Turn of the Worm

Naked plug: Please pre-order my book THE FOUR: The Hidden DNA of Amazon, Apple, Facebook, and Google. Learn more via Barnes & Noble, your local independent bookseller, or, yes, Amazon. It’s the story of a marketing professor, living in Santa Monica, who pretends to be gay to deflect the scrutiny of his wacky neighbor / landlord. I also write about the tech giants.

I’ve been blocked on ideas for No Mercy all week. But swimming in a 68-degree ocean today with my boys (and four beers) has been prunes through my brain. So, apologies in advance for the ADD post — there’s been some interesting events this past week, and I sense you feel me. Anyway.

Turn of the Worm

It’s dangerous to speculate about the direction of the market, as one of the many awesome things about markets is nobody really has any fucking idea what’s going to happen.

Like. That. Is. Going. To. Stop. Me.

We’ve been running down an up escalator, and every fall has been masked by upward momentum. Our citizenry and media have found cold comfort in the consensual hallucination between the market and investors that the presidency doesn’t impact markets, and that the president has people around him to hold his hair back as he pukes each day. No mas. The “fire and fury” comment outed the leader of the free world, when in a room with Kim Jong-un, as the irrational one.

Oh shit,” said the markets.

We know markets are cyclical and that, on average, every seven years they will correct. But it’s more difficult to identify the spark that ignites the fires of correction – tech, housing, tulips, Snap? The tinder nest, stick, and notch of ignorance? Macho tweets or poor grammar (unforgivable) may render that “real dump” on Pennsylvania Avenue the fire starter.

Reminiscing about five days ago
Ahh, “investing in Snap is like driving drunk“; “Wayfair, Blue Apron, and Snap are overvalued and have unsustainable business models.” Good times. So, in the five trading days after I threw shade at these firms, they declined 13%, 19%, and 12%. I. Rock. Btw, my predictions panning out means ignore everything I say for a while. Regression to the mean is the most powerful force in the universe – I get it wrong all the time.

Fire his ass
Big news that Google was dragged into the culture wars – shocked anybody is shocked by this. Google, Facebook, Amazon, and Apple are the corporatization of god, love, consumption, sex, reassembled as private companies. These firms are pillars of our society, and any internal border skirmish / clash of cultures escalates to multi-theater war. Looking at these firms is our society looking into an (un-)flattering mirror. The engineer who wrote the manifesto did have a point: We do lack diversity of ideology at tech firms. The political leanings in tech are 50 shades of the same color.
So, what’s a search engine to do? Fire. His. Ass. Specifically:

– Anybody who puts the CEO of a firm responsible for the livelihoods of tens of thousands of families, in an impossible position, as Damore did, runs the risk of being fired.

– If you’re seeking justice, much less an open debate on highly sensitive issues, you’re not going to find it in the corporate world. Sure, universities have a responsibility to pursue the truth and need more ideological diversity. But corporations aren’t arbiters of genetic heritability — instead, they are places that should encourage open minds, unburdened by conscious or subconscious bias.

– Google’s job isn’t to promote an internal dialog on sensitive issues of the day, but to sell keywords to Mazda. It so happens that the VP of e-commerce is a woman who has a college degree and will be less likely to increase her spend on a platform that thinks people with outdoor plumbing are less neurotic.

– Tech firms, likely found in NYC or SF, are smart to present a progressive image (take sides, gently) as it’s good for shareholder value. In the eighties, the smart strategy was for firms to portray a conservative demeanor, as eighties conservatives were viewed as responsible, measured, and less prone to hyperbole on economic issues. But things have changed, dramatically. Progressives are seen as nice but weak and are less likely to invite regulatory scrutiny. The progressive values emanating from the leadership of tech firms is an illusionist trick. They “lean in” and invite you to look over here vs. over there (how many jobs they are destroying).

In addition, whom will you not find at a Trump rally? A mobile app developer. Progressives are powering the innovation economy, and conservatives are the ones getting fucked by it. The increasingly female EE grads from top schools have two things in common: the competition for them is intense, and they are progressives. Seventy percent of high school valedictorians are female, and Google and other tech firms need to send a clear signal: You are welcome and supported here, full stop.

– At the New York Times, we needed a policy for journalists re their social media presence. By default, they represent the brand, and we wanted them active on social platforms, without the drawback or benefit of editors. The official policy: “Use your common sense.” The Google engineer who put out a manifesto claiming women are, no joke, more “neurotic” than men, lacks common sense. Really dude … really?

This was Sundar Pichai’s first big test, and he nailed it. Decisive, crisp, and right … a good cocktail.

Content is king / prince / pauper
Disney is pulling its movies from Netflix in 2019. This is the right move, but may be too late. Disney is a great firm, with incredible assets, and has one of the best CEOs in business. I believe being the best quarterback in football (Steve Young), and having to sit on the bench waiting for the other guy (Joe Montana) to retire, builds a key attribute of effective leaders: humility. Mr. Iger has this humility, as he had to wait for Eisner to (finally) leave the building.

The threat to this pivot is incrementalism. The announcement began sounding wishy-washy as they explained they might include some but not all stuff on their streaming service. Disney should partner with other content providers and offer the mother of all bundles that includes privileged access to parks, ESPN, movies, animation, and meet and greets with Phil from Modern Family – just have a feeling we’d become fast friends (Phil, call me). Trying to maintain profits (fly the plane) while fixing an engine means the strategy can get sucked into the engine. Similar to Adobe’s genius / ballsy move to switch to a monthly recurring revenue model, Disney has the opportunity to command the space they occupy.

They would be the first media company in a long time to do so. The tension between platforms snapped ten years ago, and the rope decapitated content. There are no CEOs of content companies launching rockets (billions to spare in the ultimate space / phallic race). AMC developed genius content including Mad Men, The Walking Dead, and Breaking Bad and registered $840M in EBITDA last year. However, six-year-old video messaging platform Snap, who lost $500M last year, is worth 4x AMC.

Content companies need to lock hands and carry a much bigger stick with the platforms. Otherwise, the rockets to Mars and efforts to cure malaria will be the domain of the guys excited to meet you and provide greater exposure to your content. Bob Iger has the content and the smarts. Does his board have the stones to accept the 2-3-year decrease in profitability required to move to a recurring revenue business and push back on platforms? I wonder what board member Sheryl Sandberg is telling him to do?

Scarcity

“Seemingly unlimited human wants in a world of limited resources”
– Wikipedia

Scarcity taps into our competitive instinct as people strive to meet the criteria that are being used to determine who gets what. What do Panerai watches, Birkin bags, and your girlfriend moving to Singapore have in common? They’re better, or at least the perception is they are better. Firms pursuing a premium price positioning need to determine what choking supply might do for the perception of the brand and pricing power. Restaurants, luxury brands, and universities are great at this. I find the more speaking gigs we turn down, the more requests we get. The top 20 universities could expand their supply (seats for incoming freshmen) 50% within the decade. But they won’t, as the prestige that stems from scarcity is the ointment for irrelevance most academics thirst for.

One of the benefits of having kids at a later age is you have a greater understanding of scarcity. Not just of time, but of your kids … and who they are. One of things I dislike (most) about myself – and there are several – is too often I feel sorry for myself. I think about this a lot, so I can put an end to this bullshit. Anyway, two situations create my one-man pity party: 1. When I’m at an airport and the clusterfuck that’s our air transportation system turns my sojourn home into the Batan Death March – delays, cancelled flights, missed flights, etc. 2. When I’ve been on the road for a couple weeks, and I come home, peek my head into our boys’ room, where they are fast asleep, and register they have grown since the last time I saw them.

Really. Bums. Me. Out.

I begin re-evaluating my life and start planning the re-configuration. However, by morning the sobriety of my need for relevance and economic security has downgraded the re-configuration to driving the kids to school that day.

I hope, however, I’m more “in the moment” than many young dads.

Your friends, by now, are largely static as people. They will have more expression (lines) in their faces, but you’ll get the same Bob / Jen next summer. Not true with kids. Last summer, my oldest was small for his grade, and very attached to his parents … in our bed every morning. This summer he’s four inches taller and prone to rolling his eyes … doesn’t come into our room much anymore. Our youngest, last summer, didn’t coordinate his clothes and often left the house dressed like an angry clown, lots and lots of colors. He had a big mane of curls. I am fascinated by my boys’ manes. It’s shocking to me we are in the same species, much less father and sons. This summer my youngest is suddenly very aware of his outfits, posing in front of the mirror, and asks me to comb his hair straight, like his brother’s.

The kid you have this summer, is leaving … forever. The skinny boy with the lion’s mane that tiptoed into our room and, on first evidence of me stirring, would say, “Dad, let’s make a plan for the day” is gone. It’s really sad. A relative of his will be back next summer, but different. The compensation is there will be new attributes you find hilarious and endearing. But still, sad.

I put, mentally, a big sign above my boys’ heads:
“Limited Edition, Your Nine-Year-Old Son, One Summer Only”

And then I take them to school.

Life is so rich,
Scott