I was privileged to spend an afternoon on a panel discussing angel investing and entrepreneurship for the Bloomberg Conference on Alternative Investments with Michael Maples Sr., Eric Corl, and Michael Sidgemore earlier this summer. It was a great conversation with a very positive response.
Two seemingly unrelated stories over the summer of 2013 should seriously wake you up.
At face value, it wouldn’t appear these events are connected but pause and think about them and realize the implications.
- The New York Times sold The Boston Globe sold for $70 million to a local businessman.
- Snapchat raised $80 million from venture capitalists at a valuation of $800 million.
The Boston Globe was founded in 1872. It is the dominant newspaper in America’s oldest city with nearly 3x the circulation of its rival. There are apartments in Manhattan for more than the price Mr. Henry recently acquired The Globe for from the New York Times. Think about this – it was owned by the New York Times, arguably the single most well known newspaper company in the world, and it couldn’t survive. Oh, and they paid over a billion dollars for it in 1993.
Meanwhile, Snapchat started as a student project at Stanford at the end of 2011. Its creators, Spiegel and Murray, were basically dismissed by even fellow students for the notion of a social network based on impermanent pictures.
(Background on Snapchat: users take pictures that last for between one and ten seconds on the recipient’s phone).
The average user of Snapchat is 13 – 23 years old and the majority of “Snaps” are selfies, where the user takes a picture of him or herself. It’s no secret that a healthy percentage of “Snaps” are not safe for work, as a subtle description. Within one year, one billion photos had been shared with twenty million photos shared per day. While Snapchat doesn’t reveal its user base, its users are now sharing 200 million pictures a day. Until early 2013, Snapchat was still operating out of its founder’s father’s house and had less than ten employees, including the founders.
The amount of money Snapchat just raised is more than an almost 150 year old newspaper in one of America’s biggest cities with over 25 Pulitzer prizes just sold for. Let that sink in.
What are the implications?
- Content: People demand content – and a lot of it. Some newspapers have done a great job of moving to mobile and creating a wider array of content (albeit a bit belatedly). There’s a time and a place for all content – even ephemeral and seemingly nonsensical. Certainly there is a difference between reading a random blog and the Wall Street Journal, but the “content kings” of the media no longer control all that is seen and heard.
- Consumption: The ways in which people consume content will continue to evolve. It’s no longer enough to just have mobile and a Twitter/Facebook account if you want to connect with everyone. You can choose not to engage with new platforms (whether it’s Pinterest, Snapchat, or whatever’s next), but you may do so at your detriment.
- Value: Gary Vaynerchuk wrote an amazing piece for Medium last week entitled “Value is Subjective. Even When It’s a Little Ghost.” His point was that you may think Snapchat is stupid (disclosure: I do), but there is a huge number of people who find value in it, so don’t write it off. You can examine it and choose to pursue other routes as the best way to move forward with your time, money, or business, but think back to how many people said Facebook and Twitter were stupid. Early adopters of these new technologies and networks, like Gary himself, have created enormous advantages for themselves.
- Opportunity: Lastly, take heart in knowing that an idea dismissed by many at its inception is now worth almost a billion dollars (relevant context restated: Snapchat is now almost worth what the NYT paid for the Boston Globe in 1993). Get off your butt and go create something, anything. You have no excuse not to. While I don’t buy in to the inflated valuations of Instagram and Snapchat – and I recommend you not chase them or bank on them as your only option – shouldn’t it prove to you that an incredibly simple idea, even one that seems foolish, could be something huge?
On that final note, something to remember about the difference between an idea and execution.
… I’m never going back.
Friends had been telling me for years to do CrossFit. I’ve been a “GloboGym” guy since high school. I’ve always enjoyed weightlifting and hated cardio. I figured I knew what I was doing after more than a decade in the gym – why did I need to do CrossFit? Weightlifting defined a big part of who I was. I spent an hour or two five to six days a week every morning before dawn. I didn’t need someone to tell me how to work out. To be clear, I did more than crunches, curls, and bench press and even competed in an amateur bodybuilding competition in college. I also looked at the guys who were at the elite CrossFit level and thought to myself “There’s no way they do a five minute workout and achieve that level of fitness.” After staring, admittedly curiously, from the outside in, my friend and business partner Web Smith finally got me to give it a go.
There was no question I was going to CrossFit Dallas Central to give it a shot. Widely viewed as the best CrossFit box in Dallas (“box” = gym), I’d even heard it’s one of the best in the US. One of my first reactions was a bit of sticker shock at the price. Gold’s Gym was $50 a month. I was looking at $200 a month to join CrossFit. I had enough people at this point in my life telling me I had to try it that it was more than worth a one month trial. Having started a clothing company last year, something else I’ve learned first hand is that quality is never cheap. It it’s a great product or service, it’s going to be worth the cost. Our “chasing cheap” culture has distorted reality to an unhealthy level with everyone expecting things to cost less than it takes to actually deliver that product or service. There exists an almost automatic assumption that there should always be a discount, and if it costs more than something in the same product category, it’s too expensive (even if they aren’t really comparable). Past the signup, I got my world rocked.
I can’t remember my first week of workouts in terms of specific movements/time, but I can remember being humbled as never before. There will always be someone faster or stronger (unless you are Rich Froning), so it wasn’t that someone finished something faster or with more weight… It was that I felt like the workout had obliterated me. No exaggeration. I remember collapsing on the floor thinking “But wait! I’m FIT!”. The important distinction with CrossFit is that you may be able to run a marathon, but you can’t lift much weight at all. You may be incredibly strong, but if you have to row a 1000 meters, you may actually pass out. CrossFit is all about exactly what their slogan says “Forging Real Fitness”.
Perhaps even more amazing than this realization that I was nowhere near as “fit” as I thought I was, was the bonding experience that took place almost instantly. From the coaches to those getting obliterated with me, the sense of community is phenomenal. Perhaps shared suffering (and of course triumph at the completion of each WOD) is a stronger bonding tool than I had ever realized.
This false sense from those who have not ever even tried CrossFit that it’s a bunch of workout lunatics/muscle heads couldn’t be further from the truth. I’ve seen the fittest people right next to those who are one hundred pounds overweight, all doing their best to improve their own fitness level while encouraging each other. From teenagers looking to get ready for soccer tryouts to men and women old enough to be grandparents, there is absolutely something for everyone. You do not need to get fit in order to show up on your first day. The coaches will tailor workouts to your level and push you, in a healthy way, for consistent improvement.
So about my “fitness” level… I rarely combined aerobic activity into workouts. I’d never done an overhead squat. I’d play with my phone or have long conversations with friends at the gym. I’d gotten really good at specific movements and while I was “strong”, I now understand I’ve just scratched the surface of true fitness.
Can’t wait for what’s next. Thanks Web and Lindsey Smith for opening my eyes. Thanks to the CrossFit community for welcoming me and making me want so much more for myself.
Some may have heard the news that a recent building collapse in Bangladesh killed over 1,100 people. Most have not. Disasters happen all over the world, all the time. What makes this different? It was a garment factory for some of the worlds biggest (cheap) brands with deplorable conditions. Ann Zimmerman and Neil Shah wrote a great piece in the Wall Street Journal this weekend entitled American Taste for Cheap Clothes Fed Bangladesh Boom. It is a must read.
Photo Credit: Andrew Biraj, Reuters
My wife and I walked through the mall this weekend past an H&M store where they advertised a bikini for $4.95 (modeled by Beyonce). $4.95. Let that sink in. If you’ve ever dug into the economics of products like clothing, it means the cost of goods on that bikini is somewhere between $0.50 and $1.50, depending on a number of factors, that include the fabric and the labor itself. That does not include paying Beyonce. People have quickly become familiar with China making just about everything (and typically of rather poor quality), but what people are less familiar with is that even China is becoming “too expensive” in terms of labor. Companies are shifting their manufacturing from China to even lower cost manufacturing countries like Bangladesh, with devastating consequences. There aren’t even basic safeguards for people working in these countries. Over 1,100 people died in this building collapse. In buildings like this and others that have experienced deadly accidents in Bangladesh, clothes are made for H&M, Zara, J.C. Penney, United Colors of Benetton, Wal-Mart, and other major companies. H&M and Zara have made a name for themselves with “fast fashion”, taking inspiration from couture fashion, cutting down the production to shelf time, using dirt cheap labor, and bargain basement pricing. The consequences of these business practices are great profits for these companies along with significant human suffering. It is absolutely true that offshore production can give people in developing countries a chance at a brighter future with jobs, if done responsibly. This is anything but responsible.
The only way things will change is if people in America and Europe (primarily) start to vote with their dollars and demand change. United Colors of Benetton champions itself as a company of social responsibility. It denied having any connection to the factory that collapsed, until pictures emerged of its clothing amidst the rubble.
Things have to change. I believe we’re doing our part at Mizzen+Main with our commitment to American manufacturing. While people don’t typically make the choice between item A and item B based on where it is made, seeing American made products, or responsibly made products from overseas, helps encourage people to keep in mind the consequences of their purchases.
John Mackey, the CEO of Whole Foods, is probably the best example of what he champions: conscious capitalism. At Inc’s 2013 GrowCo conference, he said America is in “disintegration mode,” and unless businesses, government, and the media behave more ethically and more cooperatively, high unemployment levels and economic decline will continue. Perhaps most importantly, he said “the virtues that made us a great nation are beginning to disappear. Capitalism needs to renew itself, and we need new ethcial foundation for business.”
There is a cost to cheap. A very, very high cost. I encourage you to vote with your dollars and effect positive change. Pay attention to who you buy from and do business with. You’ll be surprised.
Things are not going well over at Zynga.
While I always root for companies to succeed, it’s not all that surprising to hear that the company responsible for 1,400 invitations I’ve received to play pretend farming with lackluster visuals isn’t doing well, particularly when they pay nearly $200,000,000 for a company with a history of failures and a poor track record of making money.
A little over a year ago, another app was “on fire” called Draw Something by OMGPOP. It acquired almost 15 million daily active users in 6 weeks. That’s truly an unbelievable figure, particularly because it was a paid app. A bit of analysis by Tech Crunch poked more than a few holes in it’s monetization potential though: people paid a small fee upfront to download the app and in app purchases were “durable”, meaning people could retain their in app purchases (such as color packs) rather than virtual currency like other Zynga games that was “spent”.
But… like a lot of what happens in tech, there was a huge amount of hype with very little meat on the actual bone. FOMO, or Fear of Missing Out, ruled the day. Plus, with so much hype and people engaged, it’s a guaranteed success, right? Where has that not worked out before?
Andrew Carr wrote a great piece recently with some very enlightening insider interviews about the bungled acquisition which has caused Zynga to write down nearly $100 million on the OMGPOP acquisition. The most enlightening quote of all?
“I knew the OMGPOP guys–they were really talented, and really good at making games,” says a former Zynga general manager. “What they were bad at was making money, and they were struggling for a long time.”
The enormous war for talent in Silicon Valley – and the broader tech world – is no secret. Many companies are bought outright by larger ones just to bring in good engineers and developers, with the company purchased being not all that important to the new parent. This “acqui-hire” model is currently being debated in many circles, but it’s clearly not without its major flaws. The biggest flaw has been watching those “acqui-hired” depart as soon as their lockup period expires. Another insider was quoted saying “The cofounders who get hired in will stay for exactly how long it takes to vest in whatever exclusionary clause was in the acquisition. I think there are very few people who are still left who came through acqui-hires…” This has implications, on stock price and profitability, as others see things being run poorly along with hitting employee morale. Says a former designer, “I wish that they would focus in on their own employees a little bit more, because people in there have great ideas.”
When companies focus a bulk of their energy externally, chasing the next hot thing for fear it will overtake them, rather than focusing on creating value internally and building products and services that people are actually willing to spend money for, it catches up with them. Zynga’s market cap at the time of the OMGPOP acquisition was just over $10 billion. What’s a measly $200 million? Zynga’s market cap today hovers around $2-3 billion. One mistake or failed acquisition is understandable, and OMGPOP’s astronomical acquisition price and very real flameout bring a lot of attention; however, it’s clear this strategy has been more the rule than exception, and reality is beginning to set in. I wrote about this problem recently.
OMGPOP did not have a successful track record. The (overpriced) acquisition was mostly based on the skyrocketing (month long) growth of one app and apparently the talent of some of their developers. Some people may disagree with my (and other’s) analysis, saying that talented developers eventually create value, even if they aren’t successful at first. That is completely reasonable. Paying $200 million (for one popular, but fiscally lukewarm success) is not. A great deal of what Apple has built over the last decade has been predicated on acquisitions (touch screen technology, a good deal of the software). Acquisitions are a valuable tool for growth and innovation, when pursued rationally and successfully incorporating them into the company’s already proven innovative ecosystem.
What’s clear is the focus of Zynga has been more skewed towards chasing popularity than creating real value from the inside out.
While I’d prefer not to give this young woman any more attention, Suzy Lee Weiss wrote an op-ed in the Wall Street Journal this past weekend entitled To (All) The Colleges That Rejected Me with the byline “If only I had a Tiger Mom or started a fake charity”. I’m sure (and I hope) most of you are already disgusted with some saying “well, maybe it’s a bad title, and she has valid points” It is, and she doesn’t. It is a shocking confession of the most entitled generation in existence, demonstrating perfectly the “Participation Trophy” culture and should be a dramatic wake up call to parents, educators, politicians, and business leaders that years of failed policies, bad parenting, and excuses are coming home to roost. Some chastise the Wall Street Journal for posting such a ridiculous piece or childish whining, but I say kudos. I’m sure they said “People need to see this.” They most certainly do.
Some of Ms. Weiss’ embarrassing rant includes:
- Colleges apparently told her to “just be herself” – which she feels is a lie. Newsflash: just being yourself is not a skill that will earn you admission to college and no admissions officers leave their advice at that. Don’t be fake, but impress them and show them why they want you.
- She would have gotten in to her dream school(s) if she had just faked diversity by wearing a headdress or claiming 1/32nd something like Sen. Elizabeth Warren
- Taking stock photos of “scooping up” a starving African child would surely have wooed admissions officers
- If only she had a coffee pouring fake internship, she would have been deemed a top candidate
- Her parents didn’t push her hard enough and make her do activities she hated, so now she’s an undesirable undergrad (Jeez Mom and Dad, you ruin EVERYTHING!)
Anyone with any sense sees right through this pathetic diatribe – except those that live this life. It’s clear Ms. Weiss has zero drive, no ambition to succeed, no will to challenge herself, and a humiliating lack of perspective made all the worse by a bit of investigation Caity Weaver at Gawker that shows her parents have a luxury home featured by the Wall Street Journal. Life has clearly been a struggle for this privileged middle to upper class suburban child. The rude awakening she feels she’s just experienced will pale in comparison to life outside the comfortable nest her family has provided.
This generation, spanning Generation Y to the Millennials, is in for a rude awakening across the board due to what they’ve been told by their families, teachers, politicians, and corporations promising them everything without ever really having to work for it. From participation trophies to classes without “F’s” because of how it makes students “feel”, many kids and young adults feel so dangerously entitled, it’s terrifying.
Which brings me to one of the best quotes I’ve read in a long time:
Nothing is guaranteed. No one owes you anything. There is no “safe” path. Life isn’t fair. The only way to give yourself the best shot at success – whatever that means for you – is to work harder than everyone else. Make your own luck. You’ll be surprised at opportunities that suddenly “appear” because of how hard you are working, how people treat you differently and want to help you on your way, and how success begets success. One thing I can promise anyone who feels how Ms. Weiss feels is that there are countless others around you willing to work so much harder, day in and day out. Those that will work for success will earn it. Those that feel entitled, never will.
I don’t need to add much commentary around the college admissions process, because that’s not really what this young woman was even talking about. This rant was a young person waking up to a reality she had been shielded from and her violent reaction to it. I guess it isn’t even a violent reaction though – it’s just about as much effort as she could muster, a 250 word gripe fest passively complaining about everything and everyone except her own lack of ambition and motivation. Note that 250 words is just about a quarter of a standard English class essay… You can almost hear her sigh with exhaustion at the end of it. Of course the colleges admissions process is flawed at some levels, but by and large, students demonstrating drive, ambition, and an interest in the world around them outside social media and reality television will stand out.
I hope her parents are as embarrassed as they should be. If they aren’t, the only hope Ms. Weiss has a reality check outside her parent’s Wall Street Journal Luxury Homes featured nest.
The implications for our society are real. An entitled generation unwilling to work hard and frustrated by other’s success around them does not bode well for anyone.
I do see some hope, though. Organizations like the Young Entrepreneur Council are growing quickly with young adults looking to make their mark on the world in business, philanthropy, education, and the arts. Organizations like KIPP are teaching teenagers about hard work and the need to educate yourself. More needs to be done though, particularly from parents.
Let’s hope parents, teachers, politicians, and corporations are leading young adults in the direction of the YEC rather than the line of thinking that leads to this the spiteful rant of an entitled teenager.
Start Something. I think this is an amazingly simple challenge that can have profound implications for our economy and society at a macro level and our overall wellbeing and outlook on so many things at a micro level.
Start something, anything really, as long as it something in which you can make money. You don’t have to go start the next multibillion dollar business empire, next Facebook, or even the next hot gaming app. Why? There are a few main reasons.
- Experience. The experience of accomplishment (or failure) that is yours. Working for others, for companies, will mean that your successes and failures are always on on other’s shoulders – your boss, your coworkers, your direct reports, and the company’s shareholders. When things go well, or poorly, generally, the accolades or blame get spread around, even if it was virtually all because of you or in spite of you. Even if it was your idea, your execution, and even your job on the line, with almost virtual certainty you relied in some way on company resources, capital, prior experience, connections, reputation, and personnel.
It’s an indescribable feeling when you can look at something you made or a service you provided and know that someone paid their hard earned money for it.
- Ownership. If I were to say “lemonade stand”, most of you would likely think of young kids selling lemonade in their front lawn. It’s a fantastic experience as a kid, mostly because it’s all profit for you, but to make something yourself, then watch as people give you money for your time, effort, and product.
What I’m speaking of isn’t vastly different – maybe you have some artistic or crafty talent, you’re really good with computers, or perhaps could be a freelance personal trainer to help friends or family get in shape. Whatever your talents, use them, even if it’s selling hand made candles out of your house or apartment. The feeling of ownership is one our society is lacking on a growing level. Knowing that you can build something or offer your skills or talent is a powerful feeling, and one that you will never fully realize working for someone else.
This doesn’t mean you have to quit your job and be a starving soap maker. I’m merely saying start something that is yours, even as an occasional activity at night or on the weekends, to really get that amazing feeling of ownership.
- Opportunity. Do you notice how those that are successful just seem to have the right opportunities fall into their laps? I promise you, that isn’t true. They are out there working their tails off every day, whether it’s building a business as an employee, as a partner, as an owner, investing in others with their time and resources, or networking and proving their worth as a person with whom others would like to do business or just simply be around.
You’ll be surprised at the opportunities that begin to present themselves when you begin to put yourself out there.
- Understanding. There’s a great deal of hostility towards business owners these days. Walk a mile in their shoes, even in your own small way, and begin to understand things in a new light.
Certainly negligent or malicious business owners deserve the scorn they receive, but the large majority of business owners are men and women who wanted to build something of their own, hire a few employees, and make their own way in the world.
Daymond John recently said “Being a boss is this: Your employees don’t like you. Your family doesn’t think you’re doing enough at home. You share the success with everyone, and the failure is yours alone.” It’s no cakewalk, despite the widespread perception.
Business owners are also the ones who create jobs – no one else.
- Economy. That is a perfect segue. New businesses, new products, new services. These drive us forward. The beautiful thing about starting something is it’s not a zero sum game. Think about GoPro – they created an entire industry around high quality video cameras on the go out of virtually nothing and destroyed no other businesses in the process. This results in more jobs and new opportunities others had never imagined.
We need people who are willing to take risks and grow this economy. Status quo is unacceptable.
Start something. Anything. Do it for the experience and fun at first, then grow. Get to a point where you are ready to start something great. Something that will have a real impact on the world. Don’t worry about changing the world with your first go – doing it at all is more than 99% of people. As you gain experience, aim higher than a flash in the pan or a quick buck. It will be so much more rewarding than all your past experiences combined.
Please don’t misconstrue this challenge. It is vitally important that people start and continue efforts to help those around them, their community, and those that deserve our assistance. Another disclaimer that must be said: anyone who starts something is likely going to rely on the help of partners, employees, investors, or family and friends at some point. That does not diminish the points made above, and if you are fortunate enough to start something and receive help from those around you, be sure to recognize it.