Sunday Snapshots (18th August, 2019)
Kool-aid, Genetic algorithms, Momofuku, and WeWork
Hey everyone,
It’s raining this weekend in Chicago and there is nothing that makes me happier. The smell of rain hitting the ground always reminds me of boarding school. It’s pure nostalgia and it’s available all over the world!
It also gave me lots of time to lounge indoors and read! In this issue of Snapshots, I want to talk about:
Drinking the kool-aid of Silicon Valley
Optimizing floor plans using genetic algorithms
How to stay above the waterline in tough times
Running the empire of Momofuku
WeWork’s IPO
And more!
Book of the week
This week, I re-read Disrupted by Dan Lyons. It’s a story about a 40-year old going to work at Hubspot. If you asked me a couple of years ago about how I feel Silicon Valley is doing, I’d be all gung-ho about it. Today, the enthusiasm is tempered with a healthy dose of skepticism. Lyons’ experience put that feeling in words. Here are some quotes on particular themes that stood out to me:
Cynic or realist:
This is the New Work, but really it is just a new twist on an old story, the one about labor being exploited by capital. The difference is that this time the exploitation is done with a big smiley face. Everything about this new workplace, from the crazy décor to the change-the-world rhetoric to the hero’s journey mythology and the perks that are not really perks—all of these things exist for one reason, which is to drive down the cost of labor so that investors can maximize their return.
Drinking the SV kool-aid:
This is breathtaking and brazen. This is pure Orwellian doublespeak. Night is day, black is white, bad is good. Our spam is not spam. In fact it is the opposite of spam. It’s anti-spam.
Explanation for why fake news works:
The old W. C. Fields line “If you can’t dazzle them with brilliance, baffle them with bullshit” seems like the motto.
On churn at tech companies:
For whatever reason, people are getting booted out. It’s like living in Argentina during the 1970s. Every week someone else is no longer sitting at their desk, and we get an email from Cranium telling us that so-and-so has graduated, and hey ho, let’s all wish them well.
It’s a good book – one that elicits both jaw drops and eye rolls. I recommend you read the first couple of chapters to see if you’ll like his style and continue if you do.
Long read of the week
As an Industrial Engineering major (also known as Operations Research or Systems Engineering), I love analyzing the disparities between optimal and implemented solutions. Joel Simon explores how floor plans in a school optimized for minimizing traffic flow would look like:
While I don’t expect floor plans to look like this any time soon, it’s a great example of throwing the rule book out and reimagining how things should look like.
Personal update of the week
It’s been a tough week. I’ve heard a series of bad news from friends and it’s definitely affected my productivity and ability to think clearly. It’s made me take a pause in an otherwise relentless summer.
It definitely helps to journal and write down your thoughts. But I know you won’t be surprised if I said that there’s a big difference between intellectualizing something as not a big deal versus actually feeling like it’s not a big deal.
The thing that ultimately helps is allowing yourself the space to recharge and get back to 100%.
Business move of the week
Momofuku’s Secret Sauce: A 30-Year-Old C.E.O.
I’m fascinated by the idea of shadow powers – the second-in-commands of the world. I’ve written about them before. It’s interesting to see the same themes come up in this profile of Marguerite Mariscal, the CEO of the private equity-backed empire of Momofuku.
Ability to operate independently:
Ms. Mariscal began her career at Momofuku in 2011, as a public relations and events intern. Over the years, she quietly became Mr. Chang’s closest collaborator and confidante, a largely unknown force shaping matters as varied as menu design, branding and business development. “She’s the only person I’ve ever felt comfortable giving complete carte blanche to, in terms of what Momofuku looks like and what it should be,” Mr. Chang said.
Avoiding brand dilution as a company expands:
Adding to the challenge is Momofuku’s particular identity, which revolves less around a distinct culinary tradition than an attitude of restless innovation, boundary pushing and spontaneity. A formulaic chain of steakhouses, Momofuku ain’t. Scaling that ethos requires a tightrope act: Create enough structure and continuity to stave off chaos, without destroying the brand’s animating spirit in the process.
Codifying principles in a bible-like book:
She had arranged for each bartender, cook, server and dishwasher to receive a pocket-size booklet codifying snippets of internal wisdom known as “the pillars”: aphorisms distilled from a Neil Young album (“rust never sleeps”), the science fiction movie “Gattaca,” and a book on leadership written by Bill Walsh, the former head coach of the San Francisco 49ers. The idea was to channel Mr. Chang in lieu of his actual presence.
Complementary strengths and weaknesses:
If the brilliance of Momofuku springs from the collision of opposites — the familiar and the exotic, high-end ingredients in lowbrow dishes, East meets West — Ms. Mariscal and Mr. Chang might be seen as human extensions of that polarity. Mr. Chang has described himself as a D student; Ms. Mariscal had her own business cards made at age 12. Mr. Chang speaks in imperatives. Ms. Mariscal courts consensus. She is as calm and measured as he is brash and impulsive. Recently, Ms. Mariscal organized for herself a low-key 30th birthday celebration in the back room of a neighborhood restaurant, and brought along a large tin of white sturgeon caviar — a Zabar family tradition. When Mr. Chang showed up, he ladled it immoderately over potato chips and sour cream, insisting that Ms. Mariscal eat her fill.
Like every great profile, it gives you a sense of the context that the person is operating in. I highly recommend you read it.
Random corner of the week
WeWork is going to have an IPO soon.
I posted a tweetstorm this week about the WeWork S-1 that got some traction. Here are two graphs from the filing that stuck out to me:
Occupancy rates have not only gone up every yearly cohort, but have gone up faster on a 6 month horizon since the opening of a new WeWork location. This is good news in an otherwise bleak filing. Companies often face the problem of exhausting their best audiences first, so their customer acquisition costs are lower on day 1. This is a trap as it gives a false sense of the size and therefore the viability of the business.
35% of the new memberships in 2018 came from existing members. This supports the upsell hypothesis – WeWork is a platform that ropes you in with cheap co-working spaces (possibly taking a loss in this process), then monetizes you by selling you larger co-working spaces as your company grows. On the side, they also get cash flow from services and partnerships.
I also enjoyed Alex Danco’s take on the company.
Disclaimer: None of this is investment advice. IPO’s are subject to a high degree of market risk so please do your due diligence before investing.
Meal of the week
I went to Rooh in West Loop. It was a good meal, but definitely overpriced. I had the Chicken Malai Tikka, Butter Chicken, and some naan. For dishes that should be the bread and butter of any good Indian restaurant, the taste was mediocre considering the price point.
That wraps up this week’s Sunday Snapshots. If you want to discuss any of the ideas mentioned above or have any books/papers/links you think would be interesting to share on a future edition of Sunday Snapshots, please reach out to me by replying to this email or sending me a direct message on Twitter at @sidharthajha.
Until next Sunday,
Sid