Some friends of mine are starting a small business soon. It’s a really cool idea, and I plan to help out with it as I can. As we talked about it on a hike this morning, it occurred to me that a lot of key factors that make the venture viable would not really have been possible until very recently. By taking advantage of free or very low-cost technology services (primarily in regards to distribution, marketing and commerce), they will be able to bring this awesome new product to market. Who knows where it could go?
I’ve actually been thinking a lot about infrastructure lately. Public infrastructure, as one example, has always been a hobby horse interest of mine. We have tragically under-invested in public infrastructure here in the U.S. over the last few decades, which is directly harming our national competitiveness and economic growth even as borrowing costs are at historic lows… but others have written much more eloquently than I can about the importance and challenges of public investment in roads, bridges, ports, telecommunications, etc., so I won’t go into that here.
Infrastructure socializes costs and allows users to privatize most of its benefits (minus obvious costs in the form of taxes). In this way, much infrastructure is inherently more valuable to smaller constituents than big ones. If you could afford to build your own road to bring goods to market, then a public road is still a useful option as a cost-savings measure, but maybe not a must-have; but if you’re a small producer, then a public road is likely the difference between bothering to produce (or invest) in the first place or not. Good infrastructure makes critical steps in value creation easier and cheaper.
I have seen numerous performance evaluation systems throughout my career. Few, if any, of them have struck me as very effective. Most seemed to lack basic fairness or a meaningful connection to anything outside of the evaluation system itself. More often than not, they were motions we went through because someone said we were supposed to.
Old school #measure
In business school, you learn that the way most companies do performance evals is completely bonkers. There are many reasons why. A big one is that most humans just aren’t very good at evaluating others’ performance, particularly on intangible tasks (which, of course, defines many knowledge workers’ jobs). It also turns out that most people are extremely uncomfortable evaluating others at all – let alone in person, and least of all for people with whom they frequently interact. Psychology research is legion with repeatable examples of how tiny, random environmental influences – “priming” – can dramatically change people’s perceptions and moods. (Protip: have an annual review coming up? Arrange it somewhere bright and yellow.) Humans simply cannot escape our psychology, which makes us notoriously unreliable.
Yet despite all this, performance evaluations exist, as they should. Some employees do contribute more than others. Companies need a way to identify and reward top performers and help lower-performing ones improve (or leave). Inevitably, compensation and promotions are involved as well, making fine distinctions about who contributes what, and how much, highly desirable. And of course, you can’t forget the role performance evaluations have as legal CYA when it comes to disgruntled employees.
Figuring out how to accurately measure, forecast and improve employee performance in a complex organization is incredibly difficult. Virtually no one has solved it – certainly not me. Yet drawing the right conclusions about performance is the difference between rationally managing your company’s precious resources, versus relying on emotional whim and political wrangling.
You can always count on the New York Times to sell eyeballs with Serious Opinions about the chattering class’s moral panic of the day. True to form, they published a red meat op/ed today on how internet platforms like Facebook, Google, Instagram and Twitter are diabolically making money with their users’ data, thereby corrupting democracy and otherwise destroying the world. Instead, says UNC’s Zeynep Tufekci, “Internet sites” should all build direct subscription options for their users that would allow them to opt out of “tracking,” enable encryption and be treated as a customer, not just a “user.”
This idea is completely unworkable. But understanding why requires you to understand what Facebook – and other social platforms – really are, and what they aren’t.
Reddit is sort of the weird little sibling of the social web. Founded by two University of Virginia alums (wahoo-wa!) in the same two or three year span that gave the world Facebook, LinkedIn and Twitter, reddit (first letter is properly uncapitalized) has achieved both notoriety and semi-cultish status among the young and techie crowd, but has struggled to gain mainstream adoption. It has also been mostly a failure financially – the company has never been profitable.
Reddit faces some huge problems that will threaten its continued relevance as a major social platform very soon. The biggest issue is not, in fact, that the company doesn’t make enough money. The company’s shareholders don’t really seem to care about that anyway (though if they’re waiting for reddit to become a fount of profitable growth, they seem to have buddha-like patience). Rather, what threatens reddit more than anything is its lack of innovation in the user interface and format of the site, its poor leadership, and how it pursues its mission. Though at some point, they also have to figure out how to eventually make more money than they spend.
In short, the era of being the web’s cutest niche message board site is over. Reddit needs to grow up.
Where else can you buy embroidered Lady Gaga toilet paper?
Etsy IPOed this week to much well-deserved fanfare. Their original share price of $16 doubled in value almost immediately after going on the market, valuing the company of about 700 employees at over $3 billion. This was probably, in part, a calculated move – though it may have also been an indirect result of capping retail investors’ stock access to $2,500 apiece, in an effort to increase the number of subscribers. Whatever it was, it speaks to the tremendous value the market sees in Etsy’s unique two-sided marketplace business model for people to find “authentic,” hand-crafted goods from individual “makers.”
One of the most interesting aspects of Etsy’s emergence to me is its identity as a newly public “B-Corp.” In case you’re not familiar with the concept, B-Corps are companies that have chosen to undergo certification by the nonprofit organization B-Lab for adherence to a list of environmental and social accountability measures. Etsy is only the second B-Corp ever to go public, and by far the most important (the first was a tiny Canadian vertical farming company in Vancouver).
Etsy’s mission-driven identity, however, is going to be fundamentally challenged as a public company. While I love many of the ideas behind the B-Corp certification – and Etsy itself – I’m pretty skeptical as to how they truly affect policy at a public technology company. The social and environmental policies it supports might, in the end, be mostly a marketing effort that are at odds with the growth opportunities Etsy now faces. Here’s why.
I’ve been thinking a lot lately about the consumer banking industry.
Consumer banking remains the single biggest operating segment for big American banks like Bank of America, Wells Fargo and Citigroup in terms of both revenue and net income. Generally speaking, other operating segments like investment services, brokerages, wealth management or real estate services come no where close. Yet in myriad ways, these mainstays of consumer banking are being eroded – both by financial services-focused disruptors and by those from outside the industry.
As I discussed in my newsletter last week, the rise of “FinTech” firms is already having a significant impact on the wealth management market. Wealthfront, just as one example, recently announced that it now has $2 billion in assets under management – all in just a little over three years in business. The actively managed mutual fund market is now grappling with how to answer automated services like theirs in a way that preserves their operating margins – and finding that that answer isn’t yet clear.
I think that Wealthfront’s challenge to the mutual fund market is a great example of what’s about to happen in consumer banking. The changes coming to how people will keep and manage their money will have major consequences for the banking industry, obviously, but also for the merchants that consumers do business with. Fortunately, merchants and consumers could be the big winners in the democratization of banking.
If you’re a subscriber to Ben Thompson’s Stratechery blog, then you may have seen his daily update this morning discussing Facebook’s announcement that it will begin hosting news sites’ content. As usual, Ben’s analysis is spot-on, as is his observation that BuzzFeed is way out ahead. From the NYT:
With 1.4 billion users, the social media site has become a vital source of traffic for publishers looking to reach an increasingly fragmented audience glued to smartphones. In recent months, Facebook has been quietly holding talks with at least half a dozen media companies about hosting their content inside Facebook rather than making users tap a link to go to an external site…
Facebook intends to begin testing the new format in the next several months, according to two people with knowledge of the discussions. The initial partners are expected to be The New York Times, BuzzFeed and National Geographic, although others may be added since discussions are continuing. The Times and Facebook are moving closer to a firm deal, one person said.
Considered in context with my post yesterday about what Facebook could – and perhaps is – doing with its payments service, I find this particularly interesting.
I’ve written about payments quite a bit lately – in both my newsletter last night as well as in one two weeks ago. Between the rapid expansion of Apple Pay and announcements by its would-be competitors (if you want to call them that), Android Pay and Samsung Pay, all of the major platform providers are attempting to hone in on this lucrative market. Further up the stack, software-defined services are attempting to do the same, offering cross-platform universality: PayPal/Venmo, of course, and now Snap Cash (which is really Square Cash), and (finally) Facebook payments.
Unless you’ve been paying close attention, it’s easy to get confused by all of these new payment methods. Which are peer-to-peer? What do I use in a store? How do I just pay the damned dog sitter?
It seems to me that too many people think of payments in a strictly traditional sense: like writing someone else a check, which is how many of us have long used PayPal. That was probably fine for a time, but I think that era is over. It’s time to broaden how we think of payments to fit the age of social.
If you’re a retail industry executive, these are the kinds of charts that keep you up at night.
U.S. consumers, particularly younger ones, are spending much less time in malls and in physical stores. Store foot traffic has been dropping for years, which is subsequently putting pressure on merchandise productivity and comparable store sales – which have generally been pretty dreary in the physical retail sector.
For retailers, though, the bad news doesn’t stop there. The decline in store traffic accompanies a slow but steady long-term shift in consumer tastes away from retail staples like apparel and towards other consumables like food, digital media (ex. music, games/apps) and personal electronics:
It’s been something of a running theme over the last ten years, particularly in the blogosphere and social media, to declare that blogging is doomed. With the closure of Andrew Sullivan’s iconic blog, this debate has been spun up once again: Ezra Klein bemoaning the decline of the blog in the era of the social web, and Ben Thompson pointing out that his own recent success with Stratechery is a counterexample of “Blogging’s Bright Future.”
I think the rise of Stratechery actually provides some interesting lessons to anyone paying attention to the future of business models in journalism, blogging and the web generally. But as so often with new media, the medium is often confused with the product. Talking about the success or failure of blogging itself is a little like arguing about whether the smartphone “works” for whatever one wants to use it for. Blogging actually works pretty well for some goals, and less so for others.
Rather, a more interesting question might be – what will blogging be used for in the future, and importantly, who (if anyone) will pay for it? These are the kinds of questions that cleave blogging away from the future of journalism, I believe, and more towards… whatever you want to call what Ben is doing. Indeed, I’m inclined to agree with Klein: blogging is still a pretty crappy business model, and it’s certainly not a viable future for journalism.
But then, who ever said blogging has to be about journalism?