Welcome to the first non-Saturday edition of Start-up Curated. I hope to get these out on Tuesday mornings so this first one is already a day late, but we will get the kinks out over the next few weeks I promise.
Note: I am off on vacation next week, but will return with a briefing on January 5th. Have a safe and happy holiday!
This week's essay was "Contra Expertise". Last year I wrote about the importance of experience: "Experience and Progressions". The point was that some things are just too difficult to do without having actually experienced them in the real world. This new essay is the counter argument to that piece where I explore the limits to experience and why when hiring for a new role you are always trading off between experience and intelligence (and in business intelligence is USUALLY the right answer).
Onto the briefing...
- Credentials:The essay yesterday on experience vs IQ did not really touch upon the difference between expertise and credentials. Zeynep Tufekci is a high-IQ, low-public health-experience academic who has raised the alarm about some of the poor regulatory decisions being made around COVID. She wrote an essay yesterday on how dangerous “mid-status” is for getting at the truth.
- Intelligence Testing: Razib Khan published a great essay yesterday on Intelligence testing, including why humans stopped selecting for higher intelligence about 200,000 years ago, the importance of selection effects, the history of testing in China, and why eliminating testing is a tool to lock in the current set of elites. Highly recommended.
- Military Intelligence: Rob Henderson has some great data on the impact of intelligence on success in the military, including what happened when the military lowered their standards, and the impact of IQ on gunners hitting their targets.
- Roku: The streaming tool has agreed to make HBO Max available. Calling back to last week’s essay, this is a synergistic effect of Warner dropping all of their films onto the streaming service. It will (hopefully) get them customers, but it also gives them more leverage with distributors. This is the same model P&G - the mass advertising builds up demand for the product from consumers, which P&G then leverages to force retailers to distribute with better terms.
- Group Nine Media: Following up from last week’s interview with Blake Harrion (head of marketing for Pet Plan). PetPlan has partnered with TheDodo to build a new pet insurance company called “Fetch by TheDodo”). TheDodo is owned by Group Nine (which also oversees a number of other social focused media companies). Last week Group Nine announced the formation of a new “blank check company” to acquire media competitors.
- iCar:Yesterday afternoon Reuters reported that Apple will go into production of a consumer car in 2024.The car seems to be at least partially self-driving, but the reports suggest real innovation will be the battery, “It’s next level. Like the first time you saw the iPhone”. This will apparently mean much safer and longer range. Apple is so big now that they need to enter new large categories if they want to keep up their growth rate (recall: Amazon entering health care and Google pushing into financial services). Automotive is a big category to take a bite out of - even if they only enter the high end of the market. Benedict Evans has been thinking about Apple automotive for a long time and published his take yesterday.
- Google Regulation: There were TWO cases brought against Google last week (in addition to the one in October about Google’s use of Android to make Google the default search engine). The new cases:
- On Wednesday, illegal search monopoly and rigging auctions with Facebook:The suit argues Facebook agreed to not launch competitive products in exchange for special treatment in Google auctions
- On Thursday, monopolistic behavior which favored Google’s own products:This is about Google favoring their own products (like Google Local instead of Yelp, or SA360, Google’s tool for placing ads which favors Google’s search engine over Bing))
The Wednesday case seems the most damning. If the states have the evidence to prove what they are claiming it seems likely they will win. The big question is if they actually have that evidence - much of the document was censored and retracted (Side note: The best retraction was the code name the companies used. It was revealed to be a Star Wars character and the retracted was only four characters long. So it was clearly Yoda. Except… then I realized it could be almost any of the leads: Luke, Leia, Solo, R2D2, C3PO… At least we know Chewbacca and Vader are out).
The Thursday case will be harder to prove as Google will argue that their choices were about making the product better for users (i.e., there was no consumer harm, and NOT doing it would have created consumer harm). Meanwhile: The EU has cleared the Google Fitbit acquisition with the caveat the fitness data cannot be used for advertising targeting for ten years.
- European Regulation: The EU has proposed some general regulation of tech companies.The first is The Digital Services Act would require tech companies with 10% or higher penetration to “actively look for and mitigate risks” - this is stuff that Facebook and YouTube have been doing for years, it just formalizes it and make it clear smaller companies are not responsible in the same way. The second is The Digital Markets Act which would ban “gatekeeping”. It would require larger tech companies to unbundle products and provide price transparency to smaller competitors. Europe has muffed this up before with GDPR. This looks like a better attempt.
- Big Tech vs Startups:Microsoft islaunching a password manager (I use Dashlane, but Microsoft has a significant distribution advantage). Facebook is launching a services directory you can book through the platform (i.e., a Angieslist/TAskRabbit/Fiverr competitor). Amazon considering a Shopify competitor. (Unanswered question: Why hasn’t Amazon launched a services product yet?)
- Twitter:The social network has ended their “2-clicks required to re-tweet without commenting experiment. They shared the results of the change - a 20% reduction in retweets, and a significant reduction in the quality of “commented re-tweets”. What were they expecting? When you add friction to a process (2 clicks instead of one), you will get a drop in activity (although 20% seems like a lot for one one additional click!). And if you push people through a funnel the marginal people who pass through will always be lower quality than the ones that did not need the push.
- Facebook vs Apple: Just like it’s not “anti-life” vs “anti-choice”, the Apple/Facebook battle has turned into “pro-privacy” vs “pro-small business”. Facebook ran a full page ad in the WSJ, WaPo and NYTs explaining their argument. Public opinion marketing (or is it marketing to employees?). Meanwhile Apple has launched “Privacy nutrition labels" for their apps
- Monetization Idea:No link, just a thought I had this week. For a long time many online businesses did not monetize as well in some categories ("No one is going to buy a house online?"), until it did, and then “software started eating the world.” But then the consensus was mobile that did not monetize well ("Who wants to put their credit card into a mobile phone?"). For a long time you would bit significantly lower for mobile traffic off of Google (but now Facebook mobile ads monetizes just fine). We are now seeing a similar complaint around voice ("How do you even browse via an Echo?"). Based on history, even if it is not obvious now, it seems like capitalism will find a way...
- Subdomains in paid search: PPC Hero ran some tests to see the impact of the display URL on paid search CTR. They found a 50% bump in CTR when the actual domain vs a subdomain was used (i.e., greatdeal.marketinbs.com vs marketingbs.com). Seems too big to be true, but you should test this!
- 6-seconds:Traditionally advertising creative was optimized for the 30-second spot. AdExchanger argues that the focus should be on making the best 6-second spots as the flagship spots instead.
- GIPHY: The tool for finding GIFs is now the second largest search engine after Google(bigger than Facebook, YouTube, and Amazon). The link has some case studies on companies trying to build content and SEO to be found through the tool.
- Maldives:The luxury tourist destination has launched a “Country Loyalty Program”. Regular readers know how I feel about loyalty programs, but something like this COULD work. It seems it is not just points - they have a tiered system with status benefits. There are not many details yet, but you could imagine shifting your next vacation to the Maldives if it means you can skip the line at customs…
- Doorman Fallacy:I came across this idea from Rory Sutherland this week. The idea is that one often defines a job in such a way that automation is possible, and then it gets automated because it seems easy to automate the part you have defined. The example given is a doorman (defined job: “Open the door”). The defined job is easy to automate (“automatic doors”), but the doorman’s REAL job is to make the hotel seem higher end, and the automative door does not solve the real purpose. Not understanding the real purpose of activities can be dangerous.
- Breather: Breather is like WeWork but it rents its office space by the hour. Recently it moved from being its own landlord to just providing a platform so others to offer hourly real estate to its users.Lots has been written about how building a marketplace is very difficult. Breather did it by buying one side of the market. Now that they are at scale (and there is excess unused office estate space) they can pivot to being a true marketplace
- Amazon:Sifted makes the point that Amazon is a very small player in many European countries.A big deal is made about how Amazon only has single-digit penetration of US retail, but they have less than single-digit penetration on many countries in the world. Lots of TAM left!
- Brand Extensions: In the last eight years Oreo has launched 65 new novelty flavors.Sales of the novelty varieties are up 12% in the last three years, but sales are not the purpose: “the new flavors function as advertisements for the original”. Related: the Hustle published a deep dive Monopoly. Monopoly (and its expansions) is now 30% of the mass-market board game industry. “From 1995 to 2005, some 230official affinity versions of Monopoly were produced.” Almost 20% of the SKUs on Hasbro’s website are Monopoly variants.
- Observer Effect:Sriram Krishnan does very irregular long form interviews with tech leaders. His third interview was last week with Tobi Lutke, founder of Shopify. The style of the interview gets deep into ideas that most interviews with these type of people miss.
- Sports Analytics: The WSJ has a profile on the The Philadelphia Eagles and how they led the way with “sports analytics” to improve play decision making based on data.But now the other teams have caught up and they no longer have a competitive advantage. This is the Red Queen problem - competitors are always nipping at your heels. Keep innovating to stay in the same place, and excess returns go to the consumers.
COVID and the New World Order
- College:Among those graduating from college in 2020, the number who enrolled in college was down 21.7%.Will be interesting to see how much more competitive college admissions will be next year as some share of that 22% come back from their “gap year”…
- Leaving California: Lots of buzz about how COVID has been the push to accelerate the move of tech out of the Bay Area and into places like Austin and Miami. Alex Kantrowitz was able to pull data from LinkedIn to see what the data was saying, and it’s definitely not that simple.(Who does look good: Seattle…)
- Ability to work from home:~50% of the labor force is still working from home, but it varies significantly by state.
- KPS Global:KPS is the vertically integrated market leader in the design and manufacture through install and servicing of “panels” for retailers. They are looking for a Chief Commercial Officer based in Fort Worth.
- Confidential SaaS:$1B SaaS company in the Bay Area. Looking for a CMO to oversee a 250 person team. Email me if interested.
- Stripe: The financial services company is looking for a head of strategy. Small team but a really cool opportunity On my list of private comapnies I would invest in if I could). As fits the with the company’s unique culture applicants should write a short memo about “an important but non-obvious opportunity that some business is overlooking” (does not have to be Stripe). Send the memo directly to the co-CEO John Collison (email@example.com). If you do apply, please let me know for my own curiosity.
- Paul McCartney:Tyler Cowen at MarginalRevolution argues that McCartney may have had the best career across all functions and industries and - more importantly - the “most instructive” for us to learn from.
- New terms: Some new terms I had not heard before that I think will stick:
- Shimmer and Shine: The children’s cartoon was created by Iranian-American Farnaz Esnaashari.She pitched the show over 50 times, each time changing the premise (it started as a “children’s educational literacy show” with a single genie who would grant wishes if you spelled the request, and turned into one of the most successful animated franchises of the last decade). Iterate!
- Placebos: From the FDA summary of COVID vaccine testing. In 1-2 days after receiving the placebo we have a report of the “natural human condition” and it includes: 33% fatigue, 34% headaches, 12% diarrhea, 11% muscle pain, 6.5% chills, 1.2% vomiting. In TWO DAYS. I am much healthier than I thought!
- Beethoven: It was his 250th anniversary of his birthday last week. Scroll looks at how much of his success was due to his business acumen.
Keep it Simple,