head-scarf-wearing Muslim executive in a majority-Christian country, and the first Botswanan woman ever to manage a diamond mine."

Behind the scenes at Rotten Tomatoes (Wired)

+ This is an indepth inside look at the popular movie review site and its history.

These tailors have proven that custom suits are no longer just for men (Fortune)

+ For decades, the tailored suit was a man's territory. But a trend of business professional tailors catering strictly to women is winning over the other side of the aisle.

Why do private equity firms keep wrecking retail chains - three theories (Slate)

+ Overleverage, dividend recapitalizations, and disrupted industries don't seem to mix well. Remember, selling your company involves far more than the highest bidder.

Why nearly 20% of young consumers didn't read local business reviews in 2019 (Bright Local)

+ "One could certainly make the argument that the lack of trust expressed in the previous chart strongly suggests that this is just a very distrusting generation, perhaps battle-hardened by scrapes on social media, and that the number of fake reviews online hasn’t grown significantly, but by pretty much all accounts, fake reviews are indeed a growing problem."

Mondelez looks to streaming as a new frontier for marketing efforts (WARC)

+ Streaming is quickly becoming the new 'TV' advertising medium for big brands.

A structured approach to strategic decisions (MIT Sloan)

+ "Given how unreliable human judgment is, all evaluations are susceptible to errors. These errors can stem from known cognitive biases — or they can be random errors, sometimes called “noise.” Unreliability in judgment has long been recognized and studied, particularly in the context of decision-making about hiring."

2020 Edelman trust barometer report (Edelman)

+ "People today grant their trust based on two distinct attributes: competence (delivering on promises) and ethical behavior (doing the right thing and working to improve society). This year’s Trust Barometer reveals that none of the four institutions is seen as both competent and ethical. Business ranks highest in competence, holding a massive 54-point edge over government as an institution that is good at what it does (64 percent vs. 10 percent). NGOs lead on ethical behavior over government (a 31-point gap) and business (a 25-point gap). Government and media are perceived as both incompetent and unethical."

Chinese city plans to build coronavirus hospital in days (The Guardian)

+ "The Chinese city of Wuhan, the centre of the coronavirus outbreak, has begun the ambitious task of building a 1,000-bed hospital in just 10 days to treat victims of the epidemic."

The recycling of ships (Dr. Nikos Mikelis)

+ Dr. Nikos Mikelis presents a snapshot of global ship recycling and the economics behind the industry.

Kelie Morgan 1/24/20 Kelie Morgan 1/24/20

The Weekly: Edition #29 - January 24, 2020

Negotiating and Value

This week, we wanted to share a few thoughts around negotiations. We wrote about negotiating deals in edition #9, highlighting strategies for making negotiated arrangements a win-win for both sides. Four articles below (NPR on bananas, Chick-Fil-A, Coke, Isabel Dos Santos) illustrate negotiated scenarios that are noteworthy.

The dark story of United Fruit's Minor Cooper Keith illustrates the series of negotiations, bordering on maniacal and cutthroat, that led to the company's global banana trade. He raised the equivalent of $200 million and, in exchange for building the railroad for free, negotiated with the government of Costa Rica for:

- a 99 year easement along the route of the railroad he would build
- total control of the port in Limon
- 800,000 acres around the railroad route

Never mind the fact that he had already burned through millions prior to offering the government this deal. How was one man able to strike such a bargain with a sovereign government - and repeat this multiple times with other sovereign nations? He knew the position of Costa Rica better than they did.

For starters, Costa Rica was desperate financially and wanted a railroad to modernize its economy, and Keith was able to position his enterprise as the only solution in town. Eventually, he would begin to grow bananas to feed his employees while they worked on the railroad. Little did he know, this product would be exported globally and would end up ultimately being the money maker. As the saying goes - when you borrow $100,000 and go broke, it's your problem. But when you borrow $100,000,000 and go broke, it's the bank's problem. Lesson: pick your partners carefully up front and avoid situations where there is a significant chance you'll be left without control or an alternative. Costa Rica learned the hard way and paid a large price to an outsider for its missteps.

Chick-Fil-A charges franchisees 15% of sales and 50% of profits because its product is that valuable. What's the caveat? They only charge $10,000 up front for a franchisee to open a store (if they get selected, that is). Competitive fast food restaurants charge franchisees hundreds of thousands if not millions to open a chain. Chick-Fil-A on the other hand, owns the real estate and equity of the business. Effectively, they take on the risk up front for franchisees, but lower the end reward in response. Lesson: know your brand, product, or services' worth, and negotiate accordingly. Additionally, look for creative, alternative ways to attract talented people and create win-win deals that share the economics with them.

Isabel Dos Santos used her political position to siphon off hundreds of millions from Angola's coffers, but her corruption was eventually brought to light. She is currently facing embezzlement charges for her misdeeds. Negotiating from a position of power is every company's goal in striking deals. But there is a continuum of 'value' in a negotiated deal that ranges from a loss to a win-win to outright theft. We believe that long-term thinking involves striking as many win-win deals as possible, because outright theft (be it political corruption or gouging customers) eventually leads to scrutiny and ultimately to an organization's demise. Lesson: whether you are negotiating with customers, suppliers, or political authorities, play the game to be mutually beneficial over the long-run. It's in your business's best interests.

Finally, we arrive at Dean Kamen, the inventor of the Slingshot machine and Coke's Freestyle machine. Kamen knew that he had a solution to the global crisis in fresh water for those in undeveloped countries without access to potable water. However, what he lacked was a distribution network to reach these people. Coke, on the other hand, had the best distribution system in the world, but needed a creative engineer to help them design their new Freestyle machine. It was a match made in heaven. Lesson: ask yourself how your organization can provide a missing piece to another company's puzzle, and how they in turn can do the same. The Kamen-Coke deal is a textbook win-win.

There will be bananas (NPR)
+ The incredibly dark story of entrepreneur Minor Cooper Keith and the creation of the 20th century banana empire known as United Fruit.

Bargaining for clean water: why Dean Kamen invented the Coca Cola Freestyle machine (ProBiotic)

+ "Kamen’s goal to mass distribute Slingshots to thousands of water-polluted/water-stressed rural locations has been slowed by his lack of resources. Unfortunately, his medical connections were little help delivering water purifying systems to rural areas—medical technology is distributed in wealthy areas. So, he turned to Coke for assistance in mass distributing his invention."

He wanted a unicorn, but he got a sustainable business (Wired)

+ For some, a billion-dollar startup is the ultimate success. For others (like us), a sustainable, profitable business will do the trick. Knowing when to raise outside capital versus bootstrapping a business can be a difficult decision for first time founders.

Goodwill sparks deep divisions, at least on balance sheets (Wall Street Journal)

+ "At issue is an accounting term known as goodwill, which is the premium a company pays when it buys another for more than the value of its net assets. An unprecedented five-year boom in mergers and acquisitions has added urgency over how to account for the financial concept."

What we can learn about financial scams from the man who tried to sell the Eiffel Tower - twice (Fortune)

+ "Victor Lustig talked people into things because he was a master manipulator with a huge ego. But he also understood people and utilized the soft skills of trust and persuasion as well as anyone."

How Isabel Dos Santos sidestepped a crackdown by western banks (Quartz)

+ "“These guys hear about Isabel and they run like the devil from the cross,” read an email sent the next year by a business manager for dos Santos, daughter of the then-president of Angola, who led one of the world’s most corrupt regimes."

Nothing this week…

Why it only costs $10k to own a Chick-Fil-A franchise (The Hustle)

+ "The franchisee only pays the $10k franchise fee. Chick-fil-A pays for (and retains ownership of) everything — real estate, equipment, inventory — and in return, it takes a MUCH bigger piece of the pie. While a franchise like KFC takes 5% of sales, Chick-fil-A commands 15% of sales + 50% of any profit."

The number of people over age 100 in Japan has reached 70,000 (Japan Times)

+ The grey wave isn't just a US phenomenon, but a global one as well. This larger story is yet to play out as massive amounts of wealth are transferred from seniors to the next generation.

How America uses its available land (Bloomberg)

+ "According to the U.S. Forest Service, timber harvests typically occur on about 11 million acres each year. But because of regrowth, the volume of U.S. timber stock grew by about 1 percent annually from 2007 to 2012. Weyerhaeuser Co. is the largest private owner of timberlands in the U.S. With 12.4 million acres, the company controls 2.3 percent of all commercially available timber, an area nearly the size of West Virginia."

A Maine paper mill's unexpected savior: China (New York Times)

+ "First came the Buddhist monks. Then the feng shui consultant. In the summer, a battered New England mill town greeted the new owner of its factory — one of the richest tycoons in China."

Kelie Morgan 1/17/20 Kelie Morgan 1/17/20

The Weekly: Edition #28 - January 17, 2020

On Trust

This week, instead of highlighting a single article, we decided to switch things up and highlight a particular theme running through several pieces. That theme is Trust.

We've included several pieces below where trust is a central theme including the series on Apple's secretive top-down culture, the summary of Berkshire Hathaway's decentralized culture of trust, and finally the fraudulent organic farming operation. Each one illustrates various operating standards (or lack thereof) within different companies. But while each company may have a distinct culture, a different decision-making process, and varying degrees of autonomy for members, every company ultimately runs on trust.

Trust matters for many reasons, but we think there are three big reasons that can't be overstated:

1. Losing trust means losing time and money. When you lose a trusted vendor, customer, or employee, filling those holes in your business requires reallocation of productive man-hours from building your business to fixing your business. Invest the time and effort up front to hire right and diligence prospective customers and suppliers.

2. Trust is tested in the tough times. You never want to doubt the man that packed your parachute. The same holds true in business - your operation is only as good as the trust binding the internal and external relationships together, especially in turbulent times.

3. If you want to go fast, go alone. If you want to go far, start building trust (and go together). Long-termism is a concept bandied about in business circles enough that it has begun to lose its meaning, but it hasn't lost its purpose. Most folks know how to recognize when someone is legitimately oriented towards long-term mutually beneficial relationships, and when they are full of shit. Any one can start a business and hire employees, but if you want to build an enduring organization, you need partners you can trust. Start by empowering your employees and partners with incrementally more responsibility, allowing them to earn your trust over time, and earning theirs in return. It is the best investment you can possibly make in your business.

Apple's original iPod timeline (Patrick Collison)

+ If you enjoyed Patrick Collison's original Fast post, you'll marvel at the fact that it took Apple less than one year to approve, design, and sell the original iPod.

Welcome to Apple, a one-party state (Tortoise Media)

+ This is an in-depth series on Apple's culture, decision-making processes, and products."The tech giants have as much money and influence as nations. So what if we reported on them like countries? What would Apple be? A liberal China…"

Berkshire Hathaway's culture of trust (Rational Walk)

+ All companies are comprised of networks of trust between employees and employers. The employees trust that their employer will compensate them for work performed, and employers trust that their employees will put the company's priorities first and perform necessary tasks. Berkshire Hathaway takes this culture of trust to the extreme with all operating decisions relegated to managers and capital allocation decisions centralized in Omaha.

Family business succession planning opportunities (CPA Journal)

+ This piece by the CPA Journal serves as a resource for small business owners looking at various options for tax-efficient ownership transfers.

Family-owned businesses urged to sell before the party ends (Accounting Today)

+ "Not only is it a great time to put a private company up for sale while the economy is strong and many deep-pocketed buyers are circling, wealth advisers are also reminding clients of looming political uncertainty toward the end of 2020."

Afternoon of the pawnbrokers (The Baffler)

+ If you've never learned the industry basics of pawnshops, you're in luck.

Meet the billionaire family behind the hottest stock in the past 30 years (Forbes)

+ Boring is beautiful, and this family-owned aircraft parts manufacture has proven that maxim for 3 decades.

Just about every store in the mall is struggling - except Bath & Body Works (Washington Post)

+ For some it may be non-obvious, but at the end of the day... you can't smell candles for sale online.

The outlandish story of Ollie’s: a $5 billion retail empire that sells nothing online - and is beating Amazon (Forbes)

+ "Most other retailers seem headed in the other direction. The internet now accounts for 10% of American shopping—up from below 4% less than a decade ago—and e-commerce topped $130 billion in the fourth quarter of 2018, a 12% increase from a year ago. Meanwhile, companies announced 3,400 store closures last year, with plans to shutter a record 155 million square feet of shops. Those numbers will skyrocket in 2019: Retailers announced 4,300 store closures in just the first nine weeks of the year."

The new American Dream (David Perell)

+ The American Dream isn't what it used to be - one job, one house, one city for life. However, it is still as attainable as ever if you know how to use the tools of modern technology.

The 30 best pieces of advice for entrepreneurs in 2019 (First Round Review)

+ "Whether it’s tips for dealing with the emotional monsters that accompany startup life or perspectives on dealing with outright founder failure, the advice operators shared on the Review this past year underscores a simple theme: The true account of entrepreneurship isn’t the success story — it’s the work-in-progress."

Finding time to invest in yourself (Naval Ravikant)

+ "The mafia figured out this apprenticeship model a long time ago. The best way to end up running one of the families was to become the driver for the Don."

Missouri charmer led double life and masterminded one of the biggest frauds in farm history (Kansas Star)

+ "A clever and unethical seller can successfully pass off cheaper conventionally grown grain for the more expensive organic kind and make a huge profit, if they sell a lot of it. The agents suspected Randy Constant of doing just that."

Kelie Morgan 1/10/20 Kelie Morgan 1/10/20

The Weekly: Edition #27 - January 10, 2019

The loyalty economy (Harvard Business Review)

+ We can talk about products, services, marketing, finance, tech, and strategy all day. But in the long run, a business is only as good as its customers' opinions. Here are our 3 key takeaways from the Harvard Business Review piece on customer loyalty above:

1. Quantify the qualitative aspects of customer engagement and loyalty. This requires creativity around metrics that describe customers' use of products, their levels of satisfaction, and cohort analyses. All of these metrics and technological tools built into an organization's stack must answer two key questions: what is the lifetime value of my customer base and is it improving or declining?

2. Optimize your teams' problem solving around customer needs, which will lead to increased customer loyalty. Often, when businesses begin to grow and different departments are forming, silos can result in competing initiatives (between sales, marketing, finance, ops, etc.). Great leaders will ensure that each group's ultimate goal is to serve the customer better (the global optimal solution), not necessarily to hit specific group metrics (which are often local optimal solutions).

3. Increasing customer loyalty (often) leads to increasing market share. It may seem overly simple, but sometimes problem solving is about inverting to find the solution. Don't ask how you can increase your sales and grow your business in a competitive market, ask how you can build a better relationship with your customers. Without consistent, happy, repeat customers, your business may as well be spinning its wheels in quicksand.

Table stakes - how to unblock growth in your business (Permanent Equity)

+ We are passionate about helping small businesses prosper. One way to accomplish this is by building systems into everyday routines. By asking certain questions of each side of your operation, we hope you can unlock growth in the areas that need a little refinement.

For tech-weary farmers, 40-year-old tractors are becoming hot commodities (Star Tribune)

+ "“The main reason we do this is to make money,” Folland said. “Older equipment is a way to reduce your cost per bushel to become more profitable.”"

The death of supply chain management (Harvard Business Review)

+ "It’s not hard to imagine a future in which automated processes, data governance, advanced analytics, sensors, robotics, artificial intelligence, and a continual learning loop will minimize the need for humans. But when planning, purchasing, manufacturing, order fulfillment, and logistics are largely automated, what’s left for supply chain professionals?"

GDPR vs. CCPA - how the difference impacts your data privacy operations (wirewheel.io)

+ "The California Consumer Privacy Act (CCPA) isn’t simply a U.S. version of the European Union’s General Data Protection Regulation (GDPR). If you’ve already prepared for GDPR, you won’t have to start over to prepare for CCPA, but that doesn’t mean you have all the bases covered."

A timeline of Silicon Valley (Piero Scaruffi)

+ A worthy investment of your time, this list of significant Silicon Valley events spans from the late 1800's to the 2000's.

Luxury on the installment plan (The Baffler)

+ Post-financial crisis, the luxury-for-rent business model has exploded in industries ranging from apparel to hand-tools to housing.

Sales-tax ruling strains small online sellers (Wall Street Journal)

+ Taxing online transactions has been a gray area until 18 months ago when the Supreme Court ruled in favor of taxation. Small online businesses are struggling with the complexity of the regulations.

Nothing this week…

Workplace wellness comes for the working class (The Atlantic)

+ "According to U-Haul’s announcement, the company plans to note its policy on job applications, question applicants about their nicotine usage in interviews, and require them to consent to nicotine testing in the 17 states that allow it. The policy will apply to any nicotine use, which means that vapers and other users of smokeless tobacco will be excluded from the hiring pool, in addition to smokers."

7 reasons why video gaming will take over (Matthew Ball)

+ Gaming is social, it is entertaining, and it is becoming a bigger part of the mainstream culture with no signs of slowing down.

Kelie Morgan 1/3/20 Kelie Morgan 1/3/20

The Weekly: Edition #26 - January 3, 2019

Learning from Julian Richer: the ethical capitalist (Masters Invest, The Economist)

+ The little-known story of Julian Richer illustrates that even in an age where brick and mortar retailing is changing at an ever-increasing pace, there is room for success if you play the game the right way. Here are our top takeaways for running a successful operation from 'The Richer Way':

1. Customer obsession leads to customer loyalty:

"“We should be aiming to keep a customer for life, not for one transaction. Ultimately, I do believe that companies that fail to serve their customers well do not last.”"

"“Every transaction should be a reciprocal arrangement that benefits both the seller and the purchaser.”"

2. A company's culture is formed by its standard of ethics:

"“Creating an ethically minded company is not something that’s achieved the moment a list of company values has been put together. It’s a process that involves very hard work and requires constant attention. It also has to permeate every action that a company takes, which is why for me this process of creating an ethical company begins right at the very beginning of the job cycle - with the recruitment ad - and not only continues through recruitment, the setting of pay and conditions, ongoing staff welfare, and so on, but also requires regular maintenance and improvement. If one link of this complex chain is weak, or is allowed to become weak, ultimately the chain will break.”"

3. People, not just profits, are the key to success:

"“In a good company, what motivates people to turn up for work each day is much more than the amount in their wage packet. Their job satisfaction is much more likely to derive from getting on well with their colleagues, feeling part of a team and seeing customers happy.”"

"“Of course businesses need to be profitable, or else they will go bust and jobs will be lost. But the pursuit of profit before everything is not the key to business success. If profits are only gained by paying employees and suppliers the bare minimum and giving customers a bad deal, in the long run the business won’t survive.”"

4. A company gets what it incentivizes:

"“Rewarding people simply for carrying out a transaction, regardless of the wisdom of that transaction, is a recipe for disaster.”"

How Amazon squeezes the businesses behind its store (New York Times)

+ Partnering with Amazon as a seller can be both convenient and disastrous. This story shows the depths to which the behemoth is willing to go to control its seller ecosystem. "“We are dealing with a partner,” he said, “who can and will disrupt us for unpredictable reasons at any time.”"

How Hallmark took over cable TV (The New Yorker)

+ "The Hallmark Channel is a cable network owned and operated by the greeting-card company. This year, the channel and a sister network, Hallmark Movies and Mysteries, produced a hundred and three original movies; forty are about Christmas. Since 2011, from late October to January, Hallmark has broadcast Christmas movies nearly twenty-four hours a day, seven days a week. (The Hallmark Movie Checklist app, which helps guide viewers to new films, has 1.5 million users.) "

There are more single working women than ever, and that's changing the US economy (CNN)

+ "Working women contribute more than $7 trillion to America's economy. By 2030, 45% of working women aged 25 to 44 in the United States will be single. That will be the largest share in history, according to research by Morgan Stanley (MS), using data from the Bureau of Labor Statistics. In 2018, single women made up 41% of working women in that age range."

Amazon's cash flow (Behind the Balance Sheet)

+ Amazon, despite its lofty valuation, generates less cash flow than you may think depending on various 'add backs' employed.

Everything you need to know about advertising on Amazon (adweek)

+ This piece wades through Amazon's maze of advertising solutions for sellers on its platform.

I was Google’s Head of International Relations. Here’s why I left. (Ross LaJeunesse)

+ A company's culture is its starting point, its raison d'etre. But when it violates its most sacred ethic in pursuit of profit, blow back almost certainly awaits.

History's largest mining operation is about to begin - underwater (The Atlantic)

+ "Mining companies want access to the seabed beneath international waters, which contain more valuable minerals than all the continents combined."

There is now a NIMBY index (Marginal Revolution)

+ "Comparing our new data to that from a previous survey finds that the housing bust associated with the Great Recession did not lead any major market that previously was highly regulated to reverse course and deregulate to any significant extent. Moreover, regulation in most large coastal markets increased over time."

Kelie Morgan 12/27/19 Kelie Morgan 12/27/19

The Weekly: Edition #25 - December 27, 2019

Permanent Equity 2019 Annual Letter (Permanent Equity)

+ 2019 was a year filled with new relationships, new companies, and new capital. We hope you enjoy our 2019 annual letter and wish you continued success in 2020.

For this week's edition, we thought we'd wrap up 2019 with the top links (by click) for each category of The Weekly in case you missed them. As always, if you come across a piece of content worth sharing, please send it our way!

Happy Holidays from our family to yours!

Fast: Patrick Collison's list of ambitious projects that were accomplished in a small amount of time (Patrick Collison)
+ BHAGs (Big Hairy Audacious Goals) can be accomplished in incredibly short periods of time provided leadership is clear about the ultimate direction and goal of a project. This list is absolutely mind-boggling.

Lessons from 24 years of operating: Bowl America, Inc. (Macro-Ops)
+ Bowl America's letters to shareholders read like a combination of a customer service policy, owner's manual, and survival manual wrapped into one.

The secret to a great planning process - lessons from Airbnb and Eventbrite (First Round Review)
+ The authors of this piece break down a useful four step process for conducting company-wide strategic planning based on experience at Airbnb and Eventbrite.

Startups and uncertainty (Jerry Neumann)
+ Jerry Neumann masterfully illustrates the key difference between 'risk' and 'uncertainty' - namely, that risk in business is mathematically quantifiable, while the uncertainty in startups is more foggy, more indiscernible, more hazy in nature.

Apple's strategy: integration and monopoly & what Clayton Christensen got wrong (Stratechery article 1 and article 2)
+ Ben Thompson's lucid thinking on Apple's products and business strategy is instructive for all businesses and entrepreneurs.

33 things successful leaders have given up (The Startup)
+ "Leadership doesn’t exist to make you happy; it exists to make others happy and that’s the reward."

Joel Spoelsky on Strategy: Letters I, II, III, IV, V, and VI
+ While these letters were written in the early 2000's, they provide an insightful look and an insider's take on the history of the computing industry in the early years. In addition, there are timeless strategic principles within the letter series that are applicable to all businesses, regardless of industry.

CostCo's business model (Investing City)
+ Ryan Reeves digs into the business model of CostCo and explains how it is a membership business, not a retailer.

The gross margin problem: lessons from tech-enabled startups (David Sacks)
+ "How did we get here? The truth is that software startups never had to worry about gross margins until software started eating the world. Gross margins only became a concern once software blended with physical-world products and services to create new tech-enabled business models."

The new consumer - a KKR report on changing consumer trends (KKR)
+ While the average consumer seems relatively stable, there are large differences in consumer balance sheets between home-owners and renters.

3-D negotiation: playing the whole game (Harvard Business Review)
+ An oldie but a goodie, this is an in-depth look at second-order thinking applied to negotiations.

Nick Gray's notes on selling his company, Museum Hack (Nick Gray)
+ Nick Gray detailed the process of selling his small business to former partners and employees in a short but worthwhile read.

Beginner's guide to SEO (Moz)
+ This is an in-depth 7-chapter e-book explaining the concepts behind Search Engine Optimization (SEO) and demonstrates how to better optimize your website for online traffic.

Twilio's 2019 email benchmark and engagement study (Sendgrid)
+ SendGrid's annual email marketing study is a gem for marketing strategy purposes and a solid macro look at the state of all things email marketing.

Ecommerce landing page playbook (Unbounce)
+ This is a 37-page guide on what constitutes a 'great' landing page for an online business - and how to ensure it leads to higher sales conversions.

Control or be controlled: sales forecasting done right (Andreessen Horowitz)
+ "...“control” means putting in place a strong sales, forecasting, and deal qualification process. This is not some nice-to-have operational exercise — it’s a must-have for successfully scaling your company."

40 of our favorite interview questions (First Round)
+ This is a great resource for potential additional questions to mix into interviews at your company.

Nothing this week…

Kelie Morgan 12/20/19 Kelie Morgan 12/20/19

The Weekly: Edition #24 - December 20, 2019

Fast: Patrick Collison's list of ambitious projects that were accomplished in a small amount of time (Patrick Collison)

+ BHAGs (Big Hairy Audacious Goals) can be accomplished in incredibly short periods of time provided leadership is clear about the ultimate direction and goal of a project. Consider some of the notable accomplishments by businesses highlighted in Patrick Collison's piece above:

"Luckin Coffee. Luckin Coffee was founded in October 2017. Their first stores opened on January 1, 2018. On September 3 2018—245 days later—they passed 1,000 directly-operated stores in China. Source: Why is Luckin Coffee the best experimental field for Tencent Smart Retail?"
"Amazon Prime. Amazon started to implement the first version of Amazon Prime in late 2004 and announced it on February 2 2005, six weeks later. Source: The making of Amazon Prime."
"JavaScript. Brendan Eich implemented the first prototype for JavaScript in 10 days, in May 1995. It shipped in beta in September of that year. Source: Brendan Eich's history of the language."
"Boeing 747. Boeing decided to start the 747 program in March 1966. The first 747 was completed on September 30 1968, about 930 days later. Source: Boeing 747: A History."
"Disneyland. Walt Disney's conception of "The Happiest Place on Earth" was brought to life in 366 days. Source: Under Construction: A look inside Walt Disney’s Disneyland."

As we wind down 2019, there is no better time to contemplate the one or two BHAGs that your organization will be focused on in 2020. How will you accomplish them? How will you plan the process to ensure success? How will you set the project schedule?

In previous editions of The Weekly, we have explored the strategic planning process, the purpose of staff meetings, and other various operational principles (from Waffle House and Bowl America) that we hope can be useful as you set your 2020 goals and plan for success. From our family to yours, Happy Holidays and a Happy New Year!

Bulky and beautiful: how wayfair is poised to meet massive new demand for home goods - and home delivery (McKinsey)

+ The key lesson here for any business that delivers bulky, durable goods: the customer's perception of their purchase is heavily influenced by their delivery experience: "When our people go into homes, they’re not delivery drivers. They are ambassadors for Wayfair, and we need to train our people accordingly to deliver that experience, to create that trust between us and the consumer. In the future, we’re going to need even more of that."

The money men who enabled Adam Neumann and the WeWork debacle (Wall Street Journal $)

+ Adam Neumann sold investors on a new way of living and working, but ultimately couldn't bend reality to accommodate his vision. This is a deep dive into the financiers who backed Neumann and paid the price after ceding too much control to the firm's founder.

Canva uncovered: how a young Australian kitesurfer built a $3.2 billion (profitable!) startup phenom (Forbes)
+ Melanie Perkins set out to make design easy for non-professionals and demonstrated that making hard things simple can be big (profitable) business.

How a janitor invented hot cheetos (The Hustle)
+ Everyone loves a rags to riches story, and this piece doesn't disappoint: "Montañez was a janitor. But he was a janitor with an idea — an idea that would make the company billions of dollars and become one of history’s most celebrated and iconic snack foods: Flamin’ Hot Cheetos. But first, he had to convince the world to hear him out."

Beginner's guide to SEO (Moz)

+ This is an in-depth 7-chapter e-book explaining the concepts behind Search Engine Optimization (SEO) and demonstrates how to better optimize your website for online traffic.

Twilio's 2019 email benchmark and engagement study (Sendgrid)
+ SendGrid's annual email marketing study is a gem for marketing strategy purposes and a solid macro look at the state of all things email marketing.

Google culture war escalates as era of transparency wanes (Bloomberg)
+ Most small companies don't grow to 100,000+ people in size and don't experience the painful transitions that accompany such massive growth. Google's recent internal turmoil is indicative of the fact that maintaining company culture while growing from 100 to 1000 to 100,000 employees is incredibly difficult.

Away’s founders sold a vision of travel and inclusion, but former employees say it masked a toxic work environment (The Verge)
+ Company culture starts at the top and is reinforced through executives' attitudes towards their employees. While giving constructive criticism is a part of every executives jobs, it shouldn't be used to embarrass and belittle employees.

Retail CEO departures have hit a record high (Retail Brew)
+ "55 retail CEOs departed their roles from January through November, up from 33 last year. That’s the greatest number of retail CEO exits in a single year since at least 2010."

American factories demand white-collar education for blue-collar work (Wall Street Journal)
+ "U.S. manufacturers have added more than a million jobs since the recession, with the growth going to men and women with degrees, the Journal analysis found. Over the same time, manufacturers employed fewer people with at most a high-school diploma. Employment in manufacturing jobs that require the most complex problem-solving skills, such as industrial engineers, grew 10% between 2012 and 2018; jobs requiring the least declined 3%, the Journal analysis found."

Why the most important idea in behavioral decision-making is a fallacy (Scientific American)

+ "To be sure it is true that big financial losses can be more impactful than big financial gains, but this is not a cognitive bias that requires a loss aversion explanation, but perfectly rational behavior. If losing $10,000 means giving up the roof over your head whereas gaining $10,000 means going on an extra vacation, it is perfectly rational to be more concerned with the loss than the gain."

Kelie Morgan 12/13/19 Kelie Morgan 12/13/19

The Weekly: Edition #23 - December 13, 2019

Lessons from 24 years of operating: Bowl America, Inc. (Macro-Ops)

+ Bowl America's letters to shareholders read like a combination of a customer service policy, owner's manual, and survival manual wrapped into one. Our key takeaways from a 55-year profitable run in the bowling business included:

1. It is preferable for as many employees as possible to have skin in the game for alignment of interests. Employees were stockholders in the company, but more importantly, most were avid bowlers and loved the sport. They had double the incentive to ensure the company did well: it lined their pockets and furthered the interests of their sport.

2. Minimize fixed, debt-like obligations (mortgages, leases, etc.) to maximize flexibility in the tough times. This gives greater flexibility during tough times even if it stunts growth in the present. By abstaining from leverage, a business owner is choosing a stronger financial position over higher growth. A clean balance sheet weathers all storms.

3. Obsess about customer service. "Excellent customer service is a large competitive advantage. It’s also one of the hardest to achieve. Top-notch customer service requires employees to buy-in to the company’s long-term vision. Not only that, employees must enjoy working for the company. Reward your employees and they’ll reward the business." See #1. Customer service starts by empowering and rewarding employees to buy in to the company's vision and ultimate success.

4. Look for opportunities to stockpile capital and inventory at below replacement cost. This gives you a cost advantage over competitors. It is the ultimate form of deep value investing - more commonly known as 'bargain hunting' and 'thrift shopping.'

5. Sell a product or service that you believe in. Leslie Goldberg believed that bowling was a key piece in a neighborhood's social fabric - how else can you stay in a business for 55 years (and be profitable every single year) if you don't believe in the product you sell and the benefits to the community?

The future of parcel delivery: drones and disruption (McKinsey & Co.)

+ "Everybody likes to get a package. In 2020, we’ll send more than 100 billion of them—and that number could double by 2030. Who will deliver all those packages, and how? In this edition, The Next Normal explores what’s ahead in last-mile parcel delivery."

Delivering growth: the impact of third-party platform ordering on restaurants (Deloitte)

+ "According to the Uber Eats survey, the share of restaurants on its platform that reported an overall increase in sales after joining was 69% in London, 74% in Paris, and 67% in Warsaw, with this slightly lower at 59% in Madrid."

The 'Amazon Effect' is flooding the recycling system with cardboard (Verge)

+ "Last year, Cyber Monday was the biggest shopping day for Amazon in the history of the company. The trend extends beyond the holidays: US Postal Service deliveries have doubled to 6.2 billion in 2018, from 3.1 billion in 2009."

Ecommerce made warehouses hot, now investors are warming to cold storage (Wall Street Journal $)

+ Storing physical items is big business - self storage, warehousing, and now cold storage have all attracted increasing amounts of capital over the past decade as Americans need more storage for goods and demand quicker delivery times for items bought online.

Oil is the new data (Logic Mag)

+ While the author's points on the climate impacts of fossil fuels are well-intended, the deeper lesson to learn here is the impact of artificial intelligence and machine learning on traditional engineering trades such as oil and gas exploration. As artificial intelligence capabilities continue to improve and expand into more and more industries, it is worth studying how your business's functions could be improved by employing these technologies.

Gazing into the recession crystal ball (Reuters)

+ Predicting a recession is a tall task, but understanding where we stand in the business cycle is important for business owners for strategic and planning purposes.

What happens when a wedding influencer gets divorced? (New York Times)

+ This piece is a useful lesson illustrating the risks of mixing personal and professional brands.

Lessons on business partnerships by renowned couples therapist Esther Perel (First Round Review)

+ Business partnerships can be similar in a sense to marriages - and can exhibit the same types of frustrations, arguments, and problems. Esther Perel digs into how to resolve some of the most common problems that plague startup founders and partnerships.

52 things I learned in 2019 (Tom Whitwell)

+ "At least three private companies have fallen victim to ‘deep fake’ audio fraud. In each case, a computerised voice clone of the company CEO “called a senior financial officer to request an urgent money transfer.” [Kaveh Waddell, Jennifer A. Kingson]"

Ghost ships, crop circles, and soft gold: A GPS mystery in Shanghai (MIT Technology Review)

+ No one can figure out how rogue hackers spoofed GPS systems into thinking they were elsewhere in Shanghai - is this the Chinese government or run-of-the-mill hackers?

Kelie Morgan 12/6/19 Kelie Morgan 12/6/19

The Weekly: Edition #22 - December 6, 2019

The secret to a great planning process - lessons from Airbnb and Eventbrite (First Round Review)
+ As we near the end of 2019, thinking about how you will position your company going into 2020 will be key to its future success. The authors of this piece break down a useful model for conducting company-wide strategic planning based on experience at Airbnb and Eventbrite. The four step process consists of the following:

1. Leadership sets context for the various company teams. The executive team sets the tone, the direction, and the high-level goals of the company going into the next quarter or fiscal year. This serves as a guide to all team plans going forward.

2. Teams produce plans for their group. Based on leadership's guidance and context, teams must produce executable plans that are aligned with leadership's overall company direction.

3. Leadership integrates group plans into a cohesive company-wide strategy. The executives must at times make tough decisions on what to keep and what to cut from the top priorities in a company-wide strategy plan. It is especially important that executives explain why some teams' plans and goals were eliminated from the final plan to ensure buy-in and minimize damaged egos.

4. Leadership seeks buy-in from all teams. Captains can set the course of the ship, but their crew must sail the vessel. At this stage, ensuring employee buy-in on the approved strategic vision is paramount to success.

In closing, "If there’s one thing you take away from this article, it should be that good planning requires top-down guidance."

Survivorship bias: the tail of forgotten failures (Farnam Street)
+ "Examining the lives of successful entrepreneurs teaches us very little. We would do far better to analyze the causes of failure, then act accordingly. Even better would be learning from both failures and successes."

Mattel CEO Ynon Kreiz is rewriting a toy story (Fortune)
+ "“Before I joined, there was a three-inch-thick strategy document,” says Kreiz, sitting in what he dryly calls his “ocean view” office, across the street from a runway at Los Angeles International Airport. “I brought it down to one page.” That page divided Mattel’s to-do list into three categories, ranked in order of urgency: cut costs, fix broken brands, and capture value from Mattel’s intellectual property."

Merck's $1.3B cyberattack (Bloomberg $)
+ "A pink font glowed with a warning: “Ooops, your important files are encrypted. … We guarantee that you can recover all your files safely and easily. All you need to do is submit the payment …” The cost was $300 in Bitcoin per computer."

The man who cleans 8 foot tall, $250,000 IMAX screens (The Hustle)
+ Opportunities for service businesses abound in creativity: "In 2004, he and Brown came up with a patented process for cleaning large movie screens. Then, the duo launched 1570 Cinema Services, a company geared toward IMAX screens."

Peloton’s ad crisis highlights problems emblematic of a new class of companies (Modern Retail)
+ The Peloton ad campaign misstep illustrates how important brand marketing is to a company's image but also how difficult building a welcoming brand image can be.

Cyber Monday broke more than one record (Retail Brew)
+ "The National Retail Federation said that 66 million U.S. consumers shopped only online over the Thanksgiving holiday weekend, while 48 million only shopped IRL. $3 billion of sales came from purchases made on smartphones."

How to scale as a startup CEO from seed to Series A and beyond (Founder Collective)
+ Founder Collective's piece for early stage founders is valuable not only for startup executives, but also small business owners scaling their operations.

Morning commutes from around the world (Insider)
+ What does your morning commute look like?

The one traffic light town with some of the fastest internet speeds in the U.S. (The New Yorker)
+ "McKee, an Appalachian town of about twelve hundred tucked into the Pigeon Roost Creek valley, is the seat of Jackson County, one of the poorest counties in the country. There’s a sit-down restaurant, Opal’s, that serves the weekday breakfast-and-lunch crowd, one traffic light, a library, a few health clinics, eight churches, a Dairy Queen, a pair of dollar stores, and some of the fastest Internet in the United States."

The Weekly: Edition #41 - April 17, 2020

The Weekly: Edition #40 - April 10, 2020

The Weekly: Edition #39 - April 3, 2020

The Weekly: Edition #38 - March 27, 2020

The Weekly: Edition #37 - March 20, 2020

The Weekly: Edition #36 - March 13, 2020

The Weekly: Edition #35 - March 6, 2020

The Weekly: Edition #34 - February 28, 2020

The Weekly: Edition #33 - February 21, 2020

The Weekly: Edition #32 - February 14, 2020

The Weekly: Edition #31 - February 7, 2020

The Weekly: Edition #30 - January 31, 2020

The Weekly: Edition #29 - January 24, 2020

The Weekly: Edition #28 - January 17, 2020

The Weekly: Edition #27 - January 10, 2019

The Weekly: Edition #26 - January 3, 2019

The Weekly: Edition #25 - December 27, 2019

The Weekly: Edition #24 - December 20, 2019

The Weekly: Edition #23 - December 13, 2019

The Weekly: Edition #22 - December 6, 2019

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